The Phase I Environmental Site Assessments (ESA) provides you with the strategic information you need before purchasing or financing a property. It’s used to determine if the property has any associated risks which would adversely impact the value of the real estate asset. This protects you from making a poor purchasing or financing decision which will compromise your financial investment. Phase I ESA are used in real estate transactions in order to identify the potential risks associated with contamination of the real estate asset, assess business environmental risk associated with the property and to qualify for the Innocent Landowner Defense. The Environmental Protection Agency (EPA) states:
“Entities that acquire property and had no knowledge of the contamination at the time of purchase may be eligible for the “innocent landowner” (ILO) defense to Superfund liability if they conducted all appropriate inquiries (AAI) prior to purchase and complied with other pre- and post-purchase requirements.”
The desire to claim the innocent landowner defense is not limited to entities purchasing real estate. It extends to any entity acquiring an interest in real estate. Banks and other lenders that mortgage real estate almost always require a Phase I ESA to protect themselves. This is the purpose of the study and it will provide information you need to make an informed decision.
A Phase I ESA is only valid in context of a referenced standard. The recognized standard for performing a Phase I ESA is contained in 40 CFR (Code of Federal Regulations) Part 312 and the guidelines established by the American Society for Testing and Materials (ASTM). The ASTM guidelines are called: Standard Practice for Environmental Site Assessments; Phase I Environmental Site Assessments Process / Designation E 1527-13. This is generally referred to as ASTM Standard Practice E 1507-13.
When you order a Phase I ESA you should specify in the contract that all work will comply with the ASTM E 1507-13 Standard. Otherwise, you have NOT performed all appropriate inquiries. This is important because you will incur the liability if that property has contamination and you will be liable for its clean-up.
The environmental assessment complying with the ASTM standard has a number of requirements. Some of these deal with referencing at least two sources for determining the prior uses of the property and adjacent properties that may have an impact on the subject property. Additionally, there are various steps that need to be taken to make all appropriate inquiries into the prior uses of the property.
An ASTM E 1507-13 Phase I ESA will follow a protocol which analyzes the prior uses of the property, adjacent properties and surrounding properties. The radius of influence for the study is one (1) mile. The report will summarize the findings, conclusions and recommendations.
A Phase I ESA following the ASTM Standard will have the following components:
- Records Review—The records review consists of researching federal, state and local governmental databases to help identify potential sources of contamination. Additionally, historical records including aerial photographs, USGS maps, Cities Directories, Sanborn Maps and Deeds are researched to determine prior uses of the property.
- Interviews—Interviews are conducted with knowledgeable parties including current and prior owners and operators of the property. Additionally, the local emergency response agency, the fire department and other local government resources are interviewed for any known spills, landfills and other sources.
- Site Visit—A site visit is performed by an environmental professional after the records review and interviews. The purpose of the site visit is to confirm the results of the research and to further visually observe any suspected conditions on the subject site or adjacent sites.
- Report—The deliverables include a Phase I Environmental Assessment Report. The report will contain a discussion of each of the topics required by the ASTM Standard. It will also contain copies of all the research and communications. The report will conclude with recommendations for either no further action, or a need for additional investigations. Additionally, investigations are warranted when there is concern about soil and/or groundwater contamination. This is generally termed a Phase II ESA.
It should be noted that a Phase I can also include preliminary. This is especially important in certain types of housing being financed by federal grants or prior to demolition of the structure.
All this effort is a form of insurance for you to obtain valuable information concerning the environmental risks associated with the property and make an informed decision before you purchase or finance real estate.