If you engage in commercial real estate transactions, you will eventually need to use environmental risk assessment and remediation services to protect your ownership interests.
It is critical that you are familiar with these services, what remediation technologies are used to improve site usability, and how remediation impacts site value.
What Is an Environmental Risk Assessment?
The term “environmental risk assessment” is often used interchangeably with the phrase “environmental site assessment” (ESA). There are three different phases of ESA: Phase I, Phase II, and Phase III. Typically, when the phrase “environmental risk assessment” is used, this is a reference to a Phase 1 ESA.
– During a Phase 1 ESA, assessors will examine the use history and ownership records of a given property. They will also determine whether any industrial or commercial entities are located within a one-mile radius of the subject property. While a Phase 1 ESA typically includes a site visit, one is not required.
Assessors will document any hazards or concerns that they discover in the environmental risk assessment report. These hazards and concerns are known as recognized environmental conditions (RECs). A few common examples of RECs include underground storage tanks, chemical drums, and above-ground storage tanks.
Are Environmental Risk Assessments Standardized?
Yes, environmental risk assessments are standardized. When performing a Phase I ESA, assessors must adhere to ASTM E1527-13. The updated standard, ASTM E1527-21, was recently approved but is not yet in force. However, it should become the new standard by the end of 2022.
When Is Remediation Necessary?
Whether remediation is necessary cannot be determined by a Phase I ESA. Rather, this initial assessment only determines if RECs are present. If they are, then a Phase II ESA should be performed.
During the more in-depth Phase II analysis, groundwater and soil samples will be collected. The samples will then be analyzed to determine what contaminants are present and in what quantities.
If contaminants fall below the established thresholds, no remediation is needed. However, if any contaminants do exceed these limits, remediation will be required to make the property safe for use.
What Land Owners/Buyers Need to Know About Remediation
Remediation efforts should be guided by the findings of a Phase II ESA. Landowners or buyers should not start remediation after a Phase 1 ESA because this preliminary assessment cannot identify the severity of hazards on the property.
Additionally, buyers should be aware that remediation efforts can be time-consuming and costly. An environmental risk assessment will help buyers better understand the scope of these costs so that they can make informed purchasing decisions. They can also leverage the findings of a risk assessment to drive down the price of a property.
Does Remediation “Fix” Contaminated Land?
Ideally, environmental risk assessment and remediation services will eliminate the majority of contaminants found on a piece of commercial property. Once these contaminants are removed, the property can be cleared for commercial uses without restriction.
However, this is not always possible. At times, state or municipal authorities will place limitations on property use. This restriction occurs when contaminants cannot be brought below certain thresholds.
For instance, let’s say that soil contaminants are brought below the established limitations, but groundwater contaminants are not. In this scenario, the groundwater cannot be used for drinking water, but the parcel could be cleared for commercial or industrial applications.
Learn More About Environmental Risk Assessment
As you can see, environmental risk assessment and remediation services can be quite complex. However, they address only a few facets of due diligence as it pertains to commercial real estate transactions.
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