What is a Phase I Enviromental Assessment? - ABA YLD 101 Practice Series

By Matthew J. Bauer

Phase I Environmental Site Assessments ("Phase I ESAs") provide the most common means by which parties to a real property or business transaction cloak themselves with liability protection under the Comprehensive Environmental Response, Compensation & Liability Act ("CERCLA"). Phase I ESAs are typically a minimum requirement for lenders to provide real estate backed financing. Additionally, Phase I ESAs satisfy the all appropriate inquiry (commonly referred to as "AAI") to qualify a party for one of the threshold criteria for the landowner liability protections under the 2002 Brownfields Amendments to CERCLA, 42 U.S.C. §§ 9601 et seq. Thus, commercial and industrial properties are rarely bought or sold without a Phase I ESA. Therefore, an attorney may happen upon a Phase I ESA in a number of different practice areas. Accordingly, it is important to understand what a Phase I ESA is and what it entails.

Definition
The term "ESA" refers to the process by which a person or entity seeks to determine if a particular parcel of real property (including improvements) is subject to recognized environmental conditions (commonly referred to as "REC"). A recognized environmental condition is the presence or likely presence of any hazardous substances or petroleum products on a property.

Object
A Phase I ESA is intended primarily as an approach to conducting an inquiry designed to identify recognized environmental conditions in connection with a property.

Standard
ASTM 1527-05 is the current standard defining the good commercial and customary practices for conducting a Phase I ESA. ASTM 1527-05 became effective on November 1, 2006. Prior to that date, the ASTM 1527-00 was the standard.

Who May Perform
A Phase I ESA must be performed by an environmental professional or conducted under the supervision or responsible charge of the environmental professional. An environmental professional is a person possessing a Professional Engineer's or Professional Geologist's license or registration and has three years of full-time relevant experience, be licensed or certified by the federal government, a state, tribe, or U.S. territory to perform environmental inquiries and have three years of full-time relevant experience, has a Baccalaureate or higher degree from an accredited institution and has five years of full-time relevant experience, or has ten years of full-time relevant experience.

Components
A Phase I ESA consists of four parts: a records review, a site reconnaissance, interviews, and a report. A Phase I ESA, however, does not include any testing or sampling of materials, e.g., soil, water, air, building materials. The records review, site reconnaissance, and interviews are intended to be used in concert with each other to help identify recognized environmental conditions.

Records Review
Obtaining and reviewing records that will help identify recognized environmental conditions. This includes the records of properties within an approximate minimum search distance in order to help assess the likelihood of problems from migrating hazardous substances or petroleum products. Factors to determine the approximate minimum search distance include the density of the area, geologic or hydrogeologic conditions, the property type, and existing or past uses of surrounding properties.

Site Reconnaissance
An on-site visit to visually and/or physically observe the property, any structure located on it, and if possible adjoining properties for indications of current and past uses, and conditions.

Interviews
In-person, telephone, or in-writing interviews with past and present owners, operators, and occupants of the property, consist of questions to be asked attempting to obtain information about the property's uses and conditions as well as information relating to helpful documents and any pending, threatened, or past litigation or administrative proceedings or governmental notices relevant to hazardous substances or petroleum products in, on, or from the property. In-person or telephone interviews with state and/or local government officials should also be conducted.

Report
The report of a Phase I ESA must contain:

  • A section describing all services performed in sufficient detail to allow another party to reconstruct the work performed.
  • A section identifying known or suspect recognized environmental conditions, and historical recognized conditions, and de minimis conditions.
  • A section listing the environmental professional's opinions of the impact on the property of conditions identified in the findings section and the environmental professional's logic and reasoning for its conclusions.
  • If applicable, a section identifying any additional investigations that may be necessary to detect the presence of hazardous substances or petroleum products.
  • If applicable, a section identifying any significant data gaps that affect the environmental professional's ability to identify recognized environmental conditions.
  • A section summarizing all recognized environmental conditions in connection with the property and one of the following statements:
    • "We have performed a Phase I Environmental Site Assessment in conformance with the scope and limitations of ASTM Practice E 1527 of [address or legal description], the property. Any exceptions to, or deletions from, this practice are described in Section [ ] of this report. This Assessment has revealed no evidence of recognized environmental conditions in connection with the property," or
    • "We have performed a Phase I Environmental Site Assessment in conformance with the scope and limitations of ASTM Practice E 1527 of [address or legal description], the property. Any exceptions to, or deletions from, this practice are described in Section [ ] of this report. This Assessment has revealed no evidence of recognized environmental conditions in connection with the property except for the following: (list)."
  • If applicable, a section concerning any additional services contracted for.
  • A section identifying any and all deviations from the ASTM 1527-05 standard.
  • A section identifying published referenced sources relied upon in preparing the Phase I ESA.
  • The signature of the environmental professional responsible for the Phase I ESA.
  • The following environmental professional statements:
    • "[I, We] declare that, to the best of [my, our] professional knowledge and belief, [I, we] meet the definition of Environmental professional as defined in § 312.10 of 40 CFR 312" and
    • "[I, We] have the specific qualifications based on education, training, and experience to assess a property of the nature, history, and setting of the subject property. [I, We] have developed and performed the all appropriate inquiries in conformance with the standards and practices set forth in 40 CFR Part 312."
  • Appendices containing supporting documentation and the qualifications of the environmental professional and the qualifications of the personnel conducting the site reconnaissance and interviews if conducted by someone other than an environmental professional.

Resources

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About the Author

Matthew J. Bauer is an attorney with Johnstone, Adams, Bailey, Gordan, Harris, LLC., in Mobile, Alabama, and practices in the areas of admiralty, business and corporate, insurance defense, land use and environmental, and real estate. He can be contacted at mjb@johnstoneadams.com or (251) 432-7682.

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