Ep 17: Environmental Regulations Are Changing - What Business Owners Should Understand

So what
attracted you to environmental law?

I'm sorry.

No. You're good, you're good.

That's why we. That's why it's recorded.

So I took a business
law environmental class in undergrad

that piqued my interest.

And how can I use my career
to help the environment?

And so I went to law school seeking
an environmental certificate program.

Excellent. Excellent.

So, for those of you
just joining us at Touchstone Talks,

we have Deborah Picardo here
from Carmody Law.

She is an environmental attorney.

And, we're going to be talking
a little bit about some changes

that are happening
in the state of Connecticut. Him.

Maybe it.

big change, though, right?

Like,
this was a huge process to undertake.

I remember, I remember when we were

trying to understand the transfer Act.

And so now that it's

sunsetting, you know,
now we're all trying to understand

why it's sunsetting and
and give us some background on on

why that even came to be, because I know
you were heavily involved in the process.

First,
thank you so much for having me on today.

And yes, we are at the precipice of a
major shift for the state of Connecticut.

It's an exciting time for practitioners,
and I'm sure

by way of background,
this has been a very long time coming.

The Transfer Act is a very unique law
to the state of Maine.

We're only one of two states
in the United States

that has a program like this.

It was passed in 1985.

It's been around for almost 40 years,

but over the course
of implementing it in the state,

unfortunately what we've seen is that it
hasn't been altogether very successful.

Is aimed at getting sites
cleaned up, slated for redevelopment

here in Connecticut,
and it just hasn't accomplished the goal.

We have thousands of sites
currently in the program that have yet to

achieve the requirements and close out
under the Transfer Act, and we're

where all the feedback has been.

It's incentivized

development here in Connecticut
and just been a hindrance on the economy.

And so several years ago,
the state passed legislation

setting, a sunset date
for the Transfer Act and establishing

the framework for a brand
new regulatory program to take its place.

And that's called the least phase,
you know, program.

So, yes, definitely
been a long time coming.

The law passed in 2020, after it passed,

there was a multi-year effort,
with the state

and stakeholders in developing what
this new program was going to look like.

A working group was formed
that included, voices

from environmental consultants,
environmental attorneys, different

state agencies, banks,

you know, a, person from people
from various sectors

of the regulated community
in Connecticut to inform the process.

And so that working group convened
monthly, informing Connecticut DEP

on different topics
in different areas, for the program

and that ultimately resulted in draft
regulations being issued

about two years ago initially.

And then it went through the very,

onerous regulatory adoption
process here in Connecticut.

Another very esoteric process.

And the regulations,
they're about 300 pages,

and they were officially adopted
this past May,

with an effective date of March 1st,
in just a few short weeks.

Right.

Probably about the same time
this will air, actually.

So the timing is fabulous, but,
so it's interesting, right?

So everybody comes at to

learn about things

from whatever direction and vantage point
they bring.

And from my vantage point, right.

We deal with the Transfer Act only
and the sale or purchase of a business.

And so it's sometimes

I had this like epiphany moment
where I'm like, I actually forgot

that the point of the environmental
regulations were not to,

you know, influence the exit
of the business, but were actually shaped

to create a better environment
for the state of Connecticut.

Right?

Absolutely.

And yeah,
so the under the Transfer Act framework,

not only is it real estate, but yes,
business transactions and asset sales,

and it would kind of bring in properties
where these businesses have operated.

And it became just a huge consideration
in transactions.

And. Right.

And how do we work around the Transfer Act
and how do we structure these deals.

And yes,
it was just a major consideration

that will no longer have to come into
play and will no longer be a,

a consideration

for, for when you're, you know,
putting these deals together.

That said,
I think it's going to still impact

business transactions
in the diligence phase.

So okay.

Fundamentally alter
just when these questions arise

or how these questions arise.

It's still going to be a factor for,
you know, purchasers of businesses

that have sensitive operations
that could have an impact on the property.

And at the end of the day,
those buyers are going to want

to understand that risk and liability
under this new framework instead.

