Phase 1 Environmental Site Assessment

 The Phase 1 Environmental Site Assessment is a report that illuminates the environmental liability associated with a real estate asset.   A Phase 1 Environmental Site Assessment (ESA) is required by lenders during the financing of commercial real estate.   The environmental consultant providing the Phase 1 ESA is required to inspect the property, review historical records on the property and research records available at government agencies.   This information is evaluated and an opinion is made as to whether past or present activities may have caused contamination of the soil or groundwater at the subject property.

In the event that the Phase 1 ESA uncovers a recognized environmental condition (REC)*, the environmental consultant will typically recommend a Phase 2 Environmental Site Assessment, which involves invasive soil or groundwater testing.   The geologist or engineer designing the Phase 2 Environmental Testing scope of work will rely on the Phase 1 Environmental Report to understand Areas of Concern and Chemicals of Concern. 

ASTM E1527-05

In 1993 the American Society for Testing and Materials (ASTM) published the first ASTM Standard: ASTM E1527-93 Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process.   Since then the standard has been updated several times, with the most recent update occurring on in 2005.  

The ASTM E1527-05 standard outlines the purpose and use of the Phase 1 ESA as well as the scope of work to be conducted, including: records review (historical and governmental records); site reconnaissance (inspection of the property and adjacent sites); interviews (with owners and occupants and local government officials); evaluation and report preparation.

Certain items are considered out of the scope of work for an ASTM Phase 1 ESA, such as asbestos, lead-based-paint (LBP), mold and radon; however, many consultants take these potential concerns into consideration during the Phase 1 process (discussed further below).

US EPA’s All Appropriate Inquiry Standard (AAI)

Federal law requires purchasers of real estate to do “all appropriate inquiry” to qualify for the innocent landowner defense under CERCLA*.  Ordering a third party Phase 1 Environmental Site Assessment has traditionally been the method by which landowners qualify for the all appropriate inquiry standard.  In 2005, the EPA published its final rule on requirements for all appropriate inquiry.

To a large extent the all appropriate inquiry (AAI) standard for Phase 1 Environmental Site Assessments mimicked the existing ASTM E1527-00 Standard.   The new AAI Standard for Phase 1 Environmental Site Assessments required a few new scope items, including:

1)      A more stringent definition of who qualifies as an Environmental Professional*, the person under which an AAI Phase 1 ESA must be conducted

2)      The AAI Phase 1 ESA allows either the user or the environmental professional perform a search for environmental liens (however the updated ASMT E1527-05 standard designates this as the user’s responsibility)

3)      Mandatory interviews, some of which were not previously mandatory

4)      Documentation of data gaps or uncertainties     

To a large extent the industry quickly adapted the AAI ruling for Phase 1 ESAs, which went into effect on November 1, 2006.   In 2005 the ASTM E1527 standard updated to include the major elements of the final AAI ruling.   The one exception is the environmental lien search requirement.  Many lenders have developed a “business risk” scope of work for Phase 1 Environmental Site Assessments that exclude the environmental lien search, as the environmental lien search is considered by some to not be worth the extra cost.

Today the EPA recognizes two ASTM standards as being AAI compliant: the ASTM 1527-05 Standard, as well as ASTM E2247-08 Standard, discussed below.

ASTM E2247-08

An additional ASTM standard for conducting Phase 1 ESAs was created in 2008 specifically for large tracts of primarily undeveloped land: ASTM E2247-08 Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process for Forestland or Rural Property.  The standard is very similar to the E1527-05 standard, with a few key exceptions: the approach to site reconnaissance (makes provisions for limited inspection/access), the regulatory records search (additional records requirements) and historical sources (fewer “standard” sources).

