Remedial Cost Estimate (RCE) refers to a review of probable costs necessary to achieve regulatory compliance for contaminated real estate.
When Phase I Environmental Site Assessment (ESA) identifies the property as a site with potential contamination, remedial experts perform RCEs, giving the opinion of probable costs the purchaser or lender must pay to get regulatory approval.
Determining the costs of cleaning up the site, remedial experts rely on pertinent prior reports and other available data. Using that information, environmental experts project the necessary work the purchaser must undertake to achieve regulatory compliance, including the estimated costs to complete that task.
Closing deals in commercial real estate transactions are never guaranteed. There are a lot of factors you need to consider making a deal work. Both lenders and buyers have reasons to be concerned about investing in a site with potential contamination. Funding and obtaining real estate with unknown remedial costs is challenging for everyone involved in commercial real estate transactions. Lenders and equity purchasers need to see a clear projection of the deal before deciding to invest. Getting a clear picture means investors need to rely on Remedial Cost Estimates. RCEs allow them to familiarize themselves with potential upfront costs connected with remediation work. Knowing the best-case and worst-case scenarios are vital for purchasers and lenders when obtaining a contaminated site. Understanding the potential costs of cleaning up and getting regulatory approval helps investors decide if the investment is worth the effort.
For some experts, the best time to perform RCE is right after the Phase I Environmental Site Assessment. During a Phase I ESA, environmental experts use historical data (aerial photographs, topographical maps, planning records, building permits) and perform site visits. They conduct interviews, geological and hydrogeological analyses, and regulatory research. Based on an in-depth site assessment, experts may identify the real estate as a high-risk site with potentially hazardous substances. Given the importance of Phase I ESA, RCE experts rely on the assistance of environmental site assessment consultants to perform accurate remedial cost estimates.
However, others suggest performing an RCE after a Phase II ESA when more detailed data are available. A Phase II identifies petroleum products, pollutants, contaminants, or other hazardous substances in the subsurface soils. After a Phase I ESA is completed, the experts conduct Phase II Environmental Site Assessment consistent with the applicable sections of the Standard Guide for Phase II Environmental Site Assessments: Planning and Implementation (ASTM E1903-19). The process consists of visual site inspections, sampling, and the review of the available record. Environmental experts then prepare written reports with conclusions and recommendations. The report contains a site description that includes the following information: land use, description of surface, topography and hydrology, vegetative cover, groundwater table depths and direction of groundwater flow, drainage pattern, location of buildings (demolished or newly constructed), the topography of surrounding land, etc. Hence, the idea behind conducting remedial cost estimates following a Phase II ESA is that more data available and increases the chances of a more accurate RCE.
Calculating accurate and precise remedial cost estimates require considering all available data from Phase I and II environmental site assessments. In addition to relying on the ESA written reports, environmental experts must analyze the following:
Calculating remedial costs can take different forms and degrees of accuracy. Depending on the available time and the client’s preferences, calculations go from guestimates to so-called SWAG (scientific wild-ass guess) to accurate expert RCE reports containing all necessary information.
To avoid unexpected costs, ensure your RCE experts use standard cost-estimate guidelines. The most common are the ASTM Standard Guide for Estimating Monetary Costs and Liabilities for Environmental Matters (ASTM E2137-17) and USEPA’s Guide to Developing and Documenting Cost Estimates During the Feasibility Study.
At Hanis Consulting, we care about your investments. Commercial real estate transactions always come with uncertainty, but our mission is to minimize your exposure to risk by providing you with accurate Remedial Cost Estimates.
Relying on sophisticated scientific knowledge and technological expertise while following the most rigorous industry-approved cost-estimate guidelines, we produce reports ensuring your commercial real estate investment makes sense.
No two sites are identical, so our experts will provide you with a unique, custom-tailored approach to calculating remedial cost estimates.
We are available for clients in Chicago and Milwaukee areas. Reach out today to schedule your appointment.