Phase I Environmental Site Assessment Practice Questions

Question 1 of 5

How does the legalization of cannabis in Canada affect the environmental assessment of properties used for personal growing (up to 4 plants)?

• ALegal personal growing creates identical environmental concerns as commercial grow operations, and under the environmental due diligence framework that includes Phase I investigation, potential Phase II testing, and remediation planning as circumstances require, given that the property's current and historical use is consistent with the surrounding land use pattern and there are no identified sources of potential contamination on or adjacent to the site
• BLegal personal growing (up to 4 plants) creates minimal environmental concern compared to commercial operations: (1) scale — 4 plants do not generate the humidity, chemical, or electrical issues associated with large-scale operations, (2) growing methods — personal growers typically use small tents or window-sill growing that does not modify building systems, (3) however, even personal growing can create minor moisture issues if not properly managed, (4) the environmental assessment concern with personal growing is primarily about ensuring it has not been used as a cover for larger illegal operations — 4 plants in a tent is different from 400 plants in a basement, (5) for property transactions: personal growing at legal scale is unlikely to trigger environmental assessment requirements or affect property value, (6) but the registrant should still assess whether the actual growing matches the claimed scale — evidence of extensive modifications suggests operations beyond the legal personal limit
• CAny cannabis growing on a property requires full environmental remediation, particularly where the Phase I environmental site assessment did not identify any recognized environmental conditions requiring further investigation, and given that the property's current and historical use is consistent with the surrounding land use pattern and there are no identified sources of potential contamination on or adjacent to the site
• DThe Cannabis Act eliminated all environmental concerns related to growing cannabis, and under the environmental due diligence framework that includes Phase I investigation, potential Phase II testing, and remediation planning as circumstances require, given that the property's current and historical use is consistent with the surrounding land use pattern and there are no identified sources of potential contamination on or adjacent to the site

Question 2 of 5

A buyer's Phase 1 ESA was completed 14 months ago. The buyer now wants to use it for a new purchase of the same property. Is the Phase 1 still valid?

• APhase 1 ESAs never expire and can be reused indefinitely
• BPhase 1 ESAs are valid for exactly 5 years from completion
• CPhase 1 ESAs have a limited shelf life — CSA Z768 and industry practice generally consider a Phase 1 valid for 12-18 months, after which an update is recommended: (1) conditions may have changed — new contamination sources, spills, or regulatory actions may have occurred since the original assessment, (2) lender requirements — most lenders require a Phase 1 completed within the past 12 months for financing purposes, (3) update option — rather than a full new Phase 1, the environmental consultant may be able to provide a cost-effective update that reviews changes since the original assessment, (4) at 14 months, the report is at the edge of typical acceptance — the buyer should check with their lender and consider whether any changes to the property or surrounding area have occurred since the original assessment
• DA Phase 1 ESA is only valid for the specific buyer who commissioned it, and real estate, as the applicable regulatory framework and industry practices establish the standards and procedures that govern how this type of matter is addressed in Ontario real estate

Question 3 of 5

What are petroleum hydrocarbons, and why are they the most common type of environmental contamination found in Ontario real estate?

• APetroleum hydrocarbons are synthetic chemicals found only in industrial settings, under the environmental due diligence framework that includes Phase I investigation, potential Phase II testing, and remediation planning as circumstances require, particularly where the Phase I environmental site assessment did not identify any recognized environmental conditions requiring further investigation
• BPetroleum hydrocarbons break down naturally within weeks and are not a long-term concern, under the environmental due diligence framework that includes Phase I investigation, potential Phase II testing, and remediation planning as circumstances require, given that the property's current and historical use is consistent with the surrounding land use pattern and there are no identified sources of potential contamination on or adjacent to the site
• CPetroleum hydrocarbons (PHCs) are compounds derived from crude oil and petroleum products — gasoline, diesel, heating oil, motor oil, and lubricants; they are the most common contamination type because: (1) fuel storage and handling has been ubiquitous across commercial, industrial, and residential properties for over a century, (2) underground and above-ground storage tanks leak over time due to corrosion, (3) fuel spills from delivery, handling, and vehicle operations are common, (4) heating oil tanks — found on thousands of Ontario residential and commercial properties — are a major contamination source, and (5) PHCs in soil and groundwater can persist for decades and migrate significant distances
• DPetroleum contamination only occurs at gas stations and refineries, based on the environmental assessment protocols that evaluate contamination risk, remediation requirements, and compliance status under the applicable provincial legislation, particularly where the Phase I environmental site assessment did not identify any recognized environmental conditions requiring further investigation

Question 4 of 5

A Phase 1 ESA report identifies three Areas of Potential Environmental Concern (APECs). What does this mean for the transaction?

• AThe property cannot be sold until all APECs are resolved, based on the environmental assessment protocols that evaluate contamination risk, remediation requirements, and compliance status under the applicable provincial legislation, and under the environmental due diligence framework that includes Phase I investigation, potential Phase II testing, and remediation planning as circumstances require
• BAPECs only affect the property if the buyer plans to change the land use, under the environmental due diligence framework that includes Phase I investigation, potential Phase II testing, and remediation planning as circumstances require, and based on the environmental assessment protocols that evaluate contamination risk, remediation requirements, and compliance status under the applicable provincial legislation
• CAPECs automatically mean the property is contaminated and must be remediated, based on the environmental assessment protocols that evaluate contamination risk, remediation requirements, and compliance status under the applicable provincial legislation
• DAPECs indicate that Phase 1 research found evidence suggesting possible contamination that requires further investigation — the buyer's options include: (1) proceeding to a Phase 2 ESA to test soil, groundwater, or air quality at the identified APECs to determine whether actual contamination exists, (2) negotiating a price reduction to reflect the risk and potential remediation costs, (3) requiring the seller to complete Phase 2 testing (and potentially remediation) as a condition of closing, (4) walking away from the transaction if the risk level is unacceptable, or (5) accepting the risk with full knowledge — the APECs are identified concerns, not confirmed contamination; Phase 2 testing may reveal no actual contamination

Question 5 of 5

A registrant's client is purchasing a property where the municipal records show three heating oil tank permits were issued over the property's history, but only one tank removal permit exists. What does this suggest?

• AMunicipal permit records are unreliable and should be ignored, and real estate
• BOnly the most recent tank is relevant to the current transaction, as the applicable regulatory framework and industry practices establish the standards and procedures that govern how this type of matter is addressed in Ontario real estate
• CThe permit discrepancy suggests two tanks may still be on the property: (1) three installation permits with only one removal permit means two tanks may remain — either in operation, abandoned in place, or removed without permits, (2) the buyer should investigate: request records from TSSA, examine the property for physical evidence (fill caps, vent pipes, copper supply lines), and consider ground-penetrating radar scanning if physical evidence is ambiguous, (3) abandoned tanks that were never removed continue to corrode and may contain residual fuel, creating ongoing contamination risk, (4) the discrepancy may have innocent explanations — permits may not have been required for removal at certain dates, or records may be incomplete — but the conservative approach is to investigate rather than assume, (5) the investigation cost ($1,000-$3,000 for non-intrusive scanning) is minimal compared to the potential cost of undiscovered tanks
• DPermit records only show the most recent tank, not historical ones, and real estate, as the applicable regulatory framework and industry practices establish the standards and procedures that govern how this type of matter is addressed in Ontario real estate