Fifteen Years of Asbestos Abatement
From Insulation Outlook, October 1998, by John E. Osborn
The asbestos abatement industry started in the mid-1980's by Congress passing the Asbestos Hazard Emergency Response Act (AHERA) and President Regan signing it into law (40 CFR Part 763). Commentators widely believed that Congress would follow suit with passage of analogous "in-place" asbestos laws which would require all buildings throughout the country to conduct AHERA-like surveys and adopt management plans. In fact, then Congressman Florio of New Jersey introduced an "in-place" asbestos law which would, if passed, have required hospitals, hotels, office buildings and all other public buildings to inspect and set management plans for asbestos. Similar legislation was introduced in states and municipalities throughout the country. This legislation did not pass and the reasons behind the decision have set the pace of asbestos work for the past 10 years.
Why the In-Place Laws Did Not Pass
During the 1980's, public and industry perception changed to caution and questioning once AHERA was passed. There was a school of thought that asbestos could be maintained or encapsulated so that fibers would not become airborne. In fact, during the period the U.S. EPA issued a new manual entitled "Managing Asbestos In Place."
An article in the New York Times magazine on Sunday, November 25, 1990 may have put it best. The article is headlined: "The Asbestos Mess: Now Some Scientists Say Removing the Fiber Can Be Worse than Leaving It." The article refers to developments which brought about questioning of the burgeoning abatement industry. One of these developments was the December 1988 symposium at Harvard University 's Energy and Environmental Policy Center called the "International Symposium on the Health Aspects of Exposure to Asbestos in Buildings." Notably, the event was co-sponsored by the Institute of Real Estate Management, the National Association of Realtors, the Safe Buildings Alliance, and the Urban Land Institute. The symposium brought together health experts from several countries and led to a report released in August 1989 branding the public's concern with asbestos as "fiber phobia." The symposium report concluded that risks posed by in-place asbestos are low.
On June 29, 1989 the prestigious New England Journal of Medicine printed an article by participants in the Harvard study when concluded that the risks posed by non-occupational exposure to in-place asbestos did not warrant the expenditure of what they termed "unprecedented expenses on the order of $100 billion to $150 billion that could result from asbestos abatement."
As the New York Times article points out, mainstream publications found this theory irresistible and spin-off articles appeared in magazines from Forbes to Reader's Digest, and eventually worked its way into the supermarket tabloid, the National Examiner, which announced its interpretation of the findings as follows: "After spending billions taking it out of the schools, experts discover.ASBESTOS IS SAFE!"
With such a wide web of publicity favoring downplaying the asbestos issue, it is easy to understand why the in-place laws did not pass.
To round out the picture, on August 16, 1998, Jane Brody in her New York Times column, "Personal Health," page F7, column 4 observed: "the 1980's produced two Congressional acts requiring schools to inspect for asbestos hazards and clean them up. Despite the fact that in most schools asbestos levels were extremely low (less than the amount that in 10 years of exposure might cause one additional death in 100,000 over a lifetime - one - third the risk of being struck by lightning), by 1990 some $6 billion had been spent on asbestos abatement in schools."
As the column continues: "Many experts believe that asbestos removal, which increased airborne asbestos created a far greater hazard to the children, who might have benefited far more had this money been spent on enhancing their education."
Asbestos Is Not Safe
The debate is about two types of health risks - mesothelioma and asbestosis.
Mesothelioma is the more dramatic of the two and results in a fatal tumor that can crush the lungs or push its way out of the torso. It appears to have struck significant numbers of people who may have had only low level exposures to asbestos.
Asbestosis, on the other hand, requires intensive exposure. Asbestosis is a chronic, progressive lung disease caused by prolonged inhalation of asbestos particles.
The most common cancer among asbestos workers is lung cancer, and it is thought that asbestos may induce lung cancer in industrial workers. The question remains whether asbestos at low levels can cause lung cancer.
As the November 1990 New York Times article puts it: "The public has good reason to be confused. Does a single asbestos fiber floating in the basement air mean cancer 20 years down the road - and a $30,000 abatement job next week? Or does it pose less of a threat than cigarette smoke drifting over from the next table?
