Your consultant is your best friend when the Phase I you just ordered came up with no recommendations. How tested is that relationship when there is a recommendation to perform further testing? Yes, sometimes the recommendation to test is a no-brainer. Perhaps when an underground storage tank is discovered at a site for which there is no data to determine if the tank has leaked into the ground. Other times the recommendation to test might not initially make sense to the report user(s) and these recommendations usually produce a deluge of phone calls from lawyers, property owners, borrowers and lenders that demand the consultant defend the recommendation. It is not as conspiring as one individual recently suggested that “consultants just recommend testing because that is where they make their money.” Sure there are cases where frivolous recommendations are made. We see them when we perform peer reviews of Phase I reports. They are easy to pick out. Recommending testing be performed at a site because there is a gas station several blocks from away is one example. Admittedly, such work practices can tarnish the image of an environmental consultant but most in the business do things the right way; those that do not are not around long. Building trust and confidence in clients over the long haul is a much better business practice and most regular users of environmental due diligence reports have come to know who is to be trusted and who is to run from.

In defense of those doing it right, users of environmental due diligence reports must understand that individuals, municipalities and businesses do a lot of crazy things (both knowingly and unknowingly) that impact the environment. While we could never say we have seen it all, we can honestly say we have seen a lot. So, when a Phase II recommendation is made it is usually the result of the past experience of the Environmental Professionals working on the project. What is it they say…. it only takes a few bad apples to spoil the bunch. This cliché fits well with dry cleaners. I would challenge anyone to show me a Phase I report that does not recommend testing at a dry cleaner site. It could be the most well kept dry cleaner in town and a Phase II would still be recommended. Why? Because consultants have experience seeing how small an amount of dry cleaning solvent is needed to cause a problem.  

This brings up a good opportunity to discuss why a Phase II would be recommended to begin with. Quite simply a Phase II is performed to confirm or deny the potential presence of environmental impacts. In context of the consultant/client relationship the consultant should be looking out for the fiduciary and liability interests of their client when recommending a Phase II because if contamination is actually discovered it may:

• Exist at levels that are harmful to human health or the environment and need to be cleaned up to appropriate levels.
• Devalue property (important consideration for lenders and investors)
• Present 3rd party liability issues from offsite migration or site occupant exposure
• Become someone else’s problem if they unknowingly buy the property.

The most challenging Phase II recommendation to come to terms with is one in which there is no definite potential source of contamination (e.g. underground tank) or where there is no “smoking gun.” These recommendations are coming up more often now that All Appropriate Inquiry (AAI) Phase I Assessments are becoming the industry standard due diligence tool. Under AAI, a consultant is responsible for noting data gaps in the Phase I ESA that the consultant believes to be significant. AAI defines a data gap as “a lack of or inability to obtain information despite good faith efforts by the environmental professional.”

Data gaps raise a practical problem for the consultant in determining whether a data gap is significant or not. Even an insignificant gap still carries the risk that the missing data could find an undiscovered liability. A real life example of this would be a seven year gap in historical aerial photograph coverage of an agricultural field. All other records indicated the site was always agricultural. For most, this would be an insignificant data gap since the likelihood of something “popping up” on the site during this time gap is low. Unfortunately for the person who went on to purchase this land, they became responsible for the petroleum impacts resulting from a leaking bulk petroleum tank associated with a nearby rail line that existed at the site during this time.

A significant data gap might be that there are no historical records to document site use for an extended time period. This is common in urban settings where there may be a benign office building that has existed since 1980; however, historical aerial photography shows the site was developed since at least 1920. What was there before the building? If there is no data to help evaluate the historic site use, a data gap would be encountered. What about a light manufacturing site that has existed at the same location since the 1950s? Current business practices, site conditions, company officials and regulatory records do not provide any information to suggest the current site activities pose an environmental concern to the site. What about business practices before environmental regulations came into existence? Has this company always done things the “right way” (even though historically the right way is now the wrong way)? A data gap in a report might trigger someone’s memory of other information that would be available; however the likely scenario is that if this information was not uncovered during initial inquiry it is not likely to surface. So, unless there is a crystal ball that allows one to look back into time, the only way to fill a data gap is by sampling.

In essence, there is a lot of liability passed onto the consultant when determining if a data gap is or is not significant. If an environmental issue is later discovered that would have been found had the data gap not occurred, the client (and possibly his or her lawyer) is going to characterize the data gap as significant. The practical result is that the professional—and not the client—may take on the risk of data gaps if the report does not carefully discuss them and the risks involved.

The bottom line is that these environmental due diligence changes and the way consultants look at sites are driving more Phase II recommendations. Initially it might be easy to speculate on the consultants’ motive to recommend testing; however, understanding the reason behind the recommendation is that information is needed to answer the questions and fill the gap. After all, there is a lot at stake for both the consultant and user of the report. Under AAI both share a responsibility to evaluate potential liabilities in order to maintain CERCLA liability defenses (innocent land owner, bonefide prospective purchaser and contiguous property owner). Sometimes this means digging deeper and answering questions that have no answers.