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Site Assessment. Phase I. ESA.

People use different terms to talk about Phase I Environmental Site Assessments. A Phase I ESA is a standardized assessment using a practice issued by ASTM International. It is intended to identify conditions indicating surface and subsurface contamination on a property. This is usually done during the due diligence period of a property transaction.

Any time you are purchasing commercial or industrial property, a Phase I ESA should be performed to identify the environmental liabilities associated with the property. Oftentimes, a bank will require this type of assessment when loans are involved. If environmental concerns are identified, further investigation obtaining soil, groundwater and/or vapor samples can be performed. If the investigation confirms the concerns, the prospective buyer can choose to purchase the property or not.

If the Phase I ESA is done properly, a land buyer can satisfy one of three legal defenses under the federal Superfund law – a law that otherwise makes landowners strictly liable for pre-existing contamination, even if they were not the cause. Consequently, a landowner can avoid this liability by undertaking “all appropriate inquiries” into the uses and conditions of the property, and hence the need for an ASTM-compliant Phase I ESA before property acquisition.

Here are a few things to consider when reviewing a Phase I ESA in order to understand the implications:

  • Why/when was the ESA completed?
  • Was the ESA conducted by an Environmental Professional?
  • Were the three major components – records review, site reconnaissance and interviews – all included in the assessment?
  • What limitations/exceptions were noted?
  • Reliance Authority: Can you use it?
  • What are the findings, opinions and conclusions?

If you don’t understand the findings of the report, speak to an environmental specialist and ask for clarification. The assessment process should not be intended as a way to check off a requirement for the bank; it is a means of informing the buyer of the history and potential environmental liabilities of the property and its adjacent properties.