By: Jessica Myer
Congratulations! You are buying a beautiful winery and vineyard with a rich history in Napa, California. The wines are certified organic, and the business has been sustainably certified for years. Environmental due diligence for this transaction will be a breeze, right? Chances are that this transaction may not be as straightforward as it initially seems.
The food and beverage industry has many regulatory facets, including those from the Environmental Protection Agency (EPA), the Occupational Safety and Health Administration (OSHA), the Food and Drug Administration (FDA), and the Alcohol and Tobacco Tax and Trade Bureau (TTB) that require careful diligence before a transaction. Grab a glass of that organic, sustainable wine and enjoy a few sips as we outline some of the important environmental due diligence aspects of the food and beverage industry.
This is (and should be) the number one concern of any food and beverage manufacturing facility. We’re talking about cleaning floors, cleaning walls, cleaning tanks, cleaning hoses, cleaning anything that touches the product, and anything around or near the product. Sanitation requires significant amounts of water and cleaning chemicals. Items to consider during the diligence phase include:
- Process water sourcing:
- The quality and quantity of water available for production processes.
- Water rights limits on surface water and well water usage.
- Permitting associated with surface water use, well water use, and wastewater reuse.
- The amount and types of cleaning chemicals stored on-site:
- Sanitation chemicals are typically caustic (high pH/low pH) and may contain chlorine.
- Wastewater produced from using these chemicals may be considered hazardous waste.
- The storage of regulated amounts of some of these chemicals is subject to Federal and State reporting requirements.
- The amount and quality of the wastewater produced:
- Wastewater discharge or reuse likely requires treatment, monitoring, and a discharge permit from the local or state regulatory agency.
- Chemical reactions occurring during sanitation and/or wastewater treatment may produce volatile air emissions and require an air permit from the state regulatory agency.
That beautiful vineyard, planted in the mid-1900s, has a story to tell. It may be a happy story of untouched, rolling hills. Or it may be a troubled story of historical farming practices with degrading containers of pesticides and oil that have been inherited by each new owner of the property over the years. Items to consider during the diligence phase include:
- Historical land use:
- If the property (or a portion of the property) was used for commercial or industrial purposes, it’s important to gain an understanding of what may have been left behind by the previous owners. It’s not uncommon for agricultural lands to have a surprise Recognized Environmental Condition (REC) such as an old community landfill or leaking underground storage from historical uses.
- Pesticide/chemical use:
- Herbicide and insecticide formulations and application practices are much different today than in the past. Confirm farming practices comply with the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA).
- Farming requires bulk amounts of chemicals, including diesel, gasoline, and fertilizers. In some cases, a Spill Containment, Control, and Countermeasures (SPCC) plan may be required, and/or reporting of bulk chemical storage to local, state, or federal regulatory authorities.
- Agricultural water sourcing:
- What is the quality and quantity of water available for farming? It may be necessary to treat the source water in order lower or raise the pH. This often requires bulk chemical storage of an acid or base, which could trigger reporting and storage requirements.
- Water rights could be limited on surface water and well water usage.
- Permitting associated with surface water use, well water use, and wastewater reuse on crops.
This one may surprise you – the production of that wine you are sipping produces hazardous waste. From vine to bottle, multiple federal and state hazardous wastes are produced. Items to consider during the diligence phase include:
- Hazardous waste from agricultural practices:
- Including regulated pesticides, used oils, and solvent wastes.
- Hazardous waste from facility maintenance:
- Including used oils, solvent wastes, mercury-containing equipment, and paints.
- Hazardous waste from wine production:
- Including laboratory waste, printing inks, expired chemicals, empty chemical containers, and some wastewater.
- Be aware that some states classify specified non-hazardous federal wastes as toxic wastes, and these wastes must be managed as hazardous.
In conclusion, conducting environmental due diligence for the food and beverage industry is crucial to ensure a comprehensive understanding of potential environmental risks and compliance obligations. Despite organic certifications or sustainable practices associated with a business, there are several important aspects to consider.
Sanitation, a top concern in food and beverage manufacturing, involves assessing water sourcing, chemical storage, and wastewater management. Farming practices must be evaluated, taking into account historical land use, pesticide and chemical usage, and agricultural water sourcing. Additionally, the production of wine generates hazardous wastes throughout the process, necessitating careful attention to waste management and compliance with federal and state regulations. By thoroughly examining these aspects during the due diligence phase, prospective buyers can make informed decisions and mitigate potential environmental liabilities, ensuring the preservation of a business’s environmental integrity for years to come.
Environmental, health, and safety (EH&S) consulting is about more than just projects. It’s about listening to our client’s needs, concerns, and goals and then providing effective, value-added service and solutions. As an extension of your team, we understand the sense of urgency in the due diligence process and focus on the details that are critical to the transaction and their impact on your bottom line.
To learn more, contact Jessica Myer