Yeah.

Yeah, that, that very detailed legal
analysis that, transactional environmental

attorneys have done for the past 40 years
will unfortunately no longer.

I mean, that's good and bad, right?

Everything. Everything is good and bad.

I'm quite sure that understanding
the 300 pages that are in place

as of March 1st will take a good deal
of your time as well. So

if I'm a business owner and I'm going.

Okay, well, this is great.

Now, I don't have to worry about
environmental issues when I go to exit.

But what is like we're not just
going to ignore them because that would

that would defeat the entire,
you know, moment

of what
the goal is for environmental regulation.

So how does it impact them now or.

Well March 1st.

Right. Yes.
I think there is a big misnomer.

Amongst people
not in the weeds on this, but yes,

we have to worry about environmental.

Come March 1st,
we'll have some freedom here.

And that's not essentially
what's happening, right?

It is just a shift in how
and when the state requires

parties to be addressing issues.

So under the Transfer Act,
at the time of the business transaction,

under a triggering circumstance,
a party, either the seller or the fire

would have to commit to,
investigating that property

and that remediating
any issues that are found.

And it's important to understand that
for those sites in Connecticut

where those businesses

have had prior transactions
that are already in the Transfer Act,

those sites will remain
in the transfer Act.

So that's important. Yeah.

So it doesn't disappear.

It just yes, it has a different name.

It's been classified
as sunsetting and retiring.

So the law itself remains on the books.

It remains in place for those sites
that are already in it.

Okay.

That said,
the state is creating an opportunity

to what they call bridge
over to the new program.

So there is that option down the line
if it becomes,

potentially useful to do,
but it's not mandatory.

And, and any owners, of sites
with these sensitive business operations

that have been acquired there
or in the program

will need to complete those obligations.

That said, for

new transactions,
any new business transaction, again,

will not have to undergo this analysis
that is the Transfer Act applicable.

But instead there should be
an understanding that if you're acquiring

a business
that has target assets, real property.

In the potential subject of hazardous
substance releases,

that any owner of that property
has liability under this new program.

That liability doesn't arise
until those issues are discovered.

Okay.

And as you know, defined concept
within this new program,

you obviously discovered by who.

Right.

Like that that that's the ultimate,
you know, does that mean I walk in

and I go, oh,
there's something leaking on my floor.

It's discovered.

Or is it more formal than that?

So the responsible entities

or persons under this new program
are going to fall into two buckets.

Anyone that's created the issue.

And then anyone that's

characterized as

maintaining the issue, it's
maintaining like continuing it,

like perpetuating it
or is actually basically the site owner.

Okay. Owning the property.

You're maintaining that condition.

Okay.

The impact resources of the state.

That said, a tenant can also potentially

be a maintainer if they have certain
longstanding interests.

Okay.

They can be exempted from that liability
under the program

if they check certain boxes,

if they report any conditions
they find to the site owner,

and if they haven't
actually created the issue.

So they're okay for tenants.

And that's going to be an important

drafting consideration in in business
deals.

Yeah, definitely.

Because we always advise owners
not to hold property in the same entity.

So generally they're they might be leasing
from a related entity,

but it's still not the same entity.

Right.

So it's going to be your creators
and maintainers

that are responsible
under this new program.

And discovery is
when knowledge of the issue is obtained.

So there's a few different ways
this can happen.

To your point,
if you're seeing an active spill occur.

A barrel of hazardous substance fall over.

That is a visible change in circumstances.

Right.

Be considered, what the state calls
a contemporaneous spills.

Okay. Spill.

And those are actually already subject
to certain reporting requirements

under a separate release
reporting regulation framework,

which is based on the types of substances
and the quantities that are spilled.

And if those are reportable
under those regulations, then

the response action and the next steps
would be covered under the new program.

So those okay pulled into the new program
and all of its requirements

for addressing the issue.

So that said, the
the more nuanced question is

what is the discovery
of a historical issue?

Right. Right.

