3-1 Environmental Due Diligence Procedure

1.0 INTRODUCTION

FMC Technologies (FTI) routinely acquires, transfers and leases real property in the course of carrying out its business activities. During these activities, FTI must address environmental issues and liabilities associated with the property transfer. Prior to full acquisition of a business, assets acquisition of land and/or facilities, divestiture of land and/or facilities, mergers, joint ventures, and leasing of a warehouse and/or vacating a leased property, an Environmental Liability Assessment (audit) should be conducted to protect FTI’s interest.

Prior to the execution and/or finalization of any and all property transaction, the agreement (contract) should be reviewed and approved by FMC Technologies’ Corporate Director of EHS and by Corporate General Counsel.

The following due diligence guidelines have been developed to assist FTI facility personnel in conducting Environmental Liability Assessment when acquiring, leasing, transferring, or terminating FTI’s interest in any real property.

2.0 DUE DILIGENCE OVERVIEW

Environmental liability may result from a wide range of regulatory requirements affecting FTI’s operations. FTI may be held liable for cleanup of site contamination as owner or operator at a site. Cleanup work may range from identifying, removing, and cleaning up limited soil and groundwater contamination to engaging in full-scope site cleanup of multiple hazardous waste sources, adjacent soils, underlying groundwater, and contaminated surface waters and sediments. In some cases, the contamination and associated liability may extend far beyond the site boundaries affecting neighboring properties and nearby natural resources.

Environmental liability assessment for mergers, joint ventures, acquisitions and divestitures, and general property transfers are conducted in accordance with the most current American Society for Testing and Materials (ASTM) Standard Practice E 1527-00. The liability assessment process contains three distinct and cumulative phases that are designed to support key decisions. The intent of the Phase I site assessment is to evaluate potential for environmental liability at the site. This is done through interviews, a site visit and by gathering and analyzing information on current and past site uses and activities.

If Phase I report indicates a potential for environmental liability from contamination, Phase II assessment should be performed using field sampling to confirm or deny the suspected contaminants. Once contamination is confirmed, a Phase III may be initiated to fully characterize the nature and extent of the contamination and develop cleanup options and recommendations.

3.0 OBJECTIVES

The focus of the Environmental Due Diligence Assessment is to identify and document proposed transfer properties for potential environmental contamination. The objectives of the liability assessment are:

To ensure that all environmental due diligence requirements are addressed and potential environmental contamination is identified;
To establish a consistent and defensible approach for addressing necessary environmental actions;
To provide the environmental baseline and assessment of properties to assist FTI management in property transaction decision-making; and
To avoid costly litigation and environmental liability under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), Resource Conservation Recovery Act (RCRA), or other relevant regulatory statutes; and

4.0 PROPERTY TRANSACTIONS

This guidance manual is specifically designed to assist FTI facility personnel involved in routine due diligence activities associated with FTI’s manufacturing operations. It will not address mergers, joint ventures, and/or major acquisitions and divestitures. These activities will require a Phase I Environmental Site Assessment (ESA) and must be conducted in accordance with the most recent ASTM Standards.

The more common property transfer activities associated with FTI’s operations may be placed in one of the following three (3) categories:

Acquisition
An acquisition iszz defined as the act of becoming the owner or holder of an interest in certain real property. It may include the acquisition (buying) of buildings, businesses, manufacturing facilities, and land.
Divestiture
A divestiture is defined as the transfer of title and ownership of real property to another party. It may include the divestiture (selling) of buildings, manufacturing facilities, land, and businesses.
Lease
Lease execution is defined as an action to rent real property from another party. It may include the leasing of warehouses, offices, manufacturing facilities, buildings in industrial parks, and land.

Lease termination is defined as an act of ending a lease rental from another party. It may include warehouses, offices, manufacturing facilities, buildings in industrial parks, and land that have been vacated and were or being returned to the property owners (lessors).

5.0 ENVIRONMENTAL SITE ASSESSMENT PROCEDURE

The environmental liability assessment guidance document is based on the elements of Phase I environmental assessment as defined by the most recent ASTM Standard Practice E 1527-00. The checklist is a modified (simplified) version of the Phase I environmental assessment process.

The following environmental assessment guidance checklist(s) have been developed to assist facility personnel in assessing liabilities associated with property acquisition, divestiture, and concerns associated with the leasing and vacating leased properties.

