Environmental Legal Issues and Due Diligence When Cities Acquire Real Property

Transcription

1 Environmental Legal Issues and Due Diligence When Cities Acquire Real Property Thursday, September 4, 2014 General Session; 8:00 9:30 a.m. Danielle G. Sakai, Best Best & Krieger DISCLAIMER: This paper is not offered as or intended to be legal advice. Readers and conference attendees should seek the advice of an attorney when confronted with legal issues. Attorneys should perform an independent evaluation of the issues raised in these materials. Copyright 2014, League of California Cities. All rights reserved. This paper, or parts thereof, may not be reproduced in any form without express written permission from the League of California Cities. For further information, contact the League of California Cities at 1400 K Street, 4 th Floor, Sacramento, CA Telephone: (916) League of California Cities Annual Conference City Attorneys Track Los Angeles Convention Center, Los Angeles

2 Notes: 2014 League of California Cities Annual Conference City Attorneys Track Los Angeles Convention Center, Los Angeles

3 AVOIDING LEGAL ISSUES IN MUNICIPAL REAL PROPERTY ACQUISITIONS: Environmental Due Diligence and the All Appropriate Inquiry By Danielle G. Sakai, Esq. 1 I. Introduction When a city or other public entity acquires real property the purchase is generally for a public project satisfying a public purpose and using public funds. In doing so, the agency is potentially putting public coffers at risk if unknown environmental issues are discovered on the property after the purchase. Thankfully, there are ways to avoid the potential pitfalls of environmental liability by undertaking the appropriate environmental due diligence before purchasing the property. The goal of this paper is to assist public entities as they navigate the environmental due diligence mine field. It will first begin with a general background of the environmental laws imposing strict liability standards upon the owners and operators of contaminated property. Second, it will provide a background of available defenses to entities that are faced with potential liability. Third, it will provide a procedural roadmap ensuring compliance with the All Appropriate Inquiries ( AAI ) standard; which is a necessity for any purchaser seeking to qualify for the limited defenses available under the Comprehensive Environmental Response, Compensation, and Liability Act ( CERCLA ) 2 and the California equivalent, the Carpenter- Presley-Tanner Hazardous Substance Account Act. 3 Finally, this paper will discuss the most common tools of Environmental Due Diligence; the Phase II Environmental Site Assessment and Phase II Site Investigation. The Phase I investigation is mainly a records search to gather information regarding the past use of property 1 Danielle Sakai is a partner in the Environmental and Natural Resources Practice Group of Best Best & Krieger LLP. Ms. Sakai advises public and private clients about Environmental Due Diligence and helps clients identify and respond to the discovery of contamination, including working with regulators towards remediation and agency closure and, if necessary cost recovery through litigation. Ms. Sakai can be contacted at Danielle.Sakai@BBKlaw.com U.S.C (2012). 3 California Health & Safety Code sections et seq.

