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EBA TIP SHEET ___: Asbestos Risk Management for Lenders: Exposures, Obligations, and Resources (Rev.: 11/27/17)

Capsule:

 Asbestos: Exposures, Obligations, and Resources.  A Lender’s perspective / Overview of actual v. perceived risks associated with asbestos.  “The Baker’s Dozen” Pitfalls.  Four (of many) legal cases reviewed.  Four “must-have” regulatory letters that should be considered in establishing a Lender’s risk tolerance and Policy.  Four (of many) asbestos risk positions a Lender could hold; and a comparative discussion.  Informal Lender Poll: Current approach to asbestos management in buildings. o Lending Considerations o Foreclosure/Owner Considerations  Four examples of Bank Policy and Scoping Language, with sample Reference Document.  Three suggested actions in collaboration with the Environmental Information Association.  Review of compiled resources including the EPA’s 100 Answers to Questions

A Lender’s perspective… Why is asbestos even a consideration for a Lender today? And “The Baker’s Dozen” Pitfalls.

Asbestos is a durable, practically indestructible, and heat resistant naturally occurring fibrous mineral commonly used in building materials. Asbestos is a proven human carcinogen and exists in 1000s of building materials and other products. If managed properly, there is minimal risk of exposure but improper identification and management can lead to employee exposure and building contamination. High risk applications, such as asbestos-containing spray-applied surfacing materials and mechanical system insulation (Thermal System Insulation) materials were banned through the 1970s. However, most asbestos-containing materials can legally be installed in new construction today in the United States. Asbestos installation in new construction generally occurs unbeknownst to the contractor and owner.

Not all uses of asbestos-containing building materials were banned and many products manufactured today may contain asbestos. Buildings constructed prior to 1978 often contain materials later banned by the US EPA. It’s rare to find a building that does not have some asbestos containing-materials, regardless of the buildings age.

The United States Environmental Protection Agency (US EPA) did address what they refer to as the “high hazard” applications of asbestos-containing materials with a series of bans through the 1970s. The bans were limited to spray applied fireproofing (1973), Thermal System Insulation (TSI) (1975) and spray applied applications (1978). EPA issued a “ban and phase-out” rule in 1989, but this was vacated by the Fifth Circuit Court of Appeals.

Asbestos –Containing Materials legal for use today include, but are not limited to:

– Cement Corrugated Sheet – Cement Flat Sheet – Roofing Felt – Roofing Shingles – Vinyl Floor Tile – Cement Shingles Adobe PDF Document Management – Optimizing, Resizing and Creating PDFs

– Cement Pipe – Transmission Components – Friction Materials – Brake Pads/Brake Shoes – Gaskets – Roof Coatings – Mastics – Etc.

Asbestos was added to materials to provide strength, but those materials often degrade over time and with use creating an exposure potential. Demolition and renovation activities may disturb asbestos-containing materials creating an exposure to employees and the public. Potential exposure equals potential risk.

Regulations regarding asbestos include the Asbestos Hazard Emergency Response Act (AHERA: identification and management) the National Emissions Standards for Hazardous Air Pollutants (NESHAP: demolition and renovation, waste management) and the Occupational Health and Safety Act (OSHA: employee protection). Many state and local municipalities have additional requirements which are generally more stringent than Federal regulations. Non- compliance with these regulations equals potential risk.

In the case of OSHA, building owners and employers are responsible for regulatory compliance but an asbestos related release or exposure or compliance issue could affect an ability to repay a debt no differently than any other environmental issue. A Property Condition Assessment (PCA) may indicate certain building components are in need of repair or replacement. What if those components contain asbestos? Is there enough money in a renovation budget to accommodate this? Does this affect the value of a property? (In current design/build contracts, ACM identification and management must be included as it is required by law).

Asbestos Due Diligence:

Why do we apply AHERA for non-schools? The Asbestos School Hazard Abatement Reauthorization Act (ASHARA) extended the Model Accreditation Plan (AHERA Subpart E, Appendix C) accreditation requirements to people who perform asbestos related work in commercial and public buildings in addition to those working in schools. The requirement applies to anyone who inspects for asbestos containing materials in public and commercial buildings. It also applies to anyone who designs or conducts a response action for friable ACM in those buildings.