5.1 Acquisition

Acquisition of a property (facility, land) is implemented in a two-step process. During Step-1, a questionnaire is sent to subject property to collect general baseline environmental information in advance of the site visit. Step-2 is the follow-up site visit to the due diligence audit questionnaire.

5.1.1 Pre-Environmental Due Diligence Audit Questionnaire

The questionnaire should be sent to the subject site in advance of the due diligence audit. If a question does not apply, it should be indicated in the response by the subject facility. The returned information will assist in the verification of suspected contamination during the site inspection, investigation, and interview process. The questionnaire should include the following elements:

List of all personnel involved in the completion of this survey.
Location of the property (complete address, longitude/latitude, parcel number or legal description.
How large is the property (acreage, square feet)?
Is the site located on or near waterways, schools, or recreational facilities?
Does the property contain new buildings, improvements, or other modifications since current owner’s occupancy?
How large are the new structures?
What are the ages of the buildings?
How are the buildings being used?
Who are the current owners and operators?
Identify the main contacts for further inquiries.
What are the current uses of the property?
Does any of the current operating licenses or permits transfer with the property?
Who were the past owners and operators of the property?
What were the past uses of the property?
Is the owner or operator aware of any present or past underground or above ground storage tanks located on or adjacent to the subject property?
If yes, can the owner or operator demonstrate that the tanks have been properly closed, installed, certified or that existing tanks are not leaking?
If underground storage tanks (UST) or above ground storage tanks (AST) exist, provide a list of the tanks including capacity and material stored.
Is the owner or operator aware of any landfill (public or private) operators on or adjacent to the subject property?
If yes, identify the waste types that were disposed of within the landfill.
Is the owner operator aware of any past or current off-site tolling operations associated with the subject property?
If yes, identify the tolling activity and its waste management practices.
Is the owner or operator aware of any wastewater treatment tanks or lagoons (public or private) operators on site or adjacent to the subject property?
If yes, identify and quantify the waste types that are or were being treated.
Is the owner or operator aware of any present or past soil/groundwater contamination on or adjacent to the subject property?
If yes, identify the nature of the contamination and associated corrective and agency response actions?
Is the owner or operator aware of any hazardous substances (e.g. polychlorinated biphenyl (PCBs), asbestos) in any structures (electrical/mechanical), or on the premises?

5.1.2 Site Visit

The site visit is an essential element of the Environmental Liability Assessment process that allows the assessors to make first hand observations. In general, it consists of the following activities:

Visual survey of the subject property and neighboring properties;
Interviews with property owners, on-site employees and neighboring property owners; and
Review of on-site documentation.

The site visit is important in identifying potential environmental issues that should be addressed prior to transferring (acquiring) the property. During the site visit, the assessor will use the following category specific checklist as a guide to identify environmental concerns and issues:

5.1.2.1 General Information

Is the property located in an area designated as wetland, wilderness, historical area, industrial park, other?
Are any rivers, streams, springs, lakes, or ponds located near or on the property?
What are the zoning requirements or intended future use of the property?

5.1.2.2 Adjacent Property

What are the zoning requirements or intended future use for adjacent properties?
Who are the adjacent property owners?
What activities take place at all adjacent properties?
- Commercial tenants handling hazardous waste
- Industrial research
- Machinery repair
- Landscaping
- Mining/quarrying
- Oil/gas extraction
- Manufacturing
- Agriculture
- Other
Who are the adjacent property main contacts for further information and coordination?
Is the current owner/operator aware of any present or past underground or aboveground storage tanks being located adjacent to the subject property?
Is the owner or operator aware of any present or past soil/groundwater contamination on the adjacent subject property?
Is the owner or operator aware of any current or past Agency Enforcement Actions against the adjacent property concerning soil and/or groundwater contamination?

5.1.2.3 Records and Documents

Is the subject property on the National Priorities List (NPL) or Superfund sites?
Have or are nearby properties (within two miles of the site) been on the NPL?
Have been any fuel or chemical leaks or spills in the area?

5.1.2.4 Permits, Surveys, Violations

Has the facility possessed any environmental permits in the past or present?

