Key Conclusions: The process of obtaining a “comfort letter” from the State of California for SBA financing has changed. Environmental agencies will open a case for the site and it will require significantly more time and money to request the preparation of a comfort letter.
In the past, Property owners could request a “comfort letter” which is required by the SBA for financing of properties that are affected by contamination from off-site sources. These letters were issued by the State of California Regional Water Quality Control Board (RWQCB), Department of Toxic Substances Control (DTSC) and Environmental Protection Agency (EPA). All that was needed was a written request along with transmittal of investigation reports.
The State has instituted a new policy for the comfort letter that will cost considerably more time and money. The following are the steps that will now be required:

  •  Complete a Memorandum of Understanding (MOA) and submit to agency
  •  After a caseworker is assigned provide a retainer (approximately $6,000) to the agency for costs for oversight
  •  Transmit applicable reports for review to the selected agency

Note that a Phase 2 may be necessary to document subsurface environmental conditions to the satisfaction of the environmental agency and to provide evidence that the Property is not a source of the contamination.
Hazardous waste in Campbell, CA
Former gas station in Concord, CA
Recommendations: Request that ERAS performs an ESA and/or reviews the results of your ESA and Phase 2 report. The interested parties should be notified that total costs for obtaining the comfort letter could be $10-20K or more, and could take 3-6 months or more.

KEY CONCLUSION: Comfort letters from regulatory agencies are required for financing of properties contaminated by migration from offsite sources. Obtaining a letter could cost $1,000-$30,000 and require approximately 3-4 months.

A Comfort Letter, sometimes known as a Property Status Letter, has become an essential part for financing of properties contaminated from an off-site source. This letter is issued by a regulatory agency Regional Water Quality Control Board (RWQCB), Department to Toxics (DTSC) and the Environmental Protection Agency (EPA), depending on which agency provides oversight for the site which caused the contamination.

This letter is issued by a regulatory agency and specifies that the subject Property is not the source of contamination in groundwater beneath it but is from an off-site source (known or unknown).

The United States Small Business Administration (SBA) requires this letter for financing contaminated properties and many conventional lenders are following suit if contamination has impacted the subject Property.

The agencies usually require a comprehensive Phase 1 Environmental Assessment (ESA) to carefully document the previous uses of the Property.

The agency will want to know whether the previous uses could have involved the uses of the same solvents that are in the groundwater from the off-site source.

Besides summarizing the complete history, the regulatory agency will usually want verification that the Property is contaminated and therefore it is often necessary to perform Phase 2 soil and groundwater investigation. Historical Phase 2 information may also be valuable for agency determination. See next page for recent sample projects:

ERAS has significant recent experience in obtaining comfort letters and the following is a summary of several recent projects:

1500-1501 Space Park Drive, Santa Clara
ERAS transmitted ESA report to representative of RWQCB. The Property was located in a well known plume of volatile organic compounds (VOC) aka solvents. Historical research indicated no historical use of these chemicals at the Property. No further documentation was required to obtain letter.

Total time to obtain Letter: 3 Months
Total cost:~$2,500

3266-3324 Investment Boulevard, Hayward
Monitoring wells were discovered near the up-gradient and down-gradient borders of Property. Samples collected from wells indicated solvents in the up-gradient well but not the down-gradient well. Results of Phase 1 and Phase 2 monitoring results were provided to representative at the RWQCB.

Total time to obtain Letter: 2 ½ months
Total cost:~$7,000

462-472 Vista Way, Milpitas
Contamination by solvents detected on up-gradient Property line. After review of ESA by RWQCB six soil borings and two sub-slab vapor sample borings were proposed and agreed to by RWQCB.

Total time to obtain Letter: 2 ½ Months
Total cost:~$11,000

Note that comfort letters CANNOT be negotiated from city or county agencies if they are the oversight agency for the leak case. This excludes most properties contaminated by gasoline station leaks.

Comfort letters are written by regulatory agencies to clear a given property from financial liability for cleanup of contamination from an off-site source. The Small Business Administration (SBA) requires these letters in order to approve financing of contaminated Property. In the past the RWQCB has issued these letters. The process was formal and it involved detailed review of a Phase 1 Environmental Site Assessment (ESA).

In addition to the ESA report, a written request would be made by an environmental consultant that would usually expedite the process. In some cases, Phase 2 subsurface groundwater information was required by the RWQCB. In other cases the RWQCB would not issue a comfort letter, even with Phase 2 data. Their refusal was usually for sites in known plume areas where the site history was not or could not be sufficiently documented.

Comfort letters are issued almost exclusively for solvent leak cases. In cases where a Property was contaminated by a fuel leak, it has not been possible to obtain a comfort letter from the local agency (usually a health department such as San Mateo County Department of Environmental Health).

ERAS has also been recently involved with obtaining a comfort letter from the Environmental Protection Agency (listed on NPL list) for a site in Mountain View. ERAS has also discussed these letters with representatives of the Department of Toxic Substances Control (DTSC).