Member Expert: Aegis Environmental
Phase I Environmental Site Assessments: Getting to Know a Piece of Property
Before signing on the dotted line, a financial institution may require a Phase I ESA, or you may be aware that it is in your best interest to know details about the property and its history before you finalize the deal.
Imagine you have recently purchased a piece of property with big dreams for its future; multi-family housing, retail space, a doggie daycare, the list goes on. However, 60 years prior, a dry cleaner conducted business on that site. Unfortunately, the process for disposing of cleaning solvents safely was not in place at that time. The solvent, tetrachloroethene (PCE), which breaks down slowly, will likely impact the soil and groundwater. The solvent is carcinogenic and regulated by state environmental agencies. Before any of the plans you have for this site can become a reality, the property has to be “cleaned up” to regulatory standards. You, the property owner, may be financially and legally liable for the clean-up.
There is an efficient way to avoid this scenario from becoming your reality. Before finalizing a property purchase, choose a reputable environmental consultant to perform a Phase I ESA. A Phase I ESA reviews the property’s historical uses and current conditions through available property records and prior environmental reports. The consultant often visits the site to identify environmental concerns on the property and surrounding area, known as Recognized Environmental Conditions (RECs). The consultant may find a barrel partially filled with liquid lying around, a dark spot in the walkway, dozens of paint cans filled with paint, and unidentified material. Potential contaminants are often associated with the site’s history. A few of the most common compounds found are volatile organic compounds, metals, and petroleum. Finally, the consultant will interview current property owners or property managers. All of this is to identify potential environmental concerns. In this scenario, a Phase I ESA would have brought it to your attention that a dry cleaner was formerly conducting business at the site. That site’s dry cleaning business history alone would have been identified as a REC. This finding would likely lead to a more thorough look at the property, commonly known as a Phase II ESA.
In this scenario, being on the hook for the clean-up expense after making this purchase doesn’t have to be the case. Typically, the assessment occurs during the due diligence period, whether you or the bank orders it. Phase I ESAs are often used to meet the requirements of CERCLA’s innocent landowner defense. This aids in mitigating liability for contamination on a property before an acquisition.
To summarize, the reasoning behind having a Phase I ESA conducted is to reduce your risk. Phase I ESAs are relatively inexpensive, take two to three weeks to complete, and provide valuable insight regarding a piece of property, potentially saving you thousands of dollars, lots of time, and stress. It’s a win-win.
Piper, an English Cream Retriever, has been trained as a scent dog and is a devoted member of the Aegis team. Piper helps the team of professionals detect petroleum.