In the past, a Phase I Environmental Site Assessment (ESA) was typically sufficient to meet the environmental due diligence requirements needed by the SBA. In order to simplify and standardize environmental due diligence, the SBA has developed specific environmental policies and procedures in their recently adopted Standard Operating Procedure (SOP) 50 10 5. Highlights of the environmental policies and procedures are summarized as follows:

1. The initial step is an evaluation of the property’s historical and current use against a list of environmentally sensitive (heavy industrial) NAICS codes.

A. If no NAICS code match is identified and the loan amount is less than $150,000, an Environmental Questionnaire is required, otherwise for loans amounts greater than $150,000, an Environmental Questionnaire and Records Search with Risk Assessment must be performed.

B. If the property use matches an environmentally sensitive NAICS code, environmental due diligence must begin with a Phase I Environmental Site Assessment.

2. Gas stations and dry cleaners pose a unique risk and have special requirements which are outlined in the new SOP. To summarize, gas stations require at a minimum a Phase I ESA and depending on the age and availability of existing environmental information may require additional assessment. In addition, all gas stations require an equipment survey to ensure all underground storage tanks and lines comply with current leak detection requirements.

Dry cleaners older than five (5) years require Phase I and II ESAs. Dry cleaners less than five (5) years of age require a Phase I ESA.

3. In addition, buildings constructed prior to 1980 used to house schools and day care facilities require lead and asbestos assessments.

In closing, because of the tougher financial environment which we all find ourselves in, the need to identify and manage risk is at an all time high.

ETS Environmental & Associates located at 315 W. Pine Street in Lodi, California has been providing environmental assistance to its clients since 1989. If anyone has a question concerning the SBA’s new policies described above or any other environmental, compliance or due diligence questions, please feel free to contact Dan Anderson at ETS Environmental & Associates, Inc at (209) 334-1442 or visit our website at WWW.ETS-Environmental.com.