In my 20+ years of environmental consulting, I’ve seen a wide range of environmental concerns identified (or more problematically not identified) in Phase I environmental site assessments (ESAs). A Phase I ESA is a research report of the history of a property that is used to determine if there are Recognized Environmental Conditions (RECs) associated with a Site. A Phase I ESA is indispensable if you are interested in buying a commercial or industrial property. Due to liability concerns and depending on the value of the loan, it is usually required by lenders when financing the deal.
A question that should be asked by the procurer of a Phase I ESA (i.e., client) is “are all Phase I ESAs created equal”. In theory, they should since they all should be using the same ASTM standard; however, the determination of RECs at a Site is based on the judgment and expertise of the Environmental Professional (EP). Therefore, it is imperative that the selected EP has the experience needed for Phase I ESAs over a wide range of property types and for a variety of Users (from vacant properties to complex industrial facilities). It’s important to note that the EPA puts the accountability on the client to use a qualified EP. Additionally, the EP should be intimately familiar with the rules and regulations that govern environmental reporting, investigation and cleanups both federally and within the particular State where the Phase I is being conducted.
Not only are the factors described above important in commissioning a Phase I ESA, but a working relationship between the consultant and User is imperative in not only determining and communicating what RECs may exist and how to address them, but also what business environmental risks may exist (i.e., wetlands, asbestos, mold, etc.) and ultimately how to account for these issues.
There are a number of scenarios where a working relationship between an EP and a Phase I user can be advantageous. If we understand your business and risk tolerance, and goals of the ESA for your particular project, we can better communicate the findings of the Phase I ESA and ensure that your overall objectives are met. If you’re shopping for a Phase I consultant based only on price, not only may you be getting what you paid for (i.e., a poor quality Phase I conducted by an EP with limited experience which could result in environmental issues being missed), but there may also be intricacies that are not relayed by the consultant to the client, lost in the shuffle, and not accounted for in the total cost of obtaining a property. Just as we may ask for advice from our most trusted friends who may have experienced our life situation, a good working relationship between the client and consultant can significantly improve the decision-making process during the due diligence period. A good working relationship will facilitate communication between client and consultant and ultimately aid the client in achieving their ultimate goal of completing a real estate transaction in which the environmental risks have been properly identified and considered.
Please contact Frank Clark with any questions.