When Is an Environmental Site Assessment Needed?

When purchasing or developing land, an Environmental Site Assessment or ESA is often a necessary process that acts as an insurance policy to prospective buyers. An ESA is a study conducted on your property to evaluate how likely it is that your property is contaminated with substances like lead, oil, radon, mercury, asbestos, and many more toxic chemicals. Additionally, the environmental site assessment will judge the future potential for environmental contamination.

ESAs can come in both Phase I and Phase II processes. A Phase I ESA is a necessary standard for evaluating pollution or contamination involved with a piece of real estate that can present a major liability if unchecked. The second phase is a more in-depth investigation of pollution and contamination in groundwater, soil, and other aspects of the property.

In this guide, we will break down ESAs so you can determine if you need one for your development.

Do I need an Environmental Site Assessment?

Commercial, industrial, and other developers are familiar with ESAs, land surveys, and other processes as they are commonly seen as a necessary step in the due diligence of dealing with property. It is important to understand what a Phase I ESA entails before making the decision on if you need one. Here are some of the things a Phase I will do for you:

Job Site Visit and Reconnaissance
Environmental Compliance Inspection
Historical Property Information Aggregation
Regulatory Agency File Reviews.
Database Reports and Government Record Audits
Study of the Site Geology and Hydrogeology
Vapor Intrusion Risk Modeling
Researching Environmental Liens and Activity Use Limitations
Conclusions and Recommendations by Professional Geologists

The Phase I ESA scope is extensive and covers many items that are vital to know before buying a property or starting a development project. Phase I has steps that include a comprehensive look at government data on the property, historical aerial photographs, historical maps, and other documents from the past that could give a better look at the potential for contamination over time. For example, if a piece of the property used to be occupied by oil derricks, there is a high probability that the ground is still polluted in some way.

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Reasons for Getting an ESA

Liability

In 1980 the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) was created after unchecked contamination cases resulted in a litany of health cases in communities across the U.S. CERCLA was made in part to ensure that the polluting party would be responsible for all cleanup and costs of any environmental damage.

However, an amending act in 1986 called SARA clarified that to be clear of any liability with preexisting contamination, purchasers need to participate in a thorough vetting of the property and history of pollution — creating the need for an environmental site assessment. ESAs ensure that any existing environmental damage will be the burden of the previous owner to clean up and alert potential buyers of what they are getting into.

Lending Institutions

Banks and lending institutions frequently require that an ESA be conducted before they will back any investment. This is most common with industrial and commercial land as it has usually had some exposure to pollution. ESAs help banks protect their stake in the land by making it totally transparent what the contamination levels are. So, whether you believe an environmental site assessment is necessary or not, your bank may require one regardless before issuing a loan.

Innocent Landowner Defense

The Innocent Landowner Defense was later created after CERCLA to protect landowners who had done all of their due diligence for environmental effects before purchasing the land. It was made to protect them if their land was later found to be contaminated due to previous ownership and use. It is important to procure an ESA to protect you for the entirety of your ownership.

The Innocent Landowner Defense paired with Limited Liability Protection ensures that the landowner will be well protected so long as they have:

Conducted all appropriate inquiries into the property (a Phase I) during the acquisition.
They were not responsible for any contamination and had no connection with the polluting party.

To summarize, an ESA will keep you, and your partners or lenders protected when it comes to liability for any environmental cleanup during your ownership.

An ESA Will Help Protect You and Your Investment

ESAs can help businesses manage their environmental risk and can play a big part in choosing the ideal piece of property for any operation. Many view a Phase I ESA as an insurance policy that could end up saving their company millions in environmental cleanup expenses.

Having the limited liability protections afforded by the Innocent Landowners Defense and the LLPs will more than likely counteract any risk for an expensive legal battle over cleanup. WIthout a Phase I ESA, you will have no defense when it comes to the burden of any damage. If you acquire a property with no assessment of any environmental hazards, you welcome potentially millions in cleanup costs.

ESAs are especially important for land that has been well used or developed in the past. You might get away with purchasing a piece of rural property that has no history of contamination, but you will never be sure without a standardized ESA. To be sure the property is free and clear of any environmental risk, it can be a good choice to hire a certified independent environmental professional to conduct your test.

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In Summary, ESAs can be helpful tools and insurance policies to protect landowners from the liability of past environmental damage. You can now make the best decision for you or your company that will result in the best outcome!

When Is an Environmental Site Assessment Needed?