FROM DIRT TO DELIVERY: ENVIRONMENTAL AND CONDEMNATION PITFALLS IN CORRIDOR PROJECTS

1. FROM DIRT TO DELIVERY:ENVIRONMENTAL AND CONDEMNATION PITFALLS IN CORRIDOR PROJECTS CASSIE B. STINSON Partner, ANDREWS KURTH LLP

2. BASICCONCEPTS A. Acquisition Concepts 1. Standard Approach • Survey & Title • Appraisal • Environmental Phase 1 • Make Offers • Condemnation

3. 2.Major Objectives • Project Schedule • Project Costs

4. B.Environmental Concepts • Environmental Site Assessments (ESAs) • ESA Phase I: non-invasive; identifies Recognized Environmental Concerns (RECs) • ESA Phase 2: involves sampling; identifies Chemicals of Concern (COCs) • ESA Phase 3: more tests to delineate extent of COCs; generate Environmental Cost Estimate (ECE)

5. Remediation Standards • TRRP—residential • TRRP—commercial/industrial • UST rules • Groundwater • MSD • PMZ • Pump and Treat

6. C. Appraisal Considerations for Contaminated Property • USPAP AO-9 and Env’l Terms: Contaminant constituents: • COCs (Chemicals of Concern) • Pathways of exposure • Institutional controls • Remediation standards • ECE (Environmental Cost Estimate) Contamination conveyance: Limitations on use: Highest and best use: Cost and timing ofsite remediation plan:

7. 2. Appraisals Are “Professional Opinions”

8. II. SOURCES OF CONTAMINATION A. Leaking Petroleum Storage Tanks (LPSTs)

9. Results of LPST

10. Cessation of Operations Essential During Remediation

11. B. Chlorinated Solvent Leaks

12. Pump and Treat (Just Shoot Me Now!)

13. ADVANCED CONCEPTS • Modified Takes • Requires input and approval from Project engineering group • Must use modified take consistently for entire Project

14. 1. 3D Easements—A Slice of the Vertical Column of Property • Air rights (e.g., minimum elevation = 24 ft.) • Upward limitation to surface rights (e.g., max. elevation = 24 ft.) • Surface level (at grade? sea level?) • Downward limitation of surface rights (e.g., max. depth = 10 ft.) • Subsurface rights (e.g., minimum depth = 10 ft.) pipe gunk

15. 2. Bisected and Excluded Improvements • describe specifically • pay for fuel system components, but don’t title 3. Get a Temporary Easement on remainder • area needed • time needed

16. Partial Take at Gas Station Ofc & C-Store PumpIsland Tanks Pump Island Sign

17. Plan Ahead on Impaired Property • Identify Impaired Property Early Current uses having RECs: • Gas stations (currently operating, abandoned) • Small industrial: auto repair, machine shop, paint shop, battery shop, car wash • Dry cleaners • Former rail yards • Landfills • Old improvements (pre-1978): friable asbestos, lead

18. Environmental: Order ESA Ph. 1 and 2 at same time Define RECs asap and inform Appraiser Appraiser: Plan for initial appraisal “as if clean” and supplemental appraisal “as is” Define Highest and Best Use asap and inform Environmental 2. Coordinate Team Work Tip: Schedule early site visit with FULL Team

19. Standard Documents Don’t Work for Non-Standard Property 1. No such thing as a “standard” contaminated property – every case is unique!

20. Use Your Documents as Tools • You can negotiate special terms in voluntary acquisitions that are not available in eminent domain • If it’s not in writing, you don’t have a deal • Get legal help on non-standard docs

21. 3. Special Provisions in Offers and Purchase Agreements • Bisected or excluded improvements (don’t forget the TCE!) • Environmental escrow agreement • Seller’s post-closing obligations

22. Standard language: The tract or parcel of land, together with all improvements situated thereon, …. 4. Deed (Fee Simple) Special Provisions: • Include bisected improvements • Exclude title to certain improvements

23. 5. Grant of Easement Standard language: “... a strip of land, 20 feet wide, more particularly described in Exhibit A, …” Special provision: 3D Easement

24. Condemnation Concepts • Acquire Only “Interests in Real Property” NO: • Escrow agreements • Env’l Right of entry • Post-closing Seller obligations (duty to interrupt operations) YES: • Fee simple • Permanent easement • Temporary easement • Improvements in take area • Bisected improvements

25. 2.Consistency: special provisions in thefinal offer must be reflected in pleadings: • right to demolish certain improvements but not take title • bisected improvements outside “take area” • TCE (temporary construction easement)

26. “Woodshed” the witnesses before the hearing: • Appraiser • Environmental Consultant • Right of Way Agent

27. CLEAN PROPERTY – BUT ENVIRONMENTALLY IMPAIRED

28. Laws Protecting Parks, Open Space, Bugs and Bogs • FEDERAL: • Section 4(f), NEPA • US Fish & Wildlife • US Army Corps of Engineers • STATE • Chapter 26, Texas Parks & Wildlife Code • COMMON LAW RE REAL PROPERTY RIGHTS: • Restrictions and reversionary rights • Park amenities

29. Federal Test: de Minimus Impact

30. No feasible alternative Locally preferred alternative Fun with public hearings –NOT! • State Law Tests

31. Private/Real Property Law Issues • Loss of property tax exemption • Restrictive covenants • Reversionary rights

32. Deed Restrictions for Park Use Only Reversionary rights: • Acquire park interest from public entity (appraise as park, no income potential) • Acquire reversionary rights from donor’s heirs (appraise at highest and best use other than park, but subject to current right to use as park) Enforcement only: • Injunction to prohibit violation: Right to enforce restrictions is a property right • Inverse condemnation claim: damages for loss of value of benefited property

33. Reversionary Rights can be scary: If the donor died 100 years ago, who and where are the heirs now?

34. Thank you Cassie B. Stinson Andrews Kurth LLP 600 Travis St., Ste. 4200 Houston, TX 77002 713-220-4684 cstinson@andrewskurth.com 34