And so there's a few different ways

those types of issues can be discovered
under this new program.

One is having analytical laboratory data.

And by by and large, that's what.

So the testing.

Right. Testing. Yep.

But the state has said they essentially
they don't want to encourage

willful blindness of issues
occurring onsite.

And if that was the only way to discover
an issue, then no one would ever test.

And no one would ever know, right?

So, the state has established
this concept

called multiple lines of evidence.

They created a somewhat circumscribed
guidance

document on this, on what this means.

But essentially,
if in the course of an investigation,

a reasonable person
with requisite training and experience

observes different types of facts
that would appear

to suggest a release has occurred,
then that would be considered a discovery.

Okay.

Odor staining. Right.

The prior history
in a certain area of the property

where you also have the state.

So it's going to feel very
similar to a phase one.

Okay.

And there is an important

carve out from discovery
that the state put into the program

in order to not have essentially many,
if not all states,

sorry, all properties
captured in the program on day one.

And this is called
the filing cabinet exemption.

And under this exemption,
any data that exists up until March 1st

that's sitting in the filing cabinet alone
can't be the basis for discovery.

It won't be a trigger.

Okay.

One, if a client has an old report

in the cabinet that did testing five, ten

or February 28th, 2026, on day one,
they will not be deemed

to have discovered that issue provided
it stays in the file.

Okay. Yeah. Okay.

So if I'm a buyer. Right.

I'm going to want to make sure
I do my phase 1st March 2nd.

Who holds liability?

Is that still negotiable?

Right.

Like, I know that the transfer act itself
was specific on

who had to clean
what and who was responsible.

Do we have similar guidelines?

So at the end of the day, in the eyes
of the state, any person or company

or entity that created the historic issue
was going to be responsible.

That might not always be a fruitful source
of getting the issue addressed.

Right.

Companies and principles
may not even exist anymore.

And so the main major bucket
that the state will look to for,

responsibility will be the, the owner.

Okay.

And from a private perspective and,
you know, negotiating transaction.

Sure. That

liability that cost associated

with addressing
these issues can definitely be negotiated.

In terms of who's going to address it
just in in

kind of a private remediation agreement
type scenario.

Okay. So funds.

So definitely can be negotiated
at the time of the deal.

It's going to be an interesting

change to the way due diligence occurs
because of a prospective.

Right.

Coming to the table, looking at a business
that has this property

that, you know, has potential

to have had the leases in the past,
they can do their diligence

and they are not the creator of the issue
they find in.

They're not the maintainer, right?
They don't even own it yet.

So in

in our contracts and many states
do this already, it's

going to be important to say,
you know, don't disclose those conditions

to the owner
so that he or you know, that owner

and then, considered to have discovered
that issue.

So we'll have a potential

inhibiting effect on kind of transparent

discussions on how do we negotiate
through this right issue.

Like how will we adjust
the purchase price.

Yeah.

That'll be an interesting
that I, I, I see me going la la la la la

with my fingers
and my ears a lot to try to not hear.

And that that is how, you know, these,
these matters proceed in other states.

And the state has recognized that,
you know, discovery by a unrelated third

party perspective purchaser

is not going to be discovery
unless and until it's disclosed.

Right?

So if they discovered it

as a buyer before they owned it,
and then became the owner, though

they now own the problem.

Correct.

And on the date of that closing,
they are officially the maintainer.

And that would be the date
of their discovery.

Okay. Yes.

If they discovered that.

So yes, a new, a buyer stepping in
to look at the property

would need to consider
what that looks like.

The cost that we need to understand,
you know, what is it going to look like

to get through this program, address
this issue, and then make that decision?

This is something I want to mess with
or not.

I mean, I guess it's a not it's not that
different than what the conversations.

It's just we won't have

access

to the report to see whether we agree
with them or not.

Right.

And then if a buyer walks,
because there's the inability

to have those conversations
or because they deem the risk too high,

then you do have a situation

where the current owner
kind of scratches their head and says,

something's going on here.