4 to determine the likelihood of environmental contamination. 4 The Code of Federal Regulations ( CFR ) provides the procedural requirements for conducting the AAI investigation. 5 If the Phase I identifies any Recognized Environmental Conditions ( REC ), a Phase II Site Assessment is usually the next step. The Phase II entails a physical investigation into the actual condition of the property and looks for potential contamination. A public entity undertaking the AAI investigation detailed in this paper will be creating a solid foundation to shield itself from the harsh sting of liability. 6 II. Public Agencies Are Not Immune From Environmental Liability In order to address the problems presented by properties contaminated with hazardous substances, Congress passed CERCLA in Under CERCLA, there are four broad categories of potentially responsible parties ( PRPs ) subject to strict liability for cleanup costs. 8 The four categories of PRPs are: (1) current owners and operators of the property; 9 (2) any person who at the time of the disposal owned or operated the property; 10 (3) any person who... arranged with a transporter for disposal of a hazardous substance owned or possessed by that person at the property; 11 or (4) any person who accept[ed]... hazardous substances for transport to disposal or treatment facilities... from which there [was] a release, or a threatened release. 12 If a public agency falls into one of these four categories, it may be held jointly and severally liable for the costs of remediation, irrespective of whether it caused or contributed to the contamination. This liability can result in hundreds of thousands, or even millions, of public dollars being spent to respond to a problems that someone else created. 4 See 40 C.F.R Id. 6 PCS Nitrogen Inc. v. Ashley II of Charleston LLC, 714 F.3d 161, 168 (4th Cir., 2013). 7 Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C (2012). 8 Voggenthaler et al. v. Maryland Square LLC., 724 F.3d 1050, 1061 (9th Cir. 2013), vacated in part on other grounds, 2013 U.S. Dist. Lexis (D. Nev., Dec. 2013) (citing Cal. Dept. of Toxic Substances Control v. Hearthside Residential Corp., 613 F.3d 910, 912 (9th Cir. 2010)). See also 42 U.S.C. 9601(32)(imposing the strict liability standard applied under section 311 of the Federal Water Pollution Act) U.S.C. 9607(a)(1) U.S.C. 9607(a)(2) U.S.C. 9607(a)(3) U.S.C. 9607(a)(4).

5 A. Available Defenses And Exemptions From Environmental Liability When Congress enacted CERCLA, it established that a PRP will not be liable for releases of hazardous substances caused: (1) by an act of God; (2) an act of war; or (3) an act or omission of a third party that is not in a contractual relationship with the PRP. 13 These defenses are very limited, however, and even the relatively broad third party defense has been held to only insulate the property owner at the time of the specific release or threatened release. 14 Not only are there only limited defenses available, but qualifying for the defenses is difficult and requires the agency to take action even before it acquires the property. 1. Innocent Landowner Defense In 1986, Congress amended CERCLA by adopting the Superfund Amendments and Reauthorization Act ( SARA ). Under SARA, Congress created a defense to liability that applies when a release or threatened of release of a hazardous substance is caused solely by a third party, even if the third party is in a contractual relationship with the PRP. 15 The statute provides that an entity may qualify for this defense where it acquired property after a release occurred and one or more of the following circumstances are met: (i) At the time the defendant acquired the facility the defendant did not know and had no reason to know that any hazardous substance which is the subject of the release or threatened release was disposed of on, in, or at the facility[;] (ii) The defendant is a government entity which acquired the facility by escheat, or through any other involuntary transfer or acquisition, or through the exercise of eminent domain authority by purchase or condemnation[; or] (iii) The defendant acquired the facility by inheritance or bequest U.S.C. 9607(b)(1)-(3). 14 State of New York v. Shore Realty Corp., 759 F.2d 1032 (2d Cir., 1985) U.S.C. 9601(35)(A) U.S.C. 9601(35)(A)(i)-(iii).

6 Importantly, to assert this defense, the PRP must have conducted an AAI investigation before acquiring the property. 17 In addition, the PRP must also show that it took reasonable steps to: [1] stop any continuing release, [2] prevent any threatened future release, and [3] prevent or limit any human, environmental, or natural resource exposure to any previously released hazardous substance. 18 The AAI analysis will be discussed in Section III, below. 2. Contiguous Property Owner Defense In 2002, Congress again amended CERCLA by adopting the Small Business Liability Relief and Brownfields Redevelopment Act. 19 The amendments created an additional CERCLA defense. Known as the contiguous property owner defense, 20 this defense applies to an entity whose property is not the source of contamination, but rather contiguous or otherwise similarly situated with respect to contaminated property. The property owner will not be liable for the contamination if it meets certain conditions. First, to qualify for the defense, an entity must conduct an AAI investigation before acquiring the property. 21 In addition, the entity must meet seven other criteria. 22 These criteria are: (i) it did not cause, contribute or consent to the release; (ii) it is not potentially liable through any direct or indirect contractual, corporate, or financial relationship or the result of a business entity that is potentially liable; (iii) it takes reasonable steps to: (a) stop any continuing release, (b) prevent any threatened or future release, and (c) prevents or limits human, environmental, or natural resource exposure to any hazardous substances released; (iv) it provides full cooperation, assistance, and access to persons that are authorized to conduct response actions or natural resource restoration at the facility; (v) it is in compliance with any land use restrictions or relied on in connection with the response action at the facility and it does not impede the effectiveness C.F.R (b)(1)(i) U.S.C. 9601(35)(B)(i)(II)(aa)-(cc). 19 Pub. L. No (2002), codified at 42 U.S.C. 9601(35) U.S.C. 9607(q)(1)(A) U.S.C. 9607(q)(1)(A)(viii)(I). 22 See 42 U.S.C. 9607(q)(1)(A)(i)-(viii).

