How Will California’s New Vapor Intrusion Guidance Affect ... intrusion webinar … · future investigation, not a clean -up standard • USEPA Generic AF likely not representative

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How Will California’s New Vapor Intrusion Guidance Affect Your Business? May 28, 2020 | Live Webinar

John J. Lormon Partner Energy & Environment Practice Group Leader Procopio

Daniel E. Johnson Vice President, National Partner for Brownfields, SCS Engineers

Matt Winefield Principal Winefield & Associates, Inc.

Brad Wiblin EVP BRIDGE Housing

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© 2020 Procopio, Cory, Hargreaves & Savitch LLP

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Our Panelists:

John J. Lormon John is a Partner at Procopio where he focuses his practice on environmental and energy matters. He is the chair of Procopio’s Energy and Environment Practice Group. John is very active in many professional associations including Scripps Institution of Oceanography (Directors Cabinet and Emeritus Member) and former Board Member of the California Coastal Conversancy.

Matt Winefield Matt is an engineer and businessman who has been supporting the redevelopment of contaminated properties since 1989. After redeveloping oil fields, refineries, and service stations for the California oil industry (Chevron, et al.), Matt formed his first engineering consultancy in 1997. In 2005, he added a separate engineering staffing firm to his portfolio. These two companies were successfully sold to a private equity partnership.

Brad Wiblin Since joining BRIDGE in 1994, Brad has completed the development of over 3,200 units of affordable and market-rate housing in Portland, San Jose, Irvine, Carlsbad, San Marcos and San Diego. In 1998 he opened BRIDGE’s San Diego office, establishing BRIDGE’s expanded presence in Southern California. Currently based in San Francisco, he leads the company’s Business Development team, which sources and acts on development and acquisition opportunities . Recently Brad helped establish our Portland and Seattle offices.

Daniel E. Johnson Dan is a Vice President of SCS Engineers and a National Expert on Brownfields and Landfill Redevelopment. He is highly experienced in environmental affairs, having managed or been involved with over 1,000 site assessments, including Phase I ESAs, subsurface investigations of chemicals in the vadose and groundwater zones (Phase II), and site remediation, including selection of remedial alternatives for site cleanup.

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Agenda • 1. Vapor Intrusion – How Changing Policy May Affect You

Daniel E. Johnson, Vice President, National Partner for Brownfields, SCS Engineers • 2. Impacts of the CalEPA Draft Vapor Intrusion Guidance on California Brownfield Development

Matt Winefield, Principal, Winefield & Associates, Inc • 3. BRIDGE Housing | Case Study Brad Wiblin, EVP, BRIDGE Housing • 4. Legal implications of California’s New Vapor Intrusion (VI) Guidance John J. Lormon, Partner, Procopio • 5. Q&A

Please feel free to submit questions via your chat feature on your screen and we will do our best to answer these throughout the webinar, and will also have designated Q&A time at the end of our presentation

How Changing Policy May Affect You May 28, 2020

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Vapor Intrusion

DISCUSSION OUTLINE

What is Vapor Intrusion

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Changes to California Vapor Intrusion Guidance

How the Changing VI Regulatory Guidance May Affect You

Discussion

The migration of volatile chemicals from the subsurface into indoor air.

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What is Vapor Intrusion?

Chemicals of Concern/Possible Sources – Volatile Chemicals • Chlorinated Solvents or “CVOCs”

• Examples – PCE and TCE – used extensively in industry

• Potential carcinogens drive risk if exposed

• Benzene, other volatile petroleum hydrocarbons

• Common sources: • Dry cleaners

• Industry that used solvents (circuit boards, chip fab, aerospace)

• Brownfields sites

• Leaking underground tanks/gas stations

• Automotive repair

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Potential Vapor Intrusion Pathways Simplified Conceptual Model

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Major point or supporting information goes here

Changes to California’s VI Guidance

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California Regulatory Guidance Inventory

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Good Bye to 20+ Years of Accepted Practices

Vapor Models and Guidance??

• For San Diego: San Diego County “SAM Manual” and DEH Model(s) (1990s)

• US EPA / DTSC Johnson & Ettinger based analytical model to estimate indoor air

concentrations (EPC) and verify the presence of a carcinogenic and acute health risk

• DTSC Guidance – Attenuation Factors (AFs)(2011)

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CalEPA’s Draft VI Guidance • Product of the CalEPA VI Interagency

Working Group. Five years in the

making.

