# Environmental Due Diligence Reference Guide

## Overview

Environmental due diligence is a critical component of real estate and business transactions. This guide covers the Phase I Environmental Site Assessment (ESA) process and related due diligence standards.

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## PHASE I ENVIRONMENTAL SITE ASSESSMENT

### Purpose
A Phase I ESA identifies potential or existing environmental contamination liabilities associated with a property. It is the primary tool for satisfying the "All Appropriate Inquiries" (AAI) requirement under CERCLA.

### Governing Standards

#### ASTM E1527-21
The current standard for Phase I ESAs, effective November 1, 2021, replacing E1527-13.

**Full Title**: Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process

#### All Appropriate Inquiries (AAI)
**40 CFR Part 312**

Federal rule establishing minimum requirements for due diligence to qualify for CERCLA liability protections. Compliance with ASTM E1527-21 satisfies AAI requirements.

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## KEY TERMS AND DEFINITIONS

### Recognized Environmental Condition (REC)
The presence or likely presence of any hazardous substances or petroleum products in, on, or at a property:
- Due to release to the environment
- Under conditions indicative of a release to the environment
- Under conditions that pose a material threat of a future release to the environment

**Note**: RECs are the primary findings that trigger concern and potential further investigation.

### Controlled Recognized Environmental Condition (CREC)
A REC resulting from a past release that has been addressed with:
- Property use restrictions
- Activity and use limitations
- Institutional controls
- Engineering controls

The residual contamination is acceptable under regulatory closure but may require ongoing management.

### Historical Recognized Environmental Condition (HREC)
A past release that has been addressed such that the condition:
- No longer presents a material threat
- Was addressed to unrestricted residential standards
- Does not require land use restrictions or controls

### De Minimis Condition
A condition that generally does not present a material risk of harm and would not be the subject of enforcement action. Examples include:
- Small quantity of petroleum from de minimis release
- Properly maintained regulated equipment (ASTs, transformers)
- Conditions clearly below regulatory action levels

### Business Environmental Risk
A risk that can have a material environmental or environmentally-driven impact on the business associated with a property but is not necessarily a REC. Examples include:
- Asbestos-containing materials
- Lead-based paint
- Radon
- Wetlands
- Endangered species

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## PHASE I ESA COMPONENTS

### 1. Records Review

#### Standard Environmental Record Sources

**Federal Records**:
| Database | Description | Minimum Search Distance |
|----------|-------------|------------------------|
| NPL | National Priorities List (Superfund sites) | 1.0 mile |
| CERCLIS/SEMS | Superfund site inventory | 0.5 mile |
| RCRA CORRACTS | RCRA facilities with corrective action | 1.0 mile |
| RCRA TSD | RCRA treatment, storage, disposal | 0.5 mile |
| RCRA Generators | RCRA large quantity generators | Property and adjoining |
| ERNS | Emergency Response Notification System | Property only |
| Institutional Controls | Federal institutional/engineering controls | Property only |

**State Records**:
| Database | Description | Minimum Search Distance |
|----------|-------------|------------------------|
| State NPL Equivalent | State-designated contaminated sites | 1.0 mile |
| SWF/Landfills | Solid waste facilities | 0.5 mile |
| LUST | Leaking underground storage tanks | 0.5 mile |
| UST | Registered underground storage tanks | Property and adjoining |
| Brownfields | State brownfield sites | 0.5 mile |
| VCP | Voluntary cleanup program sites | 0.5 mile |

**Additional Records**:
- Local records (permits, violations, correspondence)
- Tribal records (if applicable)
- Physical setting sources (geology, hydrogeology, topography)
- Historical use records (discussed below)

#### Historical Records Review

**Objectives**: Identify past uses that may have involved hazardous substances or petroleum products.

**Standard Historical Sources**:
1. **Aerial photographs** - To 1940 or first developed use
2. **Fire insurance maps** (Sanborn) - To 1940 or first developed use
3. **City directories** - To 1940 or first developed use
4. **Property tax files** - Various time periods
5. **Recorded land title records** - Chain of title
6. **Building department records** - Permits, uses
7. **Zoning/land use records** - Historical zoning

