January 11, 2023

What is a Phase I ESA, and Why is it Important?

Two Westwood employees study soil samples while at a project site. Two Westwood employees study soil samples while at a project site.

What is a Phase I Environmental Site Assessment? 

A Phase I Environmental Site Assessment (ESA) is a study that mitigates a developer’s risk and liability during the transaction of a property through the effective due diligence of a land’s current and historical use, making it the first step to properly support the transaction of the property. Whether it is 100 square miles of land for a wind farm or three acres for a commercial property, a Phase 1 ESA will search for possible contamination, or Recognized Environmental Condition (REC), on the land in question that could impact future development.  


When is a Phase 1 ESA needed? 

There are several instances where ESAs are needed. These include: 

  • Prior to taking ownership in a commercial real estate transaction. 
  • When a lender provides a loan for the property. 
  • When a property owner wants to assess the business risk from the environmental history of the property. 
  • When applying for grant money or other government funding. 
  • Before a redevelopment or cleanup. 


Why is a Phase 1 ESA performed? 

Phase 1 ESAs are performed to: 

  • Evaluate the property for potential environmental contamination.  
  • Establish an Innocent Landowners Defense should contamination be discovered after the property is acquired. 
  • Eliminate business risk since a company cannot secure financing without checking the box that Phase 1 ESA has been completed and risk has been evaluated.  


How is the information gathered? 

Phase 1 ESA reports are commonly prepared using a work scope detailed in ASTM Standard E1527-21 (Last updated December 2021). These standards are put into place by the ASTM and U.S. Environmental Protection Agency (EPA) for use ahead of a real estate transaction to satisfy the requirements of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), or Superfund, for anyone seeking protection from liability under the Federal All Appropriate Inquiries (AAI) Rule

An environmental scientist can identify potential contaminants by compiling varied information from past and current land use through broad expertise and multi-discipline support; this includes desktop research, interviews, and on-site visits.  

Through research, an environmental scientist may review government records, find building permits, scroll through historical aerial photos, topographic maps, or fire insurance maps to see when buildings showed up and how the land use has changed. Next, a qualified scientist conducts interviews with individuals that know the property, such as current and previous owners, neighbors, and the local fire marshal.  

The most important step in researching for an ESA is the property walkover. By observing the land in person, an environmental scientist can see what the current land use is, search for chemical storage, note drainage patterns that could spread any contamination, and evaluate the general housekeeping of the property (i.e., Is there trash sitting around? Are materials properly stored and in good condition?). 


What qualifies as a REC? What happens when you find one? 

Not all types of contamination are considered standard for a Phase 1 ESA. Some items not in-scope are asbestos, lead-based paint, sinkholes, wetlands, floodplains, and radon, as well as the presence of certain types or amounts of chemicals not regulated by state or federal agencies.   

If REC is discovered, moving forward with additional investigations will help protect the landowner. Further analysis may include:  

  • In-depth File Review – Request detailed investigation or cleanup files from regulatory agencies to evaluate past actions at a site. This research is above and beyond the scope of a routine Phase I ESA.  
  • Phase II – Collect physical samples on-site (groundwater, soils, waste materials, soil vapors). This limited investigation can determine the presence/absence of contamination and provide a yes/no answer on the presence of a REC but does not fully quantify the impacts. Additional or follow-up investigation work may still be needed based on the findings.    
  • Remediation – Depending on the type of impact or environmental issue, an approach is designed to reduce, monitor, or remove the identified contamination. This may include gross removal of impacted soils, removal of an underground fuel storage tank, or periodic groundwater monitoring according to a state agency protocol.


Do you need a Phase I Environmental Site Assessment? 

If you are in the process of acquiring land for development or have already done so, a Phase I ESA conducted by a qualified and experienced professional environmental team can help you secure your loan, mitigate business risk, and protect your investment.  

Westwood performs Phase 1 ESAs on land for all of our markets, including wind, solar, energy storage, power, commercial, and residential development. Our due diligence team provides insight on greenfield sites and helps facilitate prompt financial closings as construction approaches. Contact Westwood’s environmental scientists and let us provide guidance and answers to your toughest questions. 

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  • All Appropriate Inquiries (AAI) Rule – “All appropriate inquiries” is a process of evaluating a property’s environmental conditions and assessing potential liability for any contamination. All appropriate inquiries must be conducted to obtain certain protections from liability under the federal Superfund Law (CERCLA). 
  • Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), or Superfund – “Provides a Federal "Superfund" to clean up uncontrolled or abandoned hazardous-waste sites as well as accidents, spills, and other emergency releases of pollutants and contaminants into the environment.” 
  • Innocent Landowners Defense – A defense that allows owners of a contaminated property to escape CERCLA liability if the contamination was placed on the property before acquisition, and the landowner did not know, or have reason to know, at the time of acquisition of the contamination's presence. 
  • Recognized Environmental Condition (REC)  – defined by the ASTM E1527-21 standard as “(1) the presence of hazardous substances or petroleum products in, on, or at the subject property due to a release to the environment; (2) the likely presence of hazardous substances or petroleum products in, on, or at the subject property due to a release or likely release to the environment; or (3) the presence of hazardous substances or petroleum products in, on, or at the subject property under conditions that pose a material threat of a future release to the environment." 

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