The recently revised document “Managing Asbestos in Buildings: A Guide for Owners and Managers”, also known as EPA’s “Purple” Book” is the state-of-the-art guideline for identifying and managing asbestos-containing materials in all facilities. The document provides an extensive review of current asbestos regulations, identification of ACM and control and management options. (Reference: “Managing Asbestos in Buildings: A Guide for Owners and Managers” A Revision to the United States Environmental Protection Agency 1985 document Guidance for Controlling Asbestos-Containing Materials in Buildings [EPA 560/5-85-024] Available at: www.EIA-USA.org).

Pitfalls in the Inspection Process:

1) Licensing requirements for an AHERA inspector can vary from state to state and at the local level as regulatory agencies can through due process adopt more stringent standards. Local

2 Asbestos Risk Management for Lenders: Exposures, Obligations, and Resources municipalities can also have their own requirements, especially concerning pre-demolition. It’s not only imperative to use contractors with proper licensing and insurance, but to also use those familiar with geographical specific requirements.

2) The purpose for conducting the asbestos inspection depends on the intended use of the report. AHERA inspections for schools are typically limited to only interior portions of the buildings and would not meet NESHAP demolition and renovation requirements. Public, commercial and industrial facilities which will be demolished or renovated require a NESHAP compliant inspection (Thorough Inspection) prior to demolition or renovation which identifies all ACM that may be affected by those activities. OSHA surveys generally occur for smaller scale Operations & Maintenance work for the purpose of protecting employees from asbestos exposure above OSHA established Permissible Exposure Limits (PEL). It’s imperative that an owner understand these differences to ensure regulatory compliance.

3) The report must be defensible. The sampling plan and execution should be well thought out and documented, and with corresponding descriptions of sampling strategies employed and why. Building plans and sampling maps should be included. Another licensed inspector should be able to follow the logic and identify the various functional spaces and homogeneous areas. This will become critical when handing the report off to a Management Planner if a management plan is to be established. This also exemplifies the need to follow AHERA inspection and analytical protocols as they are State-of-the Art for asbestos identification and management.

4) The inspection must be performed with a current Negative Exposure Assessment (NEA) consistent with OSHA 29 CFR 1926.1101. Consultants that do not provide OSHA exposure monitoring and require proper PPE for their employees have no defense against claims of exposure without an applicable NEA. The building owner, in scoping an asbestos survey, may inadvertently cause an exposure to his/her employees. A building owner that hires a non-AHERA inspector is asking an untrained individual to violate Federal regulations.

Considerations for Asbestos Surveys During Phase I Environmental Site Inspections. The following section can be developed as a Reference Document, perhaps as an attachment to the Lender Scope / Bid Request. A special thanks to Joe Palermo for helping assemble this section.

Lenders have recently experienced confusion among many of the approved vendors, regarding the expectations for sample collection of suspect Asbestos Containing Material (ACM), during the completion of Phase I Environmental Site Assessments. Please note the following, clarifying information.

Lender-Specific Requirements for Business Environmental Risk may state the following:

Post-1980 Buildings: Sample collection and analysis is typically not required unless specified in the solicitation.

Lenders may observe that the interpretation of these sections is that no sampling is required unless there is Pre-1981 damaged, suspect-ACM. Therefore, ACM sampling seldom, or never, occurs? Lenders may consider emphasizing the information in the Requirements above (for Pre-1981 Buildings) and offer the following general expectations:

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1. The purpose of limited ACM sampling is not to complete an ACM survey, while performing a Phase I ESA. The primary emphasis is on damaged, suspect ACM. The secondary emphasis, equally important, is the sample collection from large quantity suspect ACMs which could impact the value of the property (Example: 10,000 SF of acoustical ceiling texture).

2. Up to five (5) samples is the maximum sample collection expectation, unless otherwise directed in the Comments section of the RFP.

3. Always read the Comments section of the RFP before submitting a bid.

4. In Pre-1981 Buildings, it is preferred that only one (1) sample is collected from each of the following; the dominant wall system, the dominant ceiling system, extensive flooring systems, and any friable structural or mechanical systems (fireproofing and TSI). Even three samples (e.g., ceiling, wall, floor) is good information.

5. It is understood that the collection of one sample from each suspect ACM may not fulfill sampling requirements dictated in the AHERA 40 CFR 763 or NESHAP 40 CFR 61. Again, the collection of up to 5 samples is not intended to be a pre- renovation or demolition asbestos survey.

