Pennsylvania Act 2 and Lending

Assume the hypothetical property for which a new loan is being considered is a multi-family residential property with its lowest floor level 3-4 feet below ground level.

Assume it is located adjacent and down gradient to an off-site facility with two 20,000gal. No. 6 Heating oil tanks along with piping. The system was found to be leaking thousands of gallons of No. 6 oil. The plume migrated across the adjacent property line onto the multi-family residential property.

Assume there to be free product present and has been found in shallow ground water, hillside out-crops, in the storm water drainage system as well as under and inside the basement of one building.

Assume that a cleanup plan, voluntarily undertaken by the responsible party under the oversight of DEP to passively capture discharges of oil and water as they occur along a hillside at the opposite side of the property from which the oil enters the subject property.

Assume a risk based study offered by the responsible party, recommends the passive capture of contaminated discharges to the surface. No active remediation is anticipated in the Act 2 voluntary plan. The subsurface contamination will remain.

One last assumption is that the owner of the apartment complex was not a party to the Act 2 plan but will be requested to agree to Institutional Controls (deed restrictions) on the use of the property as well as engineering controls including installation of a lining within the storm water drainage system along with installation of a vault catch basin to gather moving oil.

Controlled Recognized Environmental Condition (CREC) is a new term introduced in the ASTM E1527-13 standard for Phase I Environmental Site Assessments (ESAs). The Controlled REC concept was introduced to address contaminated sites that have received risk-based regulatory approval, where no further remediation is required but residual contamination still exists at a site and the property is subject to some sort of control or use restriction. These sites, where contamination is controlled but could still pose ongoing or future obligations on the owner (such as special precautions during construction or grading activities), have been a source of some confusion to the environmental due diligence industry with regards to how they should be classified. The ASTM definition of CREC in the E1527-13 standard is as follows: “a recognized environmental condition resulting from a past release of hazardous substances or petroleum products that has been addressed to the satisfaction of the applicable regulatory authority (for example, as evidenced by the issuance of a no further action letter or equivalent, or meeting risk-based criteria established by regulatory authority), with hazardous substances or petroleum products allowed to remain in place subject to the implementation of required controls (for example, property use restrictions, activity and use limitations, institutional controls, or engineering controls).”

Do you believe this case study condition to be a “Controlled Recognized Environmental Condition” CREC under ASTM 1527-13?

Yes

Uncertain