Phase I Environmental Site Assessments: Spotting Data Gap Problems
The deal is moving forward and the consultant has been retained for environmental due diligence services, including preparing a Phase I ESA report. The closing date is only about two weeks away, yet the ground on the back forty is covered with snow or fall leaves. COVID-19 prevents certain site access. An agency with records will not call back in time. These are some common situations that could lead to “data gaps” in a consultant’s Phase I Environmental Site Assessment effort which may impact the ability to identify recognized environmental conditions (“RECs”).
When the requirements of the All Appropriate Inquiry process are followed, properly identified data gaps often can be sufficiently addressed by the Environmental Professional (“EP”) such that impacts on the EP’s opinion on REC identification are minimized. EPs have explained that their most commonly encountered data gaps are not problematic as they can be addressed either specifically by another source or by the totality of other information in the Phase I ESA.
This is an area that has become more specific since the early days of Phase I ESA services. We still see Phase I reports where the words “data gap” do not appear in the text or where only a part of the required data gap analysis is documented. The diligence level of data gap identification and analysis varies among EPs. Data gap reporting issues may lead to All Appropriate Inquiry compliance problems and misunderstandings of the EP’s opinions in the report.
EPs are required to identify and address data gaps in Phase I Environmental Site Assessments to meet the All Appropriate Inquiry requirements and ASTM E1527-13. This includes a certain level of analysis and comment:
Is the data gap significant in that it affects the ability of the EP to identify recognized environmental conditions?
What sources of information were identified and explained to address the impact of the data gap on the EP opinion?
Within the report, the EP must identify any data gaps and document efforts to address those with other sources of information. Then critically, the EP must use that analysis to comment on the extent of impact the data gaps have on the ability to identify RECs. When reviewing a Phase I ESA report, look for the data gap analysis to confirm that it is site and circumstance specific and follows the required process.
Discussing and understanding the Phase I ESA data gap analysis is helpful in overcoming challenges and allowing clients to prepare for potential post-acquisition continuing obligations associated with RECs and data gaps.