FROM DIRT TO DELIVERY:

ENVIRONMENTAL AND CONDEMNATION PITFALLS IN CORRIDOR PROJECTS

CASSIE B. STINSONPartner,

ANDREWS KURTH LLP

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I. BASIC CONCEPTS

A. Acquisition Concepts

1. Standard Approach

– Survey & Title

– Appraisal

– Environmental Phase 1

– Make Offers

– Condemnation

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2. Major Objectives

– Project Schedule

– Project Costs

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1. Environmental Site Assessments (ESAs)

• ESA Phase I: non-invasive; identifies Recognized Environmental Concerns (RECs)

• ESA Phase 2: involves sampling; identifies Chemicals of Concern (COCs)

• ESA Phase 3: more tests to delineate extent of COCs; generate Environmental Cost Estimate (ECE)

B. Environmental Concepts

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2. Remediation Standards

• TRRP—residential• TRRP—commercial/industrial• UST rules• Groundwater

― MSD― PMZ― Pump and Treat

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C. Appraisal Considerations for Contaminated Property

Contaminant constituents: • COCs (Chemicals of Concern)

• Pathways of exposure

• Institutional controls

• Remediation standards

• ECE (Environmental Cost Estimate)

1. USPAP AO-9 and Env’l Terms:

Contamination conveyance:

Limitations on use:

Highest and best use:

Cost and timing ofsite remediation plan:

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2. Appraisals Are “Professional Opinions”

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II. SOURCES OF CONTAMINATION

A. Leaking Petroleum Storage Tanks (LPSTs)

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Results of LPST

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Cessation of Operations Essential During Remediation

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B. Chlorinated Solvent Leaks

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Pump and Treat (Just Shoot Me Now!)

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A. Modified Takes

• Requires input and approval from Project engineering group

• Must use modified take consistently for entire Project

III. ADVANCED CONCEPTS

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• Air rights (e.g., minimum elevation = 24 ft.)

• Upward limitation to surface rights (e.g., max. elevation = 24 ft.)

• Surface level (at grade? sea level?)

• Downward limitation of surface rights (e.g., max. depth = 10 ft.)

• Subsurface rights (e.g., minimum depth = 10 ft.)

pipe

gunk

1. 3D Easements—A Slice of the Vertical Column of Property

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2. Bisected and Excluded Improvements• describe specifically• pay for fuel system components, but

don’t title

3. Get a Temporary Easement on remainder

• area needed• time needed

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Ofc &

C-S

tore

PumpIsland

Pump IslandT

anks

Partial Take at Gas Station

Sign

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1. Identify Impaired Property Early

Current uses having RECs:

• Gas stations (currently operating, abandoned)

• Small industrial: auto repair, machine shop, paint shop, battery shop, car wash

• Dry cleaners

• Former rail yards

• Landfills

• Old improvements (pre-1978): friable asbestos, lead

B. Plan Ahead on Impaired Property

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2. Coordinate Team Work

Environmental:

• Order ESA Ph. 1 and 2 at same time

• Define RECs asap and inform Appraiser

Appraiser:

• Plan for initial appraisal “as if clean” and supplemental appraisal “as is”

• Define Highest and Best Use asap and inform Environmental

Tip: Schedule early site visit with FULL Team

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1. No such thing as a “standard” contaminated property – every case is unique!

C. Standard Documents Don’t Work for Non-Standard Property

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2. Use Your Documents as Tools

• You can negotiate special terms in voluntary acquisitions that are not available in eminent domain

• If it’s not in writing, you don’t have a deal• Get legal help on non-standard docs

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• Bisected or excluded improvements (don’t forget the TCE!)

• Environmental escrow agreement

• Seller’s post-closing obligations

3. Special Provisions in Offers and Purchase Agreements

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4. Deed (Fee Simple)

Standard language:

The tract or parcel of land, together with all improvements situated thereon, ….

Special Provisions:

• Include bisected improvements

• Exclude title to certain improvements

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Standard language:

“... a strip of land, 20 feet wide, more particularly described in Exhibit A, …”

Special provision:

3D Easement

5. Grant of Easement

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YES:

• Fee simple• Permanent easement• Temporary easement• Improvements in take

area• Bisected improvements

NO:

• Escrow agreements

• Env’l Right of entry

• Post-closing Seller obligations (duty to interrupt operations)

D. Condemnation Concepts

1. Acquire Only “Interests in Real Property”

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2. Consistency: special provisions in thefinal offer must be reflected in pleadings:

• right to demolish certain improvements but not take title

• bisected improvements outside “take area”

• TCE (temporary construction easement)

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3. “Woodshed” the witnesses before the hearing:

• Appraiser

• Environmental Consultant

• Right of Way Agent

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IV. CLEAN PROPERTY – BUT ENVIRONMENTALLY IMPAIRED

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• FEDERAL: — Section 4(f), NEPA— US Fish & Wildlife— US Army Corps of Engineers

• STATE— Chapter 26, Texas Parks & Wildlife Code

• COMMON LAW RE REAL PROPERTY RIGHTS:— Restrictions and reversionary rights— Park amenities

A. Laws Protecting Parks, Open Space, Bugs and Bogs

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B. Federal Test: de Minimus Impact

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• No feasible alternative

• Locally preferred alternative

• Fun with public hearings –NOT!

C. State Law Tests

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• Loss of property tax exemption

• Restrictive covenants

• Reversionary rights

D. Private/Real Property Law Issues

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Enforcement only:• Injunction to prohibit

violation: Right to enforce restrictions is a property right

• Inverse condemnation claim: damages for loss of value of benefited property

Reversionary rights:

• Acquire park interest from public entity (appraise as park, no income potential)

• Acquire reversionary rights from donor’s heirs (appraise at highest and best use other than park, but subject to current right to use as park)

2. Deed Restrictions for Park Use Only

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3. Reversionary Rights can be scary: If the donor died

100 years ago, who and where are the heirs now?

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Cassie B. Stinson

Andrews Kurth LLP600 Travis St., Ste. 4200Houston, TX 77002

713-220-4684cstinson@andrewskurth.com

Thank you

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