Air quality;
Hazardous waste treatment, storage or disposal;
Public owned treatment works (POTW);
USTs;
National Pollutant Discharge Elimination System (NPDES); or
Stormwater Discharge.
Does any of the current operating licenses or permits transfer with the property?
Has the facility been cited for permit violations or environmental noncompliance?
Has the facility been identified as a PRP?
Have soil or groundwater studies been performed on the subject property or adjacent properties?
Does the local fire department have record of any violations (impacting human health and the environment) of the owner/operator facility?
Has an indoor air quality survey been performed recently?
Has a radon survey been performed recently?
Has a radiological survey been performed recently?
Has an asbestos inspection or survey been performed at the facility before or during occupancy?
Has an underground storage tank (UST) survey been performed in the past or recently by a qualified engineer?
Has a lead-based paint survey been performed recently?
Has a RCRA facility assessment or investigation been performed in the past or present?

5.1.2.5 Hazardous Material Usage/Release

Are any industrial batteries or paints handled or used in large volumes greater than five gallons?
Are any industrial drums (15-55 gallons) used, handled, or stored at the facility?
Was the site ever used for or by,

commercial tenants handling hazardous waste;
military or industrial research;
machinery repair;
landscaping;
mining/quarrying;
oil/gas extraction;
manufacturing; or
agriculture?

Are hazardous substances disposed of on-site, injected into groundwater, or discharged into drains, septic systems, ponds, or lagoons?
Are there any ponds or collection pits (storm water, process water) on-site?
Are signs of stressed vegetation (brown, burned out) or stained soils?
Are any leaks, spills, or stains present on the property or in any building?
What hazardous materials are or have been used, treated, or otherwise handled
on-site? (This information may be obtained from material safety data sheets (MSDS) or from the local fire department.))
Has there been any history of hazardous or municipal solid waste disposal on-site?
Have there been on-site or off-site releases?
Are there any drinking water or groundwater monitoring wells on-site?

5.1.2.6 Storage Tanks

Are there any wells, dry wells, or septic tanks currently operating at the site?
Are there any abandoned wells or septic tanks?
Are there any underground storage tanks on the property, close proximity to the subject property facility, or on the adjacent property?
Are there any aboveground storage tanks on or near the property?
Is there staining around any of the storage tanks?
Does the aboveground storage tanks have secondary containment?
Is the secondary containment free of cracks and shows no evidence of leakage?

5.1.2.7 Polychlorinated Biphenyl (PCB)

Are any of the following equipment store or contain PCBs,

Electrical transformers;
Electrical capacitors;
Hydraulic systems;
Waste oil tank; or
Other (specify).

Has or is any equipment leaking or damaged?

5.1.2.8 Radioactive Materials and Waste

Are or were radioactive materials used, stored, or manufactured at the site?
Has there ever been a radioactive materials release or violation at the site?
Is or has a liquid radioactive waste storage and treatment system been operated at the facility?
Is or has liquid radiological waste been discharged to the sanitary sewers?
Were or are radiological materials used, or stored in rooms, areas or work surfaces constructed of porous materials, tile floors, concrete, or other surfaces with cracks, crevices, and seams?
Has the facility ever stored, repaired, or managed NORM contaminated equipment?

5.1.2.9 Laboratory Operations, Analysis, and Experiments

Are or have experiments been conducted in the soils, groundwater, man-made streams, or sediments at the site?
What laboratory bench or pilot-scale operations or experiments have been or are conducted that involve engineering systems or equipment exposure to hazardous materials?
What treatment systems have been or are in operation including, but not limited to, waste water, water, incinerators, solvent recovery/recycling, elementary neutralization, and sanitary?
Are or have laboratory activities been conducted in temporary structures or mobile trailers?
Are there any on-site mobile equipment or temporary structures on site that may require removal, decommissioning, shutdown, or decontamination because of exposure to hazardous or radiological materials?

5.2 Divestiture

In advance of the divestiture, a Phase I Liability Assessment should be completed and presented to the potential buyer. The scope and depth of the environmental liability assessment depends on the past and current operations at the site. Phase I Environmental Site Assessment is conducted in accordance with the current ASTM standards.