7 of institutional controls employed in connection with a response action; (vi) it is in compliance with any request for information or administrative subpoenas issued by the President; (vii) it provides all legally required notices with respect to the discovery or release of any hazardous substances. 23 It is important to recognize that for this defense to apply, the buyer of the property knows, that the property was or could be contaminated or threatened release... from other real property not owned or operated by the person. 24 PRACTICE TIP: In addition to making sure that the agency is covered by the contiguous property owner defense, it may be appropriate to negotiate with the seller for a reduced purchase price or consider the availability of environmental insurance. 3. Bona Fide Prospective Purchaser Exemption The bona fide prospective purchaser exemption ( BFPP ) was also established by the 2002 amendments. Under this exemption, an entity will not be liable if it acquires contaminated property and its potential liability is based solely on it being... an owner or operator of the subject property. 25 To be deemed a BFPP, the entity must conduct an AAI investigation into the previous ownership and demonstrate that the release or threatened release of hazardous substances occurred before the entity acquired it. 26 Notably, this defense is only available to entities that have acquired property after January 11, Furthermore, the entity must acquire the property with the knowledge, or having reason to know, that it is contaminated. 27 In addition to conducting an AAI investigation, an entity seeking to qualify as a BFPP must establish that it: (1) acquired the property after the hazardous substances were spilled, 28 (2) provided all legally required notices about the hazardous substances used on the property, 29 and (3) took steps to stop any ongoing spill, prevent future spills, and limit the exposure from past spills. 30 PRACTICE U.S.C. 9607(q)(1)(A)(i)-(viii) U.S.C. 9607(q)(1)(A)(viii)(II) U.S.C. 9607(r)(1) U.S.C. 9601(40)(B)(i) U.S.C. 9601(40)(B) U.S.C. 9601(40)(A) U.S.C. 9601(40)(C) 30 Voggenthaler et al. v. Maryland Square LLC., 724 F.3d 1050, 1062 (9th Cir. 2013), vacated in part on other grounds, 2013 U.S. Dist. Lexis (D. Nev., Dec. 2013) (citing 42 U.S.C. 9601(40)(D)).

8 TIP: Before closing the sale, the public entity may want to consider the availability of local or Federal Brownfield Grants or whether it could enter into a Prospective Purchaser Agreement with the appropriate regulatory agency, like the California Department of Toxic Substances Control or an agreement under the California Land Use and Revitalization Act. It must be noted that for all of the defenses discussed above, the purchaser must have undertaken an AAI prior to the acquisition. 4. Due Care Requirements In addition to engaging in an AAI, after the acquiring agency takes ownership of the property, it must exercise due care in responding to the environmental issues. In the seminal case of PCS Nitrogen Inc. v. Ashley II of Charleston LLC, 31 the Court of Appeals for the Fourth Circuit addressed whether the current owner of a contaminated parcel of property qualified as a BFPP. 32 The property was contaminated with lead, arsenic, and several other hazardous substances as a result of several decades of phosphate fertilizer production. 33 The defendant, Ashley II of Charleston ( Ashley ), purchased the property knowing it was contaminated, and with the intent to remediate the contamination. 34 In addressing the issue, the Fourth Circuit focused its analysis on the appropriate care standard a PRP must show to qualify as a BFPP. After discussing the elements of the BFPP defense (discussed above), 35 the court held that, to qualify as a BFPP, a current owner must show that it took all precautions with respect to the particular waste that a similarly situated reasonable and prudent person would [take] in light of all relevant facts and circumstances. 36 Applying that standard, the court held that Ashley did not qualify as a BFPP. 37 Specifically, the court found that, because Ashley had failed to address the RECs identified in the Phase I Report, F.3d 161 (4th Cir., 2013). 32 Id. at Id. at Id. at See 42 U.S.C. 9601(40)(A)-(H), 9607(r)(1). 36 PCS Nitrogen Inc., 714 F.3d at 181 (quoting New York v. Lashins Arcade Co., 91 F.3d 353, 361 (2d Cir. 1996). 37 Id. at 181.

