1023-00001 · Ironside Capital Management LP · Diligence

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT ATTORNEY-CLIENT PRIVILEGED

CALDERWOOD & HARKNESS LLP 125 Broad Street, 44th Floor New York, New York 10004 Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com

MEMORANDUM

TO: Marcus J. Calloway, Founder & Chief Investment Officer, Ironside Capital Management LP Renata Obasi, Senior Managing Director, Infrastructure, Ironside Capital Management LP

FROM: Owen Fischer, Working Associate, Funds & Asset Management, Calderwood & Harkness LLP Theresa Kim, Lead Associate, Funds & Asset Management, Calderwood & Harkness LLP

REVIEWED BY: Pamela Cross, Responsible Partner, Funds & Asset Management, Calderwood & Harkness LLP

DATE: August 29, 2022

RE: Due Diligence Memorandum — Environmental Liabilities and Compliance, Cascadia Renewables Holdings, Inc.

MATTER NO.: 1023-00001

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I. Executive Summary

This memorandum summarizes the findings of our environmental due diligence review of Cascadia Renewables Holdings, Inc. ("Cascadia" or "CRH"), an Oregon corporation headquartered at 1100 SW Sixth Avenue, Suite 1800, Portland, Oregon 97204, conducted in connection with the proposed acquisition of 100% of the outstanding equity interests of CRH by Cascadia Acquisition Corp. ("Buyer" or "Acquisition Corp."), a newly formed special purpose vehicle organized for the benefit of Meridian Infrastructure Partners Fund IV, LP ("Fund IV") and ICM Cascadia Co-Invest, LP ("ICM Co-Invest"), at an agreed enterprise value of One Billion, Nine Hundred Fifty Million Dollars ($1,950,000,000) (the "Transaction").

The scope of this review encompasses: (i) all environmental permits, licenses, registrations, and authorizations maintained by Cascadia and its subsidiaries across their twenty-three (23) operating facilities in Oregon, Washington, and Idaho; (ii) Cascadia's environmental compliance history and incident logs from 2017 through the present; (iii) known contamination conditions and remediation obligations; (iv) Phase I and Phase II Environmental Site Assessment reports prepared by Clearwater Environmental Consulting Inc. ("Clearwater") for all operating facilities; (v) environmental representations and warranty disclosures provided in the virtual data room maintained by Cascadia and its counsel, Ridgeway, Ashford & Malone PC; and (vi) applicable federal, state, and local environmental regulatory frameworks governing Cascadia's operations across its three-state operating footprint.

Overall Assessment. Based on our review, Cascadia's environmental compliance posture is generally sound. The company maintains a functional environmental management system, holds all material environmental permits in good standing, and has not been the subject of any material unresolved enforcement actions by federal or state environmental regulatory authorities. However, our review has identified certain environmental risks that warrant further diligence, contractual protections in the Equity Purchase Agreement (the "EPA"), or both. Specifically:

• Two facilities — the Willow Creek Hydroelectric Station (Oregon) and the Boise River Hydroelectric Station (Idaho) — have historical contamination conditions that require ongoing monitoring and may require future remediation, though neither is currently subject to a regulatory enforcement action or compliance order directed at Cascadia.

• One facility — the North Cascades Hydroelectric Station (Washington) — has an active remediation obligation under the Washington Department of Ecology's Voluntary Cleanup Program ("VCP"), with estimated remediation costs ranging from $800,000 to $1,500,000 based on Clearwater's preliminary assessment.

• No material unresolved enforcement actions were identified at any of Cascadia's twenty-three operating facilities. Two minor Notice of Non-Compliance events at Oregon hydroelectric facilities in 2019 and 2020 were resolved without penalties.

• The aggregate estimated environmental liability across all identified conditions ranges from approximately $1,150,000 (low-end) to approximately $2,250,000 (high-end), based on Clearwater's preliminary cost assessments.

Recommendation. We recommend that the EPA include specific environmental representations, indemnification provisions, and escrow or insurance protections tailored to the identified environmental conditions. In particular, a specific indemnity for remediation costs at the North Cascades Hydroelectric Station, an escrow or holdback for the Willow Creek soil remediation, and a CERCLA contribution indemnity for the Boise River Hydroelectric Station should be negotiated. These key findings should be reflected in the consolidated risk matrix to be included in the C&H Summary Due Diligence Report and Risk Matrix, currently targeted for issuance on September 1, 2022. Additionally, coordination with Northgate Specialty Insurance Co. regarding the scope of the representations and warranties insurance policy coverage for environmental matters is essential prior to EPA execution.

II. Scope of Review and Methodology

A. Documents and Data Room Materials Reviewed

In connection with this memorandum, we reviewed the following documents and materials, which were made available through the Cascadia virtual data room (hosted on Thackeray Solutions), as well as materials provided directly by Clearwater and by Cascadia's counsel at Ridgeway, Ashford & Malone PC:

1. Clearwater Phase I Environmental Site Assessment Reports. Phase I Environmental Site Assessment ("ESA") reports prepared by Clearwater Environmental Consulting Inc. for all twenty-three (23) of Cascadia's operating facilities, consisting of fourteen (14) hydroelectric facilities, six (6) wind farms, and three (3) water-treatment concession facilities. These reports were dated between June 2022 and August 2022 and were prepared in connection with the Transaction.

2. Clearwater Phase II Environmental Site Assessment Reports. Phase II ESA reports prepared by Clearwater for four (4) facilities that were flagged in the Phase I ESA process as having Recognized Environmental Conditions ("RECs"). These Phase II reports are dated between July 2022 and August 2022 and include soil sampling, groundwater monitoring well installation and sampling, and laboratory analytical results.

3. Cascadia Internal Environmental Compliance Files and Incident Logs (2017–2022). Internal records maintained by Cascadia's Environmental Health and Safety ("EH&S") department, including incident reports, spill logs, regulatory inspection records, and internal audit findings for the period from January 1, 2017 through August 2022.

4. Environmental Permits, Licenses, and Registrations. Copies of all environmental permits, licenses, and registrations maintained by Cascadia and its subsidiaries, including National Pollutant Discharge Elimination System ("NPDES") permits, air quality permits, hazardous waste generator identification numbers, and Spill Prevention, Control, and Countermeasure ("SPCC") plans.

5. Regulatory Correspondence. Correspondence between Cascadia (or its subsidiaries) and federal and state regulatory agencies, including the United States Environmental Protection Agency ("EPA"), Oregon Department of Environmental Quality ("Oregon DEQ"), Washington State Department of Ecology ("Ecology"), and Idaho Department of Environmental Quality ("Idaho DEQ"), for the period from 2017 through the present.

6. Environmental Insurance Policies. Cascadia's pollution legal liability ("PLL") insurance policy, including the declarations page, policy form, endorsements, and claims history.

7. Environmental Management System Documentation. Cascadia's corporate environmental management system ("EMS") manual, standard operating procedures ("SOPs") for environmental compliance, and training records for environmental compliance personnel.

8. Historical Land-Use Records. Historical land-use records, title reports, and Trelwick fire insurance maps for select properties, as compiled by Clearwater and included in the Phase I ESA reports.

9. Draft EPA Disclosure Schedules. The environmental representations and warranties proposed by Cascadia and the Selling Shareholders in the draft EPA, together with the corresponding disclosure schedules, as circulated by Ridgeway, Ashford & Malone PC on August 15, 2022.

B. Clearwater Environmental Consulting Inc. — Engagement and Qualifications

Clearwater Environmental Consulting Inc. is an environmental consulting firm located at 4800 Meadows Road, Suite 300, Lake Oswego, Oregon 97035. Clearwater was engaged by Meridian Infrastructure Partners LP (the "Sponsor") to conduct Phase I and Phase II Environmental Site Assessments of Cascadia's operating facilities in connection with the Transaction. The resulting reports were made available to ICM Cascadia Co-Invest, LP for review, and Calderwood & Harkness LLP has been authorized to rely upon such reports for purposes of this legal due diligence analysis, subject to the reliance limitations set forth in each report.

Clearwater's Phase I ESA reports were prepared in accordance with the ASTM International Standard E1527-21, Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process (the current edition), which defines good commercial and customary practice for conducting Phase I environmental site assessments. Clearwater's Phase II ESA reports were prepared in accordance with ASTM International Standard E1903-19, Standard Practice for Environmental Site Assessments: Phase II Environmental Site Assessment Process, which provides guidance for investigating Recognized Environmental Conditions identified during a Phase I ESA.

Clearwater's project team for this engagement was led by Dr. Sarah Wakefield, P.E., ENV SP, a licensed professional engineer in Oregon, Washington, and Idaho with over twenty years of experience in environmental site assessment and remediation. We note that Clearwater's qualifications and methodology were satisfactory for the purposes of our legal review, though we have not independently verified Clearwater's sampling methodologies, analytical results, or cost estimates.

C. Limitation of Review

This memorandum constitutes a legal analysis of the environmental risks associated with the Transaction. It is not, and should not be construed as, an independent environmental, engineering, or scientific assessment of conditions at Cascadia's facilities. Calderwood & Harkness LLP is not an environmental engineering or consulting firm, and we have not conducted independent site visits, sampling, or testing at any of Cascadia's facilities.

Our analysis relies upon the Clearwater ESA reports, data room materials, management representations provided by Cascadia, and the regulatory correspondence and compliance records described above. We have assumed, without independent verification, that the information and materials provided to us are complete and accurate in all material respects. To the extent that any information provided is incomplete, inaccurate, or has been omitted, our conclusions may be affected.

We note that certain environmental permits and compliance records for two of Cascadia's Idaho facilities — the Boise River Hydroelectric Station and the Clearwater Fork Hydroelectric Station — were noted as incomplete in the data room as of the date of this memorandum. We have submitted supplemental document requests to Nina R. Castellano, Lead Partner at Ridgeway, Ashford & Malone PC (1000 SW Broadway, Suite 1600, Portland, Oregon 97205), Cascadia's outside counsel, on August 22, 2022. As of the date of this memorandum, the requested documents have not yet been produced. We will supplement this analysis upon receipt of such materials.

This memorandum is prepared solely for the use of Ironside Capital Management LP and its affiliates in connection with the Transaction and is subject to the attorney-client privilege and the attorney work product doctrine. It should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.

III. Overview of Cascadia's Environmental Regulatory Framework

Cascadia's operations span three states in the Pacific Northwest — Oregon, Washington, and Idaho — and encompass hydroelectric power generation, wind power generation, and water-treatment concession services. As a result, Cascadia is subject to a complex, multi-layered environmental regulatory framework that includes federal, state, and local requirements. This Section provides an overview of the principal environmental statutes and regulatory programs applicable to Cascadia's operations, which forms the legal backdrop against which the specific compliance and contamination findings discussed in Sections IV through VII should be understood.

A. Federal Environmental Requirements

Clean Water Act (CWA). The Federal Water Pollution Control Act, commonly known as the Clean Water Act ("CWA"), 33 U.S.C. §§ 1251–1387, regulates the discharge of pollutants into waters of the United States. Cascadia's hydroelectric facilities and water-treatment facilities discharge water into navigable waterways and are therefore required to obtain and maintain NPDES permits under Section 402 of the CWA. These permits establish effluent limitations, monitoring and reporting requirements, and best management practices for stormwater and process water discharges. Cascadia currently holds eighteen (18) active NPDES permits across its three-state footprint, administered by the respective state environmental agencies acting under delegated CWA authority.

Clean Air Act (CAA). The Clean Air Act, 42 U.S.C. §§ 7401–7671q, regulates emissions of air pollutants from stationary and mobile sources. Given Cascadia's renewable energy platform, the CAA has limited applicability to its operations. However, certain stationary source permits are required at Cascadia's water-treatment facilities, specifically for backup diesel generators used for emergency power. These generators are classified as minor sources and are subject to state-administered air quality permit programs under the CAA's delegated authority framework.

Resource Conservation and Recovery Act (RCRA). The Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901–6992k, establishes a "cradle-to-grave" regulatory framework for the management of hazardous waste. Cascadia's maintenance and operations activities at various facilities generate limited quantities of hazardous waste, including used lubricating oils, spent solvents, and waste batteries. As discussed in Section VI.D below, Cascadia's facilities are classified as Small Quantity Generators ("SQGs") or Conditionally Exempt Small Quantity Generators ("CESQGs") under RCRA, and our review has not identified any RCRA corrective action obligations.

Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601–9675, commonly known as "Superfund," imposes strict, joint and several liability on current and former owners and operators of contaminated properties, as well as on generators and transporters of hazardous substances. Our review included a search of the EPA's CERCLIS database and the National Priorities List ("NPL") for any sites associated with Cascadia's properties. As discussed in Section V.D below, the Boise River Hydroelectric Station is located adjacent to a property listed on Idaho's CERCLA site inventory, though Cascadia itself has not been named as a Potentially Responsible Party ("PRP") at that site.

National Environmental Policy Act (NEPA). The National Environmental Policy Act, 42 U.S.C. §§ 4321–4370m-12, requires federal agencies to assess the environmental effects of proposed actions before making decisions. NEPA is applicable to Cascadia's operations through the Federal Energy Regulatory Commission's ("FERC") licensing and relicensing of hydroelectric facilities under the Federal Power Act. FERC has assigned Docket Number EC22-143-000 to the pending application for approval of the transfer of Cascadia's FERC hydroelectric licenses in connection with the Transaction.

Endangered Species Act (ESA). The Endangered Species Act, 16 U.S.C. §§ 1531–1544, protects threatened and endangered species and their critical habitat. The ESA is particularly relevant to Cascadia's hydroelectric operations in the Pacific Northwest, where several anadromous fish species — including Chinook salmon, steelhead trout, and bull trout — are listed as threatened or endangered under the ESA. Cascadia's FERC hydroelectric licenses include specific conditions relating to fish passage facilities, minimum instream flow requirements, and habitat mitigation measures designed to address ESA requirements. Compliance with these conditions is monitored by FERC in coordination with the U.S. Fish and Wildlife Service and the National Marine Fisheries Service.

Federal Power Act. The Federal Power Act, 16 U.S.C. §§ 791a–828c, governs the licensing and regulation of non-federal hydroelectric power facilities by FERC. Cascadia's fourteen (14) hydroelectric facilities each operate under individual FERC licenses that contain detailed environmental conditions, including requirements for fish passage, minimum instream flows, water quality monitoring, recreation access, and cultural resource protection. The transfer of these licenses to Cascadia Acquisition Corp. will require FERC's approval under Section 203 of the Federal Power Act, and the successor licensee will be required to assume all environmental conditions contained in the existing licenses.

B. State Environmental Requirements

Oregon. Oregon's environmental regulatory framework is administered by the Oregon Department of Environmental Quality ("Oregon DEQ"). Key state environmental laws applicable to Cascadia's Oregon operations include: (i) the Oregon Cleanup Law, ORS Chapter 465, which governs the investigation and cleanup of contaminated sites in Oregon, including the Environmental Cleanup Site Information ("ECSI") database maintained by Oregon DEQ; (ii) Oregon's implementation of the CWA through state water quality permits administered by Oregon DEQ; (iii) air quality permits administered by Oregon DEQ for stationary sources; and (iv) hazardous waste management requirements under Oregon's adoption of RCRA standards. We have reviewed Oregon DEQ's ECSI database for listings associated with Cascadia's Oregon properties and have not identified any active listings.

Washington. Washington's environmental regulatory framework is administered by the Washington State Department of Ecology ("Ecology"). The principal state environmental law applicable to Cascadia's Washington operations is the Model Toxics Control Act ("MTCA"), RCW Chapter 70A.305, which is Washington's comprehensive hazardous waste cleanup law. MTCA establishes cleanup standards, including the Method A and Method B cleanup levels referenced in our discussion of the North Cascades Hydroelectric Station in Section V.B below. Ecology also administers state water quality and air quality permit programs under delegated CWA and CAA authority. The North Cascades Hydroelectric Station is currently enrolled in Ecology's Voluntary Cleanup Program under an Agreed Order, as discussed in detail in Section V.B.

Idaho. Idaho's environmental regulatory framework is administered by the Idaho Department of Environmental Quality ("Idaho DEQ"). Idaho DEQ oversees state programs governing hazardous waste management, water quality, and air quality, generally paralleling the federal regulatory framework under RCRA, the CWA, and the CAA. Idaho DEQ also administers the state's environmental cleanup program, including the Idaho CERCLA site inventory, which is relevant to our discussion of the Boise River Hydroelectric Station in Section V.D below.

C. Local Environmental Requirements

In addition to federal and state requirements, Cascadia's facilities are subject to various local environmental requirements, including:

County-Level Land Use and Zoning Environmental Conditions. Several of Cascadia's facilities are subject to county-level conditional use permits and zoning approvals that include environmental conditions relating to stormwater management, erosion control, noise limitations, and visual impact mitigation. These conditions were reviewed as part of our real property due diligence and are cross-referenced in the C&H Due Diligence Memorandum: Cascadia Real Property and Easements (dated August 25, 2022).

Portland Metropolitan Water District Requirements. Cascadia's Bull Run Water Treatment Facility operates under a forty (40)-year concession agreement with the Portland Metropolitan Water District (the "Bull Run Filtration Project"), commenced in approximately 2018 and generating approximately $64 million in annual revenue. This concession is subject to specific environmental requirements imposed by the Portland Metropolitan Water District, including water quality standards, chemical storage and handling protocols, and emergency response procedures. Any material environmental non-compliance at this facility could implicate Cascadia's obligations under the concession agreement, including notification requirements to the municipal counterparty and, in certain circumstances, potential default provisions.

Municipal Stormwater and Erosion Control Requirements. Various Cascadia facilities are subject to municipal stormwater management and erosion control requirements, including construction and post-construction stormwater permits. These requirements are generally addressed through Cascadia's site-specific stormwater pollution prevention plans ("SWPPPs") and are not separately analyzed in this memorandum.

IV. Phase I Environmental Site Assessment — Summary of Findings

Clearwater conducted Phase I ESAs for all twenty-three (23) of Cascadia's operating facilities in accordance with ASTM E1527-21. The purpose of a Phase I ESA is to identify Recognized Environmental Conditions ("RECs"), Controlled Recognized Environmental Conditions ("CRECs"), and Historical Recognized Environmental Conditions ("HRECs") at or affecting a property. Under ASTM E1527-21, a REC is defined as the presence or likely presence of any hazardous substances or petroleum products in, on, or at a property due to a release to the environment, under conditions indicative of a release to the environment, or under conditions that pose a material threat of a future release to the environment. A CREC is a recognized environmental condition that has been addressed through implementation of institutional or engineering controls. An HREC is a past release that has been addressed to the satisfaction of the applicable regulatory authority.

A. Facilities with No Recognized Environmental Conditions (RECs)

Of Cascadia's twenty-three (23) operating facilities, nineteen (19) received clean Phase I ESA reports with no RECs, CRECs, or HRECs identified. These nineteen facilities include:

• Twelve (12) of fourteen (14) hydroelectric facilities. These twelve facilities showed no evidence of historical contamination, hazardous substance releases, or other environmental conditions constituting RECs. Operations at these facilities primarily involve the passage of water through turbines for power generation, with limited use and storage of hazardous materials (primarily lubricating oils, hydraulic fluids, and small quantities of cleaning chemicals). Environmental management at these facilities was found to be consistent with Cascadia's corporate EMS and applicable regulatory requirements.

• All six (6) wind farm facilities. Cascadia's wind farm facilities were noted as presenting minimal environmental risk, given the limited ground disturbance associated with wind turbine operations and the general absence of significant hazardous materials storage at these sites. The primary environmental consideration at wind farm facilities is the presence of transformer oil in small quantities within each turbine's electrical systems and at the facility substation. Clearwater confirmed that each wind farm facility maintains a current SPCC plan and that transformer oil is managed in accordance with applicable spill prevention requirements. No soil or groundwater contamination was identified or suspected at any wind farm facility.

• One (1) of three (3) water-treatment concession facilities. The Tualatin Valley Water Treatment Facility (Oregon) received a clean Phase I ESA report with no RECs identified. Chemical storage and handling at this facility were found to be well-managed under Cascadia's SOPs, and no historical releases or contamination conditions were identified.

B. Facilities with Recognized Environmental Conditions (RECs)

Four (4) facilities were identified with RECs in the Phase I ESA process, warranting further investigation through Phase II ESA. These facilities, and the nature of the RECs identified, are summarized below:

1. Willow Creek Hydroelectric Station (Oregon). The Phase I ESA identified a historical fuel storage area adjacent to the turbine house at this facility. Evidence of soil staining was observed in the vicinity of the locations where former aboveground storage tanks ("ASTs") were used for diesel fuel storage to supply backup generators. Cascadia's records indicate that the ASTs were removed in 2014 as part of a facility upgrade; however, no closure documentation, soil sampling results, or notification to Oregon DEQ was found in Cascadia's files. The absence of closure documentation for the AST removal constituted a REC under ASTM E1527-21, and Clearwater recommended Phase II investigation to assess potential soil and groundwater impacts.

2. North Cascades Hydroelectric Station (Washington). The Phase I ESA identified historical records indicating the presence of PCB-containing transformer oil at this facility. The transformers in question were replaced in 2016 as part of an equipment modernization program; however, records obtained from Washington Department of Ecology and from Cascadia's internal files indicated that residual soil and groundwater contamination was suspected beneath the former transformer pad. Cascadia self-disclosed the potential contamination to Ecology in 2017 and enrolled the site in the Voluntary Cleanup Program. The presence of suspected PCB contamination and an active VCP enrollment constituted a REC.

3. Bull Run Water Treatment Facility (Oregon). The Phase I ESA identified a former chemical storage area at this facility with evidence of historical releases of water-treatment chemicals, including chlorine, alum (aluminum sulfate), and polymer coagulants. Staining and deterioration of the concrete containment pad in the former chemical storage area were observed during Clearwater's site reconnaissance. This facility operates under the Bull Run Filtration Project concession with the Portland Metropolitan Water District, and the identified REC was noted as potentially relevant to Cascadia's obligations under the concession agreement. Clearwater recommended Phase II investigation to assess whether the historical releases had resulted in soil or groundwater impacts.

4. Boise River Hydroelectric Station (Idaho). The Phase I ESA identified historical mercury contamination from a pre-Cascadia ownership era associated with former mine tailings located on an adjacent property. Clearwater's review of historical land-use records, aerial photographs, and Idaho DEQ files indicated that mine tailings containing mercury were deposited on the adjacent property during mining operations that ceased in the 1950s. The potential for migration of mercury-contaminated materials to Cascadia's property boundary was identified as a REC, warranting further investigation.

C. Controlled and Historical RECs

Two (2) additional facilities — both located in Oregon — were identified with Historical Recognized Environmental Conditions ("HRECs"). In each case, the HRECs relate to historical contamination conditions that were previously investigated, remediated, and received regulatory closure from Oregon DEQ. Specifically:

• Sandy River Hydroelectric Station (Oregon). A former underground storage tank ("UST") containing heating oil was removed in 2005. Soil sampling at the time of removal confirmed that petroleum hydrocarbon concentrations were below applicable Oregon DEQ screening levels. Oregon DEQ issued a No Further Action ("NFA") determination in 2006. This condition constitutes an HREC and does not represent a current environmental risk.

• McKenzie River Hydroelectric Station (Oregon). A historical release of hydraulic fluid from a turbine governor system was identified and remediated in 2011. Oregon DEQ issued an NFA determination in 2012 following confirmation sampling. This condition constitutes an HREC and does not represent a current environmental risk.

No Controlled Recognized Environmental Conditions ("CRECs") were identified at any of Cascadia's twenty-three facilities. The absence of CRECs indicates that no institutional or engineering controls have been implemented at any facility as a substitute for full cleanup to unrestricted-use standards.

V. Phase II Environmental Site Assessment — Detailed Findings

This Section presents a detailed discussion of the Phase II ESA findings for each of the four (4) facilities at which RECs were identified during the Phase I ESA process. For each facility, we summarize the Phase II investigation scope and results, the current regulatory status, the estimated remediation costs, and our risk assessment.

