Thursday, December 26, 2013 12:00 AM

Environmental Risk Management for Lenders - End of Year Observations

By: Joseph Berlin, EP, CP, Judd Olson, EP
Tags: None

A lot has been written regarding the use of the new ASTM Phase I Environmental Site Assessment (ESA) standard practice (E1527-13) prior to EPA adding E1527-13 as meeting the “all appropriate inquiry” (AAI) rule. That being said, a few of our Environmental Risk Management (ERM) clients have released updated Policy or instructions to consultants requiring the use of E1527-13. Discussions with other ERM staff indicate that they plan to release updated ERM guidance upon EPA promulgating an updated AAI rule (see: for further discussion.). Depending with whom you talk that could be as early as December 31, 2013.

Here are some observations regarding lender ERM programs at the end of 2013:

·       Based on a small sample set, the ERM programs updated so far or in-process require the use of E1527-13 in 2014.

·       None of the ERM groups indicate that they will accept E1527-05 upon EPA adding E1527-13 as AAI-compliant. However, these ERM groups indicate that they will wait until EPA issues an updated AAI rule before requiring E1527-13.

·       Increased insurance limits for environmental consultants above the “old” standard $1million aggregate are becoming common. The “new” standard is becoming a $5million aggregate, especially for work done directly for the lender (i.e. Special Assets, Bank property).

·       More lenders are moving toward narrower “approved” lists for environmental consultants.  Some community lenders and credit unions are also developing or refining their “approved” lists.

·       There have been some questions regarding ERM programs and the new requirements spelled out in the OCC CREL manual (August 2013) (e.g. training, reviews).

·       A few lenders have asked about Controlled RECs (CRECs) (new term in E1527-13) for sites with closures by operation of law (i.e. automatic closure after a specified time).  The expressed concern was whether the closure by operation of law alone (i.e. no agency review) was sufficient to conclude a REC is a CREC (sometimes called a “good” REC).

·       Some newer lender policies address seller-commissioned environmental due diligence (EDD).  Such policies require highly rigorous protocol for seller commissioned environmental due diligence or will not accept such work as standard policy.  


Please contact Joseph W. Berlin, PE, EP, CP or Judd Olson, EP at 616-459-3737 or Jeff Kenneweg, EP at 513-490-0664 with any questions. See also:


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