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Let the Buyer Beware: Estimate Potential Liabilities with ASTM E 2137

T he owner of a large automotive-repair business in operation for decades decides to close shop and sell the land. Buyers are concerned with pollution liabilities and safe reuse of the property, as toxins may have leaked into the soil or ground water. Questions are raised about environmental liabilities and how they relate to the economics of developing the property.

Standard approaches for estimating costs and liabilities of risk-based property in the United States are provided in ASTM E 2137, Standard Guide for Estimating Monetary Costs and Liabilities for Environmental Matters.

The comprehensive guide was developed by experts collaborating with Subcommittee E50.03 on Environmental Risk Management/Sustainable Development/Pollution Prevention, part of Committee E50 on Environmental Assessment. Throughout more than six years of development, Gayle Koch, principal, The Brattle Group, Cambridge, Mass., chaired deliberations with other economists, accountants, engineers, lawyers, CFOs, actuaries, and risk-managers to arrive at consensus on crucial issues in the guide.

E 2137 was designed to be used by a variety of specialists, including:

• Economists, accountants, CFOs, and other financial experts;
• Banks and lending institutions;
• Companies acquiring or selling other companies, or setting reserves;
• Environmental engineers;
• Attorneys, and others.

“We were very careful not to require only one type of professional to do this,” Koch said, “as many knowledgeable parties may contribute to the estimation process.”

Different approaches can be decided with E 2137. “There is a hierarchy in the standard of preferred approaches to estimating costs and there are cost-benefit tradeoffs in choosing one of the methodologies,” Koch noted. “There are also data-availability issues that may affect the selection of the best or most-preferred methodology. In addition, no one wants to spend more than the value of the property, investigating it.”

Technical questions may be directed to Gayle Koch, The Brattle Group, Cambridge, Mass. (phone: 617/864-7900). ASTM Committee E50 meets Oct. 23-26 in Dallas, Texas. For membership or meeting details, contact Staff Manager Dan Smith, ASTM (phone: 610/832-9727). //

Copyright 2001, ASTM