6. It is important to emphasize the collection of one (1) sample from each of the following materials, if present, in order of precedence: Spray-applied Fireproofing, Thermal System Insulation (TSI), Friable Surfacing Ceiling Material, Textured Drywall, Acoustical Ceiling Panels, Sheet Vinyl Flooring (Linoleum), any other friable or Regulated ACM. The emphasis is on friable and Regulated ACM, not necessarily Non-friable ACM (unless damaged).

7. If ALL of the materials listed in Item 6 above are present (rarely, but possible), please limit the sampling to five (5) samples from “large-quantity suspect ACMs which could impact the value of the property”, using your best professional judgment.

8. Any consulting or sampling must be provided under the supervision of a licensed or certified professional, as applicable (e.g., EPA-AHERA Inspector, TX Licensed Mold Assessment Technician). All conditions representing a potential hazard are to be addressed.

For Post-1980 buildings, Lenders may view the risk of significant quantities of ACMs in a building to be significantly diminished, or a "low potential." In many cases, it may be more appropriate to conclude that based on the date of construction, there is a low (or reduced) potential for significant quantities of ACMs to be present; however, prior to renovation, demolition, or other activities that will disturb suspect ACMs, bulk sampling of the affected materials is required to be performed by a properly licensed asbestos inspector/consultant.

Pitfalls in the Abatement Process:

1) As with the inspection, state and local jurisdictions may have administrative as well as technical requirements related to demolition and abatement notifications, fees, work procedures, licensing and final air clearance.

2) The local notification requirements and any other state or local project requirements can impact the schedule of the abatement. Work may have to be performed during off hours, at night

4 Asbestos Risk Management for Lenders: Exposures, Obligations, and Resources or on weekends. Scheduling subcontractors with these restrictions can impact the overall project schedule and cost.

3) Building systems may have to be shut down for the duration of a project. Electrical systems and HVAC may have to be shut down. If components are removed, as in the case of piping insulation or fireproofing, replacement materials will need to be installed. The removal of the asbestos is just one part of the overall project.

4) Employee and public notifications are a concern. Proper signage per OSHA which regulates the area to avoid persons accessing a controlled space is a requirement of the regulations. How will employees or tenants impacted by a project be informed and protected?

5) What will be the clearance criteria for release of the contractor and re-ocupancy of the abatement area? How will this be performed and documented?

Pitfalls in the Asbestos Management Plan:

1) The appropriateness of the Asbestos Management Plan (O&M), which is dependent on the collateral position of the lender. The risks are different for CMBS, SBA, conventional origination, foreclosure or trust situations. The chart below highlights the differences. Asbestos management is further complicated by the risk tolerance of the lender, thoroughness of the asbestos survey, the assumptions included in the survey, and the perceptions of the planner.

2) If the survey is cursory and material categories include assumptions as asbestos-containing as a tradeoff to cost, then the Management Program will necessarily include many materials that may not contain asbestos but which must be treated as asbestos-containing unless proven otherwise. The Management Program may require comprehensive response actions when a ceiling tile falls to the floor if it’s assumed to contain asbestos regardless of if it actually does. In short, without the comprehensive sampling and analysis of AHERA, the Management Plan will need to be conservative, which often results in the building owner (potentially the Lender in the case of OREO or a trust) bearing the burden of the decisions made during the asbestos inspection.

3) Without a proper NEA, OSHA regulations require full OSHA personal protective equipment (PPE) and monitoring for any asbestos-related work, even when the materials are only suspected to contain asbestos but have not b een proven to contain asbestos. There is no reference within the rules that allows an owner or operator to assume negative for asbestos. The only option is to sample or assume positive. Therefore, any suspect material that has not been proven negative by sampling following the AHERA protocol must be assumed to be ACM and treated as such. Sampling is conducted to prove negative, so until laboratory results are received, the inspector must assume that he/she is sampling ACM. Under the OSHA standard, the inspector is conducting Class III work and without a valid NEA, must be in full PPE.

