An environmental site assessment is a report prepared during a real estate transaction that identifies potential or existing environmental contamination liabilities of a property and surrounding properties. The investigation searches for Recognized Environmental Conditions, aka, RECs. The analysis, often called an ESA, typically is used to hedge investment risk for a buyer or bank lender. Project typically takes 2 weeks.
What is a failed Phase I ESA?
A Phase I ESA that has discovered Recognized Environmental Conditions and the report recommends having a Phase II ESA performed.
What is a Phase II Environmental Assessment?
Is an “intrusive” investigation which collects soil samples by drilling the ground up to 50 feet, then testing the soils for contaminants in a certified laboratory. Project typically takes 3 to 4 additional weeks.
What is a Recognized Environmental Condition (REC)?
ASTM E1527-13 defines a REC as “the presence or likely presence of any hazardous substances or petroleum products in, on, or at a property.
Naturally occurring chemicals or substances are not identified as a “REC.” Examples are : Crude oil and natural gas.
Other items not considered a REC per Phase I ESA scope: asbestos & lead paint
Controlled Recognized Environmental Conditions (“CRECs”):
The new 2013 ASTM Standard defines a Controlled Recognized Environmental Condition (“CREC”) as “a recognized environmental condition resulting from a past release of hazardous substances or petroleum products that has been addressed to the satisfaction of the applicable regulatory authority (for example, a historic leak or spill that has been remediated to something less than “clean,” so that the property may not meet residential use criteria.
Historical Recognized Environmental Conditions (“HREC”):
The new ASTM Standard defines a Historical Recognized Condition (“HREC”) as “a past release of any hazardous substances or petroleum products that has occurred in connection with the property and has been addressed to the satisfaction of the applicable regulatory authority or meeting unrestricted use criteria established by a regulatory authority, without subjecting the property to any required controls (for example, property use restrictions, activity and use limitations, institutional controls, or engineering controls)”.
Red flags that trigger a failed Phase I Assessment during site visit:
- Interior ground stains or corrosion
- Strong, pungent or noxious odors
- Discolored drains or sumps
- Pits, ponds or lagoons
- Stained soil or pavement
- Stressed vegetation
- Improperly stored solid waste
- Onsite wells or septic systems
- Drains, sumps or clarifiers (oil water separators)
- Presence of Underground Storage Tanks
As a standard, we environmental inspection companies, follow the above checklist. If the site inspector witnesses any of the above items on his/her checklist, the underwriter back at the office will more than likely fail the inspection (call an REC) and recommend a Phase II Assessment, HOWEVER, note that I said they “will more than likely” fail. That’s because most companies do. Savvy Inspections is not most companies. The checklist items above are quite subjective, in my opinion, for instance, #5 Stained soil. If we come across an auto mechanic shop and find a common oil stain on the dirt, our site inspector will scrape away the top layer to see if it’s clean underneath. It’s a mechanic’s shop, after all, and the stain is usually dirty only on the topside, therefore, no need to flunk the property. Just needs some house keeping.
Many people assume a failed Phase I ESA is the final say. Not true. You can always get a second opinion from another environmental company. Paying the fee for a second Phase I ESA from an un-bias company, is better than needlessly spending $12K-$20K for a Phase II, adding months to closing, or losing the entire deal altogether. Just because one dentist says you need your teeth drilled, doesn’t mean you can’t get a second opinion from another dentist.