LAND
CONTAMINATION ISSUES – API NOTE
Reproduced
with permission
1.0
Introduction
1.1
Purpose
The
purpose of this guidance note is to outline information, issues, and
approaches relating to contamination of land.
The
Institute recommends that it be used by Members as a guide for the
valuation, assessment or reporting of land which is contaminated or
whose contamination status is unknown or uncertain. Land includes
improvements, structures or additions to the land.
1.2
Status of Guidance Notes
Guidance
notes are intended to embody recognised ‘good practice’ and
therefore may (although this should not be assumed) provide some
professional support if properly applied. While they are not
mandatory, it is likely that they will serve as a comparative measure
of the level
of
performance of a Member. They are an integral part of ‘Professional
Practice’.
31.3
Scope of this Guidance Note
This
guidance note applies to Members reporting on property and it deals
with broad examples of environmental contamination and their
potential effect on value and marketability. It offers guidance on
general concepts and concerns, and suggests approaches that are
considered
to
have merit. It does not purport to provide a definitive coverage of
the environmental issues, which may arise, or the manner in which
Members should deal with these issues. Many issues of land
contamination are poorly defined and involve complex or unresolved
matters.
Formulaic
approaches to the valuation and assessment of contaminated land, are
not adequately developed.
The
appropriate procedures will vary according to the circumstances of
each property being valued or assessed.
Members
should apply their own skill and judgement in applying the
information contained herein to their own practice. This guidance
note should be used in conjunction with other guidance notes and
practice standards that are either over-arching or directly
applicable to the type of property, purpose or issues involved.
1.4
International Valuation Standards
This
guidance note recognises the International Valuation Standards 1 and
2, and the International Valuation Application 2, effective from July
2002 by the International Valuation Standards Committee and it is
intended to be consistent with the concepts and definitions contained
in
those
standards, however, there may be departures from IVSC Standards to
reflect Australian & New Zealand law and practice.
1.5
Member Involvement
Members
are able to provide appropriate skilled advice in relation to
valuation and property matters with the assistance of and in
accordance with this Guidance Note and bearing in mind the
limitations referred to herein.
31.6
Marketplace More Aware
Increased
environmental consciousness within the general community,
environmental protection legislation, litigation associated with
pollution and land contamination, and incidents where property users
suffer financial loss directly or indirectly from such cases, have
made the marketplace more aware of the potential adverse effects of
chemical,
radiation,
noise and other contaminants in air, groundwater, soil and the
overall environment. The market can overreact and prices may be
artificially depressed. Further, limited information about a
particular contaminant that is thought to be present on a property
can cause a secondary ‘stigma’ effect on values. Conversely, the
market seems to be increasingly aware that contaminated properties
can be redeemed and redeveloped into viable assets.
1.7
Advice about Commercial Impact
Clients,
whether they are property owners, vendors, purchasers, financial
institutions, receiver-managers, holders of major or minor property
portfolios, etc, will often look to Members of the Institute for
advice and guidance on how land contamination affects their financial
security and asset value. Although Members cannot and should not
promote
themselves as authorities who are fully capable of measuring,
recording and providing detailed scientific advice on behalf of the
client, they should be able to provide some level of advice to the
client about the commercial impact of suspected or evident
contamination.
1.8
Problems Requiring Further Investigation
Members
of the Institute should take all reasonable care in these matters.
Members who attempt to mitigate their responsibilities by adding a
disclaimer saying that the property has been valued or assessed
‘without regard to the question of presence of contamination’,
are not providing the level of best practice expected by clients and
may not satisfy the standards of practice required by the courts.
Therefore, the Institute recommends that its Members become
sufficiently knowledgeable about the contaminants, laws and
regulations associated with this topic and their effect on property
values to meet the
above
standards. This involves Members qualifying advice, where
appropriate, so as to properly inform the client of potential
problems which may require further investigation, and thereby meet
the Member’s professional obligations.
1.9
Can Affect Full Spectrum of Property Types
Members
will rarely be in command of enough information or evidence to
completely rule out the possibility of land contamination. They can,
however, through careful research and observation, provide advice
about suspected contamination and the potential consequences on a
property’s
Market Value. Environmental contamination can affect the full
spectrum of property types, and should be considered in all property
valuations and assessments.
1.10
Definition of a Contaminated Site
As
defined by the Australian and New Zealand Environment and
Conservation Council (ANZECC) and the National Health and Medical
Research Council (NHMRC), a contaminated site comprises ‘a site at
which hazardous substances occur at concentrations above background
levels, and where assessment indicates it poses or is likely to pose
an immediate or long term hazard to human health or the environment’.
Point of Reference Members are encouraged to actively foster
professional association with consultants specialising in the
identification and treatment of contamination.
2.0
Types of Contaminants and Examples
2.1
Wide range
There
is a wide range of potential environmental contaminants, varying from
liquid and solid chemicals to corrosive gases and radioactive
substances.
2.2
Physical Contaminants
Each
contaminant must be considered for its potential physical and
non-physical impact. Examples of physical contaminants include
asbestos, hydrocarbons, lead, mercury, arsenic, cyanide and
pesticides, but are not limited to these substances. Mining
by-products can include nutrients and arsenic compounds amongst
others. Unexploded ordinances have been another environmental
difficulty associated with former defence force lands. Organic
compounds such as formaldehyde are problem sources.
Coal
tars from coal-using powerhouse operations, asbestos, or PCBs can
cause toxicity problems.These are but some examples.
2.3
Non-Physical Contaminants
These
are contaminants that include non tangible, physical substance.
However, they should be considered as ‘real’ as physical
contaminants. A typical problem could be forms of radiation, intense
radio wave transmissions and excessive heat.
2.4
Radon
Radon
is a naturally occurring radio-active gas that is responsible for
about half our exposure, which is unavoidable, to background
radiation. The inhalation of radon and its decay products increases
the risk of lung cancer. Radon emanates from particular radioactive
materials
in
the ground and, to a small extent, from building materials.
It
disperses in the open air, but elevated levels may be found in spaces
like poorly ventilated basements and caves, although such levels have
not been found to be a health hazard in Australia.
2.5
Toxins in the Internal Home Environment
These
comprise a long list of substances, including insecticides, lead
based paint, wood preservatives, polishes, weed killers, bleaches and
numerous other substances.