A. Willow Creek Hydroelectric Station (Oregon)

Phase II Investigation. Clearwater conducted a Phase II ESA at the Willow Creek Hydroelectric Station, with the Phase II report dated July 2022. The investigation included the advancement of eight (8) soil borings in the vicinity of the former AST area adjacent to the turbine house, with soil samples collected at multiple depth intervals and submitted for laboratory analysis of total petroleum hydrocarbons — diesel-range (TPH-Dx) and gasoline-range (TPH-Gx) — as well as benzene, toluene, ethylbenzene, and xylenes ("BTEX"). Two (2) groundwater monitoring wells were installed and sampled for the same analytes.

Soil Sampling Results. TPH-Dx was detected in soil samples from three (3) of the eight (8) borings at concentrations exceeding Oregon DEQ's Risk-Based Concentrations ("RBCs") for residential and occupational exposure scenarios. The maximum TPH-Dx concentration detected was 1,850 mg/kg, compared to the Oregon DEQ occupational RBC of 500 mg/kg. The affected area appears to be localized within the footprint of the former AST pad and does not extend beyond approximately thirty (30) feet from the former tank locations. BTEX compounds were detected at trace levels below applicable screening criteria.

Groundwater Sampling Results. Samples from both monitoring wells did not reveal TPH-Dx, TPH-Gx, or BTEX concentrations exceeding Oregon DEQ screening levels. This suggests that the petroleum contamination has not migrated to groundwater, consistent with the relatively shallow and localized nature of the soil impacts.

Clearwater Recommendation. Clearwater recommends a limited soil excavation in the former AST area, followed by confirmation sampling to verify that remaining soil concentrations are below applicable Oregon DEQ screening levels. Clearwater estimates the cost of remediation, including excavation, off-site soil disposal, confirmation sampling, and reporting, at $150,000 to $250,000.

Regulatory Status. The Willow Creek Hydroelectric Station is not currently listed on Oregon DEQ's Environmental Cleanup Site Information ("ECSI") database, and no enforcement action has been taken by Oregon DEQ with respect to this facility. However, the failure to document closure of the former ASTs and the presence of soil contamination exceeding screening levels creates a potential regulatory obligation. A voluntary cleanup through Oregon DEQ's voluntary cleanup program may be advisable to obtain regulatory closure and to mitigate the risk of future enforcement action, particularly in connection with any future property transfer.

Risk Assessment: LOW to MODERATE. The contamination at Willow Creek is localized, has not impacted groundwater, and is amenable to a straightforward excavation remedy. The estimated remediation cost is modest relative to the Transaction value. However, the absence of AST closure documentation represents a regulatory gap that should be addressed. We recommend that the remediation at Willow Creek be included as a scheduled item in the EPA environmental indemnity, with either a specific escrow or holdback to cover the estimated remediation costs or a pre-closing remediation covenant requiring Cascadia to complete the cleanup prior to closing.

B. North Cascades Hydroelectric Station (Washington)

Phase II Investigation. Clearwater conducted a Phase II ESA at the North Cascades Hydroelectric Station, with the Phase II report dated August 2022. The investigation focused on the former transformer pad area where PCB-containing transformers were located prior to their replacement in 2016. The investigation included the advancement of six (6) soil borings beneath and adjacent to the former transformer pad, with soil samples analyzed for polychlorinated biphenyls ("PCBs") by EPA Method 8082A. One (1) groundwater monitoring well was installed downgradient of the former transformer pad and sampled for PCBs.

Soil Sampling Results. PCB contamination was confirmed in soil beneath the former transformer pad area. PCBs (as Aroclor 1260) were detected in four (4) of six (6) soil borings at concentrations ranging from 0.4 mg/kg to 3.2 mg/kg. Three of the four borings with detectable PCBs exceeded Washington's MTCA Method A cleanup level of 1.0 mg/kg for unrestricted land use, with the maximum concentration of 3.2 mg/kg detected at a depth of approximately two (2) feet below ground surface directly beneath the former transformer pad.

Groundwater Sampling Results. The groundwater monitoring well installed downgradient of the former transformer pad revealed PCB concentrations at detectable levels but below applicable MTCA Method A groundwater cleanup standards. Specifically, PCBs were detected at 0.08 µg/L, compared to the MTCA Method A groundwater cleanup standard of 0.1 µg/L. While the concentrations are currently below the applicable standard, the proximity of the detected concentration to the regulatory threshold is a matter of concern and warrants continued monitoring to assess whether groundwater conditions are stable, improving, or deteriorating.

VCP Enrollment and Regulatory Status. Cascadia self-disclosed the suspected PCB contamination to Washington Department of Ecology in 2017, and the site was subsequently enrolled in Ecology's Voluntary Cleanup Program under an Agreed Order. The Agreed Order requires Cascadia to: (i) conduct quarterly groundwater monitoring and submit results to Ecology; (ii) submit annual progress reports summarizing site conditions and remedial activities; and (iii) complete a Remedial Investigation/Feasibility Study ("RI/FS") to evaluate remediation alternatives and propose a final cleanup action plan. The RI/FS is expected to be completed by the second quarter of 2023.

Cascadia has been in compliance with the terms of the Agreed Order to date, and Ecology has not escalated the matter to a formal enforcement action. The VCP enrollment provides Cascadia with certain protections, including a covenant not to sue from Ecology upon successful completion of the cleanup, and participation in the VCP generally demonstrates good faith engagement with the regulatory process.

Estimated Remediation Cost. Clearwater estimates total remediation costs for the North Cascades site at $800,000 to $1,500,000. The lower end of the range assumes that soil contamination can be addressed through excavation and off-site disposal, and that groundwater conditions remain below applicable standards without active treatment. The upper end of the range accounts for the potential need for groundwater treatment — such as installation and operation of a small-scale pump-and-treat or permeable reactive barrier system — if ongoing monitoring reveals that PCB concentrations in groundwater are increasing or if the RI/FS identifies groundwater treatment as a necessary component of the remedial action plan. We note that these estimates are preliminary and may increase as the RI/FS progresses and additional data becomes available regarding the extent of contamination and the groundwater plume dynamics.

Risk Assessment: MODERATE. The North Cascades site represents the most significant identified environmental liability in the Cascadia portfolio. The presence of PCB contamination in soil above regulatory cleanup levels and at detectable levels in groundwater, combined with an active regulatory obligation under the VCP Agreed Order, creates both a quantifiable near-term remediation cost and a degree of uncertainty regarding the ultimate scope and cost of cleanup. The active engagement with Ecology through the VCP is a positive factor that mitigates the risk of punitive enforcement action, but the cost estimates are subject to upward revision depending on groundwater conditions. We recommend a specific indemnity provision in the EPA for remediation costs at the North Cascades site, with a structure that allocates costs above a negotiated threshold (e.g., above $800,000) to the Selling Shareholders. An environmental escrow funded at the high-end estimate of $1,500,000 should also be considered.

C. Bull Run Water Treatment Facility (Oregon)

Phase II Investigation. Clearwater conducted a Phase II ESA at the Bull Run Water Treatment Facility, with the Phase II report dated August 2022. The investigation targeted the former chemical storage area identified in the Phase I ESA, where evidence of historical releases of water-treatment chemicals was observed. The investigation included the advancement of four (4) soil borings in and around the former chemical storage area, with soil samples analyzed for pH, metals (with emphasis on aluminum), chloride, and general chemistry parameters.

Soil Sampling Results. Soil sampling in the former chemical storage area revealed elevated pH levels (ranging from 8.9 to 10.2, compared to background levels of approximately 6.5 to 7.5) and minor elevations in aluminum concentrations above background levels. However, both pH and aluminum concentrations were below applicable Oregon DEQ screening levels for occupational exposure. No other contaminants of concern were detected at concentrations of regulatory significance.

Groundwater Results. No groundwater monitoring wells were installed at this facility, as Clearwater determined that the soil impacts were minor and localized and that the hydrogeological setting (low-permeability clay soils and a relatively deep water table) made groundwater impacts unlikely. This determination is consistent with standard Phase II ESA practice under ASTM E1903-19 for conditions that do not suggest a reasonable likelihood of groundwater contamination.

Clearwater Conclusion. Clearwater concluded that the conditions observed at the Bull Run Water Treatment Facility do not constitute a current environmental liability requiring remediation. No further action is recommended at this time, though Clearwater noted that ongoing monitoring of the former chemical storage area would be prudent as a best practice.

Concession Agreement Implications. We note that the Bull Run Water Treatment Facility operates under the Bull Run Filtration Project concession agreement with the Portland Metropolitan Water District, a long-term (approximately forty-year) concession that generates approximately $64 million in annual revenue. The concession agreement contains environmental compliance covenants, including requirements for the concessionaire to maintain compliance with all applicable environmental laws and to notify the Portland Metropolitan Water District of any environmental conditions that could affect facility operations or water quality. While the conditions identified in the Phase II ESA do not appear to rise to the level of a material environmental condition requiring notification under the concession agreement, this determination should be confirmed through a detailed review of the concession's environmental provisions, which is addressed in the C&H Due Diligence Memorandum: Cascadia Material Contracts Summary (dated August 22, 2022).

Risk Assessment: LOW. No current remediation is required, and the identified conditions are below applicable regulatory thresholds. The primary risk at this facility relates to the concession agreement implications rather than environmental liability per se. We recommend ongoing monitoring of the former chemical storage area for concession compliance purposes and coordination with the material contracts diligence workstream to ensure that the environmental conditions at this facility are properly addressed in the context of the Bull Run concession.

D. Boise River Hydroelectric Station (Idaho)

Phase II Investigation. Clearwater conducted a Phase II ESA at the Boise River Hydroelectric Station, with the Phase II report dated August 2022. The investigation focused on the property boundary area adjacent to historical mine tailings located on a neighboring property that is not owned by Cascadia. The investigation included the advancement of six (6) soil borings along Cascadia's property boundary, with soil samples analyzed for mercury and other metals associated with historical mining activity.

Soil Sampling Results. Mercury was detected in two (2) of six (6) soil borings at concentrations above Idaho DEQ's residential screening levels. Specifically, mercury was detected at 7.8 mg/kg and 5.2 mg/kg in the two affected borings, compared to Idaho DEQ's residential screening level of 2.3 mg/kg. However, both detections were below Idaho DEQ's industrial/commercial screening level of 43 mg/kg. The remaining four borings showed mercury at background or non-detect levels. The spatial pattern of detections suggests that mercury-bearing materials from the adjacent mine tailings have migrated to a limited extent onto Cascadia's property, likely through surface water runoff or wind-borne transport.

Source of Contamination. The mine tailings are located on an adjacent property that was historically used for gold and silver mining operations, which ceased in the 1950s. The adjacent property is listed on Idaho's CERCLA site inventory as a potential Superfund site, and the current owner of the adjacent property has been identified as a Potentially Responsible Party ("PRP") by Idaho DEQ. Cascadia has not been named as a PRP, either by Idaho DEQ or by the EPA, at the adjacent site or at any other CERCLA site.

Regulatory Status. Idaho DEQ has not taken any enforcement action against Cascadia with respect to the mercury contamination detected on Cascadia's property. Idaho DEQ's attention has been focused on the adjacent property owner as the primary source of contamination. However, the potential for future CERCLA contribution claims exists if: (i) the adjacent site is elevated to the National Priorities List or is otherwise subject to a federal or state-led cleanup action; (ii) Cascadia is named as a PRP by virtue of its ownership of property onto which hazardous substances from the adjacent site have migrated; or (iii) the adjacent property owner or other PRPs seek contribution from Cascadia for cleanup costs under CERCLA Section 113(f).

Estimated Cost Exposure. Clearwater estimates that Cascadia's potential share of cleanup costs, based on the limited extent of property boundary contamination and Cascadia's status as a passive recipient of migrated contamination, could range from $200,000 to $500,000. This estimate is necessarily imprecise and depends on a number of factors, including the ultimate scope and cost of cleanup at the adjacent site, the number and financial condition of other PRPs, and the allocation methodology employed by the regulatory agency or the courts.

Risk Assessment: LOW to MODERATE. The current risk to Cascadia is limited by the fact that Cascadia has not been named as a PRP and that the contamination on Cascadia's property is below industrial/commercial screening levels. However, the proximity to an active CERCLA site, the potential for continued migration, and the possibility of future PRP designation or contribution claims create a latent liability that should be addressed in the EPA. We recommend a defensive environmental representation confirming Cascadia's non-PRP status, a CERCLA-specific indemnity provision, and ongoing monitoring of Idaho DEQ proceedings regarding the adjacent property.

