Phase One ESA Reliance – What is it good for?

Here’s a joke for you:

Q: Why did the banker do a Phase One Environmental Site Assessment (ESA) on the used mattress?

A: So they could “re-lie” on it!

If that isn’t the best environmental consulting joke you’ve ever heard I’d be surprised!  That joke works on so many levels (don’t feel bad if you didn’t get it) and is really meant to be an analogy for what this brief article is about…”the reliance and protection that the ESA process will provide you when doing your environmental due diligence”.

I’m not a lawyer so please don’t accept this information as legal advice but use it to be better informed when proceeding with your property transactions and speak to your council about your liabilities.

We all know that a Phase One ESA is important to get done.  If done correctly, it will identify for you the presence of any actual or potential contamination on a property.  More importantly, if there is any, the Phase Two ESA will provide you the verification of the environmental quality of the land. If you are the purchaser of this work (I.e., you hired a consultant to do the Phase One and Phase Two) then you are typically provided reliance on those reports by the consultant. Meaning that if you make certain decisions, such as the purchase of a piece of land that a Phase One said was ‘clean’, and you later found out that there was contamination, you may some protection through that consultant’s insurance company if they missed something during their investigation (errors and omissions policy).

Some people may forego the Phase One ESA process all together and purchase the land outright (maybe in cash if they don’t need financing).  If they were to find out later that the land was contaminated, guess who has to pay for the clean up?  Buyer beware!  Depending on how extensive that contamination might be, it could cost you hundreds of thousands of dollars or more to remediate…good thing you saved that $2,000-$3,000 by not doing the Phase One!  This is when it would have been good to have done that Phase One and you would have either identified it before you bought the land, or have the reliance from the consultant to put them on the hook for the clean up costs if they missed something in their investigation.

In many cases involving the financing of a property, that reliance can also be transferred by the consultant to the lender to protect said lender in the event that the land owner goes bankrupt and forfeits the land to the bank (lender).  The lender wants that protection as well.  So in simple terms, having that reliance is a form of environmental insurance for everyone involved in the deal.

Something that people should know when they commission a consultant to complete a Phase One or Two ESA on a piece of land, that they should have something in writing between them and the consultant which clearly identifies insurance amounts, associated liability, and who can rely on those reports.  Quite often, and this goes back to my previous post (When Phase One ESAs Get Weird), people will have hand me down reports that might be technically valid and current, however they are not the owners of those reports, and nor do they have third party reliance from the consultant to use them for the purpose of making business decisions.  This can get complicated when trying to use them at banks to get financing, or when trying to sell that property in the future.  In addition, if you have someone else’s reports, and you did purchase some land thinking it was ‘clean’, because of those reports and without written reliance, and later find out that its contaminated, you will not have that protection…that contamination will be your responsibility.

In summary, here are some key items to consider when commissioning this type of work:

  • Always make sure you have reliance from your consultant on your ESA reports (in writing);
  • Don’t rely on old reports done for someone else (they are worth the paper they are written on if you don’t have that authorization to rely);
  • Regardless of whether or not a Phase One is a condition needed to close a deal, consider doing one to identify any potential unknown environmental liabilities you could be faced with; and
  • Always make sure your consultant is qualified and your ESA reports are done to the applicable standards (CSA or ASTM).

So, like the banker and the mattress situation, consider the Phase One process not as a condition to be met as a part of your deal, but as a form of protection and insurance to make sure your investment and business are safe.

If you have any questions, please do not hesitate to email me at

The Gateway Site…A Proposed Brownfield Redevelopment

A potential brownfield redevelopment in my neck of the woods…I love it!  The Canal Village Development will be multi-use including commercial, residential and parkland.  They are proposing to develop the property known as the “Gateway Site” which used to be a former industrial property.  This property at one time may have had industrial activities occurring on the land associated with a neighboring chrome smelting plant, scrap metal yard, fish hatchery and settling basins for a steel manufacturer.  I applaud the proposal and urge them to push on.

The development and the environmental hurdles will be costly yet will be outweighed significantly by the benefits of repurposing this land.  The developers are known as the Canal Village Development Corporation.  I’m willing to bet that they are aware of what will be needed to develop the land in terms of the brownfield requirements under Ontario Regulation 153/04 (Phase One and Phase Two ESAs, followed by Remediation or Risk Assessment, Record of Site Condition)…who knows, maybe in a couple years we’ll be playing soccer in the Canal District…

Thanks to Darren Taylor and Sootoday for posting this:

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 (  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,
  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!