We explain the difference in Phase I & Phase II Environmental Site Assessment Costs.
A prospective buyer or someone refinancing a property can face a lot of questions. We find that most folks don't think about environmental due diligence until fairly late in their buying or refinancing process, even if they already know that a Phase I ESA can prevent bad investments. Point is, people just don't know what a Phase I actually is or don't think they're that valuable because they don't truly understand what protection a Phase I provides.
The way he phrased his last question was interesting.
What's the difference between Phase I ESA & Phase II ESA costs?
And I got thinking that's a darn good question. The cost of a Phase I Environmental Site Assessment is usually pretty cut and dry. Yes, it can vary on certain variables, but we're not talking about a difference of thousands of dollars (usually).
However, Phase II Environmental Site Assessment costs can vary, so let's look into the different factors that would impact the cost of a Phase I or Phase II ESA.
Phase I Environmental Site Assessment Cost Variables
I'm going to assume you already know what a Phase I Environmental Site Assessment is. If not, click that link. The article linked above has a full breakdown of factors that impact Phase I ESA costs, but here's a quick recap of what impacts the cost:
The location impacts both the amount of time necessary for reviewing records and can impact travel costs
The types of buildings and features on the property
The current & past use of the property
If any above & beyond work is tacked on (something like an environmental audit or testing for lead paint for example)
How many Phase I ESAs are being proposed (buy in bulk mentality)
How quickly you need the report
All in all, you can bank on a Phase I ESA costing you somewhere in the ballpark of $1,800 to $6,500+ depending on your particulars.
An environmental professional researches the site. This includes anything and everything from visiting a site for visual inspections, conducting interviews for learning about undocumented history, or reviewing historical records and government documents.
Then the professional reviews the information, collects his thoughts and compiles everything into a report. If you're unsure what's included, check out what does a Phase I ESA cover?
Now if, and I repeat, IF the information points to there being a potential problem or issue, that would be documented as an REC. Not sure what an REC in a Phase I ESA is? Click that link to learn more.
An REC, or recognized environmental condition, doesn't necessarily mean a Phase II is needed. In fact, you don't always need a Phase II ESA, despite what some unreputable "professionals" out there tell you. Some RECs may be minor, or historical, or of little concern, or may already be well known.
Understanding Phase II Environmental Site Assessment Costs
Let's use a fictitious example for explaining this.
Imagine you're looking to buy a property at 123 Main Avenue. It's 1 acre with 1 building. It used to be a gas station in the 1970's. It's in the middle of a fairly developed area.
Your Phase I is going to cost $3,500 in this example.
During the course of the Phase I, the environmental professional found out that the paperwork on the underground storage tank removal is a dead end. There are no records, receipts, government records, anything. But, the previous site owner swears it was taken out.
This is an REC, and depending on the use of the report, a Phase II may be warrented.
Hidden Phase II ESA Costs
Now here's a common scenario we've seen a lot. You hire XYZ Consultants who are conducting a Phase I ESA for $1,000. What a steal, right?! Wrong.
You get the final report in your hand and it says there are 15 potential RECs and you need a Phase II to shed some light on the situation. It doesn't matter if they're of serious concern, you're stuck at their mercy.
If they want to charge $30,000, or $50,000, or $80,000 for Phase II work, get your checkbook out. You're either hiring them for Phase II work, or you're hiring a new consultant for a new Phase I ESA.
Phase II ESA Costs: Cash Purchasing vs. Financing
Here's the good news. If you're buying the property for cash and don't really care about what's underground, you can go ahead with the purchase. It might not be a good idea, but it's your money, it's your call.
But, if you're getting financing with a bank, you're stuck. You will have to get that Phase II. It doesn't matter if you don't think it's necessary, or it's too expensive, the bank will freeze the progress of the transaction right then and there until you get a Phase II ESA conducted.
And like I said above, you have two options. Pay an outrageous price for a Phase II ESA or hire a new consultant for a new Phase I.
And you’re doing that because no serious environmental professional would sign off on someone else's work without doing their own review first. Simply put, an environmental professional most likely wouldn’t not conduct a Phase II based on another professional's Phase I ESA. It just doesn't work that way.
The True Price of a cheap Phase I ESA
We've been hired after the fact in situations like that numerous times. Like the scenario above, someone hires a cheap outfit for a cheap Phase I and get slammed with a massive proposal for Phase II work.
9 times out of 10 when this happens the first, cheap Phase I is worth almost nothing. Between data gaps, typos, sloppy work, and shoddy credentials, it's literally a waste of money.
What are average prices for a Phase II Environmental Site Assessments?
Well folks, simply stated, it depends. We've seen Phase II ESA costs range anywhere from $1,000 to well over $100,000. That's too big for a reasonable average, right?
Let's break this down, and assume a Phase II is being proposed because some sort of contamination is most likely present at a piece of property.
The Type of Contamination
If you're dealing with an old 275-gallon residential heating oil tank buried in the ground you should know what to expect. Localized contamination of some sort of heating oil.
But if the property was used for illegal dumping of unmarked 55-gallon drums, then who knows what could be involved. It could be anything from radioactive waste to corrosive acids.
Point being, the type of contamination would normally impact the type of investigation.
Add in whether or not you need soil, or water, or air tested, and you're looking at a huge range in costs. It's really hard to put a number on Phase II ESA prices for this reason alone.
The Quantity / Range of Contamination
Again with above, if you're suspecting there's one 275-gallon tank in the ground you have a rough idea of where the investigation needs to focus.
If you were to say 'somewhere on this 10-acre site is one buried, leaking 1,000-gallon oil tank', it's going to take much more time and energy to find the tank.
Additionally, if you were to say 'across a 10-acre site there're twenty-five 275-gallon tanks in the ground, and we know where they are', you're looking at a wide range of contamination. I'm not talking about the type of contamination, but physically the area where the contamination would be spread.
Again, these are things that can cause the price of a Phase II ESA to vary pretty significantly.
Are you testing groundwater, soil, or air? Or all three? Are you testing for hydrocarbons or nuclear material? Are the suspected contaminants hazardous to human health to the point where they need a specialized collecting and testing procedure?
The type of contamination can impact this, but from our experience most folks end up dealing with some sort of oil or petroleum contamination, meaning fairly similar testing methods. This doesn't impact the price as much, as far as we're concerned, since most folks aren't testing for something extremely hazardous at the property.
Are you conducting this Phase I/II process through legal counsel? This is pretty cut and dry, but certainly impacts the price of a Phase II. Lawyers aren't cheap.
How bad is the contamination? Does the government have to get involved?
For instance, if you were refinancing a piece of property and realized you've been accidentally contaminating the ground soil, you're going to have to let the government know. You're going to be on the hook for cleaning up (a Phase III) and might be subject to enforcement fees and penalties. This normally isn't the case, but it can change the cost around depending on your situation.
Phase I Environmental Site Assessment Costs vs Phase II Environmental Site Assessment Costs
Phase I Environmental Site Assessments cost anywhere between $1,800 and $6,500+.
Phase II Environmental Site Assessments cost anywhere between $1,000 and $100,000+.
I know, the range is crazy, but honestly, this is the most realistic answer to this question. The wide range in price is the reason why when anyone calls and asks us how much, we have to go over all of this.
Just like I told the fellow on the phone the other day, the costs depend. There's no cookie cutter answer, and anyone who's giving you a flat quote is someone you should be wary of.
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