Phase II Environmental Site Assessments

So you had your Phase I Environmental Site Assessment (Phase I) done and Recognized Environmental Conditions (RECs) were found.  You have decided to proceed with the transaction but you now need a Phase II ESA (Phase II) to fulfill your due diligence in determining if the site is or could be contaminated from usage of the site or properties in the vicinity.  On the financial end, you and the seller have decided who will pay for the Phase II.  This could mean that the seller will pay for it all, you will pay for it all, or the two of you will share the expense.  Many times if you are paying any part of it, there is a proviso that the seller will reimburse you in full if contamination is found and you cancel the trans-action.  The specifics are provided by your attorney.

The next step is to retain an environmental consulting firm to complete the Phase II.  It may be the same firm that did the Phase I or a different firm.  Not all Phase I firms complete Phase II’s.  Qualifications, licenses, availability, and a myriad of other considerations may result in switching firms.  However, if all things are equal, it is best to stick with the firm that did the Phase I.  The reason is that they are most intimately involved in both the assessment of the site and the basis for the RECs they reported.

Whichever firm you select, there are a number of items to check out.  You need to know how experienced they are in completing Phase II’s in general and, more specifically, in completing them on similar properties and similar contaminants.  Ask for a Statement of Qualifications & Experience which will list Phase II projects completed, resumes of the staff, and engineering or geological licenses with the State of Florida.  You can check these licenses out at www.myfloridalicense.com.

Phase IIOnce you have selected a firm, discuss the Scope of Work, turnaround, and terms.  The Scope should be designed to specifically investigate the RECs that were found during the Phase I.  This includes the media type and the contaminant types.  The media may include soil, surface water, sediments, and groundwater.  One or more of these media may need to be included.  Types of contaminants include gasoline, diesel fuel, used oil, solvents, pesticides, heavy metals, and perc (perchloroethylene, a dry cleaning chemical), among others.  There may be concerns with different contaminants in different locations on the site.  These locations may have different media to be tested.

The Scope of Work should follow Standard Operating Procedures of the Florida Department of Environmental Protection (FDEP) for quality assurance and control. Additionally, make sure the firm is using a laboratory accredited by the National Environmental Laboratory Accreditation Program, NELAP (www.nelac-institute.org) and certified by the Florida Department of Health (www.floridahealth.gov).  Otherwise, the data may not be court defensible or accepted by regulatory agencies in the event that those agencies become involved with the site.  Similarly, make sure that if a Well Driller is involved that they are licensed by the FDEP (www.fdep.gov).

After all of this is done, request a Professional Services Agreement from the firm.  This is the written contract between you and that firm.  It must spell out the basis for the Phase II, the turnaround, Scope of Work, and Terms & Conditions.  Review it closely and make sure it meets your satisfaction.  Otherwise, request revisions before you sign it.

So you have retained the firm, they are ready to start the project, and you are done, correct?  Not so fast.  When you give them notice to proceed, you need to request that they keep communications open.  Tell them that you want to know when the site work is scheduled, what the results are from the site work, what the significance of those results are, and what the analytical results from the laboratory are and what they mean. You may need to notify the seller of any significant findings as the work progresses.  Finally, let the firm know that you need the report at the time specified in the Agreement.

Once you receive the report, review it closely, then call or meet with the firm to answer any questions or clarify certain sections.  Keep in mind that there is no requirement to have the report submitted and approved by environmental regulatory agencies.  However, some lenders and other entities use other environmental consulting firms or attorneys to conduct peer reviews of the reports.  If significant contamination is found, then you or the seller should explore remediation options, which are the topic of another paper.  At that point, you may cancel the transaction and look for another site.  Your attorney must advise you.

Environmental Safety Consultants (www.escflorida.com) can make sure due diligence is exercised in completing your Phase II.  We have the credentials and experience to properly complete the work.  We are a Florida-licensed Engineering business with certified Environmental Site Assessors, a Professional Engineer (P.E.), environmental scientists, and 30 years of experience completing ESAs.  We are just a telephone call (800-226-1735) or an e-mail away ([email protected]).  Be diligent and contact us today!

Phase I Environmental Site Assessments Can Save You

There are certain extremely important environmental considerations in commercial property transactions. The soil, groundwater, or surface water, may be contaminated with pollutants such as solvents, PCBs, dry cleaning fluids, petroleum products, pesticides, arsenic, etcetera. There may be buried drums or tanks of pollutants. Or a retention pond may be part of an industrial wastewater treatment system and may be leaking pollutants into the aquifer affecting nearby residents.environmental site assessment

The conditions above may create an economically significant, environmental liability for you as the buyer. Once you enter into the chain of ownership, you are potentially liable for cleanup costs in the future. That is called joint and several liability in legalese and it could bankrupt a business, cause a default on the loan, and affect the market value of the property.

However, the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, aka Superfund, www.epa.gov/superfund) offers protection to the “innocent purchaser”. To qualify, a purchaser must exercise “due diligence” in determining whether a site is or could be contaminated. This is done by completing an Environmental Site Assessment (ESA) prior to the property transaction. The ESA is designed to determine if the property is or could be contaminated from past or current operations both on the site itself or on properties in the vicinity.

phase 1 assessment Environmental Site Assessments are conducted in phases. A Phase I ESA includes an inspection of the site and properties in the vicinity; review of environmental regulatory records, data, permits, and complaints; interviews of the buyer, seller, managers, and regulatory personnel; review of current and historical aerial photographs of the site and vicinity; review of environmental title search back to 1940; and review of nearby landfills, surface waters, and U.S. Geological Survey (USGS) topographical maps.

If the Phase I concludes that the site does not appear to be contaminated, you are done and can move on with the transaction. However, if it indicates that the site is or could be contaminated, then a Phase II ESA will be needed to test the soil, surface water, and groundwater to conclude the due diligence. But that is the topic of another paper.

The key to the ESA is exercising due diligence. Most purchasers of commercial properties retain environmental consulting firms to complete the ESA. Extreme care must be exercised in selecting the firm. It is not a situation where a penny saved is a penny earned. It can be more like a few hundred dollars saved can be thousands to millions of dollars lost.

As a consumer, you must make sure that the consulting firm has the experience, credentials, and qualifications to properly complete the ESA. This applies to the firm itself and to the actual staff members completing the ESA. Highly qualified principal consultants in offices miles away and not actually completing the ESA are of limited to no use.

Desired qualifications may include Professional Engineers, certified Environmental Site Assessors, and Professional Geologists. Of course, appropriate insurance coverage is a must. Check for inclusion of commercial general liability, professional liability, pollutant liability, workers compensation, and automobiles.

There is no requirement to have the ESA Reports submitted and approved by environmental regulatory agencies. However, some lenders and other entities use other environmental consulting firms or attorneys to conduct peer reviews of the Reports.

There are two ways that Environmental Site Assessments can help you. First, they can help you avoid acquiring contaminated properties. Second, if the ESA is completed properly and due diligence is exercised, Superfund is supposed to fund the cleanup if contamination is found later that could not be detected during the ESA. Ultimately, due diligence would be determined by the U.S. Environmental Protection Agency (EPA, www.epa.gov) or the courts.

Environmental Safety Consultants (www.escflorida.com) can make sure due diligence is exercised in completing your ESA. We have the credentials and experience to properly complete your Environmental Site Assessments. We are a Florida-licensed Engineering business with certified Environmental Site Assessors, a Professional Engineer (P.E.), environmental scientists, and 30 years of experience completing ESAs. We are just a telephone call (800-226-1735) or an e-mail away ([email protected]). Be diligent and contact us today!