9.4.1 Phase I Environmental Site Assessment Requirements

A. Submission : The Lender must submit a complete and final Phase I ESA with the pre-application or, if the pre-application stage is omitted, with the application for Firm Commitment as part of the HEROS submission. A summary submission is not acceptable. The Lender must inform the ESA preparer of all of the following Phase I ESA requirements:

1. Purpose : The Phase I ESA will make an initial determination as to the presence or likely presence of “hazardous substances” as defined by CERCLA, and of petroleum and petroleum products. The Phase I ESA can meet EPA’s All Appropriate Inquiry requirements for CERCLA liability protection for the property owner.[33] However, HUD’s purpose is to document compliance with 24 CFR 50.3(i), which states HUD’s policy that all properties proposed for use in HUD programs be free of hazardous materials, contamination, toxic chemicals and gases, and radioactive substances, where a hazard could affect the health and safety of occupants or conflict with the intended utilization of the property. This purpose must be described in the “Purpose” subsection to the required “Introduction” Section of the Phase I ESA. To meet this purpose, in addition to the standard Phase I determination of whether Recognized Environmental Conditions (RECs) have been identified in connection with the site, the Evaluation section’s discussion of Findings, Opinions, and Conclusions must state whether further investigation or corrective action is recommended to meet §50.3(i).

2. Format : The Phase I ESA must be prepared in accordance with the requirements of ASTM E1527-13 “Standard Practice for Environmental Site Assessments, Phase I Environmental Site Assessment Process”. The Phase I ESA must utilize the table of contents and report format specified in Appendix X4. The Phase I ESA must incorporate a vapor encroachment screen performed in accordance with ASTM E2600-15. The Phase I must clearly indicate that HUD is an authorized user of the report. The Phase I preparer must also be notified that HUD will post its HEROS environmental review online, including documentation such as the Phase I ESA report, for one year following its completion.

3. Timing : The Phase I ESA must be conducted (meaning the earliest of the date of the site visit, records review documents, or interviews) within one-year of the submission to HUD. HUD may require updates or additional analysis in specific circumstances. A Phase I ESA that was conducted more than 180 days prior to the submission date to HUD, but within the allowable one-year period, must be updated pursuant to Section 4.6 of ASTM E1527-13. A Phase I ESA prepared more than one year prior to submission to HUD, even if updated within 180 days of being submitted, is not acceptable.

4. Preparer’s Qualifications : The Qualifications section of the Phase I ESA must describe the preparer’s qualifications. The Environmental Professional preparing the Phase I ESA must meet all of the qualification requirements of Appendix X2 of ASTM E1527-13.

5. Findings Section : The Findings section of the Phase I ESA must list all known or suspect Recognized Environmental Conditions (REC), Controlled Recognized Environmental Conditions (CREC), Historical Recognized Environmental Conditions (HREC) and de minimis conditions (such as minor soil staining). The Findings section must also list Vapor Encroachment Conditions (VECs), likely VECs, and circumstances in which VECs cannot be ruled out.

33 For more information on the All Appropriate Inquiry Rule, please see https://www.epa.gov/brownfields/brownfields-all-appropriate-inquiries.

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6. Opinions Section : The Opinions Section must discuss each finding from the Findings section and whether it is a REC pursuant to Section 12.6 of ASTM E1527-13. The justification for any Finding deemed not to be a REC must be included in the Opinions section. If the ESA preparer cannot make a statement as to whether a condition is or is not a REC, the Opinion Section must state what information or further investigation would be deemed necessary to make such a determination. The ESA preparer must also identify any data gaps and state whether the data gaps are significant. When previous remediation has been performed or is ongoing, i.e., not yet an HREC at the proposed site, the Phase I ESA must fully discuss the extent of such remediation in this section of the Phase I ESA, including any involvement of LSTF Authorities. The Phase I preparer must justify whether such ongoing remediation should resolve any RECs or undecided issues identified in the ESA. Note that even if the Environmental Professional preparing the Phase I ESA determines that a Finding does not rise to the level of a REC, HUD may determine that the finding warrants Phase II investigation based on HUD’s toxics policy at §50.3(i).

