Environmental Due Diligence: Understanding Phase I Site Assessments and Recognized Environmental Conditions (RECs)
Published On: July 14, 2023
Phase I Environmental Site Assessments (ESAs) are performed in order to identify any known or potential environmental issues that may have impacted or have the potential to impact the property. These assessments consist of a research-based investigation involving an inspection to observe current property operations, historical research of past uses, and interviews with owners and local government. A Phase I ESA is performed is required for a variety of reasons including a property purchase or sale, a land lease, or refinancing. August Mack is practiced in Phase Is for commercial and industrial properties and our due diligence process consists of identifying if any recognized environmental conditions (RECs) that may be located on the property. A REC is defined as the presence of hazardous substance or petroleum products, in, on, or at the subject property due to a release to the environment; (2) the likely presence of hazardous substances or petroleum products in, on or at the subject property due to a release or likely release to the environment, or (3) the presence of hazardous substances or petroleum products in, on, or at the subject property under conditions that pose a material threat of a future release to the environment.
When beginning a Phase I ESA it is important to start with what the current use of the property is. This is typically done by completing a property inspection and conducting interviews with the subject property owner and Key Site Manager. Some information can only be provided through previous owner interviews. These interviews can provide essential information on understanding the historical uses of the property. During the property inspection, assessors onsite are observing any chemicals, petroleum products, or hazardous waste that is stored on the property. It is the responsibility of the assessor to find the preferential pathways within the property. Preferential pathways are any areas where contaminants can leak into the environment. A few examples of these pathways are floor drains, sump pumps, and flooring in poor condition.
The next step in the due diligence process is to research historical information regarding the property. This historical research ranges from historical aerial photographs, historical topographic photographs, sanborn maps, and city directories. It is important to note that historical research not only pertains to the property, but it involves research on adjoining properties. Historical findings that constitute cause for further research include dry cleaners, gas stations, auto shops, and industrial factories or warehousing storing hazardous chemicals located on the property or adjoining properties.
Phase Is can help the owner, tenant or prospective purchaser understand the potential environmental concerns associated with the property. If a REC is determined through the Phase I ESA process, the most commonly recommended next step is to complete a Limited Site Investigation (LSI). These investigations typically consist of a plan to evaluate subsurface conditions at property to determine if the RECs have impacted the property. An LSI specifically curated for each property based on the RECs that were identified during the Phase I ESA.