In the State of Michigan, the state legislature created a process to accommodate the continued use of contaminated property called the Baseline Environmental Assessment (BEA).
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What Problem was Michigan Trying to Solve with the BEA?
Commercial or industrial real estate can become contaminated by its use over time. Gas stations, dry cleaners and metal plating facilities are notorious for having impacted properties they inhabited. As businesses live and die, a property can become derelict and vacant if the risks to new businesses and potential purchasers from environmental contamination are perceived as being too high to finance and occupy a property. Blighted property becomes what’s called a “brownfield”. These properties can inhabit highly desirable locations inside thriving communities which can’t be redeveloped due to the perceived risks to health and human safety as well as the finances of the borrower or lender.
The State of Michigan developed a method to provide liability protection to the new business or potential purchasers of a contaminated property so the location could once again become a productive location for commerce. This method is known as the BEA.
The underlying strategy of the BEA comes from the idea that it is better for the applicable regulatory agencies in Michigan to be aware of the type, concentration, and extent of the contamination located at a property rather than force a business, person, or responsible party to remediate the property. This strategy focuses more on health and human safety than on punishment.
How Does a Baseline Environmental Assessment (BEA) Work?
It should be noted that the property must be located in the State of Michigan. While the BEA is a great idea, it has not been adopted by any other state or the federal government.
Phase I Environmental Site Assessment (ESA)
As a commercial property changes hands, often the buyer or bank performs environmental due diligence in the form of a Phase I Environmental Site Assessment (Phase I ESA). The first step in the BEA process is to do exactly the same. The Phase I ESA is performed by a qualified environmental consultant in accordance with the American Society of Testing & Materials (ASTM) and the latest revision of their rules regarding environmental due diligence, E1527-21.
A Phase I ESA is a comprehensive review of all the Federal, State, County and Municipal databases as well as historical documents relating to the property and the surrounding area. The Phase I ESA also includes an environmental professional conducting an on site visit to look for environmental concerns and conditions at the property. The Phase I ESA does not involve any environmental testing.
Phase II Environmental Site Assessment (ESA)
Should the Phase I ESA identify any Recognized Environmental Concerns (RECs) at the property, adjoining property, or surrounding area, a Phase II Environmental Site Assessment (Phase II ESA) would be recommended to evaluate the RECs. If no REC is found, then no Phase II ESA is necessary.
The Phase II ESA is conducted in order to evaluate if the subsurface soil or groundwater conditions have been impacted by the identified RECs. This investigation includes, but is not limited to, the collection of subsurface soil or groundwater samples to evaluate if the property has been environmentally impacted. The collected samples are submitted to a laboratory and compared against the State of Michigan’s regulatory reporting requirements. If analytical data indicates there is no contamination present at the property, no further action is required.
What Happens if Contamination is Identified?
If analytical data from the Phase II ESA indicates there is contamination at the property above regulatory reporting limits, then the property is deemed a “facility” under Part 201 of the Natural Resources & Environmental Protection Act (NREPA – P.A. 451 of 1994, as amended). Depending on the type, concentration, and extent of contamination identified at the property, further characterization and delineation of the contamination may be recommended by the environmental consultant.
The facility designation merely indicates that contamination is present above applicable residential cleanup criteria. The facility designation also provides eligibility to a property to undergo a BEA.
Timing Requirements for the Baseline Environmental Assessment (BEA)
The Phase I ESA, Phase II ESA, and BEA need to be performed within 45 days of the purchase of the property. The BEA paperwork must be submitted to the Michigan Department of Environment, Great Lakes, and Energy (EGLE) within 6 months of becoming owner/operator of the property.
Eligibility Requirements for a Baseline Environmental Assessment (BEA)
Not all properties are eligible for a BEA.
If no contamination was identified above applicable residential cleanup criteria during the Phase II ESA, then the property is not eligible for a BEA. In this instance a BEA would not be required or recommended.
Properties regulated under other sections of EGLE, such as Landfills, Treatment, Storage and Disposal (TSD) facilities, Underground Storage Tanks (USTs) and Federal/Superfund properties are not eligible.
Contact A3 Environmental to determine if BEA can be conducted on your property.
Why Would I Want a Baseline Environmental Assessment (BEA)?
A BEA limits your liability for the costs associated with cleaning up environmental contamination caused by others. The BEA is conducted to demonstrate that you were not responsible for the contamination at the property. The BEA further demonstrates that you do not plan to further contaminate or directly interact with the identified contamination at the property. In exchange for being upfront and honest with the State of Michigan, and undertaking due care obligations regarding the identified contamination, EGLE will provide limited liability protection for cleanup of the contamination. This opens the door to being able to get a bank to agree to lend you money to buy or refinance the property. It also makes selling the property easier (possible).
What are the Drawbacks of Getting a Baseline Environmental Assessment (BEA)?
By submitting a BEA to EGLE, your property will be identified as a ‘contaminated’ property and listed on the EGLE BEA database. In addition, you will have due care obligations to ensure the protection of human health and the environment from the identified contamination. For example, if drinking water is impacted by contamination, the prevention of groundwater ingestion will be necessary, either through prohibiting the installation of potable water wells on the property or by ensuring the property is connected to municipal water supply. In much the same way, if there is a potential soil-vapor issue ingressing into the building and affecting indoor air quality it would need to be addressed before occupancy. A3 Environmental Consultants can help you understand the risks/obligations of identified contamination on a property.
If you need a Baseline Environmental Assessment, give A3 Environmental Consultants a call. We’ll work to get your Environmental REC removed with the utmost confidentiality, we’ll meet or exceed ASTM Standard E1527-13 on any sort of commercial or industrial property. Our reports meet the requirements of all lenders and government agencies such as the Small Business Administration (SBA), Housing and Urban Development (HUD) and the United States Department of Agriculture (USDA). A3 Environmental Consultants can be reached at (888) 210-2357 or by email at Info@A3E.com.