Insight from a Phase I ESA Expert

Phase I Environmental Site Assessments are required for most commercial real estate transactions. The use of Phase I ESAs is routine and the scope is very standardized. However, there are some important elements that should be understood by the user, which may have a significant impact on the conclusions and recommendations of the report, possibly affecting the transaction depending on the user’s risk tolerance and the proposed future use of the property.

  1. Phase I ESAs are designed to provide liability protection under federal Superfund law (CERCLA). However, they don’t provide protection from other environmental statutes, such as State hazardous waste cleanup laws, State storage tank laws, and State water quality laws.
  2. A Phase I ESA is not an environmental insurance policy. Yes, environmental consulting firms carry insurance for their errors and omissions. However, these policies would only take effect in the event that the firm misses something that should have been identified using customary industry practices. Generally speaking, since a Phase I ESA doesn’t involve intrusive investigation of soil, groundwater or soil vapor, if there is no evidence of potential contamination that is visible during the site reconnaissance or discoverable in historical records or interviews, then an environmental issue that is not identified in a Phase I ESA is the responsibility of the property owner, not the consultant.
  3. A 30-day due diligence period provides ample time to complete a Phase I ESA, unless a government agency file review or a Phase II investigation are needed. Many government agencies take over a month to schedule a file review, and even a limited Phase II investigation takes a few weeks to complete. Especially for industrial properties or properties with common environmental concerns like automotive shops, gas stations and dry cleaners, it is best to allow for at least 60 days for due diligence.
  4. In following ASTM’s standard for Phase I ESAs, the environmental professional must consider whether an observed condition would be “the subject of an enforcement action if brought to the attention of appropriate governmental agencies.” As a result, the conclusions drawn in a Phase I ESA can be influenced by regulatory programs that are specific to the location of the property, as well as the planned future use of the property. Examples of these are New Jersey’s ISRA regulations which are triggered by the transfer of certain industrial properties, and New York City’s E-Designation Program that imposes certain investigation and remediation requirements for properties that are planned for redevelopment. For greenfield development sites, determining the presence of wetlands and endangered species and their regulation under State and Federal programs should be determined early in the due diligence process, as they can pose substantial limitations on the development of the site.
  5. Planned future use of a property is an important consideration in environmental due diligence, but can be easily overlooked. Cleanup levels for soil and groundwater are commonly more stringent for residential use than for commercial use. Similarly, the planned excavation depth for new construction can have substantial cost implications when there is contaminated soil to be managed. Sharing of information between the project architect/engineer and the environmental consultant during the due diligence phase can facilitate design decisions and provide valuable input in the construction budgeting process.
Phase I ESA Scientist in Lancaster PA

Information Overload! Why the Definition of “Reasonably Ascertainable” is Changing Rapidly in Due Diligence

Guest author: David S. Coyne, Principal, Liberty Environmental, Inc.

Social media, and the information age in general, has connected us in ways that were unimaginable when many us began in the environmental business.  I recall the difficulties of sharing a single PC among a staff of five in a cramped office in 1992; the novelty of Windows when it was purchased by our company a year later, and the utter joy over a company-wide internet connection – a technological wonder! – on my first day at a new job in the late 1990s.

In those days, collecting information about a site required real legwork, and the completion of a single Phase I Environmental Site Assessment meant some sweat equity.  There was the trip to the County Courthouse and its Tax Assessment Office for parcel information, then the Recorder of Deeds office for the cumbersome chain-of-title research.  Then, there was often a separate trip to the County Planning Commission for aerial photographs, and yet another drive to the County Agricultural Extension office or the local Conservation District office for soil, geologic, and other physical setting data.  In Philadelphia in the 1990s, I was on a first-name basis with the Free Library’s mapping archivist, the gatekeeper to the only reliable source of detailed historical maps in the city.  It all amounted to quite an effort, but as a result of the limited availability of records there was a clear line of demarcation between what data you could collect and what you couldn’t.  If it was available within the project timeline and you could go get it, you did.  Often, you were left with less data than you hoped to collect, but it represented what was reasonably ascertainable at the time.