7. Conclusions Section : The Conclusions Section must make a determination of whether a REC, including a CREC, exists on the site in accordance with one of the two quoted statements at Section 12.8 of ASTM E1527-13.

8. Evaluation Section: In addition to the standard Phase I determination of whether RECs have been identified in connection with the site, the Evaluation section’s discussion of Findings and Conclusions should state whether further investigation or corrective action is recommended to meet 24 CFR 50.3(i).

9. User Provided Information Section : The Borrower or the current property owner (if different from the Borrower) shall complete the User Questionnaire(s) as per Appendix X3 of ASTM E1527-13, which must be included in the “User Provided Information Section” of the Phase I ESA, and the preparer must take into account any information provided in the preparation of the Phase I ESA.

10. Testing Not Required : The Phase I ESA does not require sampling and testing. A Phase II ESA or remediation plan, if required, would include sampling and testing (see below). If a Phase II ESA had been previously completed at the property, the Phase I must reference and discuss any prior Phase II ESA performed in general accordance with ASTM E1903-19, including whether a condition is a REC.

11. Vapor Encroachment Screen : The Phase I ESA shall incorporate an initial vapor (a.k.a. gas) encroachment screen following ASTM E 2600-15 to determine if there is a potential for vapors to occur in the subsurface below existing and/or proposed on-site structures. Those hazardous substances may be petroleum and petroleum products that consist of volatile organic compounds (VOC), semi-volatile organic compounds (SVOC), and inorganic volatile compounds. The initial vapor encroachment screen shall be performed using Tier 1 “non-invasive” screening pursuant to ASTM E 2600-15 “Standard Guide for Vapor Encroachment Screening on Property Involved in Real Estate Transactions, Section 8". If the Tier 1 vapor encroachment screen determines that, as indicated in ASTM E2600-15, Section 8.7.1, there is a “vapor encroachment condition” (VEC) which is the “presence or likely presence” of such vapors in the subsurface below existing and/or proposed onsite structures, it must be reviewed under the Phase I ESA to determine if it is a REC as per the ASTM E1527-13 standard. Vapor encroachment screen analyses must be included in their own section in the report but also integrated into the findings, opinions and conclusions sections of the Phase I ESA.

12. Lead-based Paint (LBP) Chips : LBP chips that are not inside or part of a structure may be deemed to be a hazardous substance. Therefore, if there is or was a structure on the site that was built prior

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to 1978, any evidence of paint chips not inside or part of any current structures must be discussed in the “Site Reconnaissance” section of the Phase I ESA, must be listed in the Findings Section, and must be discussed further as to whether the paint chips are either a REC or a de minimis condition in the Opinions section.

13. Underground Storage Tanks (UST) containing hazardous waste or petroleum products : The Phase I ESA must identify onsite USTs containing, or previously containing, hazardous waste or petroleum products. For tanks regulated by the state, the Phase I must document that the UST is in compliance with state regulations, including confirmation of tank integrity. For tanks not regulated by the state, HUD will require an integrity test and an O&M plan as discussed in Section 9.4.13. These requirements do not apply to propane USTs.

14. Previous Remediation : When previous remediation has been performed, or remediation is currently taking place, the Phase I ESA must fully document such remediation, including any involvement from LSTF Authorities, No Further Action letters as discussed at Section 9.4.5.D.3, and narrative descriptions of any on-going remediation work and monitoring. The Phase I ESA must discuss whether the previous or ongoing remediation is consistent with current applicable LSTF standards.

15. Evaluation of the ESA : The Phase I ESA will be evaluated by HUD to determine if the property is acceptable for the hazards reviewed. HUD may require additional information, or a Phase II ESA based on findings that indicate an unacceptable risk under HUD’s toxics policy at §50.3(i), or an unacceptable business risk. Any Phase I ESA that identifies a REC will require a Phase II ESA, unless it can be determined from the Phase I ESA that corrective action is not feasible. If no corrective action is feasible, HUD may reject the property.