Other Custom Scopes of Work for Phase 1 ESAs

Most buyers must do the Phase 1 Environmental Study for a loan and many lenders and government agencies have developed custom scopes for work for Phase 1 Environmental Site Assessments.   A few examples are below:

SBA Phase 1 Environmental Site Assessments—SBA SOP 5010

The US Small Business Association (SBA) requires an environmental investigation of all commercial real estate loans, and has specific requirements for what kind of investigation is required and when. The requirements are based on a property’s environmental risk (determined by its NAICS Code*).  Some of the main particular requirements are: 

-          Environmental Questionnaires and/or Records Search with Risk Assessments (RSRAs) are required on “lower risk” sites (no NAICS Code match)

-          “Higher risk” sites (with NAICS Code matches), must do a Phase 1 to start, except for “Car Wash Only Facilities”, which must do an Environmental Transaction Screen to start

-          Requirements for gas stations: Phase 1 and equipment testing compliance review

-          Requirements for dry cleaners: Phase 1, and automatic Phase 2 if the facility is 5 years or older

-          Requirements for pre-1980 day cares/schools/residential care facilities: lead-based-paint risk assessment and lead testing in drinking water

-          Phase 2s on gas stations and dry cleaners must be conducted by an environmental professional with a current professional geologist’s or engineer’s license

-          Require the consultant to grant the SBA reliance on the reports

The SBA generally recognizes the ASTM Standards for conducting Phase 1 ESAs.  Each October the SBA releases any new changes or updates to its standard operating procedures.

Fannie Mae Phase 1 Environmental Site Assessments

Fannie Mae has specific requirements for Phase 1 ESAs on its loans, which are detailed in the Environmental Hazard Management Procedures and Sections 209-310 of the Fannie Mae Guide. Fannie Mae generally recognizes the ASTM Standards for Phase 1s with some modifications, the main components of which are:

-          Site inspection is required to cover 10% of a property’s units, and 50% of any down units

-          Requires testing for asbestos, lead and radon in some circumstances:

• Considers building materials from 1979 or earlier as suspect asbestos-containing-materials (ACM). If consultants suspect ACM, they can either test for asbestos or recommend creating an ACM Operations & Maintenance (O&M) Plan (and assume that ACM is present)
• Requires testing for LBP on buildings constructed before 1978 unless it gives the lender a waiver, in which case LBP must be assumed present and an LBP O&M Plan be implemented
• Requires testing for lead in drinking water when a property has a private, non-municipal water supply
• Leaves radon sampling to the discretion of the consultant; however, it is prudent to conduct at least minimal sampling at properties in Zone 1 radon areas

Freddie Mac Phase 1 Environmental Site Assessments

Freddie Mac environmental assessments are conducted in accordance with the Freddie Mac Multifamily Seller/Servicer Guide and Chapter 14, “Environmental Requirements.”  Freddie Mac generally recognizes the ASTM Standards for Phase 1s with some modifications, the main components of which are:

-          Site inspection is required to cover 10% of a property’s units, and 50% of any down units

-          Check for State Super Lien Law, which would allow the state to place a first priority lien on a property in response to contamination

-          Requires testing for asbestos, lead-based-paint (LBP), mold and radon in some circumstances:

• Freddie leaves it to the consultant to determine the potential for ACM; however, prefers that consultants do not use a cutoff date for determining ACM potential. If consultants suspect ACM, they can either test for asbestos or recommend creating an ACM O&M Plan (and assume that ACM is present)
• Requires that borrowers either test for LBP on buildings constructed before 1978, or assume LBP is present and implement an LBP O&M Plan
• Requires testing for lead in drinking water when a property has a private, non-municipal water supply
• Requires that consultants investigate for mold-related hazards
• Requires radon sampling in Zone 1 radon areas: 10% of the lowest level units, or 1 sample per building, whichever is greater

HUD Phase 1 Environmental Site Assessments

HUD requires ASTM Phase 1 ESAs with additional Environmental Reviews (HUD Form 4128), which go well beyond the ASTM requirements. The 4128 Form covers a range of potential impacts of a project including:

-          Zoning

-          Air quality

-          Coastal barrier resources

-          Floodplains/wetlands and other natural features

-          Historic preservation

-          Noise abatement

-          Hazardous operations/toxic and radioactive chemicals (determined by the Phase 1)

-          A range of other concerns regarding the site location, suitability, stability, social/municipal services and transportation

If a potential issue is identified in the 4128 checklist, then further study may be required, such as formal Noise Surveys for properties in potential high-noise zones (an initial noise analysis is required on all projects). 