Government officials, too, are perplexed. Will tough inspection laws protect the public or simply make matters worse by promoting unnecessary removals?"
The counterpoint is also stated well in the article:
American public health scientists usually insist that the jury is still out on chrysotile's ability to cause mesothelioma. Dr. Stephen Levin, a Mount Sinai researcher, points out that the asbestos installed in the schools in the 50's and 60's did not begin to deteriorate until a decade later. Since mesothelioma has a 40-year latency period, the epidemiological bad news could still be on its way. "It's like the joke about the man falling out [of] the building," Levin says. "He passes the 15th floor and says, 'So far so good."
Lender Concerns
Other than in the schools covered by AHERA, asbestos is not a factor until the property owner sells (or presumably when the property is leased for an extended period) or renovates. With Congress and local legislatures having taken a pass on regulating in place asbestos, the lender has emerged as the leader in caring about asbestos in place. Although certain scenarios can hook the lender into paying for a clean up, the basic reason for lender concern is that the presence of asbestos devalues the collateral. Therefore, the presence of asbestos in a building can hold up loan approval.
Lender sophistication has increased and questions about asbestos are now a pro forma part of the loan application.
What leads to even further lender concern is the degree to which the presence of asbestos devalues the property. In the early 1990s, a case involving one New York Plaza demonstrated that the presence of asbestos was enough to get the owner an abatement of over $30 million in real-property tax assessments. Since that time, the presence of asbestos in a building automatically becomes ground for a tax certiorari challenge. Although this case is one where the rollback helped the owner, the theory operates to knock down the property's market value.
The purchaser needs to know this - with the wide range of sophistication among owners, it is the lender who is left to speak up. It is the lender who is left to insist that the purchaser obtain a Phase I Environmental Assessment before the loan application can be processed. Clearly, the purchaser should be observant when it comes to the impact of the presence of asbestos on the value of the property being purchased. It should not be left to the lender to do this.
Asbestos and Property Transfers
The pervasiveness and impact of asbestos in buildings has challenged many doctrines of law. In the early 1990s in a case involving the sale of 195 Broadway, the purchaser sued the seller for fraud when it was discovered that the property contained large quantities of asbestos in bad condition.
The motion for summary judgment which sought dismissal of the fraud suit was denied. Although this did not men that the purchaser won, it was significant that the purchaser was even allowed to sue. The doctrine of law is called caveat emptor --if the property is transferred "as is," the purchaser is responsible to have checked the condition of the property. If this has not been done and a defect in the property, such as the presence of latent asbestos, is found after title has been transferred, the court's answer is "tough luck - it is up to you to have it checked."
The lesson to be learned is that in order to be fully protected, the purchaser needs to check whether asbestos is present. If asbestos is found, it needs to be addressed in connection with the transfer of title - with a concession on price, a cleanup by the seller or other arrangements. If this has not been done, the purchaser must assume that there will be no recourse later.
Notably, many states, such as New York, have declined to pass laws which require pre-purchase property assessments. Although declining to pass these laws was designed to allow for greater ease in transferring real property, what it really has done is left the less attentive or less sophisticated purchaser at peril.
Asbestos management has shown an impact on long-term leases as well. In the early 1990s in the New York case of Wolf v. 2539 Realty, the court made it clear that in a long-term lease entered in the 1960s, even where the tenant exerted full control over the property, the owner was responsible for addressing repair of asbestos which became friable. The court looked at the issue of whether, under a standard lease, asbestos was structural and exterior, or interior and incident to the tenancy. The court did not resolve this issue but decided that the responsibility for issues of this type, under the circumstances, was the owner's.
Most notably from this decision, as with the 195 Broadway case, is that the court warned future long-term tenants that they must perform thorough pre-purchase assessments. The court indicated that in a 1960s lease the potential tenant would not have contemplated that asbestos may be a problem, but that in the case of leases entered into after asbestos had become a known risk to purchasers, the decision may have gone the other way and put the responsibility on the tenant.
