The Kroger Co. – Acquisition and Redevelopment of Former Army Base Presents Myriad of Environmental Challenges Yet Client Protected from Environmental Liability

Challenge

The Kroger Co., the largest supermarket chain in the United States, wanted to purchase a portion of the recently closed army base located in Forest Park, Georgia, known as Fort Gillem, in order to construct a million square foot distribution center to service the southeast. However, there were significant known and potential releases of hazardous contaminants throughout the base, the Army was going to retain part of the property, the City planned on first acquiring then selling the remainder of the property as part of a larger distribution/warehouse complex, and the State of Georgia had already placed the property on the State Hazardous Site Index and requested that the United States EPA place the property on the federal Superfund list of most polluted properties. The client needed to quantify and limit its environmental risk in order to go through with the deal.

Approach

AGG identified three general avenues to limit potential environmental liability: develop a well-designed historical and site assessment methodology, negotiate contractual protections and exploit various regulatory programs and opportunities. Specifically, the client was protected first by thoroughly assessing the actual and potential contamination in order to understand the current condition of the property., By allocating risk and responsibility to the Army, the City of Forest Park and the Forest Park Urban Redevelopment Authority in the various acquisition documents, deeds and leases, indemnities, covenants and easements, and a management agreement, AGG shifted the onus of environmental remediation and liability to other parties. Finally, AGG successfully negotiated with the Georgia EPD and the EPA to withdraw the Kroger site from both the state and federal superfund lists and from consideration for further remedial action. In addition, EPD agreed to enter the site and the City’s retained portion of the former base into the Georgia Brownfields program in order to obtain a Limitation of Liability against future claims from the government or from third parties.

Result

By limiting potential environmental liability, Kroger’s board approved the transaction. Its purchase kick started the redevelopment of Fort Gillem and allowed Kroger to immediately begin construction on its distribution center which is anticipated to provide over 1500 new jobs to the community within the next two years.

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