**Timeframe**: Historical records review should extend to:
- 1940, OR
- The property's first developed use, whichever is earlier

### 2. Site Reconnaissance

#### Objectives
- Observe current uses and conditions
- Identify potential environmental concerns
- Verify/supplement records review findings

#### Visual Inspection Requirements

**Interior Inspection** (where not precluded):
- All accessible areas
- Storage areas
- Mechanical systems
- Evidence of hazardous substance use/storage

**Exterior Inspection**:
- Property perimeter
- Drainage patterns
- Stained soil/pavement
- Distressed vegetation
- Fill areas
- Dumping/debris
- Storage tanks and containers
- Equipment

**Adjoining Properties** (from property boundaries or public rights-of-way):
- Current uses
- Evidence of environmental concerns that may affect subject property

#### Limitations on Site Reconnaissance
Document any areas not accessible:
- Buildings not entered
- Areas blocked by equipment/materials
- Tenants who denied access
- Weather or safety constraints

### 3. Interviews

#### Required Interviews

**Current Owners/Operators**:
- Knowledge of environmental conditions
- Current operations and hazardous substance use
- Past uses and conditions
- Environmental liens or activity restrictions
- Pending/past environmental litigation

**Past Owners/Operators** (if readily available):
- Historical uses
- Past environmental incidents
- Releases or contamination knowledge

**Site Manager or Occupant**:
- Day-to-day operations
- Waste management practices
- Storage locations

**Local Government Officials**:
- Fire department (hazmat incidents)
- Health department (permits, violations)
- Building department (permits, uses)

#### Interview Documentation
- Date and method of interview
- Person interviewed and affiliation
- Questions asked
- Responses received

### 4. Report Preparation

#### Required Report Contents

1. **Executive Summary**
   - Scope and limitations
   - Findings summary
   - Conclusions
   - Data gaps

2. **Introduction**
   - Purpose
   - Scope of services
   - Significant assumptions
   - Limitations and exceptions
   - Special terms and conditions

3. **Site Description**
   - Location and legal description
   - Site and vicinity characteristics
   - Current use
   - Description of structures

4. **User Provided Information**
   - Environmental liens
   - Activity and use limitations
   - Specialized knowledge
   - Price/value relationship
   - Commonly known or reasonably ascertainable information

5. **Records Review**
   - Standard environmental record sources
   - Physical setting sources
   - Historical use information

6. **Site Reconnaissance**
   - Methodology and limiting conditions
   - General site observations
   - Specific observations

7. **Interviews**
   - Owner interview
   - Occupant interview
   - Local government interviews

8. **Findings and Opinions**
   - RECs
   - CRECs
   - HRECs
   - De minimis conditions
   - Data gaps

9. **Conclusions**

10. **Environmental Professional Declaration**

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## DATA GAPS AND LIMITING CONDITIONS

### Significant Data Gaps
When standard sources are unavailable, the environmental professional must:
1. Document attempts to obtain information
2. Seek alternative sources
3. Evaluate impact on ability to identify RECs
4. Opine whether data gap affects findings

### Standard Limiting Conditions

**Not included in typical Phase I ESA**:
- Sampling or testing
- Regulatory compliance review
- Asbestos surveys
- Lead-based paint testing
- Radon testing
- Wetlands delineation
- Indoor air quality testing
- Endangered species surveys
- Cultural resources surveys

### Shelf Life
**ASTM E1527-21**: Phase I ESA is valid for 180 days from date of report or site visit (whichever earlier). After 180 days, updates may be required.

**Update Requirements** (if 180 days exceeded):
- Updated records review
- Updated site reconnaissance (if conditions may have changed)
- Updated interviews
- No new site visit required if report less than 1 year old and no changes

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## USER RESPONSIBILITIES

### Required User-Provided Information

Under ASTM E1527-21, the "user" (typically purchaser/lender) must provide:

1. **Environmental Liens**
   - Search for recorded environmental liens

2. **Activity and Use Limitations (AULs)**
   - Institutional controls
   - Engineering controls
   - Land use restrictions

3. **Specialized Knowledge**
   - Any information indicating contamination not disclosed

4. **Commonly Known Information**
   - Generally known information about the property

