Phase I Environmental Assessments: An Investment.
Your banker tells you that you need a Phase I Environmental study before your file can be sent to credit for final approval. You are supplied a few names of companies to call and you make your calls. Shopping is like travelling, if you do not know where you are going you could get lost, at least according to Casey Stengel, the great NY Yankee manager.
Essentially, from a bankers point of view, a Phase I is a review of a property or a facility with the objective of determining the presence (or absence) of any environmental liability that might affect the bank’s decision to loan. The study looks at the history of the property (operations and surroundings), the present site conditions (which involves a mandatory site visit), records on file with the regulatory agencies, and the operations of neighbouring activities with respect to how they may have impacted your site. The Phase I is a fingerprint, the baseline of your investment. When the history of an antique is known it becomes more valuable; this logic applies to most investments, thus a Phase I is just a logical step toward protecting your investment.
When I see something called “Phase I”, I figure that it is just the start and there is more to come. The truth is, if the Phase I does not identify any environmental liability then the project is final and would be a standalone document, sufficient for the bank’s requirements, and the conclusions should be clear and concise. If a potential environmental liability is identified then the conclusion will discuss the areas of concern and recommend a Phase II. The objective of the Phase II is to determine if the potential concerns identified are real or not. The Phase II will be discussed further next month.
Be careful when selecting your consultant for a Phase I. It is usually relatively easy for an experienced assessor to identify when a site will require a Phase II and you may find large variances in the Phase I estimates you receive. In other words, Phase II is the “recover your losses phase” for many consultants who give cheap prices to start. It is important to ask the question, “do you think this may go to Phase II” when choosing your consultant, and it is important to think of the Phase I as an investment, not just a ticket the bank needs so you can get your loan. The report should stay in your files, like your certificate of location, the latter defines the boundaries, the Phase I is the inside fingerprint.
