Highlighting the EPA’s newer standard practice for environmental site assessments

Commercial Lending Solutions for Success is a new educational blog series from Servion Commercial Loan Resources, Inc. Our goal is to provide credit unions and community banks with the information needed to make strategic credit risk decisions in commercial lending.

Featured Department: Collateral Solutions

Today’s Topic: Highlighting the EPA’s newer standard practice for environmental site assessments.

On February 13, 2023, the Environmental Protection Agency approved ASTM E1527-21 as a new standard practice that meets the definition of all appropriate inquiries, making it the acceptable standard for conducting a Phase I Environmental Site Assessment (ESA). A Phase I ESA is a preliminary investigation of a property that identifies any potential or existing environmental contamination, hazardous substances or waste that could affect the value or use of the property. The objective of the Phase I ESA is to identify Recognized Environmental Conditions (RECs), which are any conditions that indicate the possible presence of hazardous substances or petroleum products on a property. ASTM E1527-21 was published by the American Society for Testing and Materials (ASTM) in 2021 as an update to the previous version, ASTM E1527-13.

Some of the new changes to the standards include clarification of existing definitions (ex. recognized environmental conditions) and expanded research requirements for the subject property and adjacent properties. Following are two items we chose to highlight as they could have an impact on your commercial lending business.

• ASTM E1527-21 Section 6 provides clarification that the user of the Phase I ESA is responsible to obtain and search title records for any land use or activity restrictions or environmental liens on the subject property from 1980 to present.
• A Phase I ESA is considered viable when it is conducted within 180 days prior to the date of acquisition of the subject property or date of intended transaction. The report viability can be extended to one year, provided these five components are updated:

Collateral Solution: Our environmental engagement letter now includes additional language to help ensure this requirement is met: “As part of your [the environmental professional] scope of work, we are requesting the environmental professional review land title records and judicial records for environmental liens and Activity and Use Limitations (AULs) on the subject property (1980 to present) and then report those findings in the Phase I ESA.”

• interviews with owners, operators, and occupants
• environmental lien search
• governmental record review
• site visit
• environmental professional declaration

Collateral Solution: We are asking our environmental professionals to include the completion date for each of those five components within the body of the report as part of the engagement letter. This will allow you to quickly find the information should the need arise. Please note that the time starts with the earliest date of those five components from the original report.

For help with simplifying the commercial third-party process, please reach out to the Collateral Solutions department at clrappraisals@myservion.com or (800) 370-9608 Option #3.