9 resulting in further releases and failed to properly maintain the property, the defendant did not exercise appropriate care for the site, and did not qualify as a BFPP. 38 PRACTICE TIP: Not only does the purchaser need to conduct the Environmental Due Diligence, but it cannot simply ignore the environmental conditions discovered. The agency must take the steps necessary address on-site conditions if it wants to ensure it is entitled to a defense from liability. 5. State And Local Government Exemption From Owner Or Operator Liability In addition to the above defenses and exemptions, CERCLA provides state or local governmental entities exemptions from liability as an owner or operator if the entity acquire[s] ownership or control involuntarily through a bankruptcy, tax delinquency, abandonment or other circumstances in which the government involuntarily acquired title by virtue of its function as sovereign. 39 This exception also applies to governmental entities acquiring property by means of its eminent domain power; either through judicial process or purchase. 40 This exemption will not apply, however, if the government entity has caused or contributed to the release or threatened release of a hazardous substance from the facility. 41 PRACTICE TIP: To the extent that the public agency must acquire contaminated property, it should consider using the power of eminent domain because while it may have to still face a state nuisance action, it will be protected from the draconian reaches of CERCLA. 38 Id U.S.C. 9601(20)(D). See also Jerry Clifford and Lawrence E. Starfield, EPA Memorandum: Municipal Immunity from CERCLA Liability for Property Acquired Through Involuntary State Action ( Oct. 20, 1995), available at 40 EPA Memorandum: Municipal Immunity from CERCLA Liability for Property Acquired Through Involuntary State Action, supra, citing 42 U.S.C. 9601(35)(A); 42 U.S.C. 9607(b)(3) U.S.C. 9601(20)(D).

10 III. AAI Procedure The AAI process entails evaluating a property s environmental conditions and assessing the likelihood of contamination. 42 In 2005, the EPA published standards and practices for conducting AAI. 43 The Final Rule went into effect in In December of 2013, EPA issued a Final Rule that updated its AAI standard. 45 Currently, to conduct an AAI investigation, an entity must either comply with the AAI Final Rule Requirements, or follow the standards set forth in the American Society for Testing and Materials ( ASTM ) E (hereinafter ASTM Standard E ). 46 The provisions are substantially similar to one another, but this paper will explain notable differences between the two. The purposes of an AAI investigation is to permit an entity to satisfy one of the requirements to qualify for the innocent landowner, contiguous property owner, or bona fide prospective purchaser limitations on CERCLA liability. 47 That is, the process of conducting an AAI investigation allows the entity to investigate and discover recognized environmental conditions or RECs that may subject the entity to future liability. 48 As defined under ASTM Standard E , REC means the presence or likely presence of any hazardous substances... in, on, or at a property caused by a release, threat of release, or under conditions that pose a material threat of a future release [of a hazardous substance] to the environment. 49 A. Phase I: Environmental Site Assessment The Code of Federal Regulations provides detailed requirements for an AAI investigation. The following procedures must be followed in undertaking the AAI investigation. 42 EPA, All Appropriate Inquiries Rule: Reporting Requirements Checklist for Assessment Grant Recipients, available at 43 See 40 C.F.R C.F.R See 78 Fed. Reg (Dec. 30, 2013) (adopting ASTM Standard E as an acceptable standard for conducting AAI investigations for complying with the Federal All Appropriate Inquiry rule). 46 Id. 47 ASTM E (1.1). 48 Id. at Id.

