Phase I & II ESA Walkthrough – Industrial Property

In our society, almost every property is liable to environmental risk. Without careful inspection from environmental professionals, many unseen problems can go undetected. A Phase I Environmental Site Assessment helps determine if a property may have been contaminated by current or previous activity. Phase I ESAs help protect the purchaser of the property and limit liability by discovering potential environmental concerns before purchase.

If you are purchasing property, your lender may require a Phase I ESA. This is to help evaluate if an environmental risk could devalue the property, impact the borrower’s finances, or open up a larger problem down the road. 

The Phase I Procedure:

The Phase I ESA process begins with the evaluation of the property in its entirety. This includes an on-site inspection, the collection of historical and environmental documents, and meeting with current and past occupants. A Phase I ESA should be completed by qualified professionals who have credentials, education in their respective fields and have years of hands-on experience. 

Here is a comprehensive break-down of the components to a Phase I ESA:

Site Inspection

1. The site inspection is a thorough visual inspection.
   1. Interior & exterior.
   2. Property characteristics and property lines in accordance with the national standard for Phase I ESA.
2. Reviews the uses of nearby properties.
   1. Properties around the area may have had spills or far-reaching contaminants that may affect your property.
   2. Chemical spills, groundwater contamination, soil contamination, etc.

Documentation Review (Environmental & Historical)

1. We are required to review regulatory records that may reveal known releases or spills on the property or nearby.
2. Records may also reveal risky activities such as hazardous materials handling and storage that may have contaminated the site. These will likely need to be properly remediated.
3. A fully functioning auto shop today may have been a metal fabrication shop 40-50 years ago.

With any given property, there is a history that may include contaminants or hazardous materials. An example of this can be a Metal Fabrication building turned auto shop. Metal Fabrication shops often use a metal cleaner and degreaser known as methylene chloride. The chemical itself is readily evaporative and can soak into the soil, contaminating both soil and groundwater.

Interviews

1. Current and former tenants of the property can provide a wealth of information and critical insight about the property and its history. These accounts and information should be backed by documentation.

Report

1. From all of this information, Alpha Environmental will draft a report that includes everything that was uncovered and any conclusions. We will also provide recommendations to address Recognized Environmental Conditions (a.k.a RECs).

Usually, the Phase I ESA procedure takes anywhere from 2-4 weeks. Here at Alpha Environmental, we can also provide Rush Options to expedite the process upon request.

Upon the discovery of any RECs, we would then recommend moving on to Phase II.

What Is A Phase II ESA? 

A Phase II Environmental Site Assessment includes sampling followed by laboratory analysis to confirm or deny the presence of any hazardous materials that have been discovered from Phase I. Depending on the results of the samples, the Phase II ESA will outline any additional site investigations and potential remediation procedures to bring the property up to the appropriate state and federal standards. Here is a breakdown of the Phase II procedure:

The Phase II Procedure:

Sample Collection:

1. Collect and analyze air, soil, groundwater and/ or site building materials to assess the presence of suspected hazardous material.
2. We will use this information to get an in-depth understanding of environmental liabilities and the financial impacts of such liabilities.

Remediation/Clean-Up: 

1. Alpha Environmental will then offer remediation and mitigation strategies and potential costs.

The Phase II process can take anywhere from a few weeks to a few months. The remediation timeline is dependent on the type of clean-up that is needed to bring the property up to national standards.

Why Experience is Important

Choosing qualified, accredited and experienced environmental consultants ensures the protection of your interests. When looking for an environmental consulting company, it is important to assess their years of experience, their qualifications and the knowledge they bring to the table. This is especially important as there are instances where buyers are forced to spend additional tens of thousands of dollars due to improper Environmental Site Assessments. 

Another concern for most potential buyers is their budget, leading some to choose a cheaper route. Many consultants offering “competitive” or “affordable” rates may cut corners, have no legitimate credentials or no guidelines.

To better understand the importance of experience, here is an example  involving improper ESAs coupled with a lack of experience.

Scenario: Industrial Properties

Joe is looking to purchase industrial property with inheritance money as a down payment. The lender (the bank) tells Joe that the purchasing process requires him to perform an Environmental Site Assessment. Joe researches consulting companies that serve around his neighborhood and stumbles upon ABC Consultants. Rather than research the company’s experience, credentials or history of work with ESAs in general, he is drawn to their lower-priced bids. After he is given a rough description of Phase I and 2 ESAs, Joe decides to hire them to perform a Phase I ESA and a Phase II if need be.

Over a few weeks, the company inspects the site, gathers necessary documentation, and conducts interviews with previous/current owners. After they have finished, the consultants generate a report. However, during the inspection stage of Phase I, the consultants did not properly inspect the soil surrounding the property and only assess the soil samples from where they assume the underground tank sits. Based on their findings, ABC consultants suggest a Phase II and the remediation of an underground oil tank for a bid of $10,000. Taking the Phase I assessment to his lender, they include the $10k in the cost of the site, maximizing Joe’s inheritance.

The company begins the remediation process on Joe’s industrial property. However, it is later revealed that the soil surrounding the property is contaminated. Due to that small oversight, the property does not meet DEQ (Department of Environmental Quality) and Joe is forced to pay an additional $25,000 out of pocket. All of this could have been avoided if the consultant performing the Phase I ESA would have made the discovery up front.. Furthermore, researching the ABC Consultants company work experience, overall knowledge in Phase I & 2 ESAs, and credentials would have ensured peace of mind.

Phase I & 2 assessment procedures should be handled by companies who have had years of experience and education. If you require a Phase I or 2 ESA, contact us today by filling out a simple contact form here, or giving us a call at 503.406.6686 for more information.