Industries in Need of Phase I
A Phase I Environmental Site Assessment (ESA) is completed to evaluate the historical and current uses of a property as part of a commercial real estate negotiation. It follows the American Society of Testing and Materials (ASTM) guidelines known as the ASTM-E-1527-13 Standard for Phase I ESAs. These guidelines satisfy the due diligence process in a financial or real estate transaction. Without a Phase I ESA, the purchaser is responsible for all liabilities associated with the property. With a Phase I, the purchaser would not be liable for any pre-acquisition impacts that may arise
A Phase I ESA is suggested for any property about which you have a responsibility to understand the environmental liability associated with purchasing the property. A Phase I ESA will protect purchaser or loan institution from unanticipated liability and cleanup costs for historical environmental actions which could affect the property's marketability.
Industries Ideal for Phase I ESAs
Industries in need of Phase I ESAs include:
- Banks: Bankers typically require Phase I ESAs to evaluate the impact of environmental conditions on the value of a property and provide the liability protection if historical contamination is found at the property following acquisition. Banks are not interested in being responsible for environmental cleanups of a property if the owner declares bankruptcy due to unknown historical site impacts that occured prior to their ownership but are now liable for.
- Investment firms: Firm investment managers typically require Phase I ESAs to assess potential borrower's ability to repay loans on commercial properties.
- Commercial and industrial real estate developers: For any organization taking on considerable risk in a real estate transaction, it's beneficial to have a Phase I ESA before the deal concludes.
- Commercial and industrial expansion: A Phase I ESA is generally performed on a commercial property as part of a purchase or sale by a broker or other lending institution.
- Infrastructure firms: For infrastructure firms, the best way to minimize risks associated with contamination and the resulting delays or potential costs to project development or financing is to have a Phase I ESA conducted before leasing or acquiring a property.
- Midstream and downstream energy assets: Companies in the oil and gas industry are usually divided into one of three groups: upstream, midstream and downstream. Oil and gas operators are typically required to perform Phase I ESAs to help identify significant liabilities.
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What Happens if I Don't Get a Phase I ESA?
Not getting a Phase I ESA is like buying a used car without hearing the engine run or taking it for a test drive or checking whether or not it had been in a previous accident or flood. A newer car with low miles driven only on Sundays may not necessarily require a Phase I and it may be the perfect car to purchase. But how do you know that car does not have electrical problems or internal rusting associated with a flood which can be quite costly to repair. Without a Phase I the purchaser is responsible for any historical issues associated with the car. With a Phase I, the purchaser would not be responsible for any issues associated with the electrical/flood damage if that information was not disclosed or uncovered during due diligence.
Phase I ESA's do not apply to cars, but are associated with real estate transactions. Depending on the environmental impacts, cleanups can run from ten of thousand to million+ dollars and that does not include any liability damages which may be brought in suit against the purchaser. A proper Phase I ESA will provide liability relief for the unknown environmental issues that may arise following purchase of a property.
Get a Phase I ESA Quote Today
With over 30 years of experience, GSI Environmental provides high-quality environmental consulting and contracting services in the Mid Atlantic region and beyond. GSI offers a range of services, including Phase I Environmental Site Assessments, drone surveying, immediate site remediation and compliance assistance. Whether you're overseas or domestic, we've got you covered.
Interested in learning more about GSI and our Phase I capabilities? Call us at 717-691-9799 or contact us online today.