It's going to inhibit
future potential buyers.

Perhaps it is something I should
voluntarily discover and take care of.

Right.

If they if it's a known how,
how is it going to address

historical or runoff or, like,
I didn't cause it, but,

you know, the buyer just discovered
that there's a stream of polluted water

that runs underneath my building
because he did testing.

Yeah.

So as part of this new program creation,
the state actually did

go back and enhance
their remedial criteria.

And so when I say
the regulations are hundreds of pages,

I should clarify that 100 or
so of those pages are actually are

remediation criteria that have been moved,
into a different book.

Oh, okay. Okay.

That portion there have been enhancements
that the state implemented,

one of which relates directly to what
you've identified, this migration issue.

And there is very reduced
requirements for property

owners suffering from, you know, a
migrating source affecting their property.

So provided there's
no imminent hazard on your property.

So if

you've got polluted groundwater
and it involves volatile

contaminants, those types of contaminants
think radon.

Has the potential to affect indoor air
if you don't have pathways

of concern like that.

Or if it's not affecting your drinking
water on your site,

then there would be very circumscribed
requirements

and you would be considered
to be in compliance. So.

Oh okay. Good.

Nice that we need to formalize
and make that more good.

We we ended up with,
an entertaining scenario.

At one point with the transfer Act where,

the concern was a lot.

Six lots over down a hill.

And it seemed a little illogical, right?

Because the, you know, water flows down,
not up, like it's not going to crawl

its way up the hill to us.

But because
it was a concern that was presented that,

hey, this is close to you,
it required kind of phase two.

And then,

so it was it was extra.

And then they came back and, you know,

three months later came back and said,
oh, no, we were wrong.

I was like, I feel like
we could have figured that out.

Yeah. So I'm glad to hear that.

They they put some more kind of large

logical guardrails
on it, certainly in the details.

And I, I would foresee similar situations
because you ultimately spoke

to demonstrate
that we haven't caused the issue.

Right. Any immediate hazards.

So the end of the day could still require

what some might consider
unnecessary testing, maybe.

But but yes, there are better guardrails.
Yeah.

Well, and better guardrails will mean
the testing

people are not tied up with everyone.

Right. Because they now have

some normalization I think is a good word.

And I'll mention another enhancement.

I think it is a great development
for the state of Connecticut.

So Connecticut's
a very coastal state right.

We are the subject of a lot of historic
filling.

Filling by the Army Corps of Engineers.

And, you know, a lot of this
fill, is contaminated and right,

you know, has fragments and,
you know, it's mixed with

various, matte materials

that ended up,
you know, well, in its historical.

Right.

So it's not nobody was testing
50 years ago, 75 years ago.

Any of these things.

Yeah. And it's a significant hurdle.

And many sites,
they have been unable to achieve

regulatory closure
because it's just a challenge.

It's a very, heterogeneous issue.

So you're not going to have like
uniform impacts across the site.

And so the sampling alone
can be very burdensome.

And, and, you know, it's caused a hold up
on a lot of different sites.

The state recognized this,
and they've developed,

essentially a long term institutional,

excuse me.

No. Fine institutional control mechanism
that would allow this bill to stay

in place, provided that the property
owner kind of follows various guidelines.

And it was checking various
regulatory boxes.

So it's called a permit by rule.

Okay.

I mean, as long as you're meeting
the requirements of the regulations

you are covered.

You don't need to actually seek
a permit from the state.

You're just considered
to be permitted. Oh.

Oh, that's that's good. Yeah.

And it's going to allow a lot of sites
to be closed out more efficiently.

And yeah, I think that's a great stuff.

Now that is that is excellent.

I mean, we are a historic state.

People have been living here since 1600s.

And so that's good that they considered
that there were.

Yeah, that was always a concern like

with that
because the transfer Act started.

Right?

But that doesn't mean the people
that owned the business

prior to that hadn't done

hadn't manufactured something that.

Yeah.

So then you're not going back

to, like, who am I going to transfer this
to, like, so they aren't here anymore?