How times have changed.  Liberty’s younger professionals cringe when I tell them of the miles I logged for a single ESA, of the piles of quarters I kept in the car for parking meters and pay phones, and – this actually gets a chuckle – the stack of County Atlases on the passenger seat to keep from getting lost somewhere in southern Delaware County.  It’s a shock because nearly every conceivable resource that we used to chase down with great effort is now available through a simple online search or ordering system.  From historical aerial photographs to fire insurance maps, deeds to liens, topographic maps to tank registrations, it’s mostly available at the click of a button and a subscription payment.  And thus, within the context of environmental due diligence, there has been a re-evaluation of what information is now reasonably ascertainable and, perhaps more to the point, practically reviewable.

Thankfully, each of these terms is clarified under ASTM Standard Practice E1527-13 for Phase I Environmental Site Assessments.  In essence, if the data is relatively easy to search using standard efforts, it’s reviewable.  More to the point, there are a number of examples that the Standard definition describes that it considers not practically reviewable – such as large numbers of records that are searchable only across large geographic areas, or databases that can only be screened through chronological entries.  But in the short period of time between the publishing of the current ASTM Standard in late 2013 and now, such circumstances are rapidly disappearing.  Once-obscure map records are now easily viewable in your browser on public agency websites backed by GIS-based applications, regulatory databases have become more robust and searchable, and archived agency records are being digitized quickly in all states.

The takeaway of all this for environmental professionals is that we must keep ahead of the information curve and be sure to collect all information that is reasonably ascertainable and practically reviewable within the definitions set forth in our industry’s standards of practice.   Periodic updates of the ASTM Standard or others, as current as they may be, may not be able to keep up with the changing nature of this definition in the information age.  More data is available to us now than ever before, so more data is expected to be collected, reviewed and evaluated within the scopes of our assessments.   Is this a good thing?  Sure.  And it’s exciting to have so much information at our fingertips, that’s for certain.  But I will admit to a certain wistfulness for those great old courthouses, and I still keep a stack of quarters in my glove compartment – just in case.

Pictured above: A Liberty Environmental, Inc. scientist visits a residential site development as part of a Phase I Environmental Site Assessment.

Knowing Where to Put the Boring

There’s an old engineering joke regarding a manufacturing facility that had a new machine that it couldn’t get running. The manufacturer was losing thousands and thousands of dollars each day. They hired an experienced industrial engineer to inspect the machine, review the design drawings, and hopefully come up with a solution. After spending two hours on the task, the engineer put a big red X one of the design drawings, accurately identifying the source of the problem, which was quickly fixed. Soon the machine was up and running.

A week later the facility manager received a bill from the engineer for $5,000. He was furious and called the engineer demanding a detailed invoice justifying the charge. The engineer submitted a revised invoice, itemized as follows:

Labor – 2 hours @ $100/hour – $200
Knowing where to put the X – $4,800

TOTAL $5,000

In environmental investigations, it’s critical to select sampling locations so that the area of concern is adequately characterized. This involves performing thorough research, using state-of-the-art investigative technologies, and applying knowledge of construction methods. If this isn’t done, serious environmental concerns can go undetected.

Take one site where an underground storage tank was being investigated. A consultant had placed soil borings 10 feet away from the tank, and no petroleum impacts were found. Later when a follow-up investigation was performed, borings placed 1 to 2 feet from the tank identified substantial petroleum impacts, and litigation ensued. In another case, a shopping center had been constructed over a former trucking terminal. A consultant performed a soil investigation intending to locate borings along the perimeters of two former trucking terminal buildings, and no impacts were identified. While reviewing the consultant’s report, a historical aerial photo was projected onto the soil investigation diagram using geographic information system (GIS) technology to confirm that the soil borings were accurately placed. Unfortunately, it was found that 9 of the 12 borings completely missed their target.

The knowledge of typical storage tank installation practices and commercial facility design is important in the performance of Phase I ESA site reconnaissance. In addition to application of state-of-the-art technologies like geophysics and GIS, this knowledge can prove to be just as critical as the application of scientific principles in performing an accurate Phase II site investigation.

