FEATURE ARTICLE, OCTOBER 2007

IS THAT PROPERTY REALLY A GOOD DEAL?
Performing a Phase I Environmental Site Assessment prior to purchasing land may save your company a bundle.
W. David Prescott and Justin W. Wheeler

In November 1996, Talon/LPE, an Amarillo, Texas-based environmental engineering firm, received a phone call from a rancher who had a problem on a piece of property he had recently purchased — an old gas station next to his farm and ranch supply store to be used for extra storage. The price was only $5,000 for the old gas station and surrounding property located in Central Texas, which was too good of a deal to pass up. So, the rancher bought the property for cash without doing an environmental study.

He had been told by the previous owner that the underground petroleum storage tanks from the old gas station had been removed and that he had received a clean closure letter from the Texas Commission on Environmental Quality (TCEQ). The rancher’s problem was that the previous owner failed to remove a waste oil tank in the back portion of the property that was still registered with the TCEQ.

The TCEQ notified the rancher that he had to remove the waste oil tank or he could face possible state imposed penalties and fines. Talon/LPE removed the waste oil tank from the ground, which had been leaking for years. The soil conditions around the tank were contaminated with gasoline and waste motor oil. The TCEQ issued a Leaking Petroleum Storage Tank (LPST) number on the site and requested the rancher to start immediate cleanup on the soil.

The first phase of the cleanup was to install soil test borings to see how deep the soil contamination had penetrated. Talon/LPE drilled to 20 feet and encountered groundwater. A groundwater monitoring well was then installed to collect the required samples, and gasoline was discovered in the new monitoring well from a historical release from the tanks. After discussing this with the rancher, he asked, “How is this possible with the clean closure letter?”.

The answer is somewhat complicated: more often than not, sites are granted clean closure because the contamination was not properly identified. If the underground tanks are only removed and the dispensers or product delivery lines are left in place, then a historical release could go undiscovered. Also, several sites have been seen that had spills from tanker trucks that overflowed prior to new connection methods to underground storage tanks, especially in sandy soils.

The site the rancher had bought for $5,000 was now entering the second phase of environmental cleanup. Over the next 11 years, the total cost to install groundwater monitor wells, collect samples from the groundwater and to remove the gasoline from the groundwater has been in excess of $260,000, and the site still has not achieved the status of clean closure. The site has more than 20 groundwater monitoring wells and has had historical gasoline levels of over 9 feet in some of the wells. The groundwater contaminate plume encompasses over two city blocks.

This is not an isolated event and problem of just one rancher in Central Texas. This happens every day all across the country. How many prime pieces of real estate on busy intersections used to have historic gas stations in the 1960s, 70s and 80s? All of these sites could potentially have the same scenario as the site mentioned above.

In addition, there are more property types than just service stations with which a potential buyer should be concerned. Dry cleaners, laundry facilities, bulk fuel terminals, printing services, cattle dipping vats, automotive and truck repair facilities, old industrial facilities, oil field service companies, and chrome plating operations are just a small list of the sites that can encounter a similar situation as described above.

With these ideas in mind, what should the rancher have done to protect his interests and not assume the environmental liability? Simple, he should have hired a professional environmental company to perform a Phase I Environmental Site Assessment.

The American Society of Testing and Materials (ASTM) has issued a standard that regulates and insures that all Phase I Site Assessments are completed in a manner that delivers consistency and professional accuracy to each site investigation.

According to ASTM, the purpose of the ASTM standard is to define good commercial and customary practice in the United States for conducting an environmental site assessment of a parcel of commercial real estate with respect to the range of contaminants within the scope of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and petroleum products.

Each Phase I Site Assessment identifies recognized environmental conditions and concerns. If the Phase I Site Assessment is done correctly and by a qualified firm with trained employees, then the landowner is able to qualify for one of the requirements as an innocent landowner, contiguous property owner or bona fide prospective purchaser — thus eliminating any liability associated with the purchase.

What would the rancher have received if he had hired an environmental consulting firm to perform the Phase I Site Assessment prior to his purchase? First, the environmental consulting firm would have conducted a site reconnaissance to properly assess the subject property. During the site reconnaissance, the environmental professional would have inspected the entire property and any structures to determine if any conditions of concern were present. Photographs would have been taken to document the current site conditions. A detailed interview would be conducted with the current and past property owner(s) to determine if any historical environmental concerns had occurred on the subject property. Additionally, a 50-year historical document research would have been conducted which would include reviewing an environmental lien search, inspecting historical aerial photographs, reviewing historical Sanborn Maps, historical city phone directories, topographic maps and determining the presence of domestic water wells in the vicinity. The historical document research would allow the environmental professional to identify any historical activities associated with the subject property would cause environmental liabilities for the future purchaser. Interviews also would be conducted with state and federal environmental agencies to determine if any ongoing cleanups were occurring in or around the subject property. Finally, a detailed report would be presented to the client identifying any possible conditions of concern on the subject property.

In the case above, the rancher would have been alerted to the presence of the waste oil tank, the shallow groundwater conditions of the area and the fact that more than 12 additional LPST sites are located within a 0.5-mile radius of the subject site. He could have asked the property owner to remove the waste oil tank and request certification from the TCEQ of no further environmental problems in the form of a clean closure letter. The rancher could then have bought the property for $5,000 plus the cost of an average Phase I Site Assessment, which is approximately $2,000. This is a great deal when considering the price of the Phase I Site Assessment versus the cost of a $250,000 dollar cleanup, not to mention years of interrupted property usage and dealing with state and federal environmental agencies.

W. David Prescott and Justin W. Wheeler are with Amarillo, Texas-based Talon/LPE.


©2007 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.