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    Agency File Reviews- The Dark Secret of Phase 1 Reports
    Entry posted May 2, 2012 by LSchnapfElite Contributor , last edited May 31, 2012
    1077 Views, 8 Comments
    Agency File Reviews- The Dark Secret of Phase 1 Reports

    Agency files can contain important information about the nature of RECs. Yet many high volume shops avoid performing these reviews, thereby enabling them to underbid firms that believe file reviews should be part of a phase 1 report.

    My latest article in the Practical Real Estate Lawyer discusses this issue. The article is available from my website:



    • PWoloszyn

      Hello Mr. Schnapf, Esq.,

      Thanks for sharing your excellent article! I look forward to your future work on this series. In fact, all of the information you share is greatly appreciated.

      Preserving all available defenses to potential CERCLA liability is certainly an important element of conducting “state-of-the-art” environmental due diligence. However, it is important to note that in California, the primary regulatory agencies enforcing potential environmental liability via real estate ownership transfer are the Department of Toxic Substances Control (DTSC) and the State Water Resources Control Board (SWRCB), via their regional arms, the Regional Water Quality Control Boards (RWQCBs). I suspect more than 98% of investigation and cleanup sites in California are under the jurisdiction of the DTSC or RWQCBs.

      It is important for property owners and non-environmental attorneys to understand that at these State agencies, the common CERCLA defenses to environmental liability have no value. If the environmental consultant does a poor phase I report, such as overlooking the significance or failing to discover a historical use that was later determined to have caused soil and groundwater contamination; or misjudging the significance of known contamination conditions, the consequences could be enormous. Complete, detailed review of all applicable regulatory agency files is essential for a “state-of-the-art” phase I report. Often, interpretation of the results can be complex and require tremendous experience.

      In one case I worked on, a consultant identified a dry cleaner during a phase I and then conducted limited phase II work. Based on the results, the consultant concluded that there was no significant contamination. As such, the user of the phase I report purchased the property. Subsequently, it was discovered that the same dry cleaner did cause significant soil and groundwater contamination. The phase II work was insufficient and incorrectly evaluated. The new property owner was named as an RP – there is likely 15 – 20 more years of environmental work at the site. There was no CERCLA defense available.

      In another case, a national attorney representing a Fortune 500 chemical company argued to the RWQCB, in writing, that its client only caused a small release and, therefore, was “de minimis”, a CERCLA position. That admission of a small release, coupled with the supporting technical information, ended the game for the RWQCB – the chemical company was named as a Responsible Party (RP) for a complex multi-party commingled solvent groundwater contamination case. At the RWQCB, there is no CERCLA “de minimis” position available – you are in or you are not.

      AAI compliant, meets ASTM standard, REC, HREC, CREC, de minimis, … does not matter. To protect California water, the RWQCBs enforce the powerful Porter-Cologne Water Quality Control Act:

      In California, if a lender relies on a poorly conducted phase I report to evaluate potential real estate collateral, they may “pay the price”. If a property owner relies on a poorly conducted phase I report to purchase a property that is found to be a source of contamination, they will “pay the price”.

    • PWoloszyn

      A complete current review of regulatory agency files for closed sites (NFA - No Further Action) is essential for a "state-of-the-art" phase I report. I suggest that this includes not only the subject site but nearby NFA sites with potential to impact the subject site.

      A NFA closure letter is only as good as the data that supports it.

      There are volumes of examples where sites have been reopened by the regulatory agency after a NFA letter was issued.

      NFA letters almost always include a warning stating that the case can be re-opened if conditions change or new data is obtained.

      Generally, regulatory agency personnel have no liability exposure for issuing a NFA letter.

      If additional investigation appears warranted even though there is a NFA letter in place, stay calm and carry on.


    • Bmanci

      The Illinois EPA is more than 2 months out on answering FOIA requests (even if you keep calling and bugging the department).  I have resulted to putting a statement in my Phase I's that basically says I will submit an addendum with the Illinois EPA FOIA results to address the data failure caused by no agency data.  Does this sound acceptable?  I cant believe they can get away with taking that long to fufill requests.  But then again, it is Illinois.

    • manno

      There are counties that serve as CUPAs in California that will NEVER respond to letters of inquiry.  And......they will NOT allow you to visit their offices to inspect files without an appointment.  File inspections should NOT be mandatory because many governmental agencies are NOT performing their duties as required by the state constitution and various statutes.

    • maverick

      Gotta look at agency records every time.  High quality work = records reviewed.  As a consultant for almost 20 years, i've always done full agency records almost since day 1.  Time and time again you see the value of reviewing them.  Yes, i'm not the cheapest consultant out there, but I never want to be.  When I look at other consultant reports it really amazes me at the poor quality.   

      Recent example - Consultant hired by seller to do phase I on old machine shop.  Operations shut down, building vacant.  Consultant (20+ years in industrial, with full Phase I, II, and III experience....they do a ton of remediation work).  Site history indicated site was historically on septic system before sewer connection made 12 years ago.  Site also had a very small clarifier which was also connected to septic historically.  Consultant (part owner of firm) concludes clarifier is clean (it was dry) and based upon previous metals testing of the clarifier discharge, no additional testing required. Typical of this consultant, they did not review the agency records.  In this case, County Health Records (free and downloadable in 5 minutes) showed a solvent vapor degreaser and lots of solvent usage.  Buyer had their own consultant do Phase I and they found the County records.  Phase II done, solvents found, wells being installed, SVE extraction system coming soon. 

      Funny thing, I bid on the Phase I for seller (guessing I lost by $200) and I knew (before job started) that it was going to a Phase II as I reviewed the records first since they were really easy to get.


    • ConnEP

      If there will be a requirement for file reviews, the term-


       reasonably ascertainable—information that is (1)

      publicly available

      , (2) obtainable from its source within

      reasonable time and cost constraints, and

       (3) practically



      will need to be defined much more specifically.  NYSDEC is running 4-6 weeks out on FOIA responses and it will only get worse.




    • Matt Fox

      I agree that there is value in these old records.  However, ASTM clearly only requires us to review the records if they are available within reasonable time and cost constraints.  Are there EPs out there that think 4+ weeks is a reasonable time???

      Personally, I think "reasonable time constraint" should probably be defined as available before the contractual due date of the report.  If the report is contratually due June 15 and it will take longer than that to get the records, then they are not reasonably available and we shouldn't be required to review them.  We should identify the data gap, comment on the significance of the data gap and our obligation should end there.  If client decides they want records that are not reasonably available reviewed to address the data gap, then that should be an additional cost to the client.

      ASTM could really help EPs out by better defining "reasonable time and cost constraints".  Then we would have something concrete to point at when trying to explain to client that spending $300 on copy charges and 4 hours to review documents 2 months after the report was issued is something they should pay extra for.

    • LSchnapf

      @Matt- good point on the phrase. You should contact Julie Kilgore of the ASTM E-50 task force and ask that the group consider this for the next round of revisions.........