Phase I Environmental Site Assessments

When is a Phase I ESA required?

A Phase I Environmental Site Assessment is typically required by lenders or purchasers to identify whether there is a potential for contamination or other conditions that may affect property values, pose a legal or financial liability, or affect the ability of the borrower to repay a loan obligation. Clients may also obtain a Phase I ESA in order to satisfy requirements of the “innocent landowner defense” under CERCLA, or to protect against potential liability for contamination originating from an off-site source.  

How long is a Phase I ESA good for?

A Phase I ESA is valid for 180 days from the earliest initial date of research and may be updated within one year of completion. AEI reports include a report viability date so that clients can clearly understand when the report is no longer viable. Typically, it is recommended that closing occur prior to the expiration of this viability date.

How much does a Phase I ESA cost?

The cost for a Phase I Environmental Site Assessment typically ranges between $1,900 to $4,600 and is determined by several factors. The cost considers the location of the property, the complexity of the site’s history, as well as the specific ways in which the property will be used.

What is a Recognized Environmental Condition?

The ultimate goal of a Phase I ESA is to identify Recognized Environmental Conditions (RECs). A REC is essentially defined as the presence or likely presence of hazardous substances or petroleum products in, on, or at a property due to a release or a material threat of a release to the environment. In other words, a REC is found when the research and inspection of the property leads an Environmental Professional to conclude that contamination is present or potentially present at the property.

What is the Process of a Phase I ESA?

ASTM International sets accurate and consistent standards for environmental professionals to follow when conducting a Phase I Environmental Site Assessment. Additional requirements may be added by banks or lenders, but the general process sticks to several key points:

Historical Research

To evaluate historical changes or developments made to the property over the years, environmental professionals will examine historical aerial photographs as well as street directories, fire insurance maps, topographical maps, building permits, planning records, and any other relevant historical sources to identify the potential for a Recognized Environmental Condition.  

Review of Records

Records of previous transfers of ownership and property use are reviewed to determine if potential environmental conditions exist.

Regulatory Research

Regulatory bodies including city, county, state, and federal environmental agencies are consulted to gain more insight into the property.

What is ASTM E1527-21?

ASTM E1527-21 is the standard that is used to complete a Phase I ESA. On January 1, 2022, the ASTM E1527-21 replaced the E1527-13 standard as the industry’s best practice for Phase I ESAs. While much of it stayed the same, there were a few notable revisions:

Definitions

Clarity has been made around a few definitions so that there can be consistent interpretation across the board. These definitions include Recognized Environmental Condition (REC), Controlled REC (CREC), and Historical REC (HREC). New definitions were also added for the terms Likely, Property Use Limitation, and Significant Data Gap.

Emerging Contaminants

The standard recognizes that emerging contaminants, such as per- and polyfluoroalkyl substances (PFAS), that are not currently classified as hazardous substances may be discussed as non-scope items.

Limited Environmental Due Diligence Assessments

While limited assessments will not qualify you for Landowner Liability Protections (LLPs) under CERCLA, they can be a helpful preliminary assessment tool. AEI can provide the following Limited Due Diligence Assessments:

Record Search with Risk Assessment (RSRA)

The RSRA is an inexpensive evaluation of Environmental Risk Level of a subject property as either being a “high or elevated-risk” or “low risk” for contamination. After regulatory and historical research review, the environmental professional will determine risk level which will determine if further investigation is recommended. This type of assessment does not include a site inspection, and thus is typically referred to as a “desktop review.”

Custom due diligence Scope Investigation

Due Diligence Assessment scopes vary from lender to lender. AEI Consultants offers custom scope investigations to our clients.

FAQs

Why do I need a Phase I ESA?

If you are buying a commercial property, many banks require the completion of a Phase I ESA before approving a loan. Government agency lenders (SBA, HUD, Fannie Mae, and Freddie Mac) will typically require a Phase I ESA or some form of due diligence. Seasoned investors also typically order Phase I ESAs for a full disclosure of potential environmental issues that may impact cash flow, property value, and purchase negotiations.

Who can perform a Phase I ESA?

An Environmental Professional must conduct the assessment.

How long does it take to complete a Phase I ESA?

On average, the total time is between two to four weeks.

What is the difference between a Phase I and Phase II environmental site assessment?

In short, a Phase I ESA conducts the initial research to identify if contamination may exist at a property. The Phase II assessment consists of the collection and analysis of samples to verify if contamination actually exists at a property.

A Phase I Environmental Assessment is conducted to determine if a release or likely release of hazardous substances or petroleum products has resulted in potential contamination at a property. This includes site visits, examining historical site records, consulting government and agency databases, as well as reviewing plans, photographs, and any other documents that would indicate what the property was used for in the past.

A Phase II assessment occurs if the Phase I ESA identified RECs or other conditions that require further investigation. During the Phase II, Environmental Professionals conduct a sampling of environmental media (including soil, soil vapor, and groundwater). These samples are then analyzed for the presence and contamination via various laboratory analytical methods.

What are the ASTM E1527-21 changes?

In 2021, the ASTM updated the standard for Phase I Environmental Site Assessments with the E1527-21, which replaced the E1527-13 standard on January 1, 2022. These changes did not significantly alter the Phase I Environmental Site Assessment report or process, but there were a few important revisions that offer clarification and guidance. For more details, please see our section above on “What is ASTM E1527-21?”