VI. Environmental Permits and Compliance Status

A. NPDES Permits (Clean Water Act)

Cascadia and its subsidiaries hold eighteen (18) active NPDES permits across Oregon, Washington, and Idaho for discharges associated with hydroelectric power generation and water-treatment facility operations. These permits authorize the discharge of process water, cooling water, fish passage flows, and stormwater to receiving waters in accordance with established effluent limitations and monitoring requirements.

Our review of Cascadia's NPDES compliance history for the past five (5) years (2017–2022) did not identify any material permit violations. Two minor Notice of Non-Compliance ("NON") events were identified, both at Oregon hydroelectric facilities:

• 2019 NON — Deschutes River Hydroelectric Station. Oregon DEQ issued a NON for a single exceedance of the permitted total suspended solids ("TSS") effluent limitation during a period of unusually heavy rainfall and elevated river turbidity. Cascadia responded to the NON with a corrective action plan that included enhanced stormwater management measures. The matter was resolved without the imposition of any penalties, and Oregon DEQ closed the NON in February 2020.

• 2020 NON — Clackamas River Hydroelectric Station. Oregon DEQ issued a NON for a late submission of a semi-annual Discharge Monitoring Report ("DMR"). The DMR was submitted twelve (12) days past the regulatory deadline due to an administrative error. Cascadia corrected the administrative process and submitted the report, and Oregon DEQ closed the NON without penalties.

All eighteen NPDES permits are currently in good standing, and Cascadia's compliance personnel maintain a permit renewal tracking system. We have reviewed the expiration and renewal dates for all NPDES permits and note that two permits — for the Willow Creek Hydroelectric Station and the Sandy River Hydroelectric Station, both in Oregon — are scheduled for renewal in 2023. No issues are anticipated with the renewal process based on Cascadia's compliance history.

B. FERC Hydroelectric License Environmental Conditions

Cascadia's fourteen (14) hydroelectric facilities operate under individual licenses issued by the Federal Energy Regulatory Commission ("FERC") pursuant to the Federal Power Act. Each FERC license contains detailed environmental conditions that were established through the FERC licensing process, including NEPA review and consultation with resource agencies under the ESA and other applicable environmental statutes. The environmental conditions in Cascadia's FERC licenses include, among other things:

• Fish passage requirements. Requirements for the construction, operation, and maintenance of fish passage facilities (fish ladders, screens, and bypass systems) to facilitate the upstream and downstream migration of anadromous fish species, including ESA-listed Chinook salmon, steelhead trout, and bull trout.

• Minimum instream flow requirements. Requirements to maintain specified minimum flow levels in bypass reaches and tailwater areas to protect aquatic habitat and water quality.

• Water quality monitoring. Requirements for ongoing monitoring of water temperature, dissolved oxygen, turbidity, and other water quality parameters in receiving waters downstream of hydroelectric facilities.

• Recreation access. Requirements to provide and maintain public recreation access facilities, including boat launches, fishing access points, and hiking trails, at or near hydroelectric facilities.

Our review of Cascadia's compliance with FERC license environmental conditions did not identify any material non-compliance. Cascadia submits annual compliance reports to FERC for each licensed facility, and our review of the most recent annual reports (for the 2021 reporting year) confirmed that all license conditions were met or that minor deviations were adequately explained and accepted by FERC staff.

FERC has assigned Docket Number EC22-143-000 to the pending application for approval of the transfer of Cascadia's FERC hydroelectric licenses to Cascadia Acquisition Corp. under Section 203 of the Federal Power Act. We note that FERC approval for the license transfer was received on December 15, 2022 (post-dating this memorandum), conditioned on the timely filing of license-transfer applications for each individual facility. The transfer of FERC licenses will require the successor licensee (Cascadia Acquisition Corp.) to assume all environmental conditions contained in the existing licenses, and no modification of existing environmental conditions is anticipated in connection with the transfer.

C. Air Quality Permits

Given Cascadia's renewable energy platform, the Clean Air Act has limited applicability to its operations. Three (3) minor source permits are maintained at Cascadia's water-treatment facilities for backup diesel generators used for emergency power. These generators are classified as minor stationary sources and are subject to state-administered minor source permit programs. All three permits are current, and our review did not identify any air quality permit violations or pending enforcement actions.

D. Hazardous Waste Management

Cascadia's facilities are classified under RCRA as either Small Quantity Generators ("SQGs") or Conditionally Exempt Small Quantity Generators ("CESQGs"), depending on the volume and type of hazardous waste generated at each facility. Typical hazardous waste streams include used lubricating oils, spent solvents, waste batteries, and small quantities of laboratory chemicals at water-treatment facilities.

Our review of Cascadia's hazardous waste manifests, generator identification numbers, and waste management records did not identify any discrepancies. All hazardous waste is transported by licensed haulers and disposed of at permitted treatment, storage, and disposal facilities. No RCRA corrective action obligations have been identified at any Cascadia facility.

E. Spill Prevention, Control, and Countermeasure (SPCC) Plans

Cascadia maintains SPCC plans at all facilities with oil storage exceeding the regulatory thresholds established under 40 C.F.R. Part 112. These plans address the prevention, containment, and cleanup of potential oil spills and include provisions for secondary containment, facility inspections, employee training, and emergency response procedures.

Clearwater reviewed the SPCC plans for all applicable facilities and found them to be current, properly certified by a licensed professional engineer, and in compliance with applicable regulatory requirements. Our review of Cascadia's spill incident logs for the past three (3) years (2019–2022) did not identify any reportable spill events at any Cascadia facility.

VII. Pending and Potential Environmental Liabilities

A. Active Remediation Obligations

As discussed in Section V.B above, the North Cascades Hydroelectric Station (Washington) is currently enrolled in Washington's Voluntary Cleanup Program under an Agreed Order with the Washington Department of Ecology. This is the only Cascadia facility with an active remediation obligation. The ongoing obligations under the Agreed Order include quarterly groundwater monitoring, annual reporting to Ecology, and completion of the RI/FS by the second quarter of 2023. Clearwater estimates total remediation costs at $800,000 to $1,500,000, with the range reflecting uncertainty regarding the potential need for groundwater treatment.

The VCP Agreed Order represents a binding obligation that will transfer to Cascadia Acquisition Corp. as the successor owner and operator of the North Cascades facility. It is essential that the EPA clearly address the allocation of remediation costs for this site, including a specific indemnity and/or escrow mechanism as recommended in Section VIII below.

B. Potential Future Liabilities

Two additional facilities present potential future environmental liabilities that, while not currently the subject of active remediation obligations, may require future expenditures:

• Willow Creek Hydroelectric Station (Oregon). Soil contamination from the former AST area exceeds Oregon DEQ screening levels, and voluntary cleanup is recommended to obtain regulatory closure. Estimated remediation cost: $150,000 to $250,000.

• Boise River Hydroelectric Station (Idaho). Potential CERCLA PRP exposure from mercury contamination migrating from adjacent mine tailings property. Cascadia has not been named as a PRP, but the risk of future designation or contribution claims remains. Estimated cost exposure: $200,000 to $500,000.

C. Aggregate Estimated Environmental Liability Range

Based on Clearwater's preliminary assessments, the aggregate estimated environmental liability across all identified conditions is summarized as follows:

We emphasize that these estimates are preliminary and are based on Clearwater's current understanding of site conditions. The estimates may increase as further investigation is conducted, particularly with respect to the North Cascades site, where groundwater conditions remain uncertain. We recommend that updated cost estimates be obtained from Clearwater prior to execution of the EPA.

D. Environmental Insurance

Cascadia maintains a pollution legal liability ("PLL") insurance policy with a $5,000,000 aggregate limit. We have reviewed the policy, including the declarations page, policy form, and endorsements. The PLL policy provides coverage for third-party bodily injury and property damage claims, cleanup costs, and legal defense costs arising from pollution conditions at covered locations. Coverage appears adequate for the identified environmental risks, subject to the following considerations:

• Known Pre-Existing Conditions Exclusion. The PLL policy contains an exclusion for known pre-existing pollution conditions as of the policy inception date. This exclusion may apply to the North Cascades VCP site, given that Cascadia self-disclosed the PCB contamination to Washington Department of Ecology in 2017, prior to the current policy period. The applicability of this exclusion should be confirmed with the insurer.

• Assignability. The assignability of the PLL policy to Cascadia Acquisition Corp. in connection with the change-of-control transaction must be confirmed with the insurer. PLL policies typically contain change-of-control provisions that may require the insurer's consent for policy transfer or may provide for automatic termination upon a change of control. If the PLL policy is not assignable, Cascadia Acquisition Corp. will need to procure replacement coverage.

VIII. Review of Environmental Representations in Draft EPA

We have reviewed the environmental representations and warranties contained in the draft Equity Purchase Agreement circulated by Ridgeway, Ashford & Malone PC on August 15, 2022, together with the corresponding disclosure schedules. The draft EPA contains customary environmental representations, including representations regarding:

• Compliance with all applicable Environmental Laws (as defined in the EPA);

• Absence of releases of hazardous substances requiring investigation or remediation;

• Validity and good standing of all environmental permits, licenses, and approvals;

• Absence of pending or threatened environmental proceedings, enforcement actions, or orders; and

• Accuracy of environmental disclosures.

The draft disclosure schedules reference the North Cascades VCP enrollment and the Boise River adjacent-property contamination, consistent with the findings described in this memorandum.

Based on our environmental due diligence findings, C&H recommends the following enhancements to the environmental provisions of the EPA:

1. Specific Indemnity — North Cascades Hydroelectric Station. The EPA should include a specific indemnity from the Selling Shareholders for remediation costs at the North Cascades Hydroelectric Station above a negotiated threshold (e.g., costs exceeding $800,000). This indemnity should survive for a period sufficient to cover the completion of the RI/FS and any resulting remedial action (we recommend a survival period of not less than five (5) years from closing). The indemnity cap for the North Cascades-specific obligation should be set at or above the high-end estimate of $1,500,000.

2. Environmental Escrow or Holdback — Willow Creek Hydroelectric Station. The EPA should provide for an environmental escrow or holdback in an amount sufficient to cover the estimated cost of soil remediation at the Willow Creek Hydroelectric Station (i.e., $250,000, representing the high-end of Clearwater's cost estimate). The escrow should be released upon completion of the remediation and receipt of regulatory closure (or, if voluntary cleanup is pursued, upon receipt of an NFA determination from Oregon DEQ).

3. CERCLA Representation and Bring-Down — Boise River Hydroelectric Station. The EPA should include a specific representation that Cascadia has not been named as a PRP at any CERCLA site (which is currently true) and that this representation should be brought down to the closing date. Additionally, a CERCLA-specific indemnity should be included to protect the Buyer against future PRP designation or contribution claims arising from the Boise River adjacent-property contamination.

4. Pre-Closing Compliance Covenant. The EPA should include a covenant by the Selling Shareholders to maintain environmental compliance at all Cascadia facilities pending closing, with particular emphasis on: (i) continued compliance with FERC license environmental conditions at all fourteen hydroelectric facilities; (ii) continued compliance with the North Cascades VCP Agreed Order; and (iii) compliance with any new environmental requirements arising from the OPUC application (OPUC Docket Number UM-2287, filed October 14, 2022) or from the FERC Section 203 approval process.

5. R&W Insurance Coordination. The Transaction contemplates a representations and warranties insurance policy issued by Northgate Specialty Insurance Co. (Policy No. NSW-RI-2022-09814) with a coverage limit of $195,000,000, representing approximately 10% of the enterprise value of $1,950,000,000. The R&W policy must be coordinated with the environmental provisions of the EPA to confirm that: (i) the environmental representations are within the scope of coverage; (ii) the identified environmental conditions at the North Cascades, Willow Creek, and Boise River facilities are not excluded by known-contamination carve-outs in the R&W policy; and (iii) the relationship between the R&W policy and the specific environmental indemnities is clearly delineated to avoid gaps or overlaps in coverage. We recommend a joint call with Northgate Specialty's underwriting team and C&H prior to EPA execution to address these coordination issues.

