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

"All Appropriate Inquiry," or AAI, is the process of evaluating a property's environmental conditions and the likelihood of contamination. The EPA's AAI Final Rule (40 CFR Part 312) governs Phase I assessments funded by EPA Brownfields grants, and recognizes ASTM E1527 (currently E1527-21) as meeting its requirements.

The Brownfields Amendments (the Small Business Liability Relief and Revitalization Act) clarify CERCLA liability protections for landowners who conduct all appropriate inquiries into a property's past and present use and contamination risk. They amend CERCLA §101(35)(B) and require EPA's AAI standards, which govern four protections: the innocent landowner defense (§101(35)), the contiguous property exemption (§107(q)), the bona fide prospective purchaser exemption (§107(r)(1), §101(40)), and brownfields grant eligibility (§104(k)(2)).

Limited Phase I Environmental Site Assessment

A Limited Phase I ESA is a truncated Phase I, normally omitting one or more work segments such as the site inspection or certain of the file searches. When the field inspection component is included, the study is sometimes called a Transaction Screen — though that is really a separate ASTM standard, and one we think has been overtaken.

What Is a Transaction Screen, and Does Your SBA Deal Need One?

If you are new to SBA environmental requirements, this is usually the first term that confuses people — so here is the plain version, and then the part nobody tells you.

What a Transaction Screen Actually Is

A Transaction Screen is its own ASTM standard — E1528, first published in 1993, currently E1528-22. ASTM's own title for it is "Standard Practice for Limited Environmental Due Diligence." That word is ASTM's, not ours.

SOP 50 10 8.1 defines it the same way, and spells out what it contains: an interview with the owner or operator of the property, a visit to the property, completion of both environmental questionnaires A and B, and a review of government records and historical sources — with an Environmental Professional supervising the site reconnaissance and concluding either that the risk is minimal or that further investigation is warranted.

When the SOP Actually Calls for One

Less often than most people assume. SBA does not require a Transaction Screen as a general step. In the current SOP it comes up in two narrow places:

• When the owner or operator will not sign the Environmental Questionnaire. The SOP says the questionnaire then cannot be used, and the lender must at a minimum obtain a Transaction Screen.
• Car-wash-only facilities. Appendix 6 lists Automotive Repair & Maintenance (NAICS 8111) as an environmentally sensitive industry, but carves out car-wash-only sites, for which a Transaction Screen is named an acceptable starting point.

And if the Environmental Professional who performs one concludes that further investigation is warranted, the lender must obtain a Phase I ESA anyway.

Why We Think It Has Been Leapfrogged

We are not criticizing the Transaction Screen from the outside. We invented the commercial version of it. Sierra Consultants was the first company in the United States to offer the Transaction Screen as a commercial report, in June of 1993, for SBA and non-SBA deals alike. That is in fact how this firm started: explaining a report nobody had heard of to people who were certain a Phase I was overkill for what they actually needed.

In 1993 that was the right answer, because the alternative did not exist. There was no RSRA. Thirty-plus years later the data a desktop screen can reach has changed completely, and an RSRA now does more with the history of a property than a Transaction Screen ever did.

The Transaction Screen sits in an awkward middle. It requires a site inspection, and a site inspection is most of what makes the expensive report expensive — so it does not cost anything like a desktop screen. But it still does not satisfy All Appropriate Inquiry, so it carries none of the CERCLA landowner liability protections a Phase I exists to secure.

Put plainly: if you are going to pay for the inspection at all, you may as well get the Phase I and pick up the liability protection with it. And if you do not need that protection, you do not need the inspection either — which is the case a Records Search with Risk Assessment was built for.

Two more things are worth knowing before you order one.

• It leans on the seller for the property's history. The questionnaires at its center are answered by the current owner or occupant — the one party in the transaction with a reason to remember the site favorably.
• It offers little corroboration of what those answers say. The history is largely taken as given rather than independently traced, so an incomplete answer tends to stay incomplete. An RSRA goes much deeper on history, and does not depend on the seller for it except in rare cases.

And on the one thing people most often misunderstand, the two are identical. A Transaction Screen and an RSRA offer exactly the same All Appropriate Inquiry protection against CERCLA liability: none. Neither is a substitute for a Phase I where liability protection is the goal. The difference is not what they protect you from — it is how much you actually learn about the property, how fast, and for how much.

So What Should You Order?

If you need All Appropriate Inquiry, order a Phase I ESA. Nothing cheaper gets you there.

If you need to know whether this deal has an environmental problem — quickly, and before you spend real money — order an RSRA EZ-Screen. From $499, typically 1-3 business days, signed by an Environmental Professional.

And you can try it without taking a risk. Add our Clean-or-Free option when you order: if the screen finds elevated risk and recommends a Phase I, your fee is waived — not credited toward something else you buy from us. Waived. We do not perform that Phase I, so there is nothing for us to sell you on the other side of the recommendation. That is the Clean-or-Free guarantee.

Not sure which one your deal needs? Check what SBA's SOP 50 10 8.1 actually requires — it is free and takes a few seconds.

Environmental Assessment

"Environmental Assessment" is often used loosely, with little connection to hazardous substance liability. In its specific sense, it is a study preliminary to an Environmental Impact Statement (EIS), which evaluates a broader set of impacts than contamination alone — biodiversity, noise, water and air quality, traffic, geotechnical risk, visual impact, public safety, and hazardous substances.

SBA Phase I Environmental Site Assessment

SBA 504 and 7(a) loans carry higher due diligence requirements than ordinary real estate transactions, based on the NAICS codes tied to the property's current and prior use. SBA maintains a list of environmentally sensitive industries — funeral homes, dry cleaners and gas stations among them — that require a Phase I, and gas stations operating beyond a stated period also require a Phase II. Current rules: SOP 50 10 8.1.

Freddie Mac and Fannie Mae Phase I Environmental Site Assessments

Freddie Mac and Fannie Mae each require their own specialized Phase I, built on the ASTM E1527 standard with added scope: a defined inspection percentage, radon testing, asbestos and lead-based paint testing with operations-and-maintenance plans, lead in drinking water, and mold. Fannie Mae also requires a Phase I on condominiums whenever underwriting flags an environmental concern.

HUD Phase I Environmental Site Assessment

The U.S. Department of Housing and Urban Development also requires a Phase I ESA for a condominium under construction that wishes to offer an FHA-insured loan to potential buyers.

Phase II Environmental Site Assessment

A Phase II ESA is an intrusive investigation — soil, groundwater, or building-material samples tested for contaminants, most often petroleum hydrocarbons, heavy metals, pesticides, solvents, asbestos and mold. It follows a Phase I that finds a likelihood of contamination.

Phase III Environmental Site Assessment

A Phase III ESA covers site remediation: delineating the extent of contamination found in Phase II through intensive sampling, monitoring, and fate-and-transport modeling, then designing and evaluating cleanup alternatives. Reporting covers the cleanup performed and the follow-up monitoring for residual contaminants.

Frequently Asked Questions