Certain
timber related or artificially produced materials used for home
insulation, furniture and fittings may release formaldehyde or other
traces of preservatives that create health problems for some
individuals. (Many of these home toxins are not structural but
transient and may be removed through relatively low cost means.)
Unless specific circumstances exist such as the use of these products
in commercial quantities, comments on domestic use in a valuation
report are considered excessive.
2.6
Changes in Lists and Definitions of Hazardous Substances
Lists
and characteristics of substances constituting hazardous waste and
amounts of substances considered detrimental change frequently as new
information becomes available. Such information is often available
from State or local environment agencies. Preliminary lists are
provided in Appendices 1 and 2.The ANZECC/NHMRC Australian
and
New Zealand Guidelines for the Assessment and Management of
Contaminated Sites, January 1992, also contain a substantial list.
2.7
Environment Related Court Cases
Environment
related court cases, particularly the Federal Court, have the
potential to affect value if judgements establish new areas as a
result of previous activities or management. Where doubt exists, this
case law may prove appropriate investigation.
3.0
Identifying and Quantifying Contamination
3.1
Information on Possible Contamination
Information
on possible contamination of the site is crucial to the property
professional. The two main sources of such information are a
Historical Land Use Survey and a scientific Survey of Environmental
contamination as would be conducted by an Environmental
Engineer/Auditor.
Three
Phases of Investigation
Phase
1: Preliminary Site Investigation
A
Phase 1 is the preliminary assessment of any contamination on the
site. It includes the following steps:
• an
investigation of site history;
• a
physical site inspection;
• a
basic sampling and analysis to determine the presence of
contamination;
• a
report prepared.
Phase
2: Detailed Site Investigation
If
the Phase 1 investigation shows further investigation is
required,
a detailed site investigation is carried out to assess:
• the
concentration of various contaminations;
• the
volume of soil to be remediated;
• the
leachability and mobility of contaminants;
• any
contamination of groundwater;
• any
possibility of off-site migration of contaminants.
Phase
3: Health and Environmental Assessment and Determination of
Remediation Plan.
The
results from Phase 2 investigation provide information to determine
the potential ‘human exposure and environmental impact’ of the
contaminants on the existing and intended land uses. If the intended
use will cause unacceptable impact on the environment, then,
depending
on the conditions, a partial or full remediation, or other land
contamination management strategy has to be implemented. A health and
environment risk assessment has to be carried out, and a site
specific remediation plan has to be prepared. (Footnote 4)
3.2
Phase I Survey : Background Research & Historical Land Uses
Previous
owners and employees can be a good source of information on the
property’s history. Local councils can provide a wealth of
information on more prominent properties, and a search of titles can
provide some indication of former use. Many state governments have
aerial photos that can assist in identifying some former uses.
Government departments such as those involved with mining, public
water
supply, environment and health, may have regulating
records
and other useful information.
3.3
Look for Signs
It
is important to look for signs that suggest a former use, if not a
present use, which may have lead to, or caused, some form of
contamination. Following the preparation of a site history, there
will need to be a complete detailed site inspection. There are often
tell-tale signs on the site that can indicate the possible presence
of some forms of contamination. The member should look for disturbed
or coloured soils, disturbed vegetation, the presence of any chemical
containers, or chemical odours, and view the quality of any surface
water. In addition, surface soils or earth fill may have been
introduced to the site from other locations. The potential for
contamination from off-site sources should also be considered. An
Environmental Assessment Checklist is provided in Appendix 3.The
ANZECC/NHMRC Australian and New Zealand Guidelines for the Assessment
and Management of Contaminated Sites include a useful chapter on
identifying and
quantifying
contamination.
3.4
Member’s Role
Members
should be aware however, that their role and expertise is limited to
the detection and preliminary identification of discoverable
contamination by reasonable site inspection and enquiries of
appropriate authorities and subsequent reporting. Detailed
identification quantification of contamination should be left to
those who specialise in
that
field.Where, however, information is available to the Member, this
should be provided to the client together with a statement of the
source (whether it be a neighbour, former owner or environmental
expert) and an appropriate qualification.
3.5
Register of Contaminated Sites
Some
States compile a register of contaminated sites which is maintained
by the relevant State environmental authority and is available for
public inspection. Where the Member discovers or suspects that a site
may be contaminated it would be prudent to inspect the Contaminated
Sites Register in applicable States. This will help to provide the
Member’s client with useful information, thereby enhancing
the
level of service provided and discharging the Member’s professional
obligations. Members should not be overreliant on these registers as
they are not exhaustive, especially in those States where they are
not formally required by legislation. Absence from a register should
not be taken to imply that a site in not contaminated.
Even
in the absence of a register of contaminated sites, Department of
Environment staff may still be willing to provide relevant
information regarding some sites.
3.6
Potential or Actual Contamination Issues
A
Member conducting an inspection of a property for the purpose of
providing a valuation or other report should be aware of the
potential of site contamination of any property. During an inspection
for this purpose, the Member should attempt to identify from on-site
observations
any potential or actual contamination issues and report accordingly,
recommending further expert advice where appropriate. Other site
factors to initially consider include site layout and contours,
storage areas, geology, water features and nearby developments which
may
affect the subject land.
3.7
Report by Suitably Qualified Expert Phase 1 of Investigation.
A
report on the site history of the property, provided by suitably
qualified expert, may address the following issues:
•
present and past land
uses;
•
processes and/or
activities carried out on the site;
•
major processes
and/or activities that were carried out near the site;
•
locations within the
site of each process and/or activity;
•
duration of each
process and/or activity;
•
waste disposal
activities;
•
source of
contamination and effluent migration pathways;
•
presence and purpose
of underground tanks;
•
signs of spills of
hazardous materials.
Phase
2 of Investigation
If,
after carrying out an investigation and inspection, the Member is
concerned or suspects that the property is or could be subject to
potential contamination that could either restrict the future use of
the site or militate against a financial consideration, the Member is
obliged to recommend that the client seek more detailed advice from
appropriately qualified professionals. Such advice should be formed
having
regard to both the current and future use of the site. A Phase 2
Investigation by a specialist environmental engineer or scientist or
other suitably qualified professional may include any or all of the
following:
•
historical land use
survey;
•
environmental risk
inventory;
•
evaluation of special
contaminants such as asbestos, PCB’s, acids, poisons such as
arsenic, and radionuclides;
•
remote sensing
surveys;
•
identification of
on-site toxic vapours;
•
surface soil and
water samplings and laboratory analysis;
•
sub-surface soil
sampling and laboratory analysis;
•
groundwater sampling
and laboratory analysis;
• a
site plan specifying locations of contaminants
• a
health and safety plan.
