An RTC Perspective on Environmental Risk

Article excerpt

The Resolution Trust Corporation (RTC) was created by Congress in August 1989 to handle the massive financial crisis caused by the combined factors of the overall economic downturn and widespread abuse in the thrift industry. To date, the RTC has closed or sold over 630 savings institutions and achieved asset sales and collections of more than $234.1 billion.

Included deep in the massive FIRREA legislation that created the RTC are sections that require it to report on properties "with natural, cultural, recreational, or scientific values of special significance." Little mention is made, however, of the need to manage or report on environmental hazard issues.

Yet some 16 to 20 percent of RTC properties have been identified as having some form of environmental problem. These range from non-friable asbestos to large Superfund sites. These percentages seem fairly typical.

An independent study conducted by Boelter Environmental Consultants in 1989 found that about 19 percent of all properties held by members of the Mortgage Bankers Association were impacted by environmental hazards. The most common problem areas were: asbestos (49 percent), surface/groundwater contamination (33 percent), and underground storage tanks (23 percent). These figures are generally in sync with those experienced by the RTC.

INVESTIGATION

Asset manager contractors for the RTC are required to inspect all properties (excluding single-family units) to determine if an environmental issue is present. In conducting the required reconnaissance and completing the environmental checklists, asset managers must look for the obvious--drums of chemicals and damaged asbestos pipe wrappings, as well as the more subtle--soil discoloration, stunted or dying vegetation, and unusual odors.

In addition to just looking at a physical structure, the RTC also requires the investigation of soil conditions, storage areas, and surrounding acreage areas that may have been overlooked during past inspections.

All asset management contractors are given periodic training in property inspection techniques as it relates to searching for potential environmental issues. Much of this training emphasizes the common sense approach: "When in doubt, check it out."

FURTHER STUDY

Once an RTC property is inspected and found "clean" of environmental problems, no additional follow-up is needed unless new issues become known. However, should a checklist indicate there may be an issue to resolve, then the asset manager contractor will engage an environmental engineering or consulting firm to complete an additional review.

Selecting an environmental contractor is often difficult because there are few industry standards designating which firms are qualified to complete environmental studies, much less what should be included in these studies. Additionally, many firms with roots in other fields--including real estate brokers, civil engineers, and building contractors--have attempted to enter this booming industry, with mixed results. Therefore, asset manager contractors must exercise great care in selecting a qualified firm to perform further investigation of a property.

The firm selected will conduct a Phase I (also known as Level I or ESA I) audit or other environmental study. Such studies normally range from $1,500 to $5,000 in cost and can be completed in two to six weeks.

The preparer of the Phase I environmental site assessment will review file information and historic data available from federal, state, and local agencies. A study will also include actual site visits, review of aerial photos (going back at least 20 to 30 years, where available), and review of all known contaminated sites in close proximity. In some cases, a preliminary asbestos survey is conducted as well.

Should additional studies be indicated by the results of a Phase I, the asset manager contractor decides on the next course of action--a Phase II (testing/drilling/probing) or a Phase III (alternatives available/actual remediation). …

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