Environmental Due Diligence Boot Camp
Lesson 3:  The Purpose of Environmental Assessments 
Part 2


Phase 1 Environmental Site Assessment: 


The primary purpose of a Phase 1 Environmental Site Assessment (ESA) is to determine whether there is reasonable basis to believe that:

  • the subject property may have been adversely impacted by environmental contaminants,
  • substances which are considered hazardous may be currently located on the subject property, and/or,
  • conditions which represent a potential health or safety risk, or ecological hazard, may be associated with the   subject property. 




Some commonly-used Phase 1 ESA formats do not completely fulfill this purpose, and therefore might not

address all types of liability and/or fully satisfy the requirements of environmental due diligence (see Lesson x).



A Phase 1 ESA evaluates the development, occupancy, and usage history of a subject property, together with available regulatory agency data, to determine if there is a significant risk for hazardous substances to be located, and/or environmental contaminants to have been released (leaked; spilled; disposed of), on the property.


A Phase 1 ESA is nothing more than a paper-trail search, and the quality of the conclusions of the assessment are completely dependent upon how meticulously and thoroughly available records were researched, and the competence of the person who evaluated the raw data that was acquired.




Phase 2 Environmental Site Assessment: 


The primary purpose of a Phase 2 Environmental Site Assessment (ESA) is to confirm whether suspected environmental contamination or environmental hazards are actually present on the subject property (i.e., confirm the actual environmental quality of the property).


A Phase 2 ESA involves obtaining samples of soil, surface water, groundwater, air, waste materials, and/or potentially-hazardous structural materials for laboratory analysis.  A Phase 2 ESA is usually conducted when the results of a Phase 1 ESA indicate an elevated risk for environmental hazards or contamination. 


A well-designed Phase 2 ESA should be able to detect any significant hazardous substances or contamination present on the subject property.  This level of assessment is not however, designed to determine the magnitude (absolute highest levels) or extent (how widespread) of any detected hazardous materials or contamination.




Secondary Purpose of an Environmental Assessment:


An important secondary purpose of an environmental site assessment is to establish an environmental baseline for the subject property.   


When an assessment is conducted as part of a property transaction (purchase/sale; lease), the assessment establishes either: 

  • the environmental history of the property (i.e., risk for contamination; Phase 1 ESA), or,
  • the actual environmental quality of the property (Phase 2 ESA),


 ...at the time of the transaction (i.e., baseline conditions).  Assuming that the assessment(s) found no significant risk for, and/or no detection of, contamination, any environmental problems subsequently found associated with the subject property would most likely be attributable to activities that occurred after the date that the transaction was completed.


With this type of baseline information, former owners or tenants of the subject property can establish that the property was not contaminated at the time of the transaction, and as a result protect themselves from liability for contamination that occurred subsequent to their involvement with the property. 


PART 1   
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POSTED:  20 December 2010          UPDATED:  16 March 2011