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File Reviews: digging to uncover business environmental risks

Agency file reviews have always been a part of a Phase I Environmental Site Assessment (ESA) to identify the potential for Recognized Environmental Conditions (REC) and assess business environmental risk associated with a property. But under the newly approved ASTM E1527-13 standard, file reviews are now far more pertinent than before.  Section 8.2.2 of the ASTM E1527-13 standard states that if the target property or any adjoining property is identified in the government records search, ‘pertinent regulatory files and/or records associated with the listing should be reviewed’. This is at the discretion of the environmental professional (EP), but an explicit explanation must be given in the Phase I ESA report if he or she decides a review is not warranted.

So what exactly is the purpose of the file review? What issues does it aim to identify; what are the things the EP is looking out for; and which agencies is this information obtained from?

File Reviews: obtaining information from agencies

While the process is a little different for each agency, nowadays it is relatively easy for an EP to request information from most regulatory agencies. Many have online Freedom of Information Act (FOIA) records request forms or a dedicated contact person for information requests.  For example, the Kansas Department of Health and Environment (KDHE) uses a request form that can be submitted online or faxed, while the Missouri Department of Natural Resources (MDNR) has a dedicated email address that the EP can send requests to. Both agencies will send a confirmation stating your request was received and provide an estimate of the cost, if applicable.

But what kind of information is the EP actually looking for?  Well, based on the Phase I ESA site visit, environmental database review and any interviews that were conducted, the EP will have a good understanding of what type of site is being assessed and what kinds of Recognized Environmental Conditions (REC) are likely.  For instance, if the Phase I ESA is being performed at a retail petroleum station, it’s likely that the files will be researched to find evidence of UST permits and compliance documentation (such as tank tightness testing and reports).  The EP may even go as far as to verify additional third party financial assurance and see if any claims have been made against or for the property.  Now, if it is found that the retail petroleum station has had a release, additional reports and documents providing critical information about the release itself will be reviewed to determine substance, quantity and location of release, and whether remedial actions or monitoring activities were undertaken. There are many files associated with petroleum operations and the file review process can get rather extensive!

Using file reviews to determine risks

File reviews can be conducted independently, or as part of a Phase I ESA to help confirm or eliminate the potential for a recognized environmental condition (REC), controlled recognized environmental condition (CREC) or a historical recognized environmental condition (HREC) to exist at the subject site.  If an environmental condition does exist, the file review will help the client to better understand the extent of the impact, whether corrective measures were taken and whether the release was closed (and if so, whether it was closed with restrictions or not).

File reviews are all about determining the level of business environmental risk involved with a real estate asset.  Under the new E1527-13 standard, file reviews must be conducted on both the target property and the adjacent property identified in the regulatory database search. Just how deep the EP should dig depends on the client’s tolerance for environmental risk!

Posted in Environmental Due Diligence.

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