So that's

that's a good step, which, you know,
puts it back in that that framework

where we started with the the goal of this
is to create an environment

with improved,

metrics, right,

to get these sites cleaned up
and kind of back to use for redevelopment

and kind of bringing
economic, developments to the state.

the file cabinet component
is one that I have.

I think it's good,
but I also am worried, right, that that

willful ignorance
component falls into that.

So, if I'm a business owner
and I'm sitting here going, wow,

I was worried about my site
because I thought maybe something

I don't have any proof,

but I think that maybe the person before
me did things that weren't great.

So I haven't tested anything.

I haven't checked anything.

What's a better plan for me?

Do I wait and let my buyers test
and then have no knowledge?

Or if I test now,
do I have to clean before I can sell?

Like.

Yeah, that's a really good question.

And I think that can shake out
in so many different ways.

There is a benefit to letting a buyer
conduct the testing

without obtaining knowledge of what,
what they're finding,

going into the deal.

With a recognition

that this is as is you take what you find,
don't disclose it to me.

And there may be buyers out there

with that risk tolerance
and sophistication to do the testing,

understand what the requirements
are going to be and close the sale.

And the the further upside of that is,
you know, if they end up walking away,

you've got an indication
you don't have that knowledge yet,

but you've got an indication
that potentially there's an issue here

and you can be strategic in your timing
about when you want to address it

and kind of do your own investigation
and officially discover it

and take care of it.

So you can be, you know,
a little strategic in the timing there.

But yeah,
I think that's going to be an evolution

and just a whole
new, set of considerations.

And it's
a very different way to think about it.

Right.

Like it's, it's so if I'm worried

and I'm, I may not even know.

Right.

Like, you know,
I know how to produce aerospace parts

or I know how to,
you know, to produce solder or and

and I know the chemicals that I'm using,
but so I'm where

can I go to find out before it's
discoverable.

Right.
Like before it counts as a discovery.

Is there somebody I can talk to
that could go, hey.

Yeah.

You're worried about something
that's not even on the list?

Because it could happen, right?

Or I could not know what the list is

and be doing things
that I didn't even know.

That's true.

So we only have a few short weeks.

But there is
this very minimal opportunity to,

you know, engage with the consultant now
to kind of get a baseline understanding

of what the risks and issues could be on
your site based on historic developments.

I do think that once we pass
that March 1st commencement date, that.

Anytime a consultant initiates

or does an investigation of a site,
there is a risk of that.

Right? And it's a significant risk.

And I think on recent training sessions
that kind of get deep

is convening
for the regulated community in the state.

I think they clarified their position
that,

you know,

a consultant doing an investigation
is going to be very rare

and that they will have
a single line of evidence because,

you know, understanding and any knowledge
of the site history that kind of

indicates, you know, operations that could
have resulted in a release, you know?

Well, it's going to be an easy
trigger, is my understanding of how

it kind of get to. Okay.

So if there's no information existing

before March 1st, I think careful
consideration, would have to be done.

And, and full disclosure
that engaging a consultant comes with a,

with a risk
that you may get involved in this program.

Got it.

But that said, you know,
the way the state has set it up

is you want to incentivize
not needing to report to the state,

not needing to get involved
with regulatory filings.

And so they're depending on what's found.

If a party does
an owner does decide to do,

analytical testing.

If they find something,

there are windows of time
in which to potentially address the issue.

And if you do that and you don't need
to even report it to the state.

And so they try to structure it
to like, incentivize, like getting things

done quickly and avoiding administrative
red tape and other.

Gotcha.

But they're still better off
using a ChatGPT

scenario. And,

Right.

I think it's going to come down to
that's an interesting.

Right.

Like, you know,
if I put it in all the chemicals that I am

using into ChatGPT,
will it tell me if I need to be regulated?

Like,
that would be like an evolving category.

And I mean, so
it is absolutely, absolutely.

Just, you know, right.

