Has Environmental Contamination Cracked Your Nest Egg?

Posted on April 11, 2019March 22, 2024 by Alex Miller

How the value of your dry cleaning business can be affected after contamination is found.

Written by Jeff Carnahan, LPG, President, EnviroForensics
As seen in the April 2019 issue of Cleaner & Launderer

At the threat of mixing metaphors right out of the gate, I’d like to start this article by referencing a fable we all know; that of the ant and the grasshopper. While the care-free grasshopper chirped away and enjoyed times of plenty, the industrious and hard-working ant busily labored to store food for winter. When readily available food became scarce as winter fell, the grasshopper starved but the clever ants remained well-fed from their stockpiles. I have had the pleasure of meeting and working alongside many dry cleaners throughout my career, and their work ethic and wisdom have consistently impressed me. Without fail, I’ve heard it told by them that the hard work they’ve put into their business is intended to help build-up winter stores for lean times, their retirement, or to pass on to their children. A lot of people refer to this as building a nest egg. Regardless of what you call it, the monetary value of the hard work, blood, sweat, and tears that you’ve invested in your business is held in the potential sales price of your business assets and potentially, your property.

The Good Old Days are Over

During all the years of doing business, the fact that your future nest egg could be potentially devalued by an environmental contamination problem was probably not part of the equation. Decades ago, it didn’t need to be. Back then, when businesses and properties were bought and sold, it wasn’t standard practice to even consider the environmental condition of the land. As such, the value of the sale wasn’t affected. The business owner could cash-in for a fair price and go on to enjoy their retirement.

Today, however, nearly every commercial property and business acquisition involves a real estate and environmental due diligence process intended to specifically and thoroughly find out whether environmental contamination has occurred. The days of expecting someone to buy your business without determining if they would be buying environmental liability, or your property without finding out if its value has been impacted by contamination, are gone.

Don’t let environmental contamination crack your nest egg. Download our questionnaire to review your real estate due diligence situation.

Let’s talk for a minute about the environmental assessment process during sales transactions, and then we can go over a couple of things that you can do to help yourself out and minimize the damage to your nest egg when the time to retire comes. For those who may be in the mode of buying business and properties, this may come in helpful for you as well.

What Happened?

A short discussion about the environmental due diligence process was presented in my February article, How Clean is Clean Enough? Regulatory Closure vs. Environmental Cleanup, but I’ll breakdown the process step-by-step. Back in the late 70s and 80s, a series of laws were passed by Congress that put into place two major facts:

Certain chemicals were determined to be hazardous and had to be managed in specific ways; and
As a generator of wastes containing these certain hazardous chemicals, businesses or individuals would forever carry any associated liabilities resulting from these chemicals.

The laws were comprised primarily of the Resource Conservation and Recovery Act (RCRA) and the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Some of you may remember these days because suddenly you had to manage your solvent waste differently and you had to ramp-up your record keeping.

It may have even seemed unfair that the federal and state governments were going to be holding you responsible for what contamination may have happened as a result of your business, or on your property, regardless of if you had anything to do with it. The fact was, and is, that RCRA and CERCLA ended up causing a standard of practice in the property and business transaction world that was intended to avoid those environmental liabilities from being transferred along with what was being sold.

How it Works These Days

When a business entity buys a property, if a series of environmental inquiries aren’t performed properly, they could accidentally be held responsible for contamination in accordance with CERCLA. If the inquiries are performed correctly, the buyer may qualify for an exemption from those CERCLA liabilities. The first inquiry that is needed is called a Phase I Environmental Site Assessment (ESA). The Phase I ESA needs to be performed by a qualified Environmental Professional (EP), like an environmental consultant. Your consultant will follow a specific set of due diligence standards to look at environmental records and databases to determine what the sale property has been used for in the past, and what has gone on at surrounding properties to see if those activities could potentially have impacted the sale property. They will also come to do a site visit to walk around the property and buildings to see if any present operations may be potentially causing a problem. They’ll also need to do an interview to ask some standard questions about knowledge of environmental issues, etc. If they do find something during this process, they may have to put in their report that a Recognized Environmental Condition (REC) has been identified. If a REC is identified during the Phase I ESA process, then there need to be samples of soil, groundwater and/or vapor collected from the sale property to determine if an actual environmental release has occurred.

The subsurface investigation process is called the Phase II ESA. If an environmental release is identified at the property, there will be additional investigations to gather more data. There needs to be more data to gain insight into the potential cost of cleanup so that the buyer and seller of the property can start talking about how the price is impacted, or even if the buyer wants to still buy the property. The cost estimating process will also need to take into consideration that the cleanup would be performed in a state agency program so that a regulatory closure can be received afterward.

The Challenge for Dry Cleaners

Here is the tricky part; due to the prevalence of environmental issues related to use of perchloroethene (PCE, Perc) in the dry cleaning industry, just the fact that a dry cleaner exists, or used to exist, at or adjacent to the sale property, is enough to trigger a Phase II ESA per the due diligence standards. At this point in the property transfer process, if you want to continue with the sale, there will definitely need to be sampling. The process can be stopped right after the Phase I ESA without any liability to the property owner, but that won’t get the property sold. This is a very uncomfortable spot to be in, I’m sure. Many of you know this for a fact.

Putting the property sale process aside for a minute, when a business is being sold, a similar due diligence process is undertaken by the potential buyer. They will want to make sure that the business they are acquiring doesn’t have a current or hidden environmental liability that could hit the new owners at some point in the future and affect the value of their investment. Businesses are usually sold either as asset-only acquisitions, or stock plus assets acquisitions. The CERCLA liability that we are talking about is tied to the stock of the company and its owners. Because of this, many times business buyers will want to purchase just the assets (equipment, customers, brand, goodwill, etc.) of the company, and not acquire the property or stock. That allows the buyer to skim the cream off the top of the business, and leave the junk at the bottom, like the environmental liability, for you. This is a way, however, of getting the job done and keeping a good bit of value for your nest egg.