The
survey may include, in terms of a particular purpose or specific
conditions of a site, a recommendation as to whether or not the
contamination has reached an action level where remediation or risk
reduction levels are necessary.
Phase
3 of Investigation
Subsequently,
it may be necessary for the appointed environmental consultant to
move into a third phase of consultancy including site
characterisation, the preparation of a preliminary remedial action
plan with cost estimates, the conduct of negotiations with regulatory
agencies, the design of remediation systems and continuing
management, and the development of suitable future monitoring
arrangements.
3.8
Whether Expert Engaged
A
Member needs to be aware of the process of the Phase 1 investigation
sufficient to advise a client as to the need for the engagement of a
suitably qualified expert. The Member should also take detailed field
notes that may or may not be used in the final report but will
nevertheless stand as a record that the valuation or assessment was
carried
out having regard to the potential presence of contamination.
3.9
Not Expert
The
Member should not hold himself or herself out as an expert in issues
of site or other contamination.
3.10
Recommending a Survey of Environmental Contamination Where
Detailed
Information Cannot Be Obtained Ultimately, only through scientific
testing can the level of contamination be verified properly. Such
testing can be both expensive and time consuming and cannot in itself
provide a complete guarantee that contamination is not present.
Where
contamination is suspected and where detailed information cannot be
obtained, the Member should assess on the basis that a property is
free of contamination, and qualify that value on the basis that some
contamination may be present that could have an impact on the value.
The following provides an example of the type of qualification
which
may be appropriate in these circumstances:
From
our inspection of the property we consider that there is (or could
be) a potential for (detail past/current contamination) to exist and
wouldrecommend that advice should be obtained from a suitably
qualified environmental expert. Please note that our valuation has
been assessed on the basis of no on-site contamination. Should the
above mentioned environmental advice reveal any contamination our
valuation may require revision.
The
greater the perceived risk of contamination being present, the
stronger the ‘qualification’ and the more specific should be the
accompanying advice.
4.0
Remediation Practices and Techniques
4.1
Remediation Techniques Rapidly Changing
The
practice of remediation of environmentally contaminated property is
rapidly changing. New techniques are being developed, new standards
are being set, both by the professions themselves and those who
legislate standards.
4.2
Remediation Defined
Remediation
has been defined as ‘an act of attempting to moderate the severity
of the contamination of soil, groundwater, service water or buildings
by various measures and methods’. Note that remediation can include
measures that alleviate the effect of contamination without
destroying or removing the contaminants, as with ‘clean-up’
technologies.
4.3
Influence on Value
The
influence of remediation or clean-up on value will depend on such
factors as whether the contamination is contained (restricted)
on-site, technology available the EPA controls affecting it, the
length of time required to make good to permit development and use of
the land and the possible need for further analysis and monitoring
after the remediation process. The risks associated with achieving
remediation in accordance with the defined plans may have to be
factored into the value assessment.
4.4
Remediation Techniques
Remediation
techniques could involve removal of affected soil from the site and
replacement with clean fill, the extraction and ‘airing’ of
hydrocarbon-affected soil from lower depths, the pumping out of
contaminated groundwater or chemical neutralisation, eg. the use of
lime
to neutralise high acid content, and a wide variety of other
measures. One difficulty with soil removal is that local authorities
tend to be reluctant to allow disposal of contaminated soil.
4.5
New Technology
The
new technology that is becoming available may potentially reduce the
extent of the negative effect of contaminants on property and its
value. Technology that permits safe, efficient and inexpensive
clean-up of contaminants tends to minimise impact on value. However,
clean-up
costs
can still be prohibitively expensive because of difficulties in
disposing of contaminated soil, toxic waste and chemicals. Members
should keep abreast of technological advances relating to this topic.
The ANZECC/NHMRC Guidelines (Footnote 5) provide a site-specific
approach to the management of contaminated sites, and indicate that
remediation can be tailored to the actual proposed use of the land.
Such awareness will assist the Member in advising appropriately on
the potential risks associated with contaminated sites and the need
for their clients to seek further information from appropriately
qualified experts. Nevertheless, as previously referred to, Members
should avoid giving advice outside their area of expertise.
4.6
Clean Up Methods
As
far as the removal of the contaminant source is concerned, there are
different clean up methods. The common ones include:
• On
site treatment
The
contaminants are destroyed or broken down while the soil remains
in-situ or excavated on site, eg. bio remediation, land farming,
vertical mixing and chemical fixation.
• Off
site treatment
The
contaminated soil is excavated, removed from the site and taken to a
depot for treatment, eg. high temperature incineration, soil washing,
thermal absorption, particle-size separation, chemical treatment like
base catalysed dechlorination (BCD), ball-mill pulverisation and
super-critical fluid extraction.
• Off
site disposal
The
contaminate soil is excavated and removed from the site for disposal
at a controlled landfill. Given that it is a controversial issue to
allow transport of a contaminated soil on public roads, it is
unlikely that the authority will approve this remediation method
today.
•
Containment on site
This
method is to keep the contaminated soil in-situ and to restrict
access to it and prevent leaking and leaching by suitable means, eg.
encapsulation and capping (Footnote 6).
In
addition to the above, recycling may also be an acceptable
remediation method, eg. silver is recovered from recycling silver
bromide used in the photo processing industry.
However,
given the high cost of recycling, this method is feasible only for
end products with high value.
5.0
Impact on Value: General Areas of Cost Impact
5.1
Responsible Party
Depending
upon the relevant legislation, it is usual that the responsible party
bear the clean-up costs of contaminated properties. Where
responsibility cannot be determined, the chain of title is generally
followed with the current owner most likely to be liable. Members
should
refer
to their relevant state legislation when determining the responsible
party and the chain of responsibility.
5.2
Effect on Present and Future Utility
Remediation
costs can range from mild instances requiring low expenditure with
little impact on value, to severe cases where virtually no use of the
property is possible for the present or foreseeable future and
prohibitive costs are needed to correct the problem. The degree to
which
contamination affects the present and future utility of the property
must be quantified before a value can be readily assessed.
Due
to the specialist work involved in assessing the type, extent and
cost of remediation, Members are strongly advised not to provide
their own estimate.
