Phase I Environmental Site Assessment Buyers Guide

What is a Phase 1 ESA? 

A Phase I ESA is an investigation of the current and historic uses of a property, and an inspection of current conditions of the properly to determine the likelihood that contamination is present. The Phase I environmental assessment is intended to be a standardized review process looking for specific indications of contamination issues; it is not intended to be an exhaustive search looking for contamination that is not there.

How Long Does a Phase I ESA Take?

This will vary greatly between providers; you should allow at least two weeks to complete the Phase I. Some providers will ask for significantly more time, some requiring 4-6 weeks.

Can I Use a Previous Phase I ESA Report?

Possibly; however the ASTM is specific on how old the ESA report can be. Reports completed within the previous six months are valid; however after six months some or all of the report will need to be updated. Environmental assessments older than one year need to be redone.

Are There Different Kinds If Phase 1 ESA?

Different companies can use a variety of terms to refer to their own initial or cursory review of environmental issues associated with a property. It is sometimes difficult to determine what the review includes.

Therefore, to assure a comprehensive assessment, the only types of Phase 1 ESA accepted by the US government, States and most lenders uses the current ASTM standard method, referred to as “ASTM E 1527-13” or "E 2247 – 08", with the later applying to large tracts of rural or forest lands only. These ASTM standards are updated every five years, so older, obsolete versions are referred to as E 1527-05, etc. In the future, environmental professionals will be using E 1527-10, expected to the released in 2010.

To compare services between companies, be sure that each is providing a Phase I ESA that explicitly meets the ASTM E 1527-13 standard.
Other types of investigations exist, including:

• Transaction Screen
• Records Search With Risk Assessment

These types of investigations are appropriate for some limited situations, or can be conducted to satisfy the environmental due diligence requirements of specific organizations. For example, the Small Business Administration has developed their own “Records Search With Risk Assessment” procedure to provide an appropriate level of environmental review for low risk properties. These types of investigations are not equivalent to a Phase 1 Environmental Site Assessment.

What is the Phase 1 Looking For?

Simply stated, a Phase I ESA is looking for indications that current or historic uses of the property may have resulted in contamination. The Phase I also considers neighboring properties where contaminates may have migrated onto the property through groundwater, etc.

Because the scope of the Phase 1 environmental site assessment is focused on contamination issues, some organizations will decide to augment the assessment to address other related issues, such as:

• Asbestos
• Lead-based paint
• Indoor air quality and industrial hygiene
• Compliance with environmental permits and environmental laws
• Compliance with OSHA rules and other health and safety issues
• Past company disposal practices in landfills, etc.

These other types of issues are not addressed in a Phase I ESA under the ASTM standard; if you wish to have these issues addressed, you need to discuss adding them with the environmental professional.

Can anyone conduct a Phase I Environmental Assessment?

Yes and no; legally, anyone can conduct a Phase I ESA. However, if you want your assessment to meet the ASTM standard, then the “environmental professional” you use will need to provide documentation that they meet the specific qualification requirements contained in ASTM E 1527-05.
Different organizations and lenders may have additional requirements on who can conduct Environmental Site Assessments they will accept. For example, the Small Business Administration (SBA) requires that the environmental professional has a minimum of $1,000,0000 professional liability insurance, in addition to meeting technical qualifications.

How is my Lender Involved?

Lenders have a vested interest in the condition of a property they will accept as collateral. If contamination is discovered later, the value of the property can be significantly reduced and can make the property difficult to resell.

Make sure to discuss the Phase I ESA with your lender. They may have additional requirements that need to be included. The lender may also need to be identified in the ESA report as an “additional user”, or may require additional liability protections, such as a “reliance letter”. Some lender prefer that they order the Phase I ESA rather than having the borrower order one.
Understanding your lender’s requirements at the onset will save time and money, and will avoid having to make last minute changes prior to closing.

What Happens If the Phase I Identifies an Issue?

Sometimes the Phase I will identify issues (referred to as “Recognized Environmental Conditions” or REC) that indicate that contamination may be present on the property. In this case, the environmental professional will recommend a Phase II Environmental Site Assessment be conducted. The Phase II ESA will likely include collecting soil, groundwater or other samples to determine if contamination is actually present.

If contamination is discovered during the Phase 2 ESA, the property owner may be obligated to report it to State and/or Federal agencies, and may be required to conduct cleanup.


For further information contact Caltha LLP at info@calthacompany.com or Caltha LLP Website