During the environmental review process, HUD also goes beyond ASTM by requiring lead paint surveys or Operations & Maintenance Plans (based on the age of the property), and vapor encroachment screenings (for all projects).

Foreclosure Phase 1 Environmental Site Assessments

Phase 1 ESAs done during pre-foreclosure process are similar to normal Phase 1s; however, strict adherence to the AAI/ASTM requirements is critical in order to maintain the secured creditor exemption or innocent landowner defense under CERCLA.  This includes conducting an Environmental Lien and/or Chain of Title search, which many lenders forego at loan origination. Some other concerns to consider:

-          Site access can be difficult due to recalcitrant site contacts

-          Asbestos, lead paint, radon, mold and other non-scope issues must be managed in order to maintain an assets’ safety and value

-          Erosion control at unfinished construction sites and other compliance concerns (not covered by AAI/ASTM)

-          A lender should evaluate any potential environmental liability and cleanup costs in comparison with the asset value when deciding whether to foreclose

Common Scope Additions to our Phase 1 ESAs

ASTM E1527-2005 recognizes several common additional scope items.  In our practice of environmental due diligence, we find that a lot of our clients are interested in investigation other environmental concerns under the cover of the Phase 1 Environmental Site Assessment.   The most commons additional scope items are:

1)      Asbestos Survey:  an asbestos survey is particularly important to buyers of old buildings or buyers who plan to demolish the buildings;

2)      Lead Paint Surveys: important in residential settings, for schools, and when a building is going to be demolished;

3)      Environmental Compliance Audits:  clients buying complex industrial operations are concerned about recognized environmental conditions as defined by ASTM E1527 as well as material non-compliant practices.    A Phase 1 ESA/Compliance Audit is the best way to understand all of the environmental liabilities associated with a manufacturing facility.

4)      Mold Survey: common for residential and hotels users of our service;

5)      Indoor Air Quality Survey:  common for high end office buyers and hotel buyers;

6)      Phase 2 Environmental Site Assessment:  clients buying property with known environmental concerns may want to do the Phase 1 & 2 Environmental concurrently.

For any questions on Phase 1 Environmental Site Assessments feel free to contact me or our Nicole Moore, our Technical Director of Environmental Due Diligence at 800-801-4923. 

Definitions

*A REC is defined as “the presence or likely presence of any hazardous substances or petroleum products on a property under conditions that indicate an existing release, a past release, or a material threat of a release of any hazardous substances or petroleum products into structures on the property or into the ground, ground water, or surface water of the property.”

*CERCLA stands for Comprehensive Environmental Response, Compensation and Liability Act, commonly known as the Superfund law

*Environmental Professional:  Someone who possesses sufficient specific education, training and experience necessary to exercise professional judgment to develop opinions and conclusions regarding conditions indicative of releases or threatened releases of hazardous substances (or petroleum products) on, at, in or to a property. An EP must have:

-          A state or tribal issued certification or license and 3 years of relevant full-time experience; or

-          A Baccalaureate degree or higher in science or engineering and 5 years of relevant full-time work experience; or

-          10 years of relevant full-time work experience.

*NAICS Code: North American Industry Classification System. The SBA maintains a list of NAICS Codes of environmentally sensitive industries.

I had the good fortune of moderating a panel at the Environmental Bankers Association (EBA) January Conference on the subject of QA/QC of Phase I Environmental Site Assessments and the entire environmental management process during underwriting.

The premise of the panel was to study error in order to make future environmental due diligence better.  Senior credit officers are asking the environmental risk managers: How did this REC site slip through the cracks (or did it)? Why are we having to do Phase II Environmental Testing on fully underwritten loans?  