Mass Toxic Tort Claims
The handling of personal injury toxic tort claims relating to asbestos has been difficult. The courts simply are not equipped to deal with so many plaintiffs' claims. With the large volume of claims, the federal courts have looked for ways to implement claim procedures which will get funding to the personal injury victims, rather than putting it in the pockets of lawyers and expert witnesses to keep the cases going. One study shows that virtually two-thirds of every dollar paid out in asbestos settlements and verdicts goes to transaction costs and only one third to the victim.
The sheer magnitude of the number of claims is overwhelming. At the beginning of the influx, claims came in big numbers. The contributions of each of the large manufacturers of asbestos to the facility set up by the manufacturers to process claims, in some cases, exceeds $100 million per year. To a very large degree, the settlements are funded out of insurance which those manufacturers had while operating. Once the insurance is depleted, and once the funds put aside at the time by the manufacturers who filed for bankruptcy protection are exhausted, remaining plaintiffs will have nowhere to look for assets to pay a judgment or settlement. As a matter of public policy, Congress may hear an argument that public funds should assist asbestos personal injury victims.
When the long latency period for asbestos death is assessed, the asbestos claims picture appears to be bleak. Commentators have spoken out against creating a climate in which punitive damages are awarded against manufacturers. The argument is in favor of promptly, and without a great deal of expense in obtaining it, providing a reasonably modest, but consistent settlement to each asbestos personal injury victim, rather than allowing a few victims to recover multimillion-dollar verdicts which include punitive damages.
How the claims procedures will work will be affected, in significant part, by how many future asbestos deaths will result from the current era in which asbestos has been managed in a more enlightened environment. The jury is still out as to whether or not and to what extent those who work in abating asbestos or managing asbestos in place will experience health side effects the way that those who mined, manufactured or installed asbestos containing products have. Building owners and managers, their employees and insurance carriers anxiously await this verdict.
Asbestos In Schools 1993 Crisis
In the early summer of 1993, the New York City Board of Education discovered lead and asbestos in places where it did not expect it. Additional testing called into question the accuracy of all of AHERA studies which had been done on the City of New York 's schools during the mid-1980s which led to re-inspection of each of New York City 's 1,069 schools, and pervasive asbestos removal.
A vigilant team headed by the inspector general of the New York City Board of Education, Stanczyk, and New York City School Construction Authority, inspector general, Thomas B. Thacher, called a press conference in early August to announce an agenda for investigation of the problem and setting and agenda for getting all of New York City's schools opened as scheduled. In the weeks that followed, possible theories of blame were examined which included the following:
- There were corrupt deals between contractors and Board of Education Officials when the original AHERA study was undertaken.
- The environmental investigation firms who undertook the inspections did not do a good job.
- Overwhelmed government officials who could not see the whole picture did not have the budget to do the job.
- Samples were taken in the wrong place or the laboratories made mistakes.
- There were difficulties of application and interpretation of data and information provided by the AHERA studies.
- The school facilities were crumbling so badly that in-place asbestos management never had a chance.
School opened approximately a week late in New York City in 1993 after "Operation Clean House" was implemented. "Operation Clean House" made it safe for the students to return to New York City classrooms after every school was re-inventoried and after a great deal of abatement which may not even have been necessary was executed.
Although an architect who worked for the Board of Education did plead guilty to some irregularities in record keeping and rushing to get the AHERA surveys done, and as a result served jail time, the main outcome of the 1993 Asbestos in Schools Crisis had nothing to do with criminality, fraud, corruption or even improper procedures. What was pointed out was the extremely poor condition of the schools, in general, a "maintenance crisis." If the schools were crumbling due to lack of an appropriate level of maintenance, it would be virtually impossible to maintain asbestos in place, even if it had been perfectly inventoried in the first place. The overall message delivered was: "If you intend to manage your asbestos in place, rather than do full scale removal, you must keep your building in good condition because repairing leaks and doing spot repairs or renovations will result in disturbing asbestos."
