Do Phase I Environmental Site Assessment results need to be reported?

Written By: Doug Ruhlin | Oct 26, 2015

Time to Read 7 Minutes

Do I have to report the results of a Phase I Environmental Site Assessment?

For many, the findings of a Phase I site assessment can make or break a financial investment, prevent or enable refinancing, or impact the facility in one way or another. Of course, it all depends on what the findings are, but when an REC is found, many folks wonder who has to be informed.

Case in point.

The other week my team and I were discussing the findings of several Phase I reports, spread across several properties, with a group of investors and lawyers. We went through the normal explanations; what’s a Phase I environmental site assessment, what a Phase I environmental assessment covers, what are RECs in a Phase I ESA, the protections a Phase I site assessment offers, etc. etc.

We went through the findings which, unfortunately, did turn up some issues that required a Phase II ESA be performed. The findings were confirmed, and we let the client know what we found, when a financial guy popped up and asked:

Do we need to report the findings of this Phase I Environmental Site Assessment to anyone?

Great question! The findings of a Phase I can really give a lot of information, both good and bad, about a facility. Sometimes these findings can be severe, sometimes they can be mundane, and sometimes they can be downright dangerous. So let’s discuss the question in depth.

Do I need to report Phase I Environmental Site Assessment results?

Do the results of a Phase I ESA have to be reported?

Let me start off by stating that this is not legal advice at all. In all circumstances, consult qualified legal counsel with questions, or to get a legal opinion about what we’re talking about here. Always find out how it applies to your particular circumstances. We’re not lawyers, and we’re not imparting any legal advice here at all. Again, consult with competent, qualified legal counsel whenever necessary.

Ok, let’s continue.

Generally, the results of a Phase I assessment can be kept confidential from unauthorized use or discovery. There are means to ensure additional protection against unauthorized use by utilizing the attorney-client privilege provided through an external legal counsel.

Effectively, this means the findings can be kept confidential, period end of story.

But what if something’s revealed in the Phase I site assessment that might need to be reported to a regulatory agency? Something like a spill, leak, or contamination.

We get it. Usually, the secrecy involved is because the parties want to use the findings to potentially leverage themselves into a better position in the transaction. Sometimes it’s just the buyer wanting to be well informed and fully in control of the situation so they can make a sound transaction.

Occasionally we see the seller stipulating that all results have to be kept confidential until closing.

But again, what if that Phase I turns up something ugly that makes you second guess everything? Does it have to be reported?

Well, yes and no.




Why the results of a Phase I assessment may not have to be reported.

Contract says so.

Let’s say you hire RMA to conduct a Phase I site assessment. You can stipulate that the findings are confidential and only reportable to you. Fine, no problem. Just be aware, in this case, it may shift the responsibility for reporting any reportable problems to you.

You selectively share the Phase I environmental assessment.

Don’t go handing out 1,000 copies of the report. Are you going to share it with the bank? With the property owner? Are you going to keep it on a jump drive the family all uses, or stashed on a secure drive somewhere used strictly for business?

Think of all the potential ways that the findings could become public knowledge, and act accordingly. There are some you're absolutely going to have to share the results with, such as your bank or lending institution, but do it carefully by making it clear to them that it's a confidential document and must be treated as such.

Attorney-Client Privilege.

You hire legal counsel, the legal counsel hires us, we report to them, they in turn report to you. Simple enough, right? The findings are considered privileged between you and your attorney.

So I don’t have to report the findings of a Phase I?

You (or I) may not even be allowed to! If any of the above situations apply to you, you might not have to report the findings. But, if the findings are severe, some of those scenarios could become meaningless, and the concept of not reporting could be thrown completely out the window.

Why the results of a Phase I ESA may have to be reported.

The findings found something bad. Really bad.

Imagine the Phase I investigation identifies a severe environmental issue. Something serious, like a significant release of petroleum or hazardous chemicals to the environment. The type of release that would normally require calling a hotline, the type of release that may cause serious or irreversible damage to the environment, or human health and safety.

In a situation like that, the findings should get reported. But it gets tricky real quick.

Do I need to report Phase I Environmental Site Assessment findings?

Who reports the findings of Phase I Environmental Site Assessments?

Let’s say this is you and me. You hired me to do a Phase I environmental assessment on a parcel of land. Turns out the previous owner had been dumping a substantial amount of used oil into a septic system that leached into a field next to a pristine stream where kids like to play in the summertime.

Sounds bad, right?

I would report to you that it’s a bad situation and here are my findings. We’ll perform a Phase II ESA to confirm, but it's pretty likely right off the bat that the release has caused a substantial amount of damage to the neighboring field, and even the stream.

Whose responsibility is it to notify the appropriate governmental agency? Me? You? The current property owner? All of us?

Someone has to.

In this situation (and the way we handle all Phase I/II assessment work here at RMA), we would have clearly spelled it out, in writing in the contract, who reports to who, and who is responsible for reporting the findings in the event of a discovery of a reportable condition.

We’d spell it out in the contract, but it usually goes like this normally. We’d notify you (our client) and it becomes your responsibility. Simple enough, right?

If there are other contractual obligations, such as you dictated that the seller has to report and address any findings, then you would pass the reporting onto them. The problem here is the seller never wants to report the findings. Sure, they’ll either try to address them, or renegotiate the price, but they usually never want to report the findings to the required regulatory agency.

Don’t willingly bear the burden of the results of a Phase I Environmental Site Assessment.

The seller doesn’t want the blame, the cost, the fines, the responsibility, anything. Usually a seller will offer a band-aid for the situation, but any real, substantial solution should really be part of the final agreed-upon transaction.

You don’t want to end up bearing the burden of any environmental issues the seller is trying to ignore or sweep under the rug.

So, do the results of a Phase I ESA have to be reported to anyone?

In most cases, no. But sometimes, absolutely 100% yes they do.

Like I said above, when in doubt, get legal counsel, because honestly, whether or not you have to report is really going to depend solely on the specifics of your situation. There is no 100% yes or no answer, it simply depends on the findings of the report.

It does help to have your ducks in a row contractually before you enter into an agreement to purchase (or sell), or before you hire an environmental professional to conduct the Phase I environmental site assessment. Make sure you have everything spelled out, and there are no gray areas.

Not sure who’s responsible, or the contract is fuzzy? Just ask for clarification! Any environmental professional worth their salt will have dealt with this issue before, and won’t have any issues discussing the situation with you.

You don’t want to end up breaking the law, or putting someone's life in jeopardy. To get more information about Phase I environmental assessments and what to do with the findings of them, click here to contact us or call us at 609-693-8301 to talk.


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