In the United States, an environmental site assessment is a report prepared for a real estate holding that identifies potential or existing environmental contamination liabilities. The analysis, often called an ESA, typically addresses both the underlying land as well as physical improvements to the property. A proportion of contaminated sites are "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. The 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. Standards for performing a Phase I site assessment have been promulgated by the US EPA and are based in part on ASTM in Standard E1527-13. If a site is considered contaminated, a Phase II environmental site assessment may be conducted, ASTM test E1903, a more detailed investigation involving chemical analysis for hazardous substances and/or petroleum hydrocarbons.
Background As early as the 1970s, specific property purchasers in the United States undertook studies resembling current Phase I ESAs to assess risks of ownership of commercial properties which had a high degree of risk from prior toxic chemical use or disposal. Many times these studies were preparatory to understanding the nature of cleanup costs if the property was being considered for redevelopment or change of land use. In the United States of America demand increased dramatically for this type of study in the 1980s following judicial decisions related to liability of property owners to effect site cleanup. Interpreting the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), the U.S. courts have held that a buyer, lessor, or lender may be held responsible for remediation of hazardous substance residues, even if a prior owner caused the contamination; performance of a Phase I Environmental Site Assessment, according to the courts' reasoning, creates a safe harbor, known as the "Innocent Landowner Defense." The original standard under CERCLA for establishing an innocent landowner defense was based upon the requirement to perform an "all appropriate inquiry" prior to ownership transfer. At such time, engineering firms started performing professional engineering reports under a variety of monikers including "Environmental Audits," "Property Transfer Screens," "Environmental Due-Diligence Reports," and "Environmental Site Assessments." In 1991, Impact Environmental coined the industry term “Environmental Site Assessment” to replace the commonly used "Environmental Audit” for property transfer studies. A 1990 Court decision, no. 89-8094 (11th Cir. May 23, 1990), United States v. Fleet Factors Corp., found that a secured creditor can be liable for property contamination under the strict, joint and several liability scheme outlined in CERCLA. As a result of this decision, banks elevated their demands for pre-transfer of all appropriate inquiries to hedge against financial risk. Starting in the New York market among banks and regional environmental consulting engineers, the term of choice evolved to Phase I Environmental Site Assessment. In 1998, the necessity of performing a Phase I ESA was underscored by congressional action in passing the Superfund Cleanup Acceleration Act of 1998. This act requires purchasers of commercial property to perform a Phase I study meeting the specific standard of ASTM E1527: Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process. The most recent standard is "Standards and Practices for All Appropriate Inquiries" 40 Code of Federal Regulations, Section 312 which drew heavily from ASTM E1527-13, the ASTM Standard for conducting "All Appropriate Inquiry" (AAI) for the environmental assessment of a real property. Previous guidance regarding the ASTM E1527 standard were ASTM E1527-97, ASTM E1527-00, and ASTM E1527-05. Residential property purchasers are only required to conduct a site inspection and chain of title survey.
Triggering actions A variety of reasons for a Phase I study to be performed exist, 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 Scrutiny of the land includes examination of potential soil contamination, groundwater quality, surface water quality, vapor intrusion, 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.
Depending upon precise protocols utilized, there are a number of variations in the scope of a Phase I study. The tasks listed here are common to almost all Phase I ESAs:
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