One of the most important professional judgments in a Phase I Environmental Site Assessment (ESA) is determining how an identified environmental condition should be classified.
A regulatory database listing, historical industrial use, former underground storage tank (UST), spill, or dry-cleaning operation does not automatically constitute a Recognized Environmental Condition (REC).
The environmental professional must evaluate the available information and determine whether the condition meets the applicable ASTM definition.
Recognized Environmental Condition (REC)
A REC generally involves the presence or likely presence of hazardous substances or petroleum products in, on, or at the subject property due to a release, likely release, or material threat of release.
Examples may include:
The key consideration is not simply whether a hazardous substance was used. The evaluation focuses on whether the available information indicates a release, likely release, or material threat of release.
- Evidence of a current petroleum release
- Historical release without adequate regulatory closure
- Contaminated soil or groundwater
- Active remediation associated with the property
- Historical industrial operations with evidence of a release
- UST releases with unresolved environmental impacts
Controlled Recognized Environmental Condition (CREC)
A CREC generally applies where a REC has been addressed through remediation or other response activities, but residual contamination remains subject to activity and use limitations or institutional/engineering controls.
Examples may include:
The fact that remediation has occurred does not necessarily eliminate the environmental condition.
- Residual contaminated soil remaining under a regulatory control
- Groundwater contamination subject to an institutional control
- A property with a recorded environmental restriction
- A remediated site where residual contamination remains in place
Historical Recognized Environmental Condition (HREC)
An HREC generally relates to a past release of hazardous substances or petroleum products that has been addressed to the satisfaction of the applicable regulatory authority and does not represent a current REC.
For example, a former UST may have been removed following a release, regulatory closure may have been obtained, and available documentation may indicate that no further action was required.
The historical release remains relevant to the property's environmental history, but the condition may not constitute a current REC.
Business Environmental Risk (BER)
Business Environmental Risk is different from a REC.
A BER may involve an environmental issue that can affect the property's value, marketability, use, or transaction but is outside the scope of the REC definition.
Examples may include:
ASTM E1527-21 recognizes that certain business environmental risks may require evaluation beyond the standard Phase I ESA scope.
- Asbestos-containing materials
- Lead-based paint
- Radon
- Mold
- Regulatory compliance issues
- Emerging contaminants
- Certain petroleum-related conditions
- Non-scope environmental concerns
- Historical uses without evidence of a release
Why Classification Requires Professional Judgment
Consider a former gasoline station.
A database may confirm that several USTs were historically present. That information alone does not establish that a REC exists.
The evaluation should consider:
The same database listing can therefore lead to different conclusions depending upon the available documentation and site-specific circumstances.
- Whether a release was documented
- Whether the USTs were properly removed
- Whether closure documentation is available
- Whether soil or groundwater impacts were identified
- Whether regulatory closure was obtained
- Whether contamination remains
- Current property development
- Surrounding environmental conditions; and
- Whether the available information indicates a material threat of a future release.
The Importance of the Final Environmental Conclusion
The purpose of environmental due diligence is not to classify every environmental record as a REC.
The objective is to evaluate the available information objectively and determine whether the identified condition meets the applicable definition.
A technically defensible conclusion should explain why a condition is or is not considered a REC, CREC, HREC, or BER.
This is where professional judgment and experience become particularly important.
Greenearth supports environmental professionals with detailed historical research, regulatory file review, database interpretation, and REC/CREC/HREC evaluation for commercial real estate transactions throughout the United States.
Environmental Due Diligence