Soil Decontamination Cost Risk Evaluation

RESEARCH TITLE: Evaluation of Soil Decontamination Cost Risk Using Bayesian Neural Networks

KEYWORDS: Soil Decontamination, Cost Risk Evaluation, Bayesian Neural Networks.

RELATED PUBLICATIONS: Evaluation of Soil Decontamination Cost Risk Using Bayesian Neural Networks, Masters Thesis, 2007

The soil contamination problem in urban areas recently captured a lot of public attention, as a result of the redevelopment of industrial sites for residential purposes, the cleaning and reclaiming of contaminated land and the mortgage evaluations of land properties. The public concern is further enhanced by the health and environmental risks that are associated with the soil contamination. Soil contamination can accumulate, if left untreated, and can potentially contaminate groundwater, rivers, lakes and the air. Furthermore, direct exposure to the polluted soil can have serious impacts on human health. Additionally, if the ground water gets contaminated from the soil pollutants that exist in a contaminated site, the contamination can potentially spread and affect other areas. In this case, the soil contamination, in addition to the environmental and health disasters that can create, can also cause heavy economic burdens to the land owner and/or third parties.

The decontamination and remediation of contaminated land sites follows a rapid upward trend in Japan, especially after the passage of the Soil Contamination Countermeasures Law in 2003. As of 2004, there were more than 320,000 estimated contaminated site locations across Japan. According to APEC-VC, as of the end of 2003, 374 locations were scheduled to be surveyed for land contamination with 205 surveys been postponed to be conducted in the near future and 65 of them already surveyed. Financial institutions also contribute to the trend by reducing to zero the valuations of land properties when soil pollution is discovered on them. The Soil Contamination Countermeasures Law also had an impact on the real estate business and soil contamination investigations are becoming essential before any transaction, because the costs that can be incurred by the soil decontamination can be very high. Another factor that makes soil contamination surveys essential before any land transaction lies in the preference of the buyer to avoid purchasing land that carries the stigma of contamination that will eventually result in a lower land market value among others.

The Japanese government regulatory action on soil contamination dates back to 1970 with the enactment of the the Anti-Farm Soil Pollution Law which introduced regulations on the soil contamination of farmland. In 1996, the Water Pollution Prevention Law was revised to control the pollution of groundwater which was followed in 2000 by the enactment of the Law Concerning the Special Measures Against Dioxins. In 2002, the Soil Contamination Countermeasures Law was enacted to address the concerns regarding soil contamination. Under this law, the owner, manager, or occupant (i.e. the landholder) of land is responsible to investigate whether there is any soil contamination from the operation of a facility used in the process of making, using or disposing of a certain number of harmful substances. If from the results of the initial investigation the possibility of existence of a certain amount of hazardous to human health pollutants arises, the governor may order the landholder to further investigate the state of soil contamination. If the soil is found to be contaminated the governor may order the party responsible for the soil contamination to decontaminate in order to protect the public health. In the case where the party responsible for the contamination cannot be identified, the governor may order the landholder to clean up the contamination even if the landholder was not the one responsible for causing the contamination. The law thus urges the parties involved in land transactions to be concerned about the existence of soil contamination on the land.

According to the Japanese legislature an administrative agency has the power to gather any information necessary to fulfil its duties. The Ministry of the Environment, as a result of its administrative authority, has the power to gather information regarding environmental pollution which includes the production of documents, site inspections, sampling and the interviewing of involved parties in pollution incidents among others. The environmental pollution laws, regulations and the penal codes provide an effective framework under which the Ministry of the Environment can collect information about pollution incidents. Under the Soil Contamination Countermeasures Law, landholders are obliged to report soil contamination to the governor only when it is found as a result of a legally compulsory investigation. The legal obligation to investigate soil contamination is provided in Articles 3 and 4 of the law. Article 3 refers to the case when on a certain site specific harmful substances are used or produced (e.g. by a manufacturing plant) and the operations are discontinued (e.g. the land usage changes), and Article 4 focuses on the case when on a site harmful substances exist that can potentially damage people's health (e.g. PCB leakage from electric equipment) and uurgentattention is necessary. When pollution is created and left untreated on a site by its landholder or others and the pollution spreads to other areas such as aadjacentland not owned by the landholder/polluter and the landholder does not report this fact to the governor, compensation may be claimed against the landholder under the doctrine of tort by the neighbours whose land was contaminated. Therefore, the landholders are compelled to report the contamination on their land even though they have no legal obligation to do so. It is also easier and more beneficial to the landholders to report to the authorities the pollution and follow their instructions because of the difficulties involved in deciding the right decontamination method.

When possibly contaminated land property is considered for sale and the land does not have the reasonable expected quality or provide the reasonable expected functionality and safety (e.g. no harmful pollutants exist on the land), the purchaser can held the seller liable for a defect based on the defect warranty doctrine of the Japanese Civil Code incurring additional costs. Even when the contamination is disclosed and soil decontamination is necessary the soil decontamination costs can run very high and in some cases can reach several hundred millions yen. The same applies when land usage is to be changed (e.g. from industrial to residential) or it is considered for residential development. The abandonment of the land development is not unusual in those cases. Therefore, when land is considered for sale, land development or when the operations of an existing manufacturing plant are ceased, the soil decontamination cost becomes a risk management item. In order to get a realistic indication of the soil contamination extends, topsoil contamination investigations, drilling investigations (soil boring exploration), and other soil contamination assessments are necessary. However, drilling investigations, which provide the most accurate assessment of the state of soil contamination of a site, are very costly and time consuming and can eventually become an encumbrance to the landholder. During the conceptual stage of the land development, when the profitability of the investment is examined, it is not reasonable to spend a large amount of money for a detailed soil contamination investigation. In that case, it becomes necessary to evaluate the soil decontamination cost using simple investigations such as topsoil contamination and historical land usage investigations and to examine the sustainability of the investment in view of the market risk and other factors. However, it is extremely difficult to calculate the extent of soil contamination deterministically using only simple investigations such as the topsoil contamination and previous land usage investigations. Therefore, the soil decontamination cost probability distribution (i.e. the soil decontamination cost risk), becomes important.

The research proposes a Bayesian Neural Network (BNN) model to evaluate the soil decontamination cost risk, under the circumstances described above, based on information gathered from simple topsoil contamination and historical land usage investigations.

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最終更新日 2013年2月22日(金曜)13:52


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