Birch Hills Golf Course, An Independent Legal Review.

Thankfully, for all of us, Dwight Manley sent a copy of the massive set of documents accompanying the October 1st item to accept title of the BHGC (Brea Hills Golf Course) to his attorney for review.

Richard Montevideo is the Chair of Rutan & Tucker, LLP’s Environmental Law Practice Group since 1992.

The review that follows was provided by him and shared with members of Council and the City Manager prior to last Tuesday’s circus of a Council meeting.

 

 

Property Transfer Document Review

There is a lot to unpack with these documents, but from my initial review of the Settlement Agreement, the AS IS Indemnity Agreement, the Guarantee, the Consolidated Area Easement Agreement and the Environmental CC&Rs, I have the following big picture comments from the perspective of protecting the City’s interest:

  1. For both legal and practical/business reasons, the City should clearly be preparing a formal Phase I Environmental Assessment Report on the Property before taking title to the same. The Phase I Report would provide some legal protection to the City from future enforcement action, and equally important, would consolidate all in one report, a description of the history operations that led to the contamination, a description of the type, levels and media of contamination, the remedial work that was conducted, the residual contamination that remains, and the risks posed by the residual contamination that remains.
  2. For all contamination on the Property, except for essentially contamination caused by Union Oil and that exceeds an existing cleanup standard, the City is indemnifying the seller, including Union Oil. As such, unless this provision is changed, the City should do everything it can to make sure it fully understands the nature and extent of the contamination, meaning conducting a Phase I Report and further evaluating the risks associated with the existing contamination for onsite workers and guests/invitees.
  3. The contaminants of concern at the Property, i.e., PCBs, dioxins, furans, arsenic among others, especially the dioxins, are significant carcinogens and thus the City should have the resulting risks associated with the residual contamination evaluated by a qualified environmental consultant, and presumably a toxicologist/risk assessor. If there is a problem in the future and someone is hurt or claims they are hurt from the contamination, it would be a PR problem for the City, in addition to being a significant legal problem.
  4. Pursuant to H&S code section 25359.7, the seller of the property is required to provide written notice of the existence or potential existence of all hazardous substances it knows or believes exists on the property to the buyer. In this case, I see no evidence of any due diligence disclosures that have been made to the City. Such due diligence reports/disclosures would provide a beginning point for the City to hire an environmental consultant to conduct a Phase I Report.
  5. The protections provided to the City under the various agreements are weak.   Essentially, the City is providing a full release of any all claims under Civil Code 1542, except for among other items, contamination caused by Union Oil that is above current regulatory agency action levels. Thus, if the cleanup standards change in the future, the City is on the hook for addressing the contamination. And in fact, DTSC is currently reviewing and will soon be issuing new guidance/policy on vapor intrusion standards, which may or may not impact the Property, depending on the nature of any volatile organic compounds on the site and their location.
  6. If a problem arises in the future resulting from existing contamination found to exceed existing cleanup standards (which is the only scenario requiring additional work by Union Oil), even then there is no direct remediation covenant that extends to the City. Instead, the City only has a general indemnity to rely upon and will need to show it has suffered some Loss before the general indemnity will kick in. in short, if there is some existing contamination exceeding existing/current cleanup standards, the City will not be able to require Union Oil to clean up the contamination. Normally, in a situation like this, you would negotiate a Remediation Covenant in the Agreement triggering an automatic cleanup obligation.
  7. Stormwater runoff, including dry weather runoff, is a significant issue in California, and golf courses can be big offenders of runoff limits, especially for nitrates, fertilizers, pesticides, etc. From the documentation provided, it is unclear whether the City has hired anyone to evaluate the stormwater runoff compliance issues, but it is clear that the City will be accepting this obligation.
  8. A certain quantity of contamination was buried within the Consolidated area, which then has resulted in a recorded set of Environmental CC&R imposed on this property. The City should make sure that its current and future use of the Consolidated area will not violate these restrictions. This is where again a Phase I Report would be helpful/important.
  9. The AS IS/Indemnity Agreement the City is committing to arbitration and waiving its right to a jury trial.
  10. The “Guarantee” provided by Union Oil is NOT a separate indemnity, but nothing more than Union Oil guarantying the very limited indemnity provided in the AS IS Indemnity agreement.
  11. The Guarantee agreement contains a Confidentiality clause which is unenforceable or otherwise irrelevant in this context when it is being provided for the benefit of a public agency. Either way, it looks bad from the City’s perspective and makes no sense.

I do not know the business/financial benefits of the transaction from the City’s perspective, but from a pure legal and environmental risk perspective, there are a number of issues that the City should take a second look at.

Also note, that the above are the larger issues with the agreements as written, but there are many more. The agreements appear to me to be seller oriented.

A “Reasonable Person” Responds.

I’ve made no attempt to distill Mr. Montevideo’s observations into lay language. As lawyers are apt to say, these remarks are understandable by “any reasonable person” – no reason for me to butt in.

I’ll close by simply saying this, all concerned… Council, Staff, “we the people”, have only a fraction of the facts and information needed to make a prudent decision in this matter.

By failing to admit their error, by not putting on the brakes to give much closer scrutiny to the details and implications of a decision this huge… Council fails us miserably.

Birch Hills Golf Course, A Toxic Blunder.

Title to the Birch Hills Golf course, owned by Union Oil/Chevron since it was built in 1972, was to be transferred to the City of Brea in exchange for being released from the obligation of paying a Parks in Lieu Fee. Who knew what a total nightmare this seemingly simple matter would become?

The pissing contest between Chevron and the City of Brea has consumed over three years in closed sessions, allowed the once popular course to be dramatically reduced in size and to fall into a horrible state of disrepair and finally, last Tuesday, it showed up on Council’s agenda as Consent Item 21.

