Environmental Due Diligence: How to Plan, Prepare and Conduct

Environmental due diligence is a systematic procedure that assesses a property or land for potential risk of environmental pollution, such as groundwater or soil pollution. The Environmental Protection Agency (EPA) provides due diligence standards. Environmental professionals (EPs) determine the degree and form of assessment that is justified, which may vary depending on the terrain.

The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) provides a mechanism for determining who is ultimately responsible for toxic materials. The law authorizes the supervisory authorities to impose fines on landowners. It imposes the deposit of toxic chemicals at the owner’s expense, even if the owner was not responsible for the pollution.

Proper environmental surveys will protect buyers from the significant burden of environmental liability under CERCLA, even if contamination is detected after purchase.

Environmental Site Assessment

Environmental Site Assessment (ESA) is a type of due diligence that takes the form of a report prepared for each property, which identifies potential or existing environmental pollution. This analysis of a property focuses on the underlying asset and the physical improvements made to that asset.

In particular, environmental site assessment is a method for making a reasonable assessment of past or current use of the area to determine whether the area is affected by Recognized Environmental Status (REC). ESA is an important part of due diligence when buying commercial property, and this should be done before the transaction is completed. The purpose of ESA is to ensure that a buyer’s liability for environmental pollution is limited.

Initiation of actions for the environmental assessment of the site

The following events can trigger an environmental assessment of an area:

  • A home or business is sold or bought

If a person wishes to sell or buy a property and / or business, due diligence is required to determine whether the property or business faces actual or potential environmental liability, including lack of permits, contamination with hazardous substances, breach of licensing and law enforcement. missing.

By understanding the requirements, the buyer can consider any restrictions, obligations and dangers associated with the country.

  • The property is refinanced

If a property needs to be refinanced, the bank will require an environmental assessment of the site to gain access to the property for potential environmental pollution risk.

  • Transfer of ownership to a relative after retirement

If a person is planning to retire with the intention of transferring the property to their family members, he or she must make an environmental assessment of the site to ensure that they are covered for environmental liability.

  • The necessity of a supervisory authority

If a supervisory body suspects toxic conditions on the property or land, it may order the owner to make an environmental assessment of the plot. In addition, the municipality will, upon request from the municipal body for a change of permit related to the use of the property or other discretionary land use, demand that an environmental assessment of the site be carried out.

  • Wanted by existing owners

Owners of existing properties or businesses may want to identify the property’s toxic history.

Stages Of Environmental Site Assessment

Stage I

The due diligence process begins with the completion of Stage I or Tier I environmental assessment, an analysis of recent and past events on and around the property to determine potential or current environmental pollution obligations. Level I ESA may be requested by a bank or other financial entity during the term of the loan or advised by business advisers.

The purpose of a level I environmental assessment is to gather the appropriate evidence to provide an objective expert assessment of the property’s environmental condition and to identify actual or potential environmental pollution that may have an effect on the value assessment of the property. or may affect the innocent owner after the purchase.

Stage I environmental assessment includes the following:

  • see historical records to determine previous use;
  • see public records such as fire insurance maps, historical aerial photos, topographic maps and historical city guides;
  • conduct site visits and research to observe current and historical conditions and customs for the land and related properties;
  • interview current and former owners, managers and tenants, or those familiar with the country;
  • check regulatory records for the site and surrounding properties.

Stage II

Stage II of the environmental assessment requires the collection of samples of soil, groundwater or building materials to study various contaminants. It provides a better insight into the condition of the soil, the groundwater level and the construction of the property. When Stage I discovers potential environmental concerns, it generally calls for further action.

Petroleum hydrocarbons, pesticides, heavy metals, asbestos, solvents and molds are the compounds most tested in Stage II or Level II environmental assessment.

Stage III

A Stage III or Level III Area Environmental Assessment is an application requiring the improvement of an area. The purpose of the Stage III studies is to determine the physical level of exposure based on the recommendations in the Stage II assessments.

Stage III studies may include rigorous preparation, sampling and monitoring, modeling including lot and transport testing, and probability studies designed for remediation and recovery plans. It usually includes an assessment of possible cleaning approaches, logistics and costs. The accompanying report outlines the actions taken to clean up the site and verify monitoring for residual contaminants.

Regulations that control activities that can harm the environment are the responsibility of the federal and provincial governments and vary from region to region. Guidelines for determining pollution liability can be complex and time-consuming.


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