LESSONS FROM EPA’S OFFICE OF INSPECTOR GENERAL: PHASE 1 ENVIRONMENTAL SITE ASSESSMENTS MAY BE DEFICIENT
02.18.11 12:56 PMIn 2004 Congress amended CERCLA to provide statutory defenses to liability. These defenses, are (1) innocent landowner, (2) prospective purchaser and (3) contiguous property owner (hereinafter, “Brownfield Defenses.”). All of these defenses are predicated on undertaking all appropriate inquiries (AAI) by an environmental professional that concludes that there was no likelihood of a release of hazardous substances. These reports are known commonly as Phase I Environmental Site Assessments (“Phase I ESAs”) and are a staple in commercial real estate transactions. However, the EPA Office of Inspector General (“OIG”) recently reported that every single one of the Phase I ESAs they reviewed were deficient.
The OIG’s report, issued on February 14, 2011, revealed that 35 of the 35 (yep, that’s all of them), drawn from a sample of some $2.1 million in brownfield grants, flunked in some respect. EPA Must Implement Controls to Ensure Proper Investigations Are Conducted at Brownfields Sites. While OIG certainly made EPA look silly, the real potential revelation is that most of the Phase I environmental site assessment conducted for the purpose of claiming one of the Brownfield Defenses could likewise be deficient.
The following is a summary of OIG Findings:
1. EP Qualifications Statement: All 35 reports failed to include the required statement to certify the qualifications of the EP. 16 of the 35 reports (46 percent) included deviations from the required qualifications statement. Among the 16, either no statement was included, or the required statement was abbreviated or modified. The remaining 19 reports (54 percent) generally contained all three required sentences of the statement, but included wording that was inconsistent. For example, several statements used the terms “we” and “our” when only one EP signed the qualifications statement.
2. EP Signature(s): Nine of the 35 reports (26 percent) were not signed by the responsible EP.
3. EP Statement on Data Gaps: Seven of the 35 reports (20 percent) did not include a statement on data gaps.
4. EP Opinion Statement (in Conclusion section): All 35 reports failed to include the required EP opinion statement in the Conclusion section. Of this number, 33 reports, or 94 percent, included deviations from the required opinion statement, e.g., missing sentences, abbreviated or modified sentences, replacing “I” with the name of the environmental firm, or stating “general” conformance. The remaining two reports generally contained all parts of the statement, but also included some minor deviations, e.g., rewording or additional wording and omissions that do not alter the meaning of the statement.
Typically a user of the Phase I just wants to know if they have a “clean environmental report” and place a tremendous amount of reliance on consultant to get it right. What if they get it wrong? Well, the property could contain hazardous waste contamination which not only impairs the property, but also subjects the owner to state and federal superfund liability. Most consultants try to put in the fine print of their contracts that their liability is limited to a fixed amount and in some the amount paid for the report. While I would venture to say that most of the environmental professionals do a good job with ESAs, this level of risk is unreasonable for an owner to take and without being too self serving, it seems to make sense that they should have an attorney thoroughly review the report.
No comments yet. You should leave one!