Balancing Costs and Liabilities for Consulting Firms in Phase I Environmental Site Assessments

January 15, 2024

environmental liability cost analysis
Phase I ESAs reflect the research and analysis, including a review of historical records, site visits, and potential environmental risk evaluation required. You may need specialized expertise, especially for properties with complex histories or significant environmental issues and legacies.


Conducting Phase I Environmental Site Assessments (ESAs) must navigate the complexities of fees versus liability to provide crucial services. Balancing these aspects is essential for mitigating future liabilities while ensuring thorough assessments during due diligence.

Environmental consultants face significant risks during Phase I ESAs. The potential environmental liabilities discovered often exceed the fees and profits from these assessments. Inadequately performed ESAs or overlooked environmental issues have led to substantial financial consequences for firms, sometimes amounting to hundreds of thousands of dollars. This highlights the importance of thoroughness and accuracy in these assessments to mitigate risk and protect the environment, the borrower or lender, and the consulting firm.

environmental liability consulting
LightBox 2023 Benchmark Survey

According to LightBox EDR’s historical data[1], the average fee for a Phase I ESA rose 11% from 2018 to 2023, with costs ranging between $1,400 and over $7,500. These variations reflect factors like the assessment’s complexity and the property’s characteristics.

Report writing consumes the most hours in Phase I ESA-related tasks, LightBox EDR reports. The average hours per report across all aspects is twenty-five. A $75/hr. Consultant preparing the report costs $1,875, compared to $150/hr. Consultant at $3,625, not including profit and direct costs like travel, historical research fees, and regulatory fees. Investing more in a comprehensive ESA may be more cost-effective than missing a significant environmental issue.

Choosing a sub-$3,000 consultant for a Phase I ESA, regardless of the property’s apparent simplicity, could increase risks. Even straightforward properties can present unforeseen environmental challenges, affecting assessment accuracy and the project’s timeline and cost.

Firms conducting Phase I ESAs must adhere to professional standards like ASTM E1527-21 or local standards. Failing to meet these standards can lead to liability for missed or inadequately assessed environmental conditions.

The cost of a Phase I ESA reflects the required research and analysis, including a review of historical records, site visits, and potential environmental risk evaluation. Costs vary based on the expertise needed, especially for properties with complex histories or significant environmental issues and legacies.

Despite having professional liability insurance and contractual limitations of liability, firms can face significant business disruptions due to the time and expenses involved in litigation from oversights or inaccuracies in assessments.

Paying more for a Phase I ESA often results in a more comprehensive assessment. Higher fees enable exhaustive research, advanced technology use, and specialist engagement, leading to a thorough understanding of the property’s environmental status.

The fee for a Phase I ESA should align with the property’s specific complexities and risks. Industrial properties or those with hazardous material histories require more intensive assessment and review than simpler sites. However, low-risk sites can also reveal hidden environmental issues during assessments.

For example, a Phase I ESA on a rural property without apparent issues can become complex due to external factors like a neighboring gasoline tank leak. Such situations highlight the need for comprehensive and well-funded assessments to evaluate a property’s environmental status accurately.

The unpredictable nature of environmental risks emphasizes the importance of thorough and adequately funded Phase I ESAs to identify and address such risks effectively.

The implementation of ASTM E1527-21 in February 2023 introduced new considerations. This standard clarifies All Appropriate Inquiries (AAI) requirements and brings more precision to the assessment process. It mandates historical records for industrial properties, specific photographic and mapping requirements, and land title records detailing environmental liens or Activity/Use Limitations.

A notable update in E1527-21 is the approach to emerging contaminants. Until classified as a federal CERCLA hazardous substance, emerging contaminants like PFAS and PCB-containing building materials are optional in Phase I ESAs. This standard evolution reflects the dynamic nature of environmental assessments, where the cost of a Phase I ESA is a strategic decision to mitigate liability risks. Consequently, contaminants like PFAS and PCB-containing building materials, while not mandatory, can be included as a ‘non-scope consideration’ at the discretion of the Phase I ESA user.

While higher costs often lead to more thorough and reliable Phase I ESAs, balancing these costs with the property’s specific needs and risks is vital. The goal is a comprehensive understanding of environmental risks and conditions that support cost-effectiveness.

  • Higher fees facilitate thorough historical research, detailed site inspections, and in-depth property analysis, uncovering potential issues that might be missed in less extensive assessments. They also cover the cost of involving specialized experts, particularly for properties with unique environmental concerns or complex histories.
  • Adhering to stringent industry standards like ASTM E1527-21 often necessitates a more detailed approach, and higher fees can ensure compliance, thus reducing future liability issues.
  • A detailed, comprehensive Phase I ESA reduces the likelihood of overlooking significant environmental issues, protects the consulting firm from liabilities and legal challenges and provides clients with a clearer understanding of their environmental risks and liabilities.

Investing more in a Phase I ESA is an investment in quality, risk management, and long-term cost-effectiveness, benefiting both the client and the consulting firm.


Phase I Environmental Site Assessments References:




Posted by Diane Samuels at 6:00 am