Site Assessment

NTS defines Site Assessment as the performance of Phase I and Phase II site Assessments, to a point where a release is identified, or the understanding of the environmental conditions of the property is sufficient and no release has been identified. Once a release has been identified, the work becomes Site Investigation and the objectives of the client include satisfying regulatory requirements associated with the release. From a process point of view, Assessment work focuses on protection from liability, exposure or an understanding of the effect attached liability may have on the asset value of the property. Defensibility of the work rests on proving appropriate inquiry sufficient for due diligence liability protections. In most cases assessment work is performed in support of property transfer and/or property redevelopment.

 

The Site Assessment services provided by NTS include:

 

  • ASTM E1527 - Phase I Environmental Site Assessments
  • ASTM E1528 - Transaction Screen Process
  • Phase II Environmental Site Assessments
  • Voluntary Investigation and Cleanup (VIC)
  • Asbestos

A close relationship exists between assessment, investigation, and cleanup work. Our staff is very experienced in meshing the two areas into the overall objective, which is property transfer, development or economic development with managed exposures to liabilities.

Site Investigation

The Site Investigation process consists of data collection, interpretation, risk based evaluation and formulating conclusions regarding a potential or existing release of a hazardous substance or petroleum product. A site is investigated when it has either come under regulatory scrutiny as a planned result of Site Assessment, or the project site is currently regulated through other means. This typically creates two types of clients for NTS:

 

  1. Clients who are participating in redevelopment or transfer of a contaminated property and view the property as an asset; and,
  2. Clients who are responding to regulatory enforcement and view the property as a liability.

NTS is able to breakdown the regulatory process and offer recommendations that provide our clients a pathway for making the right business decisions.  NTS offers a unique advantage in Site Investigation by being able to no only coordinate but also provide professional, technical and laboratory services all under the same NTS umbrella.  By being able to offer all of these services, we are able to meet project objectives cost effectively, professionally, and in a time frame that fits our client's needs. 

Examples of Site Investigation Projects

NTS has performed Site Investigation in support of, but not limited to the following:

 

 

  • Property Transfer and Redevelopment
  • Regulatory Compliance
    • Minnesota Pollution Control Agency (MPCA) Petroleum Remediation Program (PRP)
    • MPCA Petroleum Brownfields Program
    • MPCA Voluntary Investigation and Cleanup (VIC) Program
    • Resource Conservation and Recovery Act (RCRA)
    • Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)
    • Toxic Substances Control Act (TSCA)
    • Minnesota Environmental Response and Liability Act (MERLA)

The Purpose of Enivronmental Site Assessments

 

If a party purchases a contaminated commercial property without taking appropriate steps, the state and federal regulatory agencies may consider that purchaser as a responsible party (RP).  Because investigation and cleanup of sites contaminated with petroleum or hazardous wastes can be expensive and take years to complete, managing environmental liability has become an integral part of commercial land transactions. 

 

A Phase I Environmental Site Assessment (ESA) is an important step a purchaser can take to learn about the property’s historical use and development, the environmental conditions, and the likely presence of hazardous substances and petroleum.  By following the appropriate standard, the prospective purchaser can fulfill All Appropriate Inquiry (AAI) requirements codified in federal law which qualifies them for full or partial liability protections (see additional Fact Sheet “Landowner Liability Protections”).  Beyond the issue of avoiding environmental liability, the purchaser gains information to assess other financial risk posed by potential environmental contamination which may include:

 

  • diminished asset value of the property if an identified release is discovered
  • delays in construction of a release is identified during property development
  • activity and use limitations (AUL) that effect how the purchaser may use the property

These business risk considerations mean that entities other than the prospective purchaser may drive the requirement for an environmental assessment including; lenders, bank regulators, financial backers such as SBA or HUD, and Wall Street rating agencies.

 

Phase I ESAs are conducted in accordance with “ASTM Standards on Environmental Site Assessments for Commercial Real Estate,” American Society for Testing and Materials (ASTM) Standard E 1527-00 and E 1527-05 (see additional Fact Sheet “Landowner Liability Protections”)  and involve public records review, a site visit, and interviews with owners, occupants and local government officials.  Phase I ESAs do not involve laboratory analysis, but must be conducted by a trained and experienced environmental professional. 

 

Landowner Liability Protections Provided by the Brownfields Amendments.

The Comprehensive Environmental Response, Compensation and Liability Act  (CERCLA) was passed in 1980 (42 U.S. C. 9601 (35)) to respond to situations involving historical releases of hazardous substances and petroleum. CERCLA places liability on potentially responsible parties (PRPs) which include owners and operators of the property.  Therefore, if a party acquires a contaminated site, they could be held liable for cleanup of hazardous substances and petroleum present at the site.  The Superfund Amendments and Reauthorization Act, passed in 1986 specified the potential protections to liability, of which the Innocent Landowner defense was the most readily available. 

 

In the past what was considered appropriate inquiry was not well understood and the scope of environmental assessments was extremely variable.  This opened the possibility for argument in the courts about whether the amount of inquiry conducted was enough to qualify for the innocent landowner defense.  Use of the ASTM standards has lead to a standardized approach to ESAs and the Small Business Liability Relief and Brownfields Revitalization Act (Brownfields Amendments) passed in 2002, clarified eligibility provisions for the Innocent Landowner and  expanded the liability protections to include the Bonafied Prospective Purchaser and the Contiguous Property Owner.