IX. Interaction with Other Diligence Workstreams

The environmental due diligence findings discussed in this memorandum intersect with several other C&H due diligence workstreams. This Section identifies the relevant

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT ATTORNEY-CLIENT PRIVILEGED
CALDERWOOD & HARKNESS LLP 125 Broad Street, 44th Floor New York, New York 10004 Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com
MEMORANDUM
TO: Marcus J. Calloway, Founder & Chief Investment Officer, Ironside Capital Management LP Renata Obasi, Senior Managing Director, Infrastructure, Ironside Capital Management LP
FROM: Owen Fischer, Working Associate, Funds & Asset Management, Calderwood & Harkness LLP Theresa Kim, Lead Associate, Funds & Asset Management, Calderwood & Harkness LLP
REVIEWED BY: Pamela Cross, Responsible Partner, Funds & Asset Management, Calderwood & Harkness LLP
DATE: August 29, 2022
RE: Due Diligence Memorandum — Environmental Liabilities and Compliance, Cascadia Renewables Holdings, Inc.
MATTER NO.: 1023-00001
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I. Executive Summary
This memorandum summarizes the findings of our environmental due diligence review of Cascadia Renewables Holdings, Inc. ("Cascadia" or "CRH"), an Oregon corporation headquartered at 1100 SW Sixth Avenue, Suite 1800, Portland, Oregon 97204, conducted in connection with the proposed acquisition of 100% of the outstanding equity interests of CRH by Cascadia Acquisition Corp. ("Buyer" or "Acquisition Corp."), a newly formed special purpose vehicle organized for the benefit of Meridian Infrastructure Partners Fund IV, LP ("Fund IV") and ICM Cascadia Co-Invest, LP ("ICM Co-Invest"), at an agreed enterprise value of One Billion, Nine Hundred Fifty Million Dollars ($1,950,000,000) (the "Transaction").
The scope of this review encompasses: (i) all environmental permits, licenses, registrations, and authorizations maintained by Cascadia and its subsidiaries across their twenty-three (23) operating facilities in Oregon, Washington, and Idaho; (ii) Cascadia's environmental compliance history and incident logs from 2017 through the present; (iii) known contamination conditions and remediation obligations; (iv) Phase I and Phase II Environmental Site Assessment reports prepared by Clearwater Environmental Consulting Inc. ("Clearwater") for all operating facilities; (v) environmental representations and warranty disclosures provided in the virtual data room maintained by Cascadia and its counsel, Ridgeway, Ashford & Malone PC; and (vi) applicable federal, state, and local environmental regulatory frameworks governing Cascadia's operations across its three-state operating footprint.
Overall Assessment. Based on our review, Cascadia's environmental compliance posture is generally sound. The company maintains a functional environmental management system, holds all material environmental permits in good standing, and has not been the subject of any material unresolved enforcement actions by federal or state environmental regulatory authorities. However, our review has identified certain environmental risks that warrant further diligence, contractual protections in the Equity Purchase Agreement (the "EPA"), or both. Specifically:
• Two facilities — the Willow Creek Hydroelectric Station (Oregon) and the Boise River Hydroelectric Station (Idaho) — have historical contamination conditions that require ongoing monitoring and may require future remediation, though neither is currently subject to a regulatory enforcement action or compliance order directed at Cascadia.
• One facility — the North Cascades Hydroelectric Station (Washington) — has an active remediation obligation under the Washington Department of Ecology's Voluntary Cleanup Program ("VCP"), with estimated remediation costs ranging from $800,000 to $1,500,000 based on Clearwater's preliminary assessment.
• No material unresolved enforcement actions were identified at any of Cascadia's twenty-three operating facilities. Two minor Notice of Non-Compliance events at Oregon hydroelectric facilities in 2019 and 2020 were resolved without penalties.
• The aggregate estimated environmental liability across all identified conditions ranges from approximately $1,150,000 (low-end) to approximately $2,250,000 (high-end), based on Clearwater's preliminary cost assessments.
Recommendation. We recommend that the EPA include specific environmental representations, indemnification provisions, and escrow or insurance protections tailored to the identified environmental conditions. In particular, a specific indemnity for remediation costs at the North Cascades Hydroelectric Station, an escrow or holdback for the Willow Creek soil remediation, and a CERCLA contribution indemnity for the Boise River Hydroelectric Station should be negotiated. These key findings should be reflected in the consolidated risk matrix to be included in the C&H Summary Due Diligence Report and Risk Matrix, currently targeted for issuance on September 1, 2022. Additionally, coordination with Northgate Specialty Insurance Co. regarding the scope of the representations and warranties insurance policy coverage for environmental matters is essential prior to EPA execution.
II. Scope of Review and Methodology
A. Documents and Data Room Materials Reviewed
In connection with this memorandum, we reviewed the following documents and materials, which were made available through the Cascadia virtual data room (hosted on Thackeray Solutions), as well as materials provided directly by Clearwater and by Cascadia's counsel at Ridgeway, Ashford & Malone PC:
1. Clearwater Phase I Environmental Site Assessment Reports. Phase I Environmental Site Assessment ("ESA") reports prepared by Clearwater Environmental Consulting Inc. for all twenty-three (23) of Cascadia's operating facilities, consisting of fourteen (14) hydroelectric facilities, six (6) wind farms, and three (3) water-treatment concession facilities. These reports were dated between June 2022 and August 2022 and were prepared in connection with the Transaction.
2. Clearwater Phase II Environmental Site Assessment Reports. Phase II ESA reports prepared by Clearwater for four (4) facilities that were flagged in the Phase I ESA process as having Recognized Environmental Conditions ("RECs"). These Phase II reports are dated between July 2022 and August 2022 and include soil sampling, groundwater monitoring well installation and sampling, and laboratory analytical results.
3. Cascadia Internal Environmental Compliance Files and Incident Logs (2017–2022). Internal records maintained by Cascadia's Environmental Health and Safety ("EH&S") department, including incident reports, spill logs, regulatory inspection records, and internal audit findings for the period from January 1, 2017 through August 2022.
4. Environmental Permits, Licenses, and Registrations. Copies of all environmental permits, licenses, and registrations maintained by Cascadia and its subsidiaries, including National Pollutant Discharge Elimination System ("NPDES") permits, air quality permits, hazardous waste generator identification numbers, and Spill Prevention, Control, and Countermeasure ("SPCC") plans.
5. Regulatory Correspondence. Correspondence between Cascadia (or its subsidiaries) and federal and state regulatory agencies, including the United States Environmental Protection Agency ("EPA"), Oregon Department of Environmental Quality ("Oregon DEQ"), Washington State Department of Ecology ("Ecology"), and Idaho Department of Environmental Quality ("Idaho DEQ"), for the period from 2017 through the present.
6. Environmental Insurance Policies. Cascadia's pollution legal liability ("PLL") insurance policy, including the declarations page, policy form, endorsements, and claims history.
7. Environmental Management System Documentation. Cascadia's corporate environmental management system ("EMS") manual, standard operating procedures ("SOPs") for environmental compliance, and training records for environmental compliance personnel.
8. Historical Land-Use Records. Historical land-use records, title reports, and Trelwick fire insurance maps for select properties, as compiled by Clearwater and included in the Phase I ESA reports.
9. Draft EPA Disclosure Schedules. The environmental representations and warranties proposed by Cascadia and the Selling Shareholders in the draft EPA, together with the corresponding disclosure schedules, as circulated by Ridgeway, Ashford & Malone PC on August 15, 2022.
B. Clearwater Environmental Consulting Inc. — Engagement and Qualifications
Clearwater Environmental Consulting Inc. is an environmental consulting firm located at 4800 Meadows Road, Suite 300, Lake Oswego, Oregon 97035. Clearwater was engaged by Meridian Infrastructure Partners LP (the "Sponsor") to conduct Phase I and Phase II Environmental Site Assessments of Cascadia's operating facilities in connection with the Transaction. The resulting reports were made available to ICM Cascadia Co-Invest, LP for review, and Calderwood & Harkness LLP has been authorized to rely upon such reports for purposes of this legal due diligence analysis, subject to the reliance limitations set forth in each report.
Clearwater's Phase I ESA reports were prepared in accordance with the ASTM International Standard E1527-21, Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process (the current edition), which defines good commercial and customary practice for conducting Phase I environmental site assessments. Clearwater's Phase II ESA reports were prepared in accordance with ASTM International Standard E1903-19, Standard Practice for Environmental Site Assessments: Phase II Environmental Site Assessment Process, which provides guidance for investigating Recognized Environmental Conditions identified during a Phase I ESA.
Clearwater's project team for this engagement was led by Dr. Sarah Wakefield, P.E., ENV SP, a licensed professional engineer in Oregon, Washington, and Idaho with over twenty years of experience in environmental site assessment and remediation. We note that Clearwater's qualifications and methodology were satisfactory for the purposes of our legal review, though we have not independently verified Clearwater's sampling methodologies, analytical results, or cost estimates.
C. Limitation of Review
This memorandum constitutes a legal analysis of the environmental risks associated with the Transaction. It is not, and should not be construed as, an independent environmental, engineering, or scientific assessment of conditions at Cascadia's facilities. Calderwood & Harkness LLP is not an environmental engineering or consulting firm, and we have not conducted independent site visits, sampling, or testing at any of Cascadia's facilities.
Our analysis relies upon the Clearwater ESA reports, data room materials, management representations provided by Cascadia, and the regulatory correspondence and compliance records described above. We have assumed, without independent verification, that the information and materials provided to us are complete and accurate in all material respects. To the extent that any information provided is incomplete, inaccurate, or has been omitted, our conclusions may be affected.
We note that certain environmental permits and compliance records for two of Cascadia's Idaho facilities — the Boise River Hydroelectric Station and the Clearwater Fork Hydroelectric Station — were noted as incomplete in the data room as of the date of this memorandum. We have submitted supplemental document requests to Nina R. Castellano, Lead Partner at Ridgeway, Ashford & Malone PC (1000 SW Broadway, Suite 1600, Portland, Oregon 97205), Cascadia's outside counsel, on August 22, 2022. As of the date of this memorandum, the requested documents have not yet been produced. We will supplement this analysis upon receipt of such materials.
This memorandum is prepared solely for the use of Ironside Capital Management LP and its affiliates in connection with the Transaction and is subject to the attorney-client privilege and the attorney work product doctrine. It should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
III. Overview of Cascadia's Environmental Regulatory Framework
Cascadia's operations span three states in the Pacific Northwest — Oregon, Washington, and Idaho — and encompass hydroelectric power generation, wind power generation, and water-treatment concession services. As a result, Cascadia is subject to a complex, multi-layered environmental regulatory framework that includes federal, state, and local requirements. This Section provides an overview of the principal environmental statutes and regulatory programs applicable to Cascadia's operations, which forms the legal backdrop against which the specific compliance and contamination findings discussed in Sections IV through VII should be understood.
A. Federal Environmental Requirements
Clean Water Act (CWA). The Federal Water Pollution Control Act, commonly known as the Clean Water Act ("CWA"), 33 U.S.C. §§ 1251–1387, regulates the discharge of pollutants into waters of the United States. Cascadia's hydroelectric facilities and water-treatment facilities discharge water into navigable waterways and are therefore required to obtain and maintain NPDES permits under Section 402 of the CWA. These permits establish effluent limitations, monitoring and reporting requirements, and best management practices for stormwater and process water discharges. Cascadia currently holds eighteen (18) active NPDES permits across its three-state footprint, administered by the respective state environmental agencies acting under delegated CWA authority.
Clean Air Act (CAA). The Clean Air Act, 42 U.S.C. §§ 7401–7671q, regulates emissions of air pollutants from stationary and mobile sources. Given Cascadia's renewable energy platform, the CAA has limited applicability to its operations. However, certain stationary source permits are required at Cascadia's water-treatment facilities, specifically for backup diesel generators used for emergency power. These generators are classified as minor sources and are subject to state-administered air quality permit programs under the CAA's delegated authority framework.
Resource Conservation and Recovery Act (RCRA). The Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901–6992k, establishes a "cradle-to-grave" regulatory framework for the management of hazardous waste. Cascadia's maintenance and operations activities at various facilities generate limited quantities of hazardous waste, including used lubricating oils, spent solvents, and waste batteries. As discussed in Section VI.D below, Cascadia's facilities are classified as Small Quantity Generators ("SQGs") or Conditionally Exempt Small Quantity Generators ("CESQGs") under RCRA, and our review has not identified any RCRA corrective action obligations.
Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601–9675, commonly known as "Superfund," imposes strict, joint and several liability on current and former owners and operators of contaminated properties, as well as on generators and transporters of hazardous substances. Our review included a search of the EPA's CERCLIS database and the National Priorities List ("NPL") for any sites associated with Cascadia's properties. As discussed in Section V.D below, the Boise River Hydroelectric Station is located adjacent to a property listed on Idaho's CERCLA site inventory, though Cascadia itself has not been named as a Potentially Responsible Party ("PRP") at that site.
National Environmental Policy Act (NEPA). The National Environmental Policy Act, 42 U.S.C. §§ 4321–4370m-12, requires federal agencies to assess the environmental effects of proposed actions before making decisions. NEPA is applicable to Cascadia's operations through the Federal Energy Regulatory Commission's ("FERC") licensing and relicensing of hydroelectric facilities under the Federal Power Act. FERC has assigned Docket Number EC22-143-000 to the pending application for approval of the transfer of Cascadia's FERC hydroelectric licenses in connection with the Transaction.
Endangered Species Act (ESA). The Endangered Species Act, 16 U.S.C. §§ 1531–1544, protects threatened and endangered species and their critical habitat. The ESA is particularly relevant to Cascadia's hydroelectric operations in the Pacific Northwest, where several anadromous fish species — including Chinook salmon, steelhead trout, and bull trout — are listed as threatened or endangered under the ESA. Cascadia's FERC hydroelectric licenses include specific conditions relating to fish passage facilities, minimum instream flow requirements, and habitat mitigation measures designed to address ESA requirements. Compliance with these conditions is monitored by FERC in coordination with the U.S. Fish and Wildlife Service and the National Marine Fisheries Service.
Federal Power Act. The Federal Power Act, 16 U.S.C. §§ 791a–828c, governs the licensing and regulation of non-federal hydroelectric power facilities by FERC. Cascadia's fourteen (14) hydroelectric facilities each operate under individual FERC licenses that contain detailed environmental conditions, including requirements for fish passage, minimum instream flows, water quality monitoring, recreation access, and cultural resource protection. The transfer of these licenses to Cascadia Acquisition Corp. will require FERC's approval under Section 203 of the Federal Power Act, and the successor licensee will be required to assume all environmental conditions contained in the existing licenses.
B. State Environmental Requirements
Oregon. Oregon's environmental regulatory framework is administered by the Oregon Department of Environmental Quality ("Oregon DEQ"). Key state environmental laws applicable to Cascadia's Oregon operations include: (i) the Oregon Cleanup Law, ORS Chapter 465, which governs the investigation and cleanup of contaminated sites in Oregon, including the Environmental Cleanup Site Information ("ECSI") database maintained by Oregon DEQ; (ii) Oregon's implementation of the CWA through state water quality permits administered by Oregon DEQ; (iii) air quality permits administered by Oregon DEQ for stationary sources; and (iv) hazardous waste management requirements under Oregon's adoption of RCRA standards. We have reviewed Oregon DEQ's ECSI database for listings associated with Cascadia's Oregon properties and have not identified any active listings.
Washington. Washington's environmental regulatory framework is administered by the Washington State Department of Ecology ("Ecology"). The principal state environmental law applicable to Cascadia's Washington operations is the Model Toxics Control Act ("MTCA"), RCW Chapter 70A.305, which is Washington's comprehensive hazardous waste cleanup law. MTCA establishes cleanup standards, including the Method A and Method B cleanup levels referenced in our discussion of the North Cascades Hydroelectric Station in Section V.B below. Ecology also administers state water quality and air quality permit programs under delegated CWA and CAA authority. The North Cascades Hydroelectric Station is currently enrolled in Ecology's Voluntary Cleanup Program under an Agreed Order, as discussed in detail in Section V.B.
Idaho. Idaho's environmental regulatory framework is administered by the Idaho Department of Environmental Quality ("Idaho DEQ"). Idaho DEQ oversees state programs governing hazardous waste management, water quality, and air quality, generally paralleling the federal regulatory framework under RCRA, the CWA, and the CAA. Idaho DEQ also administers the state's environmental cleanup program, including the Idaho CERCLA site inventory, which is relevant to our discussion of the Boise River Hydroelectric Station in Section V.D below.
C. Local Environmental Requirements
In addition to federal and state requirements, Cascadia's facilities are subject to various local environmental requirements, including:
County-Level Land Use and Zoning Environmental Conditions. Several of Cascadia's facilities are subject to county-level conditional use permits and zoning approvals that include environmental conditions relating to stormwater management, erosion control, noise limitations, and visual impact mitigation. These conditions were reviewed as part of our real property due diligence and are cross-referenced in the C&H Due Diligence Memorandum: Cascadia Real Property and Easements (dated August 25, 2022).
Portland Metropolitan Water District Requirements. Cascadia's Bull Run Water Treatment Facility operates under a forty (40)-year concession agreement with the Portland Metropolitan Water District (the "Bull Run Filtration Project"), commenced in approximately 2018 and generating approximately $64 million in annual revenue. This concession is subject to specific environmental requirements imposed by the Portland Metropolitan Water District, including water quality standards, chemical storage and handling protocols, and emergency response procedures. Any material environmental non-compliance at this facility could implicate Cascadia's obligations under the concession agreement, including notification requirements to the municipal counterparty and, in certain circumstances, potential default provisions.
Municipal Stormwater and Erosion Control Requirements. Various Cascadia facilities are subject to municipal stormwater management and erosion control requirements, including construction and post-construction stormwater permits. These requirements are generally addressed through Cascadia's site-specific stormwater pollution prevention plans ("SWPPPs") and are not separately analyzed in this memorandum.
IV. Phase I Environmental Site Assessment — Summary of Findings
Clearwater conducted Phase I ESAs for all twenty-three (23) of Cascadia's operating facilities in accordance with ASTM E1527-21. The purpose of a Phase I ESA is to identify Recognized Environmental Conditions ("RECs"), Controlled Recognized Environmental Conditions ("CRECs"), and Historical Recognized Environmental Conditions ("HRECs") at or affecting a property. Under ASTM E1527-21, a REC is defined as the presence or likely presence of any hazardous substances or petroleum products in, on, or at a property due to a release to the environment, under conditions indicative of a release to the environment, or under conditions that pose a material threat of a future release to the environment. A CREC is a recognized environmental condition that has been addressed through implementation of institutional or engineering controls. An HREC is a past release that has been addressed to the satisfaction of the applicable regulatory authority.
A. Facilities with No Recognized Environmental Conditions (RECs)
Of Cascadia's twenty-three (23) operating facilities, nineteen (19) received clean Phase I ESA reports with no RECs, CRECs, or HRECs identified. These nineteen facilities include:
• Twelve (12) of fourteen (14) hydroelectric facilities. These twelve facilities showed no evidence of historical contamination, hazardous substance releases, or other environmental conditions constituting RECs. Operations at these facilities primarily involve the passage of water through turbines for power generation, with limited use and storage of hazardous materials (primarily lubricating oils, hydraulic fluids, and small quantities of cleaning chemicals). Environmental management at these facilities was found to be consistent with Cascadia's corporate EMS and applicable regulatory requirements.
• All six (6) wind farm facilities. Cascadia's wind farm facilities were noted as presenting minimal environmental risk, given the limited ground disturbance associated with wind turbine operations and the general absence of significant hazardous materials storage at these sites. The primary environmental consideration at wind farm facilities is the presence of transformer oil in small quantities within each turbine's electrical systems and at the facility substation. Clearwater confirmed that each wind farm facility maintains a current SPCC plan and that transformer oil is managed in accordance with applicable spill prevention requirements. No soil or groundwater contamination was identified or suspected at any wind farm facility.
• One (1) of three (3) water-treatment concession facilities. The Tualatin Valley Water Treatment Facility (Oregon) received a clean Phase I ESA report with no RECs identified. Chemical storage and handling at this facility were found to be well-managed under Cascadia's SOPs, and no historical releases or contamination conditions were identified.
B. Facilities with Recognized Environmental Conditions (RECs)
Four (4) facilities were identified with RECs in the Phase I ESA process, warranting further investigation through Phase II ESA. These facilities, and the nature of the RECs identified, are summarized below:
1. Willow Creek Hydroelectric Station (Oregon). The Phase I ESA identified a historical fuel storage area adjacent to the turbine house at this facility. Evidence of soil staining was observed in the vicinity of the locations where former aboveground storage tanks ("ASTs") were used for diesel fuel storage to supply backup generators. Cascadia's records indicate that the ASTs were removed in 2014 as part of a facility upgrade; however, no closure documentation, soil sampling results, or notification to Oregon DEQ was found in Cascadia's files. The absence of closure documentation for the AST removal constituted a REC under ASTM E1527-21, and Clearwater recommended Phase II investigation to assess potential soil and groundwater impacts.
2. North Cascades Hydroelectric Station (Washington). The Phase I ESA identified historical records indicating the presence of PCB-containing transformer oil at this facility. The transformers in question were replaced in 2016 as part of an equipment modernization program; however, records obtained from Washington Department of Ecology and from Cascadia's internal files indicated that residual soil and groundwater contamination was suspected beneath the former transformer pad. Cascadia self-disclosed the potential contamination to Ecology in 2017 and enrolled the site in the Voluntary Cleanup Program. The presence of suspected PCB contamination and an active VCP enrollment constituted a REC.
3. Bull Run Water Treatment Facility (Oregon). The Phase I ESA identified a former chemical storage area at this facility with evidence of historical releases of water-treatment chemicals, including chlorine, alum (aluminum sulfate), and polymer coagulants. Staining and deterioration of the concrete containment pad in the former chemical storage area were observed during Clearwater's site reconnaissance. This facility operates under the Bull Run Filtration Project concession with the Portland Metropolitan Water District, and the identified REC was noted as potentially relevant to Cascadia's obligations under the concession agreement. Clearwater recommended Phase II investigation to assess whether the historical releases had resulted in soil or groundwater impacts.
4. Boise River Hydroelectric Station (Idaho). The Phase I ESA identified historical mercury contamination from a pre-Cascadia ownership era associated with former mine tailings located on an adjacent property. Clearwater's review of historical land-use records, aerial photographs, and Idaho DEQ files indicated that mine tailings containing mercury were deposited on the adjacent property during mining operations that ceased in the 1950s. The potential for migration of mercury-contaminated materials to Cascadia's property boundary was identified as a REC, warranting further investigation.
C. Controlled and Historical RECs
Two (2) additional facilities — both located in Oregon — were identified with Historical Recognized Environmental Conditions ("HRECs"). In each case, the HRECs relate to historical contamination conditions that were previously investigated, remediated, and received regulatory closure from Oregon DEQ. Specifically:
• Sandy River Hydroelectric Station (Oregon). A former underground storage tank ("UST") containing heating oil was removed in 2005. Soil sampling at the time of removal confirmed that petroleum hydrocarbon concentrations were below applicable Oregon DEQ screening levels. Oregon DEQ issued a No Further Action ("NFA") determination in 2006. This condition constitutes an HREC and does not represent a current environmental risk.
• McKenzie River Hydroelectric Station (Oregon). A historical release of hydraulic fluid from a turbine governor system was identified and remediated in 2011. Oregon DEQ issued an NFA determination in 2012 following confirmation sampling. This condition constitutes an HREC and does not represent a current environmental risk.
No Controlled Recognized Environmental Conditions ("CRECs") were identified at any of Cascadia's twenty-three facilities. The absence of CRECs indicates that no institutional or engineering controls have been implemented at any facility as a substitute for full cleanup to unrestricted-use standards.
V. Phase II Environmental Site Assessment — Detailed Findings
This Section presents a detailed discussion of the Phase II ESA findings for each of the four (4) facilities at which RECs were identified during the Phase I ESA process. For each facility, we summarize the Phase II investigation scope and results, the current regulatory status, the estimated remediation costs, and our risk assessment.
A. Willow Creek Hydroelectric Station (Oregon)