A Review of More Than Four Legal Cases:

 We did not find any amazing cases involving direct liability to a bank (as a lender; rather than an owner of property) and asbestos.  We did not find cases that imposed “huge” fines and, without doing a state by state survey, it looks like the statutory maximum penalty for many violations is only $25,000 per violation. However, the expense in defending a case can far exceed the penalties.  We did find records of some fairly recent OSHA enforcement actions with sizable penalties.  Link to: EPA Criminal Prosecutions

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 With these cases below, notably the “Asbestos Litigation Summary,” each case should be researched to assure it is still current.

Schnapf Environmental Journal - Fumax Case Sycamore Industrial Park Case Schnapf Environmental Journal - HSBC Case Asbestos-Related Litigation Summary US v B and W Inv Properties Tara Woods Ltd Partnership v Fannie Mae Odyssey Capital Group III LP v OSHSRC OSHA Enforcement 60K Penalty OSHA Enforcement 1.2MM Penalty 3 Asbestos Case Summaries (Franklin Office Park, Beerman Realty, SCM Glidco) State Dpt of Env Reg v SCM Glidco Organics Corp

Four “must-have” resources that should be considered in establishing a Lender’s risk tolerance and Policy:

EPA Letter 1994 Robert Trotter EPA Letter 2006 Robert Trotter OSHA Letter 1997 William George OSHA Standard Letter - Why Sample

Four (of many) asbestos risk positions a Lender could hold: (And, findings from an informal poll regarding managing Asbestos Risks and use of O&M Plans):

TYPE CMBS Loans SBA Loan Non-CMBS CRE Owner (CREF C Rep & Loans Warrant 43) Take Title to No: Only if there No. No: But may Typically “Yes” RE: is a foreclosure. have no choice This includes on certain loans OREO, and certain but to foreclose Equity, REIT, and (or walk away). bank-managed Trust positions. Depends Liens; Pledges; on contract terms for balance sheet the latter few. May considerations. also have “Forced Sale” without taking title.

Asbestos Lowest: Low: 7a and 504 Moderate: Highest: Risk Level: Since the bank is need to observe Exit strategies for Owner can be the not keeping the requirements. See M&E and similar subject of an loan on its “Considerations” loans may enforcement action, balance sheet. below. require taking liable for clean-up, And, loan is title to the RE. or third party claim typically full under statutory or recourse to common law. Borrower and Guarantor for environmental issues.

Asbestos Not required. Typically none (or “Yes”: Often a Yes: Often sample Sampling: Commercial Real few samples). SBA visual survey and to quantify the Estate Finance SOP is silent on cursory sampling presence. May Counsel asbestos; however, to qualify the include Destructive, (CREFC) Model all risks are to be presence; may Pre-Demo/NESHAP Representation quantified. recommend full Surveys.

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and Warranty 43 Liquidation would survey prior to requires that the typically require Closing. May O&M Plan sampling. include “reasonably be management expected to statement; mitigate the response action; environmental or O&M Plan to risk.” be implemented pre-closing or post-closing.

Asbestos AHERA + State AHERA + State for AHERA + State AHERA +State, but Licenses: for sampling (if sampling. for sampling. also typically seek any). assistance from Project Designer, CIH, and others to create strategy for asbestos management and sequencing of site work.

O&M Plans & Often a generic 1527-13 is Cursory (e.g., Comprehensive Pitfalls: O&M Plan with referenced; ASTM limited, Program based on little to no Non-Scope is not preliminary) current occupancy, sampling. specifically called sampling, O&M intended use, Generic plans out. Asbestos is Plan, primary exit strategy may be difficult only referenced Contingency / (and, “alternate” for the building under in the context Hold-Back may strategy); owner to follow, of the EQ and not be thorough Operating? or increasing liability Definitions enough. Mothball?; “As- for the owner that Is/Where-Is” sale? fails to follow its “Recommendations Cursory sampling Sale as a going O&M Plan. This ” typically end up as (limited number concern? in turn can impact “Requirements” of samples) may the borrower’s under the SBA not capture all Exposures for every ability to pay. program. damaged employee, material to contractor, and The Owner may O&M Plans would determine patron. May be best never receive the need to be immediate needs to remove small O&M Plan. submitted with the and result in quantity and friable report and Costs O&M Plan that is materials to need to be defined. not eliminate the comprehensive. exposure risk.

