environmental Strategist, between the lines: I am often asked what a Phase I site assessment entails. The following article does an excellent job of describing not only what comprises a Phase I but also discusses changes taking place with the addition of All Appropriate Inquiry (AAI). Please share this with client’s looking or buy or sell commercial property.
Phase I – Environmental Site Assessments (ESAs)
By Richard Popino
Courtesy of Common Sense Solutions, LLC
Oct. 1, 2009
Nowadays, real estate mortgage companies often require the execution of a Phase I Environmental Site Assessment (ESA) to identify a property’s potential environmental concerns which may affect its value and/or liabilities. The purpose of the Phase I ESA is to disclose any Recognized Environmental Condition (REC) associated with the property. It comprises four main activities:
- Reviewing records that will help identify RECs connected with the property;
- Site Inspections that will help evaluate any potential RECs at the site. These can include building interior and exteriors, public utilities, transformers, septic systems, water wells, underground storage tanks, and other items with the potential for environmental contamination;
- Interviews with past and present owners, operators and occupants of the property as well as interviews with state and/or local government officials. This interviews will help gather information about the property history; and
- Report Writing which will include all findings, professional’s opinion of the impact of those findings and any remedial recommendations identified as a result of the Phase I ESA. Parties (including recipients of Brownfield grants) who want to seek a defense to Superfund (CERCLA) liability must comply with a number of requirements outlined in CERCLA and the Brownfields Act. The landowner of a contaminated property that qualifies as: “Bona Fide Prospective Purchasers (BFPPs), Contiguous Property Owners (CPOs) and/or Innocent Landowners (ILOs) are entitled to the Landowner Liability Protections. All of them involve, among other requirements, performing ‘All Appropriate Inquiry’ rule (AAI) to determine the potential for environmental liabilities that exist on a property.
The new AAI rule references the American Society for Testing and Materials (ASTM) Standard Practice 1527-05: ‘Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessments Process.’ The ASTM 1527 Standard has been the recognized method for conducting real estate environmental assessments since 1993. Compared to the current standard, the new rule will require:
- A broader scope of environmental inquiry;
- The Environmental Professional preparing the environmental assessment to have specific educational and experience requirements;
- Extensive reliance on the Environmental Professional’s judgment;
- Users of the property (i.e., seeking the Landowner Liability Protections) to share certain types of information with the Environmental Professional;
- Identification of data gaps, a description of the efforts to resolve them, and an opinion about the impact of the data gaps on the ability to identify conditions indicative of releases or threatened releases of hazardous substances;
- The Environmental Professional to express written opinions about the thoroughness and reliability of the data gathered in the AAI process;
- The Environmental Professional to make declarations in the due diligence report regarding credentials and qualifications; and
- Comparison of the purchase price to the value of the property if the property was not contaminated