Like I, I, I had an owner say to me once

I change the oil of my car and like a lot

a little like there's actual

metrics here, right?

I, you know,

there are various exemptions
built into this new program and framework.

And I would say many of them arose due
to a lot of

concerns, employees throughout that
multi year development process.

So, I can just run through.

Yeah.

Originally as originally conceived,
this was going to be applicable

to every property in the state,
including residential.

And then oh my goodness.

But in response
to a lot of concern about that, the state

did include basically an exemption
for single family residences

that as long as you don't have like
a significant hazard, as long as you're

not affecting any neighbors,
you're not going to be selling.

You can keep your canopy kind of thing.

And the theory is like
you can live in your pigsty,

but as long as you're
affecting other people

or there's not like significant hazard
concern, you're not going to require you

to hire an expensive consultant
and comply with this program.

There's also,

what, the Connecticut DEA
because a lower bound.

So there was originally again
as originally drafted,

the program comes into play anytime
there's any detection of any measurable

constituent of a contaminant.

There was concern like,
what if you've got trace amounts,

right every time you do anything?

So they did create a 25% threshold.

So if you if the consultant finds
the for most contaminants

under 25% of the cleanup criteria, that's
not going to be subject to the probe.

Okay. Yeah. So they're okay baseline.

And then there's what the state calls
incidental releases,

although things like road salt during
winter storm.

Right.

Fire firepit that create like hydrocarbon
issues like that's exam

just a recognition
that, you know, people have firepits. Yes.

Let's say
the company picnic happened here.

Any discharges or releases to,

like, a secondary containment that gets
cleaned up within a certain window?

That's not going to be subject
to the program.

Oh, so like the the, you know,
I changed the oil.

The oil went into the container.

The container
got picked up by the service.

That's no longer an issue.

That's not going to be considered. Right.
Okay.

Good releases
to land and waters of the state.

So they don't consider secondary
containment land and waters of the state.

That's true.
There's always kind of boxes of checks.

Oh, absolutely.

Absolutely. Yeah.

So the application of pesticides

or fertilizers,
if done so consistent with labeling,

that's not going to be subject
to the program or considered or released

to the environment.

You know, automotive exhaust

and atmospheric kind of releases, air

deep like ts the example of like a tanker

carrying a gas on the road
falls over that's,

you know, not going to be considered, a
release for purposes of this program.

Okay.

Other programs?

Yep, yep.

But. Okay.

Well, it sounds it sounds

more logical
than what we had in place before.

I, you know, we used to tell our clients,
I know they're coming for a phase one,

and they'd be like,
we're going to clean up.

I'm like, actually don't.

Because chemical smells
could be a trigger.

And we did have someone that

that painted their electrical box
and ended up with a phase two.

Oh, dear.

That's like.

So I'm glad

we have some some better guardrails.

Yeah. Going forward. Yeah.

And it is a reasonable program.

And honestly, it
mirrors, what, 49 other states.

That's great.

So the thought at the time, 40 years ago
was very innovative and different.

And it's going to be great. But,
that didn't pan out.

And the thought process is
let's kind of get on the track

that most other states are doing and it,
you know, works well in those contexts.

And we make it come up for Connecticut.

Great. Great.

Well, I'm sure there will be nuances
that come out.

And so if anybody has questions,
make sure that your,

Deborah's information is on the on
the bottom of the screen.

If you're on, YouTube,
it's on your podcast screen.

If you are working
from a podcast platform.

I'm sure she'll be happy to hear from you.

And offer any, any guidance,
that you might need in this.

And so thank you so much for coming.

I have one more question. So

if you were doing any

other career right,
besides environmental attorney,

looking back on your life,
you have all the choices to make again.

What would you do instead?

That's a great question.

And I thought to this,
I would love to be a wildlife photographer

that, you know, Nat Geo travels
the world in, in beautiful

penguins and lions and tigers and bears.

Absolutely.

The environment is always there.

So yeah, that would be my my alter career.

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Thank you.

Meet. Him.

Maybe it.

Means we.