Re: [CPEO-BIF] When. where, and how? - continuing the debate

["Trilling, Barry" <BTrilling@wiggin.com>]

Although I promised Larry in a side-message that I would not try to trade allegorical references with him, this latest broadside addressed directly to my arguments compels that I remind him that "the path to hell is paved with great intentiions." I sincerely pray that when we shed these curret coils  will meet one another in a more temperate venue.

----- Original Message -----
From: brownfields-bounces@lists.cpeo.org <brownfields-bounces@lists.cpeo.org>
To: Brownfields Internet Forum <brownfields@lists.cpeo.org>
Sent: Tue Apr 28 11:30:51 2009
Subject: Re: [CPEO-BIF] When. where, and how? - continuing the debate

I would estimate that 75% of the 10,000 phase 1 reports I reviewed over
the past decade as counsel to several conduit lenders were subject to
AAI. I suspect there are few lawyers who personally reviewed as many
phase 1 reports as I did during the past decade. Thus, my views on AAI
have been shaped by this experience. While the following statements are
not based on empirical data, they are also not a result of unexamined
assumptions or unexplored convictions.

1. AAI was an incremental improvement over the existing practice.
However, because of a number of concessions (including the definition of
environmental professional), it created a lower ceiling rather than a
higher floor.

2. Market participants views phase 1 reports as commodity products. They
did not distinguish between good and bad reports. Thus, they choose
consultants largely on pricing. While there is not a deliberate effort
to conceal or not properly investigate, the pricing pressure essentially
eliminates full service engineering firms. Most of the low-priced
reports are produced by firms that are incompetent or not concerned
about producing quality product. The historical investigations are
awful. That is how we end up with housing developments on former bombing
ranges, etc.

3. Those consultants who try to do quality reports face pressure from
lenders and their counsel to "sanitize" their reports. The consultants
usually comply because they want the repeat. high volume business.

4. During the real estate boom, there was incredible timing pressure. I
cannot begin to tell you how many drug stores and big boxes were built
on contaminated sites where because of tight construction schedules the
owners remediated the sites without going through any formal voluntary
cleanup program. Many asked their consultants to observe earth-moving
activities and remove visibly-contaminated soils but others just did the
usual pave and wave. The number of self-directed cleanups was epidemic
in FLA and Cal but also occurred a lot in Michigan as well.

5. Too many times, institutional and engineering controls were not
implemented and not picked up by the bottom-feeder consultants because
it took too much time to search to the local land records. And of
course, state regulators frequently did not have the resources to verify
that the controls were properly implemented.

6. It may be true that lender underwriting standards have recently
tightened but that is because lenders are afraid to do loans. Once the
"green shoots" begin to blossom, we can be sure that underwriting
standards will again lapse as banks compete for borrowers. It has
happened too many times during our lifetimes to believe otherwise.

7. It is true that an inadequate AAI report could expose an owner to
liability for failure to comply with continuing obligations. But in the
absence of any significant litigation, the fact that most of the loans
were being sold off by banks and many developers/owners figured they
would flip the properties in a few years and not be around when an
enforcement action might be brought, they were usually not too concerned
about what was commonly viewed as a "hypothetical" or "technical"
liability. Those of us who raised these issued would be considered
called a Dr. Doom.

In sum, I would characterize AAI as "all hat and no cattle" (or for you
city slickers- "all cage and no bird")in terms of improving
environmental due diligence standards.



"The Hottest Places in Hell are reserved for those who, in time of great
moral crisis, maintain their neutrality"

Larry

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purpose of avoiding U.S. federal tax penalties.
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