• Draft Vapor Intrusion Guidance (DVIG)

Published in February 2020 -

https://dtsc.ca.gov/vapor-intrusion/

• Comment period ends June 1, 2020

• Numerous groups requesting extension

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https://dtsc.ca.gov/vapor-intrusion/

What’s the DVIG Say? • A LOT! 44 pages, plus

appendices

• Key Factors: • Extensive protocol for diagnostic work

• Attenuation Factors or AF

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Step 1 •Prioritize Buildings/Select Sampling Approach

Step 2 •Evaluate Vapor Intrusion Risk Using Vapor Data

Step 3 •Evaluate VI Using Indoor Air, Vapor, Subslab

Step 4 •Risk Management – Based on Current/Future Risk

Simplified (!) Flow Chart

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Attenuation What? Math? AF drives which sites require screening/Phase IIs and possible remediation.

Attenuation Factors (AF) are defined as ratio of indoor air to subsurface concentration, for example:

3 (Indoor Air) / 100 (Subsurface) = 0.03 (AF)

• Or Put another way: 100 (contaminant concentration in subsurface) x 0.03 (3%) (AF) = 3 (theoretical

concentration in indoor air) (3% flux)

Compare theoretical indoor air concentrations to pertinent regulatory screening levels

AFs depend on many factors:

• Building type (e.g., residential vs commercial)

• Building construction (slab, basement, crawl space)

• Sample depth (sub-slab, shallow soil gas, deep soil gas)

• Chemicals (petroleum vs. solvents)

May be estimated by:

• Empirical data analysis, Modeling, Building-specific testing (radon or pneumatic testing) 14

100 (Subsurface)

0.03 (AF)

3 (Indoor Air)

Big Changes to Default Empirical AFs

• The 2011 DTSC VI Guidance suggests an AF of 0.001 for

commercial and 0.002 for residential using the contaminant

source and 0.05 for sub-slab

• The DVIG suggests an AF of 0.03 for sub-slab and soil vapor and

0.001 for groundwater. 30 Times more conservative.

• Example Changes to Regulatory Thresholds (Next Slide)

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BRRC Medium Receptor TCE PCE Benzene

Current Proposed Current Proposed Current Proposed

Soil vapor & subslab vapor

Residential (.002 vs. .03) 240 16 230 15 49 3.2

Commercial (.001 vs. .03) 3000 100 2000 67 420 14

• We all want the same thing, to be protective of public health. The changes to AF will likely result in many more sites “screening in” and requiring indoor air sampling. Are we in fact responding to significant exposures and real health risk? At what cost?

Concentrations in µg/m3

Regulatory Thresholds: Examples of Changes

Where Did The AF Come From? EPA 2012 Database and 2015 Guidance

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# of Bldgs

DVIG Relies on EPA “Peer Reviewed” Work. Comments: • USEPA default AF (AF = 0.03) is intended only to identify buildings that may warrant

future investigation, not a clean-up standard

• USEPA Generic AF likely not representative of CA conditions

• Majority of USEPA data from sites with climates and

groundwater conditions different from California

• Only 4 California sites out of 41 sites total; 3% of data

• Data are not generally based on California building types

• Average construction date = 1938

• The USEPA study did not adequately address potential indoor

background sources

• Extensive Peer Review comments regarding issues with the EPA database

California Specific Data • Recent California-specific study covers major urban areas of the

State across 31 sites, including residential and non-residential buildings

(Ettinger et al)

• 95th Percentile AF from CA AF Study is 0.002

• Generally consistent w/current guidance but not 0.03

• DTSC Currently Developing CA AF using data from extensive data set

including sites under their purview

Bottom Line: DVIG Relies on EPA Database and 2015

Guidance, but this likely results in an unrealistic AF (0.03) and

flawed guidance.

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Discussion: What Does This Mean for Me and Why Should I Care • DVIG will result in many more sites being “screened” in

• Significant additional Phase II investigation costs and more time

• Much higher probability of needing mitigation/remediation over a longer time horizon. “Typical” additional costs: Investigation, Mitigation, O & M

• How clean is clean? Remediation standards for buildings with VIMs not clear, based on 0.03?

• Will closed cases be “re-opened?

• DVIG is “Guidance” but is it really? DVIG already being used. Underground regulation? Already being embraced by lenders, regulators, others

• Implications: Detrimental to Affordable Housing, Brownfields Sites, Infill Development and Industry. Does this make sense and is it truly in the interest of public health?

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Strategy and Tactics – How Do I Get Off This Train? • Voice concern to CALEPA regarding the DVIG, get comment period

extended and sign/send comment letter. Model letters available. • Technical Strategies

• Develop site specific, defensible data, to refute generic, empirically derived AFs and off-ramps from “guidance”

• Manage and disclose data carefully • Regulatory Strategies

• Appeal to sound science • Attempt to negotiate flexibility

• Legal Strategies • Insurance Strategies

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Impacts of the CalEPA Draft Vapor Intrusion Guidance on California Brownfield Development

Procopio Environmental Breakfast Club May 28, 2020

Matt Winefield, MS, MBA, PE Winefield & Associates, Inc.

