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Expert Insights in Phase 1 Environmental Assessments

Expert Insights in Phase 1 Environmental Assessments


If you need to go to a doctor for an annual checkup, you will make sure you see a licensed medical professional and an expert in the relevant field. How about your car repair? You will probably not risk going to a person without adequate mechanic qualifications. The same applies to Phase 1 Environmental Site Assessments (Phase 1 ESA).

Phase 1 ESA is paramount to commercial and industrial real estate transactions. Environmental due diligence is pivotal in property development, risk management, and environmental protection. The professionals conducting Phase 1 ESA are indispensable to achieving full regulatory compliance and liability protection. Their expert insights contribute to environmental science, engineering, and the real estate industry.

In this blog post, we will offer key statistics highlighting the importance of professional environmental consultants and present their fundamental expert insights that have shaped the art of environmental due diligence. Ready to expand your knowledge? Dive in!

Statistics Highlighting the Value of Expert Insights

Numerous case studies and industry experience have witnessed the impact of expert insights in Phase 1 ESA. Available data showcase how their guidance resulted in accurate risk assessments, reduced environmental liability costs, and informed decision-making in real estate transactions.

Here are the statistics on the value of expert insights:

  • Increased Reliability: The Environmental Protection Agency (EPA) conducted a study showing the reliability of Phase 1 ESAs conducted with expert involvement. According to the research, professional assessments had an accuracy rate of 95% – significantly higher than non-professional assessments (75%).
  • Reduction in Transaction Delays: Expediency is vital in real estate transactions, but environmental issues often cause delays. According to the American Bar Association’s (ABA) survey, 80% of delayed transactions have roots in ecological concerns. However, delays are significantly lower in transactions involving professional Phase 1 ESA with expert insights (50% fewer delays).
  • Cost Savings: The National Association of Realtors (NAR) reported about 30% higher costs of property transactions involving Phase 1 ESAs without expert insights. On the other hand, expert-led assessments helped investors save between $5,000 and $10,000 per transaction.
  • Enhanced Marketability: Real estate market values properties with complete (and clean) Phase 1 ESA reports. The Appraisal Institute’s study shows enhanced marketability of properties where experts conducted due diligence assessments – their price is 10% higher, and the owners sell them 15% faster.
  • Insurance Premium Reduction: Another benefit of expert Phase 1 ESAs is insurance premium reduction. Some companies offer up to 20% reduction to property owners who conducted Phase 1 ESA with professional environmental consultants.
Beyond Compliance: Expert Perspectives for Sustainable Business Growth

Beyond Compliance: Expert Perspectives for Sustainable Business Growth

Before diving into the expert insights on Phase 1 ESA, let us briefly define what an environmental expert is.

In short, environmental professionals must have a professional engineer or professional geologist license with a minimum of 3 years of full-time environmental due diligence experience. Phase 1 ESAs, conducted by people who are not professionals, do not qualify for CERCLA liability protection and – as such – are worthless.

Ensuring comprehensive and accurate Phase 1 ESA is unachievable without tapping into the wisdom of environmental experts. Here are their insights on an effective due diligence process. Below are core principles and some common misconceptions about Phase 1 Environmental Assessments:

  1. Interpretation of Complex Data is the Essence of Phase I ESA

Identifying potential environmental risks requires a comprehensive data analysis. Unlimited geological, historical, regulatory, and market information surrounds each property transaction. An effective fact-finding and analytical effort are a foundation for later stages in Phase 1 ESA. Environmental experts review historical data, conduct on-site visits, and interview past and current owners to form a data basis to help them make informed decisions and continue with more demanding due diligence tasks. Except for licensed environmental professionals, no other individuals or companies can make valid and reliable interpretations of such complex data.

  1. Ensuring Regulatory Compliance is Crucial for Achieving Environmental Safety

Federal (Title 40 of the Code of Federal Regulations) and state (Title 35 of the Illinois Administrative Code) regulations ensuring environmental safety and potential liability constantly evolve. Meeting regulatory requirements is crucial for avoiding accountability for violations. Environmental experts help clients understand and implement rules by taking required actions, including Phase 1 ESA and other environmental due diligence measures. Expert insights are indispensable for achieving full regulatory compliance and environmental safety standards.

