Phase I ESAs Are Not A Commodity
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Transcript of Phase I ESAs Are Not A Commodity
PANEL DISCUSSION:
Why the Phase I ESA Should NOT Be Viewed as a Commodity
Anthony J. Buonicore, Moderator
Panel:Nestor Benavides, President, EMG
Holly Neber, President, AEI ConsultantsRick Ferguson, US Bank
Brian Walker, Chase
› A marketable item that is mass-produced and unspecialized to satisfy a need.
› Describes a class of goods for which there is demand, but which is supplied without qualitative differentiation across a market.
› Interchangeable with other items of the same type.› Market treats as equivalent with no regard to who
produced (“fungibility”).› Typically leads to smaller profit margins and
diminishes the importance of factors other than price.
Definition of a Commodity
NEED A PHASE - I REPORT? DON'T SQUASH YOUR DEAL WITH A HIGH BILL,
_____'s BANKERS PHASE - I COST ONLY $730.00!WITH _____’S BANKERS PHASE - I, YOU GET A REPORT THAT CONFORMS WITH ASTM’S STANDARDS & INCLUDES:
¨ State environmental files review of sites within 1 mile.
¨ State Underground Storage Tank registrations within 1 mile.
¨ State Leaking Underground Storage Tank sites within 1 mile.
¨ Landfill listings within 1 mile and Storm Water Regulatory Analysis.
¨ Treatment Storage and Disposal facilities and Storm Water Compliance review.
¨ Site Inspection by State and Federal Registered Consultant.
¨ Asbestos Construction Building Materials (ACBM) over-view and much more
› Organized in January 2012 at the EBA’s Santa Fe meeting› Mission:
Provide a unified voice for Phase I EPs in the industry Disseminate information and provide a consistent
message on good commercial industry practice Educate those who rely on Phase I ESAs Improve the status of the industry
› Roundtable meets four times per year (in conjunction with Spring and Fall ASTM meetings and Winter and Summer EBA meetings)
Phase I Environmental Consultants Roundtable
› “What you need to know as a Phase I EP that is NOT in the ASTM E1527 Standard”
› Twelve (12) specific issues were identified in June 2012 at the EBA Newport, RI meeting that needed to be addressed
› Supported by an industry-wide survey conducted by the Roundtable in August-September 2012
› More than 100 representatives of the Phase I industry participated in the full day workshop
› First Roundtable report published January 31, 2013 (Report No. 13-001-31) focusing on the workshop
October 23, 2012 Roundtable Workshop
> Recognized that: The quality of Phase Is across the
market is highly variable. The consistency of Phase Is is
highly variable. Phase I pricing is highly variable.
Why Phase I Should Not Be Viewed as a Commodity
> ASTM E1527 recognizes that:
The extent of the investigation may vary depending on property type, client’s expertise, client’s risk tolerance and the information developed in the course of the inquiry.
There may be site-specific considerations that can impact the scope of work conducted.
Professional judgment is integral to a Phase I investigation.
Why Phase I Should Not Be Viewed as a Commodity Cont’d
ECR Industry Survey found that:
On PRICE:
EPs compete on price for their Phase I ESAs…
Why Phase I Should Not Be Viewed as a Commodity Cont’d
ECR Industry Survey found that:
With respect to client views the Phase I as a commodity:
EPs feel that ___ of their clients view Phase I ESAs as a commodity.
Why Phase I Should Not Be Viewed as a Commodity Cont’d
Similarly, EDR Insight’s 1Q13 State of the Property Assessment Market Survey (April 2013) found that:
EPs feel pressured on price:
Why Phase I Should Not Be Viewed as a Commodity cont’d
EDR 1Q13 State of the Property Assessment Market Survey found that:
Pricing pressure from lender clients vs. prospective purchasers:
Why Phase I Should Not Be Viewed as a Commodity cont’d
EDR 1Q13 State of the Property Assessment Market Survey found that:
EPs feel that their clients give them credit for their value proposition:
Why Phase I Should Not Be Viewed as a Commodity
Why Phase I Should Not Be Viewed as a Commodity Cont’d
Debt Phase I ESAs Equity Phase I ESAs
Client?
Lender Prospective purchaser
Why?
Phase I to protect its risk Phase I to protect its risk
Risk Profile?
Secured creditor exemption from cleanup liability
Liability for total cleanup cost (may exceed value of the property)
Maximum loss is capped at the collateral
Litigation liability with potential third parties
Can foreclose without cleanup liability Potential liability is not limited
Phase I Investigation Cost?
Generally less expensive Phase IESA because risk profile is much lower
Generally more expensive Phase I ESA because risk profile is significantly greater
Q & A
Why Phase I Should Not Be Viewed as a Commodity