Q: What is a Phase I Environmental Site Assessment (ESA)?

A: The Phase I ESA is a review of relevant historic information and a non-intrusive assessment of existing site conditions. The Phase I ESA is generally conducted in accordance with the "Standard Practice for Environmental Assessments: Phase I Environmental Site Assessment Process" (ASTM E1527-05 (E1527)). The E1527-05 standard is often supplemented by lender guidance and requirements (e.g. U.S. SBA, HUD). As of November 6, 2013 the new version (E1527-13) has been released but not officially adopted by USEPA to meet "all appropriate inquiry" rule.

Q: What is the goal of conducting a Phase I Environmental Site Assessment (ESA)?

Q: What is the purpose of a Phase I Environmental Site Assessment (ESA)?

A: Generally, the Phase I ESA has two purposes:

  • to provide environmental liability protection for a prospective purchase and
  • to conduct environmental risk management (ERM) for a lender, investor or purchaser

For lenders, meeting the ERM guidance (i.e. environmental policy) is required to close the loan in compliance with policy and applicable regulatory guidance, including the recently released OCC manual (August 2013). The Phase I ESA is typically the first step in the Environmental Due Diligence (EDD) process which can include: Phase I ESA, Phase II ESA, Phase III ESA (remediation), continuing obligations/due care and baseline environmental assessment (BEA)(Michigan-only).

For mergers & acquisition (M&A) transactions the structure of the EDD process should be structured to complement the transaction structure.

Q: What do I get as far as output from a Phase I ESA?

Q: What is a "recognized environmental condition" (REC)?

Q: Methods to screen for RECs per ASTM definition?

Q: What happens if a REC is identified?

Q: Does a Phase I ESA with no RECs identified mean the site is "clean"?

Q: What is are the some of the most common RECs?

Q: What is a Phase II ESA?

Q: What is the cost of a Phase II ESA?

Q: In a real estate transaction how are the environmental costs shared between seller and purchaser?

Q: How does a consultant screen a property historic use to identify a REC?

Q: Can former tenants or owners be tracked down to assess their operations and potential responsibility?

Click here to view the SBA SOP 50 10 5(D) NAICS Codes of Environmentally Sensitive Industries.


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