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Standards for Phase II ESAs have been established by the American Society for Testing and Materials (ASTM) to address the “All‐Appropriate‐Inquiry” (AAI) aspect to the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). CERCLA contains national policy and procedures for containing or removing hazardous substances that have been released, and also provides funding and guidance for cleaning up some abandoned and contaminated hazardous waste sites. The ASTM standard describes a recognized environmental condition as the presence or likely presence of any hazardous substances or petroleum products on a property under conditions that indicate an existing release, a past release, or a threat of a release of any hazardous substances or petroleum products into structures on the property or into the ground, ground water, or surface water of the property.

Further analysis into the specific site details during the Phase I Environmental process will determine, if any of these previous uses have created a significant potential for a release or if a known release has occurred. In general, previous uses that can typically create the need for a Phase II Environmental Study include: gas stations, dry cleaners, machine shops, manufacturing, hazardous waste storage, etc.

A Phase II ESA is often included as part of a commercial real estate transaction and is designed to meet the scrutiny of the various parties involved in the subject property including commercial lenders, federal and state regulatory agencies and attorneys. These studies can range from Limited Phase II Environmental Assessments to a full Phase II Environmental. As part of the due diligence process for real estate transactions, a more limited study should be conducted to initially determine the likelihood of a severe problem. If this is the case, further site characterization may be required. The results of the Phase II ESA can help the buyer decide if he wants to go forward with the transaction.

Phase II reports are typically limited in nature and are usually the result of a Recognized Environmental Condition being found in a Phase I report during a real estate transaction, or prior to an owner listing a property for sale. The Phase II report is only an initial screen of soil and/or groundwater, in order to determine if there is contamination.

Where a Phase I is a paper research and physical inspection of a property, a Phase II often involves physical testing at a property. A Phase II is performed to help answer questions that arise in a Phase I such as whether there are any buried storage tanks; or if there is contamination present from past operations at the property. A Phase II ESA may include a metal detector survey or Ground Penetrating Radar (GPR) survey of a property to locate suspect Underground Storage Tanks (USTs).  Based on the Phase I report, Investigative soil borings are collected in Environmental Areas of Concern (AOCs).

Phase II Environmental Assessments consist of collecting soil samples to screen for chemical or metal contamination. This sampling is conducted by drill rig, hydraulic push, hand auger or backhoe, depending on site conditions. Phase II Environmental reports can also include sampling of groundwater and surface water. The samples are collected and tested according to State and Federal regulations with the samples collected shipped to a state certified laboratory for independent analysis.  This testing is recommended when there is a significant potential for the existence of an environmental liability that can affect the value of a property.

Some of the tests that may be performed include:

  • surficial soil and water samples
  • subsurface soil borings
  • groundwater monitoring well installation, sampling, and analysis
  • drum sampling (if any were left on the property)
  • sampling of dry wells, floor drains and catch basins
  • sampling for hazardous chemicals
  • geophysical testing for buried tanks and drums
  • testing of underground storage tanks

A Phase II ESA report will describe the investigative activities performed including:

  • detailing soil borings performed,
  • soil and groundwater analytical results as compared to applicable state standards.

Conclusions are then drawn from the data collected. If conditions are identified that may require remediation, the recommendations section of the report will discuss options available as well as costs for addressing each Area of Concern. Depending on the results of the samples, the Phase II ESA should outline additional site investigation needs, and potential remedial actions that may be required to clean up the property. Environmental liabilities are costs associated with regulatory-mandated cleanup, disposal of regulated-waste and civil liability. Civil liability occurs when the contamination has migrated off-site or tenants sue over exposure to hazardous materials.

How to Use the Results from the Phase II ESA
If the results from the Phase II report suggest the likelihood of contamination the property buyer can:

  • require that the current landowner clean up the property prior to the sale.
  • reduce the cost of the property commensurate with the cost of remediation required.
  • pursue acquisition and clean up alternatives that help control the environmental liability for the property.

Expertise in soil and groundwater contamination is required in order to make good judgments with regards to environmental site assessments and only a Professional Geologist or Professional Engineer with specific experience in this field should be hired.

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