A lot goes into purchasing, developing, or even just financing a property. There are plenty of regulations you need to follow, boxes that need to be checked, and budgets and timelines that need to be met. But if you want the property to truly succeed, knowledge of it really is power. For example, understanding a site’s environmental history and the risks that it might pose is essential knowledge. That’s where an Environmental Site Assessment (ESA) comes in. It can help you identify past and present contamination, and even plan for potential future ones. As such contaminations can have a significant impact on value, safety, and future use, this blog aims to cover one key thing: the differences between a Phase 1 ESA and a Phase 2 ESA.
What Is a Phase 1 ESA?
The main goal of a Phase 1 ESA is to identify environmental contamination (potential or existing). More often than not, this is the first step in the process of environmental due diligence.
Key Components
- Site Visit: Environmental professionals pay the site a visit to inspect it and its surrounding property. During the visit, they’ll be on the lookout for any signs of contamination—chemical spills, improperly handled storage tanks, stressed vegetations, and more.
- Historical Research: A site’s past can give plenty of information on a property’s current condition. That’s why the examination of historical records is important in the environmental site assessment process. These records could include aerial photographs, city directories, and land title documents which could shed light on previous land uses that could have caused contamination.
- Interviews and Records Review: Assessors will conduct interviews with current and former property owners and occupants. When combined with a review of regulatory databases, these interviews will paint a clearer picture of potential environmental concerns.
When it’s all said and done, a Phase 1 ESA produces a thorough report of the status of the site. If significant cause for concern is found, a Phase 2 ESA must be performed.
What Is a Phase 2 ESA?
In a Phase 2 Environmental Site Assessment, tests are performed by environmental consulting professionals to determine possible risks of a property. As we touched on previously, Phase 2 is only conducted if Phase 1 uncovers Recognized Environmental Conditions (RECs). Basically, a REC is an indication that hazardous substances may be onsite and not properly contained.
Key Components
- Soil Sampling: Soil samples are taken from various locations—and from multiple depths—around the property to be tested for contamination.
- Groundwater Testing: Monitoring wells, used for evaluating groundwater quality, are installed to detect pollutants.
- Laboratory Analysis: Samples are sent to certified labs to be analyzed and measured for hazardous material concentration.
A Phase 2 ESA is an important step in the environmental diligence process, providing data-driven results that define the nature and severity of contamination on a site. Such findings are vital in determining environmental risks, property value, and necessary remediation.
Key Differences at a Glance
- Scope
Phase 1: Identification of potential contamination
Phase 2: Confirmation and further classification of contamination
- Methodology
Phase 1: Visual inspections and thorough review of historic records
Phase 2: Testing of soil and groundwater, as well as lab testing and results
- Cost
Phase 1: Generally low
Phase 2: Higher cost, with higher range depending on scope
- Timeline
Phase 1: Generally completed within two to four weeks
Phase 2: Depending on complexity, this can last anywhere from three to eight weeks
- End Users
Phase 1: Buyers, developers, and lenders
Phase 2: Buyers, developers, and regulators
When Do You Need Each?
A Phase 1 ESA is needed much more frequently than a Phase 2. This is because it’s standard practice to conduct one as part of most commercial real estate transactions. Lenders require a Phase 1 assessment before granting financing. And it’s a good idea on the buyer’s part, as well, so they have a full understanding of the property before they commit.
If the first phase identifies any concerns regarding present or historical contamination on the site, a Phase 2 ESA will be needed. This is historically more likely to occur in places you’d expect to find contaminants—gas stations, dry cleaners, industrial operations, etc. If there’s a planned site redevelopment, this testing needs to take place before such projects begin.
In any real estate transactions, this level of environmental caution can protect buyers and lenders from hidden liabilities, delays, and costs.
Your Environmental Consulting Professionals
Knowing the differences between a Phase 1 ESA and a Phase 2 ESA is an important part of informed property decision-making. While Phase 1 is all about inspections, Phase 2 takes it a step further with important testing and analysis required to manage environmental risks.
If you have plans to purchase or develop a property, it’s a good idea to take every precaution you can. Our trained professionals are more than capable of performing all steps of an ESA. Get in touch and let’s make sure your property is safe and free from contaminants!