11 First, it must include an investigation by an environmental professional, as defined under the law. 50 In conducting the investigation, the environmental professional must: Investigate whether the entity has specialized knowledge for the purpose of identifying conditions indicative of releases or threatened releases; 51 Investigate the relationship of the purchase price to the value of the property, if it was not contaminated; 52 Interview past and present owners, operators, and occupants; 53 Search for recorded environmental cleanup liens; 54 Review federal, tribal, state, and local government records regarding the property; 55 and Visually inspect the property and adjoining properties. 56 In addition to the above factors, the environmental professional must complete a written report detailing his or her findings. 57 Each of these factors will be discussed in detail below. 1. Analysis By An Environmental Professional For purposes of an AAI investigation, an environmental professional is any person who possesses sufficient specific education, training, and experience necessary to exercise professional judgment to develop opinions and conclusions regarding conditions indicative of releases or threatened releases on, at, in, or to a property, sufficient to conduct the AAI inquiry. 58 Experience, means the individual has participated in previous AAI inquiries or C.F.R (a)(1) C.F.R (a)(2) (citing 40 C.F.R (a)) C.F.R (a)(3) (citing 40 C.F.R )) C.F.R (b)(1) (citing 40 C.F.R (a)) C.F.R (a)-(b) C.F.R (a) C.F.R (b)(4) (citing 40 C.F.R ) C.F.R (c)(1) C.F.R (b)(1) (citing 40 C.F.R (e) and (f)).

12 similar environmental site assessments which involve the understanding of surface and subsurface environmental conditions and the processes used to evaluate these conditions. 59 In addition to the above requirements, an environmental professional must also: (i) Hold a current Professional Engineer's or Professional Geologist's license or registration from a state, tribe, or U.S. territory... and have the equivalent of three (3) years of full-time relevant experience; (ii) Be licensed or certified by the federal [or state government]... to perform environmental inquiries... and have the equivalent of three (3) years of full-time relevant experience; (iii) Have a Baccalaureate or higher degree from an accredited institution of higher education in a discipline of engineering or science and the equivalent of five (5) years of full-time relevant experience; or (iv) Have the equivalent of ten (10) years of fulltime relevant experience. 60 PRACTICE TIP: Do not go with the least expensive environmental professional Be sure that the person has sufficient experience, a good reputation and is fully insured. You do get what you pay for. A consultant that commoditizes due diligence is not going to be as careful and provide as much useful information that the agency needs to meet its obligations. 2. Information Available To Acquiring Agency The next steps are statutory requirements of the purchaser, but can be undertaken in conjunction with the environmental professions pursuant to CFR sections (a)(2) and (a)(1)-(4). 61 Under those sections, the entity must first investigate whether there are any environmental cleanup liens against the subject property that are filed or recorded under federal, tribal, state, or local law. 62 The entity must then provide this information to the environmental professional C.F.R. 312(b)(5) C.F.R (b)(2)(i)-(iv) C.F.R (a)(2) (citing 40 C.F.R ) C.F.R C.F.R (a)