Preserving Your Nest Egg

Let’s talk about a couple of ways that you can preserve the integrity of that nest egg in preparation for the time when you are ready to cash-in and move on.

Read how a prominent second generation dry cleaner proactively prepared their exit strategy

First, there are a variety of insurance products available that you can purchase as protection against environmental liability. The insurance industry started specifically excluding coverage for environmental pollution from their general liability policies back in the mid-80’s, right around the time that the CERCLA responsibilities were being formed. However, environmental pollution liability can still be insured today as specific policies or riders if it needs to be a part of your calculation. If you think that these may be of interest to you, I encourage you to reach out to your agent or a representative for a carrier that is involved in the dry cleaning industry. An insurance company with a long history and knowledge of dry cleaners would probably be best.

Another way to help preserve your nest egg against devaluation from contamination issues is, of course, those old general liability policies from before the mid-80s, when there weren’t specific exclusions. From my experience, this is usually the time period when environmental releases actually occurred anyway. Find them and assess their value. Even if there are no known environmental releases associated with your dry cleaning business, having these old policies in hand may be what is needed to convince a potential business or property buyer that they won’t be stepping into a problem that can’t be paid for if they close the deal with you. Those old policies are an asset to your business, so they should be part of your nest egg calculation.

Once triggered historical commercial general liability (CGL) policies may be used to for legal fees, defense against claims, site investigation, remediation/cleanup, interim remedial measures, building legal case, potentially responsible parties (PRP) search, interfacing with agencies and prior costs be may be retroactively recovered.

Contact us so we can help you protect your nest egg.

As seen in Cleaner & Launderer

Jeff Carnahan, LPG, has 20+ years of environmental consulting and remediation experience. His technical expertise focuses on the investigation and interpretation of subsurface releases of hazardous substances for the purpose of evaluating and controlling the risk and cost implications. He has focused on being a partner with the dry cleaning industry for the past decade, and he’s a frequent contributor to the national dry cleaning publication Cleaner & Launderer. He is an industry leader in understanding that environmental risk includes not only cleanup costs, but also known and unknown third-party liability.

Case Study: Second-generation dry cleaner prepares exit strategy

Posted on April 11, 2019March 22, 2024 by Alex Miller

Insurance archeology uncovers historical insurance that funds the environmental cleanup

A prominent dry cleaner located on main thoroughfare in Highland, Indiana.

The dry cleaner owner wanted to sell his family’s business and property, which he anticipated had contamination. He contacted EnviroForensics to proactively develop a plan of using the business’ historical insurance to fund the environmental investigation and cleanup work. This allows him to sell a “clean” property without any environmental encumbrances maximize his property values.

Issue

Environmental due diligence revealed soil and groundwater contamination from historical dry cleaning operations. The vapor intrusion assessment indicated that the contamination was contributing to documented indoor air impacts at the adjacent restaurant. This meant the dry cleaner was on the hook to assess the nature and extent of PCE contamination in the soil, groundwater and air; and to clean it up.

Action

EnviroForensics conducted insurance archeology, which located historical insurance policies to fund all the environmental investigation and remediation, including the indoor air impacts next door. EnviroForensics provided a site-specific remediation plan to clean up the soil and groundwater that reduced the long-term monitoring activities and included a vapor mitigation system to mitigate the indoor air impact at the neighboring restaurant.

Results

EnviroForensics provided an effective environmental remediation solution and effectively mitigated the vapor intrusion concerns. The insurance carriers ultimately agreed to fully cover all costs. The owner did not have any out-of-pocket expenses. When the time comes to sell, the property value will be maximized—thanks in a large part to the owner’s proactive planning.

Contact us for more information.

What makes cleaning up perc spills so expensive?

Posted on February 28, 2019March 22, 2024 by Alex Miller

PERC IS ONE OF THE MORE EXPENSIVE CONTAMINANTS TO CLEAN UP. HERE’S WHY IT’S SO EXPENSIVE TO CLEAN UP AND WHAT YOU CAN DO ABOUT IT.

Dry cleaners are keenly aware that the use of tetrachloroethene (PCE, known as Perc) in the textiles industry has become as heavily regulated as nearly any other industrial chemical to date. In fact, environmental concerns resulting from the current or past use of Perc are practically as common as those arising from old gasoline stations. Everyone has seen the vacant, seemingly valuable, corner lot that used to house a bustling gas station yet is now sitting in ruin. These old gas stations are known to have been the cause of environmental problems, and the high cost of the cleanup is often the reason why they go dormant for so long. Unfortunately, the amount of time and money that is required to investigate and ultimately clean up dry cleaner sites that have been impacted with Perc can be several times higher than at typical gas station sites. A common gas station site falls into the $350,000 range, and we have seen average closure costs for dry cleaner sites more in the $1 million to $1.25 million range. What makes Perc so much harder and more expensive to clean up than petroleum?

This article discusses a few of the complicating factors about Perc releases that make them so unique and so darn expensive.

1. PERC IS HEAVIER THAN WATER

Part of the reason that Perc releases are so challenging to investigate and cleanup is because of its chemical properties. PCE is over 60% heavier than water under normal conditions and sinks to the bottom while the groundwater floats on top. Likewise, when a release of Perc to the ground occurs and it reaches down to the groundwater table, it will continue to sink until it hits a layer of dense material, like clay.

Illustration of perc contamination sinking through the groundwater to the bedrock while the petroleum sits on top of the groundwater — An illustration of PCE contamination vs petroleum contamination.

It will sit there and continue to dissolve for a long time, which can cause a long groundwater contamination plume. The groundwater plume may also be very deep, depending on the geological conditions in your neighborhood. Big and deep means that more off-site properties are likely to be impacted as the plume grows. If multiple clay layers exist, there may be continuing sources of groundwater impacts.

FACT: PERC IS HEAVY AND CAN TRAVEL FAST AND FAR, WHICH CREATES LARGE PLUMES IN GROUNDWATER.

