When Phase One ESAs Get Weird

I love the title of this post because it really portrays a certain situation consultants, property owners, developers, etc. face when dealing with old Phase One Environmental Site Assessment (ESA) reports.  It happens all too often that these old reports get passed down like a bad family heirloom that no one wants to get rid of because they think it might be worth something.  In actuality they are probably worth nothing more than the paper that they are written on.  If you do end up with an old Phase One ESA and you are faced with making a decision about buying or refinancing a property based on those results, things can get weird, if not end badly, and possibly put yourself into an unnecessary lawsuit, if you do so.

The relationship between the client and the consultant that the client hired to assess their property is very special since the consultant is providing the client with a form of insurance through reliance on their Phase One report (that’s sounds complicated).  Reliance is such an important aspect of the due diligence assessment process which so few people understand.  All too often we have people with these old Phase One reports making decisions based on them without knowing the consequences of not having that reliance.  The reasons why we shouldn’t rely on someone else’s Phase One ESA are as follows:

  1. They might be too old. – Typically I wouldn’t recommend using a Phase One report if its older than a year.  These reports are nothing more than a snapshot in time.  In accordance with Ontario Regulation 153/04, if you need a Phase One ESA for the purpose of filing a Record of Site Condition you cannot use it if it is older than 18 months.
  2. Things can change overnight. – Anything can happen in a short amount of time…spills of fuel, changes in manufacturing or operations processes, moving of waste storage areas, etc.  If that old report was done after things or releases to the environment had occurred there may be hidden liabilities on the property that you will never know about until its too late.
  3. Standards and the Phase One ESA process has changed. – The fundamental components of a standard Phase One ESA haven’t changed much in Canada since the early 2000s.  In Ontario however, major changes in the process and criteria for ESAs have changed with respect to brownfield property assessment and Ontario Regulation 153/04, including the allowable limits for contaminant concentrations on a property.  In Ontario, as of 2011 new criteria used in the comparison of environmental soil and groundwater data have been redefined by the Ontario Ministry of Environment and Climate Change (MOE).  Here is a link to the new criteria (http://www.mah.gov.on.ca/AssetFactory.aspx?did=8993).  The MOE changed the standard soil and groundwater criteria in 2011 which resulted in more stringent allowable levels of contaminants on a property (for the most part, some levels actually went up).  Due to those reductions and more stringent levels imposed by the MOE we are now seeing properties that were assessed pre-2011 that were assessed as being clean, are now being identified as having levels of contaminants exceeding the criteria (now are dirty?), even though no changes to the operations or sources have occurred.  (email me if you are confused about this and I can give you some better examples, northenvironmental@gmail.com)
  4. Why was the Phase One done in the first place? – This is an important factor to consider when reviewing an old Phase One report.  Although the fundamental components of the process shouldn’t change, there are different reasons why a Phase One ESA is done that may affect the outcome, results or recommendations.  It is always recommended that the objectives for doing a Phase One are clearly stated to your consultant so that the Phase One is tailored to suit your needs.
  5. Who did the previous Phase One report? – Unfortunately you can’t go back in time and have control over the quality of the work produced in the prior report. In addition you will likely not even know who the previous assessor was or what company did it.  Lots of times the company doesn’t exist anymore, or maybe the assessor isn’t qualified to be doing Phase One ESAs.  They may not have been following the required standards in place at that time, or even worse, they might have been the cheapest outfit that the other guy could find to do the work.  Maybe they skimped on paying for important regulatory searches or made some short cuts to get the costs down? Remember, you get what you pay for…

If you rely on a prior Phase One done by someone else, and you end up finding contamination on your property at a later date (that the original Phase One didn’t identify due any one of the five reasons above) you may be held liable for that contamination since its on your property.  Furthermore, if you haven’t been given any legal permission to rely on that report from the prior consultant,  you will be left on the hook for possible clean up costs and not have their insurance to fall back on.  You may also be susceptible to fines or environmental penalties as a result of the contamination.

The best advice I can give is that if you end up with an old Phase One report, don’t put too much faith into it and rely on it as your only source of information…hire a good environmental consultant and give it to them as part of the records review of a new updated Phase One.  Your business and land are worth it, you have too much riding on it, financially and otherwise to make that mistake!