 

If a landowner wishes to claim any of the landowner protections, they must be prepared to establish the following threshold criteria:

 

  • They conducted All Appropriate Inquiry (AAI) prior to purchase.
  • The  identified release occurred before they purchased the property.
  • The purchaser has no direct, contractual or business affiliation with any entity that is potentially liable for the release. (The innocent landowner defense only requires the preponderance of the evidence must show that the act or omission that caused the release was caused by a third party with whom the person does not have an employment, agency or contractual relationship.)
  • In addition to the threshold criteria the following continuing obligations must be met to maintain the liability protection:
  • Appropriate care is taken with respect to stopping continued release, preventing future releases and limiting human, environmental or natural resource exposure to the release.
  • The purchaser provided full cooperation with the regulatory agencies.
    Maintain compliance with any institutional controls or land use restrictions that have been put in place.
  • Provide all required notices to the regulatory agency.

Innocent Landowner

 

An innocent landowner defense protects the property owner from enforcement actions by the EPA which would otherwise seek to establish that the property owner is a responsible party (RP) to an identified release.  To be eligible for the innocent landowner defense, the property owner must establish that they completed AAI  prior to purchase and had no reason to know that an identified release was present. 

 

Contiguous Property Owner

 

As the name implies, this protection excludes from the list of potential responsible parties, the owner of the property adjacent to the contaminated property, as long as the only source of contamination on the contiguous property is a the property containing the identified release.  It is important to note that if the contiguous property can be shown to also have a source of the identified release, or if the owner failed to complete AAI prior to purchase and cannot demonstrate that they had no reason to know of the contamination, they are not eligible for the Contiguous Property Owner protection

 

Bona Fide Prospective Purchaser

 

The bonfide prospective purchaser defense removes the provision that the purchaser had no reason to know of the identified release.  In other words a person may buy a contaminated property having full knowledge of the contamination.


Phase II ESAs

 

If a Phase I ESA identifies a Recognized Environmental Condition (REC) on a property and the Environmental Professional cannot clearly determine the presence of absence of an identified release, a Phase II ESAis typically recommended is required to constitute All Appropriate Inquiry and provide sufficient information for planning. Often the most cost-effective possibility includes a Limited Phase II ESA.  The Limited Phase II seeks only to make one of the following statements:

 

 

  1. The Phase II data provide sufficient information to determine that there is no reasonable basis to suspect the presence of hazardous substances or petroleum under conditions that constitute a “release.”  Therefore, no additional investigation is necessary to provide “appropriate inquiry” into the REC.
  2. The Phase II data identify the presence of hazardous substances or petroleum under conditions that constitute a “release.”  Therefore, additional investigation is required to provide “appropriate inquiry” into the REC unless it can be demonstrated that additional information will not provide significant value or understanding of the release.

If significant concentrations of contaminants occur on the property and the prospective purchaser desires to pursue the purchase, further evaluation should be conducted under one of the voluntary investigation and cleanup programs of the Minnesota Pollution Control Agency (MPCA).  These programs function as an agent of the federal EPA to furnish direct liability assurances to the purchaser.

 

A Phase II ESA may include one or more of the following:

 

  • Surficial soil and water samples;
  • Subsurface soil borings;
  • Groundwater monitoring well installation, sampling and analysis;
  • Container (drum) sampling;
  • Sampling of dry wells, floor drains and catch basins;
  • Testing of USTs;
  • Transformer/capacitor sampling and wipe tests for PCBs;
  • Geophysical surveys for buried tanks and drums;
  • Asbestos surveys; and
  • Lead paint surveys.

Please note that upon detection of contaminants during a Phase II ESA the owner is required to report the condition to the Minnesota State Duty officer and is now a Potential Responsible Party (PRP).

 
Frequently Asked Questions about ESAs


How detailed should the ESAs be?

For each real estate transaction, the level of inquiry will be different.  The term “appropriate inquiry” suggests that the level of inquiry will depend on the circumstances and the underlying facts for each parcel of real estate.  Depending on the findings of the ESA, the future owner may need to conduct further research or actually have sampling conducted (Phase II ESA) to determine if there is contamination.  Therefore, the appropriate level of inquiry may range from none at all (in the case of a single-family residence), to an intrusive Phase II ESA where there is much concern about the likely possibility of contamination.

 

How current must a Phase I ESA be?

There is no commonly used commercial practice or standard for the age of an ESA among commercial banks or developers, except the guidance found in the ASTM Standard E 1527-00.  The standard states that a Phase I ESA should be completed less than six months before acquiring the property.  Conditions differ from site to site and in some cases, days or weeks can make a difference in the environmental conditions.  Minimizing risk depends on the environmental professional’s knowledge of the area, the property and their professional judgement.

Contact Info

If you would like more information or obtain a price quote please call or email:

 

Doug Fossell

Phone:  218-742-1029
Email: Click to send Email to Doug