Ember Environmental is headquartered in Chicago, IL and has locations across the greater Midwest offering Phase I Environmental Site Assessments. A Phase 1 ESA is a common part of industrial and commercial property sales and the “Due Diligence” period of these real estate transactions. A properly done Phase I ESA that follows ASTM standards can save a buyer time and money by warning of potential environmental problems and liabilities before it is too late. Are you buying a property or is your broker/lender stating you need a Phase 1 Environmental Site Assessment? Figuring out exactly what a Phase I ESA is and why you need one is a good starting point.
What is a Phase 1 Environmental Site Assessment?
In simple terms a Phase I ESA investigates the past and present uses of a property. Furthermore, it looks for any evidence of a current or past release of hazardous materials/chemicals or petroleum products. Was your property home to a gas station or dry cleaners 40 years ago? Did a gasoline underground storage tank (UST) leak its contents and contaminate the soil or groundwater? Do other hazardous materials or chemicals at the site pose an environmental risk? These are examples of questions a Phase 1 Environmental Site Assessment aims to answer.
In more official terms, according to ASTM E1527-13, a Phase I ESA is looking to identify what are known as a REC, or Recognized Environmental Condition. This means the presence or likely presence of any hazardous substances or petroleum products in, on, or at the property; (1) due to any release to the environment, (2) under conditions indicative of a release to the environment, or (3) under conditions that pose a material threat of a future release to the environment.
What’s in a Phase 1 Environmental Site Assessment?
Historical resources such as fire insurance maps, city directories, and aerial photos help ascertain past uses of the property.
A review of local, state, and federal regulatory databases and records for current or past environmental issues regarding the property and surrounding area.
A site visit to inspect the property for indications of contamination, spills, or other environmental concerns.
Ember may interview current owners, property managers, occupants and tenants, government officials, and the prospective buyer for knowledge of the property.
A Phase I ESA report following ASTM E1527-13 with the appropriate information from the Phase 1 Environmental Site Assessment process.
Why do I need a Phase I ESA?
So you understand the basics of what a Phase 1 Environmental is but do you really need one? The quick answer to that is yes because your lender likely requires it as part of the due diligence process. Regardless, a Phase I ESA is also valuable for your own knowledge as it can alert you to potential environmental liability or an issue impacting the property’s value.
Obviously if you contaminate a site you are responsible for the cleanup and the massive costs. But did you realize you are also responsible for the cleanup and costs if the site was contaminated before you bought it? Not only that, you could be footing the bill for cleanup costs of any neighboring properties your site contaminates. In some cases you could even be responsible for the cleanup of your site from contamination by another property. That might not sound fair but that is the law.
Luckily a properly done Phase 1 Environmental Site Assessment that follows ASTM E1527-13 may provide you with some legal protection if your site ends up in the EPA’s Superfund program.* As the current landowner you may qualify for an “Innocent Landowner Defense” to Superfund liability. However in order to do this you must satisfy the EPA’s “All Appropriate Inquiries” (AAI) of the Comprehensive Environmental Response, Compensation, & Liability Act (CERCLA). Essentially before you buy the property you must do the proper research and show you had no idea it was contaminated. Guess what is recognized as helping satisfy AAI requirements? That’s right, a Phase 1 Environmental Site Assessment that follows ASTM E1527-13.
Common examples of a “R.E.C.” discovered by a Phase I Environmental Assessment
There are a variety of problems or Recognized Environmental Conditions (REC) a Phase 1 Environmental can unearth but here are a few common ones.
The chemical most often used by dry cleaners is called PERC (Perchloroethylene/Tetrachloroethylene). While it does a great job cleaning your cloths it only takes an extremely small amount to contaminate a property. In fact past studies by the EPA estimate that 75% of dry cleaning properties are or have been contaminated. Discovering that your site or a neighboring property was a dry cleaner is important to know before closing.
Leaking Underground Storage Tanks (LUST)
Leaking USTs are the most common concern unearthed by the regulatory review. Because they are buried underground it is easy for leaks to go undiscovered for long periods of time. Underground storage tanks are far more common than you think. Many businesses have petroleum USTs to fuel trucking operations on site. They also use to be very common on residential properties as a way to store heating oil for furnaces and boilers.
Gas Stations & Auto Repair Shops
If leaking USTs pose a risk it makes sense that gas stations are of a particular need to pay attention to. By nature gas stations and auto repair shops contain an extremely large amount of petroleum products. At a fuel station the gasoline and diesel is stored in a large system of underground storage tanks on the property. Those tanks could still be on the property or may have leaked at some point. Auto repair shops have rules they need to follow when cleaning up and disposing of waste oil and petroleum products. Unfortunately many shops don’t follow them.
Proximity to sites with hazardous releases
Just because your site appears clean doesn’t mean your neighbor’s is. It is quite common to find issues in environmental records regarding sites in your area whether they be leaking USTs, former illegal dumping sites, an automotive repair shop caught improperly disposing their oil waste products, or a variety of other concerns.
How much does a Phase 1 Environmental Site Assessment cost and how long does it take?
A Phase I ESA following ASTM E1527-13 typically takes 2 to 3 weeks to complete. Why so long? The biggest reason are the records, files, and historical data that need to be reviewed. These take time to be gathered from the appropriate agencies and often consist of thousands of pages. So beware the company that tells you they can complete a Phase I ESA in a week. They are likely cutting corners by not gathering the required information or taking the time to review it.
The cost of a Phase I Environmental Site Assessment (Phase 1 ESA) typically ranges from $1600 for the very simplest and smallest property to $4000 for larger commercial or industrial sites. This is however a general range and is highly dependent on the details of your property and its location. Can you find a Phase I ESA for cheaper? You may be able to get a quote for under $1600 but we caution you to tread carefully. Remember all the records and data that need to be gathered? Those cost a lot of money and take a significant number of man hours to review.
If someone offers a cut rate price it is likely they aren’t following the spirit of ASTM E1527-13 which could spell trouble for you down the road. Offering a cheap Phase I ESA and then recommending the need for a Phase II ESA, which can cost you well over $10,000, is another common scam. Of course the Phase II Environmental will more than make up for whatever money they lost completing the Phase 1 ESA.
What isn’t in a Phase I Environmental?
It is important to know what is in a Phase I ESA and what isn’t. ASTM E1527-13 sets out a specific scope of work for these environmental site assessments. The scope of work does not include mold, asbestos, lead paint, radon, regulatory compliance, wetlands, and more. If you feel you need investigations into any of these areas it is best to contract those services separately. However, if any of these concerns are observed during the Phase I Environmental Site Assessment process Ember will give you a heads up. It is also important to be clear that a Phase I ESA does not include any sort of sampling or testing. This normally follows in a Phase II assessment if the Phase 1 Environmental Site Assessment uncovers anything of particular concern to yourself or the lender. Luckily most properties do not end up needing a Phase II ESA. This is good news since they can be extremely expensive.
Hopefully we have helped clear up some of the mystery around Phase 1 Enviromental Site Assessments. If you would like a quote for a Phase I ESA or have further questions please feel free to contact us or give us a call at (312) 340-5472.
*The following is a general description and shouldn’t be considered legal advice.