5.3
Initial Survey Costs
The
first cost associated with environmental contamination is the cost of
discovering the extent of any problem.
5.4
Cost to Remedy
The
cost of remediation of a particular problem can be major, but care
needs to be taken not to understate or overstate the impact on value.
For example, property may be able to maintain an income stream while
remediation process is in progress. In some cases these costs may be
amortised
over a period rather than as a one-off cost.
5.5
All Costs with Clean-up
The
cost to remedy a contamination problem includes all costs resulting
from and associated with the clean-up.
These
include the cost of the physical clean-up, monitoring remedial
measures, legal fees and continuing costs. Costs may also involve a
capital improvement such as a more efficient, less polluting system
that enhances residual property value significantly.
5.6
Develop & Maintain Cost Information File
Members
may develop and maintain files of clean-up cost information. This
information should not, however, be used to give detailed
environmental advice or cost estimates to clients. Appropriate
experts should be retained for this purpose.
5.7
Physical Clean-up and/or Remedial Costs
This
can involve a variety of techniques such as simply removing and
replacing contaminated soil (recognising that an acceptable location
to receive contaminated material is often very difficult to find),
extracting harmful chemicals in groundwater by pump extraction, or
isolating
and
permanently sealing off contamination. Neutralising the contaminants
with special chemicals is a possible solution in some cases.
Environmental engineers and other experts can explain the options for
remedial work or hazard reduction and provide cost estimates for
undertaking this work.
5.8
Legal Costs
Legal
costs associated with contamination may be considered part of the
cost to cure the problem. The extent of these legal costs will vary
according to the circumstances of each particular property. Members
should refer to these costs in their report, where appropriate, and
ensure that they are addressed by any expert environmental report
obtained. The potential for litigation or pending litigation may
affect marketability and further affect value by deterring
prospective buyers. Such effects will usually be included within the
Stigma component of environmental liabilities. Alternatively, Members
may include a separate
‘contingency
figure’ to cover these effects. Such a figure should either be
provided by an environmental expert or estimated by the Member
following suitable enquiries of solicitors. It should always be
qualified to inform the client that it is a contingency figure only
and that it may not reflect the costs actually incurred should
litigation eventuate.
5.9
Continuing Costs
Final
costs are often unknown before the completion of any clean-up.These
costs often exceed original estimates, especially when future, more
stringent regulations are anticipated. In addition, perceived or
actual risks remaining after completion of clean-up may result in
higher insurance costs. Members should ensure that figures obtained
from
environmental
experts make allowance for these continuing costs and that these
costs are appropriately spread over a period corresponding to
anticipated plant or improvement life or the period of the
remediation.
5.10
Indirect Costs
These
can include anything that affect the property’s income producing
potential during or after the clean-up.
For
example, tenants may not be able to live in a rental unit during lead
paint removal. Another example would occur if one portion of an
industrial plant could not be used because of toxic contamination and
an intermediate product manufactured in that area was no longer able
to
be
produced on-site. Additional expenses would be incurred and the
operation’s earnings could suffer accordingly. Holding costs, due
to delays in development caused by the need for prior remediation,
are another form of indirect cost.
5.11
Financing
There
can be an adverse effect through financiers applying more
conservative lending policies where there is a perception that a
property may be secondary due to the effects of contaminants. (A
Member, however, has a responsibility to ensure that mortgage clients
are adequately informed of risks associated with known
contamination.)
5.12
Indemnification Agreements
Some
indemnification agreements, as set out by the seller, agree to retain
responsibility for current and future costs related to environmental
contamination. From the point of view of market sales information,
the sale price would need to be discounted. The valuer wherever
possible makes enquiries to establish the extent of the
indemnification.
5.13
Stigma
This
is an intangible factor that may not be measurable in terms of cost
to cure but may have real impact on Market Value. It arises from the
effect of present or past contamination upon the market’s
perception of the property and represents a discount, beyond the
direct and indirect
costs
likely to be incurred, required to compensate for the risks
associated with contaminated or previously contaminated property
including the risk of achieving the planned remediation.
5.14
Market Perception
The
market may perceive stigma exists because of:
•
uncertainty affecting
the existing or future use of the site;
•
risks associated with
the effectiveness of remediation;
• a
full ‘cure’ of the site being unattainable;
•
concern at possible
hidden clean-up costs;
•
prejudice arising out
of prior site uses;
•
alternative site uses
being restricted;
•
legislative issues
affecting contaminated sites;
•
possible future
financing and marketability difficulties;
•
risks associated with
public liability.
Stigma
makes property less desirable, even when a complete remediation or
cleanup has been carried out.
That
is, where there is a market perception that a property is or has been
contaminated, despite the availability of information that cleanup
has taken place, the market will often pay less than normal
unaffected values. This situation is similar to obsolescence and
represents a lingering detriment to a property. In some cases the
stigma effect is variable with time or is transitory.
5.15
Effect May be Out of Proportion
The
stigma effect on value may be out of proportion to the cost to cure
the problem, and can persist at varying levels for many years.
Main
Causes of Market Value Loss There are three broad categories of
market value loss caused by land contamination:
•
cost and risk of
remediation including consultancy, legal and monitoring costs;
•
liability to the
public; and
•
stigma (affecting
marketability and suitability for mortgage security).
5.16
Contaminants may not Necessarily Reduce Value
The
presence of contaminants within a property may not necessarily reduce
its value within the land use class or industry in which it is
operating. Under State laws an existing use might be continued
without remediation being required. For example, an industrial
tailings pond
having
protective confines within land may contain toxic compounds that form
part of a valuable industrial process for which there is a long term
market demand. Special licensing generally accompanies these
processes and the property can continue to be used as it is. A valuer
reporting
a value under these circumstances should also advise the client that
the valuation could be significantly different should the current use
cease.
6.0
Potential Problems for Lenders
6.1
Lenders have Potential Exposure
Lenders
have potential exposure to risk through land contamination as
follows:
•
loss of market value
of collateral (property);
• a
borrower’s inability to repay loans because of cleanup costs,
penalties or inability to continue business activities;
•
lender’s liability
for clean-up costs following foreclosure of a mortgage, entering into
possession as mortgagee in possession, or even exercising control
under a scheme of arrangement.
7.0
Legislation
7.1
Legislation Increasing
Legislation
affecting property contamination and related environmental matters is
increasing in this country and overseas. A list of some of the
relevant legislation and agreements is offered in Appendix 6.
