by Kerri Boddy
Senior Environmental Scientist

Phase Is are conducted per ASTM E 1527-13 and include several major components: a site reconnaissance, completion of a User Questionnaire, a regulatory database search, interviews with persons knowledgeable of the property, and a review of reasonably ascertainable and readily available historical sources to identify the use of the property back to 1940 or its first developed use, whichever is earlier.  As such, the ASTM E 1527-13 Standard Practice provides specific guidance as to what must be addressed.  However, there is no ASTM standard for Desktop Reviews (more commonly called Risk Search with Risk Assessments-RSRAs).  Therefore, RSRAs differ from consultant to consultant and also do not provide protection on CERCLA. 

While RSRAs differ from consultant to consultant, the industry standard includes a regulatory database search and an historical review of the big four (i.e., aerial photographs, Sanborn fire insurance maps, topographic maps, and city/street directories).  Some companies also add an owner interview, a review of online property cards, deeds, plat maps, zoning records, etc.  In general, RSRAs include most components of a phase I minus the site inspection and User Questionnaire (including a search for environmental liens and AULs [activity use limitations]).  

So, when is it okay to order the RSRA lower-tiered due diligence product instead of a phase I?  This is a risk-based decision that is best left to the discretion of the User (most times the lending institution).  Many banks will base this decision on the loan amount and the use of the property.   Banks generally require a phase I at a certain monetary threshold, usually between one million and three million dollars.   Banks also require phase Is on lesser dollar loans if a property is considered a high-risk property.  Determining the classification of a property into a high-risk category is generally done using the NAICS (North American Industry Classification System) codes.

I provide the following examples:

  • The subject property consists of a restaurant and you are told the restaurant was developed from vacant or undeveloped land in 1990.  The loan amount is $800,000.  Based on the low-risk use of the property, the amount of the loan, and reported undeveloped use of the property in 1990, the bank might order a RSRA in this case as it is below the bank’s 2 million dollar phase I threshold. 
  • The subject property consists of a restaurant and you are told the restaurant was developed in 1990.  The prior use of the property is unknown and the property is located at the corner of a main intersection in a long-term developed area; an area which has been developed since the late 1800s.  Your instinct is likely correct in that the property was developed for something prior to 1990 and likely was developed for many decades.  While the loan amount is only $800,000, the bank might order a phase I based on the high probability of a past occupant/use, which may include a past occupant/use of environmental concern. 
  • The subject property consists of an unoccupied gas/fueling facility.  You are told the facility closed in 2019, you have a closure assessment report from the current owner that indicates three gasoline underground storage tanks (USTs) installed in 1975 were removed in 2020.  An NFA (no further action) letter was granted by the governing regulatory body in 2021.  The current owner indicates the site was given a clean bill of health and nothing else was required by the governing regulatory body.  While the loan amount is only $800,000, your knowledge of fueling facilities dating back to the 1970s alerts you to the likely presence of automotive repair activities as most fueling facilities also provided repairs services during that time frame.  As such, you cannot rule out the possibility of a waste oil tank (possibly underground), underground automotive lifts, the use of chlorinated solvents commonly used in the 1970s for cleaning parts such as carburetors, and other potential concerns associated with 1970s-dated automotive repair facilities.  While the owner and prospective purchaser believe the property has a clean bill of health, a phase I, along with a regulatory file review, is required by the bank.

In summary, ordering a RSRA (desktop) instead of a phase I includes the consideration of many factors.  These decisions are considered risk-based and should weigh all the facts available to you.  While this risk-based decision is best left to the discretion of the User, consultation with your environmental professional should be considered when the answer is not obvious.

If you have due diligence needs or other questions regarding other environmental concerns, please contact EI’s Senior Environmental Specialist, Kerri Boddy, at (502) 499-2985 or [email protected].