Definitive figures are hard to come by, but the best available estimates suggest that the number of potentially contaminated sites in the European Union exceeds one million, although only around 18,000 of these have been confirmed. The cost of cleaning up these sites is similarly uncertain, but current estimates suggest that it is unlikely to be less than 100 billion euros - around 300 euros per head.
In Slovakia, the Ministry of Environment has so far identified around 7,000 contaminated sites, though the real figure is almost certainly higher. Typical areas of contamination include operational and disused waste dumps (both legally and illegally operated), industrial sites, military installations, and mining activities.
The costs of site clean-up vary wildly depending on the nature of the site and the contamination, and on the extent to which the site is to be decontaminated, but certainly they may exceed the value of the land many-fold. In the Czech Republic, the National Property Fund privatisation agency is committed to ensuring adequate clean-up of 253 now-privatised sites, at a total estimated cost of 85 billion Czech crowns ($2.3 billion), or 340 million Czech crowns ($9.2 million) per site.
Investors therefore cannot afford to ignore the possibility that a site may be contaminated when purchasing land or assets on that land. Even apparently pristine greenfield sites may be contaminated, for instance by past atmospheric deposition from nearby industry or flooding. Groundwater flow can also carry contamination some distance away from its original source, so a wise buyer will ensure that he knows the environmental 'baseline' of a site before the purchase goes through.
Otherwise there is a risk that a foreign investor with a perceived 'deep pocket' may be unfairly landed with costs for clean-up - as we'll see in more detail next month, the purchaser of a site is generally liable for any contamination associated with it, regardless of who caused it originally.
Environmental consultants can help make sure that a buyer knows the environmental implications of what he is purchasing, and an environmental audit should be a routine part of due diligence procedures alongside legal, commercial and financial due diligence. In selecting a consultant, it is important to find a company that can provide cost-effective design of any investigative work and proper interpretation of its results, and not simply a mass of raw data.
It's also important to start as soon as possible with the process of audit and site investigation, because the longer the time period available for the work, the cheaper it will be. Property assessments carried out under Slovak law on the assessment of commercial property value do not address environmental issues at all - and these of course are much broader than just the possibility of contaminated land.
Other environmental liabilities may be associated with the presence of hazardous materials on the site (such as asbestos or PCBs), non-compliance with legislation, and a multitude of other issues from land-use planning to the efficient use of energy.
Should contamination be confirmed, a good consultant will also be able to provide advice concerning the costs of remediating it. However the preliminary investigation that will typically be undertaken as part of due diligence proceedings may provide only a very slim basis for making a reliable cost assessment, and investors should beware figures that are produced without clear evidence of how they have been arrived at.
This article is the first of a monthly column providing a concise, up-to-date and informative insight into key environmental issues for the business community in Slovakia. Next month: contaminated land, comparing current legislation and practice in Slovakia with those in the EU.
Tim Young heads AEA Technology's Bratislava office. He can be reached at firstname.lastname@example.org.
29. Jan 2001 at 0:00 | Tim Young