Environmental Risk Management

The panel provided tremendous insight into better technique in environmental risk management.  My take-aways from the EBA panel discussion were the following:

• Environmental loss (an environmental “mistake” that caused the bank a financial loss of some sort) during this downturn was way lower than previous downturns, but environmental loss is still occurring.
• A lot of environmental loss was attributed to loan where less than a Phase I Environmental Site Assessment was required.  Lower-tier products like Records Search and Risk Assessments and other Desktop Environmental reviews (which do have their place in a risk management strategy), let some polluted properties through.
• Consultant errors on Phase I ESAs were generally a small fraction of environmental loss for environmental bankers who spoke—in my opinion these bankers generally maintain higher standards for Phase I ESAs than the average lender. 
• The frequency of environmental loss experienced on loans with Phase I ESAs was way higher when the bank accepted a borrower-supplied report!
• Environmental waivers from bank credit staff was a major category for environmental loss.  Often the strength of the borrower was the justification for not requiring Phase II Environmental Testing on a site with a Recognized Environmental Condition.      
• Environmental Risk Managers struggle at times to get their entire bank to comply with their environmental policy.  

During the question and answer secession, Mike Kulka asked if any lenders in the room had sued a consultant that had completed a bad report.  No lenders cited an example.  The implication of his question was that an occasional lawsuit might force the worst proprietors of Phase I ESAs out of the field.  I certainly share Mike’s frustration with having to compete with unregistered and less experienced professionals. 

The overall message was that our industry had successfully reduced environmental loss considerably, but that there was plenty of room for improvement.   Finally, a sound environmental policy is as important as a good environmental consultant.

The new ASTM E2600-10 Standard Guide for Vapor Encroachment Screening on Property Involved in Real Estate Transactions (the Standard) was designed to screen properties for the presence or likely presence of chemicals of concern (COC) vapors in the subsurface of the target property (TP) cause by the release of vapors from contaminated soil and/or groundwater either on or near the TP.  The ASTM E2600-10 Vapor Encroachment Standard procedures were intended to complement and be conducted concurrently with the Phase I ESA process, but can also be used as a stand-alone screen. 

However, the ASTM 2600-10 Standard may not be a “one-size fits all” approach according to the environmental consulting community, including panelists at the recent Environmental Bankers Association (EBA) conference in Fort Myers, FL.  The discussion centered around which approaches consultants currently use, the impact of the 2010 revisions to the ASTM E2600 Standard on the Phase I ESA process, and the regulatory factors at play.

Some use the ASTM E2600-10 Standard as a valuable tool but consider it to be just one option, and use their own checklists or individual case consultations as appropriate based on the site characteristics.  Others noted that the ASTM Standard may not be stringent enough in the search distances for certain types of releases.  Of particular concern were the variations in regulations from state to state.  Many states do not consider vapor encroachment at all, and some states allow closure of a release incident with residual contamination at levels high enough to still cause a vapor concern. 

The consensus seemed to be that consultants do not have to use ASTM 2600-10, but they do have to consider the potential for a vapor encroachment condition (VEC) during the Phase I ESA process.  Exactly how they consider and evaluate that risk appears to still be up for debate, as each site is unique and many complexities contribute to vapor migration.

Partner Engineering and Science, Inc. has always considered the potential for vapor concerns during the Phase I ESA process.  Our geologists, engineers and environmental professionals analyze the various factors that can affect a potential vapor migration pathway, such as soil type, design and use of a building, groundwater depth and the type of chemical released, in order to evaluate whether the subject property may be affected.  Our Partners are well versed in both the ASTM 2600-08 and 2600-10 Standards and their value as tools to evaluate vapor encroachment.

You’ve been told you need to have a Phase I Environmental Site Assessment (ESA) and now may be looking for answers to the questions:

• Why you need one
• Where you get them
• How much they cost
• How long do they take
• Will it meet the Small Business Administration (SBA) environmental requirements .

When ordering a Phase I Environmental Site Assessment (ESA) you want to make sure that:

• It is AAI (All Appropriate Inquiry) compliant, and conforms to ASTM 1527 05
• The environmental firm maintains certain levels of liability insurance (required by the SBA for SBA 7a and SBA 504 loans)
• The environmental firm will sign the latest Reliance Letter  required by the SBA
• The environmental firm understands the latest environmental requirements outlined in the Small Business Administration’s Standard Operating Procedures (SOP), for year 2011 this would mean SOP 5010 5 (C)– valid through November 15^th 2011
• The Environmental Firm that you choose is approved by your lender

Why Do I Need a Phase I Environmental Site Assessment (ESA)?