The First Phase aka Phase One

In keeping with the theme from my recent post about Brownfield Redevelopment I’ve realized that I need to write dedicated posts about the individual Phases for assessing contaminated land.  These Phases are very unique and I can appreciate the work involved to complete each of them.  Its really worth spending the time to describe each, since they are so detailed.  I’ve also realized that there aren’t many websites out there that are user friendly and accessible to the public with good links to the resources needed to conduct projects such as these.

I’ve been looking at this over the past few years and I’ve noticed that its very hard to find any direct training on Phased Environmental Site Assessments (ESAs).  Its not like you can just take a course on Phase One ESAs and learn everything you need to know.  I’ve seen consultants produce such a wide variety of content in these types of reports.   Its hard to imagine where their training comes from for these specific types of projects??….Likely their predecessors or some sort or supervisor taught them and now they are passing down that information to their technicians or interns…all highly variable in experiences and education.  As of 2011 the Ontario Ministry of Environment (MOE) has attempted to level the playing field for consultants in terms of the preparation of Phase One and Two ESAs for the purpose of filing a Record of Site Condition (Brownfield Property Development – go back to my previous post for all that in a nutshell).  I’ll get into that more later…

I’m hoping that as I develop these posts I can keep a catalogue of reference material for people like consultants to use in the future to help them learn about these types of projects and to be a library in a sense, which is really the spirit of the website.

The Phase One ESA is really the backbone of the environmental due diligence consulting industry.  It all starts here and is really (to me) the most interesting portion of the whole assessment process.  Its interesting to me because every new site and Phase One tells a different story about a property’s history, how it was developed, who/what business lived there, what did they do, and what impact did they have on the land.  Some Phase Ones tell a very short and lonely story (maybe about an old farm house on some agricultural land) and some Phase Ones tell a long intriguing story about maybe an old bulk fuel storage facility, old gas station, or manufacturing plant, or a combination of many activities, some of which could have had environmental activities like illegal dumping and spills which lead to further investigation…doing a Phase One its kind of like being an environmental sleuth, looking for clues from the past that will help you solve some kind of environmental mystery.

Phase One ESAs are conducted for a number of different reasons.  For the most part banks or financial institutions trigger the need for a Phase One to be done to determine if they are lending money on a property that may be dirty and possibly become a liability for them…if they were ever to be the receiver of the land through a possible bankruptcy per se.  Its really the beginning of a transactional environmental due diligence process (if transactional is even a word).   This is done as part of the redevelopment of a property, refinancing of a property, divestment or acquisition of a property to determine if there are any areas on that subject land that could carry any inherent environmental liability.  In simpler terms, the objective is to find out if there is going to be anything in the land that could harm or cause an adverse effect to anyone or anything that occupies the property (people, animals, trees, etc.).

There are two different types of Phase One ESAs that are commonly seen done in Ontario:

  1. The standard Phase One that is used for day to day business/property transactions.  This type generally follows the Canadian Standards Association (CSA) Standard “Z768-01 (Reaffirmed 2012) – Phase I Environmental Site Assessment“.  Because this standard is a private document I can’t post a link to it, but here is a link to the CSA website where you can buy it http://shop.csa.ca/en/canada/environmental-auditing-and-related-investigations/z768-01-r2012/invt/27015182001.  If you email me at northenvironmental@gmail.com I will lend you a copy of mine.
  2. The MOE Ontario Regulation 153/04 (as amended) version of the Phase One ESA that is used for filing a Record of Site Condition.  This type of Phase One is somewhat different than the standard version as the requirements of what is completed during the assessment is strictly defined by the MOE.  A copy of the MOE’s guide to completing a Phase One ESA to the regulated standard is here http://www.mah.gov.on.ca/AssetFactory.aspx?did=9278.

No matter what type of Phase One you are intending on completing they both have the same objective which was stated above…to find out if there are any environmental liabilities associated with a specific piece of land.  They both also have the same four fundamental components: 1) a visual inspection of the property; 2) a series of interviews with people that are knowledgeable about the property; 3) a review of records and documents pertaining to the property; and 4) the compilation of a Phase One report.  The main difference between the two is that the regulated version (for Brownfield Redevelopment purposes) is very strict in terms of what and how the fundamental components are completed and evaluated, i.e., more intensely scrutinized and defined.

