More than an RSRA? Different Types of Environmental Site Assessments for Different Purposes

In addition to the Records Search with Risk Assessment (RSRA), there are several other common environmental report types. Some of these resemble each other in name or degree of detail, but there are key differences.

AAI Phase I Environmental Site Assessment or “All Appropriate Inquiry,” or AAI, is a process of evaluating a property’s environmental conditions and assessing the likelihood of any contamination. Every Phase I assessment conducted with EPA Brownfields Assessment Grant funds must be conducted in compliance with the All Appropriate Inquiries Final Rule at 40 CFR Part 312. The All Appropriate Inquiries Final Rule provides that the ASTM E1527-05 standard is consistent with the requirements of the final rule and may be used to comply with the provisions of the rule.

The Small Business Liability Relief and Revitalization Act (the Brownfields Amendments) clarifies CERCLA liability provisions for certain landowners and potential property owners. The Brownfields Amendments provide liability protections for certain property owners, if the property owners comply with specific provisions outlined in the statute, including conducting all appropriate inquiries into present and past uses of the property and the potential presence of environmental contamination on the property. The Brownfields Amendments amend Section 101(35)(B) of CERCLA and require EPA to promulgate regulations that establish federal standards and practices for conducting all appropriate inquiries. The all appropriate inquiries standards and practices are relevant to:

• the innocent landowner defense to CERCLA liability (§101 (35));
• the contiguous property exemption to CERCLA liability (§107 (q));
• the bona fide prospective purchaser exemption to CERCLA liability (§107 (r)(1) and (§101 (40)); and
• the brownfields site characterization and assessment grant programs (§104 (k)(2)).

Limited Phase I Environmental Site Assessment is a truncated Phase I ESA, normally omitting one or more work segments such as the site visit or certain of the file searches. When the field visit component is included the study is sometimes called a Transaction Screen. However, a Transaction Screen is really a separate ASTM Standard from 1993, now largely obsolete.

Environmental Assessment is often used as a common catch-all term that can have little to do with the subject of hazardous substance liability.  In some cases however, it specifically describes a study which is preliminary to an Environmental Impact Statement (EIS).  An EIS identifies environmental impacts of a land development action and analyzes a broad set of parameters including biodiversity, environmental noise, water pollution, air pollution, traffic, geotechnical risks, visual impacts, public safety issues and also hazardous substance issues.

SBA Phase I Environmental Site Assessment means all properties purchased through the United States Small Business Administration’s 504 Fixed Asset Financing Program require specific and often higher due diligence requirements than regular Real Estate transactions. Due diligence requirements are determined according to the NAICS codes associated with the prior business use of the property. There are 58 specific NAICS codes that require Phase I Investigations. These include, but are not limited to: Funeral Homes, Dry Cleaners, and Gas Stations. The SBA also requires Phase II Environmental Site Assessment to be performed on any Gas Station that has been in operation for more than 5 years. The additional cost to perform this assessment cannot be included in the amount requested in the loan and adds significant costs to the borrower.

Freddie Mac/Fannie Mae Phase I Environmental Site Assessments[2] are two specialized types of Phase I ESAs that are required when a loan is financed through Freddie Mac or Fannie Mae. The scopes of work are based on the ASTM E1527-05 Standard but have specific requirements including the following: the percent and scope of the property inspection; requirements for radon testing; asbestos and lead-based paint testing and operations-and-maintenance (O&M) plans to manage the hazards in place; lead in drinking water; and mold inspection. For condominiums, Fannie Mae requires a Phase I ESA anytime the initial underwriting analysis indicates environmental concerns.[12]

HUD Phase I Environmental Site Assessment The U.S. Department of Housing and Urban Development also requires a Phase I ESA for any condominium under construction that wishes to offer an FHA insured loan to potential buyers.[13]

Phase II Environmental Site Assessment is an “intrusive” investigation which collects original samples of soil, groundwater or building materials to analyze for quantitative values of various contaminants.[11] This investigation is normally undertaken when a Phase I ESA determines a likelihood of site contamination. The most frequent substances tested are petroleum hydrocarbons, heavy metals, pesticides, solvents, asbestos and mold.

Phase III Environmental Site Assessment is an investigation involving remediation of a site. Phase III investigations aim to delineate the physical extent of contamination based on recommendations made in Phase II assessments. Phase III investigations may involve intensive testing, sampling, and monitoring, “fate and transport” studies and other modeling, and the design of feasibility studies for remediation and remedial plans. This study normally involves assessment of alternative cleanup methods, costs and logistics. The associated reportage details the steps taken to perform site cleanup and the follow-up monitoring for residual contaminants.