All the sampling in the world won’t do a bit of good if the boring isn’t in the right place.

The Subjective Nature of Phase I ESAs

The thought that Phase I ESAs are a simple checklist procedure where findings are black-and-white is an all-too-common misconception by those who have limited exposure to the process. To understand this, one only needs to look at the definition of a de minimis condition in the ASTM standard:

de minimis condition – a condition that generally does not present a threat to human health or the environment and that generally would not be the subject of an enforcement action if brought to the attention of appropriate governmental agencies.

Does this definition leave room for interpretation? Oh, let me count the ways! First, use of the word “generally” immediately implies that there is no certainty in what constitutes a de minimis condition and what does not. Second, each state has its own environmental laws, regulations and enforcement policies, and therefore there can be great differences among states as far as what types and sizes of releases could be subject to an enforcement action. Third, and perhaps most importantly, the combined visual assessment and prior experience of the environmental professional in dealing with small releases in the site’s jurisdiction can be a major factor in deciding whether an observation is identified as a de minimis condition or a recognized environmental condition (REC). Because most Phase I ESA users skip past most of the report and go right to the list of RECs, this critical decision, and the reasoning behind it, can go unnoticed.

Another subjective decision to be made by the environmental professional is distinguishing between an REC and historical REC (HREC). As noted in the ASTM standard, a change in regulatory criteria (e.g., a change to a contaminant’s action level in soil or groundwater) since a cleanup was approved by an environmental agency could possibly change what was once classified as an HREC to a REC. It is important for the EP to be familiar with the cleanup methods that were implemented at the site in determining whether a change in the regulatory criteria has any bearing on the cleanup approval.

You probably know what I’m getting at. Knowledge of the Phase I ESA standard and experience performing Phase I ESAs provides limited value to the report recipient. For maximum value in your environmental due diligence reporting, select an EP with knowledge of the regulatory programs and experience performing remediation in the site’s jurisdiction.

Underground storage tank removal in Allentown PA

Is my tank leaking?

If I had a dime for every time I heard this question. It’s a perfectly normal question to ask, and it often comes up when someone is contemplating selling or purchasing a property. Actually the question is typically posed as, “What are the chances that my tank is leaking?”

Unfortunately, there’s really no simple or definitive answer that can be given. Sure, the older the tank is, the more likely it is to be leaking.  If it’s a tank that was constructed to modern standards, it will be protected from corrosion and therefore it is less likely to have leaked. But let’s forget about modern tanks for now, and consider just bare steel tanks without corrosion protection. Within that subset of tanks, here are some facts to consider:

  1. Tanks come in different shapes and sizes, and have different wall thicknesses. A larger volume tank will have thicker walls, and a thicker wall will take longer to corrode through. Additionally, I’ve seen old riveted tanker railcars used as underground tanks, which have exceptionally thick walls, and small heating oil tanks with thin walls made for aboveground service that were buried and used as underground tanks.
  2. The backfill material can be highly variable. Quality tank installations have gravel or sand backfill surrounding the tank to draw moisture away. Backfill with silt or clay will trap moisture on the sides of the tank. This can accelerate corrosion tremendously.
  3. The quality of the tank installation can be critical. I saw one tank installation where the tank sat directly on a concrete pad. Instead of stresses being distributed along the entire underside of the tank, they were distributed along a line where the tank contacted the pad, resulting in accelerated corrosion. There was a straight line of corrosion holes along the bottom centerline of the tank, and significant leakage had occurred.

In summary, I’ve seen 50-year old tanks come out of the ground in great shape with manufacturer’s printing still fully legible, and others that come out of the ground after 20 years riddled with holes. Unless there is documentation of the tank installation procedures and tank type, which there almost always is not, there’s really no reliable way to predict whether a tank has leaked or not simply by knowing its age. It is therefore advisable, at the very least, to completely empty an old underground tank and remove it from service as soon as practicable. This will at least reduce the potential for a future release. Historical releases, of course, will remain unknown until a soil investigation is completed.

