So What’s Next…Phase Two?

I’ve never had to get a Phase Two Environmental Site Assessment (ESA) done on any property that I own, but I have to imagine it’s got to be a lot like going to see the doctor when you’ve noticed that you haven’t been feeling well.  You might luck out and come out of your doctor’s office with their recommendation to lay off the McDonalds or maybe quit smoking…or on the contrary, you might find out that you have something seriously wrong like a tumour or heart problem and they are going to have to go in and surgically remove whatever it is to make you healthy again, or inject you with medicine to make you feel better.  I’m not trying to make light of serious health issues through this comparison.  There is no question that one’s personal health is paramount above all else, however some people may argue that their land is everything they have and is truly their livelihood, especially if their business resides and operates there, or if its their home.

What I’m trying to say is that during the due diligence process of a land transaction for example, the Phase Two is when things start to get serious. Someone has made the opinion that there needs to be some further investigation into the quality of the land to determine if historical or current activities have caused an issue which might be harming the occupants.  All of this is being spurned from the Phase One (read my previous post about how we get to this point).  In brief summary, the Phase One ESA is completed which leads the project to either some form of closure by not finding anything that warrants further investigation, or else it will come to the determination that there is enough actual evidence of contamination, or potential for contamination to exist, on the land that there is a need to do a Phase Two in order to confirm those opinions or findings.

And in a nutshell that is what the Phase Two is…an intrusive investigation of the environmental condition of the property…there is going to be some actual digging into the past…there is going to be some poking around to see what’s going on down there.  Test pits will be excavated, boreholes will be drilled, monitoring wells will be instrumented, soil will be stuffed into jars, water will be pumped, chains of custody will be filled, coolers will be shipped, labs will be busy doing whatever they do, data will be crunched and reports will be written…this is really the front line of the environmental due diligence industry.

The Phase Two ESA can be a really complex process but doesn’t have to be complicated.  Once the decision has been made to commence with the recommendation to move forward with the Phase Two, the majority of the work comes in the initial preparation and planning stage.  First and foremost a sampling plan needs to be designed.  This is the most important step.  If the sampling plan isn’t well thought out you are going to either miss something or end up with a bunch of lab data that doesn’t mean anything or is worth nothing.  This could be a very costly mistake at your client’s expense.  Sampling plans take so much into consideration and should be designed by someone with experience, and whose considerations might include:

  • Where are we going to sample?  Are we going to collect samples randomly or are we going to focus on a certain area like the old underground storage tank nest?
  • Once we decide where we are going to do the testing, what contaminants are going to test for?  Petroleum hydrocarbons?  Cyanide?  Mercury? Methylethylmeatball?
  • What are we testing?  Soil? Groundwater? Sediment? Air?
  • How are we going to get the samples?  Test pits?  Boreholes?  Monitoring wells?  All of the above?
  • What lab is going to test them?  The one in some guy’s garage or an accredited certified and approved lab?

Somebody good better have some good answers to these questions…you need to hire a good consultant and trust them, but ask lots of good questions about the sampling plan they design for you (the word ‘good’ 4 times in one sentence is emphasis).  I’m sure there are lots of cases where the over design of the plan due to the conservatism of the practitioner possibly leads to unnecessarily overspending or inflated costs for the Phase Two project…do we really need 5 boreholes for one underground storage tank?  Do we need to test for every element on the periodic chart?  And the under design of the sampling plan will lead to big misses which could possibly lead to contamination not being discovered.

Once a good sampling plan is established and agreed upon by all stakeholders the project moves forward with the field investigation.  It is important that everyone agrees and understands what is going to happen during the Phase Two so there are no surprises when a drilling crew shows up to drill a 20′ borehole through the ceramic floor tiles in your office’s foyer).

Underground utility locates are filed, safety concerns are addressed for the field staff and then the sampling plan is implemented.  It is critical that the people conducting the field work specified in the sampling plan are qualified…I can’t stress that enough.  Mistakes made in the field can be very costly if you have to go back because a sample was missed or insufficient data was collected because the field technologist “didn’t know”.  In Ontario the Ministry of Environment (MOE) has provided a general guidance document for public consultation in regards to the sampling of contaminated sites.  Although it’s a bit dated (1996) it is still relevant as one of our industry standards (https://archive.org/details/guidanceonsampli00ontauoft).  In later posts I will provide additional details for sampling procedures as there is a ton of information out there worth reviewing and posting about.