The following checklist has been developed to assist facility personnel in assessing environmental liabilities associated with the divestiture (sale) of FTI owned property. The assessor will use the checklist as a guide to identify immediate and current environmental concerns and/or issues:

5.2.1 Records and Documents

Has the site previously conducted a Phase I Environmental Site Assessment?
Has the facility transferred and/or cancelled environmental permits?
Has there been any fuel or chemical leaks at the site?

5.2.2 Permits, Surveys, Violations

Does any of the current operating licenses or permits transfer with the property?
Has the facility been cited for permit violations or environmental noncompliance?
Has the facility been identified as a PRP?
Have soil or groundwater studies been performed on the subject property or adjacent properties?
Has an indoor air quality survey been performed recently?
Has a radon survey been performed recently?
Has a radiological survey been performed recently?
Has an asbestos inspection or survey been performed at the facility before or during occupancy?
Has a lead-based paint survey been performed recently?
Has a RCRA facility assessment or investigation been performed in the past or present?
Is there any unauthorized water discharge point?
Is there any illegal use of subject property by neighbors?

5.2.3 Hazardous Material Usage/Release

Are hazardous substances disposed of on-site, injected into groundwater, or discharged into drains, septic systems, ponds, or lagoons?
Are there any ponds or collection pits (storm water, process water) on-site?
Are signs of stressed vegetation (brown, burned out) or stained soils?
Are any leaks, spills, or stains present on the property or in any building?
What hazardous materials are or have been used, treated, or otherwise handled
on-site? (This information may be obtained from material safety data sheets.)
Has there been any history of hazardous waste disposal on-site?
Has there been any history of non-hazardous waste disposal on-site?
Have there been on-site or off-site releases?
Are there any drinking water or groundwater monitoring wells on-site?
Are there any "open" floor drains within the buildings?

5.2.4 Storage Tanks

Are there any wells, dry wells, or septic tanks currently operating at the site?
Are there any abandoned wells or septic tanks?
Are there any underground storage tanks on the property, close proximity to the subject property facility, or on the adjacent property?
Are there any aboveground storage tanks on or near the property?
Is there staining around any of the storage tanks?
Does the aboveground storage tanks have secondary containment?
Is the secondary containment free of cracks and shows no evidence of leakage?

5.2.5 Equipment Deactivation/Decommissioning (If applicable)

Has the fuel and other products from the storage tanks been removed?
Has the non-essential systems been drained and de-energized?
Have all process systems and pipelines been emptied and flushed?
Have all radioactive, hazardous, and chemical materials been removed?
Have all non-essential utility services, including electric, gas, fuel oil, propane, steam been discontinued?
Have all temporary and portable structures, including trailers, laboratories, and equipment been dismantled and removed?
Have all large portable containers been decontaminated, cleaned, removed, or disposed?

5.2.6 Polychlorinated Biphenyl (PCB)

Is there any Polychlorinated Biphenyl (PCB) containing equipment on-site?
Has or is any PCB equipment leaking or damaged?

5.3 Lease Transactions

A Phase I Environmental Site Assessment (ESA) should be performed before FTI enters into a new lease to conduct operations or otherwise use property owned by another entity. In the absence of a Phase I ESA, FTI has no knowledge of prior uses and activities conducted on the property and may be liable for environmental costs if contamination is identified after FTI begins operations.

The ESA performed prior to the lease execution will serve as the baseline for comparing environmental conditions of the property prior to FTI operations and subsequent to FTI operations when the lease is terminated or when contamination is otherwise identified.

Prior to terminating the lease, a Phase I Liability Assessment should be completed and presented to the property owner for acceptance. This documents that FTI tenancy has not contributed to site contamination or, in the event of suspected site contamination, identifies potential environmental liabilities.

5.3.1 Lease Execution

Prior to executing the lease, an environmental site assessment should be conducted to protect FTI’s interest. The scope and the depth of the ESA depend on the size and the complexity of the property. At large and complex sites (manufacturing, land, warehouse, etc.), Phase I ESA should be performed.

The following checklist has been developed to assist facility personnel in assessing liabilities associated with the leasing of small warehouses, offices, and small non- manufacturing facilities with minimal environmental liabilities.

(During the site visit, the assessor should take as many photographs as needed to describe the site and to confirm the site’s current (pre-lease) physical condition.)

