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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.
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.
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.
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.
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.
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.
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.
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.
The report of a Phase I ESA must contain:
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 firstname.lastname@example.org or (251) 432-7682.