If you have ever considered purchasing commercial property and embarking on a development project, you most likely would have encountered environmental site assessments (ESAs), which help ensure that your investment towards commercial properties does not go to waste as a result of environmental liabilities.
ESAs are especially important for property transactions, development projects, and regulatory compliance, and for industries that handle hazardous materials. This can include sectors like manufacturing, automotive, or chemical processing.
Consider a hypothetical situation where you purchase a seemingly perfect commercial property, but later on, you discover that the property was once a gas station with contaminated soil. Implementing clean-up measures in such situations can be extremely costly.
In fact, according to one advisory firm, an entrepreneur had to bear more than $100,000 in remediation costs because they skipped the ESA before purchasing a property. Compared to the average cost of a Phase I ESA in 2023 – which was around $3,083 – the value of an ESA cannot be understated.
An environmental site assessment can help you avoid high clean-up and remediation costs associated with commercial property purchases by identifying potential environmental risks and the extent of risk they present.
Depending on the state of the assessed site, both Phase I and Phase II environmental site assessments may be necessary.
What is a Phase I Environmental Site Assessment?
A Phase I environmental site assessment is a preliminary assessment that is focused on uncovering the property’s history. This is then used to determine any potential environmental concerns associated with the property.
Here, assessors will conduct a comprehensive review of the land’s historical records and regulatory databases and perform a visual inspection of the site.
The objective of a Phase I ESA is to identify Recognized Environmental Conditions (RECs). These are defined by the American Society for Testing and Materials (ASTM) as the presence or likely presence of contamination that could pose a threat to human health or the environment.
Key components of a Phase I ESA include:
1. Historical Reviews
Environmental professionals will conduct in-depth research on the property’s past uses here. They will utilize resources such as historical maps, aerial photographs, city directories, and building permits to ensure that the information derived from research is accurate. This helps them identify any past industrial activities that may have taken place on the site, or detect the potential storage of hazardous material that could have led to contamination.
2. Regulatory Records Checks
Here, assessors will perform a comprehensive check-up of government databases to ensure that no violations of registrations related to hazardous materials were recorded on the site or within the surrounding properties.
3. Visual Inspections
A trained professional will also conduct an on-site visual inspection to assess its current condition. They will check the property for spills, stained soil, underground storage tanks, or stressed vegetation—all of which could indicate environmental issues.
Ultimately, Phase I ESAs aim to give you a warning if there’s a chance that the property you’re about to purchase is environmentally compromised.
What is a Phase II Environmental Site Assessment?
While the Phase I ESA provides valuable insights for you to gauge whether your property purchase is feasible or not, it doesn’t definitively determine whether contamination is absent or present. To prove this, a Phase II ESA is necessary.
A Phase II ESA is a much more intensive investigation that will have to be conducted depending on the Phase I findings. In the event that the Phase I ESA identifies RECs or concludes that there is a high likelihood of contamination, a Phase II ESA is recommended for confirmation.
The key action taken in a Phase II ESA is sampling. This refers to the process of collecting samples of soil, groundwater, and even air samples where applicable from strategic locations on the property. Once the collection is complete, the samples are sent to a laboratory to analyze and determine the presence and the extent of contamination.
Phase I and Phase II environmental site assessments will provide you with a definitive answer about the environmental status of the property you’re about to purchase, allowing you to make an informed decision and helping you avoid any long-term, unnecessary costs that may arise from trying to remediate these issues.
Key Differences Between Phase I and Phase II Environmental Site Assessments
Based on the information discussed so far, here is a comparison of Phase I and Phase II ESAs in the contexts of objective, methodology, and outcome.
| Phase I ESA | Phase II ESA | |
| Objective | Identifying potential environmental concerns that may pose a threat to human health or the environment | Confirming and quantifying the identified contamination |
| Methodology | Conducting historical reviews, regulatory records checks, and visual inspections | Collecting soil, water, and air samples and conducting laboratory analyses to evaluate the contamination levels |
| Outcome | Identifying the presence and the extent of RECs | Deriving detailed findings on the presence and extent of contaminants at the site |
Evaluate the need for Phase I and Phase II environmental site assessments with the support of experts
According to the Environmental Protection Agency (EPA), anyone involved in the purchase, sale, or financing of commercial property should consider getting the help of environmental professionals to conduct an ESA. This is especially true if you’re a property buyer or developer, a lender financing commercial properties, or businesses inheriting environmental liabilities from previous tenants.
Depending on the extent of contamination on a property, both Phase I and Phase II ESAs may be necessary. Get the help of a qualified environmental professional to evaluate the state of your commercial property and make an informed purchasing decision.
