Purchasing or leasing property includes the risk of acquiring the liability for environmental conditions caused by previous owners. The costs of cleaning up or managing the impacts of contamination can vary widely, but even small unanticipated expenses are always unwelcome. Environmental problems are often significant enough to cost more than a the market value of a project.
Although it is limited in scope, a properly conducted Environmental Site Assessment (ESA) can provide a good general indication of the past and existing conditions on a site that could indicate a recognized environment condition. The Phase I ESA is intended to provide a review of known and observable conditions that would allow you to evaluate the environmental condition of a site or property at a relatively low cost. Based on the Phase I ESA, you should be able to decide whether to continue with a project, or to investigate further.
Should you elect to proceed with a project, and a significant environmental problem be discovered later, the ESA could be an important tool in establishing your defense as an innocent landowner. As a builder or developer, you would be considered a person with expertise in real estate and you may be held to a higher standard of review than another property buyer. It is important therefore that you should pay particular attention to the quality of the ESA.
The Phase I Environmental Assessment Process
The Phase I Environmental Site Assessment (ESA) process is usually performed by a qualified environmental professional. Although some states have defined the minimum qualifications for performing an ESA, most states have not. The ESA process requires interdisciplinary skills and is therefore it is difficult to prescribe a specific set of narrowly defined qualifications. Perhaps the best indicators of an environmental professional=s qualification is in the combination of specific experience and education. Experience that is specific to the type property or issues to be assessed should weigh more heavily than other experience. When evaluating education and training consider the academic background of individuals but also review the commitment to continuing education and training. The ESA is a relatively new process and one that continues to evolve so that staying current with the latest standards and guidelines is critical for the environmental professional.
While there are a variety of different protocols offered by various technical and professional groups, in general, the method most commonly used in the American Society for Testing and Materials (ASTM ) Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment, E-1527, last revised in 1997. This guideline provides clear guidance with which to undertake an ESA but also allows for the exercise of the judgment and discretion of the environmental professional. The purpose of the ASTM Standard Practice os to establish a standard which would allow property buyers and developers to meet the requirements established by the laws and courts to minimize the risks of environmental liability associated with buying property. Some lenders have their own ESA protocols which must be used instead of the ASTM Standard.
The Standard also creates a framework for the client to evaluate the proposed work product of the environmental professional in the context of the proposed project. For example, the ASTM Standard Practice does not call for the collection of samples, however you might decide that it would be appropriate to samples for lead based paint or asbestos in a building you are considering for renovation. In this case the scope of work would have to be modified to include the collection of samples and the laboratory analysis. Using the ASTM Standard as a guidance document, you can decide to accept the scope of work as it is presented or modify it to meet your specific goals.
Finally, the Standard can be used to evaluate the final work product of the environmental professional. A checklist of the key points of the ASTM Standard may be used to measure the completeness of the report and work effort. An example of such a quality assurance checklist is attached.
Benefits and Limitations of a Phase I ESA
The Phase I ESA is designed in principle to be a cost effective overview of a site which should identify indications of recognized environmental conditions. To keep the cost of the investigation at a reasonable level, the typical Phase I ESA involves no collection or testing of samples and is limited to information already available through public sources, interviews or first hand observation. This approach allows a buyer to determine if there is an indication of a problem or an increased risk with a particular property.
By limiting the scope of the ESA the cost is minimized but the conclusions of the environmental professional are therefore drawn with limited information. For this reason the environmental professional may be unable to conclude that contamination is or is not present stating instead she can conclude only that there are indications of this condition or that circumstance which could indicate contamination.