Petroleum products, including gasoline, diesel fuel, Stoddard solvent, and the like, are less dense than water. In contrast to Perc releases, once a petroleum spill reaches the groundwater table it floats on top of the groundwater and migrates horizontally. As a result, most petroleum releases are fairly shallow and comparatively simple to investigate and cleanup.

2. PCE IS RESISTANT TO NATURAL BREAKDOWN

There are naturally occurring microbes, bugs, in the subsurface that breakdown many organic compounds and materials. In the shallow zones, there is usually plenty of oxygen in the soils and groundwater, and oxygen-loving bugs thrive here. Some varieties of these bugs readily use petroleum contamination as a food source, which has the result of slowly reducing the amount of petroleum contamination over time. So, recall that most gas station and petroleum pollution is present in the shallower zones of the subsurface where there are plenty of these helpful, oxygen-loving bugs that eat petroleum, and voila; you have a cheap cleanup method. In fact, a common and cost-effective remediation strategy in these situations involves simply monitoring the effects until cleanup objectives are reached, which is called Monitored Natural Attenuation (MNA).

Conversely to petroleum releases, the type of bugs responsible for the biodegradation of Perc and other chlorinated solvents thrive in an environment without the presence of much oxygen (anaerobic conditions). The most common biological process that naturally occurring bugs use for breaking down Perc is called reductive dechlorination. In this process, the bugs cause hydrogen atoms present in the groundwater (H₂O) to be substituted for chlorine (Cl) atoms in the Perc molecule.

Chemical structure of Perc or PCE degrading into TCE, cis-DCE, and finally VC — Follow the loss of chlorine (Cl) atoms through the degradation process.

That’s why it’s called dechlorination. Each time a chlorine atom is plucked off the parent Perc molecule; Perc, which has four chlorine atoms, is transformed to trichloroethene (TCE), which has three chlorine atoms, to dichloroethene (DCE), which has two, to vinyl chloride, which has one, and ultimately to ethene, which is basically a Perc compound with no chlorines at all. While Perc and all its other daughter products are considered toxic, ethene is non-toxic.

So, cleanup of Perc spills can be performed taking advantage of these naturally occurring bugs, but they aren’t really found in very common places. The conditions present in the subsurface need to be studied carefully and a remediation plan needs to be devised that takes advantage of this complicated, naturally occurring process to help achieve cleanup objectives where spills of Perc have occurred. Many times, naturally occurring conditions in the groundwater must be enhanced to take away the oxygen and we may even need to inject more of the right kind of bugs to speed up the reductive dechlorination process.

FACT: THE PERC DECHLORINATION PROCESSES ADDS SIGNIFICANT COST AND TIME TO REMEDIATION PROJECTS, AS COMPARED TO THE SIMPLE MONITORED NATURAL ATTENUATION OF A PETROLEUM PLUME.

3. PCE VAPORS ARE PERSISTENT AND MOBILE

Not only is Perc resistant to natural degradation, it also can remain in the soil as a vapor for a long period of time without breaking down. As all dry cleaners know, the volatile nature of Perc means that it will evaporate from a liquid to a vapor easily, which is one of the characteristics that make it such a good cleaning solvent. However, once PCE is released to the subsurface it also volatilizes as it disperses through the soil. If the vapors reached an occupied structure, like a house, and migrate into the indoor living space, vapor intrusion (VI) has occurred.

An illustration of perc soil vapors moving through the soil and into the basement of a home — An illustration of vapor intrusion.

VI concerns are at the top of most regulator’s list of concerns since Perc is considered a probable carcinogen. Just like we discussed above, the special kind of bugs needed to break down Perc don’t like oxygen, and the soil where the Perc vapors are is full of oxygen. Perc vapors don’t breakdown, and they can cause VI concerns for a long time. Since PCE vapors do not readily breakdown, they have been known to travel great distances even from minor solvent spills. Many dry cleaners are located close to their customers in highly populated areas, and as a result the risk of VI occurring from a subsurface release is compounded.

FACT: THE VI EXPOSURE PATHWAY IS AN EXTREMELY COMPLICATED PROCESS, WHICH REQUIRES A SOPHISTICATED AND KNOWLEDGEABLE ENVIRONMENTAL PROFESSIONAL TO ADEQUATELY INVESTIGATE AND ADDRESS THE PATHWAY. BECAUSE OF THIS, COSTLY VI INVESTIGATIONS AND MITIGATION SYSTEMS COME WITH NEARLY EVERY DRY CLEANER SITE WHERE A RELEASE OF PERC HAS OCCURRED.

On the flip-side, VI issues occasionally happen with gas station sites, but it’s not all that common. The petroleum hydrocarbon compound Benzene is a major component of gasoline spills. It is also very volatile and is a known carcinogen, like Perc. The difference is that benzene vapors have been shown to naturally degrade in soils. As a result, the occurrence of VI concerns resulting from releases of petroleum products is limited, and the associated costs are not necessary at gas station sites as often as at dry cleaner sites.

These are only a few of the reasons that releases of PCE from neighborhood dry cleaners are commonly so much more expensive to address than those from the typical corner gas station.

WHAT YOU NEED TO KNOW

It’s crucial that owners and operators of dry cleaning operations that have historically used or presently use Perc be aware of all potential funding sources available to them, such as:

Historical insurance policies
Redevelopment cleanup grants
State Trust Funds

In those states that have dry cleaner remediation trust funds available for cleaning up dry cleaner sites, they are commonly stretched thin due to lack of funding, if eligibility is still available.

Historical insurance policies have proven to be the most powerful funding sources for dry cleaners across the country. Dry cleaner sites contaminated with Perc are complicated, expensive, and risky. Your best plan of action is to actually have a plan of action.

