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What is a Phase I ESA? Part 3

What is a Phase I ESA? Part 3

( Click here for Part 1, Click here for Part 2 )

Phase I ESA Report:

Once the environmental professional has performed the appropriate records review, site reconnaissance, and key site personnel interviews, the report can be prepared and issued. The Phase I ESA report should follow the ASTM International Standard Practice for a Phase I Environmental Site Assessment. In addition, the Phase I ESA MUST include an appendix section containing supporting documentation and the qualifications of the environmental professional.

All appropriate inquiry requires that the Phase I ESA be performed during the six month period prior to the acquisition of the property. There is often confusion regarding this timeframe, so let’s clear it up. The six month period that the Phase I ESA is good for starts when the assessment process starts, not from the date of the report. So, if the records review is performed one month before the report is issued, then the report is only good for five months from its date. The good news is that the Phase I report may be refreshed to extend it another six months; however, this can only be done once before needing to start the process all over again.

What are non-scope items?

Now that you know the key parts that go into a Phase I ESA, let’s discuss non-scope items that are not required under AAI (all appropriate inquiry) rule but can still be important to anyone having a Phase I ESA performed. Depending on property type and age there may be environmental issues or conditions at the property that are outside the scope of ASTM International Standard Practice for a Phase I Environmental Site Assessment. Such issues can be asbestos-containing materials, lead-based paint, mold, radon, biological agents, cultural and historic resources, ecological resources, endangered species, wetlands, industrial hygiene, and lead in drinking water.

Individuals looking to have a Phase I ESA performed should ask their environmental consultant to add any non-scope items that may be site-specific and of importance. Let’s say you are looking to acquire an old commercial property that will be utilized by numerous employees daily. Having an environmental professional look for potential asbestos-containing material at the property may be a good idea to ensure the health and safety of those employees. If risks are identified, the environmental professional can provide options to either remediate or appropriately manage identified non-scope issues at the property.

Common deficiencies

At Hanis Consulting, we have reviewed a lot of Phase I ESAs from other consultants, usually when a client is in trouble with a deal. Below are common mistakes that we see that you should look out for.

  • No city directory search (when available)
  • Reviewing only one or two aerial photographs or maps
  • Not discussing limitations or data gaps
  • No searching all available records
  • Characterizing environmental conditions incorrectly

If we listed everything we’ve seen, the list would be much longer, but these are the common ones. The reason why we see these usually boils down to greed. To be honest, there is not much money to be made by consultants on Phase I ESAs. There is a very thin profit margin and one rework by an environmental professional may cause the project to drop into the red. To combat this, we see shortcuts and cost savings measures constantly. A quick Google search is not an adequate replacement for a thorough database search and a Google Earth image doesn’t replace an aerial photograph library.

Is saving a few hundred dollars worth potentially taking on a million dollars of liability?

The other thing we see from certain consultants is the projects with no profit margin (i.e. a low priced Phase I ESA) almost always lead to additional work, such as a Phase II. Hey, they have to make their money somewhere, right?

So what does a Phase I ESA cost?

This is almost always the first question from a buyer and there is no simple answer. The cost of a Phase I ESA depends on a variety of factors. The consultants must take into account the age, size, use and location of the property. A Phase I ESA in rural Illinois that has a history of agriculture is going to have a significantly lower cost than a million square foot industrial facility on the southside of Chicago.

What we commonly see is relatively small parcels (think the size of a gas station) as the majority of transactions. Phase I ESAs for these types of properties should be around $2,000.

How long does a Phase I ESA take to complete?

Typically, a Phase I ESA takes approximately 1 month to complete. This is due to the environmental professional waiting for information from state and local officials. Depending on the circumstances, the report may be produced faster; however, rush charges may apply and there will need to be a discussion regarding the lack of response from state and local officials in the report.

For more information

Please email us below if you have questions or concerns about your Phase I ESA, or are looking to bring our expertise to your upcoming project.