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

My previous experience with gas stations comes from a regulatory standpoint where the focus for evaluating the USTs was compliance. Currently, as an environmental professional, the evaluation of a gas station for a lender, involves more than just compliance when performing a Phase I ESA on gas station. The Energy Act of 2005 required that all USTs not inspected since 1998 to be inspected by August 8, 2007, and inspections every three years thereafter. In addition, the Energy Act requires training for the operator of the UST.  But is this inspection and training criteria stringent enough to give lenders a level of comfort to proceed with a loan? Could a lender, use inspection records and increased training alone and be comfortable that a release had not occurred.  Should a lender require Phase II’s on all gas stations regardless of compliance records?

I think compliance records along with a good visual inspection should always be included in evaluating a gas station. On newer stations, this maybe all that is needed.  But for older USTs compliance records and a visual inspection may just be the starting point. Since December 22, 1998, all UST systems (tanks and piping) should meet the new tank requirements in regards to spill and overfill prevention, corrosion protection, and release detection requirements.  These tanks are now at least 12 years old.  Even with good recordkeeping, a Phase II may be necessary to give the lender the level of confidence that the property value will not be diminished by latent contamination not identified by the due diligence process, especially if the borrower ended up defaulting on the loan.

Is this a no-brainer?  Any thoughts?

By Kimberly Houston