Considerations: CREFC Model Follow SBA SOP 50 Lender may end For longer term Representation 10 5 (J). 7a v 504 up in a position ownership, O&M and Warranty 43 Loan type; 504 is of initial “physical may be more (see References submitted to SBA possession” but expensive than below). But note for approval v. 7a no “legal abatement. that the Mortgage typically is not. possession.” Loan Purchase Errors in 7a loans Agreement may may result in Destructive deviate from the challenges with the testing may not Model Reps. Guarantee and be acceptable to Bank’s “Preferred the owner. May It may be more Lender” also compromise cost effective for designation. weather seal, the building roof warranties, owner to remove Bank Policy is often property value. the ACM than to stricter than SBA 7 Adobe PDF Document Management – Optimizing, Resizing and Creating PDFs

adhere to the Policy; Bank does plan. not want to generate audit Phase I must exception by having meet ASTM pre-loan diligence requirements and that is not compliant be completed by with Bank Policy. a “reputable consultant” (an Environmental Professional must perform the Phase I). If the property is constructed prior to 1985, a property condition assessment (PCA) must be performed.

Summary of “current” Asbestos Risks and Use of O&M Plans:

Lender Considerations:

 “Anything that can interfere with the Customer’s cash-flow and ability to service the debt is material to the loan, and that includes asbestos.”  “ Asbestos can still be a material risk today, but in general, asbestos is often a manageable ‘risk’ if the Lender can avoid management or decision-making; (‘Keep your hands out of the gears’).”  “ This isn’t 1980 anymore!” – We aren’t typically seeing buildings with significant asbestos risks to the lender (just the loan). Certainly, Borrowers continue to make mistakes, but the Bank needs to maintain distance and accountability of the Borrower.”  “ Lenders should not put themselves into a position of having to ‘police’ asbestos compliance for the Borrower; once the loan funds, the bank should stay out of the way.”  Banks need reasonable standards for these types of issues under Dodd-Frank and Sarbanes. o Especially relevant to new lenders or people new to their position that are creating policies for the bank. o Established lenders should probably re-visit their Policy  More banks focusing their Policies and Scopes to not require sampling, or only sampling of damaged material to determine immediate repair needs.  Loans on schools, churches with schools, charter schools (federal funds; and recent case lost), daycares, and other sensitive receptors should be managed separately.  Lenders seem to be moving away from requiring extensive testing and O&M Plans as Closing requirements, in favor of just “recommending” asbestos be addressed as a categorical handling statement (or possibly through an O&M Plan that does not reference “the bank”; and may not even be provided to the bank).  Who should order the O&M Plan? - Borrower or, if foreclosure, the Receiver?  Who should own the O&M Plan? O&M plan should typically not be in the bank’s name and the bank does not generally review and micromanage the plan anymore (except perhaps in the context of a Trust or other situation where the bank will own the property). Generally the bank wants to avoid exercising management and control to retain lender liability protections and/or taking on liability because the bank “approved” the plan.

8 Asbestos Risk Management for Lenders: Exposures, Obligations, and Resources

Foreclosure/Owner Considerations:

 IMPORTANT: What is the exit strategy (and, “alternate” strategy); Operating? Mothball? “As-Is/Where-Is” / no warranty / “Sale as a going concern”?  Often, asbestos can just be identified, and a “Hand Off” policy is applied at the site.  Be wary of Surveys and O&M Plans ordered by the seller.  If work must be done engage a contractor and follow NESPAP or local regulations.  In talking with Equity players we found: Notably on redevelopment projects, many contracts are silent or just reference asbestos being the Contractor’s responsibility.  Architects are rarely involved with asbestos any more. The General Contractor deals with the asbestos. The Survey guides the Abatement Contractor and General Contractor.  The Owner should not hire the Asbestos Survey; let the General Contractor do it (though be prepared for some push-back). The Owner cannot delegate away his/her Liability.  Typically push everything down as a Design-Build Contract (“all-in” approach).  Avoid custom contracts; use new standardized AIA language.  Keep an eye out for cursory / ESA surveys being mistaken or mischaracterized as comprehensive/pre-demo/NESHAP surveys! – yes... it still happens.

