What is Phase 1 preliminary site investigation?

The process follows established industry standards and aims to identify the presence or potential presence of hazardous substances and petroleum products as defined by the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), commonly known as “Superfund.” By adhering to best practices, the assessment supports informed decision-making and responsible management of environmental risks.

A Phase 1 ESA should:

• Figure out where contamination might come from and what types of contaminants could be present
• Pinpoint the locations that might be contaminated
• Identify people, wildlife or ecosystems that could be exposed to the contamination
• Determine which parts of the environment could be affected, such as soil, sediment, groundwater, surface water or air (both indoors and outdoors)

The preliminary site investigation permits the person who has ordered the ESA to satisfy one of the landowner liability protections under CERCLA and can generally identify issues of environmental concern to most potential purchasers of property. In almost every instance, if a lending institution is involved in the transaction, the Phase 1 ESA is required and should be ordered early in the process.

Phase 1 ESAs rely on data from a variety of sources to build an initial picture of a site. This includes what can be observed on the surface, what lies beneath, information from databases and input from stakeholders. Historical records are especially valuable, as they provide context that helps identify potential issues. Knowing where to find reliable information — and how to interpret it — is essential for Phase 1 success.

ESA success lies in knowing what the site is and was, present and past. This is both valid for the physical characteristics and records of past uses and environmental concerns.

For the physical setting, a United States Geological Survey topographic map can provide information about the geologic, hydrogeologic, hydrologic or topographic characteristics of a site. This allows information to be extracted to determine the likelihood that contamination will migrate to or from the property of interest.

In terms of database sources, there are standard federal, state and tribal environmental record sources, which include a series of published databases covering many of the most common environmental concerns associated with a property, such as the presence of underground storage tanks, past spills, prior regulatory enforcement and waste generation, among others.

Reviewing aerial photographs allows identification of development and activities of areas encompassing and surrounding the property. Other resources, such as fire insurance maps, can indicate uses of properties at specified dates and reveal site features and operations that could raise environmental concerns, while local street directories can reveal former owner or tenant operations that may be of environmental concern through the street address rather than the facility name.

With all the key information at hand, the purchaser can make an informed decision about acquiring, redevelopment or financing of a property. By systematically investigating the likelihood of environmental contamination, a Phase 1 ESA helps clients manage risk and make informed decisions at the early stages of their project.

By identifying environmental concerns, or the lack thereof, at the outset, a Phase 1 ESA empowers clients to:

• Negotiate price adjustments or contract terms based on potential risks
• Budget for additional investigation, remediation or liability insurance, if needed
• Assess eligibility for landowner liability protections (LLPs)
• Decide whether to proceed, renegotiate or walk away from the transaction before substantial resources are committed
• Demonstrate due diligence to lenders, investors and regulators

The Recognised Environmental Conditions (RECs) definition has limitations. RECs refer to CERCLA-defined releases or likely releases of hazardous substances from specific sources. However, some contaminants lack identifiable sources, are common in the environment, or not classified as CERCLA hazardous substances, such as petroleum products. Additionally, contamination may fall outside CERCLA’s release definition. Determining a “likely” release requires clear evidence and expertise, not just suggestive language.

PFAS presence is rarely considered a REC. Diffuse contamination like PFAS, found in most humans worldwide, does not meet the REC definition. A REC requires a CERCLA-defined facility or source with confirmed or likely PFAS release that has impacted the Phase 1 ESA site. Mere likely presence alone does not constitute a REC.

Recommendations are not part of a Phase 1 ESA and are not required by American Society of Testing Materials (ASTM) practice. Users should decide if they want recommendations for further inquiries or services, as these are optional and may help in evaluating liability or environmental risks. However, environmental professionals should avoid giving unsolicited recommendations without understanding the user’s risk tolerance, intended property use and reasons for the Phase 1. Unnecessary recommendations can lead to users ignoring their consultant or incurring extra costs if lenders require the additional work.