Presentation on theme: "A Case Study in What Can Go Wrong, Thinking in 3D, and Alternative Solutions."— Presentation transcript:
A Case Study in What Can Go Wrong, Thinking in 3D, and Alternative Solutions
Houston, Texas Moderately performing asset owned from 1993-1999. Scheduled for sale in 1998 Contamination from gas station held process Concerns about retention of liability A solution to sell with a fixed fee remediation plan and an “insurance” policy
Northwestern obtained a fixed fee remediation contract to affect the free product contamination on the site and obtain closure from the TCEQ (using LUST fund) A “Cost Cap” Environmental Insurance policy was obtained to “guarantee” the remediation contract. The property transacted and was sold in 1999. Within one year, it became clear that the remediation plan would not work…
Remedial Action Plan projected 6-12 months to clear free product from wells. After 18 months the Contractor became difficult to work with and non-responsive. At 24 months, chlorinated solvents were detected on the east half of the property (somewhat away from the petroleum contamination). At 30 months, the contractor found an exit to the contract…
The Contractor discovered, via historical city directory search, that the property had formerly had a dry cleaner listed as occupying the site. (No evidence that this was anything more than a pick-up/drop off location). Contractor notified TCEQ of chlorinated solvent contamination, causing the site to be kicked out of LUST fund. Contractor claimed breach of contract terms and abandoned the project and files bankruptcy.
As the Buyer (new Owner) becomes vocal, Northwestern moves forward and inserts new consultant on the project. Environmental Insurance carrier was notified, very slow to respond. After 12 months of monitoring and holding the TCEQ at bay, Kemper Environmental Insurance notifies policy holders that they can no longer cover losses on existing policies. Northwestern begins to manage the project on a sold asset…
My first advice: just sell the property as contaminated and take the monetary write-down. If you’re going to enter the site in a Fixed Fee contract, hire a reputable, high net worth contractor and ensure that all contracts absolve your firm and ownership interest. If you’re going to use Environmental Insurance for Bonding, make certain all contracts tie to new Buyer. Don’t stay involved after sale. If things fail, refer the project to your legal department and stay away from it.
When you manage a general fund, your name is on title…dictates action plan. Northwestern has 9 remediation projects on assets not owned. Projects held through sale or lawsuit. Tendency is long term monitoring. This project drifted for five years… Finally, in 2008 we started taking action after demands from current owner.
Quarterly monitoring and natural attenuation Site has been enrolled in LNAPL Risk Based Closure Program Very few sites have been closed “Progress” alleviates contractual obligations May or may not be a good long term solution for long term invested assets Risky for short term invested assets