Consent Item! Bull Sugar!

Consent Calendars are reserved for routine, non-controversial, housekeeping items, or matters the Council has achieved consensus on after previous discussion. Generally, topics that have not been previously discussed by Council should not be put on the consent agenda.

Since the early ‘90’s Staff and Council have been burying critical items on the Consent Calendar to avoid conflicting public opinion. It’s a practice I’ve been fighting for years.

The moment agendas are posted late Friday afternoon, I immediately check the Consent Calendar to see what is getting swept under the rug at the next meeting. I find dubious items virtually every time, the Birch Hills matter is a prime example.

Why Pull The Item For Discussion? 

Three years in the making and this multi-million dollar city asset was being acquired like a thief in the night, with no provision for discussion. Again, bull sugar.

Well over a hundred pages of complicated legal documents, with 14 attachments, were handed off to Council Friday evening and they… we all… had 97 hours to digest and research or corroborate it all.

Thankfully there were several folks willing to attempt the task.

What they found was a grossly incomplete set of documents that saddled Brea, forever, with a toxic, barely profitable piece of property with virtually no means of turning it around without spending a fortune.

How toxic? How costly to mitigate? What options for repurposing some or all of the land to a more safe and profitable use? Nothing in the documents offered even a hint at answers.

Birch Hills Toxicity Is Serious Issue.

Chevron’s field assistant to the project manager on the La Floresta and the senior boots on the ground as the biohazards on the golf course and Rails-to-Trails segment were mitigated, John Bickel, pleaded with Council at their study session to pull the item from the Consent Calendar and table it until they had a better idea of what they were really accepting.

John provided a detailed account of burying countless yards of contaminated soil under the parking lot and the additional mitigation required to bring the property up to residential standards.

John concluded his remarks with the admonition that we just don’t know enough… there are still too many unknowns. There’s a lot more explaining to do before we saddle ourselves with this monster.

Addendum – John Bickel: I think it’s important to add some clarity on exactly what is buried there, why there is more remediation to do.We (Chevron) cleaned up to meet golf course spec not residential. There really is no danger in playing golf, the lake is not contaminated. The soil beneath MAY be, no one knows for sure, it has liner underneath it is why it wasn’t sampled. The unknowns and talk of toxics could damage the income of the course.

Erin Brockovich ring a bell?

Let me add that converting this land to residential use has been a part of the General Plan since 2003. It’s on the city website. The map on page 40 shows this property as low density residential.

The city planners knew it. Unocal/Chevron knew it. Yet the documents to effect the transfer of title provide little or no clear answers how the city might proceed in that direction in the future.

Another Voice Of Reason.

During Matters From The Audience, Dwight Manley chastised Council for putting such an important matter on Consent Calendar and to table the item until the many blanks could be filled in. Clearly Council could not proceed with any certainty based upon the information available.

Here are Dwight’s comments to Council. Please listen carefully. Would you have proceeded blindly to conclude this transaction knowing how little you really knew?

Vargas Exits, Council Dives In.

Forced by legal counsel to recuse himself, Council member Vargas left the meeting. Having voiced his serious concerns since early in the weekend about the Birch Hills issues, Mr. Vargas appeared to be the only real voice of reason.

Many people, believing that Council had clearly heard the public’s position on the matter, left the meeting as well. Thinking it was tabled… they were in for the shock of their lives.

A Comedy Of Errors.

I was watching from home and hung in there. The thirty minutes of bungling and incompetence that followed was gut-wrenching.

In response to half-baked questions from an obviously uninformed Council, staff pulled off an exhibition of world class sugarcoating, deflection, outright misinformation including the “$80 a cubic yard” lie.

If you have the stomach for it, you can watch the streaming video on the city website.

I texted Dwight, warning him that it appeared Council was being drug down a path towards approving the transfer of the Birch Hills Golf Course and direct the Mayor to execute all documents necessary to close escrow.

That’s exactly what they did. They saddled us with a toxic horror and no means to dealing with it lest we spend millions upon millions of dollars ($300 million?) and beg, with fingers crossed, that Chevron and the EPA would approve our request to clean up and repurpose the property.

Unbelievable! Inconceivable!

Brea resident, Thomas Kwan, turned off his TV and emailed Council after listening to Dwight’s detailed and heartfelt plea. A copy of it reached me on Friday. Here I’ve paraphrased a few excerpts.

The last document of the set of exhibits setting forth the request for approval of the Birch Hills Golf Course Ownership Transfer Documents is the Covenants, Conditions, and Environmental Restrictions…which contains the Soil Mediation Plans for the different parts of the property.

There remains on the southern portion of the property toxic chemicals including among others, PCB’s polychlorinated biphenyls, dioxins/furans, relatively stable compounds toxic chemicals that will be there for a long time.

Who in their right mind would want to accept the Draconian responsibilities and liabilities associated with that property and the associated acquisition agreement?

Keep in mind not all of the soil has been tested. There may be areas of contamination that have not been found, have been buried without record or carried by the elements elsewhere to an untested area.

As far as I am concerned the owner (Chevron) should keep Birch Hills, build a sarcophagus over the site and fence it with skull and crossbones signs around the property.

If Brea wants to take over compliance with the EPA and OCHCA restrictions and share the responsibilities and liabilities, then Chevron should fund a multimillion dollar trust for such.

So What’s The Damned Rush?

There are no critical deadlines, threatening penalties or life and death issues here. No real urgency at all. Hell, we’ve screwed around with this for three to four years. Can’t we take a few more weeks… months… to make sure we do this right?

There are legally acceptable ways to delay the final execution of escrow while we connect all the dots. Why wouldn’t Council use every means at their disposal to do this right?