Phase II Investigation. Clearwater conducted a Phase II ESA at the Willow Creek Hydroelectric Station, with the Phase II report dated July 2022. The investigation included the advancement of eight (8) soil borings in the vicinity of the former AST area adjacent to the turbine house, with soil samples collected at multiple depth intervals and submitted for laboratory analysis of total petroleum hydrocarbons — diesel-range (TPH-Dx) and gasoline-range (TPH-Gx) — as well as benzene, toluene, ethylbenzene, and xylenes ("BTEX"). Two (2) groundwater monitoring wells were installed and sampled for the same analytes.
Soil Sampling Results. TPH-Dx was detected in soil samples from three (3) of the eight (8) borings at concentrations exceeding Oregon DEQ's Risk-Based Concentrations ("RBCs") for residential and occupational exposure scenarios. The maximum TPH-Dx concentration detected was 1,850 mg/kg, compared to the Oregon DEQ occupational RBC of 500 mg/kg. The affected area appears to be localized within the footprint of the former AST pad and does not extend beyond approximately thirty (30) feet from the former tank locations. BTEX compounds were detected at trace levels below applicable screening criteria.
Groundwater Sampling Results. Samples from both monitoring wells did not reveal TPH-Dx, TPH-Gx, or BTEX concentrations exceeding Oregon DEQ screening levels. This suggests that the petroleum contamination has not migrated to groundwater, consistent with the relatively shallow and localized nature of the soil impacts.
Clearwater Recommendation. Clearwater recommends a limited soil excavation in the former AST area, followed by confirmation sampling to verify that remaining soil concentrations are below applicable Oregon DEQ screening levels. Clearwater estimates the cost of remediation, including excavation, off-site soil disposal, confirmation sampling, and reporting, at $150,000 to $250,000.
Regulatory Status. The Willow Creek Hydroelectric Station is not currently listed on Oregon DEQ's Environmental Cleanup Site Information ("ECSI") database, and no enforcement action has been taken by Oregon DEQ with respect to this facility. However, the failure to document closure of the former ASTs and the presence of soil contamination exceeding screening levels creates a potential regulatory obligation. A voluntary cleanup through Oregon DEQ's voluntary cleanup program may be advisable to obtain regulatory closure and to mitigate the risk of future enforcement action, particularly in connection with any future property transfer.
Risk Assessment: LOW to MODERATE. The contamination at Willow Creek is localized, has not impacted groundwater, and is amenable to a straightforward excavation remedy. The estimated remediation cost is modest relative to the Transaction value. However, the absence of AST closure documentation represents a regulatory gap that should be addressed. We recommend that the remediation at Willow Creek be included as a scheduled item in the EPA environmental indemnity, with either a specific escrow or holdback to cover the estimated remediation costs or a pre-closing remediation covenant requiring Cascadia to complete the cleanup prior to closing.
B. North Cascades Hydroelectric Station (Washington)
Phase II Investigation. Clearwater conducted a Phase II ESA at the North Cascades Hydroelectric Station, with the Phase II report dated August 2022. The investigation focused on the former transformer pad area where PCB-containing transformers were located prior to their replacement in 2016. The investigation included the advancement of six (6) soil borings beneath and adjacent to the former transformer pad, with soil samples analyzed for polychlorinated biphenyls ("PCBs") by EPA Method 8082A. One (1) groundwater monitoring well was installed downgradient of the former transformer pad and sampled for PCBs.
Soil Sampling Results. PCB contamination was confirmed in soil beneath the former transformer pad area. PCBs (as Aroclor 1260) were detected in four (4) of six (6) soil borings at concentrations ranging from 0.4 mg/kg to 3.2 mg/kg. Three of the four borings with detectable PCBs exceeded Washington's MTCA Method A cleanup level of 1.0 mg/kg for unrestricted land use, with the maximum concentration of 3.2 mg/kg detected at a depth of approximately two (2) feet below ground surface directly beneath the former transformer pad.
Groundwater Sampling Results. The groundwater monitoring well installed downgradient of the former transformer pad revealed PCB concentrations at detectable levels but below applicable MTCA Method A groundwater cleanup standards. Specifically, PCBs were detected at 0.08 µg/L, compared to the MTCA Method A groundwater cleanup standard of 0.1 µg/L. While the concentrations are currently below the applicable standard, the proximity of the detected concentration to the regulatory threshold is a matter of concern and warrants continued monitoring to assess whether groundwater conditions are stable, improving, or deteriorating.
VCP Enrollment and Regulatory Status. Cascadia self-disclosed the suspected PCB contamination to Washington Department of Ecology in 2017, and the site was subsequently enrolled in Ecology's Voluntary Cleanup Program under an Agreed Order. The Agreed Order requires Cascadia to: (i) conduct quarterly groundwater monitoring and submit results to Ecology; (ii) submit annual progress reports summarizing site conditions and remedial activities; and (iii) complete a Remedial Investigation/Feasibility Study ("RI/FS") to evaluate remediation alternatives and propose a final cleanup action plan. The RI/FS is expected to be completed by the second quarter of 2023.
Cascadia has been in compliance with the terms of the Agreed Order to date, and Ecology has not escalated the matter to a formal enforcement action. The VCP enrollment provides Cascadia with certain protections, including a covenant not to sue from Ecology upon successful completion of the cleanup, and participation in the VCP generally demonstrates good faith engagement with the regulatory process.
Estimated Remediation Cost. Clearwater estimates total remediation costs for the North Cascades site at $800,000 to $1,500,000. The lower end of the range assumes that soil contamination can be addressed through excavation and off-site disposal, and that groundwater conditions remain below applicable standards without active treatment. The upper end of the range accounts for the potential need for groundwater treatment — such as installation and operation of a small-scale pump-and-treat or permeable reactive barrier system — if ongoing monitoring reveals that PCB concentrations in groundwater are increasing or if the RI/FS identifies groundwater treatment as a necessary component of the remedial action plan. We note that these estimates are preliminary and may increase as the RI/FS progresses and additional data becomes available regarding the extent of contamination and the groundwater plume dynamics.
Risk Assessment: MODERATE. The North Cascades site represents the most significant identified environmental liability in the Cascadia portfolio. The presence of PCB contamination in soil above regulatory cleanup levels and at detectable levels in groundwater, combined with an active regulatory obligation under the VCP Agreed Order, creates both a quantifiable near-term remediation cost and a degree of uncertainty regarding the ultimate scope and cost of cleanup. The active engagement with Ecology through the VCP is a positive factor that mitigates the risk of punitive enforcement action, but the cost estimates are subject to upward revision depending on groundwater conditions. We recommend a specific indemnity provision in the EPA for remediation costs at the North Cascades site, with a structure that allocates costs above a negotiated threshold (e.g., above $800,000) to the Selling Shareholders. An environmental escrow funded at the high-end estimate of $1,500,000 should also be considered.
C. Bull Run Water Treatment Facility (Oregon)
Phase II Investigation. Clearwater conducted a Phase II ESA at the Bull Run Water Treatment Facility, with the Phase II report dated August 2022. The investigation targeted the former chemical storage area identified in the Phase I ESA, where evidence of historical releases of water-treatment chemicals was observed. The investigation included the advancement of four (4) soil borings in and around the former chemical storage area, with soil samples analyzed for pH, metals (with emphasis on aluminum), chloride, and general chemistry parameters.
Soil Sampling Results. Soil sampling in the former chemical storage area revealed elevated pH levels (ranging from 8.9 to 10.2, compared to background levels of approximately 6.5 to 7.5) and minor elevations in aluminum concentrations above background levels. However, both pH and aluminum concentrations were below applicable Oregon DEQ screening levels for occupational exposure. No other contaminants of concern were detected at concentrations of regulatory significance.
Groundwater Results. No groundwater monitoring wells were installed at this facility, as Clearwater determined that the soil impacts were minor and localized and that the hydrogeological setting (low-permeability clay soils and a relatively deep water table) made groundwater impacts unlikely. This determination is consistent with standard Phase II ESA practice under ASTM E1903-19 for conditions that do not suggest a reasonable likelihood of groundwater contamination.
Clearwater Conclusion. Clearwater concluded that the conditions observed at the Bull Run Water Treatment Facility do not constitute a current environmental liability requiring remediation. No further action is recommended at this time, though Clearwater noted that ongoing monitoring of the former chemical storage area would be prudent as a best practice.
Concession Agreement Implications. We note that the Bull Run Water Treatment Facility operates under the Bull Run Filtration Project concession agreement with the Portland Metropolitan Water District, a long-term (approximately forty-year) concession that generates approximately $64 million in annual revenue. The concession agreement contains environmental compliance covenants, including requirements for the concessionaire to maintain compliance with all applicable environmental laws and to notify the Portland Metropolitan Water District of any environmental conditions that could affect facility operations or water quality. While the conditions identified in the Phase II ESA do not appear to rise to the level of a material environmental condition requiring notification under the concession agreement, this determination should be confirmed through a detailed review of the concession's environmental provisions, which is addressed in the C&H Due Diligence Memorandum: Cascadia Material Contracts Summary (dated August 22, 2022).
Risk Assessment: LOW. No current remediation is required, and the identified conditions are below applicable regulatory thresholds. The primary risk at this facility relates to the concession agreement implications rather than environmental liability per se. We recommend ongoing monitoring of the former chemical storage area for concession compliance purposes and coordination with the material contracts diligence workstream to ensure that the environmental conditions at this facility are properly addressed in the context of the Bull Run concession.
D. Boise River Hydroelectric Station (Idaho)
Phase II Investigation. Clearwater conducted a Phase II ESA at the Boise River Hydroelectric Station, with the Phase II report dated August 2022. The investigation focused on the property boundary area adjacent to historical mine tailings located on a neighboring property that is not owned by Cascadia. The investigation included the advancement of six (6) soil borings along Cascadia's property boundary, with soil samples analyzed for mercury and other metals associated with historical mining activity.
Soil Sampling Results. Mercury was detected in two (2) of six (6) soil borings at concentrations above Idaho DEQ's residential screening levels. Specifically, mercury was detected at 7.8 mg/kg and 5.2 mg/kg in the two affected borings, compared to Idaho DEQ's residential screening level of 2.3 mg/kg. However, both detections were below Idaho DEQ's industrial/commercial screening level of 43 mg/kg. The remaining four borings showed mercury at background or non-detect levels. The spatial pattern of detections suggests that mercury-bearing materials from the adjacent mine tailings have migrated to a limited extent onto Cascadia's property, likely through surface water runoff or wind-borne transport.
Source of Contamination. The mine tailings are located on an adjacent property that was historically used for gold and silver mining operations, which ceased in the 1950s. The adjacent property is listed on Idaho's CERCLA site inventory as a potential Superfund site, and the current owner of the adjacent property has been identified as a Potentially Responsible Party ("PRP") by Idaho DEQ. Cascadia has not been named as a PRP, either by Idaho DEQ or by the EPA, at the adjacent site or at any other CERCLA site.
Regulatory Status. Idaho DEQ has not taken any enforcement action against Cascadia with respect to the mercury contamination detected on Cascadia's property. Idaho DEQ's attention has been focused on the adjacent property owner as the primary source of contamination. However, the potential for future CERCLA contribution claims exists if: (i) the adjacent site is elevated to the National Priorities List or is otherwise subject to a federal or state-led cleanup action; (ii) Cascadia is named as a PRP by virtue of its ownership of property onto which hazardous substances from the adjacent site have migrated; or (iii) the adjacent property owner or other PRPs seek contribution from Cascadia for cleanup costs under CERCLA Section 113(f).
Estimated Cost Exposure. Clearwater estimates that Cascadia's potential share of cleanup costs, based on the limited extent of property boundary contamination and Cascadia's status as a passive recipient of migrated contamination, could range from $200,000 to $500,000. This estimate is necessarily imprecise and depends on a number of factors, including the ultimate scope and cost of cleanup at the adjacent site, the number and financial condition of other PRPs, and the allocation methodology employed by the regulatory agency or the courts.
Risk Assessment: LOW to MODERATE. The current risk to Cascadia is limited by the fact that Cascadia has not been named as a PRP and that the contamination on Cascadia's property is below industrial/commercial screening levels. However, the proximity to an active CERCLA site, the potential for continued migration, and the possibility of future PRP designation or contribution claims create a latent liability that should be addressed in the EPA. We recommend a defensive environmental representation confirming Cascadia's non-PRP status, a CERCLA-specific indemnity provision, and ongoing monitoring of Idaho DEQ proceedings regarding the adjacent property.
VI. Environmental Permits and Compliance Status
A. NPDES Permits (Clean Water Act)
