3.8   Complete Due Diligence

There are several aspects of due diligence that should be performed for most acquisitions. Prior to this step that includes three due diligence components, steps 3.2 and 3.5 contain due diligence components.

Complete Boundary Surveys

Ocean and Coastal-specific Issues: Property boundaries waterward of the high water line are often unclear and confusing. As such, it is often important to survey the boundaries of lease or ownership sites if a survey has not already been completed. Landowners, especially government agencies, may require boundary surveys. Boundary surveys for areas below the high water line can be complicated and more expensive than terrestrial surveys.

Complete Baseline Inventories

Prior to leasing or acquiring fee-title ownership of a site, inventories of the flora and fauna are needed to document baseline biological conditions and to inform the site's restoration and conservation planning. Some of this baseline biological information may also be used in the Environmental Site Assessment (see below).

Ocean and Coastal-specific Issues: Biological inventories in ocean and coastal areas require special knowledge, skills, and equipment. In particular, boats and SCUBA will likely be required, both of which can create additional liability concerns.

Fee-title-specific Issues: While recommended and useful for ownership projects, baseline biological inventories are not always undertaken for ownership projects.

Complete Environmental Site Assessments

Environmental Site Assessments (ESAs) evaluate liabilities or problems with property. ESAs are undertaken on behalf of the organization acquiring interests in the property or resource. ESAs are not required by law. Whether an organization chooses to undertake an ESA depends on the amount of risk the organization is willing to assume. ESAs can reduce liabilities associated with the property. Organizations should consider consulting an attorney to understand the applicable laws and regulations as well as how to mitigate risks.

Environmental Site Assessments are undertaken prior to leasing and ownership projects to determine the baseline environmental conditions of a site. The environmental conditions of a site will reveal whether the site is contaminated in some way that could create clean-up liability concerns under the federal Comprehensive Environmental Response, Cleanup, and Liability Act (CERCLA) and similar state laws.

Generally, formal ESAs conform to standards set by the American Society for Testing and Materials (ASTM) and often take one of three forms: Transaction Screen, Phase 1, and/or Phase 2 (although several additional variations of ESAs exist). Depending on the location and historical use of the site and its surrounding, one or more ESAs may be required.

Often, if a site has never been used for or exposed to industrial or other potentially contaminating uses and if the site is not adjacent to or near other sites that have been used for or exposed to industrial or other potentially contaminating uses, then a simple Transaction Screen may be all that is necessary. However, if either of these two circumstances exist, then a Phase 1 and Phase 2 ESA are usually necessary. The fundamental difference between a Phase 1 and a Phase 2 ESA is that the former typically relies on research into the use-history of the property, along with some on-site observations, while the latter often incorporates soil, sediment, water sampling, and laboratory analysis to identify the presence of specific contaminants and their relative concentrations.

Numerous data sets may feed into ESAs, including biological inventories, sediment and water quality sampling, historical use information, title search information, and state/federal data on hazardous materials, contamination, and pollution. Some form of ESA is recommended for all leasing and ownership projects.

ASTM-certified environmental professionals should be consulted to make ESA need determinations and to complete ESAs as per ASTM standards if organizations want to use the innocent purchaser defense under CERCLA. The results of ESAs can affect the transaction negotiations (i.e., indemnification warranties).

Ocean and Coastal-specific Issues: In marine waters, issues such as creosote pilings, wood debris, industrial and municipal outfalls, abandoned structures and vessels, contaminated sediment, and other types of foreign materials may be present and create liability. The fluid environment of ocean and coastal areas facilitates the transportation of contaminants. It common to find water quality and sediment issues in urbanized ocean and coastal areas.