What Is a Phase 1 ESA?

An ESA is a systematic investigation and site characterization to determine whether a particular property is or may be subject to actual or potential contamination (Canadian Standards Association). This involves record reviews, site visits and interviews. A Phase 1 ESA does not include sampling of soil or water, lab analysis or measuring unless prescribed by a landowner. ESAs may range in cost from $900 to $1,500, depending on requirements of a landowner and individual consultant charges.

Why Do I Need a Phase 1 ESA?

Property owners, purchasers, lenders, and tenants may face potential liabilities (i.e. extra costs) when dealing with remediation or management of contaminated sites. Liability costs may arise from government initiated orders, loss of land value, or litigation. ESAs can be used to estimate the likelihood, types, and locations of contamination that may be present on a site. This information can then be used to make informed decisions concerning property management, facility operations and investments.

When Do I Need a Phase 1 ESA?

ESAs are required by lenders or government regulations when:

* planning to redevelop or change land use of property

* applying for refinancing

* potential change in site ownership

* requested by interested site owner

* result of environmental site screening by financial institution.

What Does it Do for Me?

* essential for investment risk analysis

* demonstrates due diligence for environmental liability

* pollution prevention

* required by all financing institutions

* enhances property resale value

* may affect land use and facilities

* required by CMHC

What Happens Next?

A Phase 1 ESA will determine the inherent environmental risks associated with a site. The property may be determined to have little or no risk and be suitable for financing and development.

If environmental risks are present a Phase 2 investigation(sampling and analysis) may be required, which, in turn, may be followed by a Phase 3 clean-up. Costs for each follow-up step increase exponentially.

Obviously there are no sure answers when dealing with environmental risk, each site and problem is different and requires an individual approach. Environmental problems are "grandsonned", meaning the present owner of a site is responsible for past activities. An ESA will determine the effect of past activities on a site and prevent environmental liability or government orders. For a relatively low cost an Esa may greatly affect investment decisions and land use. Environmental risk studies are a fundamental tool for doing business in today's environmentally aware climate.
 

OVERVIEW

Prudent advice to all individuals or corporations, worldwide, is that negotiations for real estate transactions should not proceed without, at a minimum, a properly executed Phase I Environmental Site Assessment. Professional Phase I ESAs are modeled after, and incorporate, ASTM Standard E-1527-00 and E-1528-00. As such, this practice assists a property purchaser to satisfy one of the requirements to qualify for the innocent landowner defense to RCRA liability. IIt is believed that this practice and its authorized procedures, constitute "all appropriate inquiry into the previous ownership and uses of the property consistent with good commercial or customary practice" as defined in 42 USC [section]9601(35)(B).

STANDARD PROCEDURES

    This practice is designed to provide a comprehensive coverage of Phase I objectives. Further, it is to provide a logical sequence for reporting of all findings in a standardized format. The goal of the format is to facilitate review, evaluation, and approval of a Phase I report. The details of this practice: investigation methods, minimum reporting requirements, explanations of terminology, and approved report format shall be incorporated in a set of standard procedures.

DEFINITIONS OF ESA PHASES
   A complete Environmental Site Assessment can involve three Phases, depending upon the size, type, construction and location of the property; the past and present intended use(s) of the property; and availability and access to complete records.

PHASE I ELEMENTS

A Phase I ESA determines, for a parcel of real estate, the "recognized environmental conditions." That is, the presence or likely presence of any hazardous substances or petroleum products on a property under conditions that indicate an existing release, a past release, or a material threat of a release of the substance(s) into structures on the property, or into the ground, groundwater, or surface water of the property. It does this by accomplishing due diligence in:
   1. A visual inspection of the property, including walking over the entire site, ideally with the owner/manager/user present to answer questions.
   2. A comprehensive photographic log.
   3. Interviews with the owner/manager/user of all adjacent properties.
   4. A thorough review of all "practically reviewable" records pertaining to the property and surrounding properties within ASTM radii.
   5. A comprehensive written report.

PHASE II ELEMENTS

   Based on a properly executed Phase I report advising a Phase II report, a Phase II shall consist of:
   1. The physical sampling of the site, using the recommendations of the Phase I report as a minimum guideline.
   2. A comprehensive written report detailing the rationale for the sampling that took place, the sampling protocols and procedures employed, an explanation of the analytical results, and, if necessary, a description of the recommended remedial action needed to restore the site to the appropriate condition for its intended use.

PHASE III ELEMENTS

Based on a properly executed Phase II report, a Phase III shall consist of:
   1. The design and implementation of the remediation of the site.
   2. All necessary reports and permits to achieve cleanup of the site to agreed upon site specific standards.

LIMITATIONS TO PHASE I SCOPE

   The scope of this practice includes research and reporting requirements that support the user's ability to qualify for the innocent landowner defense. As such, sufficient documentation of all sources, records, and resources utilized in conducting the inquiry required by this practice must be provided in the written report.
NOTE:
This practice does not purport to address all of the safety concerns, if any, associated with its use. It is the responsibility of the user to establish appropriate safety and health practices.

   The degree to which an ESA is conducted will vary according to the environmental concerns identified for each real estate transaction and the laws of the country in which the site is located. However, all ESAs must be comprehensive enough so that environmental risks are properly considered in any business decision involving the real estate transaction.

CERCLA Requirements Other Than Appropriate Inquiry: This practice does not address whether requirements in addition to appropriate inquiry have been met in order to qualify for CERCLA's innocent landowner defense (for example, the duties specified in 42 USC [section]9607(b)(3)(a) and (b).

CAUTION
   Phase I report users are to be cautioned that federal, state, and local laws may impose their own environmental assessment obligations. Users must also be made aware that there may be other legal obligations with regard to hazardous substances or petroleum products discovered on property that are not addressed in this practice and that may pose risks of civil and/or criminal sanctions for non-compliance.

FACTORS WHICH CAN AFFECT THE EXTENT OF AN ESA

   In some cases, completion of Phase I may result in an ESA which is comprehensive enough to adequately assess environmental risks. For example, Phases II and III may not be necessary if available site information is adequate or if environmental risks are satisfactorily addressed by an indemnification.
    If more than one phase is conducted, the phases would logically occur in a sequential fashion, with information obtained from each phase used to better define the scope of work in the next phase. However, the schedule for completing the real estate transaction may require that several phases be conducted simultaneously.

CONFIDENTIALITY

   The Phase I report is confidential and remains the property of the client. An ESA is confidential and privileged if developed in anticipation of possible litigation. Accordingly, all parties involved in the performance and review of an ESA must take appropriate steps to protect the unauthorized disclosure of confidential and/or privileged information.