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Navigating Due Diligence Assessments and Remediation in Massachusetts

In MA, do I need a 21E or Phase I ESA, an LSP or an EP?

Most lenders require a careful due diligence assessment of Commercial Real Estate (CRE) sites as part of their informed risk analysis for real estate assets. Assessment and remediation of contaminated sites is handled slightly differently in Massachusetts than the rest of the United States. In 1983, the Commonwealth of Massachusetts legislature enacted Massachusetts General Law Chapter 21E (Massachusetts Oil and Hazardous Material Release Prevention and Response Act), a statute encompassing issues related to the identification and cleanup of property contaminated by releases of oil and hazardous materials. Largely patterned after the 1980 Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) commonly known as Superfund, Chapter 21E provided for the assessment and remediation of hazardous sites.  Chapter 21E also established preliminary assessments for identifying potential or existing environmental contamination liabilities.

The Massachusetts Department of Environmental Protection (MassDEP) implemented the 21E program through a set of regulations known the Massachusetts Contingency Plan (MCP). Although Massachusetts does not regulate lender requirements for due diligence site assessments, if contamination above legally permissible concentrations is detected, the release must be reported to the MassDEP by the potentially responsible party and MCP response actions be undertaken to reach a permanent solution.  MCP response actions, including assessment and remediation, must be conducted under the oversight of a Licensed Site Professional (LSP), an environmental scientist or engineer specifically trained in the cleanup of oil and other hazardous materials.

The vast majority of CRE transactions, particularly when financed through a lender, require a Phase I Environmental Site Assessment, which in MA has become synonymous with a “Chapter 21E” by sheer virtue of established historical precedent. However, these assessments are not the same thing, so even when lenders ask for a 21E by shorthand, they’re referring to a Phase I ESA. ASTM’s Phase I Environmental Site Assessment, currently designated as ASTM E1527-13, has become the industry standard for CRE professionals. Although Partner can provide an LSP to review more complicated Phase I ESA reports, ESAs are generally conducted by environmental professionals who do not necessarily have to be LSPs. If a Phase I ESA determines a likelihood of site contamination or a recognized environmental condition, a more intrusive Phase II ESA (Subsurface Investigation) is performed to identify the nature of the hazardous materials and the severity of the release. Although Phase II ESAs do not have to be conducted by LSPs, Partner offers our clients the option to have our in-house LSP oversee it in case of site contamination that might necessitate an MCP program.

The MCP provides the regulatory framework for the reporting, assessment, and remediation of properties that have been contaminated by oil or hazardous materials. If a Phase II due diligence assessment detects impact to soil or groundwater above reporting thresholds, the MCP requires the potentially responsible party (i.e. owner, title holder, or operator of the property) to provide notification of the release to MassDEP. A LSP is then required to be retained to investigate and oversee the cleanup as specifically dictated by the parameters and time frame of the MCP regulations. The prospective buyer can then make a purchasing and/or release reporting decision based on the best recommendation from their LSP and assessment professional, along with abiding by Commonwealth of Massachusetts law.

Following the release notification, the MCP provides a timeframe for conducting response actions.  The types of response actions to be conducted are dependent on the complexity of the release site.  Preliminary Response Actions, including Initial Site Investigations (referred to as Phase I, but not to be confused with Phase I ESAs), Immediate Response Actions (IRAs), Release Abatement Measures (RAMs), Utility Release Abatement Measures (URAMS) are taken within one year of notification.  Preliminary response actions conducted for straightforward or uncomplicated releases may lead to a Permanent Solution to document the completion of response actions. If a Permanent Solution cannot be obtained within one year, Comprehensive Response Actions consisting of Phases II through V, allow for an additional five years to reach a Permanent Solution for more complex release sites.  The MCP includes regulations for the disposal of waste that is generated during response actions. 

The MCP is a semi-privatized program, but owner compliance and LSP work is audited by the MassDEP.  The audit process is required by statute (21E) to ensure compliance, consistency, credibility, and commitment.  Audits focus on Permanent Solutions statements, Notices of Activity Use Limitations (AULs), and remedial systems (such as Sub Slab Depressurization Systems). 

Some prospective buyers and developers walk away from deals if the price or scope of a remediation contingency is too daunting. There are several important considerations and incentives for compliance and following through with an MCP:

  • An overall shortage of available undeveloped land and a tight Massachusetts CRE market means the most attractive properties may be historical or industrial sites that are contaminated.
  • Cleaning up, restoring, and developing this type of land will skyrocket property value for future deals.
  • Per Massachusetts law, the title holder in possession of a property is the responsible party for notifying the MassDEP of contamination and engaging an LSP for remediation actions. Any legal liability, including audits or lawsuits, for health issues, contamination of nearby properties or discovery of hazardous materials, will fall to the responsible party.
  • Pertaining to the above, the cost for conducting response actions under the MCP can be, and very often is, an excellent negotiating tool for escrow and pricing of land purchase agreements.

Partner Engineering and Science, Inc. (Partner) and our team based in Framingham offers market-leading core expertise in both transactional Phase I and Phase II Environmental Site Assessments and LSP services, including MCP assessment and response actions across Massachusetts.

As an LSP myself, my role is managing the assessment process from start to finish. This includes frequent oversight of Partner’s Phase II ESAs in Massachusetts, even though this isn’t a MassDEP regulatory requirement. Drawing on my extensive knowledge of 310 CMR 40.0000 regulations (MCP), I help our clients understand the assessment and remediation process for impacted properties, including providing an initial remedial cost estimate. The variables of a response action timeline might depend on the levels and kind of contaminant present, the extent of hazardous waste spread and impact on adjacent properties, and what the property will ultimately be used for. We can help navigate these complexities of the MCP phases and remediation process, while conducting and signing off on cleanup and site release, as well as suggesting opportunities to procure external financial assistance for remediation if the development has public value (i.e. brownfield conversions).

Our goal as a team of environmental professionals and mine as a LSP is to work collaboratively with lenders, prospective buyers, and title holders to come up with cost effective solutions, manage risk, and facilitate sound property investments for the future.