Overview of what a Phase I ESA is, how long it takes, and other frequently asked questions regarding the Phase 1 Environmental Assessment process.

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A Phase I ESA is an investigation of the current and historic uses of a
property, and an inspection of current conditions of the property to
determine the likelihood that contamination is present. The Phase I
environmental assessment is intended to be a standardized review process
looking for specific indications of contamination issues; it is not intended
to be an exhaustive search looking for contamination that is not there.
What is a Phase 1 ESA?
Simply stated, a Phase I ESA is looking for indications that current or
historic uses of the property may have resulted in contamination. The
Phase I also considers neighboring properties where contaminants may
have migrated onto the property through groundwater, etc.
Because the scope of the Phase 1 environmental site assessment is
focused on contamination issues, some organizations will decide to
augment the assessment to address other related issues, such as:
•Asbestos
•Lead-based paint
•Indoor air quality and industrial hygiene
•Compliance with environmental permits and environmental laws
•Compliance with OSHA rules and other health and safety issues
•Past company disposal practices in landfills, etc.
These other types of issues are not addressed in a Phase I ESA under the
ASTM standard; if you wish to have these issues addressed, you need to
discuss adding them with the environmental professional.
I N S I D E T H I S
B R I E F I N G
1 What is a Phase 1 ESA?
2 How Long Does a Phase 1
Take?
3 What is the Phase 1
Looking For?
4 Are There Different Kinds?
5 Can Anyone Conduct a
Phase 1 ESA?
6 Can I Use an Old ESA?
7 What Happens If My Phase
I Identifies An Issue?
Landowner Liability
Protections are available
only if a Phase I
Environmental Site
Assessment was
conducted prior to
purchasing property
What is the Phase 1 Looking For?
Regulatory Briefing
Phase 1 ESA
Buyer’s
Guide
December 2016
This will vary greatly between providers; you should allow at least two
weeks to complete the Phase I. Some providers will ask for significantly
more time, some requiring 4-6 weeks.
How Long Does A Phase 1 Take?

2. © Caltha LLP 2016
Page 2 Regulatory Briefing
Are There Different Kinds If Phase 1
ESA?
Different companies can use a variety of terms to refer to their own
initial or cursory review of environmental issues associated with a
property. It is sometimes difficult to determine what the review includes.
Therefore, to assure a comprehensive assessment, the only types of
Phase 1 ESA accepted by the US government, States and most lenders
uses the current ASTM standard method, referred to as “ASTM E 1527-13”
or "E 2247 – 08", with the later applying to large tracts of rural or forest
lands only. These ASTM standards are updated every five years, so older,
obsolete versions are referred to as E 1527-03, etc.
To compare services between companies, be sure that each is providing a
Phase I ESA that explicitly meets the ASTM E 1527-13 standard.
Other types of investigations exist, including:
 Transaction Screen
 Records Search With Risk Assessment
These types of investigations are appropriate for some limited situations,
or can be conducted to satisfy the environmental due diligence
requirements of specific organizations. For example, the Small Business
Administration has developed their own “Records Search With Risk
Assessment” procedure to provide an appropriate level of environmental
review for low risk properties. These types of investigations are not
equivalent to a Phase 1 Environmental Site Assessment.
Activity & Use
Restrictions (AULs)
AULs are explicit
restrictions on the uses
and/or activities that are
allowed on a property.
The existence of an AUL
should be considered an
indication that the
property is contaminated
and not suitable for
unrestricted use.
“Industrial Use Only”
restriction may indicate
that contamination was
partially cleaned up to
meet industrial standards.
Restrictions could also
limit physical changes to
the buildings, parking
lots, etc.
To be eligible for LLPs,
Owners must know and
have complied with all
AULs
Can anyone conduct a Phase I
Environmental Assessment?
Yes and no; legally, anyone can conduct a Phase I ESA. However, if you
want your assessment to meet the ASTM standard, then the
“environmental professional” you use will need to provide documentation
that they meet the specific qualification requirements contained in
ASTM E 1527-13.
Different organizations and lenders may have additional requirements on
who can conduct Environmental Site Assessments they will accept. For
example, the Small Business Administration (SBA) requires that the
environmental professional has a minimum of $1,000,0000 professional
liability insurance, in addition to meeting technical qualifications.

3. © Caltha LLP 2016
Regulatory Briefing Page 3
Lenders have a vested interest in the condition of a property they will accept as collateral. If
contamination is discovered later, the value of the property can be significantly reduced and can make the
property difficult to resell.
Make sure to discuss the Phase I ESA with your lender. They may have additional requirements that need to
be included. The lender may also need to be identified in the ESA report as an “additional user”, or may
require additional liability protections, such as a “reliance letter”. Some lenders prefer that they order the
Phase I ESA rather than having the borrower order one.
Understanding your lender’s requirements at the onset will save time and money, and will avoid having to
make last minute changes prior to closing.
How Is My Lender Involved?
Can I Use a Previous Phase I ESA Report?
Possibly; however the ASTM is specific on how old the ESA report can be. Reports completed
within the previous six months are valid; after six months some or all of the report will need to
be updated. Environmental assessments older than one year need to be redone.
Sometimes the Phase I will identify issues (referred to as “Recognized Environmental Conditions” or REC)
that indicate that contamination may be present on the property. In this case, the environmental
professional will recommend a Phase II Environmental Site Assessment be conducted. The Phase II ESA will
likely include collecting soil, groundwater or other samples to determine if contamination is actually
present.
If contamination is discovered during the Phase 2 ESA, the property owner may be obligated to report it to
State and/or Federal agencies, and may be required to conduct cleanup.
Finally, it is important to consider that the ESA process is only one element of environmental due
diligence (although it is the only element required for LLPs). Other business risks may be important to a
purchaser, which are not considered as part of the ASTM standard practice. These issues need to be
discussed with the environmental professional conducting the assessment.
What Happens If My Phase I Environmental Assessment
Identified An Issue?
Caltha LLP Services
Caltha LLP provides expert due diligence support to
Buyers, Sellers and Lenders. Click on the service
area below for more information:
Phase 1 Environmental Site Assessment
Phase 2 Investigations
Due Diligence Compliance Audits
Regulatory Briefings are published periodically by
Caltha to highlight new or proposed environmental,
health & safety regulations
Caltha LLP
Phone:
(763) 208-6430
Website:
http://www.calthacompany.com
E-mail:
info@calthacompany.com