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Environmental 101: Finding The Right Consultant

For real estate deals, the standard process for evaluating environmental risks is to conduct a Phase I Environmental Site Assessment (ESA) followed by a Phase II Investigation when a Recognized Environmental Condition (REC, suspected contamination) is identified. Typically, the first question a consultant receives when a Phase II is recommended is “how much?” followed by “can you do it cheaper?”  These are fair questions and I ask them myself with my CPA, handy man, painters, mechanic, etc.

The big challenge for W&M is balancing the Phase II scope of work with costs. The bigger the scope (e.g., number of samples, chemical analyses, etc.), the higher the price will be.  Sure it would be nice if we could collect one “magic sample” but such a sample doesn’t exist.  I like to compare the sampling process to playing the board game Battleship.  We can make some educated guesses but don’t really know if we’ll get a “hit” and ultimately “sink your battleship”.  On the other hand, if you conclude that a property is “clean” with limited sampling, what happens when more robust sampling performed down the road when you are selling or refinancing identifies contamination?  Now the property you bought as clean is contaminated.  The responsible party is now the current owner (you) and not the seller.  In property deals, we like to say pay me a little now, or pay me a lot later.

Key issues that impact the scope of the Phase II Investigation are:

  • What are the sources of the potential contamination and what are the elements/compounds to look for: metals, petroleum hydrocarbons, gasoline, solvents, other?
  • How much historical information including previous sampling data is available?
  • How many soil boring and/or monitoring wells do we need to properly evaluate all of the source areas and potential contaminants to conclude that the property is either clean or contaminated?
  • Can we estimate the likely direction of groundwater flow in order to locate investigations downgradient of suspected source areas?
  • How deep is groundwater and how long will it take for water to seep into the monitoring wells (in north Texas soils this can sometimes take 30 days, or longer)?
  • Can we install cheaper temporary monitoring wells using a hydraulic probe or do we need to drill more expensive permanent monitoring wells (in the case of metals, probably not)?
  • How complicated is the Site history and resulting sampling program, and what level of experience is needed for the staff working on the project?
  • How detailed does the report need to be to satisfy the buyer, seller, and lender – simple letter report or comprehensive report?
  • If the property is impacted do we have enough data to properly quantify the problem and strategize solutions (e. g., costs to investigate and clean the property and close through an applicable regulatory program).
  • In the case of the buyer and lender, what is their risk tolerance?

In the end, the consultant needs to gather enough data to make a reasonable determination that the Site is clean or contaminated based upon a number of variables. Just as too few samples can miss a contaminated area, sometimes too many samples taken in low risk locations may be wasteful.  So finding the right balance when it comes to performing a Phase II Investigation is always a challenge, and in the end finding the right experienced professional  is the key to your success.

For brevity, here are a few of W&M’s suggestions for balancing scope and costs for a Phase II Investigation:

  1. Utilize available data from your Site along with any nearby properties that may be in a regulatory program (like former leaking tank or Voluntary Cleanup Program sites).
  2. Have your consultant develop a scope of work that has enough sampling to satisfy your risk level as well as potential concerns of the next consultant when you sell the property; the bigger the deal or risk, the bigger the scope.
  3. Work with a consultant that has experience in the area and understands the geology and soil conditions they will be encountering.
  4. Limit sample analysis to key analytical parameters and focus on the primary sources and sources areas on the property. If the consultant appears to be “sample happy”, seek justification for the additional sampling.
  5. Schedule the Phase II early and avoid surcharges for rush laboratory analysis as much as possible.
  6. Sometimes you have to take “baby steps”, remember the first round of sampling is to determine if the Site is clean or impacted. At this point, your consultant doesn’t have to fully delineate all potential contaminants to the satisfaction of the state agency. If the Site is impacted, you can do that later in a regulatory program.

For more on strategies for cost effective sampling of property, contact Michael Whitehead, or any one of the many experts at W&M.

 

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