Need For Protocols
Perhaps the biggest problem with asbestos issues is that protocols have not been developed throughout the industry. Probably the biggest issue in renovation is "How can we help spending a fortune on asbestos on this project?" Very often the asbestos issues is left until after the overall budget has already been developed and, of course, then there is a great incentive to minimize the financial impact or to take it as it comes. Advanced planning and insight into the effects of asbestos on project schedule and budget are most often lacking. This is true in spite of legal requirements, in many jurisdictions, for the filing of a certificate stating whether asbestos is present before a building permit can be issued.
Some architects still lay low on asbestos issues, thereby requiring the owner to bring a whole separate team to address asbestos issues. Most often, the owner, not the design professional, brings in the environmental consultant who inspects for asbestos and sets a project design which will abate or protect asbestos in place during the renovation.
The general contractor on a renovation will often take an analogous position on asbestos - when the asbestos abatement contractor hired by the owner has removed the asbestos, then and only then will the general contractor send in the demolition team to continue with the project.
Confirming the prevalence of this "hands off" approach by construction industry regulars, the American Institute of Architect (AIA) standard contracts for contractors and architects, in both its 1987 and 1997 editions, provide that the architect encountering unanticipated asbestos is entitled to stop and seek direction from the owner. In addition, the contractor, under its contract with the owner, is allowed to do the same.
Environmental Building Management
Good asbestos management is simply a part of good capital planning. Maintaining and scheduling renovation or replacement of the capital plant is a regularized part of asset management, when the asset is a building. Those who manage their bulidings and facilities in a highly professional manner and who manage through long-term planning self-assess their properties so that they can budget appropriately. Building owners who resist self-assessment as a part of their overall capital program are left with crisis management and are stunned when friable asbestos necessitates "emergency spending."
Chances are that self-assessment coupled with regularly budgeted expenditures for managing asbestos in place.
Where Have We Been?
At the start, testing, training, abatement methods and laboratory protocols needed to be determined. Discovery of asbestos unexpectedly could cause months of delay on a renovation project. Many architects steered clear of asbestos issues all together and placed clauses their contracts which gave the right to suspend all work while the owner sorted out asbestos issues. General contractors were no more courageous; they too, under standard industry contracts, reserved the right to stop work and return only when asbestos issues had been cleared away.
The price of gathering asbestos samples in the field and having them analyzed in the lab was dictated by the seller of the services. So was the price of the abatement itself. Further, the cost of insurance was high an invariably was passed along to the owner of the property, even though the owner usually had no idea if the coverage was needed or what coverage was being purchased.
Another factor weighed in - there was not much of a bar to entry into the field. This was particularly true for the environmental consultant. The environmental consultant could be anyone who could take the training course and sell some business.
The contractors were often not new entrants, but rather former insulation contractors, demolition contractors, general contractors or other tradesmen with an entrepreneurial streak. Here, in the case of the contractor, the bar was a bit higher because the capital outlay was more significant for equipment and start-up costs.
Understandably, competition and increased sophistication among those buying the service have changed the way the asbestos abatement business is being conducted.
Pricing: Most significantly, pricing has taken a dramatic turn. In the early days, it would have cost as much as $600 for a TEM (transmission electron microscopy) air sample, and now you can get one on a non-expedited basis for as low as $30. The cost of abatement has similarly plummeted. In the early days it would have cost between $30 and $40 per sq. ft. to remove fireproofing and between $12 and $17 per linear foot to remove pipe insulation. Now you can get that same abatement done for as little as $8 to $10 per sq. ft. for fireproofing removal and $6 to $7 per linear foot for pipe insulation removal.
Consolidation: Over the past 15 years, competitors have figured out what works and what does not. Consolidation throughout the industry has taken place. Environmental consultants, asbestos abatement contractors and laboratories have all faced significant challenges to be the fastest, cheapest and provide the highest quality. The lack of one of the three ingredients makes the company a logical takeover candidate. The asbestos abatement battlefield is strewn with the bodes of defunct companies who compromised quality in favor of speed and price.
The bottom line is that there are fewer companies while there continues to be an astonishing volume of asbestos work.