5.3.1.1 General Information

Is the property located in an area designated as wetland, wilderness, historical area, industrial park, other?
Are any rivers, streams, springs, lakes, or ponds located near or on the property?
Location of the property (complete address, longitude/latitude, parcel number or legal description.
How large is the property (acreage, square feet)?
What are the ages of the buildings?
Who are the current owners and operators?
What are the current uses of the property?
Who were the past owners and operators of the property?
What were the past uses of the property?
Is the owner or operator aware of any present or past underground or above ground storage tanks located on or adjacent to the subject property?
If underground storage tanks (UST) or above ground storage tanks (AST) exist, provide a list of the tanks including capacity and material stored.
Is the owner or operator aware of any landfill (public or private) operators on or adjacent to the subject property?
Is the owner or operator aware of any wastewater treatment tanks or lagoons (public or private) operators on site or adjacent to the subject property?
Is the owner or operator aware of any present or past soil/groundwater contamination on or adjacent to the subject property?
If yes, identify the nature of the contamination and associated corrective and agency response actions?
Is the owner or operator aware of any hazardous substances (e.g. polychlorinated biphenyl (PCBs), asbestos) in any structures (electrical/mechanical), or on the premises?

5.3.1.2 Adjacent Property

What are the zoning requirements or intended future use for adjacent properties?
Who are the adjacent property owners?
What activities take place at all adjacent properties?
Is the owner or operator aware of any present or past soil/groundwater contamination on the adjacent subject property?
Is the owner or operator aware of any current or past Agency Enforcement Actions against the adjacent property concerning soil and/or groundwater contamination?

5.3.1.3 Records and Documents

Is the subject property on the National Priorities List (NPL) or Superfund sites?
Have or are nearby properties (within two miles of the site) been on the NPL?
Have been any fuel or chemical leaks or spills in the area?

5.3.1.4 Permits, Surveys, Violations

Has the facility possessed any environmental permits in the past or present?
Does any of the current operating licenses or permits transfer with the property?
Has the facility been cited for permit violations or environmental noncompliance?
Has the facility been identified as a PRP?
Are there any environmental liens against the property?
Have soil or groundwater studies been performed on the subject property or adjacent properties?
Does the local fire department have record of any violations (impacting human health and the environment) of the owner/operator facility?
Has an indoor air quality survey been performed recently?
Has a radon survey been performed recently?
Has a radiological survey been performed recently?
Has an asbestos inspection or survey been performed at the facility before or during occupancy?
Has an underground storage tank (UST) survey been performed recently?
Has a lead-based paint survey been performed recently?
Has a RCRA facility assessment or investigation been performed in the past or present?

5.1.3.5 Hazardous Material Usage/Release

Are any industrial batteries, paints, or chemicals handled or used in large volumes greater than five gallons?
Are any industrial drums (15-55 gallons) used, handled, or stored at the facility?
Are hazardous substances disposed of on-site, injected into groundwater, or discharged into drains, septic systems, ponds, or lagoons?
Are there any ponds or collection pits (storm water, process water) on-site?
Are signs of stressed vegetation (brown, burned out) or stained soils?
Are any leaks, spills, or stains present on the property or in any building?
What hazardous materials are or have been used, treated, or otherwise handled
on-site? (This information may be obtained from material safety data sheets (MSDS) or from the local fire department.))
Has there been any history of hazardous or non-hazardous waste disposal on-site?
Have there been on-site or off-site releases?
Are there any drinking water or groundwater monitoring wells on-site?

5.3.1.6 Storage Tanks

Are there any wells, dry wells, or septic tanks currently operating at the site?
Are there any abandoned wells or septic tanks?
Are there any underground storage tanks on the property, close proximity to the subject property facility, or on the adjacent property?
Are there any aboveground storage tanks on or near the property?
Is there staining around any of the storage tanks?
Does the aboveground storage tanks have secondary containment?
Is the secondary containment free of cracks and shows no evidence of leakage?

5.3.1.7 Polychlorinated Biphenyl/Radioactive Material

Is there any Polychlorinated Biphenyl (PCB) on site?
Has or is any PCB equipment leaking or damaged?
Are or were radioactive materials used, stored, or manufactured at the site?
Has there ever been a radioactive materials release or violation at the site?
Has the facility ever stored, repaired, or managed NORM contaminated equipment?