The purpose of an Environmental Site Assessment (ESA) is to identify any existing environmental contamination on the subject property.  You as a buyer do not want to unwillingly become financially responsible for the prior environmental practices on the subject property.  An ESA saves you from assuming liability for existing contamination and the costs of remediation (if needed).  A Phase I ESA provides a current and historical record search as well as a site visit and inspection by a trained and certified Environmental Professional.  The Environmental Professional’s job is to provide you with a report of the property site that informs you that either the site is clean, or there are Recognized Environmental Conditions (REC’s) that exist.

Where Do I Get a Phase I Environmental Site Assessment (ESA)?

Your banker can suggest some names of Environmental Firms that are on the bank’s approved lists.  In cases where no recommendations are given, you can search the Internet for Phase I Environmental Site Assessments.

How Much Will a Phase I Environmental Site Assessment (ESA) Cost?

Typically you can expect to pay between $2,000 and $3,000 depending on the property. 

How Long Does it Take to have a Phase I Environmental Site Assessment performed?

The average turn around time for a Phase I Environmental Site Assessment is three (3) to four (4) weeks.  Many firms can provide rush jobs as well.

Will the Phase I Environmental Site Assessment meet the Small Business Administration (SBA) Environmental Requirements?

The Phase I Environmental Site Assessment performed in accordance with  ASTM 1527 05 does meet the environmental requirements of the U.S. Small Business Administration.

If you are buying a commercial property, you need to do environmental due diligence.  The gold standard for due diligence is the Phase I Environmental Site Assessment.   The Phase I ESA is basically a research project into the properties current and past use and how these uses could potentially affect the environment.   As a buyer, you want to make sure that you don’t get stuck cleaning up someone else’s environmental mess, so the ASTM 1527-05 Phase I ESA is the most appropriate tool.

For Lenders however, the full Phase I Environmental Report is not always warranted particularly for smaller or less risky transactions.  Our lender clients sometimes ask for environmental reports that are less comprehensive and expensive than the Phase I ESA.   A few options that are available are:

Environmental Transaction Screen:  The Environmental Transaction Screen consists of a Site Visit by an environmental professional, the review of an environmental database report, and very limited historical research.   The Environmental Transaction Screen is about half the price of the Phase I ESA and has a scope of work defined by ASTM E1528-06.  

Environmental Database Reports:  The Environmental Database Report involves the review of an environmental database report by an environmental professional and a short letter report in front of the database.    We always recommend that you order these very inexpensive reports from an environmental professional instead of directly from a database company, as what is really valuable is the professional advice.     

Records Search and Risk Assessment:  The Records Search and Risk Assessment (RSRA) involves the review of an environmental database and historical sources.  The report must be done by an environmental professional.  This scope of work is recognized by the Small Business Administration (SBA).

I hope this helps commercial property buyers and lenders make good decisions.

Seismic Damageability Reports and Probable Maximum Loss Reports are terms that are used interchangeably in the engineering due diligence field. In both instances, engineers are engaged to quantify the amount of seismic risk associated with a building. Most engineers prepare reports according to ASTM E 2026-2007 guidelines.  

While Probable Maximum Loss (PML) is by far the more commonly used term in the industry, many engineers have favored Seismic Damageability Report, as the term PML can have several meanings. Consequently, ASTM has issued a guideline document that attempts to standardize the terminology used for seismic loss reports.

Many engineers, including my firm (Partner Engineering and Science), provide “Scenario Loss” estimates to clients. The Scenario Upper Loss (SUL) is the scenario loss that has a 10% probability of exceedance due to the specified earthquake scenario, and the Scenario Expected Loss (SEL) is the expected loss value due to the specified earthquake scenario. Therefore, the SUL represents an upper loss estimate, and the SEL represents an average or expected estimate. 

Clients should be careful when ordering Seismic Damageability Reports (or PMLs) as there are some firms that use significantly different methods for calculation of the SEL and SUL.   My recommendation when ordering a report is to make sure of the following:       

1)      The firm should have a registered engineer on staff;

2)      Ask the firm to follow ASTM E2026-2007 and, if being done for lenders ASTM E2557-2007;

3)      Request that the firm show their math on the calculations.

