What Happens After a Phase I Environmental Site Assessment Identifies a Problem?

A Phase I ESA Is the Beginning of an Informed Decision

A Phase I Environmental Site Assessment (ESA) is an important step in understanding the environmental history and potential liabilities associated with commercial property. Whether you are acquiring an industrial facility, evaluating a commercial investment, or preparing a brownfield for redevelopment, a Phase I ESA helps identify conditions that may influence the transaction.

But what happens when the assessment identifies a problem?

A potential environmental concern does not automatically mean the property is contaminated, unsuitable for redevelopment, or that the transaction needs to stop. It means there is more information to consider.

A Phase I ESA generally reviews historical property uses, environmental records, regulatory databases, available property information, and current site conditions. Interviews and other research may also be completed as appropriate.

The objective is to identify potential environmental conditions that may require additional attention before a buyer, lender, property owner, or project team moves forward.

What Does a Recognized Environmental Condition Mean?

A recognized environmental condition (REC) generally involves the presence or likely presence of hazardous substances or petroleum products associated with a release, conditions indicative of a release, or a material threat of a future release.

Examples may include:

• Historical gas stations, dry cleaners, or industrial operations.
• Existing or former underground storage tanks.
• Documented spills or releases of hazardous substances.
• Areas associated with historical manufacturing or chemical use.
• Potential migration of contamination from a neighboring property.

A Phase I ESA may also identify historical recognized environmental conditions (HRECs) or controlled recognized environmental conditions (CRECs). Those distinctions matter because not every environmental finding carries the same implications for acquisition, liability, construction, or future property use.

When Is a Phase II Environmental Site Assessment Needed?

If a Phase I ESA identifies a condition that requires additional investigation, a Phase II Environmental Site Assessment may be recommended.

Unlike a Phase I ESA, a Phase II investigation may involve collecting environmental samples and submitting them for laboratory analysis.

Depending on the site history and the concern identified, that may include:

• Soil sampling.
• Groundwater sampling.
• Soil gas or vapor intrusion evaluation.
• Investigation around former underground storage tanks.
• Targeted sampling near historical industrial operations.

The scope should be built around the actual question the project needs answered. A former dry cleaner, automotive service facility, manufacturing site, and vacant commercial property may require very different investigation strategies.

What Happens if the Investigation Confirms Contamination?

Confirmed contamination can affect a property transaction, but it does not automatically prevent acquisition or redevelopment.

The next step depends on what was found, where it was found, potential exposure pathways, applicable regulatory requirements, and the way the property will be used.

Depending on the site, the project team may need to consider:

• Additional investigation to better define the condition.
• Remediation or environmental management measures.
• Engineering controls or exposure controls.
• Construction and excavation planning.
• Material handling or disposal requirements.
• Land-use restrictions or other ongoing obligations.

For developers, this information should become part of project design and budgeting. For purchasers, it may influence financing, negotiations, liability protection, and transaction timing. For existing owners, it may affect how portions of the property can be safely used.

Michigan Baseline Environmental Assessments and Due Care

Michigan property transactions involving known or suspected contamination require particular attention to the state’s environmental liability framework.

A Baseline Environmental Assessment (BEA) can provide qualifying purchasers or operators with protection from liability for cleanup of existing contamination when applicable statutory requirements are satisfied.

A BEA is not the same thing as a Phase I ESA. The Phase I helps identify potential environmental conditions. A BEA is a separate statutory process with its own requirements, timing, and documentation considerations.

Liability protection also does not eliminate every environmental responsibility associated with the property.

Michigan’s due care framework generally requires owners and operators of contaminated property to take appropriate measures to prevent unacceptable exposure and support safe use of the property.

Those responsibilities can influence:

• Construction and excavation activities.
• Groundwater use.
• Soil management.
• Future occupancy and property operations.
• Redevelopment design and long-term property management.

Evaluating these considerations before closing gives buyers and project teams more time to understand what ownership may require.

Turn the Findings Into an Action Plan

The value of environmental due diligence is not simply identifying a potential problem. It is using the information to make a better decision about the property.

1. 1Review the finding. Clarify what the Phase I identified, what evidence supports it, and what remains uncertain.
2. 2Define the decision. Consider the closing date, funding source, intended use, financing requirements, and planned construction.
3. 3Scope follow-up work. Determine whether targeted Phase II sampling or another environmental evaluation is appropriate.
4. 4Evaluate responsibilities. Consider Michigan BEA eligibility, due care, lender requirements, and applicable regulatory obligations.
5. 5Integrate the results. Bring the environmental findings into acquisition, budgeting, design, construction, and redevelopment planning.

The ETC Difference

Environmental due diligence should provide more than a report. It should help your team understand what you are working with, what the findings mean, and what comes next.

ETC connects consulting, field services, laboratory resources, and project support through one experienced team. We start with the property, funding source, schedule, and intended outcome, then shape the scope around the information your project actually needs.

• ✓Environmental consulting, field services, laboratory resources, and training connected through one team.
• ✓Scope built around the property and decision in front of you, not a one-size-fits-all service list.
• ✓Support that can continue from initial due diligence through investigation, construction planning, and redevelopment.
• ✓Clear findings and practical next steps designed to help owners, developers, municipalities, and project teams move forward.

Further Reading