  1. Risk Assessment and Management are Cornerstone Phase I ESA Efforts

Identifying environmental risks and recommending appropriate mitigation strategies is at the heart of the effort experts undertake in Phase 1 ESA. Professional consultants base their suggestions on prior fact-finding activities where they accurately diagnose the hazards and sources of pollution. Mitigating measures include further investigations (to define the full scope of contamination), remediation measures, and risk management plans. Such a comprehensive approach (only possible with environmental experts) ensures that the property is suitable for the intended use.

  1. Phase I ESAs Provide Liability Protection under Federal Law

One of the common misconceptions about Phase 1 ESAs is that they are a comprehensive environmental due diligence review. The truth is that Phase 1 ESAs, following the American Society for Testing and Materials (ASTM) practice, identify conditions pointing to soil and groundwater contamination. As such, they cover one of the three legal defenses under federal Superfund law (CERCLA), mandating landowners to undertake All Appropriate Inquiries (AAI) to avoid environmental liability. However, Phase 1 ESAs alone do not protect from accountability under state environmental statutes (storage tank, water quality, and hazardous waste cleanup laws). The property owner must conduct a title search seeking prohibitions, restrictions, and limitations on the property use. So, despite having a clean Phase 1 ESA report, owners are responsible for compliance with state environmental regulations.

  1. Phase I ESA is Not a Comprehensive Environmental Insurance Policy

Environmental consultants are responsible for their omissions and errors. But that applies if experts omit standard practices and, as a result, misidentify hazards they could have identified using customary industry standards. Because Phase 1 ESA does not include intrusive soil investigation (experts seek visible signs of contamination during on-site visits, historical reviews, and interviews), some issues may remain unidentified. The liability in such cases lies upon property owners, not environmental experts.

  1. A Quality Phase I ESA Takes More Than 30 Days

A 30-day due diligence period seems like enough time to complete a comprehensive Phase 1 ESA. However, government environmental agencies (federal and state) typically need more time to review assessment reports, resulting in property transaction delays. Therefore, property owners in gas stations, dry cleaners, automotive, and other industries with common environmental concerns should allow at least a 60-day due diligence period. Timewise, it is worth noting that Phase 1 ESA reports older than 180 days must be updated, while those older than one year are not valid.

  1. Regulatory Programs Influence Phase I ESA Conclusions

The ASTM standards for Phase I ESAs mandate the environmental experts to consider whether the on-site condition would be the subject of an enforcement action by the relevant government agency. Hence, the location determines the expert’s conclusions due to specific regulatory programs specific to that location. For example, some programs impose special remediation requirements for properties intended for redevelopment or greenfield development. In such cases, the Phase 1 ESA report must focus on endangered species and wetlands, including potential hazards.

Key Takeaways

  • The professionals conducting Phase 1 ESA are indispensable to achieving full regulatory compliance and liability protection.
  • Their insights have shaped the art of environmental due diligence, contributing to environmental science, engineering, and the real estate industry.
  • The available statistics show that expert insights help increase the reliability and marketability of property transactions while reducing costs, delays, and insurance premiums.
  • Phase 1 ESA expert insights highlight the importance of complex data interpretation, regulatory compliance, and risk assessment.
  • On the other hand, experts warn that Phase 1 ESA is not a comprehensive environmental insurance policy, that quality assessment reports take time, and that its conclusions depend on regulatory requirements.
Key Takeaways

Experts You Can Rely On: Hanis Consulting

As a fundamental step in property due diligence, Phase 1 Environmental Assessments aid in risk management and informed decision-making. Expert insights are vital for ensuring their comprehensiveness and accuracy.

Hanis Consulting, an Illinois-based environmental consulting company, prides itself on professionals possessing in-depth expertise in environmental science and regulatory compliance. We add value to your commercial property transactions by interpreting complex data, understanding regulations, and recommending risk mitigation strategies.

If you do commercial real estate business, do it right. Unlock the secrets of environmental due diligence with Hanis Consulting. Request a consultation and let our experts guide you to a contamination and liability-free future.

Please call us today at (773) 453-8900 or email us at info@hanisconsulting.com to schedule your appointment.