The purpose of a Phase I Environmental Site Assessment (Phase I ESA) is to identify environmental liability associated with commercial real estate transactions. Following guidelines prescribed by ASTM 1527-05, the most recent guidance for conducting Phase I ESAs, an environmental professional looks at historical resources, current site conditions, and government regulatory records to identify potential impacts to the soil and groundwater associated with the property in question. ASTM 1527-05 provides environmental professionals with the term Recognized Environmental Condition (REC) to describe an event or condition that has impacted or has the potential to impact, the environmental integrity of a piece of property. ASTM also gives us clear language to describe an event that was a REC in the past, but has received regulatory closure and may or may not be considered a REC in the present; this is a Historical Recognized Environmental Condition (HREC).
At face value, the definition of a HREC can be misleading, and I have seen the term interpreted quite literally and often times erroneously. To demonstrate this point, when I was new to writing Phase I ESAs, I was tasked with assessing a property that had been developed with a navigational tower in the past. The tower included a generator powered by fuel stored in an underground storage tank (UST). After reviewing regulatory files for the UST, I discovered that a fuel release had been reported for this UST; however, the release had not yet been remediated or issued proper regulatory closure. This being very early on in my career, I was not yet comprehensively versed in the intricacies of identifying RECs and labeled this former fuel release a HREC. My logic being that it was a REC that had happened in the past. My project manager at the time, after reviewing the report, handled my error with care and used it as a positive learning experience and kindly went over the ASTM definition of an HREC with me and pointed out that the fuel release in question had not been issued closure and could therefore not qualify as an HREC. This event has stuck with me over the years not only for the positive management style, but because the incident solidified the actual meaning of the term and the application of the term struck me as very useful in that moment. Because of this experience, I have felt confident over the years in applying the term HREC, where applicable and appropriate, in writing Phase I ESAs.
As I transitioned into reviewing reports of younger staff, I have seen my error repeated many times. I have also seen similar misinterpretations of the term including calling any REC identified in the historical portion of the report an HREC, calling RECs identified by other consultants in previous reports HRECs, and calling a REC identified on an adjacent property that occurred in the past an HREC for the property in question. As I continue to train others in Phase I writing, I have a made an effort to draw attention to this term and give case histories that demonstrate its correct use. Based on my interpretation, the defining moment for an HREC is regulatory closure and the HREC conclusion is solidified by presenting documentation demonstrating proper closure, such as a no further action letter. In many cases, however, this documentation is not available or the environmental professional has determined that despite the closure documentation, conditions still exist that elevate the condition to a REC.
For further discussion on what constitutes an HREC, check out Larry Schnapf’s post on the subject.