15 Nov Phase I vs. Preliminary Assessment
ESA President Chris Martell explains the reasons why New Jersey property investors should seek a Preliminary Assessment instead of a Phase I Environmental Site Assessment for their environmental due diligence.
VIDEO TRANSCRIPT:
Our overarching goal at ESA is three-fold: to MINIMIZE our clients’ risk, PROTECT their real estate assets, and IMPROVE their return on investment. That first part — minimizing risk — is addressed by the process of Environmental Due Diligence — the primary tool we use to protect you from potential future liability.
Today I’m going to talk to you briefly about the differences between the two most common forms of due diligence — the Phase I Environmental Site Assessment and the New Jersey-Specific Preliminary Assessment.
Phase I Environmental Site Assessments
Phase I Environmental Site Assessments identify recognized environmental conditions as defined by the American Society for Testing Materials. Phase Ones require, among other things, a comprehensive records review, interviews with knowledgeable parties, data gap identification, an environmental lien search, and a comprehensive historical records review.
Phase Ones follow a specific process to evaluate a property’s environmental condition and assess its potential liability for contamination. This process is necessary to gain protections under CERCLA, the Federal Superfund law.
Preliminary Assessments
Preliminary Assessments go a step beyond the Phase I by including an Order of Magnitude Analysis to ensure that previously generated environmental data is compliant with current New Jersey regulations.
Another key differentiator between a PA and a Phase I is that a PA must be used in order to satisfy the NJDEP’s specific requirements for an innocent landowner defense. The DEP makes a clear distinction that a Phase I is not equivalent to — and cannot be substituted for — a PA.
In addition, only a PA can be used to satisfy requirements of the New Jersey Industrial Site Recovery Act or when licensing a new childcare center.
In short, a Phase I grants federal protections while a PA provides protections specific to New Jersey environmental laws. This distinction is important because most clients that we represent do not require protection under CERCLA, but the majority of industrial properties in New Jersey meet the definition of a brownfield, so a PA is typically the most logical form of due diligence to use.
Combined Reports
There are certain situations where ESA recommends a combination Phase I and PA report. This strategy is often used for complex sites where the purchaser wishes to have both federal and state protections. Combined reports will satisfy both New Jersey and Federal requirements for an innocent landowner defense. For most projects, however, a combined report is excessive and unnecessary.
The key is that it takes an experienced and skilled environmental consultant to advise you on which route is the best to follow depending on your unique circumstances.
There’s a lot more detail to this topic than I’m able to share here. ESA always recommends you speak with an experienced environmental attorney for a definitive interpretation of the laws specific to your situation. If you’d like more information about the differences between Phase Ones and Preliminary Assessments, or if you have a concern about a current environmental project that’s keeping you up at night, call me, Chris Martell, at 732-469-8888 extension 206, or send me an email at cmartell@askesa.com.
In the meantime, stay safe, stay smart, and Ask ESA.