Eisenbach & Ruhnke - Levels of Assessment

1.2 Levels of Assessment

The parties involved in a transfer of property may conduct various levels of environmental assessments. These assessments are completed to protect themselves from acquiring contaminated property and or CERCLA liability . The levels of assessment are referred to throughout the industry as the following: Due Diligence, Environmental Transaction Screen, Phase I Environmental Site Assessment (Phase I ESA), Phase II Site Investigation (Phase II SI), Phase III Remedial Investigation/ Feasibility Study (Phase III RI/FS). The term “environmental assessment” is used to describe the overall process, which may include more than one of these phases.

A description of these phases are provided below:

1.2.1 Due Diligence

Due diligence is the most common level of assessment used to determine whether a commercial or industrial property is environmentally sound; and to inform parties involved in the transfer of the property of it’s environmental condition. Due diligence incorporates elements of the transaction screen, Phase I Assessment, Phase II Investigation and Phase III Remediation if the property is contaminated. The scope of work involved in the due diligence will vary with each property.

Due diligence is particularly important in that it may later be used to satisfy some of the conditions of the “innocent landowner defense”. Under this defense the assessment must include all appropriate inquiry into the previous ownership and uses of the property consistent with good commercial or customary practice. However, there are no regulatory guidelines that define “ all appropriate inquiry” or “ good commercial or customary practice”.

1.2.2 Transaction Screen Assessment (TSA)

A Transaction Screen Assessment (TSA) is the least involved of the assessments and is performed to determine if a full Phase I ESA is necessary. The TSA may also be called a preliminary evaluation, initial assessment or property screening. The TSA is a scaled down version of the Phase I ESA. Buyers will typically perform this level of assessment themselves and determine if they need to go to a full Phase I ESA and retain outside consultation. This TSA will not satisfy due diligence and will not qualify a party for the innocent landowner defense. The TSA is typically not completed on commercial or industrial properties and is reserved for agricultural or residential properties with no history of commercial or industrial use.

1.2.3 Phase I Environmental Site Assessment (Phase I ESA)

Phase I ESA process is used to establish if a property may have been impacted and suffered environmental degradation from past uses, and/or from adjacent properties. This process is usually not intrusive and uses investigative techniques to discover what contaminants may be present on site. Site inspection, interviews, historical maps, aerial photos, city directories and sources of information can be used to conduct this level of investigation. A Phase I ESA may also be called a due diligence evaluation, transfer assessment or site evaluation.

1.2.4 Phase II Site Investigation (Phase II SI)

A Phase II SI is an intrusive investigation involving the collection of air, soil and water samples to confirm if the property has been impacted by contaminants causing environmental degradation. This phase may also be referred to as subsurface investigation, test pit investigation, or baseline environmental assessment.

1.2.5 Phase III Remedial Investigation/ Feasibility Study (Phase III RI/FS)

A Phase III RI/FS may be completed to fully define or characterize the extent of soil and water impact identified in the Phase II SI. During this phase remediation alternatives can be developed with cost estimates and feasibility studies. This Phase may also be called remedial action investigation, site characterization, or remedial investigation.

1.3 Summary

Each environmental assessment will progress based on the site and findings in each phase of the assessment. If the Phase I ESA discovers no potential impacts from prior uses then assessment process may stop there. If the Phase I ESA process concludes the property may have been impacted from past use then a Phase II SI would be performed to confirm the findings in the Phase I ESA. If the Phase II SI discovers contamination then a Phase III RI/FS may be completed to define the extents of the contamination, remediation alternatives, feasibility studies and cost estimates.