International Risk Group, LLC, Announces a National First - The Privatization
of the Remaining Environmental Liability at the Former Lowry Air Force
Base
Littleton, CO - September 4, 2002 - In a nationally precedent-setting agreement, Lowry Assumption, LLC, a subsidiary of International Risk Group, LLC, was awarded a $39.6 million contract by the U.S. Air Force and the Lowry Redevelopment Authority (LRA) for the privatization of the majority of the remaining environmental liability at the former Lowry Air Force Base site in Denver, CO. Lowry Assumption will assume the responsibility for remediation of an onsite landfill and site-wide ground water, and will provide security for third party liability. The agreement is the first of its kind for the Air Force, which is responsible for the environmental remediation and conversion of 32 closed air force bases around the country.
Wayne Dorband, Chairman of International Risk Group stated, "Through our extensive knowledge and experience in securitizing environmental liability, in particular at federal facilities, we created a solution that allows the Air Force to focus on its primary mission, allows the LRA to complete the redevelopment of Lowry, and gives the State of Colorado much greater control over the remaining environmental issues at the site. This is a win-win solution for all parties."
The privatization was structured by Lowry Assumption's affiliate, International Risk Group, an investment banking firm that specializes in structuring transactions involving environmentally impaired assets. International Risk Group is extensively involved in the privatization of former military bases and surplus federal properties, as well as in acquisitions and divestitures for corporate clients. In the military base market, International Risk Group is currently providing impaired asset advisory and risk management services for California's Alameda Naval Air Station and McClellan Air Force Base. International Risk Group is also providing liability management and impaired asset services for Cecil Naval Air Station in Florida and Tooele Army Munitions Depot in Utah.
Under the privatization contract, Lowry Assumption will manage the remediation of groundwater contamination and the former base landfill. The remediation will come under the regulatory oversight of the Colorado Department of Public Health and Environment (CDPHE), through a Consent Agreement under the State's Resource Conservation and Recovery Act (RCRA) authority. Lowry Assumption has secured $57 million in environmental insurance to cover potential cost overruns or other unforeseen environmental liability.
Fred Kuhn, Deputy Assistant Secretary for Installations, Department of the Air Force, stated "The privatization of Lowry was the first of its kind for the Air Force and a model for future privatizations."
Environmental investigations at Lowry began in 1983 with the Department of Defense Installation Restoration Program. The Air Force has spent approximately $55 million on environmental investigations and limited remediation since Lowry closed in September 1994. Final remediation was scheduled to be in place by September 2000, but had been delayed for a variety of reasons. According to the CDPHE, no one living, working or going to school is at risk from the environmental contaminants found at Lowry to date. Lowry is not a federal Superfund site.
"The Air Force is committed to the remediation of Lowry and it makes good sense to integrate the remediation with redevelopment," said Albert F. Lowas Jr., Director of the Air Force Base Conversion Agency. "The arrangement has a high potential to expedite both remediation and property transfer for re-development. The concept recognizes the need for collaborative work of local regulatory agencies and stakeholders, and empowers local decision makers."
"We think it's one of the biggest milestones ensuring the successful re-development of Lowry," LRA spokeswoman Hilarie Portell said Wednesday. "Now we will be able to develop these areas while the remediation process is going on." The estimated total real estate development investment is approximately $1 billion.
Public involvement in the 18-month privatization negotiations occurred through a 15-person advisory group of Lowry residents and business owners, as well as neighbors and local, state and federal officials. The Stakeholder group included representation from the Lowry Restoration Advisory Board, Lowry Community Master Association, Lowry Community Advisory Committee and the Lowry Foundation. The offices of U. S. Senator Wayne Allard, Congresswoman Diana DeGette, Denver Mayor Wellington Webb and Denver City Council member Polly Flobeck were involved in the advisory group meetings.
The privatization effort began more than two years ago in a process that involved significant public input, the Air Force, the LRA, International Risk Group and the CDPHE. Brent Anderson, CEO of International Risk Group, said, "This has been a very complicated project with numerous stakeholders. With the cooperation of the negotiating parties, we developed a privatization arrangement that is unique in the industry."
The privatization agreement will transfer the remediation from a federal program to the State RCRA program. The privatization structure involves five separate documents and an environmental insurance policy. Structuring the transaction required extensive integration of federal and state regulatory programs as well as integrating the environmental insurance program. The documents include:
- Cooperative Agreement which sets forth the remediation
services the LRA will undertake on behalf of the Air Force as well
as the funding to pay for the remediation and environmental insurance.
The Air Force remains ultimately responsible for completing any
remediation and will renew its direct participation if the total
cost of the remediation exceeds the agreed upon amount of $ 39.6
million plus applicable insurance proceeds.
- Remediation Agreement which requires Lowry Assumption
to perform the LRA's remediation responsibilities under the Cooperative
Agreement and provides indemnification protection to the LRA.
- Consent Agreement which sets forth the regulatory framework
that will govern the remediation. The agreement establishes a remediation
schedule, enforceable milestones and a mechanism for public involvement.
- Enforceable Agreement which acknowledges that the Air
Force remains ultimately responsible for the remediation at Lowry
and memorializes the Air Force funding commitments. The agreement
also describes the Air Force's remediation responsibilities following
termination of the Consent Agreement or in the event of default
by Lowry Assumption or the Lowry Redevelopment Authority.
- Finding of Suitability for Early Transfer (FOSET) which, when complete, will enable the transfer of property from the Air Force to the LRA before remediation is complete. The FOSET contains analysis that demonstrates that the property can be safely used while remediation continues. Signatories will be the Air Force and the Governor of the State of Colorado.
The transaction also involves the placement of a comprehensive environmental insurance program to address potential cost overruns associated with changes in the scope of work, unknown environmental conditions and other potential environmental liabilities.
International Risk Group, LLC, is an impaired asset investment banking and environmental risk management firm headquartered in Denver, Colorado. The firm specializes in acquisitions, divestitures, mergers, liability assumptions, public to private transfers, valuations and impaired asset advisory services for assets with valuations between $1 million and $1 billion and with liabilities between $1 million and $300 million.
International Risk Group, LLC is located at 7991 Shaffer Parkway, Suite 300, Littleton, CO 80127. Phone: 303.972.6633 Fax: 303.948.4155
Contact Brent Anderson at banderson@irgco.com for more information.