Orchards and Arsenic

Unless you’re an environmental consultant or work in the orchard industry, you may not be aware of the contamination issues that are common at orchards due to historical pesticide use. Arsenic-based pesticides were at one time heavily used on orchards. Use of these pesticides, which included lead arsenate and lead arsenite, began in the late 19th century and continued well into the 20th century to protect fruit crops from pests. Due their low cost and ease of application as both a liquid spray and as a powder, these compounds gained wide popularity among farmers and orchard operators, who often performed multiple applications throughout a typical growing season.  At orchards, the pattern of impact to soils was most pronounced along ‘drip lines’, created as the excess liquid pesticide dripped from the edges of the fruit tree onto the ground surface between tree rows.   Although typically limited to shallow soils, the compounds could also be worked into deeper soils during tree replanting or after the conversion of an orchard into a row-crop field.  I’ve seen arsenic and lead concentrations in soils at orchards that were 10 times greater than residential cleanup standards. In addition to orchards, arsenic-based pesticides were also commonly used on golf courses, particularly on greens, which are most susceptible to pest infestation.

The unfortunate thing about pesticide contamination is that when a real estate investor looks at a farm or golf course property for development, environmental concerns often aren’t anticipated and creep up after substantial costs have been incurred for development planning. I’ve seen both orchard and golf course properties where tens of thousands of cubic yards of pesticide-impacted soil needed to be addressed. However, in recent years studies have been performed that have demonstrated that not all arsenic is bioavailable. In other words, if ingested, only a fraction of the available metal compound can be absorbed into the body through the gastrointestinal system.   Most regulatory standards are calculated using the characteristics of elemental arsenic rather than its complexed version as an arsenate or arsenite.  Thus, when performing a site-specific risk assessment, it is often possible to take this bioavailability adjustment into account, and calculate a more realistic, and higher, acceptable level of arsenic in soil.  These risk-based adjustments can reduce, or possibly even eliminate, the cost of remediation.

In addition to arsenic and lead, there is a class of pesticides known as organochlorine pesticides, which includes the commonly known pesticide DDT. These pesticides were commonly used from the 1940s through the 1960s, and while highly toxic, they are much less often encountered at high concentrations in soils when compared to arsenic and lead.

The lesson.  If purchasing an agricultural property or golf course, be sure to begin your environmental due diligence early in the planning stages so that remediation costs can be accounted for in your pro forma and soil management can be considered in the redevelopment plan for the site.

A Note on Sheens (not Charlie or Martin)

I recently read a Phase I ESA report where the inspector noted a sheen on water in a stormwater inlet (also referred to as a catch basin). The Phase I ESA report identified this sheen as a recognized environmental condition (REC), and recommended performing a Phase II investigation in the vicinity of the inlet. There are often grey areas and disagreement on what constitutes a REC, and in this case I had to disagree with the consultant’s findings. Here’s why.

In urban areas, stormwater inlets are frequently fitted with devices on the exiting pipe to prevent floating materials from entering the pipe.  The pipe is typically connected to a combined sewer system (both wastewater and stormwater). Cities require these traps to be installed to minimize the amount of trash that needs to be screened at the treatment plant. Most of us have noted sheens on stormwater in streets and parking lots at the start of a rain event. These are an inevitable result of automobile use. The oil stains that one sees in parking stalls are normally considered “de minimis” observations that do not meet the definition of an REC.  My conclusion is that the minor sheens resulting from these minor surficial releases of oil, whether observed on the surface or inside a stormwater inlet, would also be considered de minimis. This example further emphasizes the point that was made in my last blog, that knowledge of the ASTM Phase I ESA standard is only part of what is really necessary to draw conclusions that are based on sound science.

And while we’re on the subject of sheens, it’s interesting to note that not all sheens are the same. In addition to oil sheens, there are biological sheens that can result from degrading leaves and other organic matter. How do you tell the difference? An oil sheen, when disturbed, moves in a swirly manner but generally stays intact. On the other hand, a biological sheen, when disturbed, breaks apart into sharp-edged pieces, much like a broken piece of glass. Below are photos depicting the two.