As seen as Cleaner & Launderer

How Clean is Clean Enough? Regulatory Closure vs. Environmental Remediation

Posted on February 5, 2019March 22, 2024 by Alex Miller

HOW TO MAKE FINANCIALLY SOUND ENVIRONMENTAL CLEANUP DECISIONS

BY: JEFF CARNAHAN

Many years ago, when I was a younger man just waiting for life to teach me the lessons I’d need, I had a brown, four-door 1976 Ford Maverick. This thing wasn’t pretty, and it certainly wasn’t cool, but it got me to school and to work, and occasionally it would deliver a brave girl and I to the movies on a Saturday night. I spent the time needed to change the oil and replace the filters, but for the most part I took for granted how important it was to me. One day on my way to somewhere, I heard an awful clunk and it just died. The first thought through my head was, “Oh no! How much is this going to cost me?” After a $50 tow to the shop and following several hours of waiting, the mechanic asked me this question, “Well son, do you want it to run, or do you want it fixed?”

I’m sure you can figure out the rest of the story. Since I was counting pennies at the time, I chose to have the minimum amount of work done to get my car running and back on the road immediately for the cheapest amount possible, rather than investing the time and money into getting it fixed correctly. I won’t bore you with the details but be assured that when that old Maverick died for good soon after, I was left high and dry with no transportation and wishing I’d have made a different decision a few months prior. That was an important lesson for me, and one that I keep with me.

TIP: FIX THINGS RIGHT, AND THE INVESTMENT WILL MORE THAN PAY FOR ITSELF.

I’d love to say that it only took that one incident for me to learn this lesson. It’s funny how life keeps giving you opportunities to learn.

Most of us have an example of how we’ve experienced this situation in the past, but when these types of decisions must be made in business it’s even trickier. In your experience, was it during a dry cleaning machine repair job or when fixing a leaky roof, or even as you tried to put yet another quick fix on that temperamental boiler? Environmental cleanups probably don’t come to mind for most folks, but the exact same thing applies for them. There are three components to dealing with an environmental contamination problem:

Immediately halting any human exposure to chemicals that may be occurring;
Cleaning up the contamination on-site and off-site; and
Getting a Closure, or No Further Action, Letter from the state regulatory agency.

Once the necessary work has been conducted to stop human exposure, the question then becomes, “Now, do you want it clean, or do you just want a regulatory closure?” This may be putting the cart before the horse a little bit, but let’s leave the discussion about why immediately halting human exposure is top priority and non-negotiable for a later edition, and let’s focus on the interplay between cleaning up and getting regulatory closure.

WHAT DOES “CLEAN” MEAN IN AN ENVIRONMENTAL CLEANUP?

When performing an environmental cleanup, there is very little basis to involve the word “clean”. True clean never really occurs. There are only various levels of not quite, and at some point, it’s “clean enough”. In the world of environmental contamination there are numerous people setting the standard for when a property can be called “clean enough”. Most regulators worry mainly about two things beyond the current human exposure component:

Ensuring that the contamination problem is getting better rather than worse
Ensuring that there is no threat of future human or ecological exposure

Believe it or not, your property doesn’t have to be very clean at all for these boxes to be checked. Other parties who will be deciding if your property is clean enough are future purchasers and their financial lenders. They will not only be looking at whether you have a regulatory closure, but they will also be using the general environmental health of the property to help determine its practical value. This is a component that often gets overlooked when deciding how clean is “clean enough”. If the money isn’t spent during the first crack at environmental remedy, it could cost a significant amount of money later in the form of a lower property value when it’s time to sell, or a requirement for additional environmental work to be performed to even attract qualified purchasers.

TIP: THE TRICK IS TO STRIKE JUST THE RIGHT BALANCE BETWEEN SPENDING MONEY ON ACTIVE ENVIRONMENTAL CLEANUP, AND THE FUTURE COSTS THAT COULD ARISE. THIS WILL BE A LITTLE DIFFERENT FOR MOST EVERYONE FACING THESE DECISIONS, BUT THE FUNDAMENTAL THOUGHT PROCESS REMAINS THE SAME.

WHAT DOES REGULATORY CLOSURE MEANS FOR DRY CLEANERS?

Some state environmental regulators have very prescribed cleanup standards that have been put in place for regulated chemicals and are based upon certain human exposure scenarios given various land uses. For example, the cleanup standard for tetrachloroethene (PCE, or Perc) is much less stringent for properties which are and will remain commercial or industrial in nature, as opposed to used for residential purposes. This is because commercial property users spend much less time at the property than a residential user would and are engaging in activities that are much less likely to put them in contact with subsurface contamination than the residential user. So even when regulators strictly apply cleanup standards, their definition of clean is different for commercial and residential properties.

Other states allow for the person or business entity responsible for the contamination (Responsible Party, or RP) to decide how clean is clean enough by giving them the option to determine ongoing land usage more specifically with deed restrictions that limit the type of activities property owners and users can perform. A classic example is turning a contaminated property into a parking lot, and then putting in place a deed restriction or covenant that states that the property must always remain a parking lot, and it must be maintained that way, so no one can come into contact with the contamination. In this scenario, there is no need to perform much contaminant removal beyond what is necessary to keep it from spreading to other properties beyond the owner’s control. The presence of the well-maintained parking lot surface and the accompanying deed restrictions essentially remove the “risk” of human exposure. This type of regulatory closure is called a “Risk-Based Closure”. Many RPs initially love to employ such Risk-Based Closures because they are much cheaper initially than those remedies where a substantial amount of cleanup occurs. But keep in mind the little story about my old Ford Maverick. “Do you want it fixed, or do you just want it to run?” Well, do you want it clean, which restores your property to fair market value and provides you with a more robust set of reuse options, or do you just want a regulatory closure, which doesn’t restore your property to fair market value and limits future reuse options?

Settling for a pure Risk-Based Closure in lieu of a significant active cleanup can negatively impact the value of your property. I’m not saying complete elimination of environmental impacts is wise, or even possible. In fact, most of the time, it’s not even realistic to assume that every molecule of contamination can be removed from the soil, groundwater and soil gas after an environmental release. As such, nearly every remedy contains some component of a Risk-Based Cleanup. As I mentioned a bit earlier, the trick is finding the right balance that incorporates not only your wants and needs regarding post-closure usage of your property, but also takes into consideration your ability to shoulder the significant cost of active remedy.