7.2
Environmental Protection Authorities in Australia
A
list of the internet addresses for the Environmental Protection
Authorities in Australia is offered in Appendix 7.1.
7.3
Certain State Legislation Embodies ‘the polluter pays’
Members
who are acting for the vendor of a property should recognise that
certain State legislation embodies the principle that in matters of
land contamination, there is a principle ‘the polluter pays’, and
this means that if a vendor has caused the land being valued to be
contaminated, they may not be able to avoid responsibility for
subsequent remediation even though the property has been sold.
Members
should refer to their own State legislation in this regard. Future
Federal legislation may influence liability issues.
7.4
Responsibility for Lessees
The
lessor could be responsible for the activities of a lessee who is
unable to pay remediation costs or penalties . Many leases now
contain provisions to prohibit activities that would result in
contamination. Where the lessee could be engaging in activities that
could result in contamination, the valuation should comment on
inadequate provisions of the lease.
8.0
Indemnity Insurance
8.1
Policy Exclusions
Members
should be aware of any exclusions within their professional indemnity
insurance policy related to pollution, contamination or specific
contaminants. Some policies do not provide cover in relation to
claims arising from or in connection with these matters. For example,
many policies exclude liability for claims arising from nuclear
radiation.
Furthermore,
a Member may in some instances not be covered by a policy where the
Member has failed to confine himself or herself to their field of
expertise. Members should consult their professional indemnity
insurance brokers in this regard.
9.0
GST Caution
Since
the introduction of the GST on 1st July 2000 specific legal and/or
accounting advice will need to be sought regarding the GST
implications for this Guidance Note.
Appendix
1 United Nations hazard classes
1.
Explosives
2.
Flammable Gas
3.
Non-Flammable/Compressed Gas
4.
Poison Gas
5.
Highly Flammable Liquid
6.
Flammable Liquid
7.
Flammable Solids
8.
Substances Liable to Spontaneous Combustion
9.
Substances Emitting Flammable Gases when Wet
10.
Oxidising Agents
11.
Organic Peroxides
12.
Poisonous (Toxic) Substances
13.
Infectious Substances
14.
Radioactive Substances
15.
Corrosives
16.
Miscellaneous Dangerous Substances
The
categorisation of contaminating substances into these ‘Hazard
Classes’ has been provided by the United Nations.
These
classes are not necessarily exclusive. Members should not confine
their attention to substances falling within these classes.
Appendix
2 Potentially Contaminating activities, industries and land uses
1.
Abattoirs and Animal Processing Works
1b.
Arsenic
2.
Acid/Alkali Plant and Formulation
3.
Agricultural Activities (Vineyards,Tobacco, Sheep Dips, Market
Gardens). Heavy metals
4.
Airports.Trichlore-ethylene from solvent cleaning operations.
5.
Alumina Refinery Residue Disposal Areas.
Fluoride
(atmospheric emissions).
6.
Asbestos/Asbestos Production
7.
By-Product Animal Rendering. Pesticides.
8.
Bottling Works
9.
Breweries. Pesticides, oils and greases, underground storage tanks
10.
Brickworks
11.
Car Wreckers. Oils and greases,TPH and BTEX compounds,TCE (solvent
cleaning).
12.
Cement Works
13.
Cemeteries
14.
Ceramic Works. Heavy metals.
15.
Chemical Manufacture and Formulation
16.
Coal Mines and preparation Plants. Organic
compounds
– surfactants.
17.
Defence Works
18.
Docks. Oils and greases,TPH and BTEX compounds, TCE (solvent
cleaning), pesticides, heavy metals.
19.
Drum Reconditioning Works
20.
Dry Cleaning Establishments. Organic compounds.
21.
Electricity Distribution. PCB compounds.
22.
Electroplating and Heat Treatment Premises. Chrome, heavy metals.
23.
Ethanol Production Plants
24.
Engine works. TPH, BTEX compounds, organic compounds (associated with
solvents).
25.
Explosives Industries
26.
Fertiliser Manufacturing Plants
27.
Gasworks
28.
Glass Manufacturing Works
29.
Horticulture/Orchards. OCP and OPP pesticides.
30.
Industrial Tailings Ponds. Heavy metals, organic
compounds,TPH,
BTEX.
31.
Iron and Steel Works
32.
Landfill Sites.Variety of possible contaminants.
33.
Limeworks
34.
Marinas and Associated Boat Yards. Heavy metals –
particularly
Tri butyl tin
35.
Metal Treatment. Heavy metals.
36.
Mineral Sand Dumps
37.
Mining and Extractive Industries
38.
Munitions Testing and Production Sites
39.
Oil Production,Treatment and Storage
40.
Paint Formulation and Manufacture
41.
Pesticide Manufacture and Formulation
42.
Pharmaceutical Manufacture and Formulation
43.
Photographic Developers. Heavy metals –
Ag
Cl used as part of process.
44.
Piggeries. Pesticides and heavy metals.
45.
Plant Nurseries
46.
Plant or Fibreglass
47.
Power Stations
48.
Prescribed Waste Treatment and Storage Facilities
49.
Printed Circuit Board Manufacturers. Solvents and
glues
– volatile organic compounds.
50.
Properties Containing Underground Storage Tanks.
TPH,
BTEX, PAH, solvents.
51.
Radioactive Materials, Use or Disposal
52.
Railway Yards
53.
Research Laboratories. Metal, organic compounds, radioactive
elements.
54.
Sawmills and Joinery works. Copper, chrome, arsenic.
55.
Scrapyards.TPH, BTEX.
56.
Service Stations
57.
Sewerage Works
58.
Smelting and Refining
59.
Sugarmill or Refinery
60.
Tanning and Associated Trades (eg. Fellmongery)
61.
Timber Treatment works. Formaldehyde, copper, chrome, arsenic.
62.
Transport/Storage Depots
63.
Tyre Manufacturing and Retreading Works. Glues – volatile organic
constituents.
64.
Waste Treatment Plants in which Solid, Liquid Chemical, Oil,
Petroleum or Hospital Wastes are Incinerated, Crushed, Stored,
Processed, Recovered or Disposed of.
65.
Wood Storage Treatment. Formaldehyde, copper, chrome, arsenic.
66.
Wood Treatment Facility. Formaldehyde, copper, chrome, arsenic.
67.Wood
Preservation. Formaldehyde, copper, chrome, arsenic.
68. Other
Activities, Industries and Land Uses
1.