Non-Petroleum Sheen (L)                 Petroleum Sheen (R)



The Value of ‘Going It Alone’

Guest blogger: David S. Coyne, QEP, Principal at Liberty Environmental, Inc.

It can be said in this politically volatile, rigidly-divided society we now live in that there are really are just two types of people in this world.  Republicans and Democrats, you say? Conservatives and Liberals?   Kardashians and Jenners?  No, no, and, um…no.

I mean, of course, those who can read with the TV on, and those who can’t.

And while I certainly hope it’s not a sign of my cognitive decline, I place myself firmly in the latter group these days.  I’m likely one of the few individuals left on the planet who prefer to exercise without earbuds, and listen instead to my thoughts, the birds (and oncoming traffic!) as I jog.  I’ve even caught myself on a short drive on a mild fall day with no radio on; just the wind whistling through the open windows, a behavior my socially-connected 14-year old daughter finds outright horrifying.

Reviewing my notes a few years ago after a full week of performing site inspections on due diligence project sites, I also noticed a stark difference related to this issue. When accompanied by a site representative during the walkover, my notes tended to be cursory, non-linear, and more general in nature. Those notes required careful review, and needed ample after-the-fact margin notes to supplement what I recalled the conditions to be. By contrast, notes taken while I walked a property alone were better organized, more sequential, clearer to understand, and carried far more detail by comparison. The solo notes didn’t require any interpretation, and I was able to carry the data more directly into my reports and, accordingly, into my project findings.

Intrigued by this difference, I found an interesting piece of research online: according to a collection of clinical studies between 1964 and 2014 recounted in the research periodical Frontiers of Psychology, audio and visual distractions resulted in significantly lower memory recall of details and chronological events, reductions in attention spans, and difficulty problem-solving.  The effects were most pronounced in older individuals, who generally showed a lower ability to screen out sensory distractions while performing concentrated tasks.

With this scientific evidence in hand, I’ve since endeavored to use this knowledge to my advantage in the job.  Site inspections for due diligence, permitting, or plan preparation are typically performed in the company of others.  Most often, the ‘others’ are one or more site contacts whose task it is to escort us through a facility for the purpose of safety, security, or a general sense of duty to the project at hand.  This is certainly understandable and often absolutely essential to the data collection process. But when a guided tour instead becomes a constant commentary, however, our site-contact-as-tour-guide threatens to divert us, innocently or otherwise, away from something very important: that area of staining, the small door leading to the chemical containment room, or the barely-visible patching marking a former underground storage tank.  At worst, a guided walkthrough can feel like a whirlwind, sweeping us along and leaving us feeling overwhelmed and mentally scattered afterward, with a field log full of blank spots.

So, should we shun all human interaction on the job site? Certainly not, our success depends on our ability to work with others, and particularly our site contacts.  But thankfully, we can properly manage our experience on site to achieve the best results.  I’ve adopted a method I call the 10-50-30 Rule, which I made up entirely and has utterly no scientific basis behind it. First, I’ll take 10 minutes to sit with the site contact in one place, an office typically, and ask general questions about site fundamentals: Age of the building? Site operations? Waste streams? Next, I allow for a guided tour for the remainder of the hour, which is often sufficient for a thorough but efficient operational view of most facilities.  Lastly, I request that I be allowed to revisit certain portions of the site for a half hour – on my own – to complete my notes and focus on areas that will be most important to the project objectives.

I find this last segment to be the most valuable part of the inspection by far.  It’s where I can revisit an area I felt hurried through earlier, grab a few extra photos of a boiler plaque or tank, scrutinize a surface stain to see if it extends to the slab edge.  Most importantly, I find that the time alone simply galvanizes my overall observations and conclusions in my mind, making it easier to recall and recount in report format later.

