To identify potential or existing environmental liabilities and address underlying land and physical improvements to the property, Phase 1 ESA (Environmental Site Assessment) is conducted.
Under the general standard ASTM E1527-13 and ASTM E1527-21, Phase I ESA is generally considered the first step in the process of environmental due diligence. With this, an assessment is performed to uncover any environmental risks before purchasing a property.
In the case of the site being contaminated after the assessment, a Phase II ESA may be conducted, which is a more detailed investigation involving chemical analysis for hazardous substances and/or petroleum hydrocarbons.
Furthermore, if the site has contamination, a Phase III ESA will be required for the remediation/removal of the contaminants.
To perform the Phase I ESA, an entity that is going to purchase land to be developed into commercial/industrial property or lease land commercially will assess the area to reduce risks.
Although a deed is issued by the landowner upon buying the land, still it does not guarantee an environment-friendly space. Therefore, records review, on-site requirements, All Appropriate Inquiry (AAI), and non-scope items are performed according to the guidelines set by the environmental professional.
- Records review – this includes scope items such as the definition of any chemical residues within structures; inventory of hazardous substances stored or used on-site; review of Federal, State, Local and Tribal Records out to distances specified by the ASTM 1527-13, ASTM E1527-21 and AAI Standards (ranging from 1/8 to 1 mile depending on the database). The following are activities under records review:
- Examine of municipal or county planning files to check prior land usage and permits granted;
- Conduct file searches with public agencies (State water board, fire department, county health department, etc.) having oversight relative to water quality and soil contamination issues;
- Examine historic aerial photography of the vicinity;
- Examine current USGS maps to scrutinize drainage patterns and topography; and
- Examine chain-of-title for Environmental Liens and/or Activity and Land Use Limitations (AULs).
- On-site requirement – at this stage, the performance of an on-site visit to view present conditions such as chemical spill residue, die-back of vegetation, etc.; hazardous substances or petroleum products usage – the presence of above ground or underground storage tanks, storage of acids, etc.; and evaluate any likely environmentally hazardous site history to include evaluation of risks of neighboring properties upon the subject property.
- All Appropriate Inquiry (AAI) – this requires an interview of persons knowledgeable regarding the property history. For instance, past owners, present owners, key site managers, present tenants, and neighbors.
- Non-Scope Items – include visual inspections or records review searches such as
- Asbestos Containing Building Materials (ACM)
- Lead-Based Paint
- Lead in Drinking Water
- Threatened and Endangered Species
- Vapor intrusion
Under ASTM E 1527-13 and ASTM E1527-21, the qualified to perform Phase I ESAs are the following:
- someone with a current Professional Engineer’s or Professional Geologist’s license or registration from a state or U.S. territory with 3 years equivalent full-time experience;
- have a Baccalaureate or higher degree from an accredited institution of higher education in a discipline of engineering or science and 5 years equivalent full-time experience; or
- have the equivalent of 10 years full-time relevant experience (defined as an Environmental Professional (EP) by the guidelines of the EPA)
An individual who did not meet any of the one or more of the mentioned qualifications may assist in the conduct of Phase I ESA considering that the person is under the direct supervision of a person meeting the definition set by the Environmental Professionals. In most cases, assessments are conducted by private companies independent of the owner or potential purchaser of the land.
Records Search with Risk Assessment (RSRA)
A Records Search with Risk Assessment (RSRA), Phase I ESA is sometimes an additional investigation for Small Business Administration’s environmental policy.
The RSRA is a limited environmental due diligence tool intended to inexpensively evaluate the environmental risk level of the subject property as either classified as “high or elevated-risk” or “low risk” for contamination.
In case the property is not determined “low risk”, an additional environmental investigation may be required. Such advantage of RSRA over Phase I ESA is that it has a quick shift of fewer than 5 days and offers a lower cost.
Reports of RSRA include a review of government and historical records, aerials, the property’s NAICS code, and a completed SBA Environmental Questionnaire for environmentally sensitive operations on the subject property or nearby properties. Such information will be reviewed and analyzed by an Environmental Professional, who determines whether the property is “high risk” or “low risk” for contamination. In the case where an RSRA report indicates “high risk”, the SBA requires that the lender must then proceed to a Phase I ESA.
Pieces of information derived from record search with risk assessment can also be used on non-SBA loans or by non-SBA lenders as a risk-screening tool as part of a well-rounded environmental risk management policy, and many lenders do so.
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