13 Second, the entity must inform the environmental professional if it has any specialized knowledge of the subject property, or the surrounding properties, that will help identify conditions indicative of releases or threatened releases at the subject property. 64 Third, the entity must consider whether the purchase price of the subject property reasonably reflects the fair market value of the property, if [it] were not contaminated. 65 The CFR does not provide guidance for assessing this measure. Furthermore, no case law has cited to this section for assessing this reasonableness standard. As a result, it is unclear whether an entity is required to undertake a real estate appraisal, or if the environmental professional may conduct an informal appraisal. Nonetheless, the CFR places the burden upon the entity to ensure that price differentials are not a result of contamination. It provides: [p]ersons who conclude that the purchase price of the subject property does not reasonably reflect the fair market value of the property... must consider whether or not the differential in purchase price and fair market value is due to the presence of releases or threatened releases of hazardous substances. 66 PRACTICE TIP: If the purchase price does not reflect fair market value, investigate and document why that is the case. Fourth, the entity will need to obtain commonly known or reasonably ascertainable information about the subject property. 67 As the CFR provides, entities acquiring property must take into account commonly known or reasonably ascertainable information within the local community about the subject property and determine whether such information provides sufficient indications of releases or threatened releases C.F.R (a)(2)(citing 40 C.F.R ) C.F.R (a)(3) (citing 40. C.F.R ) C.F.R (b) C.F.R (a)(4) (citing 40 C.F.R ) C.F.R

14 3. Interviews With The Past And Present Owner Of The Property First, the CFR requires an environmental professional to conduct interviews with past and present owners of the property. 69 Interviewing past and present owners serves three purposes: (1) to identify conditions indicative of releases or potential releases; 70 (2) to meet the CFR s requirements; and (3) to determine whether there are potential data gaps in available information that may be required for compiling a complete analysis. 71 That is, this stage of the investigation requires that the environmental professional [r]eview and evaluate the thoroughness and reliability of the information gathered. 72 In addition, the environmental professional must interview one or more of the following persons: (1) current and past facility managers with relevant knowledge of uses and physical characteristics of the property; (2) past owners, occupants, or operators of the subject property; or (3) employees of current and past occupants of the subject property. 73 Under ASTM Standard E , the interviews must be conducted by a person possessing sufficient training and experience necessary to... identify issues relevant to [RECs] in connection with the property. 74 Moreover, the interviewer may rely upon the truth of information provided unless he or she has actual knowledge that certain information is incorrect. 75 PRACTICE TIP: ASTM Standard E (11) requires the AAI investigation to include interviews with state and local government officials. 76 That is, [a] reasonable attempt shall be made to interview at least one staff member 77 from the following: (1) the fire department that serves the property; (2) the state or local health agency; (3) the local hazardous waste disposal agency; and (4) the local agency responsible for building permits See 40 C.F.R (b)(1)(citing 40 C.F.R (a)) C.F.R (a) (citing 40 C.F.R (e)) C.F.R (f)(2) C.F.R (f)(2) C.F.R (c)(1)-(3). 74 ASTM E (7.5.1). 75 Id. at ASTM E (11) 77 Id. at (11.5.1). 78 Id. at (11.5.1)-( ).

15 4. Review Federal, State, And Local Government Records And Search For Recorded Environmental Liens The AAI investigation requires a substantial review of governmental records to determine whether there is evidence of past releases or threatened releases on or near the property being acquired. Most importantly, all [f]ederal, tribal, state, and local government records of the subject property and adjoining properties must be reviewed. 79 Essentially, the purpose of reviewing records is to identify the historical use of the property and the likelihood of past uses having led to RECs in connection with the property. 80 The new ASTM Standard E advises that the investigation include an analysis of whether there have been any historic or controlled RECs on the property. 81 This means that the entity or environmental professional must inquire into whether a past release of any hazardous substances... has occurred in connection with the property. 82 The entity or environmental professional must investigate whether there are any recorded environmental cleanup liens on the property that are filed or recorded under federal, tribal, state, or local law. 83 PRACTICE TIP: There is some conflict as to whether these requirements have to be completed within a year of the purchase or within 180 days. To be on the safe side, make sure that this has been done within six months of closing. 5. Visual Inspections Of The Subject And Adjoining Properties The environmental professional must undertake sight reconnaissance, 84 or visual inspection of the property, with special attention paid to areas where hazardous substances were C.F.R (a). 80 ASTM E (8.3.1). 81 See Id. at (3.2.42). 82 Id C.F.R (a)-(b) C.F.R (a)-(b); 40 C.F.R (3) (citing 40 C.F.R (a)) 84 ASTM E (9).

