Do I need a Phase I Environmental Site Assessment (Phase I ESA) and What do they cost?
A Phase I Environmental Site Assessment, often called a Phase I ESA, is generally performed on a commercial property usually as part of a sale/purchase or commercial financing by a broker or other lending institution.
The objective is to protect a prospective buyer, property owner, or lending institution from some unforeseen aspect of the property that could affect the value or saleability of the property.
What Does A Phase I Environmental Property Assessment Cost?
The cost can vary considerably but usually, they vary from $1800 to $4000 depending upon the size and complexity of the building and/or the property itself. A former gas station’s property may be more expensive to perform a Phase I ESA due to the potential for soil and groundwater contamination from a leaking tank or spills. Also, an industrial site—especially a closed one—could be even more than $4000 due to the potential for asbestos, lead, abandon equipment, chemical spills, illegal dumping, hazardous waste, soil contamination, and groundwater contamination.
To properly protect the involved parties, the Phase I ESA must rigidly follow the ASTM guidelines. The latest ASTM guide is ASTM-E-1527-13 which was revised and updated in 2013.
A Phase I Environmental Site Assessment (ESA) follows the American Society of Testing and Materials (ASTM) guidelines known as ASTM-E-1527-13 Standard for Phase One ESAs and satisfies the “Due Diligence” process in a real estate or financial transaction. The “due diligence” is defined in the USEPA-CERCLA regulation.
This ASTM-E-1527-13 standard is intended for Commercial Properties to identify possible environmental risks of a particular site and surrounding sites that may adversely affect the property value or pose a liability on a property owner, purchaser or financier. Only a Phase I Environmental (ESA) will satisfy the liability protection under CERCLA for “recognized environmental conditions”.
ASTM defines “recognized environmental condition” also known as a REC as the presence or likely presence of hazardous substances and petroleum products on a property under conditions that indicate an existing release, a past release, or a material threat of a release into the ground, groundwater or surface water.
Another important conclusion point in a Phase I ESA is what is known as an “Area of Concern” or AOC which relates to a potential problem or liability that needs to be further investigated—thus a Phase II.
A Phase 1 ESA that conforms to the appropriate level of “due diligence” as specified in ASTM-E-1527-13 includes the following:
- Thorough database/records review of all available sources in federal, state, county and municipal records of recognized environmental conditions.
- Historical land use research.
- Site inspection including surrounding properties.
- Interview with the property owner, occupants and possible neighbors.
- Documentation questionnaire.
- Obtaining any previous Phase 1 ESA, Business Plans, Permits or any other documents that may have environmental significance.
- Photographs of property and surrounding property.
- Geologic characteristic of property, soils, surface, and groundwater (i.e. 7.5-minute topographic maps).
- Aerial photographs and Sanborn Maps as available.
- Other relevant documents such as tax maps, title records, zoning, and land use records, building department records (as reasonably available).
- Records review of environmental records at county and state level (NEW).
- A comprehensive report outlining findings of all above items.
Some of the most likely items found during a Phase I ESA are (but not limited to):
- Underground storage tank (UST) spill or leakage from gas stations or commercial fuel tanks.
- Surface and subsurface contamination due to commercial activities as chemical production, junkyards, service stations, spills, leaking Surface contaminants.
- Stack or uncontrolled air emissions that settle on soil, drainage area, or surrounding properties.
- Illegal dumping of waste material including chemicals, fuels, oils, asbestos, lead, and radioactive materials.
- Interior contaminants such as asbestos, chemical spills, waste materials, fuel storage, raw materials, and even bird droppings.
The most common reasons for a Phase 1 ESA include:
- Purchase or sale of a property.
- Financing of a commercial property.
- Re-Financing or second mortgage of a commercial property.
- Change in use of property such as from farmland to school/daycare/playground/park/golf course etc.
- Evidence of clandestine (illegal) dumping, spills.
- Follow-up after the flood where sewerage, chemical, or fuel release is suspected.