BUSINESS AND PROPERTY OWNERS SHOULD WANT BOTH THE REGULATORY CLOSURE AND ENVIRONMENTAL CLEANUP

Environmental cleanup is a very costly endeavor, and it can heavily burden a business. Depending on how your business is set up, the liability for contamination could actually lie with you personally. Before you make that decision about how clean is clean enough, carefully consider all that you can afford. If you can swing it, the investment in a cleaner site will pay off in the future. Be sure to consider all your financial assets that can be used to pay for environmental cleanup.

TIP: REMEMBER THAT PAST COMMERCIAL GENERAL LIABILITY INSURANCE POLICIES CAN BE TRIGGERED TO PAY FOR ENVIRONMENTAL CLEANUP. ESPECIALLY SINCE MOST ENVIRONMENTAL RELEASES ALSO OCCURRED IN THE PAST.

By levering as much cleanup power and by choosing the best cleanup option, you can add value back to your contaminated property for future reimbursement. I wish the decision I made back with my Ford Maverick had been, “I want it to run, and I want it fixed.” As is the case for many dry cleaners, you’ll be better off if you get a regulatory closure and a cleanup.

As seen in Cleaner & Launderer

Jeff Carnahan, President at EnviroForensics
Jeff Carnahan, LPG, has 20+ years of environmental consulting and remediation experience. His technical expertise focuses on the investigation and interpretation of subsurface releases of hazardous substances for the purpose of evaluating and controlling the risk and cost implications. He has focused on being a partner with the drycleaning industry for the past decade, and he’s a frequent contributor to the national drycleaning publication Cleaner & Launderer. He is an industry leader in understanding that environmental risk includes not only cleanup costs, but also known and unknown third-party liability.

Thermal remediation cleans up environmental contamination in just 120 days

Posted on January 14, 2019March 22, 2024 by Alex Miller

For decades, the site in Crown Point, Indiana served as a dry cleaner and was unsuitable for redevelopment. In four months, EnviroForensics has successfully remediated contamination at the old Family Pride Cleaners, 600 N. Main Street, by using thermal remediation. More traditional cleanup techniques can take between five and seven years to complete but using an innovative thermal remediation technology to heat the soil and groundwater beneath the former dry cleaner, levels of contamination in the treatment area were effectively eliminated in just 120 days.

The property has a long commercial history, including being the site of a beverage manufacturer in 1921. A dry cleaner operated at the property between 1961 and 2012, after which time the resulting contamination had rendered the site uninhabitable. As with most dry cleaners, the cleaning process involved using a solvent called perchloroethylene (Perc) to remove grease and stains from garments and fabrics. Perc is a hazardous chlorinated compound that is delivered to dry cleaners as a liquid. Over the years during dry cleaning operations, especially during the time before the formation of the Environmental Protection Agency (EPA) and applicable regulations, small inadvertent spills occurred which caused the soil and groundwater beneath the building to become contaminated.

cleanup equipment in fenced area behind building — Thermal remediation technology reduced contamination by 99% in just four months.

As mentioned in an October 19th IndyStar article, the soil heating technology that EnviroForensics implemented during the cleanup increased the temperature of the soil and groundwater to near boiling, which essentially created a vapor of steam mixed with the Perc that was then captured and collected by above ground equipment. The collected Perc was then disposed of properly. Once subsurface temperatures reached near boiling temperature, the system operated for three months. Within this short time, the site contamination was reduced by over 99%! Now that the property is suitable for use, the property owner is currently working to redevelop the property and make it a part of the dynamic downtown Crown Point community again.

Contact us for more information

Fear, Hope and Determination: A Tale of Two Dry Cleaners

Posted on January 14, 2019March 22, 2024 by Alex Miller

MANAGE YOUR ENVIRONMENTAL ISSUES, DON’T LET THEM MANAGE YOU.

BY: JEFF CARNAHAN

The evolution of environmental laws and regulations over the past few decades have resulted in the reality that operators of drycleaners, owners of property where drycleaning has occurred, and chemical suppliers or waste haulers can all be held responsible for an identified release of solvents to the ground, no matter how long ago it happened. I’ve worked with hundreds of drycleaners when the time has come to approach their environmental concerns, and I’ve seen the reasons why they made the decision to do so.

CASE #1 – PROACTIVELY MANAGING ENVIRONMENTAL CONTAMINATION
We have a client who came to us and was interested in addressing their fear that past dry cleaning operations had caused a contamination problem at their property. Let’s call them Happy Cleaners. The business had owned the property since the 1960s, and they had operated a Perc plant until the early 2000s, when they switched to a hydrocarbon solvent. Business was going well, so they wanted to take out a loan to expand operations, using the property as collateral.

When a property is used as collateral for a commercial loan, the lending institution requires that a Phase I environmental assessment be performed, and if the property has a history of dry cleaning operations, a Phase II subsurface investigation will also be required that includes below ground sampling. If contamination is identified during this process, lenders will most likely not allow the property to be used as collateral due to a presumed reduction in property value and the potential that environmental liability could transfer to the lender if a worse-case loan default situation were to arise.

Happy Cleaners understood these facts and they wanted to find out if contamination existed before they approached their lender so that if a problem existed, they could address the issue and get a regulatory closure before they approached their lender. This showed ambitious planning by our client, because if they had rolled the dice with the question of contamination, they could have wasted a lot of time and money dealing with the lender prematurely and potentially upset their business relationship, if things didn’t turn out well.

Happy Cleaners also had fears about how they were going to pay for the environmental contamination issue if one was identified. Fortunately, we were able to consult with Happy Cleaners and we were able to reconstruct their past general liability insurance coverage portfolio, which was worth more than 20 million dollars in coverage that could be used to pay for any environmental issues that may be discovered during due diligence.

