August Mack Newsletter | July, 2017

Behind the Scenes of a Phase I Environmental Site Assessment
by Ashley Bring

In the world of real estate, transactions can be exhilarating - a small business owner with big dreams to open their first store, a manufacturer acquiring a site to expand operations, or a housing developer bringing new affordable living options to a neighborhood in need.  Although these times are filled with excitement, there are many moving parts – title searches, building inspections, zoning, financing, appraisals, and … the Phase I Environmental Site Assessment (Phase I ESA). 

For parties who are new to real estate investment, or even those who are sophisticated purchasers, the methodology behind a Phase I ESA is sometimes cloudy.  The final report can range from a thirty page document to several reams of paper, and various parties can recommend, or even require the report to be completed as a condition of the transaction.

The Phase I ESA is a tool for purchasers and other interested parties to look at environmental liabilities on and adjacent to a specific property.  The Phase I ESA that exists today via the American Society of Testing and Materials (ASTM) 1527-13 standard has undergone several revisions since its inception. The origin of this standardized report was in response to the Comprehensive Environmental Response Compensation and Liability Act of 1980, which imposes joint and several liabilities on owners and operators of real property, regardless of fault of contamination of hazardous materials.   An option to mitigate this liability was put into place later, as long as All Appropriate Inquiry was conducted – and the Phase I ESA was created to satisfy this requirement. 

Although the purchaser may have some familiarity about a property, a significant amount of liability can be mitigated, as well as a good amount of information obtained, by an environmental professional conducting a Phase I ESA.  Environmental professionals must possess specific education, training, and experience in order to exercise professional judgment to develop conclusions regarding conditions indicative of releases or threatened releases of hazardous substances on, at, in, or to a property. 

Once they are engaged to provide an assessment, the environmental professional looks at a myriad of sources in order to develop their professional conclusion about a property, including topographic and aerial maps, city directories, Sanborn Fire Insurance maps, interviews with owners and occupants, and a visit to the site to visit the exterior and interior of any developed property.

With all of the many moving parts in a transaction, timing is oftentimes critical.  Turnaround time to complete a Phase I ESA is usually 15+ business days.  The ASTM standard sets forth that sources have 20 calendar days to respond to a request for information.  Third parties such as fire departments, past owners, and other sources must be contacted and can affect how quickly the report can be finalized.  Communicating transaction timelines and allowing ample time for an environmental professional to complete the report is important.  While a Phase I ESA can give a good snapshot of a property, that snapshot does have an “expiration” – interviews, records, searches, and inspections must be completed no more than 180 days prior to the date of acquisition.  Beyond that time, an update may be performed, as long as it is less than one year from the original report date.

When a Phase I ESA is finalized, it is oftentimes a lengthy document.  Reading through a Phase I ESA is always recommended, but there are some highlights of the report that are good to check:

  • Executive Summary.  The Executive Summary portion of the report gives a good snapshot about the overall findings of the report.  The summary will address Recognized Environmental Conditions, Data Gaps, and other site considerations.
  • Site Location. Phase I ESA’s are completed for a specific parcel(s); checking to ensure that all portions of a transaction are accounted for in the report is a good practice to follow.  Additionally, many of the historical and aerial maps are interesting to view.
  • Reliance.  If the purchasing entity intends to claim CERCLA liability protection in the future, the report must be addressed to them, or a reliance letter obtained. 

The Phase I ESA is a useful report for many parties interested in a property transaction.  For commercial, industrial, retail, and multi-family transactions, the Phase I is an important tool, but it is not designed to be an exhaustive assessment of a property.  The level of inquiry into a site may be variable, and is oftentimes guided by the type of property and the risk tolerance of the user.  Although the scope of a Phase I is standardized, non-scope items such as lead, asbestos, wetland, or vapor intrusion considerations are frequently part of the conversation when determining the scope of a Phase I ESA.  Discussing the goals and purpose of conducting an environmental site assessment with a trusted environmental consultant can help develop a scope that can help accomplish their goals. 

For more information, please contact Ashley Bring abring@augustmack.com, and for a closer look “Behind the Scenes of a Phase I Environmental Site Assessment” register here for our webinar on August 16th. 


Ashley Bring is a Business Development Representative for August Mack Environmental, Inc in their Ohio office. She works closely with the environmental due diligence team, with a focus on Phase I and II environmental site assessments, building sciences, and closure services. Ashley can be reached at 740.548.1524 or via email at abring@augustmack.com.


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