A Guide to Environmental Due Diligence

One of the most basic requirements for anyone purchasing or developing land is environmental due diligence. It is an essential protection measure that can help you and your company avoid hefty lawsuits, fines, and remediation projects that slow down your project or cancel it altogether.

Explore more about what environmental due diligence is and the types of assessments that can help you stay compliant with the law.

What Is Environmental Due Diligence?

In a legal context, environmental due diligence is the process of assessing property and real estate for potential risks of environmental contamination. The Environmental Protection Agency (EPA) refers to this assessment as All Appropriate Inquiry (AAI). There is also an ASTM standard (E1527) that provides guidance for meeting EPA AAI requirements.

A key component of environmental due diligence is Environmental Site Assessments (ESA). ESAs are designed to limit your liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also known as Superfund, and state regulations.

There are two main types of environmental site assessments that land developers and property owners should know about, separated into different phases:

• Phase I: A Phase I Environmental Site Assessment researches the historic and current use of a property and nearby properties and identifies potential or known environmental risks called recognized environmental conditions (RECs).

• Phase II: Phase II Environmental Site Assessments include soil, groundwater, and/or vapor testing to identify contamination.

• Due care: In environmental site assessments, due care, or what the EPA calls “continuing obligations,” typically refers to the process of addressing contamination in order to allow for continued use while being protective of users of the property. This can include remediation or other controls that limit exposure to contaminants.

Buyers of property should conduct a Phase I ESA prior to purchase. Lenders may also require a Phase I ESA when refinancing in order to evaluate their risk in the event of foreclosure. The findings of the Phase I ESA may indicate the requirement of additional assessments through a Phase II ESA.

Factors to Consider in an Environmental Site Assessment

Type of Project

If you are purchasing property intending to dig, develop land, or do virtually anything involving breaking ground, you will likely need at least a Phase I ESA.

Type of Environmental Due Diligence Needed

Several different types of assessments fall under the purview of environmental due diligence. Here are some of the types of reviews properties may need, depending on their circumstances:

• Proximity to sensitive natural habitats and wetlands
• Historical materials and structures
• Safe disposal of hazardous materials
• Operational procedures
• Soil and groundwater contamination
• Property condition report

Phase I Environmental Site Assessments

What Is Involved?

In general, a phase I environmental site assessment typically includes the following steps:

• Interviews with past and present occupants and neighbors
• Historical records research (aerial photographs, topographic maps, city directory listings, and Sanborn Fire Insurance maps)
• Review of site plans
• State and Federal database search of sites of known contamination or concern
• Review of prior land use history, dating back to 1940 or whenever the site was built
• Site visit, including reconnaissance of interior and exterior portions of the property
• Interview of state and local officials
• FOIA requests from state and local agencies for relevant files for the property and for sites identified in the database search determined to be a potential concern

In most cases, a Phase I ESA will look at historical records going back to 1940 or the earliest date of development. However, the contractor conducting the site assessment may want to gather additional records as well

Phase II Environmental Site Assessments

What Makes This Phase Different?

Where the Phase I ESA focuses primarily on gathering information about the property’s previous uses and purposes, Phase II environmental site assessments involve testing samples from the property.

These tests primarily look at samples of the soil, soil vapor, and groundwater to determine if contamination is present. Additional sampling may be necessary to identify due care obligations, should they be required. 

How Much Does a Phase II Environmental Site Assessment Cost?

No two situations that require a Phase II ESA are exactly the same, so the costs can vary wildly.  However, common cost factors for a Phase II ESA can include the amount of borings and samples needed to assess the concerns, the laboratory analyses needed, and the media being sampled. 

Use Our Environmental Site Assessment Services for Your Project

At Fleis & VandenBrink, our experts specialize in multiple forms of environmental due diligence, including Environmental Site Assessment services. Our staff has decades of experience providing Phase I and II ESA services in Michigan and Indiana, including multi-site portfolios with short turnaround times. Contact us today to learn more about these services.