Sites of incidence: road or rail spillage involving hazardous
substances; fires involving hazardous substances.
2.
‘Hot spots’ of likely contamination by agricultural chemicals and
their by-products, eg. spray mixing sites; sheep and cattle dips;
pesticide disposal sites.
The
above lists are illustrative only. They are not intended to be
exclusive.
Appendix
3 Suggested Environmental Checklist
The
following Checklist 3 is not intended to be exhaustive. It is
included to illustrate the type of factors Members should be aware of
when undertaking a visual inspection of a property. Members should
exercise their own professional judgement in deciding what factors
are relevant to the particular property being valued.
Hazardous
Materials, Storage and Disposal
1.
Are there any drums, tanks or other holders of hazardous materials
like chemicals, pesticides, cleaners, solvents on the property?
Y/N
N/A Comment:
Unknown
N/A Comment
2.
If so, is there any indication of spills, leaks or discharges to the
ground from the drums, tanks, other holders of hazardous material?
Y/N
N/A Comment:
Unknown
N/A Comment
3.
Are there any areas observed with stains on the ground or with dead
or stressed vegetation?
Y/N
N/A Comment:
Unknown
N/A Comment
4.
Is the facility on the property a generator of hazardous waste?
Y/N
N/A Comment:
Unknown
N/A Comment
5.
If hazardous waste is generated at the property, does it appear to be
improperly monitored or not transported off the property by
professional hazardous waste disposal contractors?
Y/N
N/A Comment:
Unknown
N/A Comment
6.
If the property generated hazardous waste, does it have statutory
environmental authority approval, or is it licensed to do so?
Y/N
N/A Comment:
Unknown
N/A Comment
7.
Does the property appear to have any pits, ponds, lagoons (other than
normal water retention ponds required by some local councils) or
other dumping areas?
Y/N
N/A Comment:
Unknown
N/A Comment
8.
Is there any evidence of radioactive products being utilised on the
property?
Y/N
N/A Comment:
Unknown
N/A Comment
9.
Does the facility appear to be free of any obvious sources of air
emissions that have chemical odours, fumes or mists?
Y/N
N/A Comment:
Unknown
N/A Comment
10.
Does the facility appear to be free of any noise pollution and are
controls in place?
Y/N
N/A Comment:
Unknown
N/A Comment
11.
Is there any evidence of any source of infectious waste (medical
pathological wastes) on the property?
Y/N
N/A Comment:
Unknown
N/A Comment
12.
If there is any source of infectious waste, are facilities for its
disposal inadequate or not functioning properly?
Y/N
N/A Comment:
Unknown
N/A Comment
13.
If the current use of the property does not indicate any of the
above, could prior uses of the land involve hazardous materials,
storage and disposal?
Y/N
N/A Comment:
Unknown
N/A Comment
14.
Is the property registered on any Government register of contaminated
land or its equivalent?
Y/N
N/A Comment:
Unknown
N/A Comment
15.
Are the existing or past operations on the property subject to local
environmental concerns expressed by the local community, Council,
Health Department or EPA?
Y/N
N/A Comment:
Unknown
N/A Comment
16.
Do the existing operations comply with current regulatory permits and
licensing?
Y/N
N/A Comment:
Unknown
N/A Comment
17.
With reference to storage of hazardous chemicals, are the storage
structures designed to minimise contamination in the event of fire or
natural disaster?
Y/N
N/A Comment:
Unknown
N/A Comment
Management
Controls: Hazardous Waste
1.
Does this facility have a policy document and is it available to all
staff?
Y/N
N/A Comment:
Unknown
N/A Comment
2.
Does the facility have an action plan in place for monitoring and
reviewing environment controls?
Y/N
N/A Comment:
Unknown
N/A Comment
3.
Does the facility have an emergency plan and/or procedures in the
event of a spill, explosion or break
down?
Y/N
N/A Comment:
Unknown
N/A Comment
4.
Are copies of licenses and/or registrations easily visible and are
they up to date?
Y/N
N/A Comment:
Unknown
N/A Comment
5.
Verify the current status on any current orders
Y/N
N/A Comment:
Unknown
N/A Comment
6.
Verify the status on current audits
Y/N
N/A Comment:
Unknown
N/A Comment
Extractive
Industries
1.
Is there any extractive industry currently being operated on the
site?
Y/N
N/A Comment:
Unknown
N/A Comment
2.
If yes, is there an Environmental Impact Statement available for
perusal?
Y/N
N/A Comment:
Unknown
N/A Comment
3.
If yes, is there a current Development Approval available for
inspection?
Y/N
N/A Comment:
Unknown
N/A Comment
Asbestos
1.
Is asbestos apparent on the property?
Y/N
N/A Comment:
Unknown
N/A Comment
2.
Does a walk through the facilities reveal any obvious evidence of
asbestos in ceilings, pipes, ducts, roofing, boiler insulation or
structural beams, etc, that appears to be fireable, flaking or
damaged?
Y/N
N/A Comment:
Unknown
N/A Comment
3.
Were the facilities on the property constructed prior to 1980 when
the use of asbestos was banned?
Y/N
N/A Comment:
Unknown
N/A Comment
4.
Has an asbestos survey/audit of the facilities been conducted?
Y/N
N/A Comment:
Unknown
N/A Comment
5.
Did the survey find the buildings to be free of asbestos containing
materials?
Y/N
N/A Comment:
Unknown
N/A Comment
Polychlorinated
Biphenyls (PCBs)
1.
Is there any electrical equipment (transformers, capacitors, etc)
that contain polychlorinated biphenyls
(PCBs)
on the property?
Y/N
N/A Comment:
Unknown
N/A Comment
2.
If PCB containing electrical equipment is presently on the property,
is there any evidence of leaks or spills on the ground near the
equipment?
Y/N
N/A Comment:
Unknown
N/A Comment
Underground
Storage Tanks (USTs)
1.
Are there any underground storage tanks (USTs) containing petroleum
products or hazardous chemicals on the property?
Y/N
N/A Comment:
Unknown
N/A Comment
2.
If USTs exist on the property, are leak detection equipment or
secondary containment systems not installed on the tanks?
Y/N
N/A Comment:
Unknown
N/A Comment
3.
Have they ever been tested for leaks?
Y/N
N/A Comment:
Unknown
N/A Comment
4.
Has there ever been an incident of a leak, spill or discharge?
