A Phase I Environmental Site Assessment (ESA) is a common due diligence item performed when purchasing land for development. Its purpose is to identify potential or existing environmental contamination liabilities that could impact the property’s value and pose threats to the environment or human health. The intent is to evaluate the historical and current uses of the property to evaluate whether these uses have affected the soil or groundwater.
Phase I ESA Overview:
A Phase I ESA involves thorough research and analysis to determine if a property has any environmental concerns. The process adheres to ASTM E1527-13 standards, ensuring compliance and reliability.
Key Components of a Phase I ESA:
- Site Visit:
- Observation: Current and past conditions and uses of the property and adjacent properties are observed.
- Regulatory Database Review:
- Databases: Federal, state, tribal, and local databases are reviewed for records of underground storage tanks (USTs), aboveground storage tanks (ASTs), hazardous substance storage, and known or suspected release cases.
- Historical Records Review:
- Documents: Historical aerial photographs, fire insurance maps (Sanborn maps), historical city directories, and topographic maps are examined to understand past property uses.
- Agency Records Review:
- Local Records: Records from state and local environmental agencies, building departments, fire departments, and health departments are reviewed.
- Interviews:
- Stakeholders: Interviews with current and past property owners, operators, occupants, and others familiar with the property are conducted.
- Report User Interviews:
- User Input: Interviews with the report user for title or judicial records, environmental liens, activity and use limitations (AULs), specialized knowledge, and reasons for the property’s lower purchase price.
Environmental Risk Identification: The gathered information is evaluated by an Environmental Professional (EP) to identify potential environmental risks, such as historical operations involving hazardous substances or petroleum products. Common uses of concern include dry cleaners, gas stations, auto repair, printing operations, and manufacturing.
Non-ASTM Concerns:
- Additional Risks: Phase I ESA reports often discuss observed suspect asbestos-containing materials (ACM), potential lead-based paint (LBP), mold growth, lead in drinking water, and radon. While not part of ASTM requirements, sampling for these concerns can be included upon request.
Conclusion and Recommendations: After completing the Phase I ESA, the Environmental Professional will summarize identified concerns and recommend any necessary actions. Identified recognized environmental conditions (RECs) indicate known or potential contamination. Controlled RECs (CRECs) show that contamination has been investigated and fixed but may still pose issues during redevelopment. Historical RECs (HRECs) refer to past contamination that has been fixed to meet unrestricted use criteria.
Next Steps: If a REC is identified, a Phase II Environmental Site Assessment may be recommended. This involves collecting soil, groundwater, and/or soil vapor samples to analyze for contamination, providing a deeper understanding of the subsurface conditions and the extent of any environmental issues. If a Phase II is recommended a developer may need to re-evaluate their project budget.
Value to Developers:
- Liability Protection: Helps developers understand potential environmental liabilities and address them before property acquisition.
- Risk Mitigation: Identifies environmental risks early, reducing unforeseen challenges during development.
- Regulatory Compliance: Ensures compliance with environmental laws and regulations, protecting developers from legal issues.
- Informed Decision-Making: Provides essential data for making informed decisions about property investment and development.
A Phase I ESA is an essential tool for developers, lenders, and property owners aiming to manage environmental risks effectively and ensure the successful completion of the real estate deal.