I could write a post about each of those fundamental components (and maybe I will…actually I should) but for now I will keep descriptions short…

Inspections of the property are typically walkthroughs that looks for obvious signs of contamination or hidden liabilities like vent pipes for underground storage tanks or surface staining from leaks and spills.  Interviews are usually done with the property owner, or someone that is very knowledgeable about the property, in hopes of finding out what they know happened there over the years such as who the previous occupants were or history of tenants (and hopefully they are truthful and honest about it!).  A review of records can include a huge database of information, most typical sources include aerial photographs, fire insurance plans, insurance reports, waste records, MSDSs, and public records with the MOE, TSSA, and local Municipality (just to name a few).  The report itself is basically that.  All the findings that the assessor discovers is laid out into some form of a written report.  Like I mentioned before I’ve seen a wide range of interpretation of what is thought to be needed to be contained in these, some are 3-5 pages, some are over 1000 pages.  All of them have a conclusion though and that  is whether or not the property is or might be contaminated.

Generally at no point does a Phase One complete any intrusive soil or groundwater testing of a property.  And on many occasions the Phase One undergoes a review of the property’s assets to determine if there are any harmful building materials, such as asbestos, that might be of a concern.  Variations of the Phase One have been seen to include limited versions of these testing such as this but are not always normal practice.

For the sake of the reader I’d like to comment on the general cost and timeframe to complete a Phase One…but I don’t want to be misleading anyone so I make the caveat known that there are many factors that can affect the deliverable such as: where the property is, how big it is, how much history it has, how many records need to be reviewed, etc.  However, as a ballpark I’ve seen the median range (excluding the outliers) go anywhere from $1000 to $5000 for a standard Phase One and shouldn’t take any longer than a week to a month to complete.  I won’t comment on the time and costs for the regulated RSC version of the Phase One since there are so many factors in making those determinations (you can always email me offline if you are looking for some guidance with that).

As I mentioned before, what I like most about Phase Ones is their story that they tell.  I’ve read and written some that tell tales of gross negligence leading to the ugliest contamination…and I’ve read and written some that tell stories about legendary companies developing a piece of land to build their empire in industry and manufacturing, and how they toiled to clean up their land from their past activities, only to bury their dirty secrets somewhere safe in a landfill so no one will ever find them…If there is anything romantic or thrilling about environmental consulting…its the Phase One…I’m glad I was gifted with a good imagination or else it would make my day job pretty boring.



Recycling Coke Bottles and Newspapers…Why Not Our Land?

What is “Brownfield Redevelopment”?  Its hard to explain what this is without putting someone to sleep so I will try to jazz it up a bit…think about the crappiest piece of derelict property you remember as a kid that might have seen being used as an old wrecking yard, factory or gas station…now envision it in your present local downtown streets, maybe next to your favorite Starbucks or a friend’s apartment.  All that’s left is a dusty skeleton of its past, maybe a few old condemned buildings left behind, a fence put up along its perimeter hopefully keeping the vandals out, a couple weathered signs that stay “No Trespassing”, garbage littering the ground…This could be potential Brownfield Property.

What makes these properties concerning is that they could have serious environmental concerns associated with their historical operations, which may pose a health and safety risk to the public.  However, when dealt with correctly these derelict properties are valuable as they may potentially be reused for another generation of business.

Maybe that vacant ‘dive of a property’ next to your favorite watering hole is redeveloped into a luxury condo building or a new university residence or maybe a nursing home or park.  All of which would be an overall improvement to the property, an increase in the tax base for the municipality, and possibly an increase in the surrounding properties real estate value.

If these old properties are contaminated, then they need to be cleaned up before they are reused for certain applications (i.e., an old commercial property into a more sensitive land use such as residential).  The process in which these properties are determined to be clean or dirty, and how they get cleaned up is the real challenge as there is regulatory red tape and hoops to jump through.

In a nutshell, in our Province of Ontario you cannot redevelop these types of properties for certain land uses without firstly obtaining what’s called a Record of Site Condition (RSC).  To get an RSC you must comply with the requirements of Ontario Regulation 153/04 (as amended, http://www.e-laws.gov.on.ca/html/regs/english/elaws_regs_040153_e.htm).   Its not an easy or quick process.  In the simplest of scenarios it can be somewhat costly and take a few months at least.  If not planned for correctly, it could result in a significant delay in development plans.

