Phase I environmental site assessment


In the United States, an environmental site assessment is a report prepared for a real estate holding that identifies potential or existing environmental contamination liabilities. The analysis, often called an ESA, typically addresses both the underlying land as well as physical improvements to the property. A proportion of contaminated sites are "brownfield sites." In severe cases, brownfield sites may be added to the National Priorities List where they will be subject to the U.S. Environmental Protection Agency's Superfund program.
The actual sampling of soil, air, groundwater and/or building materials is typically not conducted during a Phase I ESA. The Phase I ESA is generally considered the first step in the process of environmental due diligence. Standards for performing a Phase I site assessment have been promulgated by the US EPA and are based in part on ASTM in Standard E1527-13.
If a site is considered contaminated, a Phase II environmental site assessment may be conducted, ASTM test E1903, a more detailed investigation involving chemical analysis for hazardous substances and/or petroleum hydrocarbons.

Background

As early as the 1970s, specific property purchasers in the United States undertook studies resembling current Phase I ESAs to assess risks of ownership of commercial properties which had a high degree of risk from prior toxic chemical use or disposal. Many times these studies were preparatory to understanding the nature of cleanup costs if the property was being considered for redevelopment or change of land use.
In the United States of America demand increased dramatically for this type of study in the 1980s following judicial decisions related to liability of property owners to effect site cleanup. Interpreting the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the U.S. courts have held that a buyer, lessor, or lender may be held responsible for remediation of hazardous substance residues, even if a prior owner caused the contamination; performance of a Phase I Environmental Site Assessment, according to the courts' reasoning, creates a safe harbor, known as the "Innocent Landowner Defense." The original standard under CERCLA for establishing an innocent landowner defense was based upon the requirement to perform an "all appropriate inquiry" prior to ownership transfer. At such time, engineering firms started performing professional engineering reports under a variety of monikers including "Environmental Audits," "Property Transfer Screens," "Environmental Due-Diligence Reports," and "Environmental Site Assessments." In 1991, coined the industry term “Environmental Site Assessment” to replace the commonly used "Environmental Audit” for property transfer studies. A 1990 Court decision, no. 89-8094, United States v. Fleet Factors Corp., found that a secured creditor can be liable for property contamination under the strict, joint and several liability scheme outlined in CERCLA. As a result of this decision, banks elevated their demands for pre-transfer of all appropriate inquiries to hedge against financial risk. Starting in the New York market among banks and regional environmental consulting engineers, the term of choice evolved to Phase I Environmental Site Assessment.
In 1998, the necessity of performing a Phase I ESA was underscored by congressional action in passing the Superfund Cleanup Acceleration Act of 1998. This act requires purchasers of commercial property to perform a Phase I study meeting the specific standard of ASTM E1527: Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process.
The most recent standard is "Standards and Practices for All Appropriate Inquiries" 40 Code of Federal Regulations, Section 312 which drew heavily from ASTM E1527-13, the ASTM Standard for conducting "All Appropriate Inquiry" for the environmental assessment of a real property. Previous guidance regarding the ASTM E1527 standard were ASTM E1527-97, ASTM E1527-00, and ASTM E1527-05.
Residential property purchasers are only required to conduct a site inspection and chain of title survey.

Triggering actions

A variety of reasons for a Phase I study to be performed exist, the most common being:
  • Purchase of real property by a person or entity not previously on title.
  • Contemplation by a new lender to provide a loan on the subject real estate.
  • Partnership buyout or principal redistribution of ownership.
  • Application to a public agency for change of use or other discretionary land use permit.
  • Existing property owner's desire to understand toxic history of the property.
  • Compulsion by a regulatory agency who suspects toxic conditions on the site.
  • Divestiture of properties.

    Scope

Scrutiny of the land includes examination of potential soil contamination, groundwater quality, surface water quality, vapor intrusion, and sometimes issues related to hazardous substance uptake by biota. The examination of a site may include: definition of any chemical residues within structures; identification of possible asbestos containing building materials; inventory of hazardous substances stored or used on site; assessment of mold and mildew; and evaluation of other indoor air quality parameters.
Depending upon precise protocols utilized, there are a number of variations in the scope of a Phase I study. The tasks listed here are common to almost all Phase I ESAs:
  • Performance of an on-site visit to view present conditions ; hazardous substances or petroleum products usage ; and evaluate any likely environmentally hazardous site history.
  • Evaluation of risks of neighboring properties upon the subject property
  • Review of Federal, State, Local and Tribal Records out to distances specified by the ASTM 1528 and AAI Standards
  • Interview of persons knowledgeable regarding the property history.
  • Examine municipal or county planning files to check prior land usage and permits granted.
  • Conduct file searches with public agencies having oversight relative to water quality and soil contamination issues.
  • Examine historical aerial photography of the vicinity.
  • Examine current USGS maps to scrutinize drainage patterns and topography.
  • Examine chain-of-title for Environmental Liens and/or Activity and Land Use Limitations.
In most cases, the public file searches, historical research and chain-of-title examinations are outsourced to information services that specialize in such activities. Non-Scope Items in a Phase I Environmental Site Assessment can include visual inspections or records review searches for:
  • Asbestos Containing Building Materials
  • Lead-Based Paint
  • Lead in Drinking Water
  • Mold
  • Radon
  • Wetlands
  • Threatened and Endangered Species
  • Mercury poisoning
  • Debris flow
  • Earthquake Hazard
  • Vapor intrusion
  • Emerging contaminants
Observations of Non-scope Items can be reported as "findings" if requested by the report user, however, these items do not constitute recognized environmental conditions.

Preparers

Often a multi-disciplinary approach is taken in compiling all the components of a Phase I study, since skills in chemistry, atmospheric physics, geology, microbiology and even botany are frequently required. Many of the preparers are environmental scientists who have been trained to integrate these diverse disciplines. Many states have professional registrations which are applicable to the preparers of Phase I ESAs; for example, the state of California had a registration entitled "California Registered Environmental Assessor Class I or Class II" until July 2012, when it removed this REA certification program due to budget cuts.
Under ASTM E 1527-13 parameters were set forth as to who is qualified to perform Phase I ESAs. An Environmental Professional is someone with:
  1. 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; or
  2. 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
  3. have the equivalent of 10 years full-time experience.
A person not meeting one or more of those qualifications may assist in the conduct of a Phase I ESA if the individual is under the supervision or responsible charge of a person meeting the definition of an Environmental Professional when concluding such activities.
Most site assessments are conducted by private companies independent of the owner or potential purchaser of the land.

Examples

While there are myriad sites that have been analyzed to date within the United States, the following list will serve as examples of the subject matter:
In Japan, with the passage of the 2003 Soil Contamination Countermeasures Law, there is a strong movement to conduct Phase I studies more routinely. At least one jurisdiction in Canada now requires the completion of a Phase I prior to the transfer of some types of industrial properties. Some parts of Europe began to conduct Phase I studies on selected properties in the 1990s, but still lack the comprehensive attention given to virtually all major real estate transactions in the USA.
In the United Kingdom contaminated land regulation is outlined in the Environment Act 1995. The Environment Agency of England and Wales have produced a set of guidance; CLEA a standardized approach to the assessment of land contamination. A Phase 1 Desktop Study is often required in support of a planning application. These reports must be assembled by a "competent person".