With a solid plan in place, along with a healthy portfolio of known insurance assets lined up, Happy Cleaners performed some limited subsurface sampling to determine if a release of Perc had occurred at the property at some point in the past. True to expectations, Perc was identified in soil, groundwater and soil gas samples collected from the property and an adjacent property owned by others. The state environmental regulatory agency was notified of the problem, and the investigation process was started. I’ll spare you the gory details of the environmental investigation process for now, but after a little more than a year, Happy Cleaners was able to estimate the cost of future cleanup, verify that their insurance assets were adequate to cover the cost, and approach their lender about the loan. Once a remediation work plan had been approved by the regulatory agency, the loan was closed and Happy Cleaners was able to perform their expansion.

In the case of Happy Cleaners, they approached their fear of environmental contamination in an ambitious and calculated manner. They were fortunate in that they were in control of the process the entire time. Not everyone has that opportunity, like my second client example who we will call Scrappy Cleaners.

CASE #2 – DON’T LET ENVIRONMENTAL CONTAMINATION MANAGE YOU
Due to a series of hard knocks, Scrappy Cleaners was in the process of winding down their business. They had a thriving business back in the early 1980s when they opened, but they had been trying for years to sell their operations. Finally, they had decided just to close shop. During this time, however, an adjacent commercial property was undergoing a re-financing process and a Phase I and Phase II environmental site assessment identified Perc contamination. The source of the Perc appeared to be Scrappy Cleaners, and it had migrated to the adjacent property in soil and groundwater. The adjacent property owner notified the state regulatory agency of the issue, who in turn sent a letter to Scrappy Cleaners demanding that the contamination be investigated and cleaned up. The adjacent property owner also applied pressure.

Once their fear had transformed into determination, Scrappy Cleaners set to the effort of getting themselves out of harm’s way. They knew that they had always purchased the required general liability insurance coverage to do business, but they had thrown away a lot of files and records during the winding down process. They hired our insurance archeology division who was able to find evidence of a few policies. Although their entire portfolio of insurance coverage couldn’t be identified, there was enough evidence to compel the insurance carrier to start paying for the environmental investigation work being demanded. Ultimately, the insurance carrier looked at their own records and identified additional policies that they had written, and enough coverage was identified that the entire onsite and offsite cleanup was funded per the regulatory agency demands.

Now, obviously, business owners would much rather be in the position of Happy Cleaners rather than Scrappy Cleaners if possible. These were two examples, however, that demonstrate that whether you start out in complete control and systematically walk through evaluating and managing your environmental liability, or you are quickly forced into dealing with them; fear doesn’t have to be the driving emotion. Call someone who has been through this before to get perspective, become determined, and put these issues behind you because they aren’t going away. Also, find yourself a qualified environmental consultant who knows your business concerns, as well as your technical needs. Remember, they work for you and you are in charge.

For more information, please fill out our contact form.

As seen in Cleaner & Launderer

Jeff Carnahan, LPG, has 20+ years of environmental consulting and remediation experience. His technical expertise focuses on the investigation and interpretation of subsurface releases of hazardous substances for the purpose of evaluating and controlling the risk and cost implications. He has focused on being a partner with the dry cleaning industry for the past decade, and he’s a frequent contributor to the national dry cleaning publication Cleaner & Launderer. He is an industry leader in understanding that environmental risk includes not only cleanup costs, but also known and unknown third-party liability.

How Does It Work? Insurance Archeology and CGL Policies

Posted on June 15, 2018March 22, 2024 by Alex Miller

LEARN HOW POLICYFIND USES INSURANCE ARCHEOLOGY TO PUT THE POWER OF THE CGL POLICY BACK IN THE HANDS OF THE POLICYHOLDER

BY: KRISTEN DRAKE

Over 25 years ago, EnviroForensics and PolicyFind’s CEO Steve Henshaw, P.G. discovered the power contained within historical commercial general liability (CGL) insurance policies in the face of a lawsuit or an environmental issue. Henshaw discovered and has since proven, that using a company’s historical CGL insurance policy is an effective funding source to pay for the expensive cost of investigating and cleaning up environmental contamination.

WHAT ARE COMMERCIAL GENERAL LIABILITY INSURANCE POLICIES?

CGL insurance policies are purchased by business owners to cover them against their business’ liability exposures. This is very important in determining whether an individual or business’ old insurance policies can be used to pay for environmental investigations and clean-ups.

This makes CGL policies very important protection for corporate policyholders because they broadly provide defense and indemnity coverage against claims for bodily injury and property damage. Coverage includes products, completed operations, premises, and operations, elevators, and independent contractors, to name a few.

Tabs of old insurance files that can be used as evidence of historical insurance coverage — Hiring a proven Insurance Archeologist can help your company uncover millions of dollars in usable insurance assets to cover legal fees and pay for investigation and remediation of environmental contamination.

HOW DO “HISTORICAL” COMMERCIAL GENERAL LIABILITY INSURANCE POLICIES WORK?

In general, CGL policies have included and even excluded environmental pollution and contamination language like “unexpected and unintended releases.” Such unexpected and unintended releases mean accidental releases or accidental spills, not intentional releases, which would be better defined as dumping or disposing. CGL policies were not covering individuals and businesses for pollution or contamination associated with dry cleaning operations. A separate environmental policy would be required to cover environmental pollution and contamination.

So, if you or your business bought CGL insurance before the policies contained absolute pollution exclusion language, you are likely to have insurance coverage that can address environmental contamination, even if that contamination has only been recently discovered.

In addition, old policies provide a defense against a claim or suit. In some states, a claim or suit could be a letter from the regulatory agency or a neighboring property owner demanding a response to identified environmental contamination. In other states, the courts have determined that the insurers must only defend an actual lawsuit.

‘OK’, you might ask, ‘that sounds great, but what if I can’t find my old policies or policies that were bought by the former owners?’ Well, those old policies can still be found. While there is no guarantee, contacting an expert insurance archeologist increases your chances of finding old policies or evidence of old policies. PolicyFind, a division of EnviroForensics, boasts an 85% success rate at finding old insurance policies or evidence of old policies.

