What is a Phase I ESA and Why Do I need one? A Phase I Environmental Site Assessment (ESA) is a Site Investigation that identifies Recognized Environmental Conditions [REC]on or at a property. The Phase I ESA is generally considered the first step in the process of environmental due diligence and is typically prepared based upon the American Society for Testing Materials (ASTM) Standard. This standard was established to meet the Environmental Protection Agency’s (EPA) requirements for an ‘All Appropriate Inquiry’ (AAI) on a property. When purchasing or financing a property, it is an important precaution for owners and lenders to know that they are covered by the ‘Innocent Landowner Defense’ and that they have done their due diligence on the property in question.
An ESA does not guarantee that a site is clean or eliminate risk, however knowing about a REC will help users identify property value impacts; account for potential delays on property transactions due to site remediation ;and identify potential owner cash flow constraints due to remediation Costs.
[The Innocent Landowner Defense was established by the Superfund Amendments and Reauthorization Act (SARA) on October 17, 1986, holding that “the defendant must have undertaken at the time of acquisition an all appropriate inquiry (AAI) into the previous ownership and uses of the property consistent with good commercial or customary practice in an effort to minimize liability.”]
If requested, testing for asbestos-containing materials and lead-based paint can be added to the Phase I ESA scope-of work. The analysis typically addresses both the underlying land; the physical improvements to the property; and the adjacent properties. Phase I ESAs are often required by lenders for commercial, industrial and multi-unit residential property transactions and are a great way for potential purchasers, developers and/or lenders to do their due diligence prior to purchasing a property.
The ASTM E1527 – 05 Standard was updated as of November 6, 2013. Most of the changes in 2013 are clarifications / additions to terminology that will help clients better understand the report and set the best practices in the industry as a minimum requirement.
CHANGES TO THE ASTM:
REC Redefined – The new REC Definition is: “the presence or likely presence of any hazardous substances or petroleum products in on or at a property: (1) due to any release to the environment; (2) under conditions indicative of a release to the environment; or (3) under conditions that pose a material threat of a future release to the environment”
Historical REC – ASTM updated definition: The HREC definition has been revised to clarify that the scope and application of an HREC is limited to include only past releases that have been addressed to unrestricted residential use.
New Classification - CREC: Controlled Recognized Environmental Condition (CREC)- new terminology added for clarification purposes to differentiate sites: A ‘Controlled Environmental Condition’ describes the condition where previous releases at properties that underwent risk-based closures were addressed, but contaminants are allowed to remain in place under certain restrictions or conditions.
Example: If the property is cleaned up, but has a restriction to commercial /industrial because of contamination remaining – that would be a CREC. If the property is cleaned up w/ no restrictions and could even be used for Residential use– it is a HREC. This clarification makes a differentiation between items that are closed w/ no restrictions and those that still have regulation on them.
Activity and Use Limitations (AULs) Revised: A Client Requirement that needs to be done by a Title Professional – Wording modified to highlight the need to also search Judicial records on top of deeds and liens.
Regulatory File Reviews (Section 8.2.2) Revised – Reviews may increase due to rewording that is intended to have the Environmental Professional explain in greater detail their rationale for when a regulatory file review is or is not warranted. The idea is that ‘more information is better than less’.
Vapor Intrusion Revised: New language added to reinforce that this type of contamination needs to be considered, however it does NOT require ASTM E2600 which is a separate, more comprehensive assessment of vapor migration. The revised definition of ‘migrate/migration’ specifically includes vapor migrations. This revision clarifies that releases of contaminants that migrate via vapor in the subsurface or in soils are recognized environmental concerns (REC). Prospective property owners will have the added assurance that releases that migrate onto a subject property via a vapor pathway will be identified as recognized environmental conditions.
Need to know more or want help understanding what this all means for you? Contact us at 630-554-6655.