5. **Valuation Reduction**
   - Whether purchase price reflects environmental contamination

6. **Reason for Significantly Lower Price**
   - Explanation if purchase price significantly below market value

### Reporting User-Provided Information
- Environmental professional documents what information was requested
- Document what information was provided (or not provided)
- Document date of transmission

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## PHASE II ENVIRONMENTAL SITE ASSESSMENT

### When Required
Phase II investigation is triggered when Phase I identifies:
- RECs requiring further evaluation
- Data gaps that cannot be resolved
- Conditions warranting characterization

### ASTM E1903-19
Standard Practice for Environmental Site Assessments: Phase II Environmental Site Assessment Process

### Typical Scope
- Soil sampling and analysis
- Groundwater sampling and analysis
- Soil gas sampling
- Indoor air sampling
- Geophysical surveys
- Tank integrity testing

### Sampling Strategy
- Based on RECs identified in Phase I
- Follows professional judgment
- Considers regulatory guidance
- May follow EPA or state protocols

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## TRANSACTION SCREENS

### ASTM E1528-22
Standard Practice for Limited Environmental Due Diligence: Transaction Screen Process

### Appropriate Use
- Lower-risk properties
- Limited budgets
- Initial screening before full Phase I
- Portfolio assessments

### Limitations
- Does not satisfy AAI requirements
- May not identify all RECs
- Limited records review
- Limited historical review

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## CERCLA LIABILITY PROTECTIONS

### Innocent Landowner Defense (42 USC § 9601(35))
Requirements:
- Acquired after disposal
- Did not know and had no reason to know
- Made AAI
- Exercised due care
- Took reasonable precautions

### Bona Fide Prospective Purchaser (42 USC § 9607(r))
Requirements:
- All disposal before acquisition
- Made AAI
- Full cooperation and access
- Complies with land use restrictions
- Takes reasonable steps
- Provides required notices
- Exercises appropriate care

### Contiguous Property Owner (42 USC § 9607(q))
Requirements:
- Did not cause, contribute, or consent
- Not affiliated with responsible party
- Made AAI
- Takes reasonable steps
- Cooperates with response actions

### All Appropriate Inquiries Compliance
**40 CFR Part 312** - AAI satisfied by:
- Phase I ESA per ASTM E1527-21 (or E1527-13 until updated)
- Completed or updated within one year of acquisition
- Site visit within 180 days of acquisition
- Government records search within 180 days

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## ENVIRONMENTAL CONSULTANT QUALIFICATIONS

### Environmental Professional (EP)
ASTM E1527-21 requires oversight by an "Environmental Professional" meeting one of these criteria:

1. Licensed Professional Engineer (PE) or Geologist (PG) with 3+ years environmental experience

2. Licensed or certified by federal, state, or tribal authority with 3+ years experience

3. Baccalaureate degree or higher in science/engineering with 5+ years experience

4. 10+ years full-time environmental experience

### EP Declaration
The EP must sign a statement declaring:
- Meets EP definition
- Has developed and performed AAI per ASTM standard
- Required components were performed

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## SPECIALIZED ASSESSMENTS

### Asbestos Survey
- AHERA (40 CFR Part 763, Subpart E) for schools
- NESHAP (40 CFR Part 61, Subpart M) for demolition/renovation
- Pre-purchase surveys

### Lead-Based Paint
- HUD/EPA disclosure requirements (42 USC § 4852d)
- Pre-renovation requirements (40 CFR Part 745)
- Risk assessments

### Vapor Intrusion Assessment
- EPA 2015 Vapor Intrusion Guidance
- Indoor air sampling
- Sub-slab soil gas sampling
- Groundwater pathway analysis

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## KEY CITATIONS

- **CERCLA AAI**: 40 CFR Part 312
- **Phase I ESA**: ASTM E1527-21
- **Phase II ESA**: ASTM E1903-19
- **Transaction Screen**: ASTM E1528-22
- **Vapor Intrusion**: EPA OSWER 9200.2-154 (2015)
- **CERCLA Defenses**: 42 USC §§ 9601(35), 9607(q), 9607(r)

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*Last Updated: March 2026*
*This reference is for informational purposes only and does not constitute legal advice.*