Whether you call it a Probable Maximum Loss Report or a Seismic Damageability Report, in the end, the name does not matter; as long as the assessment is done by a quality engineer and performed consistently and transparently, the lender can use this tool to measure their seismic risk.

Property Condition Report

What is included in a Property Condition Report (PCR)? The short answer is that the Property Condition Report evaluates all improvements.    Most Property Condition Reports done for lenders are done within the scope and limitation of the ASTM Standard E2018. 

My firm, Partner Engineering and Science, typically defines the scope as follows:

1. Conduct a thorough walk-thru inspection of the asset by an experienced building inspector or engineer;
2. Interview tenants, building maintenance staff, and building management;
3. Visit the city building department to look for violations, records of improvements, and the certificate of occupancy;
4. Review of building plans, quotations for work, and warranties provided by the seller;
5. Develop a schedule of Immediate Repairs necessary due to failed systems, systems being past their useful life, and/or building code violations;
6.  Develop a Replacement Reserve Schedule for the next 12 years (or the requested reserve period), where Partner will estimate the remaining useful life of major systems and provide an estimate of the replacement cost at that time in the future;
7. Prepare a detailed report discussing each building system and its condition.

Partner’s PCR will evaluate the following systems and conditions:

• Site Improvements
• Site Access and Traffic Flow
• Topography
• Storm Water Drainage
• Paving Type/Age
• Curbing/Wheel Stops
• Pavement Striping
• Parking
• Flatwork/Stairs/Railing
• Landscaping and Appurtenances
• Retaining Walls
• Utilities
• Site Lighting
• Waste Storage Area
• Site and Building Signage
• Other Site Amenities/Recreational Facilities
• Structural Foundation and Frame
• Structural Design Criteria
• Soils/Geotechnical
• Foundations
• Structural Frame
• Parking Garage/Carport
• Facades/Exterior Wall Systems
• Exterior Walls
• Windows
• Insulation
• Doors/Frames
• Balconies
• Stairs
• Roofing
• Roof Type
• Active Leaks
• Roof Drainage
• Thermal Insulation
• Flashings/Details
• Expansion Joints
• Maintenance
• Warranty
• Ancillary roof(s)
• Mechanical, Electrical & Plumbing
• HVAC Systems
• Electrical Systems
• Plumbing Systems
• Vertical Transportation/Conveyor Systems
• Elevators
• Escalators
• Fire/Life Safety
• Fire Sprinklers
• Life Safety/Alarm Systems
• Interior Elements
• Viewed Spaces
• Floor Coverings
• Ceiling/Walls/Window Coverings
• Common Areas

All of these elements are inspected during a walk-through inspection. The inspector will not be turning systems on and off; rather, the inspector will visually inspect the systems and ask questions of building personnel. Some clients want us to do more, and for those clients, Partner will hire sub-specialist to accompany our inspector.   

POTENTIAL EXTRA SPECIALTY SERVICES:

In addition to our walk-thru assessment, Partner can provide specialty inspections. Specialty inspections are done by our significant roster of sub-contract specialist. The Specialty Inspectors investigate beyond the requirements of ASTM E2018. For example, Partner’s general inspector will inspect the elevator and the elevator controls, but an elevator specialist is qualified to open and inspect the elevator pit. The following specialty inspections are often added to Equity Property Condition Reports: 

Specialty                                                   Description 

Energy Audit                                           Model the entire building’s energy consumption, rate building against peer buildings; enter into Portfolio Manager; and make recommendations for energy efficiency improvements.

Energy Benchmark/Disclosure   Enter the building’s utility data and relevant building parameters into EPA’s Portfolio Manager and get a rating for the building.

Structural Inspection                      A registered engineer / structural engineer will inspect the sites superstructure foundations for signs of deflection, structural sagging, cracking, and vulnerability to future loading (seismic if applicable).

Elevator Inspection                         Inspect elevator cab, elevator equipment room, the elevator shaft and hydraulic lifts.

HVAC Inspection                               Inspect all heating and cooling equipment as well as ducting and heat conveyance systems.   Test the heating and cooling output regardless of the season (i.e. test the air condition in the winter).

