A Phase Two environmental site assessment often becomes a vital part of individual commercial real estate transactions. However, many commercial landowners are unfamiliar with Phase Two ESAs because they are not required in every land purchase.
To help you protect your investment, we have created this guide to Phase Two environmental site assessments. We discuss what they are and when you may need one.
What Is a Phase Two ESA?
A Phase Two ESA is an in-depth site inspection. Phase II assessments check for contamination when recognized environmental conditions (RECs) are present. Common RECs include:
- Soil vapor or groundwater concerns
- Used fuel drums
- Fill materials on a site
- Dry cleaning chemicals
- Underground storage tanks
- Leaking pipes or tanks
Phase Two ESAs do not check for RECs. Instead, this inspection examines RECs that are found at the previous step during a Phase One ESA. Phase Two ESAs reveal if contamination is present on a site. These ESAs can unveil water or soil contamination.
When Are Phase II ESAs Necessary?
Phase One ESAs are needed for commercial real estate deals because lenders almost always require them to protect their interests. However, if a Phase One ESA is not mandated by your lender, we believe that you should still perform one. It will protect you from liability if environmental hazards are present.
Unlike Phase One ESAs, Phase Two ESAs are not always needed. A Phase Two ESA is only required if the Phase One ESA discovers RECs or other hazards. Phase Two ESAs reveal the severity of environmental contamination. They also help you determine how much it will cost you to make the land safe to use.
What Does a Phase Two Environmental Site Assessment Entail?
Phase Two ESAs are complex site assessments. They follow specific guidelines outlined by ASTM in their document, “Standard Practice for Environmental Site Assessments: Phase II Environmental Site Assessment Process.”
As a result, a Phase Two ESA involves many steps. The exact steps taken during a Phase Two ESA will vary. However, site inspectors will typically perform the following activity during a Phase Two ESA:
Review Site Data
Site inspectors must review all land data. This data will help them determine the scope of the inspection. The data that they will review includes:
- Phase One ESA reports
- Title history
- Usage history
- Sale records
The assessment team will need to perform different tests depending on what the land was used for. The scope of the Phase Two ESA must also align with state and federal regulations. If it does not, then the Phase Two ESA may not protect you from liability.
After site assessors define the scope of the Phase Two ESA, they will need to obtain permits. Permits are needed for Phase Two ESA site drilling. Obtaining permits will increase the total cost of the Phase Two ESA. However, failing to obtain permits can result in fines.
Each state responds to permit requests at different rates. Some states offer permits in as few as five days. Others take two weeks or more. If your state takes longer to issue permits, it can delay the Phase Two ESA.
The key aspect of a Phase Two ESA is fieldwork. This fieldwork will vary depending on your Phase One ESA report findings. However, all Phase Two ESAs involve drilling. Some involve water sampling as well.
Inspectors will also assess RECs. They will check for leaks or other concerns. If new issues are discovered, then inspectors may have to expand the scope of the Phase Two ESA.
All of the collected samples will then be sent to a lab. The lab will test samples for various contaminants. After this step is completed, the results will be returned to the inspectors for review.
Review Test Results
Inspectors obtain large amounts of data during a Phase Two ESA. They must review all of this data to determine whether hazards are present. After the data is consolidated and reviewed, it is presented in text and charts. Presenting information in this way makes the data easier to read.
All tests must be performed following EPA standards to ensure accuracy. Otherwise, the results may be unreliable. You must select a reputable Phase Two ESA firm to handle your site inspection.
Create a Report
Phase Two assessors will compile an inspection report. The report will be presented to you and your lender. The report outlines what contaminants were discovered – if any. It will also explain whether these contaminants pose a risk to people or the environment.
The report will explain what tests the assessment team performed. It documents every step taken to obtain samples. This information demonstrates the legitimacy of the methods and findings.
Phase II ESA reports also include the firm’s recommendations. The firm may suggest remediation. Site remediation involves reducing or eliminating the contaminants present. Remediation may include things like removing soil or cleansing groundwater.
If remediation is recommended, you will need to schedule these services as soon as possible. When a site requires extensive remediation, it will reduce the value of the land.
You can use Phase Two ESA findings to negotiate a fair purchase price. You may even decide a piece of land is not a worthwhile investment based on your Phase Two ESA findings.
Learn More About Phase Two Environmental Site Assessments
Want to learn more about Phase II assessments and other due diligence practices? If so, then RSB Environmental can help.
We also publish a monthly email newsletter that covers critical environmental topics. Send us an email at firstname.lastname@example.org to start receiving updates directly to your inbox. We’ll help you stay up-to-date on the latest developments that affect environmental compliance for property owners.