5.3.1.8 Process Equipment/Building Interior

Has the fuel and other products from the storage tanks been removed?
Has the non-essential systems been drained and de-energized?
Have all process systems and pipelines been emptied and flushed?
Have all non-essential equipment been removed?
Have all radioactive, hazardous and non-hazardous, and chemical materials been removed?
Have all temporary and portable structures, including trailers, laboratories, and equipment been dismantled and removed?
Does the building have the essential sanitary and utility services?
Are there any heavy oil, grease and/or chemical stains on the floor?
Is there any open floor drain inside the building?
Are there any unusual or noxious odors inside or outside the building?
Are there any holes in the walls or any other damage?
Have all signs and labels used by previous tenant been removed and/or scraped off the windows and building?
What is the condition of the floor and/or carpet?
Does the facility contain any asbestos material?
Is there any deteriorating ceiling tiles, pipe or boiler wrapping?
Are there any sewers and/or drains inside or outside the building?
What is the condition of the parking lot?
Is the building considered in a "ready to move into" condition?
If not, what other actions may be required to facilitate a timely occupancy of the building?

5.3.2 Lease Termination

In lease termination, FTI is the tenant seeking to end occupancy or use of a property. By leasing the property, FTI is considered an operator, and can be held liable under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") for contamination on the property. Without Environmental Site Assessment (ESA) documentation stating the environmental condition of the property at the time FTI vacated, FTI may be held liable for contamination caused by future owners or operators.

The assessor (FTI personnel) should take as many photographs as needed to verify and to confirm the environmental condition of the property at the time of the tenant’s departure.

The following checklist has been developed to assist facility personnel in assessing liabilities associated with the lease termination at small warehouses, offices, and small non-manufacturing facilities with minimal environmental liabilities.

5.3.2.1 Permits/Documents

Has the facility notified appropriate regulatory agencies and cancelled in writing applicable operating permits and/or EPA ID #?
Has FTI personnel been identified to receive and retain outstanding environmental documents (i.e. TSDF copies of manifest) relative to the vacated facility?
Has FTI personnel been identified to ensure that pertinent environmental documents are retained in accordance with FTI and Agency document retention requirements?
Has the facility notified and cancelled contracts with local waste disposal firms and service contractors?

5.3.2.2 Waste Management

Has the facility completely removed and/or disposed of all waste materials prior to vacating the facility?

NaOH, phosphoric acid, and solvents from parts washers
Sludge from test tanks
Spent air filters, waste paint, residual paint, etc., from paint booths
Waste paint and containers
Mercury and Lead
Oils, grease
Scrap metal and metal chips
Spent machine coolants
Sand blasting dust
Wastewater
General trash

Have all FTI related signs and labels been removed and/or scraped off the windows and building?

5.3.2.3 Process Equipment/Building Interior

Has the fuel and other products from the storage tanks been removed?
Has the non-essential systems been drained and de-energized?
Have all process systems and pipelines been emptied and flushed?
Have all non-essential equipment been removed?
Have all process equipment been emptied of liquids (oils, coolants, solvents, etc.) prior to disposal or transfer to a new relocation?
Have all radioactive, hazardous and non-hazardous, and chemical materials been removed?
Have all temporary and portable structures, including trailers, laboratories, and equipment been dismantled and removed?
Have all non-essential utility services, including electric, gas fuel oil, propane, or steam been discontinued?
Have all the office and other associated furniture been removed?
Have all shelves, equipment racks, or any other affixed and/or installed items/equipment during tenancy been removed?
Are there any heavy oil, grease and/or chemical stains on the floor?
Are there any holes in the walls or any other damage?
What is the condition of the floor and/or carpet?
What is the condition of the parking lot?
Have all process equipment, fixtures, floors, and sanitary facilities that are part of the leased facility been returned in good working order?
Have all items/concerns identified by the owner been resolved?

6.0 SUMMARY

The above Environmental Site Assessment (ESA) guidance manual summarizes the general requirements and process for evaluating potential liability from environmental contamination and environmental issues associated with real property transfers.

The general guidelines set out in this manual for conducting an "Environmental Due Diligence Audit" are intended for use as baseline guidance when acquiring, leasing, transferring, or terminating interest in any real property.

It should be noted that additional FTI specific policies and guidelines may apply for particular sites and situations, along with federal, state, and local regulations.