Once that sampling plan is executed, the field data and samples are gathered and analyzed.  An accredited laboratory follows analytical procedures to determine the concentrations of the contaminants that are in the samples.  Those procedures are defined by our good friends at the MOE (https://dr6j45jk9xcmk.cloudfront.net/documents/1006/3-6-12-protocol-for-analytical-methods-en.pdf).

Typically an environmental scientist, engineer, hydrogeologist or someone with the necessary qualifications and experience, will evaluate all the field and lab data and come to a conclusion about the environmental quality of the land under investigation.  In Ontario there are criteria or limits used for the comparison of the lab data to define the presence of contamination (http://www.mah.gov.on.ca/AssetFactory.aspx?did=8993).

At the end of the evaluation stage a formal written report is normally prepared which outlines all the work that was completed and conclusions regarding the results.  The report usually ends in one of two statements (not in these exact words): 1) The concentrations found on the property are below the allowable limits and no further investigation or work is required, or 2) The concentrations exceed the allowable limits, contamination is present, and something should be done about it…CONSULTANT INSERT RECOMMENDATIONS HERE.

Recommendations based on unfavorable results usually include some form of supplemental delineation, remediation or risk assessment.  Without writing a novel about this stuff I will delve into that in separate posts.  Those recommendations may proceed further if needed to meet the overall objectives of the whole ESA process.  For example the sale of a parcel of land to a buyer may not go through unless they get financing and the bank will not lend money until they can get a clean bill of health.  Therefore remediation will need to take place to clean up any contamination that was found.

Similar to the Phase One process, the following two versions of the Phase Two ESAs are typically completed in Ontario:

  1. The standard Phase Two that is used for day-to-day business/property transactions.  This type generally follows the Canadian Standards Association (CSA) Standard “Z769-0o (Reaffirmed 2013) – Phase II Environmental Site Assessment“.  http://shop.csa.ca/en/canada/environmental-auditing-and-related-investigations/cancsa-z769-00-r2013/invt/27010352000.
  2. The MOE Ontario Regulation 153/04 (as amended) version of the Phase Two ESA that is used for filing a Record of Site Condition.  This type of Phase Two has specific requirements of what is completed during the assessment which are defined for us by the MOE.  A copy of the MOE’s guide to completing a Phase Two ESA to the regulated standard is here http://www.mah.gov.on.ca/AssetFactory.aspx?did=9279.

The costs to complete a standard due diligence Phase Two are highly dependent on the results of the Phase One.  Simple Phase Twos could range anywhere on average from $5,000 up to $10,000 and might include the investigation of one or two areas of concern only.  More detailed investigations for larger properties with many areas of concern requiring investigation could range easily between $20-50k and could involve multiple rounds of testing to narrow down the volume of contamination.  Driving factors in the determination of the costs for Phase Two investigations are usually the lab fees and drilling subcontractor costs.  Both easily add up to 50% or more of the total cost of the project.  The costs for the regulated version of the Phase Two are typically double the costs of the standard.

Organized and efficient firms can generally turn basic Phase Two projects around in 3-4 weeks; however a Phase Two ESA for the purpose of filing a Record of Site Condition can take months, or over a year to complete if remediation is required.  A project’s schedule should be carefully considered if any environmental due diligence requirements need to be met.

This post is intended only to give an overview of the Phase Two process.  What I’ve put down in words only scratches the surface.  I haven’t spent any time discussing important topics such as what do with off-site contamination issues and reporting to the regulators; Phase Two liability importance; quality assurance and control practices; the actual science behind environmental contamination and its mobility in the subsurface, etc. etc. etc.

Phase Two investigations are really quite interesting especially if you are crazy about hydrogeology and environmental science, or if you are really into the business models behind brownfield sites and what value they hold for redevelopment purposes…the Phase Two is the key to unlocking what steps are needed to move forward.

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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?