Four Examples of CRE Lender Policy and Scope Language

Lender Example 1 –

SCOPE:

Business Environmental Risk: The EP is to address business environmental risk, notably all facets in ASTM E 1527-13 Section 13 "Non-Scope Considerations". The EP should review each Consideration relative to the potential to devalue the collateral; impact site operations; or disrupt the customer's cash flow. Though all Considerations should be reviewed, the Bank's Risk Tolerance and the Risk Class Model emphasize the following:

Asbestos: A visual assessment of suspect asbestos containing materials (ACMs) is to be conducted. Materials that are damaged or have potential for damage shall be identified. Sampling must be conducted as set forth below. (See "Assessment Qualifier" below):

Pre-1981 Buildings: Regardless of whether specified in the solicitation, sampling is required in the event that damaged friable or damaged non-friable materials requiring a response action are observed, or other large quantity suspect ACMs are observed which could impact the value of the property (e.g., spray-applied fire proofing, significant quantities of TSI). It is assumed that professional judgment will be utilized in determining the need for and number of samples to be collected, but generally between 0 and a maximum of 5 bulk samples are sufficient dependent upon conditions encountered. The Consultant shall factor in the above sampling requirement into their bid.

ASSESSMENT QUALIFIER: Any consulting or sampling must be provided under the supervision of a licensed or certified professional, as applicable (e.g., AHERA, TX Licensed Mold Assessment Technician). All conditions representing a potential hazard are to be addressed. All data (material type, location, friability, condition, amount, and asbestos/lead content) should be summarized in tabular form, with the associated regulatory citing and action level or clean-up objectives provided for reference.

In certain cases, the RIMS solicitation may require additional sampling (e.g., rehabilitation loans, special uses). In these cases, analysis of samples collected in excess of the authorized number will require approval from the assigned Bank Reviewer.

Post-1980 Buildings: Sample analysis is typically not required unless specified in the solicitation.

For pre-1981 buildings, or where asbestos-containing materials (ACMs) have been confirmed in post-1980 buildings, based on the Consultant's professional judgment, recommendations for proper management or abatement of identified asbestos hazards should be provided. For pre-1981 buildings, where all suspect or confirmed ACMs were observed to be in good condition, the Consultant may include recommendations for in-place management (i.e., implementation of an Asbestos O&M Plan).

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For post-1980 buildings, where the presence of ACMs have not been confirmed and materials were observed to be in good condition, the Bank views the risk of significant quantities of ACMs in a building to be significantly diminished, or a "low potential," even when considering the requirement to perform a comprehensive asbestos survey of suspect ACMs prior to renovation, demolition, or other activities that may impact the materials. Thus, rather than routinely recommending an Asbestos O&M Plan on all post-1980 buildings, the Consultant should carefully consider the site-specific need to recommend the implementation of Asbestos O&M Plan. In many cases, it may be more appropriate to conclude that based on the date of construction, there is a low (or reduced) potential for significant quantities of ACMs to be present; however, prior to renovation, demolition, or other activities that will disturb suspect ACMs, that sampling of the affected materials is required to be performed by a properly licensed asbestos inspector/consultant.

REFERENCE DOCUMENT – See section above: “Pitfalls in the Inspection Process – Considerations for Asbestos Surveys” can be developed as an attachment to the Lender Scope / Bid Request.

Lender Example 2 –

POLICY:

Our Environmental and Social Risk Policy (recently revised) is silent on asbestos specifically, but here is the language under the Workout section. "Contamination" could imply asbestos as well. It is left up to the individual [___] to make the call and require a survey or an O&M Plan depending on the situation. We would absolutely not take any abatement action, if necessary, until after we foreclosed and took title.

The Bank must not take title to real property unless the Environmental Due Diligence has indicated the absence of contamination, or a reasonable estimate of the cost to clean up any contamination has been obtained and is found acceptable to the Bank, based on ERO and Legal recommendations and approved by the respective Workout area.

SCOPE:

For buildings constructed before 1980 or where asbestos is a concern, a limited visual asbestos survey should be conducted to assess the relative quantity, location and condition of Presumed Asbestos Containing Material (PACM), and identify Asbestos Containing Material (ACM) [particularly friable Asbestos Containing Material (ACM)] that should be contained, repaired or replaced. Asbestos Containing Material (ACM) in good condition can typically remain in place under the implementation of an Operations and Maintenance (O&M) plan for relatively large quantities or a large variety of materials or a posting of its presence, for small quantities or when the variety of Asbestos Containing Material (ACM) is small and of limited risk.