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Index Expected Annual Returns

Treasury Bill 1.5%

Commercial Mortgage 5.5%

Dow Jones 10%

Morning Star Real Estate 10%

NASDAQ 12%

Morning Star Health Care 18%

Contaminated Real Estate > 20%

Investor Requirements

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Turning Polluted Properties Into Profits New York Times, Wealth Matters, By Paul Sullivan, Feb. 26, 2016 Decades ago, Ideal Uniform Rental operated a dry cleaner in Garden Grove, Calif., and some of the solvents it used leaked into the ground and the water supply. The contaminants traveled downhill to the city’s vehicle maintenance yard and may have crossed the street to Woodbury Elementary School.

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Case 1 – Hollywood Gas Station

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Case 1 – Comparing VI Calculations

J&E Residential 0.03 AF Residential 0.03 AF Commercial

5’ bgs 2E-08 1.2E-05 9.6E-07

17’ bgs 5E-07 4.3E-05 3.6E-06

27’ bgs 1E-06 4.7E-04 3.9E-05

Note: Risk driver was PCE from off-site source.

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Case 1 – Status in March 2020

• Purchase & Sale Agreement with housing developer could not be consummated

• All plans for affordable housing stopped, notwithstanding location in an OpZone

• Temporary use as an outdoor parking lot • Land value loss to W&A of $1.8 million

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Case 1 – My Nephew’s Question

“Uncle Matt, Why are Slurpees more important than homes for the poor?” Harry Winefield, Age 13

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Case 1 – Hope from Regional Boards

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Case 2 – South LA Vacant Lot Trade School Candidate

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Case 2 – Investor Perspective

“Matt, We’d love to build a trade school at your South LA site, but CalEPA needs to give you better direction about its vapor criteria. Brownfield redevelopment is hard enough without all of this added uncertainty. And if 0.03 is their final answer, it <bad word> kills everything in CA.”

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$70 MILLION

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A Brownfield Investor’s Recommendations to CalEPA

1. Stop using the 0.03 AF immediately 2. Direct all Regional Boards, Health Agencies, and DTSC not to use the

0.03 AF as a “guidance” ESL or clean-up level 3. Use only existing 2011 DTSC remediation guidance 4. Revisit draft VI Guidance after California data is evaluated

Let Your Voice be Heard! CalEPA Public Question & Answer Webcasts: May 14th and May 19th Email: [email protected] W&A VI Blog for Public Comment Template: https://www.winefieldinc.com/vi-blog

mailto:[email protected]



https://www.winefieldinc.com/vi-blog



Matt Winefield, MS, MBA, PE President Winefield & Associates, Inc. Mobile: 562-618-0037 [email protected] www.winefieldinc.com Acquiring Contaminated Properties & Distressed Notes

Questions & Comments


http://www.winefieldinc.com/

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BRIDGE HOUSING • 37 Year old non-profit developer

• Production-minded builder focused on

West Coast markets including Seattle, Portland, San Francisco, Los Angeles, Orange County, and San Diego

• 80% new construction, primarily infill and TOD sites

• Long term owner and manager with 110 buildings under ownership, over 16,000 apartments under management

• 11 Buildings currently under construction

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Case Study 1740 San Pablo, Berkeley

BRIDGE Housing

• Fully entitled 51 unit apartment project • Due Diligence Materials from the seller included an NFA • Seller’s pricing assumed entitled, RWQCB compliant,

ready to build opportunity

Parking pits have been removed

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• January 2016, property received a NFA letter from SF Bay RWQCB and its case was closed • In January 2019, the Water Board adopted significantly more stringent ESLs for soil vapors, creating

uncertainty over whether the previous NFA was still valid. • March 2019, BRIDGE obtained site control and, given its pre-approved entitlements, assumed the

property was ready for development within 10-12 months • During its due diligence, BRIDGE learned that the Water Board halted construction at another project

which had vapors that were below the older ESLs but above the 2019 ESLs. The developer ultimately agreed to retrofit a vapor barrier in the midst of construction.

• Our Seller agreed to amend the purchase agreement, reopen a case with the Water Board, commissioned additional soil vapor samples. We found that vapors were well below the old ESLs and would not have warranted any further action, but some VOCs were slightly above current standards.

• BRIDGE drafted a Correction Action Plan which calls for soil removal and a vapor barrier to be installed along with on-going monitoring.

