Recently, I asked the Phase II Environmental Site Assessment (ESA) Team at Partner Engineering and Science, which includes me, “What is the most common question your clients ask you?” The responses I received from my fellow Partner Project Managers (PMs) across the country mirrored the same questions I often get asked: "How much is this going to cost to clean up?" and "Do I have to report this?".
Being from geographically different areas - ranging from California to Texas, Pennsylvania, Kansas and North Carolina - it seems that where the PMs reside or which territories they're responsible for doesn't matter: the questions asked by lenders, clients and property owners are the same.
Client Questions during the DD Process
Of course, the cost of a clean-up and whether an environmental condition should be reported depends many factors – such as the type, size and location of the contamination – but the process followed to be able to answer these questions is generally the same: A Phase I Environmental Site Assessment (ESA) is performed; a recognized environmental condition (REC) is identified and a Phase II ESA or subsurface Investigation is recommended; a Phase II ESA proposal is drafted, reviewed and approved; and then the work proposed is scheduled and implemented.
The first common question, “How much is this going to cost to clean up?” typically arises as soon as the Phase I ESA report is submitted (if a preliminary summary was not required or requested) and the client reads the executive summary that identifies a recognized environmental condition. Issues caused by underground and aboveground storage tanks and dry cleaners are what most often results in a recommendation for further investigation. However, it is difficult to estimate the cost to clean up until the following has been determined: 1) the presence, degree and extent of the impact; and 2) whether the site is eligible for reimbursement from an insurance policy or state funding.
Getting the Questions Answered
A Phase II ESA will confirm or eliminate the REC identified in the Phase I ESA. If impacts are confirmed and the results are above the regulatory action levels, the results should be sent to the regulatory agency for review and determination for additional investigation.
So, the first part of the answer would be that generally – depending on the REC you are addressing and the area covered – a Phase II ESA ranges between $4,500 and $10,000. This cost example excludes excavations which can be much more costly.
Phase II ESAs give a general overview of the potential for impact but they do not remediate, or clean up the site. Site remediation may be relatively straightforward – and thus inexpensive – but a full site clean-up can cost upwards of $100,000, especially if you're dealing with major releases to the soil and groundwater. And if light non-aqueous liquids (LNAPLs) or dense non-aqueous liquids (DNAPLs) are present, the process could be ever more elaborate. In such cases, the remediation process is largely dictated by the relevant regulatory agency, and the client should look into potential regulatory funding that may be available.
Reporting Responsibilities
If impacts are found or even if a recognized environmental condition is identified, the next big question becomes: “Do I need to report this?” Again, the answer to this is dependent on various factors – such as the scope and results of the investigation, and the regulatory jurisdiction. I am not an attorney and as a consultant, I recommend report impacts and releases per the relevant state's regulatory requirements, but I would urge the client to contact an attorney regarding reporting responsibilities and liabilities.
My colleague Azad Khalighi will look at the issue of when the results of a Phase II ESA must be reported to regulatory agencies in more detail in an upcoming Globe St blog – stay tuned!
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Janet Annan
Janet Annan is the Technical Director of SBA Services at Partner Engineering and Science, Inc. She has over 13 years of experience in the environmental due diligence service industry, specifically providing technical expertise and senior review for ASTM, AAI, and SBA requirements on RSRAs, TSAs, ESAs, and Phase II ESAs. She is a technical expert on all aspects of environmental due diligence required for SBA loans. Ms. Annan has a BA in geology from the University of Kansas, and her certifications include AHERA Asbestos Inspector registrations in Kansas and Missouri, as well as Underground Storage Tank Operation.