16 or might have been stored. 85 must be noted in the environmental professional s report. 86 In addition, any physical limitations in inspecting the property 6. Vapor Encroachment In addition to the requirements codified in the CFR, the EPA s recent adoption of a Final Rule amending the standards and practices to allow ASTM Standard E as an acceptable alternative to the CFR s AAI standard. 87 Under this new standard, an entity must analyze vapor releases, or the potential presence or migration of vapors associated with hazardous substance[s]. 88 That is, in conducting an AAI investigation under the ASTM standard, environmental professionals must consider whether there are conditions indicative of hazardous vapor releases from or onto the property. 7. Written Report And Environmental Professional s Declaration Finally, all of the above described information must be included in the written report prepared and signed by the environmental professional in compliance with Section The report must have the following three elements: (1) an opinion as to whether the AAI investigation has identified conditions indicative of releases or threatened releases of hazardous substances; 89 (2) identification of data gaps in the information that affect the ability of the environmental professional to identify conditions indicative of releases or threats of releases; 90 and (3) the qualifications of the environmental professional C.F.R (b)(4); 40 C.F.R (a)(1). 86 Id. 87 See Id. at Id. at C.F.R (c)(1) C.F.R (c)(2) C.F.R (c)(3).

17 IV. Phase II Environmental Site Assessment Procedure As discussed above, the purpose of a Phase I ESA is to identify... [RECs] in connection with the property. 92 If a REC or the potential for a REC is discovered during the Phase I investigation, a Phase II ESA may be required to understand the nature and extent of the environmental issues. Phase II ESAs are governed by ASTM Standard E , which specifies procedures to be used to characterize property conditions using the scientific method in an objective, representative, reproducible, and defensible manner. 93 The purpose of conducting the Phase II analysis is to obtain scientifically valid data concerning property conditions. 94 As a result, the scope of the investigation conducted will vary depending upon the specific contamination or threat of contamination involved. A Phase II analysis should be conducted by a Phase II Assessor. 95 To qualify as a Phase II Assessor, the person must meet the requirements of an environmental professional, as defined above. 96 To comply with ASTM standards, the following elements must be included in the written report 97 following the on-site activities: (1) statement of the objectives of the analysis; 98 (2) formulation of the questions to be answered by the Phase II ESA; 99 (3) identification of the areas warranting investigation; 100 (4) development of a conceptual model describing the target analytes (potential hazardous substances that may contaminate the site); 101 (5) plan for the sampling and chemical testing; 102 (6) carry out the sampling and chemical testing; 103 (7) validation of the conceptual model by corroborating the results 104 ; and (8) the results of the Phase II ESA ASTM E (7.1) 93 Id. at (1.1). 94 Id. at (1.1.2). 95 See Id. at (7). 96 Id. at (3.1.33). 97 Id. at (6.4.8). 98 Id. at (5.1.1). 99 Id. at (6.4.1). 100 Id. at (6.4.2). 101 Id. at (6.4.3)(citing (3.1.50)). 102 Id. at (6.6.4). 103 Id. at (6.4.5). 104 Id. at (6.4.6). 105 Id. at (6.4.7).

18 PRACTICE TIP: While the Phase II report is far more technical than the Phase I report, experienced counsel should still review it on behalf of the acquiring agency to make sure that it includes all the required elements to meet the AAI standard. Additionally, the nature and extent of the contamination should be considered in evaluating or renegotiating the purchase price and whether the agency will move forward with the acquisition. Lastly, the results of the Phase II must be considered to ensure that the agency is handling the environmental issues with due care. V. Conclusion To be sure, the environmental due diligence process can be complicated. By making sure that it is complete, before acquiring property, acquiring agencies can help shield themselves from potentially enormous liability under federal and state environmental laws.