ADA Compliance Inspection     Inspect the entire asset for compliance with the Americans Disability Act (ADA) and catalogue each system that does not meet ADA Compliance.   Provide a cost estimate for bringing the asset into compliance with ADA.  

Roof Inspection                                     A Roof Inspector will inspect the roof of each of the buildings.  The roof inspector will map all signs of roof aging and failure including: cracking, silting, ponding, bowing, leaking, and patches.

Building Envelope Inspection    Inspect the entire building envelope and curtain wall for its ability to serve as an effective moisture barrier.  Complex curtain wall systems should be evaluated by a specialist.

The selection of a vendor for the completion of Phase I Environmental Site Assessment (ESAs) in North Carolina should be based on the qualifications of the firm.  Over the last seven years, I have been personally involved in the completion or review of upwards of 1,000 Phase I ESAs in North Carolina.  A lender once jokingly accused me of memorizing the location of every drycleaner in the state. 

During my years completing reviews at major lending institutions, I saw the complete spectrum of report quality.   A quality report is defined not only by meeting ASTM Standard Practice E1527-05 and the Environmental Protection Agency (EPA) Standards and Practices for All Appropriate Inquiries (AAI) (40 CFR Part 312), but also by providing reasonable findings and conclusions that are supported with documentation provided in the report.  A poor quality report often lacks detailed information and includes illogical conclusions.  Often, this will delay the transaction that prompted the completion of the report. 

Recently, I reviewed a Phase I Environmental Site Assessment completed as pre-foreclosure due diligence.  The report identified the presence of a chicken broiler onsite from 1960-1965.  While there was no substantiating evidence, the consultant indicated that a UST may have been associated with the chicken broiler operations.  Consequently, at the request of a purchaser, the lending institution could end up chasing a non-existent UST.

It has been my experience that quality and price do not always go hand in hand.  It can be very troubling to inform a client that they overpaid for a report that does not meet industry standards.    On the other hand, if the price is substantially below market rates, the quality is likely to be substantially below industry standard as well. When ordering a Phase I Environmental Site Assessment in North Carolina, careful consideration should be given the credentials of the firm and their experience with similar property types.  Partner Engineering and Science has been involved in more than 5,000 environmental site assessments in North Carolina covering a wide range of property types.

Entry by JoeDerhake

Entry

There has been much discussion about the creation of a national environmental professional registration system and having a new ASTM Standard to require that a ‘Registered’ Environmental Professional conduct a Phase I Environmental Site Assessment (ESA).

I support such a requirement, as Environmental Professionals too often have to compete with either non-professionals or professionals in a related profession who think that because they are engineers or geologists, they are qualified to complete a Phase I Environmental Site Assessment.  The fact is, performing a Phase I ESA well depends heavily on experience.  Experience is what you need to uncover the less than apparent, recognized environmental conditions; it is what makes the assessor ask the less than obvious questions.

Now, I realize that there is much to work out on the subject of the environmental professional registration process.  Who will run such a program?  What will be the qualifications? Who will verify education and/or experience? Who will design the ‘test,’ if the registration includes passing a base test?   I am open to all reasonable proposals here, but I would like to offer my recommendations:

Who would run the Environmental Professional Registration Program?

I propose that the ASTM would run the National Environmental Professionals Registry Program.   The ASTM could likely charge a significant fee—good, this will serve as a barrier to entry.

Qualifications?

Qualifications should require a combination of experience, education, and test base registration.    A professional with a strong education and state registrations would require less experience.  An individual without as much education or registrations can still become an EP, but would require more experience.  Again, here is my proposal:

To become an Environmental Professional, the person must meet one of the following:

1)      A Registered Professional Engineer or a Registered Geologist with five years  experience in environmental consulting;

2)      A bachelors in science in a related field from an accredited university with 5 years full time experience in environmental due diligence;

3)      A bachelors in arts or a bachelors of science in an unrelated field from an accredited university with 7 years full time experience in environmental due diligence;

4)      Have the equivalent of 15 years of full time relevant experience.

My suggested qualifications are a bit more stringent than those currently incorporated in ASTM 1527.

Keywords

Environmental Professional, ASTM 1527-05, ASTM Phase I