And with this technique, I’ve found that the process of data collection and interpretation can always be improved upon, toward the most effective project results.  Go ahead, try it yourself – turn that radio off and listen to the wind through the window!

Pictured Above: Liberty Environmental Project Manager, Matt Adukaitis, documents a vent pipe on an ESA walkthrough.

In the Air ≠ In the Clear

Being an Environmental Professional (EP) under the All Appropriate Inquiry (AAI) definition requires knowledge of the ASTM Phase I ESA standard and appropriate training and experience. A minimum of five years of experience is required by AAI to attain EP status, which qualifies someone to conduct a site walk, perform interviews, and review historical information.  However, being an expert at environmental due diligence requires a much greater skill set, particularly the ability to draw defensible conclusions and to make appropriate recommendations that enable the user to make a purchase or lending decision. This requires substantial industry knowledge that goes beyond basic Phase I ESA training. Here’s one example.

In the Air ≠ In the Clear

A former industrial property had been converted into office condominiums, and a consultant was retained to perform a Phase I ESA on one of the condominium units. Historical research identified underground tanks and prior industrial uses that included varnish and paint manufacturing. The consultant recognized that these are both normally environmental concerns; however, he concluded that they did not constitute a recognized environmental condition (REC) for the subject condominium because it was located not on the ground level. In reading this conclusion, I was skeptical and so consulted with a real estate attorney, as I often do when legal questions arise. I confirmed that although condominium agreements vary, generally all condominium owners all have a percent ownership of common areas of the building, and therefore would all be jointly liable for environmental cleanup.

This example shows how a couple of minutes on the phone with a legal expert, which is not a necessary element of the Phase I ESA process, made a remarkable difference  in the report conclusion and alerted the buyer to potentially significant environmental liabilities.  It takes years of industry experience to know the right questions to ask, and whom to ask. Hire wisely!

No Further Action vs. Release of Liability

This question comes up frequently. If an environmental agency issues a No Further Action (NFA) letter, say for an underground storage tank closure, can this be considered a Historical Recognized Environmental Condition (HREC)? Or is it still a Recognized Environmental Condition (REC) because a release of liability wasn’t issued? The question is not that simple, and you have to dig deep into the closure report and data. In the case where the tank was closed and all soil samples were non-detect, it could be considered a HREC and no further action recommended. But what about situations where there was contamination, either localized or extensive, and the agency issued a NFA?

Remember that an NFA is NOT a release of liability, and environmental agencies can revisit the site at any time and possibly require additional investigation or even remediation. As Environmental Professionals, we rely on our experience in performing remediation and working with environmental agencies to communicate to the Phase I ESA user the relative risks of our ESA findings, including the likelihood of certain liability-causing events, such as 1) an agency revisiting a case, 2) future human exposure to contaminants on the property, or 3) migration of contaminants off-site resulting in third-party liability.

Regarding the question of when to consider a former UST with an NFA a REC or HREC, consider the following example.

A site had a leaking tank in the early 1990s, prior to a state’s voluntary cleanup program going into effect. Contamination was identified in soil and groundwater, and there was contamination in groundwater at the most downgradient monitoring well. The state concluded that there was not any likely threat to human health or the environment, and issued an NFA.

The site investigation reports identified BTEX contamination in groundwater. Looking at the data, we found that benzene concentrations exceeded applicable cleanup standards in the most downgradient well. As a result, off-site migration of contaminants in groundwater was a definite possibility. Although the agency concluded there was no threat to human health or the environment, the extent of contamination was never characterized, and no controls (e.g., deed restrictions) were put in place to eliminate the exposure pathway to contaminated groundwater. The absence of administrative controls and potential for off-site contamination resulted in this former UST being identified as a REC, and additional investigation of groundwater and evaluation of exposure pathways was recommended.

This example quite clearly demonstrates that an NFA does not automatically result in concluding that a former UST is a HREC.  It also demonstrates the importance of retaining an environmental consultant that has experience not only in performing Phase I ESAs, but in cleanup program knowledge, an understanding of groundwater and contaminant fate-and-transport, and experience bringing properties through state cleanup programs.