• In sum, the uncertainty over environmental conditions and mitigations will added $200,000-250,000 in upfront costs and 4-5 months of delay, plus yet to be determined annual monitoring costs for up to 10 years.

BRIDGE HOUSING Case Study 1740 San Pablo, Berkeley

Brownfields Redevelopment and Reuse Collaborative (BRRC) Attendee Contact Information

Name Organization Email Phone

Robbie Ettinger Senior Principal Geosyntec Consultants [email protected] 805-897-3800

Dan Johnson Vice President SCS Engineers [email protected] 858-571-5500

Brad Wiblin Executive Vice President Bridge Housing [email protected] 415-321-3565

Matt Winefield President Winefield & Associates [email protected] 562-618-0037

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LEGAL IMPLICATIONS OF CALIFORNIA’S NEW VAPOR INTRUSION (VI) GUIDANCE May 28, 2020

John J. Lormon Procopio, Cory, Hargreaves & Savitch LLP Partner, Energy and Environment Practice Group Leader

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Project Impacts from New VI Guidance

• Creates an impractical and unattainable new standard – Technology can't meet the new limit – Up to 95% of industrial and commercial properties will be

included • Even if no human health risk due to clean indoor air

– More sites characterized as “high risk” • State Water Board will publish all impacted properties on

Geotracker • Clean-up costs will increase

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Project Impacts from New VI Guidance (cont.)

• Increased transactional costs, delays, uncertainty • No Further Action (“NFA”) designation will become nearly

impossible to obtain • Completed projects with NFAs could be reopened • Lenders and investors will be less likely to finance • Underwriters may be hesitant to place certain coverages

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Liability Protections

• Due Diligence – ASTM All Appropriate Inquiry (40 CFR 312)

• Statutory Liability Protections – Innocent Landowner CERCLA 101(35); 107(b)(3) – Bona Fide Purchase CERCLA 101(40); 107(r) – Contiguous Property Owner CERCLA 107(q) – Lender Liability Protection CERCLA 107(20) – De Micromis Exception CERCLA 107(o)

• These protections will not cover impacts from the new VI guidance

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Transactional Protections

• Changes to Traditional Terms and Conditions – Reps and Warranties – Indemnity, Defend, Protect & Hold Harmless

• Backed by insurance, letter of credit, bond, guarantees • CERCLA 107(e): can enter into agreements, but no transfer of statutory

liability

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Transactional Protections (cont.)

• Environmental Liability Reserve & Additional Collateral • Price Reduction

– CERCLA 101(35)(B)(VIII): the relationship of the purchase price to the value of the property can defeat the claim that the buyer had “no reason to know”

• Escrowed Fund or Phased Funding of Purchase Price • Environmental Liability Transfer Agreements

– E.g. pay 50% of the value of the lost deal

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Insurance Coverage Issues

• Pollution Legal Liability Policies – Unknown pollution conditions

• Property Transfer Policies – Preexisting, unknown contamination

• Cleanup Costs and Cap or Stop Loss Policies – Additional remediation costs

• Brownfields Restoration and Development – Known contamination with remediation as part of development plan

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Prospects for Legal Challenges to New VI Guidance

• Purpose of Regulatory Guidance – To help with interpretation and application of the law – Does not have the force of law – Can’t challenge the guidance itself – not justiciable – Can challenge the application of the guidance to a case

• Chevron v. NRDC, 104 S. Ct. 2778 (1984) – Under Chevron, guidance doesn’t get much deference – But the agency gets a lot of power from guidance – Guidance affects the application of law – Chevron and its progeny make it clear that the agency acting with the force of law gets some

deference if delegated authority by Congress

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Prospects for Legal Challenges to New VI Guidance (cont.)

• Yamaha Corporation Of America v. State Board of Equalization, 19 Cal.4th 1 (1998) – CA administrative law has a more deferential approach – The legislature has given state agencies board permitting and enforcement authority – Court discretion is granted to a wider range of actions by the agency

• Conclusion – Same federal and state standard - AF 0.03 – Scope of authority granted by Congress or the CA legislature

• Federal: more limited • State: broader, more deference is given to agencies by the court

– Can’t challenge until the new VI Guidance is applied to particular case

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Thank You

John J. Lormon [email protected]

(619) 515-3217

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John J. Lormon Partner Energy & Environment Practice Group Leader Procopio

Daniel E. Johnson Vice President, National Partner for Brownfields, SCS Engineers

Matt Winefield Principal Winefield & Associates, Inc.

Brad Wiblin EVP BRIDGE Housing

Questions?

Documents

How Will California’s New Vapor Intrusion Guidance Affect ... intrusion webinar … · future investigation, not a clean -up standard • USEPA Generic AF likely not representative