Respecting ASTM E 1527-13, Section 13.1.5.1, if buildings exist on the subject property, Environmental Professional shall either (1) obtain from the current property owner/lessor asbestos records prepared pursuant to OSHA asbestos regulation 29 CFR 1910.1001(j) or 1926.1101(k); or (2) within the Report or an addendum to the Report, the report must identify by location, nature and general condition any observed asbestos containing materials, presumed asbestos containing materials or suspect asbestos containing materials.

(Under ASTM Non-Scope): Note age of facility, particularly if pre-1980; identify potential asbestos-containing materials (ACM) in, e.g., thermal system insulation, ceiling and floor tiles, sheetrock. Assume any suspect ACM is ACM. State the type and condition of the ACM, i.e., friable or non-friable, damaged or undamaged, accessibility, and quantity (i.e., linear or square footage). Include photographs of suspect ACM. Recommend any necessary abatement and develop an estimate to abate or manage (O&M Plan) any friable ACM based on expected average costs. Note: This asbestos determination is for the Bank's internal purposes only and need not be performed by a licensed or certified asbestos professional.

(Under Recommendations): If suspect friable asbestos containing materials are identified at the Site, recommend any necessary abatement and develop an estimate to abate or manage any friable ACM based upon expected average costs. Note: This asbestos determination is for the Bank’s internal purposes only and need not be performed by a licensed or certified asbestos professional.

Lender Example 3 – SCOPE: For real property improvements built before January 1, 1981, either an asbestos survey with testing determining no asbestos is present or a site-specific Operations and Maintenance (O&M) plan for known and potential Asbestos Containing Material is required. If [___] review of an environmental assessment reveals only potential asbestos material which is observed to be maintained in good condition, at the discretion of the [___] (or designee), the requirement for an O&M plan may be changed to a recommendation. Asbestos containing material which is in damaged condition must be abated or repaired. School properties must meet additional federal and state requirements. Residential 1 to 4 units are exempt. As required by federal and state regulations, asbestos sampling and/or abatement must be conducted before demolition or significant renovation.

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Lender Example 4 – SCOPE: No sampling of building materials suspected to contain asbestos should be conducted without [___]’s prior approval.

Report observations of suspect ACMs, with descriptions of the type, location, condition, and the quantity of each suspect material in a tabular format. If significant quantities of damaged, suspect materials are observed at the site, notify [___] as soon as practical to determine whether sampling may be appropriate (pursuant to approved change order request).

Site management and/or maintenance supervisors should be questions as to the presence of ACMs, and availability of an Operations and Maintenance Plan (O&M). Utilization of the plan, if available, should be confirmed through review of documentation referencing periodic inspections of ACMs and/or personnel training which have been completed since implementation of the O&M.

The report should contain a statement regarding ACM even if no suspect ACM is identified during the site inspection.

If sampling is authorized by [___], Consultant shall collect samples of suspect materials, as directed in the Task Order. Authorization for additional sample collection and laboratory analysis must be provided in writing by [___] to the Consultant.

Reference the samples analyzed and their location within a table format within the text of the report (i.e., Table II). When ACMs are confirmed, their estimated quantity, physical condition, and friability should be provided. Information referencing the method of analysis (PLM), laboratory, sample collection method, certification/licensing of inspectors, chain-of-custody, and laboratory analytical reports should be included in the appendices.

What’s next?:

Three suggested actions in collaboration with the Environmental Information Association:

1) For the Consultant: Develop you own NEA and Sampling Protocol for Lender DD Level Cursory Sampling. Remember: An NEA for friable surfacing (e.g., popcorn ceiling) and TSI does not relieve the employee from wearing PPE, as it does with all other materials. All the NEA really accomplishes for the remaining materials is to alleviate the requirement to conduct personal air monitoring.

2) For the Lender: Defining Generic O&M and Cursory Sampling SOW (see link to “REFERENCE DOCUMENT”)

3) For the Owner: Maintenance Protocol. Identify new available technology. Document available foam products and vendors (e.g., MCC).

