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.
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.
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:
About the Author: David Palmerton, Jr., PG, is a Project Director for the Environmental Services Practice. Mr. Palmerton has managed strategic and technical environmental consulting issues for Fortune 100 companies throughout the United States. He has typically provided senior technical oversight, strategic support, and cost control for large multi-component environmental sites. His consulting assignments have included environmental science-based investigations, including soil, sediment, groundwater, and dense non-aqueous phase (DNAPL) investigations and remediation at some of the nation’s most high-profile sites. Mr. Palmerton has over 35 years of experience in environmental consulting in the areas of environmental liability assessment, investigation and remediation. Reach Dave on LinkedIn, or our consultants and engineers nearby at
SCS Engineers periodically prepare SCS Technical Bulletins – short, clear summaries of rules, plans, and standards. In 2021, ASTM International published an updated consensus guidance document for evaluating environmental conditions at properties involved in commercial real estate transactions.
This SCS Technical Bulletin for the revised E1527-21, Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process addresses definitions and terminology, clarifies industry practice for the historical records review of the subject and adjoining properties, and provides for updates and additions to appendices, report outlines, and other collateral.
Our updated edition now includes the revised guidance speaks to the business risk associated with emerging contaminants, such as Per- and polyfluoroalkyl substances (PFAS).
Read, share, download the A New Standard Practice for Phase I Environmental Site Assessments Tech Bulletin here.
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