Environmental Site Assessments

As a consequence of the far-reaching liability under CERCLA, otherwise known as the Superfund Act, whether you are buying, selling or refinancing commercial or industrial property, your lender will insist that you have an Environmental Site Assessment (ESA) performed upon the property. This is so they will be assured that they are not lending money on a contaminated property. The last thing that any lender wants on their hands is the liability of a contaminated property. This is because CERCLA states that all parties will be held "jointly and severally" responsible for the remediation of any property that is contaminated with hazardous materials. Environmental remediation can be horribly expensive. Not only does an ESA protect the lender, it also protects the buyer, and acts as a powerful tool that can be used in deciding whether to buy a property.

An Environmental Site Assessment is a phased investigation, ranging from Phase I through Phase III. Each of these investigations are performed to American Society of Testing Materials (ASTM) Standards; or in Connecticut, under certain conditions, the Connecticut Transfer Act Standards apply, and the process is known as a Transfer Act Site Assessment (TASA). The Transfer Act defines certain specific business operations and conditions that will require that the ESA be performed to TASA guidelines. The results of such a site assessment must be reported to DEP using forms which are specified by DEP. There is a sliding scale of fees ranging from $200 to $23,000 depending upon the level of contamination found on the property.

A Phase I ESA is used to gather information both historical and physical, which will include a review of all local, state and federal sources which are relevant to the property. This is to determine the likelihood that a release of hazardous materials has occurred on the property. Usually a site assessment goes back to 1940, but under certain circumstances it is wise to look at a property from a historical viewpoint.

More then one consultant has been taken by ancient contamination. There was a property in a nearby town that on the surface looked as clean as a whistle, but under the circumstances I actually took the investigation back to 1763. In the late 1700s the site was the largest tannery in Connecticut. Believe me, the last thing in the world you want to own is an old tannery. Another thing you don't want to own is any property associated with railroad yard operations—especially railroad equipment maintenance and repair.

A Phase II investigation determines whether a release indeed has occurred, based upon information derived from the Phase I assessment and a sampling and testing program designed for the particular site. Generally both soil and water samples are taken.

A Phase III assessment is used to evaluate the degree of any contamination discovered during the Phase II investigation, and its impact on the property. Phase III also gives us a working plan for any remediation work required to clean up the site.

Probably the most important facet of an ESA is that it bestows upon all parties the "innocent landowners" defense. A person acquiring property after contamination has already occurred may qualify as an innocent landowner and limit any liability to the value of the property, provided the property owner has no knowledge of any contamination on the property, and makes inquiries regarding the environmental soundness of the property related to its current and past uses.

There are penalties and liabilities for transferors who fail to comply with the Transfer Act, who may be liable to transferees for all remediation and removal costs as well as all direct and indirect damages without regard to fault. Also, anyone who knowingly gives false information or who fails to comply with the act may be fined up to $100,000.

John Carter is President of Geoteknika LLC, an environmental consulting firm, and has been actively involved with environmental issues since 1977.