Y/N
N/A Comment:
Unknown
N/A Comment
5.
Have the owners or lessees of the property undertaken any
environmental audit pertaining to underground storage tanks on the
property?
Y/N
N/A Comment:
Unknown
N/A Comment
6.
Have the proper registration forms been submitted to the designated
regulatory authorities?
Y/N
N/A Comment:
Unknown
N/A Comment
Land
Fills
1.
Is there any evidence that the site is currently being filled or has
been filled?
Y/N
N/A Comment:
Unknown
N/A Comment
2.
Have the filling operations been approved by Council and the EPA?
Y/N
N/A Comment:
Unknown
N/A Comment
3.
Do the filling operations allow for putrescible, nonputrescible or
toxic wastes?
Y/N
N/A Comment:
Unknown
N/A Comment
4.
Do the filling operations require a licence and/or Performance
Guarantee and License from the EPA?
Y/N
N/A Comment:
Unknown
N/A Comment
Agricultural-Type
Properties
1.
If the property has previously been used for horticultural, orchard
or market garden purposes, is there any historic evidence of past
land uses having involved persistent pesticides, such as dieldrin or
DDT?
Y/N
N/A Comment:
Unknown
N/A Comment
2.
Are there any environmental audits available evaluating the presence
of pesticides?
Y/N
N/A Comment:
Unknown
N/A Comment
Former
Defence-Oriented Property
1.
Does the land contain unexploded munitions, radioactivity or other
hazardous substances that could be associated with defence works?
Y/N
N/A Comment:
Unknown
N/A Comment
2.
Is there any information available from the Department of Defence or
local authorities regarding the presence of unexploded munitions?
Y/N
N/A Comment:
Unknown
N/A Comment
Environmental
Hazards on Adjacent Properties 1. Do any adjacent properties appear
to have any improper storage or dumping of hazardous materials, drums
or containers that could impact on the value of the subject property?
Y/N
N/A Comment:
Unknown
N/A Comment
2.
Are there any landfills, dumps or other waste disposal facilities
within one kilometre of the subject property?
Y/N
N/A Comment:
Unknown
N/A Comment
3.
Is there any indication of operations such as gas stations, chemical
plants, bulk storage tanks, manufacturing plants or other land uses
which potentially involve land contamination (as outlined in
this
document), on any of the adjacent properties?
Y/N
N/A Comment:
Unknown
N/A Comment:
Appendix
4 Sample Environmental Balance Sheet The following is a relatively
simple non-costed Environmental Balance Sheet for example purposes.
IMPAIRED
VALUE OPINION BALANCE SHEET
UNIMPAIRED
VALUE OPINION $
Less
: ENVIRONMENTAL LIABILITIES:
Due
Diligence/Initial Environment Consultants Costs $
Quantification
& Alternative Strategy Development Costs $
PRESENT
VALUE OF ACTION PLAN COMPONENTS:
Remediation/Clean-Up
Action Costs $
Contamination
Control and Management Measures $
Redesign
of Production Facilities $
Avoidance
of Migration of Contamination to Adjacent Sites $
Notification,Training
and Record Keeping $
Allowance
for Emergency Response Actions $
Legal
Costs $
Indemnity
Insurance for the Future $
Monitoring
Costs $
Licensing
Costs where Applicable $
SUBTOTAL:
Present Value of Action Plan $
Estimated
Negative Intangible (Stigma) Impact $
TOTAL
ENVIRONMENTAL LIABILITIES $
OWNER’S
IMPAIRED POSITION* $
- The GREATER of
Zero or Unimpaired Value LESS any Environmental Liabilities.
Appendix
5 A Method of Assessing Stigma
Unimpaired
Value of the Land (a medium hazard risk property) $
Present
value of remediating costs $
Impaired
value 1 - not allowing for stigma $
Comparable
Case Studies
Case
Study Number Indicated percentage Comparison to the property being
valued
of
impaired value 1 lost
to
stigma
1
25.9% Treatment completed, stigma caused by fear of additional
contamination,
less severe than the subject property.
2
29.2% No treatment proposed at present, continued industrial
use,
similar risk level to subject property
3
20.9% Site not contaminated but is situated adjacent to
a
contaminated site
4
32.7% Similar type of contamination to subject property
but
slightly more severe
5
45.4% Heavily contaminated site, derelict land, more severe
than
the subject property
Range
of stigma effects indicated by comparables 20.9% to 45.4%
Comparables
closest to subject property, numbers 2 and 4, 29.2% to 32.7%
Therefore
percentage stigma applicable to the subject property is 31%
Amount
of stigma @ 31% of impaired value 1 $
Impaired
value 2 (taking account of treatment and associated costs and stigma)
$
Add
value of buildings $
Total
value of asset say $
Percentage
reduction in value attributable to contamination 21.60%
Source:
Developed from Patchin (1994) and Syms (1995) (UK)
Appendix
6 Environmental
Legislation
in Australia
For
legislation in Australia see Australian Legal Information Institute
(AUSTLII) Website
The
following list is not intended to be exhaustive. It should, however,
illustrate the wide variety of existing environmental legislation
which may affect the value of a particular interest in land.
Commonwealth
of Australia
1.
The Inter-Governmental Agreement on the Environment.
2.
National Waste Minimisation and Re cycling Strategy released by
Commonwealth Environmental Protection Authority.
3.
Industrial Chemicals (Notification and Assessment) Amendment Act
1989.
4.
Ozone Protection Amendment Act 1992.
5.
Commonwealth Ozone Protection Act 1988.
6.
Petroleum (Submerged Lands) Act 1967.
7.
Environmental Protection (Nuclear Codes) Act 1978.
8.
Nature Conservation Act 1980.
9.
Water Pollution Act 1984.
10. ACT (Planning
& Land Management) Act 1988.
Australian
Capital Territory
1.
Clinical Waste Act 1990
2.
Public Health Act 1982
3.
Poisons Act 1993
4.
Radiation Act 1983
5.
Air Pollution Act 1984
6. Land Planning
Act 1991
New
South Wales
1.
Environmental Planning and Assessment Act 1979.
2.
Environmentally Hazardous Chemical Act 1985.
3.
State Environmental Planning Policy No. 33: Hazardous and Offensive
Development - Gazetted 11 March 1992.
4.
Clean Waters Act 1970.
5.
Environmental Offences and Penalties Act 1989.
6.
Clean Air Act.
7.
Noise Control Act.
