Q&A On Topic: Environmental Engineering
TEXAS REAL ESTATE BUSINESS June 2009
Real Estate Opportunity through Brownfields Reclamation
REDNews January 2009
Making Brownfields Green
REDNews April 2008
Q&A On Topic: Environmental Engineering
Interview by Lindsey Walker Marec
Tim O’Neil with ESE Partners discusses his company, its interest in brownfields and how the environmental engineering business is changing in today’s market.
TREB: Tell me a little bit about your company’s history.
O’Neil: ESE, founded in 2002 under a different name, began as a consulting firm that offered environmental engineering, safety engineering and asset optimization consulting. The organization grew to more than 130 employees with offices located in Houston, Perth, Aberdeen, and the Hague. In 2007, all foreign interests were sold and the environmental engineering practice split from the safety engineering group and became ESE Partners. ESE’s brand promise is “Making Brownfields Green” and the company’s primary focus is brownfields initiatives. Our purpose is to recognize and deliver opportunities to stakeholders while at the same time improving the community’s quality of life and economic basis through the reclamation of environmentally blighted properties. However, ESE is a full-service environmental science and engineering firm conducting all aspects of environmental consulting with the exception of air. Our main areas of business include brownfields compliance, due diligence, environmental construction, investigations and corrective action, NEPA documentation, remediation, and wetlands and ecology.
TREB: Your company specializes in brownfields initiatives. What is it about this field that attracted you? Why is it important or relevant in today’s market?
O’Neil: Brownfields initiatives and redevelopment projects are especially rewarding because their result is the transformation of unused, unsightly and typically contaminated property into an alternative beneficial end use. These types of projects benefit the developer/investor, the local governments and the community. Brownfields are important in today’s real estate market because in many large municipalities and cities, inner-city real estate for new development is limited. Additionally, the economics of brownfields projects can be quite favorable to investors, developers and community stakeholders.
TREB: What is one project in Texas that stands out as your favorite example of recycling “unusable” land and turning it into a viable development?
O’Neil: My personal favorite is the Webster Power Plant. This property is an approximately 700-acre tract of land that once housed a decommissioned natural gas-fired power plant that was built in the 1950s. The property is located in Webster, Texas, minutes from Clear Lake and NASA. ESE provided environmental engineering and project management services to the investors/developers, which included asbestos abatement and demolition of all facility structures and regulatory closure of all environmental impacts associated with the former power plant. Construction of the master-planned development was initiated in 2007 and is ongoing. Upon completion, the development will include retail shops, restaurants, condominiums, single-family homes, a marina with access to Clear Lake, and a town center with upscale retail shops. Innovative approaches utilized for the project include substantially funding the asbestos abatement and demolition costs with revenue generated form steel salvage, recycling of more than 70 percent of the material generated during demolition and remediation activities.
TREB: Currently, what sort of services are most in demand from your real estate clients in Texas? Why?
O’Neil: Currently, we are predominantly seeing requests for Phase I ESAs and industrial facility investigations and audits. It appears that under the current market conditions, a large portion of the active projects are associated with refinancing, foreclosures, and acquisitions/mergers.
TREB: How is the economic downturn affecting your business?
O’Neil: We have definitely seen the market slow in the past number of months. Many of our clients are taking the cautious wait-and-see approach to the economy. However, through our working relationships with a number of banks and capital investment firms, it is clear that funding is still available and people are looking for deals to make.
TREB: How has the environmental science and engineering business changed in Texas during the past few years? How do you foresee it changing in the future?
O’Neil: Trends in the environmental business, as well as with the regulatory agencies, has moved toward a risk-based approach to address contamination rather than the former approach of complete removal. In many circumstances, contamination left in place and properly managed can be as protective of human health and the environment as removal of the contaminant. Additionally, this approach can save time and money associated with assessment, investigation and remediation. In the future, I anticipate the continued evolution of risk-based strategies such as the Municipal Setting Designation recently adopted by the City of Houston. Furthermore, I anticipate that the redevelopment of currently un-utilized or under-utilized properties with environmental liabilities will become more frequent.
- Tim O’Neil is vice president of Houston-based ESE Partners.
Making Brownfields Green
by Bryan Gay
Since the industrial revolution, more and more land has been contaminated, abandoned and perceived as unusable, and therefore often deemed as a waste or liability. As no more land will be created, it is important for us as a community to commit to recycling the land, revitalizing our cities and neighborhoods, making the unusable usable, making Brownfields green.
The definition of a Brownfield as defined by the Environmental Protection Agency (EPA) is “the expansion, redevelopment or reuse of real property which may be complicated by the presence or potential presence of a hazardous substance, pollutant or contaminant”. The purpose of a Brownfields redevelopment is to increase the aesthetic, social and monetary value of environmentally impaired property within the community through environmental reclamation, which in turn will create an opportunity for the stakeholders.
