Environmental due diligence is a structured process used to identify and evaluate potential environmental conditions that may affect a commercial real estate transaction.
For many properties, the process begins with an environmental database report. However, database review is only one component of a comprehensive environmental assessment.
The most important part of environmental due diligence is the interpretation of available information.
Step 1: Understand the Property
The first step is to establish the basic characteristics of the subject property.
This includes:
Understanding the property provides the framework for evaluating subsequent environmental information.
- Property address
- Parcel configuration
- Current use
- Building improvements
- Historical development
- Surrounding land use
- Property size
- Current occupants
- Available environmental documentation
Step 2: Evaluate Historical Uses
Historical research is performed to determine how the property developed over time.
Historical sources may include:
The objective is to identify historical uses that may have involved hazardous substances, petroleum products, waste handling, manufacturing, or other potentially significant activities.
- Aerial photographs
- Topographic maps
- Sanborn maps
- City directories
- Historical property records
- Previous reports
Step 3: Review Environmental Databases
Environmental database reports identify nearby facilities associated with environmental regulatory programs.
Common listings include:
The database findings are then evaluated based on their relationship to the subject property.
- UST
- LUST
- RCRA
- CERCLA
- Superfund
- Brownfields
- State remediation programs
- Spill records
- Other federal and state environmental programs
Step 4: Evaluate Regulatory Records
Where a listing may represent a potential environmental concern, regulatory documentation can provide additional information.
The review may identify:
This information can significantly change the interpretation of a database listing.
- Release information
- Contaminant concentrations
- Sampling results
- Remediation activities
- Closure status
- Regulatory correspondence
- Institutional controls
- Remaining contamination
Step 5: Evaluate Physical and Hydrogeologic Setting
Environmental risk is also influenced by the physical setting.
Relevant considerations may include:
These factors can be particularly important when evaluating off-site releases.
- Topography
- Surface drainage
- Geology
- Soil characteristics
- Groundwater depth
- Groundwater flow direction
- Nearby surface water
- Potential migration pathways
Step 6: Evaluate RECs, CRECs and HRECs
The available information is integrated to determine whether identified conditions meet the applicable ASTM definitions.
The evaluation should distinguish between:
The conclusion should be supported by the available evidence.
- Current environmental conditions
- Historical releases
- Controlled conditions
- Resolved environmental conditions
- Business environmental risks
- Conditions outside the scope of the Phase I ESA
Step 7: Determine Whether Additional Investigation Is Appropriate
If the available information indicates potential contamination that cannot be adequately evaluated through the Phase I process, additional investigation may be considered.
Depending upon the circumstances, this may include:
The scope of additional investigation should be based on the specific environmental concern.
- Regulatory file review
- Additional historical research
- Phase II ESA
- Soil sampling
- Groundwater sampling
- Soil vapor investigation
- Other environmental investigation
Step 8: Translate Findings Into Transaction Risk
The final objective is not simply to identify environmental records.
The information must be translated into a conclusion that is meaningful to the transaction.
The user may need to understand:
This is the difference between environmental data collection and environmental due diligence.
- What environmental condition was identified?
- Where is it located?
- Is there evidence of a release?
- Is contamination present?
- Has the condition been addressed?
- Could contamination migrate to the property?
- Is regulatory closure available?
- Is additional investigation recommended?
- Could the condition affect the transaction?
Conclusion
Effective environmental due diligence requires multiple lines of evidence.
Historical records establish how a property was used. Environmental databases identify regulated facilities. Regulatory records provide details regarding releases and remediation. Site observations provide current physical information. Geological and hydrogeological conditions help evaluate potential migration.
These sources must then be integrated using professional environmental judgment.
Our objective is simple: convert environmental and property information into clear, technically supported due diligence conclusions that help clients make informed real estate decisions.
At Greenearth Environment Consultants, we provide environmental due diligence support for US commercial real estate, including Phase I ESA research, environmental database review, historical research, regulatory file review, REC/CREC/HREC evaluation, and PCA support.
Environmental Due Diligence