8.
State Pollution Commission Control Act.
9.
Marine Pollution Act 1987.
10.
Petroleum (Submerged Land) Act 1982.
11.
Coastal Protection Act 1979.
12.
Drainage Act 1939.
13.
Water Board Act 1987.
14.
Pesticides Act 1978.
15.
Radioactive Control Act 1990.
16.
Rural Lands Protection Act 1989.
17.
Soil Conservation Act 1938.
18.
Unhealthy Building Land Act 1990.
19.
Environmental Restoration and Rehabilitation
Trust
Act 1990.
20. Protection of
the Environment (Operations) Act 1997
Queensland
1.
Local Government (Planning and Environment) Act 1990.
2.
The Contaminated Land Act 1991.
3.
Nature Conservation Act.
4.
Local Government (Planning & Environmental)
Amendment
Act 1992.
5.
Pollution of Waters by Oil Amendment Bill 1992
(Proposed).
6.
Local Government Act 1936.
7.
Petroleum (Submerged Land) Act 1982.
8.
Harbours Act 1955.
9.
River Improvement Trust Act 1940.
10.
Water Resources Act 1989.
11.
Soil Conservation Act 1986.
12.
Radioactive Substances Act 1958.
13.
National workshop on Health Risk, Assessment and
Management
of Contaminated Land, November 1991.
14.
Clean Air Act 1963-1990.
15. State
Environment Act 1988.
South
Australia
1.
Planning Practice Circular (distributed by the Department of
Environment and Planning to Local Councils, Planners and Consultants
in October 1990).
2.
Discussion Paper - Contaminated Land - A South Australian Legislative
Approach.
3.
Proposal for South Australian Environmental Protection Authority and
Chapter on Environmental Policy.
4.
Dangerous Substances Act 1979/1988.
5.
Environmental Protection Council Act 1972 and Local Government Act
1934.
6.
Marine Environment Protection Act 1990.
7.
Petroleum (Submerged Lands) Act 1982.
8.
Water Conservation Act 1936.
9.
Harbours Act 1936.
10.
Water Resources Act 1976.
11.
Native Vegetation Act 1991.
12.
Soil Conservation and Land Care Act 1989.
13.
Waste Management Act 1987.
14.
Clean Air Act 1984.
15. Public &
Environmental Health Act 1987.
Tasmania
1.
Environmental Protection Act 1973.
2.
Chlorofluorocarbons and other Ozone Depleting Substances Control Act
1988.
3.
Oil Pollution Act 1961.
4.
Public Health Act 1962.
5.
Groundwater Act 1985-1988.
6.
Water Act 1957-1923.
7. Petroleum
(Submerged Lands) Act 1982.
Northern
Territory
1.
Conservation Commission Act 1980.
2.
Local Government Act 1954.
3.
Ozone Protection Act 1990.
4.
Public Health Act 1952.
5.
Uranium Mining (Environmental Control) Act 1979-1981.
6.
Petroleum (Submerged Lands) Act 1982-1986.
7.
Environmental Protection (NT Supreme Court) Act 1978.
8.
Environmental Assessment Act 1982.
9. Soil
Conservation & Land Utilisation Act.
Victoria
1.
Environment Protection Act 1970.
2.
Pollution of Waters by Oil and Noxious Substances (Amendment) Act
1991.
3.
Marine Act 1988.
4.
Heritage Rivers Act 1992.
5.
Agricultural and Veterinary Chemicals Act 1992.
6.
Environment Protection (Resource Recovery) Act 1992.
7.
Various State Environmental Protection Policies made under the
Environmental Protection Act 1970 covering air environment, control
of noise, ground waters, etc.
8.
Local Government Act 1958.
9.
Petroleum (Submerged Land) Act 1982.
10.
Extractive Industries Act 1966.
11.
Land Conservation Act 1970.
12.
Soil Conservation and Land Utilisation Act 1958.
13. Occupational
Health and Safety (Asbestos) Regulations 1992.
Western
Australia
1.
Environmental Protection Act 1986.
2.
Local Government Act 1960.
3.
Petroleum (Submerged Lands) Act 1982.
4.
Marine Harbours Act 1981.
5.
Pollution of Waters by Oil and Noxious Substances Act 1987.
6.
Waterways Conservation Act 1976.
7.
Poisons Act 1964.
8.
Radiation Safety Act 1975.
9.
Explosives and Dangerous Goods Act 1961.
10.
Agricultural Produce (Chemical Residues) Act 1983.
11.
Health Act 1911.
12.
Aerial Spraying Control Act 1966.
13.
Nuclear Activities Regulation Act 1978.
14.
Industrial Lands Development Authority Act 1966.
15. Soil & Land
Conservation Act 1945.
APPENDIX
7 Internet Address of Environment Protection Authorities of Australia
Environment
Australia – Department of the Environment and Heritage
(Commonwealth)
http://www.ea.gov.au
Department
of Lands Planning and Environment, NT
http://www.nt.gov.au/dlpe/
Department
of Environment and Heritage, QLD
http://www.env.qld.gov.au/
Department
of Environment, Heritage and Aboriginal Affairs, SA
http://www.denr.sa.gov.au/
Department
of Primary Industries, Water and Environment,TAS
http://www.dpiwe.tas.gov.au/
Department
of Environmental Protection,WA
http://www.environ.wa.gov.au/
Environment
ACT
http://www.act.gov.au/environ/
Environment
Protection Authority, NSW
http://www.epa.nsw.gov.au/
Environment
Protection Authority, SA
http://www.epa.sa.gov.au/
Environment
Protection Authority,VIC
http://www.epa.vic.gov.au/
Footnotes:
1.
Australian and New Zealand Environment and Conservation
Council,
National Health and Medical Research Council, Australian
and
New Zealand Guidelines for the Assessment and Management
of
Contaminated Sites, January 1992, p. 2.
2.
Research on Radon is being conducted by Murdoch University in
Western
Australia.
3.
The Institute gratefully acknowledges the assistance of the NSW
Property
Valuation Department of the Commonwealth Bank of
Australia
in the preparation of this Appendix.
4.
DoE, Queensland 1998.
5.
National Environmental Protection Council is to release a National
Environment
Protection Measure which will supersede the relevant sections of the
ANZECC/NHRMC Australia and New Zealand Guidelines for the Assessment
and Management of Contaminated Sites 1992.
6. New South Wales
EPA 1995.
30