Industry Insights

Environmental due diligence is fundamental to transactions involving properties that may have been subject to a hazardous substance release. Although such due diligence remains an important aspect of a successful property acquisition, the risks of due diligence have increased as more environmental conditions must be reported to the Department of Energy and Environmental Protection (DEEP).

As of July 1, 2015, more stringent reporting requirements under the Significant Environmental Hazard (SEH) statute, Conn. General Statutes §22a-6u, became effective. These changes originally passed in 2013 by Public Act 13-308 significantly lower certain reporting thresholds and will result in increased reporting to the DEEP.

The SEH statute requires reporting to the DEEP of the discovery of certain environmental conditions. Specifically, a “technical environmental professional” that discovers certain environmental conditions during the conduct of a site investigation is required to notify his/ her client and the property owner of such condition. The statute then requires the property owner (and in some cases the technical environmental professional’s client) to notify the DEEP of the hazard within a certain time period. The DEEP may then require the property owner to further investigate, mitigate and/or abate the condition.

Notably, the changes have significantly lowered certain reporting thresholds. For example, some important changes include the following:

• The reporting threshold has been lowered from 30 times to 15 times the Residential Direct Exposure Criteria for metals, PCBs and volatile organic compounds (some substances exempted) in soils within 2 feet of the ground surface if the property is in residential use.
• The reporting threshold has been lowered from 30 times to 10 times the volatilization criteria for volatile organic compounds in groundwater within 15 feet “of” a building instead of “below.”
• Notification is required for groundwater contamination located within 200 feet in any direction of a drinking water supply well.

It is also important to note that for certain hazards, the changes to the statute require the property owner to conduct specific actions to evaluate and confirm the hazard within short time periods of time.

The impact of the changes to the SEH statute will result in increased reporting to the DEEP. Therefore, buyers, sellers, lenders and property owners conducting environmental investigations should plan for the possibility of a SEH reporting obligation. Prior to the conduct of site investigations, the parties should address how they will manage a SEH reporting obligation and who will be responsible for the notification, responses actions and costs. Parties to a transaction should also address who will be responsible for any long term response actions (and associated costs) that may extend past the closing date of the transaction.