Cascadia and its subsidiaries hold eighteen (18) active NPDES permits across Oregon, Washington, and Idaho for discharges associated with hydroelectric power generation and water-treatment facility operations. These permits authorize the discharge of process water, cooling water, fish passage flows, and stormwater to receiving waters in accordance with established effluent limitations and monitoring requirements.
Our review of Cascadia's NPDES compliance history for the past five (5) years (2017–2022) did not identify any material permit violations. Two minor Notice of Non-Compliance ("NON") events were identified, both at Oregon hydroelectric facilities:
• 2019 NON — Deschutes River Hydroelectric Station. Oregon DEQ issued a NON for a single exceedance of the permitted total suspended solids ("TSS") effluent limitation during a period of unusually heavy rainfall and elevated river turbidity. Cascadia responded to the NON with a corrective action plan that included enhanced stormwater management measures. The matter was resolved without the imposition of any penalties, and Oregon DEQ closed the NON in February 2020.
• 2020 NON — Clackamas River Hydroelectric Station. Oregon DEQ issued a NON for a late submission of a semi-annual Discharge Monitoring Report ("DMR"). The DMR was submitted twelve (12) days past the regulatory deadline due to an administrative error. Cascadia corrected the administrative process and submitted the report, and Oregon DEQ closed the NON without penalties.
All eighteen NPDES permits are currently in good standing, and Cascadia's compliance personnel maintain a permit renewal tracking system. We have reviewed the expiration and renewal dates for all NPDES permits and note that two permits — for the Willow Creek Hydroelectric Station and the Sandy River Hydroelectric Station, both in Oregon — are scheduled for renewal in 2023. No issues are anticipated with the renewal process based on Cascadia's compliance history.
B. FERC Hydroelectric License Environmental Conditions
Cascadia's fourteen (14) hydroelectric facilities operate under individual licenses issued by the Federal Energy Regulatory Commission ("FERC") pursuant to the Federal Power Act. Each FERC license contains detailed environmental conditions that were established through the FERC licensing process, including NEPA review and consultation with resource agencies under the ESA and other applicable environmental statutes. The environmental conditions in Cascadia's FERC licenses include, among other things:
• Fish passage requirements. Requirements for the construction, operation, and maintenance of fish passage facilities (fish ladders, screens, and bypass systems) to facilitate the upstream and downstream migration of anadromous fish species, including ESA-listed Chinook salmon, steelhead trout, and bull trout.
• Minimum instream flow requirements. Requirements to maintain specified minimum flow levels in bypass reaches and tailwater areas to protect aquatic habitat and water quality.
• Water quality monitoring. Requirements for ongoing monitoring of water temperature, dissolved oxygen, turbidity, and other water quality parameters in receiving waters downstream of hydroelectric facilities.
• Recreation access. Requirements to provide and maintain public recreation access facilities, including boat launches, fishing access points, and hiking trails, at or near hydroelectric facilities.
Our review of Cascadia's compliance with FERC license environmental conditions did not identify any material non-compliance. Cascadia submits annual compliance reports to FERC for each licensed facility, and our review of the most recent annual reports (for the 2021 reporting year) confirmed that all license conditions were met or that minor deviations were adequately explained and accepted by FERC staff.
FERC has assigned Docket Number EC22-143-000 to the pending application for approval of the transfer of Cascadia's FERC hydroelectric licenses to Cascadia Acquisition Corp. under Section 203 of the Federal Power Act. We note that FERC approval for the license transfer was received on December 15, 2022 (post-dating this memorandum), conditioned on the timely filing of license-transfer applications for each individual facility. The transfer of FERC licenses will require the successor licensee (Cascadia Acquisition Corp.) to assume all environmental conditions contained in the existing licenses, and no modification of existing environmental conditions is anticipated in connection with the transfer.
C. Air Quality Permits
Given Cascadia's renewable energy platform, the Clean Air Act has limited applicability to its operations. Three (3) minor source permits are maintained at Cascadia's water-treatment facilities for backup diesel generators used for emergency power. These generators are classified as minor stationary sources and are subject to state-administered minor source permit programs. All three permits are current, and our review did not identify any air quality permit violations or pending enforcement actions.
D. Hazardous Waste Management
Cascadia's facilities are classified under RCRA as either Small Quantity Generators ("SQGs") or Conditionally Exempt Small Quantity Generators ("CESQGs"), depending on the volume and type of hazardous waste generated at each facility. Typical hazardous waste streams include used lubricating oils, spent solvents, waste batteries, and small quantities of laboratory chemicals at water-treatment facilities.
Our review of Cascadia's hazardous waste manifests, generator identification numbers, and waste management records did not identify any discrepancies. All hazardous waste is transported by licensed haulers and disposed of at permitted treatment, storage, and disposal facilities. No RCRA corrective action obligations have been identified at any Cascadia facility.
E. Spill Prevention, Control, and Countermeasure (SPCC) Plans
Cascadia maintains SPCC plans at all facilities with oil storage exceeding the regulatory thresholds established under 40 C.F.R. Part 112. These plans address the prevention, containment, and cleanup of potential oil spills and include provisions for secondary containment, facility inspections, employee training, and emergency response procedures.
Clearwater reviewed the SPCC plans for all applicable facilities and found them to be current, properly certified by a licensed professional engineer, and in compliance with applicable regulatory requirements. Our review of Cascadia's spill incident logs for the past three (3) years (2019–2022) did not identify any reportable spill events at any Cascadia facility.
VII. Pending and Potential Environmental Liabilities
A. Active Remediation Obligations
As discussed in Section V.B above, the North Cascades Hydroelectric Station (Washington) is currently enrolled in Washington's Voluntary Cleanup Program under an Agreed Order with the Washington Department of Ecology. This is the only Cascadia facility with an active remediation obligation. The ongoing obligations under the Agreed Order include quarterly groundwater monitoring, annual reporting to Ecology, and completion of the RI/FS by the second quarter of 2023. Clearwater estimates total remediation costs at $800,000 to $1,500,000, with the range reflecting uncertainty regarding the potential need for groundwater treatment.
The VCP Agreed Order represents a binding obligation that will transfer to Cascadia Acquisition Corp. as the successor owner and operator of the North Cascades facility. It is essential that the EPA clearly address the allocation of remediation costs for this site, including a specific indemnity and/or escrow mechanism as recommended in Section VIII below.
B. Potential Future Liabilities
Two additional facilities present potential future environmental liabilities that, while not currently the subject of active remediation obligations, may require future expenditures:
• Willow Creek Hydroelectric Station (Oregon). Soil contamination from the former AST area exceeds Oregon DEQ screening levels, and voluntary cleanup is recommended to obtain regulatory closure. Estimated remediation cost: $150,000 to $250,000.
• Boise River Hydroelectric Station (Idaho). Potential CERCLA PRP exposure from mercury contamination migrating from adjacent mine tailings property. Cascadia has not been named as a PRP, but the risk of future designation or contribution claims remains. Estimated cost exposure: $200,000 to $500,000.
C. Aggregate Estimated Environmental Liability Range
Based on Clearwater's preliminary assessments, the aggregate estimated environmental liability across all identified conditions is summarized as follows:
We emphasize that these estimates are preliminary and are based on Clearwater's current understanding of site conditions. The estimates may increase as further investigation is conducted, particularly with respect to the North Cascades site, where groundwater conditions remain uncertain. We recommend that updated cost estimates be obtained from Clearwater prior to execution of the EPA.
D. Environmental Insurance
Cascadia maintains a pollution legal liability ("PLL") insurance policy with a $5,000,000 aggregate limit. We have reviewed the policy, including the declarations page, policy form, and endorsements. The PLL policy provides coverage for third-party bodily injury and property damage claims, cleanup costs, and legal defense costs arising from pollution conditions at covered locations. Coverage appears adequate for the identified environmental risks, subject to the following considerations:
• Known Pre-Existing Conditions Exclusion. The PLL policy contains an exclusion for known pre-existing pollution conditions as of the policy inception date. This exclusion may apply to the North Cascades VCP site, given that Cascadia self-disclosed the PCB contamination to Washington Department of Ecology in 2017, prior to the current policy period. The applicability of this exclusion should be confirmed with the insurer.
• Assignability. The assignability of the PLL policy to Cascadia Acquisition Corp. in connection with the change-of-control transaction must be confirmed with the insurer. PLL policies typically contain change-of-control provisions that may require the insurer's consent for policy transfer or may provide for automatic termination upon a change of control. If the PLL policy is not assignable, Cascadia Acquisition Corp. will need to procure replacement coverage.
VIII. Review of Environmental Representations in Draft EPA
We have reviewed the environmental representations and warranties contained in the draft Equity Purchase Agreement circulated by Ridgeway, Ashford & Malone PC on August 15, 2022, together with the corresponding disclosure schedules. The draft EPA contains customary environmental representations, including representations regarding:
• Compliance with all applicable Environmental Laws (as defined in the EPA);
• Absence of releases of hazardous substances requiring investigation or remediation;
• Validity and good standing of all environmental permits, licenses, and approvals;
• Absence of pending or threatened environmental proceedings, enforcement actions, or orders; and
• Accuracy of environmental disclosures.
The draft disclosure schedules reference the North Cascades VCP enrollment and the Boise River adjacent-property contamination, consistent with the findings described in this memorandum.
Based on our environmental due diligence findings, C&H recommends the following enhancements to the environmental provisions of the EPA:
1. Specific Indemnity — North Cascades Hydroelectric Station. The EPA should include a specific indemnity from the Selling Shareholders for remediation costs at the North Cascades Hydroelectric Station above a negotiated threshold (e.g., costs exceeding $800,000). This indemnity should survive for a period sufficient to cover the completion of the RI/FS and any resulting remedial action (we recommend a survival period of not less than five (5) years from closing). The indemnity cap for the North Cascades-specific obligation should be set at or above the high-end estimate of $1,500,000.
2. Environmental Escrow or Holdback — Willow Creek Hydroelectric Station. The EPA should provide for an environmental escrow or holdback in an amount sufficient to cover the estimated cost of soil remediation at the Willow Creek Hydroelectric Station (i.e., $250,000, representing the high-end of Clearwater's cost estimate). The escrow should be released upon completion of the remediation and receipt of regulatory closure (or, if voluntary cleanup is pursued, upon receipt of an NFA determination from Oregon DEQ).
3. CERCLA Representation and Bring-Down — Boise River Hydroelectric Station. The EPA should include a specific representation that Cascadia has not been named as a PRP at any CERCLA site (which is currently true) and that this representation should be brought down to the closing date. Additionally, a CERCLA-specific indemnity should be included to protect the Buyer against future PRP designation or contribution claims arising from the Boise River adjacent-property contamination.
4. Pre-Closing Compliance Covenant. The EPA should include a covenant by the Selling Shareholders to maintain environmental compliance at all Cascadia facilities pending closing, with particular emphasis on: (i) continued compliance with FERC license environmental conditions at all fourteen hydroelectric facilities; (ii) continued compliance with the North Cascades VCP Agreed Order; and (iii) compliance with any new environmental requirements arising from the OPUC application (OPUC Docket Number UM-2287, filed October 14, 2022) or from the FERC Section 203 approval process.
5. R&W Insurance Coordination. The Transaction contemplates a representations and warranties insurance policy issued by Northgate Specialty Insurance Co. (Policy No. NSW-RI-2022-09814) with a coverage limit of $195,000,000, representing approximately 10% of the enterprise value of $1,950,000,000. The R&W policy must be coordinated with the environmental provisions of the EPA to confirm that: (i) the environmental representations are within the scope of coverage; (ii) the identified environmental conditions at the North Cascades, Willow Creek, and Boise River facilities are not excluded by known-contamination carve-outs in the R&W policy; and (iii) the relationship between the R&W policy and the specific environmental indemnities is clearly delineated to avoid gaps or overlaps in coverage. We recommend a joint call with Northgate Specialty's underwriting team and C&H prior to EPA execution to address these coordination issues.
IX. Interaction with Other Diligence Workstreams
The environmental due diligence findings discussed in this memorandum intersect with several other C&H due diligence workstreams. This Section identifies the relevant

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