Insurance archeologist looking over old insurance files in front of sunlit window — Insurance archeologists have the knowledge-base to find evidence of CGL policies, and advise clients on how those policies can be used. Frequently clients say hiring an Insurance Archeology team was one of the best investments they’ve made and helped further their company’s success.

USING YOUR POLICIES FOR DEFENSE AND INDEMNIFICATION

After finding the old policies, it is then critical that you know how to use these policies to your benefit. Insurance law is different from state to state and not every state has good law for the policyholder. Insurance policies contain different language which can vary by carrier and by policy period.

In pulling this concept together:

A defense includes paying for lawyers dealing with the environmental contamination. A defense would also include quantifying an individual or business’ exposure and liability. The only way to quantify environmental liability is to collect environmental samples (e.g. soil, soil gas, indoor vapor, groundwater). It would also mean determining how expensive a cleanup would be, which means that, aquifer tests, feasibility studies and remediation technology evaluation should be covered.
Indemnification is the process where the insurer brings the insured back to where they were before the damages occurred, as stipulated within the insuring agreement. In other words, indemnification makes the insured ‘whole’ again by paying for damages or losses already sustained and expenses already incurred.

PRACTICAL APPLICATIONS OF YOUR CGL POLICIES

Historical insurance policies can be beneficial in providing coverage for a number of different situations. For example:

Plumbing and building supply companies defending product liability claims from exposure to products sold containing asbestos.
Municipalities involved in litigation.
Manufacturers of pumps defending product liability claims from exposure to asbestos gaskets.
Churches and schools defending personal injury claims.
Dry cleaners defending against environmental property damage claims brought by neighboring business property owners.
Business property owners defending property damage claims by state environmental authorities.
Insurance companies defending policyholders against environmental property damage claims and wishing to document insurance coverage of other potentially responsible parties.
Real estate developers, environmental consultants, attorneys and regulatory agencies.

WHAT YOU CAN USE CGL POLICIES TO FUND

Infographic illustrating the what commercial general liability policies can be used to pay for, such as environmental and defense costs. — Once triggered historical commercial general liability (CGL) policies may be used to for legal fees, defense against claims, site investigation, remediation/cleanup, interim remedial measures, building legal case, potentially responsible parties (PRP) search, interfacing with agencies and prior costs be may be retroactively recovered.

The process of using old insurance policies has many parts. There may be an insurance archeology component, a legal component and an environmental component and they all have to work together. Understanding all aspects of the process is not your job, that’s why you hire experts to uncover your insurance assets.

EnviroForensics and PolicyFind have successfully used the historical insurance of businesses, individuals and even defunct and bankrupt companies as sources of funding to pay for the investigation and cleanup of contaminated sites.

There are billions of dollars in unclaimed assets available to parties looking to defend environmental claims and personal injury claims. PolicyFind works diligently every day to put the power of the policy back in the policyholder’s hands – where it belongs.

Call PolicyFind’s insurance archeology experts today at 866-888-7911 or fill out our form.

PolicyFind clients commonly face immense challenges and deadlines, and they rely on our strengths to provide solutions for them. Our team understands the unique set of circumstances that businesses face when liabilities from past business operations arise. With our help, they can overcome their inevitable feelings of anxiety, powerlessness, and uncertainty.

Kristen Drake brings more than a decade of research and managerial experience in broadcast journalism to the field of insurance archeology. Since joining the PolicyFind team in 2015, Mrs. Drake has successfully documented liability insurance programs on behalf of municipalities, manufacturers and dry cleaners. She continues to translate her expertise in source procurement and digital fact-finding, performing insurance research activities at a very high level, providing on-time execution of contracted performance goals.

How Historical Insurance Can Help Get Your Environmental Cleanup Back On Track When the Wisconsin Dry Cleaner Environmental Response Fund (DERF) Goes Broke

Posted on February 2, 2018December 6, 2023 by Jackie Cabrera

By Dru Shields
Director of Sales, EnviroForensics^®

Let’s face the facts, the dry cleaning industry has seen its fair share of environmental problems, which are very complicated and costly. Some Wisconsin drycleaners are fortunate to have access to a limited amount of funding for environmental cleanup, which is partially sustained by a tax on certain dry cleaning solvents. If their sites are eligible through the Wisconsin Department of Natural Resources’ (WDNR) Dry Cleaner Environmental Response Fund (DERF), this fund can bring financial benefits to drycleaners required to clean up their property in Wisconsin. There are a few limitations to consider, however:

The DERF process is a reimbursement program that requires you to pay upfront for the environmental investigation and cleanup. Many drycleaners don’t have the money to pay for this work. We are even aware of several drycleaners who have had to take out business loans to make upfront payments.
Over the past eight years, the DERF fund has run out of funding three times. This leaves drycleaners in a scary situation since it is a reimbursement-based program. DERF reimbursements are currently taking two and a half to three years to process, meaning that if you made a claim today for money you already spent, you might not be reimbursed until the end of 2020 or beginning of 2021. In the meantime, the WDNR has expressed no intention to slow down on its enforcement activities requiring continued investigation and remediation at impacted sites, despite the lack of available DERF funding.
The DERF program requires a deductible payment that can exceed $35,000, and caps the amount of eligible funding for each site at $500,000. Many environmental cleanups at drycleaner sites exceed $500,000 and oftentimes can be double or triple that amount.

These are frightening facts for drycleaners relying on the DERF. The one financial solution that is still available for drycleaners trying to do the right thing by cleaning up their properties are historical insurance assets. In Wisconsin, Commercial General Liability (CGL) policies from before 1985 may very well cover dry cleaners for environmental releases. This means that if a dry cleaner can find its (or its predecessor’s) insurance assets, those policies could help pay for the investigation and clean up required by the WDNR. They would likely also protect you from any neighbors who could sue for environmental damage to their property.

Our Unique Advantage
We are the nation’s leading environmental engineering firm and the industry leader for cleaning up PERC contamination from current and former drycleaners. We have worked with small business owners just like you for over 20 years and have helped Wisconsin drycleaners since 2008. In fact, we are actively cleaning up over 100 drycleaner sites right now.

