About Phase II Environmental Site Assessments
Environmental Site Assessments (ESAs) for Real Estate Due Diligence are set procedures often conducted in phases to evaluate the environmental condition of a property.
A Phase II Environmental Site Assessment (ESA) is a secondary step in the Environmental Due Diligence services process, typically following the recommendations of a Transaction Screen or Phase I ESA. The purpose of these assessments is to identify potential or existing environmental contamination liabilities that may pose a threat to human health or the environment.
When are Phase II Environmental Site Assessments Necessary?
A Phase II ESA becomes crucial when a Transaction Screen or Phase I ESA uncovers Potential Environmental Concerns (PECs) or Recognized Environmental Conditions (RECs), signaling potential contamination. Phase II Environmental Site Assessments involve scientific testing of air, soil, soil vapor, and/or groundwater to comprehend the extent of contamination, if any.
Understanding the Stakes
The presence of environmental contamination can significantly devalue property, lead to future cleanup expenses, and pose a threat to human health and natural ecosystems. As market-leading experts in Due Diligence Compliance Solutions, we’d like to bore into how Phase II Site Investigations are used to reduce hidden risks and liabilities to stakeholders involved in commercial or industrial property transactions.
Transaction Screen/Phase I ESAs: The Starting Point
Transaction Screen and Phase I ESAs are preliminary steps, adhering to ASTM Standards, to spot potential threats through site inspections, historical research, and analysis of geology and regulatory databases. However, Transaction Screen and Phase I ESA’s do not involve the analysis of air, soil, vapor, or groundwater samples.
These processes include an evaluation of current site conditions through a site inspection, historical research, interviews, an analysis of geology and hydrogeology (Phase I ESA), and regulatory database research. These ESAs specifically focus on the in-person inspection and review of records related to the management and/or disposal of hazardous substances and petroleum products on or surrounding a site. An Environmental Professional must complete or oversee environmental assessments, which may include a licensed geologist, engineer, or properly educated/experienced professional.
Diving into Phase II ESAs
If evidence of known or potential contamination are identified as PECs/RECs at a site based on a Transaction Screen or Phase I ESA, further investigation through completion of a Phase II Environmental Site Assessment may be needed to quantitatively assess site conditions.
The Phase II Environmental Site Assessment (ESA) serves as a crucial second phase in the meticulous process of environmental due diligence. Phase II’s are complex investigations implemented to reduce risk associated with commercial or industrial property transactions. Upon identification of PECs/RECs, a Phase II ESA becomes indispensable in many cases. This level of assessment demands a skilled due diligence consultant to navigate through commercial or industrial property transactions, minimizing liability and providing a quantitative analysis to further understand potential remediation cost and scope.
Key Components of a Phase II Site Investigation
The detailed site investigation techniques for Phase II ESAs can vary depending on the site-specific data and scope of the investigation. A Phase II ESA typically involves the collection of soil, soil gas, and/or groundwater samples and the submission of samples to a laboratory to determine if there is any contamination present on the property, and to evaluate the extent of contamination.
Common aspects of a Phase II ESA include:
Selection of a Competent Consultant
An Environmental Professional must complete or oversee the completion of a Phase II ESA based upon institutional and state regulatory requirements, which may include a licensed geologist, engineer, or site professional.
The Review of Prior Environmental Investigations/Assessments
A review is used to best approximate the location of known or potential contamination, contaminants likely to be present based on current and historical operations, subsurface features, and substrate characteristics.
The Development and Client Approval of a Sampling Plan (Scope of Work).
The Scope of Work should include a brief description of the investigation strategy, associated site maps, and a cost to complete.
Site investigation techniques are based on the potential contaminants of concern. Field screening techniques and instrumentation used are tailored to the requirements of the investigation and are used to assist in the collection of soil, groundwater or air/vapor samples for field examination and/or laboratory analysis.
Test pits, surface soil samples, and subsurface soil borings are used to assess impacts to native soils or fill material. Soil borings are commonly used to evaluate impacts from subsurface concerns such as underground storage tanks (USTs), floor drains, hydraulic lifts, hazardous materials usage/storage, etc.
If impact to groundwater is suspected, temporary or permanent monitoring wells can be installed to the depth of groundwater, if present, in order to collect groundwater samples for laboratory analysis. Groundwater wells are used to assess contamination from USTs, on-site operations, and impacts migrating from off-site.
Vapor Gas Sampling
Sub-slab, soil column, or indoor air vapor gas samples can be used to investigate the presence of VOCs beneath a property. In some situations, soil vapor samples can be used instead of or in addition to soil samples. Soil gas sampling is particularly advantageous in porous media such as sands, or to evaluate potential impacts to human health within a structure.
Soil, groundwater, or vapor samples are analyzed through the use of mobile laboratories or submitted through chain-of-custody to an approved laboratory to determine the presence of analytes in the provided samples.
Issuance of Investigation Reports
Based upon consultant data analysis and observations, the results of the Phase II Site Investigation are submitted to the client in a report. The data interpretation and risk assessment in Phase II ESA can vary depending on the site-specific data and the scope of investigation. The ASTM E1903-19 Standard Practice provides guidance on conducting a Phase II ESA, including data interpretation and risk assessment. The report should include a summary of the findings, an evaluation of the potential risks associated with the contamination, and recommendations for remediation if necessary.
Phase II and Site Remediation: A Contrast
The purpose of a Phase II ESA is to determine the presence and extent of known or potential contamination on a property through the testing of soil, soil vapor, and/or groundwater samples.
Environmental Remediation Services are used to remedy a property of environmental liabilities in cases where significant environmental contamination of concern has been identified. Transaction Screen and Phase I ESAs (preliminary assessments) and Phase II ESAs (sampling and testing) confirm the presence of impact. The Phase II may include the limited removal of subsurface features of concern (such as storage tanks). However, remediation strategies are site-specific approaches tailored to remove existing pollution or contaminants from environmental media such as air, soil, and groundwater. The Environmental Professional completing remedial services does not have to have completed the initial environmental site assessments; however, they should be very familiar with the prior assessments, subsurface data, and other pertinent details relating to the site.
What to Consider When a Phase II Is Recommended
Conducting a Phase II Environmental Site Assessment (ESA) can help minimize financial risks for banks, credit unions, and private investors by providing a comprehensive evaluation of the presence of contamination on a property. The results of the Phase II ESA can help stakeholders make informed decisions about the property, such as whether to proceed with the transaction, renegotiate the terms, or terminate the deal altogether. By identifying potential sources of contamination, banks and investors can avoid costly cleanup expenses and reduce their liability on their investments.
Site characterization during a Phase II Site Investigation can be complex and requires careful planning and execution. Cost considerations, budgeting, timelines, unexpected findings, and triggering factors that prompt a Phase II are important aspects of the Phase II process, which we look forward to discussing in greater detail.
Phase II Environmental Site Assessments are crucial for stakeholders in property transactions, providing clarity on potential contamination issues and safeguarding assets. Our team, with its vast experience in Due Diligence Compliance Solutions, stands ready to assist in navigating these complex investigations, ensuring peace of mind and secure investments.
And as always….
LCS listens to your needs to develop products that are right for your lending transaction. Whether that be an individual appraisal, environmental or construction report, or a combination of services; LCS will meet your needs in the most efficient, effective way possible.
To learn more, reach out to Liz Mahoney, Director of Sales & Business Development today.