The Phase I Environmental Site Assessment is designed to identify areas of potential soil or groundwater contamination and consists of a site inspection and a review of public and private records to ascertain the present and past regulatory and operational history of the site.
Part 1 and Part 2 of this series mostly defined the importance of doing due diligence and the consequences of failing to do so. Part 3 set out the essential needs for undertaking the job, the beginning of which is covered here—after a brief description of some additional preliminary work requirement, namely, arriving at a SOW.
Preparing and Reviewing the SOW
Before commencing a project involving environmental concerns, the consultant should prepare a scope of work (SOW) unless the client, as part of the bid package, previously prepared it. The SOW probably is the most critical document in the due-diligence process because it determines how the investigation will be performed.
The scope of work is developed using the information that is already available from the existing company or regulatory records as well as the responses to the questionnaire or transaction screening. It should include
Specifically, SOW will indicate
Staffing. Once the scope of work is approved, the consultant will have to determine its staffing needs.
As a result, a site inspection typically will cost between U.S.$5000 and $7000 per industrial facility—without soil or groundwater sampling.
Sampling, if required, could add $10,000 to $20,000 to the cost of each site, depending on
Phase I Environmental Site Assessments
Environmental due diligence customarily is performed in phases since this will be the most cost-effective methodology. Under this approach, each investigative phase is based on the information gathered in the preceding phase. Thus, it is extremely important that each phase be performed as thoroughly as possible.
The Phase I Environmental Site Assessment (ESA) is designed to identify areas of potential soil or groundwater contamination. The Phase I ESA consists of a site inspection and a review of public and private records to ascertain the present and past regulatory and operational history of the site.
This ESA should include the following:
And note! Contacts with regulatory agencies must be handled with extreme care to avoid triggering reporting obligations.
Getting Past the Phase I Report
When the Phase I report is completed, the consultant should orally review the results of the investigation with the client and the attorney. If time is short, more frequent oral debriefings may take place at set intervals or after the investigation of certain key facilities are completed.
Following the oral report, the consultant should prepare a draft report for review by the attorney. One of the most important tasks of the attorney is to make sure that the report is limited as much as possible to factual observations. Conclusions or opinions regarding status of regulatory compliance or speculations on the sources of potential contamination should be excluded.
The reason for strictly reporting only observations is that many clients will not be prepared to address all of the noncompliance issues that may be raised by a report, and their existence in a report could be used by a government agency in a subsequent civil or criminal enforcement action as evidence of willful or deliberate noncompliance with environmental laws.
Should the attorney make substantive changes to the draft Phase I report, a revised draft should be forwarded to the attorney and a final Phase I report should not be issued until the attorney approves the revised draft. The final Phase I report should be issued to the attorney.
Next installment: Phase II ESA and beyond
About the author: Lawrence P. Schnapf, Esq. is a New York City-based environmental lawyer whose practice at Schnapf & Associates concentrates on environmental issues associated with business and real-estate transactions. He is also an adjunct professor at New York Law School where he teaches "Environmental Problems in Business Transactions." He also is the author of "Environmental Liability: Managing Environmental Risk in Corporate/Real Estate Transactions and Brownfield Redevelopment". He has an environmental law website at www.environmental-law.net and is a principal at Schnapf & Associates, 55 E. 87th Street #8B, New York, New York 10128. Tel: 212-996-5395; Fax: 503-213-9314; E-mail: LSchnapf@environmental-law.net. (Back to top)