Environmental site assessments

A Phase I ESA is a preliminary evaluation of a property’s environmental condition, designed to identify potential or existing environmental contamination liabilities. It is typically conducted during real estate transactions, such as property purchases, refinancing, or development, to help buyers, sellers, lenders, and other stakeholders assess risks and ensure compliance with regulations like the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, also known as Superfund). The process does not involve physical sampling, testing, or invasive procedures; instead, it relies on research, observations, and interviews to flag “Recognized Environmental Conditions” (RECs)—the presence or likely presence of hazardous substances or petroleum products due to a release or material threat of release.

The Phase I ESA follows the ASTM International Standard E1527-21 (“Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process”), which is consistent with the U.S. Environmental Protection Agency’s (EPA) All Appropriate Inquiries (AAI) rule under 40 CFR Part 312. Compliance with this standard can qualify property owners for liability protections under CERCLA, such as innocent landowner defenses. The assessment must be performed by a qualified “environmental professional” (EP) with specific credentials, such as relevant education, experience, and licensure.

Purpose of a Phase I ESA

• Risk Identification: To uncover potential environmental issues early, preventing buyers from inheriting costly cleanup responsibilities.
• Regulatory Compliance: Meets EPA’s AAI requirements for CERCLA liability protections and supports due diligence in transactions.
• Informed Decision-Making: Helps stakeholders evaluate property value, negotiate terms, secure financing, and plan for any further investigations (e.g., Phase II ESA with sampling).
• Financial Protection: Identifies issues that could affect insurance, loans, or resale value.

Key Steps in the Phase I ESA Process

The process is structured and non-invasive, typically taking 2-4 weeks to complete. Here’s a breakdown of the main components, based on ASTM E1527-21 and EPA guidelines:

1. Records Review:
   • Examine historical and regulatory records to trace the property’s past uses and potential contamination sources.
   • Sources include: Aerial photographs, fire insurance maps (e.g., Sanborn maps), city directories, topographic maps, building permits, property tax files, zoning/land use records, and environmental databases (e.g., federal, state, tribal, and local records on hazardous waste sites, spills, or underground storage tanks).
   • For adjoining properties, review obvious uses and assess their potential impact on the subject property; justify any omissions in the report.
   • Also includes a search for environmental liens and Activity and Use Limitations (AULs) in land title records, dating back to at least 1980 (or explain why not).
2. Site Reconnaissance (Visual Inspection):
   • Conduct an on-site walkthrough of the property and visual observations of adjoining properties (from public vantage points if access is denied).
   • Look for signs of environmental concerns, such as stained soil, distressed vegetation, abandoned drums or tanks, odors, chemical storage, or evidence of spills/releases.
   • Note current operations, structures, and any obvious hazards.
3. Interviews:
   • Speak with current and past property owners, operators, occupants, and site managers about historical uses, incidents, or concerns.
   • For abandoned properties, interview neighboring owners or occupants.
   • Consult local government officials (e.g., fire departments, health agencies) for additional records or insights.
   • Assess the purchaser’s specialized knowledge, the property’s purchase price relative to fair market value (if uncontaminated), and any commonly known information.
4. Report Preparation and Evaluation:
   • Compile findings into a detailed report, including: Summary of research, observations, interviews; identification of RECs, Historical RECs (HRECs—past issues resolved), or Controlled RECs (CRECs—ongoing but managed conditions); photographs, maps, and appendices.
   • The EP must sign a declaration certifying the assessment.
   • Note any data gaps (e.g., inaccessible records) and their impact on conclusions.
   • The report is viable for 180 days from the transaction date; for up to one year, specific components (e.g., interviews, inspections) must be updated.

Important Definitions from ASTM E1527-21

• Recognized Environmental Condition (REC): The presence, likely presence, or material threat of hazardous substances or petroleum products at the property, excluding minor (de minimis) conditions that don’t pose a threat.
• Historical REC (HREC): A past REC that has been addressed to regulatory satisfaction and no longer poses a threat.
• Controlled REC (CREC): A REC managed through controls (e.g., deed restrictions) to prevent exposure or release.
• Non-scope items include emerging contaminants like PFAS (per- and polyfluoroalkyl substances), unless classified as hazardous under CERCLA or required by state laws.

Updates in ASTM E1527-21 (from E1527-13)

• Refined REC definitions and added a logic diagram for classifying REC/HREC/CREC.
• Mandated title searches from 1980 and justification for skipped historical reviews.
• Required dating of key components in reports and clarified update rules for report viability.
• Emphasized adjoining property reviews and emerging contaminants as non-scope.

Benefits of Conducting a Phase I ESA

• Liability Protection: Qualifies for CERCLA defenses, shielding owners from cleanup costs.
• Cost Savings: Identifies issues early, allowing for negotiation or avoidance of problematic properties.
• Marketability: Enhances property appeal by demonstrating due diligence and transparency.
• Peace of Mind: Provides a clear picture of environmental risks, facilitating smoother transactions.

If RECs are identified, a Phase II ESA (involving sampling and analysis) may be recommended. Costs for a Phase I typically range from $2,000 to $5,000, depending on property size and complexity. For the most current guidance, consult an environmental professional or review the full ASTM standard.