Municipal Settings Designation (MSD)- Is it right for my site?

The real estate you own has been declared contaminated through the performance of an environmental study.  The concentrations of Chemicals of Concern (COCs) exceed the Texas Commission on Environmental Quality’s (TCEQ)  Protective Concentration Levels in groundwater.  Now what do you do?

One option which is available in some cities in Texas is called the Municipal Setting Designation – MSD.  Instead of remediating the site and cleaning up or removing the water-borne contaminants, which can be extremely costly , the Responsible Party and their consultant can choose to go through a series of defined procedures in order to leave the contamination safely in-place.  An MSD can applied for if the following conditions are met:  the source of the contamination is removed; the contamination has been vertically and horizontally delineated as to its extents in the soil and groundwater; the contaminant concentrations in the groundwater are relatively stable as proven through sampling over time; no water wells, surface water bodies, or other sensitive receptors have been adversely impacted; area water well owners and land owners have been properly notified of the contamination; and the only route that the contaminant can harm people is through ingestion.  The MSD process involves completing the TCEQ and municipality applications, holding stakeholder meetings, field assessment work, and of application fees.

The factors to be first considered by the land owner are:

  • The cost for an MSD runs between $75,000 to $125,000 depending on complexity
  • There will be meetings with stakeholders such as nearby municipalities,  City officials, and nearby water well and land owners where issues must be explained.
  • Municipalities and nearby utilities must agree to the MSD.
  • Contaminant stability of groundwater concentrations must be demonstrated through quarterly sampling
  • A letter must be prepared explaining the type of contamination and extents and sent to nearby stakeholders, namely water well and land owners.  The mail-out process must be well-documented as three attempts must be verified for delivery and acceptance by each identified stakeholder.
  • Both the local municipality and the TCEQ must have the completed MSD applications, the required fees, and proof of the mailings.
  • Some municipalities do not have MSDs.
  • Other issues such as health issues from soil contamination or vapor impacts from the groundwater are not covered.
  • The ultimate goal is the issuance of a  “No Further Action Letter” which may not satisfy some lenders or land potential buyers.

If these steps seem ominous due to facts the process increases the visibility of the contaminant issue, involves several governmental bodies’ oversight, may be too timely, than remediation or other institutional or engineering controls may be more suited for your real estate.

In the end, your risk tolerance and financial capabilities will be major driving forces towards the proper decision.


To DCRP or not to DCRP

Occasionally clients see governmental programs as a panacea for their environmental problems.  One example is the Texas Dry Cleaner Remediation Program  (DCRP).  The program was implemented in 2007-2008 to fund the assessment and clean-up of contaminated sites occupied dry cleaners that used perchloroethylene (PERC) as a solvent.  The program can be beneficial to owner/operators of dry cleaners who discover upon an attempted business sale or during refinancing assessments that the property underlying their space has been impacted  by a PERC release to soils or groundwater or both.  If the dry cleaners is up to date with their PERC and DCRP fees, the the TCEQ will fund the assessment and clean-up of their site – that is after a $5,000 deductible and the preparation and submission of an application performed by a Professional Geologist or Professional Engineer.  The application details the known nature of the contamination, the dry cleaning equipment, and the possible receptors of the Perc groundwater contamination via a half-mile water well search.  This helps the TCEQ rank the prioritization of the site as to the immediacy of the regulatory assessment and clean-up  response.

However, if the dry cleaner is not current with fees or if the unlucky land owner must become the Responsible Party (RP), then the fees must be assessed at $1500 per year and $100/month in late fees.  A land owner who has never personally paid any fees and cannot find the dry cleaner operator must pay back fees and penalties that currently total approximately $25,000, not including the $5,000 deductible and application preparation fee.  It should be noted that this would be cheaper for the land owner than the average cost of a groundwater clean-up at cost of $100,000  and up.  However, it should give pause to land owners with a minor release that would only require a soil clean-up.  Down sides of the DCRP besides the fee is that the response time of the TCEQ may not meet your financial institute’s time line.  Additionally, a well-meaning Petroleum Storage Tank program was defunded for a short period in the past with a similar goal for service station releases causing concern that this could happen to the DCRP.  Although the TCEQ states that third party liability, neighbors impacted by migrated Perc releases, are covered by the DCRP, this has yet to be tested.

In conclusion, impacted property should ideally always be remedied by the RP. In lieu of that, it is good to have a State-funded clean-up program for what is an all-too common contaminant scenario.   Before control of your property’s environmental issue is to be given over to a State program, a certain amount of assessment, beyond the minimum, should be under-taken.  It is only when you understand your financial institution’s  requirements, the TCEQ risk-based assessment/clean-up levels set for the property, and the breadth of your environmental issue, can you make a truly informed decision.