Phase I Environmental Site Assessments & Due Diligence

Confidence in Experience

GAIA's personnel have completed over 5,000 Phase I ESAs combined, and are fully versed in the most current standards and regulatory requirements for similar services for particular lenders like Fannie Mae, Freddie Mac and HUD, to help ensure our clients' ability to succeed.

GAIA completes and designs comprehensive Environmental Site Assessments (ESA) in accordance with the American Society for Testing and Materials (ASTM) Standard for Environmental Site Assessments: Phase I Environmental Site Assessment (ESA) Process, for real estate transactions, property development, zoning, bank financing, refinancing, and foreclosures, and other in-house proactive audit programs.

An Environmental Site Assessment is a report prepared for a real estate holding which identifies potential or existing environmental contamination liabilities. The analysis, often called a ESA, typically addresses both the underlying land as well as physical improvements to the property; however, techniques applied in a Phase I ESA never include actual collection of physical samples or chemical analyses of any kind. Scrutiny of the land includes examination of potential soil contamination, groundwater quality, surface water quality and sometimes issues related to hazardous substance uptake by biota. The examination of a site may include: definition of any chemical residues within structures; identification of possible asbestos containing building materials; inventory of hazardous substances stored or used on site; assessment of mold and mildew; and evaluation of other indoor air quality parameters. Contaminated sites are often referred to as "brownfield sites." In severe cases, brownfield sites may be added to the National Priorities List where they will be subject to the U.S. Environmental Protection Agency's Superfund program.

Actual sampling of soil, air, groundwater and/or building materials is typically not conducted during a Phase I ESA. The Phase I ESA is generally considered the first step in the process of environmental due diligence. This type of study is alternatively called a Level I Environmental Site Assessment. Standards for performing a Phase I site assessment have been promulgated by the US EPA and have been based in part on ASTM in Standard E1527-05 and currently E1527-13. If a site is considered contaminated, a Phase II Environmental Site Assessment may be conducted, ASTM Standard E1903, a more detailed investigation involving chemical analysis for hazardous substances and/or petroleum hydrocarbons.

The purpose of the Phase I Environmental Site Assessment (ESA) is to gather sufficient information to develop an independent professional opinion about the environmental condition of the property and to identify actual or potential environmental contamination which may have an impact on the property value or effect claim to an "innocent land owner" exemption following acquisition.

A Limited Phase I Environmental Site Assessment is a truncated Phase I ESA, normally omitting one or more work segments such as the site visit or certain of the file searches. When the field visit component is deleted the study is sometimes called a Transaction Screen.

Phase I ESA Background:
The Small Business Liability Relief and Revitalization Act (the Brownfields Amendments) clarifies CERCLA liability provisions for certain landowners and potential property owners. The Brownfields Amendments provide liability protections for certain property owners, if the property owners comply with specific provisions outlined in the statute, including conducting all appropriate inquiries into present and past uses of the property and the potential presence of environmental contamination on the property. The Brownfields Amendments amend Section 101(35)(B) of CERCLA and require EPA to promulgate regulations that establish federal standards and practices for conducting all appropriate inquiries. The all appropriate inquiries standards and practices are relevant to:

  • the innocent landowner defense to CERCLA liability;
  • the contiguous property exemption to CERCLA liability;
  • the bona fide prospective purchaser exemption to CERCLA liability; and
  • the brownfields site characterization and assessment grant programs.

EPA Published Final Rule on All Appropriate Inquiries:

The Environmental Protection Agency published a final rule setting federal standards for the conduct of all appropriate inquiries. The rule was published in the Federal Register on November 1, 2005. The final rule and preamble is available below.

The final rule establishes specific regulatory requirements for conducting all appropriate inquiries into the previous ownership, uses, and environmental conditions of a property for the purposes of qualifying for certain landowner liability protections under CERCLA. The final rule went into effect on November 1, 2006, one year following the date of publication.

As of November 1, 2006, parties must comply with the requirements of the All Appropriate Inquiries Final Rule, or follow the standards set forth in the ASTM E1527-13 Phase I Environmental Site Assessment Process, to satisfy the statutory requirements for conducting all appropriate inquiries. All appropriate inquiries must be conducted in compliance with either of these standards to obtain protection from potential liability under CERCLA as an innocent landowner, a contiguous property owner, or a bona fide prospective purchaser.

The EPA Recognizes Two ASTM Standards as Compliant with All Appropriate Inquiries:
EPA now recognizes both ASTM International's E1527-13 "Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process" and ASTM E2247-16 "Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process for Forestland and Rural Property" as compliant with the All Appropriate Inquiries Regulation. Either of these ASTM International Phase I standards may be used to satisfy the statutory requirements for conducting all appropriate inquiries under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).

Actions triggering the Phase I ESA:
A variety of actions can cause a Phase I study to be performed for a commercial property, the most common being:

  • Purchase of real property by a person or entity not previously on title.
  • Contemplation by a new lender to provide a loan on the subject real estate.
  • Partnership buyout or principal redistribution of ownership.
  • Application to a public agency for change of use or other discretionary land use permit.
  • Existing property owner’s desire to understand toxic history of the property.
  • Compulsion by a regulatory agency who suspects toxic conditions on the site.
  • Divestiture of properties

Scope of Work for a Phase I ESA:

Depending upon precise protocols used, there are a number of variations in the scope of a Phase I study. The tasks common to almost all Phase I ESAs include:

  • Performance of an on-site visit to view present conditions (chemical spill residue, die-back of vegetation, etc); hazardous substances or petroleum products usage (presence of above ground or underground storage tanks, storage of acids, etc.); and evaluate any likely environmentally hazardous site history.
  • Evaluation of risks of neighboring properties upon the subject property.
  • Review of Federal, State, Local and Tribal Records out to distances specified by the ASTM 1527 and AAI Standards (ranging from ⅛ to 1 mile depending on the database).
  • Interview of persons knowledgeable regarding the property history (past owners, present owner, key site manager, present tenants, neighbors).
  • Examine municipal or county planning files to check prior land usage and permits granted.
  • Conduct file searches with public agencies (State water board, fire department, county health department, etc) having oversight relative to water quality and soil contamination issues.
  • Examine historic aerial photography of the vicinity.
  • Examine current USGS maps to scrutinize drainage patterns and topography.
  • Examine chain-of-title for Environmental Liens and/or Activity and Land Use Limitations (AULs).

Non-Scope Items in a Phase I Environmental Site Assessments can include visual inspections, limited sampling or records review searches for:

  • Asbestos Containing Building Materials (ACBM)
  • Lead-Based Paint
  • Lead in Drinking Water
  • Mold
  • Radon
  • Wetlands
  • Threatened and Endangered Species
  • Earthquake Hazard
  • Vapor Intrusion