Having provided Environmental due diligence Phase 1 reports all over the world including Australia, Canada and the USA we often get asked the question when do I need a Phase 1 Environmental Assessment?
This is a very good question. Part of your due diligence when purchasing a commercial property should always be to obtain a Phase 1 ESA. Nearly all bank lenders will insist on this being completed as they do not want to take the risk of a mortgaged property being situated on a contaminated site. They are not insisting you have this report completed to incur extra costs for you but simply because they want to protect their investment.
If you were buying the land outright would you want to take that gamble? Hopefully you are reading this and said a resounding NO!
So it is not always a requirement that you have an ESA Phase 1 completed but you would be taking a huge gamble that could prove very costly in the long run if you didn’t.
The Phase 1 ESA report is very important as it can protect you from liability and let you know before purchase of any risk that might be associated with purchasing said property.
This contamination could be environmental contamination such as groundwater and soil contamination or contamination resulting from the use of unsafe building materials such as asbestos.
If there is contamination then you can renegotiate the price to incorporate the cost of cleanup or you can simply walk away from the deal. Whatever you decide it means you go into the purchase with your eyes wide open to any issues that you face or may not face down the road
One of the most common questions we are asked is what exactly is a Phase 1 ESA?
To begin with ESA stands for environmental site assessment.
A Phase 1 ESA is an environmental site assessment report that is prepared to identify any possible or potential environmental contamination issues. This is done via a detailed visual inspection and records review of the property that will include looking at the history of the property, reviewing government records, viewing aerial photography of the property and any other public and private resources available to create as detailed a history of the property and its past use as possible.
We will cover this in another article but a Phase 2 ESA would then be implemented depending on the results found in the Phase 1 ESA. A Phase 2 ESA is often undertaken if the Phase 1 ESA finds actual or potential risks of contamination.
A Phase 1 ESA report is basically due diligence on behalf of the purchaser or property owner to ensure there are no known contamination issues and to help make you aware of any potential contamination issues that may arise in the future. Phase 1 ESA reports are often required for financing from the banks for commercial properties and are also useful to provide baseline data before any activity is undertaken. It would not make sense to make a large purchase on a property and then five years down the road find out you cannot sell it because you neglected to complete a Phase 1 ESA at purchase that could have identified issues you now find prevent you from selling the property. It would be like bolting the stable after the horse has gone and the clean-up is often very expensive. As the property owner it would be your responsibility to clean up any contamination. A Phase 1 ESA protects you against this and could help protect you from being liable to complete the fore mentioned cleanup. Any baseline data you have collected before you undertake any activity which could potentially contaminate a site provides evidence of the condition of the site at that point in time and can assist in protecting you when you go to sell your property.
In Alberta and throughout Canada Phase 1 Environmental Site Assessments are undertaken in accordance with Canadian Standards Association (CSA) document “Z768-01 (2012) Phase 1 Environmental Site Assessment. In Alberta Phase 1 ESA’s must be undertaken in accordance with the “Alberta Environmental Site Assessment Standard” as listed below.
These types of assessments are undertaken to determine the risk of contamination being present on a property or the risk of a property being impacted by nearby contamination from properties within a 300 metre radius from the boundary of the subject property as required by the standard. No matter the reason for undertaking such a report including bank financing, oil and gas baseline assessments and remediation, or risk assessment for a potential purchaser the overriding reason for undertaking a Phase 1 ESA is for the assessment of risk and to determine if a property or site is likely to have been impacted by contamination. When these reports are undertaken they determine:
- Area(s)of Potential Environmental Concern (APEC). These are any areas on, in or under the site and surrounding area where one or more contaminants of potential concern may be present, as identified through an initial Phase 1 Environmental Site Assessment (Phase 1 ESA)
- Contaminant(s)of Potential Concern(CoPC): any substance that is identified as potentially present on, in or under the site and surrounding area that, if released has the potential for adverse effect.
A Phase 1 ESA generally entails the following:
- Record Reviews: A thorough records review is undertaken which includes: county or city records, fire department records of spills, underground storage tank registrars, ERIS Report, aerial photographic interpretation, topographic and geological/soils mapping, well records, and evaluation and searches of other records where appropriate to reveal any former uses of the property could have caused environmental damage or site contamination.
- Interviews: Abundant information regarding the actual uses and on-site activities can be gained by interviewing past and current tenants of the property. Interviews are undertaken where possible of current property owners, neighbours and other parties such as county officers, city officers, or fire department officers to gain further background information.
- Site Inspection: A detailed site inspection is undertaken to determine any signs of potential or actual contamination.
- Reporting: A detailed report is provided which outlines in detail the potential for contamination on the site and identifies potential risks.
Clients must recognise the importance of Phase 1 Environmental Site Assessments as an extremely important tool in identifying the potential for contamination on a property. We have undertaken Phase 1 ESA’s right across Alberta in locations such as Calgary, Edmonton, Medicine Hat, south to the US border, to the north and everywhere in between. Each site is different with slightly different potential risks of contamination and as such a detailed background evaluation through record reviews and a detailed site inspection is required.
We are Certified Environmental Site Assessors (Phase 1 and Phase 2) – Associated Environmental Site Assessors of Canada (AESAC National Certification Programme). This certification comes with a responsibility to provide our clients with the best possible service and we are fully insured and experienced to undertake this work.
As a small company you can be assured you will be dealing with an experienced professional with all work done in house and quick response times for our clients as we realise that often these assessments are time sensitive for purchases.