Phase I ESA: Frequently Asked Questions

What is a Phase I Environmental Site Assessment?

Often the first step in the environmental due diligence process, a Phase I Environmental Site Assessment, or ESA, is a report completed in commercial real estate transactions. The purpose of an ESA is to identify any potential or existing threats of environmental conditions, such as soil contamination from a release of hazardous substances or petroleum products. If any issues are discovered, the environmental burdens carry a potentially exorbitant pricetag and often the owner is held liable simply because he or she owns the property.

What Does a Phase 1 ESA Entail?

The sole purpose of a Phase 1 ESA is to determine whether there is the presence or likely presence of contamination, so physical samples are not typically collected. Phase 1 ESAs are performed according to the American Society for Testing and Materials (ASTM) E1527-13 and generally include the following:

  • A site visit to observe the current and historical uses of the property
  • A review of federal, state, tribal, and local records including, but not limited to, under- or above-ground storage tanks and hazardous substance storage or disposal near the property
  • Interviews with people knowledgeable of the property, including current and past property owners
  • A review of state and local planning records to verify prior land usage and permits granted
  • A search of public agency files for records of water and soil contamination issues
  • Studying aerial photography of the surrounding area and USGS topography maps

Does the law require a Phase I ESA?

Although not required by law, a Phase 1 ESA prior to purchasing a property protects you against the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). CERCLA can require the removal of hazardous substances at the owner’s expense even if he or she is not responsible for the contamination. Most, if not all, lenders will also require that a Phase I ESA be completed before providing financing.

How much does a Phase I ESA cost?

The costs involved with a Phase I ESA can vary considerably. It’s important to keep in mind that a properly conducted Phase I ESA can be the catalyst to avoiding thousands or even hundreds of thousands of dollars in liabilities. Hiring an expert environmental consultant to conduct a proper and thorough Phase I ESA is critical.

How long does a Phase I ESA take?

A Phase I ESA can take anywhere from one week to one month, and sometimes longer, depending on several factors such as the complexity of research and location of the property.

How long is a Phase I ESA good for?

The ASTM dictates that a Phase I ESA is valid for six months. Assessments completed between six months and one-year prior need a comprehensive update and those conducted over a year ago are not valid.

Environmental due diligence

Environmental due diligence is the formal process in which commercial real estate is assessed for possible risk of environmental contamination. It is designed to protect innocent landowners and prospective buyers from potentially devastating environmental liabilities. The Environmental Protection Agency (EPA) mandates the standards for conducting environmental due diligence.