Our business-oriented strategy focuses on helping business and property owners locate and use old insurance policies to help pay for the environmental cleanup work, which does not require you to make payments upfront like the DERF. Our goal is to help our clients achieve Site Closure and free them from environmental liability by cleaning up soil and groundwater contamination with minimal out of pocket expense. In the instances where our clients also own the real estate, our process can help restore their property to fair-market value. We pride ourselves on fighting for our client’s best interests.

Our process is proven; we have countless satisfied clients. Please consider having a free and confidential conversation with John Neu, our Wisconsin Sales Executive to answer any questions you may have about our services. You can reach John at 866-888-7911 or by email at jneu@enviroforensics.com.

Did the EPA just end the era of PCE drycleaners?

Posted on December 15, 2016December 6, 2023 by Jeff Carnahan

The United States Environmental Protection Agency (EPA) has announced a proposal that would bring about sweeping changes to the drycleaning industry. The measure is a ban on the chlorinated solvent trichloroethylene (TCE) being used as an aerosol degreaser and as a spotting agent in the drycleaning process. This major announcement was the first of its kind following this year’s revisions to the Toxic Substances Control Act (TSCA). Only two weeks ago, the EPA released their list of the first ten chemicals to be assessed under TSCA reform. Not only did the list include TCE, but also tetrachloroethylene (PCE), which is another one of the most commonly used drycleaning chemical.

While TCE is used mainly as a pretreatment spot removing chemical in small volumes, PCE is used as a primary solvent in which textiles are completely immersed during drycleaning. Those in the fabric care industry commonly refer to PCE as Perc. Not all drycleaners use Perc as their primary solvent, but many at least still use TCE for spot removal. If the EPA follows suit and proposes a nationwide ban on the use of PCE, many Perc drycleaners could be in serious jeopardy of losing their business, not just scrambling for a replacement spot remover. The cost to convert a Perc drycleaning operation to one of the other available solvents can be cost-prohibitive for small business owners.

The use of Perc has been losing favor slowly over time, especially on the West Coast, as new toxicological data continue to show that exposure to PCE is probably linked to an increase in risk of cancer. California enacted law in 2007 that requires all Perc drycleaning to be phased out by 2023. Historical (usually pre-EPA) drycleaning practices have also resulted in an overabundance of environmental releases to soil and groundwater, which are very costly to clean up, result in a great deal of legal risk to the responsible parties, and cause exposure concerns. The fallout for drycleaners has included diminishing clientele, difficulties getting funding for upgrades to operations, loss of rental leases, and depressed property values.

The amended TSCA requires EPA to publish the entire list of ten chemicals in the Federal Register by December 19, 2016. At that time, it will trigger a statutory deadline will be established to complete risk evaluations for these chemicals within three years. If it is determined that one of the chemicals presents an unreasonable risk to human health or the environment, EPA has only two years to address the risk. Scoping documents for each chemical will be released by the EPA within six months, which should provide more details.

In essence, the EPA may have just brought the balance of the nation up to speed with California’s Perc phase-out date of 2023. That gives Perc drycleaners precious little time to devise an action plan on how to continue operating their businesses beyond the first quarter of the 21st Century, or alternatively, to get their business exit strategy finalized.

Published: December 15, 2016

Minimizing The Impact of a Cleanup

Posted on September 21, 2016December 6, 2023 by EnviroForensics Staff

It can feel like their whole world has been turned upside down when our clients receive the news that they have an environmental contamination issue on their property that could take hundreds of thousands, or millions, of dollars to clean up. Adding to this sense of panic is the knowledge that active remediation activities can be intrusive, time-consuming, and potentially disrupt business operations. The risk of losing loyal customers during forced down-time can keep anyone up at night. That’s why EnviroForensics goes to great lengths to work with drycleaner owners to make sure we’re doing our job while also allowing them to do theirs.

Recently, we began the process of remediating a Site in Indiana where the best remedial technology necessitated work inside the drycleaner building. The owners needed to keep the business running uninterrupted, and we needed to work with them to make that happen. We put our heads together and came up with a schedule and approach to install our remedial components while minimizing the impact on the drycleaner’s ability to conduct normal business.

We moved most of the drilling outside to minimize impact to the business. — We moved most of the drilling for our ozone sparge points outside to minimize impact to the business.

The first task was the installation process involved installing ozone sparge points into the groundwater beneath the Site building. Ozone sparge technology is able to oxidize contaminants in groundwater through the injection of ozone through subsurface injection points. For this phase, we devised a way to stay out of our clients way altogether by drilling angled sparge points from outside of the building to reach the contaminants beneath the building. This innovative approach allowed for normal cleaning operations to continue inside the building during the drilling activities.

The second step of the installation process was a little bit trickier since it necessitated the installation of soil vapor extraction (SVE) wells and above ground piping inside the building. We were able to schedule this portion of the work during February, which has historically been one of the slower times of year for our clients. For two weeks, dry cleaning and laundry operations were conducted as normal from 8am to 2pm before the building shifted into remediation mode. The front desk and pick-up/drop-off operations continued as usual while our experienced install team went to work installing the SVE system from 2pm until 10pm each night. Pulling those second shift hours paid dividends for our dry cleaning partner by allowing them to keep the doors open and meet the cleaning needs of their customers. Now, while the public gets their dry cleaning finished on time, our remediation system is keeping a low profile, cleaning up soil and groundwater impacts.

Staying open is a big deal. For some business owners, it’s absolutely necessary to keep their heads above water. For others, it’s just a powerful statement to their loyal customers that they can continue to serve them in spite of their commitment to improving environmental conditions at their site. Keeping our client’s best interests in mind is a vital part of our job, and we demonstrate this on each and every project through team work and innovation to develop new solutions to old problems. We work hard behind closed doors so yours can stay open.

This poster is prominently displayed outside the actual drycleaner. It was put up to help maintain transparency between the business and its loyal customers as well as establish the drycleaner owners as stewards for the environment.