A Phase I Environmental Site Assessment (ESA) is an environmental due diligence assessment conducted to evaluate the potential for recognized environmental conditions (RECs) associated with a commercial real estate property.
In the United States, Phase I ESAs are commonly performed in accordance with ASTM E1527-21, Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process. The standard is intended to identify recognized environmental conditions associated with the subject property and to provide a framework for conducting appropriate environmental inquiry. ASTM E1527-21 is also recognized by the U.S. Environmental Protection Agency (EPA) as consistent with the All Appropriate Inquiries (AAI) requirements under 40 CFR Part 312.
What Does a Phase I ESA Evaluate?
A Phase I ESA generally evaluates the current and historical environmental conditions of the subject property and surrounding properties.
The assessment typically includes:
The purpose is not simply to determine whether a property appears clean. Rather, the assessment is intended to evaluate whether available information indicates the presence, likely presence, or material threat of a release of hazardous substances or petroleum products.
- Review of historical property uses
- Review of historical aerial photographs
- Review of historical topographic maps
- Review of Sanborn fire insurance maps, where available
- Review of city directories and other historical sources
- Environmental regulatory database review
- Review of regulatory agency records, where appropriate
- Site reconnaissance
- Interviews with persons knowledgeable about the property
- Review of previous environmental reports
- Evaluation of adjoining and nearby properties
- Identification and evaluation of RECs, CRECs, and HRECs
- Identification of significant data gaps
- Evaluation of certain business environmental risks and non-scope considerations, where requested
What Is a Recognized Environmental Condition?
Under ASTM E1527-21, a REC generally relates to the presence of hazardous substances or petroleum products due to a release, the likely presence due to a release or likely release, or conditions that pose a material threat of a future release.
This distinction is important because the presence of an environmental database listing does not automatically mean that a REC exists.
For example, a nearby leaking underground storage tank (LUST) site may be listed in a regulatory database. The environmental professional must evaluate the site's distance, direction, topography, groundwater conditions, site history, regulatory status, and available information regarding the release before determining whether the listing represents a concern to the subject property.
Why Historical Research Matters
Historical property use is one of the most important components of a Phase I ESA.
A property currently occupied by an office building may previously have been used for industrial manufacturing, vehicle maintenance, agricultural operations, dry cleaning, or petroleum storage.
Current conditions alone may therefore not adequately represent historical environmental risk.
Historical sources are reviewed to identify activities that may have resulted in recognized environmental conditions or other potential environmental concerns.
What a Phase I ESA Does Not Do
A Phase I ESA is primarily a research and observational assessment.
It generally does not include:
Where available information indicates a potential release requiring further evaluation, a Phase II ESA or other additional investigation may be recommended.
- Soil sampling
- Groundwater sampling
- Soil vapor sampling
- Laboratory chemical analysis
- Subsurface investigation
- Remediation
- Detailed building-condition assessment
Why Phase I ESA Matters in a Real Estate Transaction
Environmental conditions can affect property value, financing, redevelopment, liability, and transaction decisions.
A properly performed Phase I ESA provides the user with an environmental risk assessment based on available historical, regulatory, observational, and other reasonably ascertainable information.
For buyers, lenders, investors, and other stakeholders, the objective is to identify potential environmental concerns before the transaction is completed.
At Greenearth Environment Consultants, we support commercial real estate environmental due diligence through historical research, environmental database review, regulatory research, REC/CREC/HREC evaluation, and Phase I ESA report support for US properties. Have a commercial property under review? Contact Greenearth to discuss your environmental due diligence requirements.
Environmental Due Diligence