As previously mentioned, potential Brownfields sites are often perceived as liabilities, instead of the opportunities they truly can be. Based on the increasing demand for land and changes in land use and increase in land value within many urbanized areas, stakeholders are showing a greater interest in Brownfields opportunities. In concept, the model for Brownfields redevelopment is quite simple. Acquire contaminated property at below market value, restore or increase market value through management or mitigation of environmental liabilities and redevelopment, and optimize the rate of return on investment. Four key components must be understood and employed when moving forward with the acquisition and redevelopment of an environmentally impaired property: Initiation, Evaluation, Transaction and Implementation.
The Initiation phase of a Brownfields redevelopment occurs when a stakeholder or group of stakeholders identify a property for redevelopment based on the potential for the project to provide a financial return on investment and create a benefit to the community. When looking at an environmentally impaired property, one must consider its potential for redevelopment, as well as its feasible and marketable end use alternatives based on a number of factors, including surrounding land use, infrastructure, environmental condition of adjacent properties, character of the neighborhood, commitment from local government agencies, financial incentives through tax relief and grants and community participation.
Once stakeholders have identified a Brownfields candidate property with potential for redevelopment, a detailed evaluation is conducted to assess the economic feasibility of proceeding with the project. Quite often a developer can purchase an environmentally impaired property for cents on the dollar when assuming the environmental liability with the property acquisition. The key is to understand the environmental liability well enough to quantify the risk and develop a level of financial certainty to remedy the environmental issues relative to the proposed end-use of the property.
A detailed evaluation is typically a collaborative effort between stakeholders, investors, developers, and civil and environmental engineers. The purpose of the evaluation component is to determine the viability of proceeding with a Brownfields redevelopment through identification of development options and quantification of associated costs. The environmental property assessment activities focus on identifying environmental and human health risks due to potential exposure pathways of contaminants. Once the property assessment has identified the basic extent, magnitude, and exposure risk of existing contaminants, a feasibility study can be prepared to accurately estimate the future cost of assessment, remediation, regulatory reporting, demolition, and other project specific environmental related liabilities.
The stakeholders must consider the many aspects of the property transaction component. Most importantly, the cost determined to be associated with any identified environmental risk that is to be transferred to a purchaser must be accounted for in the final purchase price of the property. For the stakeholder retaining or acquiring the environmental liabilities from the transaction, he can protect himself from the risk of exceeding projected environmental cost by securing a fixed price or guaranteed remediation contract, which is offered by some environmental engineering firms, or by securing an environmental cost cap insurance policy.
Once the property transaction has been completed, the reclamation plan derived from the evaluation phase can be implemented. The remediation of the property is an integral part of Brownfields redevelopment. Corrective action e° orts should be designed to accommodate final end-use of the property. For the purpose of managing project cost and schedule, it is important to evaluate the use of institutional controls as opposed to remedial action to address contaminants that do not present a real threat to human and ecological receptors. Deed recordation and restrictive covenants can often be an acceptable and financially sound closure strategy for an environmental liability. The goal of all of the stakeholders is to move forward with development as soon as possible.
It is important to understand that each Brownfields redevelopment project is unique, based on property characteristics, contaminants present, and intended end use. However, if the four basic components of the Brownfields process are followed with the assistance of qualified stakeholders and environmental professionals, Brownfields redevelopment can be a lucrative investment for developers, end-users, and the community.
Real Estate Opportunity through Brownfields Reclamation
by Bryan Gay
A Houston based environmental engineering firm, Environmental Science and Engineering Partners, LLC (ESE) has been offering unique investment strategies to the real estate market for the past seven years. This strategy is based on the concept of investing in environmentally blighted properties which can be managed through environmental science and engineering. ESE’s team of Environmental Scientists and Engineers assists their clients by navigating through the complexities of environmental regulations within the financial thresholds of a viable land investment. ESE’s primary purpose in business is to recognize and deliver opportunity to stakeholders while at the same time improving the community’s quality of life through the reclamation of environmentally blighted properties. According to ESE’s President and CEO, Bryan Gay, ESE along with their clients, are making the unusable, usable, Making Brownfields Green.
ESE was founded in 2002 and was recently ranked among the top five environmental firms in Houston by the Houston Business Journal. ESE offers a full range of environmental consulting services ranging from Phase I and II Environmental Site Assessments to multi-million dollar brownfields reclamations. Although ESE offers the staple of environmental consulting services that we are all use to seeing in the real estate industry, they are offering something unique, something outside the box of traditional environmental engineering services. In today’s going green movement there is an ever increasing cultural demand on doing what’s right for the environment. In most cases going green comes with a hefty price tag. ESE is taking the going green philosophy one step further and creating assets from perceived liabilities from both the perspective of the community and the balance sheet.
