The Phase I ESA

The Phase I Environmental Site Assessment exists because of federal cleanup liability. The standard's nonmandatory legal appendix traces much of the call for environmental assessments in commercial property deals to CERCLA's strict, joint and several liability, and to state laws like it (E1527-21, Appendix X1 introduction).

ASTM E1527-21 sets out good commercial and customary practice for assessing commercial real estate for the substances within CERCLA's scope and for petroleum products. It is meant to let a user satisfy one requirement of the innocent landowner, contiguous property owner and bona fide prospective purchaser protections from CERCLA liability: all appropriate inquiries into the property's previous ownership and uses (E1527-21, 1.1). EPA's All Appropriate Inquiries rule, 40 CFR part 312, sets the standards for that inquiry, and names E1527-21 as an industry standard that may be used to meet its requirements in 312.23 through 312.31 (40 CFR 312.1, 312.11). The practice also serves users who seek no liability protection at all (E1527-21, 4.2.1).

What it looks for

Its goal is to identify recognized environmental conditions (RECs): hazardous substances or petroleum products that a release has left at the subject property, that are likely there from a release, whether known or likely, or that are present in circumstances posing a material threat of a future environmental release. A de minimis condition is not a REC (E1527-21, 1.1.1).

How it works

An environmental professional conducts the assessment or supervises it (E1527-21, 7.5.1). Its parts are the user's own tasks, reviews of physical setting sources, government records and historical records, a visit to the property, interviews with owners, operators, occupants and local government officials, and an evaluation and report (E1527-21, 7.2). Government records that are reasonably ascertainable are searched out to approximate minimum distances the standard sets for each source, which the environmental professional may adjust within its limits (E1527-21, 8.1.2.1, 8.1.4, 8.2.2). The subject property's obvious uses are traced back to its first developed use or to 1940, whichever is earlier, using the standard historical sources that are reasonably ascertainable and likely to help; if they run out before that point, the report records a data failure (E1527-21, 8.3.6, 8.3.8). The site visit observes the property and its buildings, and the adjoining properties from the property's edges and nearby roads (E1527-21, 9.2, 9.2.5). The report sets out findings, the environmental professional's opinions and the conclusions, and the environmental professional signs it (E1527-21, 12.5 to 12.7, 12.13).

The assessment takes no samples (E1527-21, 7.4). The legal appendix says a user whose Phase I identifies RECs may want further subsurface investigation, commonly called a Phase II (E1527-21, X1.6.3). The assessment reduces uncertainty without removing it, and it speaks to conditions when its parts were done (E1527-21, 4.5.1, 4.5.5).

Some loan programs set requirements of their own. SBA's lending rules say which environmental report each 7(a) or 504 loan needs (SBA environmental investigation steps), and HUD's MAP Guide sets what the Phase I for an FHA multifamily loan must hold (HUD Phase I requirements). What the standard itself says about lenders is in why lenders require a Phase I.

How this section is organized

The ASTM search distances table shows how far the standard says each government record search reaches. The record type pages below it explain, one source at a time, what a listing means and what it does not. The pages on classifying a finding, starting with REC, CREC, HREC or de minimis condition, and on writing the report, starting with what a Phase I report must contain, come next. The federal inquiry rule has a page for each section of 40 CFR part 312, and the agency and lender requirements and the state records follow it. What a Phase I is, what it costs, how long it takes and stays valid, and what follows a REC are in the Buyer & Lender FAQ.

This page is general reference. It does not assess any property. ASTM E1527-21 is the standard and is not reproduced here.