CPP CPP Site Assessment & Due Diligence 1 — Questions and Answers
Question 1: What is the purpose of a Phase I Environmental Site Assessment (ESA)?
- To identify recognized environmental conditions (RECs) through records review and site inspection without sampling (Correct answer)
- To collect soil and groundwater samples to confirm contamination
- To remediate identified contamination on a property
- To assess the value of a contaminated property for tax purposes
Correct answer: To identify recognized environmental conditions (RECs) through records review and site inspection without sampling
A Phase I ESA identifies Recognized Environmental Conditions through historical records review, regulatory database searches, and a site reconnaissance without intrusive sampling, providing CERCLA liability protection.
Question 2: What triggers the need for a Phase II Environmental Site Assessment?
- Recognized environmental conditions (RECs) identified in a Phase I ESA that require further investigation (Correct answer)
- Any property transaction over $1 million
- All commercial properties regardless of prior use history
- Whenever a Phase I ESA is more than 2 years old
Correct answer: Recognized environmental conditions (RECs) identified in a Phase I ESA that require further investigation
Phase II ESAs are conducted when Phase I identifies RECs suggesting potential contamination, requiring soil, groundwater, or building material sampling to confirm or rule out contamination.
Question 3: What are 'recognized environmental conditions' (RECs) in environmental due diligence?
- The presence or likely presence of hazardous substances or petroleum products due to a release or threatened release (Correct answer)
- Visible pollution observed during a site walk
- Any environmental permits associated with a property
- Environmental conditions that meet regulatory cleanup standards
Correct answer: The presence or likely presence of hazardous substances or petroleum products due to a release or threatened release
RECs are the standard of care finding in a Phase I ESA, identifying conditions suggesting hazardous substance or petroleum releases that could pose regulatory or legal liability.
Question 4: What federal law creates environmental liability for contaminated site cleanup and drives Phase I/II due diligence?
- Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA/Superfund) (Correct answer)
- Resource Conservation and Recovery Act (RCRA)
- Safe Drinking Water Act
- Toxic Substances Control Act (TSCA)
Correct answer: Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA/Superfund)
CERCLA imposes strict, joint, and several liability on property owners and operators for cleanup costs, driving buyers to conduct environmental due diligence to qualify for liability protections.
Question 5: What is a 'Brownfield' site in the context of US environmental law and permitting?
- A real property where expansion or redevelopment is complicated by real or perceived contamination (Correct answer)
- Any site on the EPA Superfund National Priorities List
- A site where industrial use has been banned permanently
- Agricultural land converted to residential use
Correct answer: A real property where expansion or redevelopment is complicated by real or perceived contamination
Brownfields are properties with known or suspected contamination that may deter development; federal and state programs provide grants, loans, and liability relief to incentivize brownfield cleanup and redevelopment.
Question 6: What is 'All Appropriate Inquiry' (AAI) under CERCLA as it relates to environmental due diligence?
- The standard of environmental investigation required to qualify for CERCLA liability protections as an innocent purchaser (Correct answer)
- A comprehensive soil sampling protocol for industrial sites
- The level of review required before issuing a Section 404 permit
- A federal audit program for industrial facilities
Correct answer: The standard of environmental investigation required to qualify for CERCLA liability protections as an innocent purchaser
AAI is the EPA's regulatory standard (40 CFR Part 312) defining the scope of environmental investigation needed before property purchase to qualify for CERCLA's innocent landowner and bona fide prospective purchaser defenses.
CPP CPP Site Assessment & Due Diligence 1
What is the purpose of a Phase I Environmental Site Assessment (ESA)?