411 Terrace Place
PO Box 94
Cincinnati, OH 45174-0094
 "A Higher Level of Thinking" Consultants in Industrial Hygiene, Environmental, & Building Sciences

Why undergo environmental due diligence for a property transaction?


As a potential buyer and/or lender related to commercial real estate, one of the ways of protecting your large capital investment is to have a Phase I Environmental Site Assessment (ESA) completed using the American Society for Testing and Materials (ASTM) standard E1527-13 and the EPA All Appropriate Inquiry (AAI) rule. Per the USEPA, a "potentially responsible party" (PRP) may be liable for contamination at a site.  PRPs include: 1) the current owner or operator of the site; 2) the owner or operator of a site at the time that disposal of a hazardous substance, pollutant or contaminant occurred; 3) a person who arranged for the disposal of a hazardous substance, pollutant or contaminant at a site; and 4) a person who transported a hazardous substance, pollutant or contaminant to a site; that transporter must have also selected that site for the disposal of the hazardous substances, pollutants or contaminants. Therefore, a person who owns a property from which there is / was a release of hazardous substances can be held liable just by ownership virtue. The AAI rule establishes specific regulatory requirements when completing a Phase I ESA for the purposes of qualifying for certain landowner liability protections under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) (commonly known as "Superfund").


A Phase I ESA is typically considered the first step in the process of environmental due diligence.  Phase I ESAs are, to the extent feasible, used to identify recognized environmental conditions (RECs) in connection with a property. An ESA includes a site reconnaissance, user questionnaire completion, interviews with representatives of the public / property manager and/or owner, an environmental records review, a review of historical information to the extent feasible, and the opinion of the Environmental Professional (EP).  Actual sampling of soil, groundwater, and building materials is typically not conducted during a Phase I ESA.  If the site is considered a risk in the opinion of the EP, a Phase II ESA may be recommended which may involve sampling and analysis for hazardous substances and/or petroleum hydrocarbons.


Limited environmental due diligence (ASTM E1528-14 Transaction Screen Process) is a more narrow investigation.  It does not identify RECs.  Transaction screens can be utilized on properties where a prospective buyer has a reason to believe that no adverse environmental conditions or RECs exist. It should be noted that parties cannot use the ASTM transaction screen standard or Phase II ESA standard as a substitute for the Phase I ESA standard to comply with the AAI rule. AAI is required for: many EPA Brownfields grant recipients; required if seeking to assert certain liability protections under CERCLA; to understand potential environmental risks/liabilities associated with a property prior to purchase, sale, lease, joint venture, purchase of insurance, financing; and to gain information that will help property owner comply with continuing obligations after purchase.


Ecostratum has the capability to complete Phase I ESAs and transaction screens using ASTM standards (and the EPA AAI rule for more detailed Phase I ESA requirements). Contact Steve Rucker at srucker@ecostratum.com for more information and for project requests.