Phase I ESAs Are Not A Commodity


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Panel discussion from the 2013 Annual Client Summit

Anthony J. Buonicore, Moderator

Nestor Benavides, President, EMG
Holly Neber, President, AEI Consultants
Rick Ferguson, US Bank
Brian Walker, Chase

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Phase I ESAs Are Not A Commodity

  1. 1. PANEL DISCUSSION:Why the Phase I ESA Should NOTBe Viewed as a Commodity
  2. 2. Anthony J. Buonicore, ModeratorPanel:Nestor Benavides, President, EMGHolly Neber, President, AEI ConsultantsRick Ferguson, US BankBrian Walker, Chase
  3. 3. › A marketable item that is mass-produced andunspecialized to satisfy a need.› Describes a class of goods for which there isdemand, but which is supplied without qualitativedifferentiation across a market.› Interchangeable with other items of the same type.› Market treats as equivalent with no regard to whoproduced (“fungibility”).› Typically leads to smaller profit margins anddiminishes the importance of factors other thanprice.Definition of a Commodity
  4. 4. NEED A PHASE - I REPORT?DONT SQUASH YOUR DEAL WITH A HIGH BILL,_____s BANKERS PHASE - I COST ONLY $730.00!WITH _____’S BANKERS PHASE - I, YOU GET A REPORT THAT CONFORMS WITH ASTM’S STANDARDS & INCLUDES:¨ State environmental files review of sites within 1 mile.¨ State Underground Storage Tank registrations within 1 mile.¨ State Leaking Underground Storage Tank sites within 1 mile.¨ Landfill listings within 1 mile and Storm Water Regulatory Analysis.¨ Treatment Storage and Disposal facilities and Storm Water Compliance review.¨ Site Inspection by State and Federal Registered Consultant.¨ Asbestos Construction Building Materials (ACBM) over-view and much more
  5. 5. › Organized in January 2012 at the EBA’s Santa Fe meeting› Mission: Provide a unified voice for Phase I EPs in the industry Disseminate information and provide a consistentmessage on good commercial industry practice Educate those who rely on Phase I ESAs Improve the status of the industry› Roundtable meets four times per year (in conjunction withSpring and Fall ASTM meetings and Winter and SummerEBA meetings)Phase I Environmental ConsultantsRoundtable
  6. 6. › “What you need to know as a Phase I EP that is NOT in theASTM E1527 Standard”› Twelve (12) specific issues were identified in June 2012 atthe EBA Newport, RI meeting that needed to be addressed› Supported by an industry-wide survey conducted by theRoundtable in August-September 2012› More than 100 representatives of the Phase I industryparticipated in the full day workshop› First Roundtable report published January 31, 2013 (ReportNo. 13-001-31) focusing on the workshopOctober 23, 2012 Roundtable Workshop
  7. 7. > Recognized that: The quality of Phase Is across themarket is highly variable. The consistency of Phase Is ishighly variable. Phase I pricing is highly variable.Why Phase I Should Not Be Viewed as aCommodity
  8. 8. > ASTM E1527 recognizes that: The extent of the investigation may varydepending on property type, client’sexpertise, client’s risk tolerance and theinformation developed in the course of theinquiry. There may be site-specific considerations thatcan impact the scope of work conducted. Professional judgment is integral to a Phase Iinvestigation.Why Phase I Should Not Be Viewed as aCommodity Cont’d
  9. 9.  ECR Industry Survey found that: On PRICE: EPs compete on price for their Phase I ESAs…Why Phase I Should Not Be Viewed as aCommodity Cont’d
  10. 10.  ECR Industry Survey found that: With respect to client views the Phase I as a commodity: EPs feel that ___ of their clients view Phase I ESAs as a commodity.Why Phase I Should Not Be Viewed as aCommodity Cont’d
  11. 11.  Similarly, EDR Insight’s 1Q13 State of the Property Assessment MarketSurvey (April 2013) found that: EPs feel pressured on price:Why Phase I Should Not Be Viewed as aCommodity cont’d
  12. 12.  EDR 1Q13 State of the Property Assessment Market Survey found that: Pricing pressure from lender clients vs. prospective purchasers:Why Phase I Should Not Be Viewed as aCommodity cont’d
  13. 13.  EDR 1Q13 State of the Property Assessment Market Survey found that: EPs feel that their clients give them credit for their value proposition:Why Phase I Should Not Be Viewed as aCommodity
  14. 14. Why Phase I Should Not Be Viewed as aCommodity Cont’dDebt Phase I ESAs Equity Phase I ESAsClient?Lender Prospective purchaserWhy?Phase I to protect its risk Phase I to protect its riskRisk Profile?Secured creditor exemption fromcleanup liabilityLiability for total cleanup cost (mayexceed value of the property)Maximum loss is capped at thecollateralLitigation liability with potential thirdpartiesCan foreclose without cleanup liability Potential liability is not limitedPhase I Investigation Cost?Generally less expensive Phase IESAbecause risk profile is much lowerGenerally more expensive Phase I ESAbecause risk profile is significantlygreater
  15. 15. Q & AWhy Phase I Should Not Be Viewed as aCommodity