Phase I Environmental Site Assessments (ESA) Services
We conduct Phase I Environmental Site Assessments (ESA) to determine the liability to property owners, property buyers, or lending institutions during financing, mergers and acquisitions, refinancing of commercial real estate, and other situations in order to identify the environmental risks of a site and satisfy the “due diligence” efforts to identify any liabilities associated with a commercial property. There are a variety of names for this process besides a Phase I ESA. Sometimes referred to as a Commercial Property Assessment, a Pollution Liability Inspection, even a due diligence report. Often, a Phase 1 ESA is required by the lending institution providing the funding for purchase or refinancing.
This ASTM-E-1527-13 standard is intended for Commercial Properties to identify possible environmental risks of unknown or unforeseen conditions 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 1 Environmental ESA will satisfy the liability protection under CERCLA for “recognized environmental conditions”. This commercial property assessment satisfies the “due diligence” provisions of CERCLA (the Comprehensive Environmental Response, Compensation, and Liability Act) which is also known as the Superfund Act.
ASTM defines “recognized environmental condition” 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.
Federal, state and local laws make the current and prior property owners liable for the cost of cleaning up contaminated soils, groundwater and surface water. If you are buying – or financing – a property, you would want to know if any contamination or hazardous conditions exist on a property before the transaction since you may be paying the cost of clean-up. Clean-up may not just be on your property but any other property including surface and groundwater that may have originated on your property.
A Phase I ESA provides the appropriate level of “due diligence” in the transaction.
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.
The comprehensive Phase I ESA Report will identify all known or suspected hazardous material or petroleum product releases with recommendations for sampling/testing and analysis (referred to as Phase II) and/or remediation/clean-up (Phase III). The Phase 1 report is intended to identify 2 primary situations.
- Areas of concern (AOC) items not resolved or clarified that could pose a liability to the property owner, purchaser, or lender.
- Recognized Environmental Conditions (REC’s) actual liability problems that can affect the value, saleability, or remediation costs of the property.
Often, Phase II or Phase III recommendations are not possible until the previous phase has been completed. Thus a Phase II soil, groundwater, or surface water sampling/testing and analysis cannot be developed until the Phase I Environmental Site Assessment (ESA) has been completed. Likewise, a Phase III – clean-up remediation cannot be developed until Phase II Testing is complete.
Some of the most unlikely 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, and 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.
The most common reasons for a Phase 1 ESA include:
- Purchase or sale of a property.
- Financing of commercial property.
- Re-financing or second mortgage of 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 flood where sewerage, chemical, or fuel release is suspected.
How Much Does a Phase I Environmental Site Assessment (ESA) Cost?
There is a wide variety of costs to perform a Phase I ESA. As you may have guessed, there is a wide variety of quality on such ESA. Honestly, you get what you pay for!
The ASTM requirements for a Phase I, the most recent of which is ASTM-E-1527-13. This is a rigid protocol to protect the property owner, buyer, or lending institution. This “due diligence” protocol must be followed rigidly. It is almost a certainty that a price of $1,000 will not rise to the level of quality to satisfy the ASTM requirements and protect you with “due diligence” requirements as well.
It is our belief that the lowest cost to do an ASTM valid and “due diligence” Phase I is in the range of about $2,100 to $4,000 unless it is an unusually large property or has a strong suspicion of environmental contamination (landfill, gas station, factory). There is a reasonable ceiling amount for a Phase I as well. Remember, it is only an assessment of the property and buildings and the possible impact of the neighbors. It is not a thorough building inspection, soil sampling, or groundwater sampling. It is possible to include samples for items such as asbestos, lead, PCB’s oils, or building contents but these items are generally added to the scope upon request. From experience, the maximum except for extremely large or complex properties is about $8,000.
For How Long Is A Phase I Environmental Site Assessment Valid?
The ASTM E1527-13 Standard says that the intended transaction (usually purchase/sale, or financing) should be within 180 days of the Phase I Environmental Site Assessments. Thus, if it’s less than 6 months, it should be valid for sure—unless some major event on the property has occurred within 6 months such as a fire, or plant closure, known spill, or flood.
Between 6 months and 1 year, generally, there is a need to update the information. After 1 year, it certainly should be redone. Performing a new Phase I in less than a year should be somewhat lower in cost since obtaining aerial photos, Sanborn maps, an extensive survey of the surrounding properties may not be necessary—noting that a site visit is still very important.
As an ethical matter, Atlantic Environmental, Inc. generally recommends Full Phase I Environmental Site Assessments according to ASTM-E-1527-13 rather than the more limited Pre-Phase 1 according to ASTM-E-1528-06 known as a “transaction screen.” It is our belief that a transaction screen does not fully satisfy the “due diligence” requirement under CERCLA.