ESE’s brand promise is Making Brownfields GreenTM. ESE’s Brownfields practice is the cornerstone of their consultancy. They have a team of consulting professionals experienced and focused on Brownfields redevelopment. They have taken their local, state, and federal Brownfields experience and applied that expertise to the ever growing entrepreneurial market of redeveloping blighted properties for alternative end uses. ESE assists their clients with these initiatives by providing program management services which include budgetary project life-cycle cost model preparation, project strategy and outcome analysis, program enrollment assistance, site assessment, fixed price remediation, and regulatory negotiations. ESE has been responsible for the reclamation of former power plants, landfills, oilfields, and industrials sites for the purpose of residential and commercial redevelopment.
ESE also delivers a feasibility assessment for Brownfields initiatives through budgetary estimation of environmental liabilities prior to the acquisition of a property in order to give their clients basis for price negotiation with respect to environmentally impaired properties. A brief overview of ESE’s experience with brownfields projects is described below.
ESE served as the Project Manager and Engineer for the Brownfields reclamation of a former Power Plant located in Texas. Brownfields reclamation occurred for the purpose of redeveloping the 750 acre site as a master planned mixed use community. They were responsible for managing the 750 acre project from cradle to grave for the client. The former gas fired power plant consisted of three boiler units, turbine decks, warehouses, office buildings, support structures, pipelines, and surface impoundments. Prior to acquisition of the property, ESE conducted the preliminary environmental due diligence assessments and feasibility studies for asbestos abatement, demolition, and environmental corrective actions. Upon completion of feasibility and the acquisition of the property, ESE implemented the actions necessary to complete the reclamation of the Site which included: preparation of Health and Safety Plans, preparation of SOWs and RFPs for public bid of the asbestos abatement and demolition services, preparation of asbestos abatement and demolition contracts, bid evaluations, contractor interviews, and bidder selection. ESE provided full time on-site construction management of all asbestos abatement and demolition activities for the removal of the three boiler units and all structures. ESE was also responsible for managing the project schedule and budget and was responsible for delivering verbal updates to the City Engineer and City Council when requested. In addition to the demolition and abatement activities, ESE also conducted all of the necessary site assessment and remediation of soil, groundwater, and surface water in accordance with Texas Commission on Environmental Quality’s (TCEQ) Texas Risk Reduction Program’s (TRRP) residential standards. ESE delivered the power plant operating area to the client as vacant land ready for redevelopment on schedule within 15 months. The project was designed in such a way that revenue generated from the steel salvaged during the demolition of the boilers, off-set a majority of the environmental reclamation cost. At the end of the day the project has created a new eco-friendly master planned community, and a new tax revenue for the city from the ruins of an out of service power plant.
ESE is also responsible for recently designing the assessment and closure strategy for an approximately 30 acre industrial facility which has operated since the late 1800’s. ESE designed a detailed assessment strategy, based on review of historic property use and limited environmental data, in order to identify, characterize, and delineate soil and groundwater impacts at the site. Additionally, ESE developed a closure strategy focusing on TCEQ closure through the Voluntary Cleanup Program (VCP) to residential standards. Recent and historic uses of the subject property include residential development, landfill, tank fabrication, pipe fitting, automotive and heavy equipment maintenance and repair, oilfield support services, sand blasting, painting, lumber milling and storage, and cotton/cotton seed oil processing. The assessment strategy implemented by ESE resulted in completion of assessment scopes within the projected budget and approximately 2 months ahead of schedule. This is currently an on-going project. The goal of this project is to redevelop the 100 year old industrial facility into a mixed use master planned community.
ESE has also assisted clients with the redevelopment of former oil and gas exploration and production fields by applying the same methods and practices describe above. Recently ESE has completed the reclamation of an oilfield in south Houston under the rules and regulations set forth by the Texas Railroad Commission. The property was acquired by a foreign investor in the mid 1980’s and was never developed due to the environmental liabilities associated with the Site. ESE developed a feasibility study and closure strategy that met the financial limitations associated with the redevelopment of the Site. ESE’s reclamation strategy allowed for the regulatory closure and redevelopment of the Site within 2 years, after the property set idle for over 20 years. The property is currently developed as a new business park with 100% tenant occupancy.
In conclusion, ESE is offering unique services to the real estate community by identifying opportunities hidden behind perceived environmental liabilities through their expertise in environmental science and engineering. If you would like to learn more about ESE’s brownfields services please call them at 281-501-6100. Or visit them on the web at www.esepartners.com