Here at Hanis Consulting we get asked a lot, what is a Phase I ESA is and why is it needed? A Phase I ESA must cover specific criteria to be “All Appropriate Inquiry,” (or AAI) compliant. If there are any deficiencies with the Phase I ESA, the User, (or individual having the Phase I ESA performed) may not be protected. This article covers what a Phase I ESA is and breaks down its key parts required to be AAI compliant. Please feel free to go to our first post titled “What is Environmental Due Diligence” to better understand environmental due diligence and why it is needed whether you are a buyer or seller. We also have specific posts available with more detailed information whether you are the buyer or seller.
If so, it is essential that you perform environmental due diligence. Without proper due diligence, a potential buyer could also purchase all of the environmental liability associated with the property’s past use, even though the buyer did not cause it. This is why most lenders require that Phase I Environmental Site Assessments be performed as a condition to the loan. Otherwise, the environmental liability costs could far exceed any equity in the property. Therefore, environmental due diligence must conform to “All Appropriate Inquiry” standards set forth by federal law and state statutes. Failure to do so may result in significant financial loss for your company if you purchase an environmentally impaired site without knowing about its problems beforehand!
Don’t let this happen! Instead, we can help you make sure your next real estate transaction goes smoothly and safely by performing thorough environmental due diligence on your behalf before closing on any commercial or industrial properties! Contact Hanis Consulting today at (773) 453-8900 for more information!
Phase 1 environmental site assessments (ESAs) are intended to identify the presence and absence of regulated substances at a property. They may also be used to determine if there is any evidence of an environmental release from the property. Commonly, environmental consultants conduct ESAs for purchasers or potential purchasers of commercial or industrial real estate properties who need accurate information about known or possible conditions before moving forward with a transaction. The following ASTM standard establishes procedures for conducting Phase I ESAs in various types of commercial or industrial situations:
Why do you need a Phase I ESA? The “Comprehensive Environmental Response, Compensation and Liability Act” (CERCLA) is a federal law that requires those seeking liability protections to follow the guidelines set out in AAI. If you are an innocent landowner or want your property’s environmental concerns addressed before buying it, this should be done through performance of Phase I Environmental Site Assessment.
The environmental screening process is a crucial part of the due diligence for any land purchase. Environmental violations can result in millions of dollars worth or remediation costs, which could dramatically impact your bottom line if left unchecked- especially when selling an already contaminated property! By performing a Phase I ESA analysis (and identifying possible issues), all potential hazards can be identified before even an offer is made on your property.
A Phase I ESA begins by doing an initial site reconnaissance and documentation of what is found at the premises. A qualified Environmental Professional will walk through each part of the building and its yard to record observations. These records become crucial in determining if there were any known or unknown chemicals present at one time that could still be impacting soil or groundwater at the property. Hanis Consulting’s ESAs generally include taking photographs and measurements of what is seen during the initial site reconnaissance, to include details such as the date and time that the inspection took place, weather conditions at that time, parking lot lighting or lack thereof, landscaping or lack thereof, presence or absence of any posted signs about environmental concerns onsite (such as storage tanks), the appearance of the premises including building materials used for construction.
A Phase I ESA also includes a review of what environmental laws may apply at the property, the potential liability associated with each law, and how best to resolve any issues identified before they become legal problems proactively. This part of the process includes determining whether pollution insurance coverage is appropriate, an overview of environmental regulatory requirements that may apply to the property, and what is required from a legal perspective depending on this Phase I ESA results.
In summary, a Phase I Environmental Site Assessment is performed before purchasing real estate to determine if any known or unknown chemicals are present on site that can impact human health and safety. Due process must be followed as outlined by ASTM E1527-13 and other federal and state regulations to violate consumer protection laws and protocols. The goal of an ASTM E1527 Phase I ESA is to identify the confirmed presence and extent of any environmental conditions on a property that could potentially impact its use. The focus of a Phase I ESA is on gathering sufficient information about the site and its environs to allow for an informed decision about whether or not to proceed with a more detailed Phase II ESA. A Phase I ESA may also be used as part of due diligence for real estate transactions.
On November 1, 2021 – the American Society for Testings and Materials (ASTM) approved a new standard for conducting Phase 1 ESAs, replacing a prior ASTM E-1527-13 that have been used for the last 8 years. This new standard provides a clear and concise way for businesses to identify hazardous substances, as well as petroleum products. It also includes guidance on how best prepare Phase I reports that list environmental conditions on properties. ASTM E1527-21 is required for projects starting in February 2024.
