All Appropriate Inquiry?

16 Mar 2011

I have written and spoken before about the importance for buyers, tenants, or lenders ensuring that their consultants conduct environmental due diligence in accordance in with the all appropriate inquiry (AAI) standard.  The importance of ensuring such compliance was recently highlighted by an EPA Study which studied 35 AAI reports associated with $2.14 Million in EPA grants.

The EPA study evaluated whether the reports included the required detail of: (1) qualifications of the environmental professional (EP) preparing the study; (2) the report including the EP signature; (3) a description of the gaps in the data reviewed by the EP; and (4) a conclusion that conforms to the prescribed conclusion form.

Amazingly, not one of the 35 reports had all of the required elements.  This barely scratches the surface of this issue but raises some signficant questions about the overall quality of AAI reports.  The EPA evaluation concluded that the lack of AAI compliance resulted from a lack of controls by the EPA to verify AAI compliance.

Does this mean that all Phase I environmental assessments may be deficient, as some have concluded?  I doubt it.  As in many cases, Phase I reports are reviewed by lenders or others to ensure their compliance, but this EPA Report does highlight the need to have someone review Environmental Site Assessment or AAI reports before they are finalized.  Many times, I have seen Phase I and II reports that are poorly: (1) proofread; (2) written; or (3) formatted so that they do not meet that AAI standard or are just not clear. 

Given that these reports determine whether a buyer, tenant or lender are protected from potentially massive liability under state and federal “superfund laws,” this is pretty important. Even if the information is in the consultant’s “head,” it still needs to be on the “page” so that any third party, including a judge, can follow it. Don’t rely on the consultant to get it right – make sure there are at least two sets of separate eyes reading these reports before you need to rely on them.

Leave a Comment Below

Leave a Reply