What is a Negative Exposure Assessment (NEA):

OSHA 29 CFR 1926.1101 (Construction Standard for Asbestos) requires the employer to ascertain employee’s exposure levels when ACM is contacted or disturbed through personal air monitoring. In addition, prior to any asbestos related work a competent person must make an Initial Exposure Assessment to predict whether exposure levels during asbestos related activities would be expected to exceed the Permissible Exposure Limit (PEL). The Initial Exposure Assessment is essentially a written statement by the employer of predicted exposure levels prior to the commencement of a specific asbestos activity. The employer must consider all factors that may affect exposure levels such as control methods to be utilized, environmental conditions, workers level of training and removal techniques. The asbestos work is then performed utilizing the methods outlined in the written initial exposure assessment while personal air monitoring of employees is performed. The intention of monitoring employees is to verify the initial exposure assessment by showing no exceedances of the PELs. If the monitoring is shown to be below the PELs then a NEA has been established.

The established NEA can be used for 12 months on all future work consisting of like materials with the same type and percent of asbestos. Air monitoring data collected by the employer must be repeated at least once every 12 months to remain in compliance. The established NEA can be used to lessen the controls or burdens placed on the employer whose employees are conducting asbestos related work. For instance, all

11 Adobe PDF Document Management – Optimizing, Resizing and Creating PDFs but Class I removal activities (friable surfacing and TSI) and most O&M work can legally be performed without respiratory protection. OSHA’s position is that if negative exposure (below the PEL) has been established, then there is no exposure and thus no need for respiratory protection. The use of respirators is still recommended but would now be the employer’s choice.

Lack of exposure monitoring is a commonly-cited violation of the OSHA Construction Standard. The burden is on the employer to ensure that this is accomplished according to the standard. Without a properly executed personal monitoring and a documented NEA, the employer is forced into a position of assuming employee exposure is above the PEL which is of course presents its own problems and should be avoided.

Resources:

1) Resources on the MCC website, notably the “AHERA 100 Commonly Asked Questions”:

Why Must I Test For Asbestos Is Work Making Me Sick AHERA 100 Questions Handout Common Questions On the Asbestos NESHAP

2) Sample O&M Plans for commercial properties:

EIA Model O&M Plan Fish & Wildlife ACM O&M Template

3) OTHER:

ASTM: E1368: Practice for Visual Inspection of Asbestos Abatement Projects E2356: Practice for Comprehensive Building Asbestos Surveys E2308: (Withdrawn/Sunset; but still a good “language” resource. A withdrawn standard is an ASTM standard that has been discontinued by the ASTM Sponsoring Committee responsible for the standard. A standard may be withdrawn with or without replacement. ASTM makes withdrawn standards available for informational purposes.)

SBA: https://www.sba.gov/content/lender-and-development-company-loan-programs

OSHA and EPA: OSHA Asbestos Construction Standard: https://www.osha.gov/SLTC/asbestos/standards.html EPA Asbestos Website: http://www2.epa.gov/asbestos NESHAP: https://www.epa.gov/stationary-sources-air-pollution/asbestos-national-emission-standards-hazardous-air- pollutants

CMBS:

http://www.crefc.org/uploadedFiles/CMSA_Site_Home/Government_Relations/CMBS_20/CREFC_Underwriting _Principles.pdf http://www.crefc.org/uploadedFiles/CMSA_Site_Home/Government_Relations/CMBS_20/CREFC_Model_Reps .pdf

12 Asbestos Risk Management for Lenders: Exposures, Obligations, and Resources

CMBS Legal and Structured Finance Criteria

Authors:

William K. Sloan, CHMM Commerce Bank 8000 Forsyth Boulevard St. Louis, MO 63105-1797 T 314.746.3759 [email protected]

Dennis P. Firestone, RG, REM | National Program Director ATC Group Services LLC Tempe, AZ C 602.790.4444 [email protected]

Chris Gates MC Consultants, Inc. (MCC) 2055 Corte del Nogal Carlsbad, CA 92011 C 480.227.2305 [email protected] -- and -- Environmental Information Association 6935 Wisconsin Ave # 306 Chevy Chase, MD 20815 T 301.961.4999 http://eia-usa.org

Contributors:

Jessica Crutchfield, Esq. McRoberts & Associates, PC 4550 Belleview Avenue Kansas City, MO 64111 T 816.285.6018 [email protected]

Joseph Palermo, CHMM, CSP Wells Fargo Bank, NA 2222 W Rose Garden Lane MAC S3837-012 Phoenix, AZ 85027

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