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By Eric C. Peterson
New Jersey enacted landmark legislation concerning environmental investigations and cleanups in May 2009 with the Site Remediation Reform Act (SRRA), including its new Licensed Site Remediation Professional (LSRP) program. Under LSRP, New Jersey Department of Environmental Protection staffers will be replaced in on-site remediation projects, and oversight will now fall to third-party professionals to be trained and licensed by the state.
But even though the LSRP legislation is widely acknowledged as highly significant, it is hardly straightforward, and the program’s true impact on development remains to be seen. And while there has been much discussion about the LSRP program’s potential impact on real estate owners and developers, lenders are also affected by it—a fact that was acknowledged last November to an audience of bankers at a panel discussion co-sponsored by the law firm Riker Danzig Scherer Hyland Perretti and the New Jersey Bankers Association.
At the panel discussion, Jorge Berkowitz, director of environmental services at Langan Engineering and Environmental Services and a former NJDEP official, joked about “the traveling road show” that he and the other panelists had been participating throughout the state, explaining LSRP to the real estate industry.
Certainly the new environmental laws are “very important in the transaction side” because they “often drive the transaction,” says Mark S. Rattner, who heads Riker Danzig’s financial services practice, but there is also a substantial “learning curve” relating to LSRPs, especially for the lending community. “The big picture is that while much of the process has changed, there won’t be much of a difference for the banks,” Rattner said in addressing the bankers attending the panel discussion. “At least the process has been defined. There will still be troubled situations on the banking side, such as foreclosures, but everything else from that standpoint will be pretty much the same for you. Only the process itself is different.”
Indeed, to address the larger issue of what the lending community needs to know and when, DEP is working with the New Jersey Bankers Association and the Bank of America to create a manual of sorts on the program. “The lending community is not really up to speed on the specifics of the program,” concedes Peter Rand, vice president of KeyBank’s real estate capital group. “They have not fully digested what it all means.”
“First, we’re educating our clients, specifically about the mandatory timeframes,”says Barry Skoultchi, CEO and president of environmental and engineering firm the Whitman Companies, Inc., based in East Brunswick. “We’ve also started to educate the brokers, telling them to basically erase their memories from the past 20-plus years because they have to learn all of the new nomenclature and abbreviations. Next will be the banks. They are next on our hit list, and we will be reaching out to them shortly.”
The general issues facing lenders regarding the new environmental legislation range from a simple lack of knowledge about how the LSRP program works, to having leaner staffing tied to the recession and not enough people to truly be on top of the issue. “I just found out about the new rules a few weeks ago,” admits one banking official, who asked not to be identified. “We’ve been so wrapped up in issues tied to the recession and banking crisis, including the number of foreclosures.”
And when it comes to complex changes brought about for lenders by the LSRP program, the list is long—and, says Senior, “a work in progress.” He explains,“The regulations are in place and posted on DEP’s website, but more are coming. There is more direction and more guidance coming in the future.”
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