This document summarizes environmental and climate change policies and how to minimize liability for businesses. It discusses increased enforcement of environmental regulations and closure obligations. It recommends conducting thorough environmental due diligence when acquiring property, which includes Phase I and Phase II environmental site assessments. It also discusses new considerations like vapor intrusion assessments and evaluating potential impacts of operational changes. Finally, it outlines new proposed greenhouse gas reporting requirements and potential regulation and litigation related to climate change that businesses should be aware of.

1. Navigating Environmental and Climate Change Policies: What You Need to Know to Protect Business Assets and Minimize Liability Cindy Bishop Gardere Wynne Sewell LLP Dallas, Texas www.gardere.com April 21, 2009

2. What Does Environmental Liability Mean to You?

5. Basic Exposure Pathways

6. What’s Different Now? Increased Enforcement Increased Liability Increased Emphasis on Closure Obligations = Increased Due Diligence

7. Minimizing Liability During Due Diligence Preparing for Greenhouse Gas Regulation Increased Due Diligence

8. All Appropriate Inquiry “ All appropriate inquiry” is the process of evaluating a property’s environmental conditions and assessing potential contamination liability prior to its acquisition. Possible Defense under CERCLA Requirement from Most Lenders before Purchase EPA and States regulate what constitutes “all appropriate inquiry.” e.g., American Society for Testing and Materials (“ASTM”) Phase I Environmental Site Assessment Standard (E 1527)

9. Phase I Environmental Site Assessment (ESA) Interviews, Records Searches, Site Visit, Historical Research ASTM E-1527 Phase II ESA Collect soil, groundwater, sediment, surface water samples Environmental Due Diligence Elements

10. Not properly signed by Environmental Professional. ‘‘ [I, We] declare that, to the best of [my, our] professional knowledge and belief, [I, we] meet the definition of Environmental Professional as defined in §312.10 of this part.’’ ‘‘[I, We] have the specific qualifications based on education, training, and experience to assess a property of the nature, history, and setting of the subject property. [I, We] have developed and performed the all appropriate inquiries in conformance with the standards and practices set forth in 40 CFR Part 312.’’ Acquiring Property The Due Diligence Standard Problem Area

11. Due Diligence Issues

12. Due Diligence Issues

13. New Due Diligence Considerations Vapor Intrusion Assessment (ASTM E2600)

14. Increased Closure Obligations

15. What Changes Are Triggered? Transfer, sale, closure or abandonment of a “facility” Scaling back operations, consolidations and facility closures Changing production lines, raw materials, suppliers Materials reuse, repurposing, recycling Reducing air emissions or water usage and changing waste handling practices Changing material storage practices

16. Increased Closure Obligations Identify the effect on operations. Gather all permits, regulations, orders, citizen complaints, environmental compliance audits or assessments. Evaluate the proposed operational change against the obligations. Timely communication to management and regulating authorities where applicable.

17. Closure/Slowdown Effect on Permits Idle petroleum USTs update UST registration status or permanently remove and close USTs Significantly reduced wastewater volume advance notice to permitting authority (e.g., municipal wastewater treatment authority) may be required Changes in fuel or hazardous substance storage update plans, including SPCC (fuel), SWPPP (stormwater) Operational changes that impact environmental permits include:

18. Post Closure Post Closure Audits: Purpose Required by some regulations Establish a baseline Marketing tool Essential for redevelopment How to address concerns? Audit Privilege Voluntary disclosure to the government Disclosure in transactions (reps & warranties)

19. Climate Change “ Greenhouse Gases” Carbon Dioxide Methane Nitrous Oxide Hydrofluorocarbons Perflurorcarbons Sulfur hexafluoride

20. New Proposed Reporting Requirements Regulation of Greenhouse Gases New Air Permitting Requirements SEC disclosure obligations Litigation Climate Change

21. Climate Change March 10, 2009 – EPA proposed rule requiring reporting of GHG for certain sources April 17, 2009 – EPA submits issued proposed rule declaring that GHG are dangerous to human health and the environment What does that mean to me?

22. Climate Change Certain industrial facilities Vehicle manufacturers Facilities that emit 25,000 tons/yr CO 2 e Reporting proposed to begin in 2011 for calendar year 2010 Comments due by May 25, 2009 You may have to report your GHG emissions to EPA:

23. Climate Change GHG Regulation Cap & Trade SEC Disclosure Litigation

24. Summary More diligent due diligence Be aware of closure requirements Consider GHG emission impacts

25. Gardere Wynne Sewell LLP Cindy Bishop 1601 Elm St., Suite 3000 Dallas, Texas 75201 Phone: 214.999.4506 Fax: 214.999.3506 [email_address]