The process starts with what is called a Phase One Environmental Site Assessment (ESA).  This process is generally a desktop review of the property with the objective of determining if there is any actual or perceived contamination to the soil, groundwater or sediment on-site.  For example, during a Phase One, the person assessing the site would (as a small portion of the process) review historical building records or aerial photographs that might indicate the presence and location of underground fuel storage tanks or a gas station canopy.  These types of issues would be deemed as Areas of Potential Environmental Concern (APECs) and warrant needing a Phase Two ESA before you can get your RSC.  Without getting too specific, the Phase One ESA is a very detailed and thorough process which follows a specific set of criteria that is defined by the Ontario Ministry of Environment and Climate Change (MOE).

At the end of the Phase One ESA process, the assessor determines if any APECs exist.  If so, the project requires a Phase Two ESA to be completed prior to obtaining the RSC.  If no APECs are discovered during the course of the Phase One, the property owner can then file for an RSC within the MOE’s Brownfield Environmental Site Registry and becomes a public record.

If a Phase Two ESA is required to investigate the areas of concern (e.g., gas station underground storage tanks) some environmental testing is required.  The amount and type of testing is scripted by the MOE in the Regulation as well as what the assessor defines (the assessor is the person who is reviewing the condition of the property, also referred to as the Qualified Person (this needs to be a licensed Professional Engineer or Geoscientist)).  Phase Two activities may consist of a series of soil test pit excavations or boreholes using a drill rig with some groundwater monitoring wells.

Environmental soil and groundwater samples (and sometime sediment samples depending on where the property is located) are collected as part of the Phase Two process and analyzed at a laboratory for certain chemicals and parameters.  The lab data is then compared to criteria defined by the MOE.  This criteria is established by the MOE using toxicological human health and ecological information.  If the lab data analyzed from the samples collected from the property are greater than the established MOE criteria then there is so called ‘contamination’ on the property that needs to be dealt with prior to obtaining the RSC.  On the contrary, if all the samples collected during the Phase Two come back from the lab below the MOE criteria, the assessor has determined no further work is required to assess the property and the owner can file for RSC with the MOE.

There are a number of ways to deal with the contamination.  It can be dealt with through either various forms of remediation or through risk assessment, and in some cases a combination of both.  Once the contamination has been remediated or deemed safe to be left on-site through the use of a number of risk mitigation measures, and that all further sampling requirements have been met to satisfy the Regulation, an RSC can be obtained.  Once that RSC is obtained, the owner has satisfactorily met the requirements of Ontario Regulation 153/04, and can proceed with development of the brownfield property (barring all other municipal or regulatory requirements have been met).

There are a number of reasons why an RSC is or may be required.   I’ve only touched on one for the topic of this post (i.e., to redevelop a brownfield property for a certain use).  Phase One and Two projects and the work involved in obtaining an RSC are highly variable.  The objective of this post is only to provide a brief overview of the process only and is not intended to simplify or downplay this process.  It is recommended that significant consultation with all stakeholders is completed prior to taking on a brownfield redevelopment project (municipality, environmental consultant, property owner, MOE, etc.).

The costs and time to complete the process of obtaining an RSC can vary significantly from site to site.  Over the past few years I’ve seen the costs and timeframe to obtain an RSC under the most basic conditions be just below $10K and approximately 2-3 months from start to finish.  These projects are also known to range into the millions of dollars and extend over the course of a couple years.  These cases involve significant remedial efforts, risk assessment and lengthy review consultation periods with the MOE.

Although the work required to satisfy the provincial requirements for developing brownfield property can be onerous and costly if not planned and budgeted for correctly, these laws are in place for good reasons:

  • To ensure these properties are assessed correctly and fairly in order to adequately restore and evaluate the environment;
  • To bring new life to old, used and abused urban areas worth recycling for another generation and limiting urban sprawl; and
  • For the utmost reason, to protect human health and our ecosystem for the people who use these properties and for our future generations.

I encourage the development of brownfield property.  I think its an exceptional idea.  We recycle anything from our coke bottles to newspaper….why not our land?