Phase 1 and Phase 2 environmental reviews for AI data center sites

In short

Under CERCLA, the federal Superfund law, a current owner or operator of contaminated property can be held strictly liable for cleanup costs. This means they can be forced to pay even if the contamination happened before they bought the land. 42 U.S.C. § 9607(a) To claim one of the landowner liability protections, a buyer must perform All Appropriate Inquiries (AAI) before the purchase. 40 CFR § 312.20(a) A Phase I Environmental Site Assessment that follows ASTM E1527-21 is an accepted way to meet AAI. 87 Fed. Reg. 76579 A Phase I ESA is a non intrusive review of records, site conditions, and interviews. It identifies Recognized Environmental Conditions (RECs), signs that hazardous substances or petroleum may be present. EPA guidance The Phase I must be completed within one year before acquisition, and five core components must be done or updated within 180 days. 40 CFR § 312.20 If a Phase I finds a REC, a Phase II ESA may follow. A Phase II ESA involves physical sampling of soil, groundwater, or vapor to confirm contamination. For AI data center sites, the most common risks include diesel fuel storage for backup generators, PFAS contamination, and existing contamination on brownfield sites. A Phase I ESA typically costs $2,000 to $6,000-plus and takes 10 to 15 business days. A Phase II ESA can cost $5,000 to $50,000 and take 4 to 8 weeks. If contamination is found, remediation can run $50,000 to over $2 million and add 6 to 24 months to the project. Provident Data Centers white paper

Why CERCLA makes environmental reviews essential for AI data center sites

The Comprehensive Environmental Response, Compensation, and Liability Act imposes liability on the owner and operator of a facility where hazardous substances have been released. 42 U.S.C. § 9607(a) In everyday terms, that means the current owner can be ordered to pay for a cleanup that someone else caused. There is no need to prove fault.

For a company buying land to build an AI data center, this is a serious financial threat. Cleanup costs often reach six or seven figures. For that reason, Congress created three landowner liability protections, including the innocent landowner defense, the bona fide prospective purchaser (BFPP) protection, and the contiguous property owner protection. EPA Superfund Landowner Liability Protections Each one requires the buyer to conduct All Appropriate Inquiries into the property’s past uses before closing.

The 2018 BUILD Act expanded the BFPP protection to certain commercial tenants and lessees who acquire a leasehold interest. ASTM E1527-21 § 4.2.2, Note 1 So a developer or operator signing a long term AI data center lease may also need to perform AAI. Environmental due diligence is not just a purchase step. It can apply to major leases too.

What is a Phase I Environmental Site Assessment under ASTM E1527-21?

A Phase I ESA is a non intrusive investigation. It does not involve taking soil, water, or air samples. Instead, it requires five components including a records review, a site reconnaissance, interviews with present and past owners, operators, occupants, and local government officials, a search for environmental cleanup liens, and a report. Phase I ESA scope analysis

The main job of a Phase I is to find Recognized Environmental Conditions, or RECs. A REC is a condition that shows hazardous substances or petroleum products are present, are likely present, or pose a material threat of a future release. The standard also defines Historical RECs, which are past releases that were cleaned up to unrestricted use standards, and Controlled RECs, where contamination was left in place but is managed through land use restrictions.

The EPA recognizes ASTM E1527-21 as the current standard that satisfies the AAI rule. As of February 13, 2024, the older ASTM E1527-13 no longer qualifies. After that date, parties that choose to use an ASTM E1527 Phase I ESA for a CERCLA defense must use the 2021 version. 87 Fed. Reg. 76579

The four standard historical sources

Under the 2021 standard, the environmental professional must review four specific types of historical information for the subject property and adjoining properties, including historical aerial photographs, fire insurance (Sanborn) maps, city directories, and topographic maps. If any of these cannot be reviewed, the professional must explain why in the report.

The user’s responsibility

The ASTM standard assigns one task squarely to the user, the buyer or developer who commissions the Phase I. The task is to perform the search for environmental cleanup liens and activity and use limitations. This is not the environmental professional’s job unless the contract says otherwise. Standard practice overview

Vapor encroachment screening

The Phase I ESA also includes a vapor encroachment screen, or VES. It uses the assessment data to evaluate whether volatile chemicals from contaminated soil or groundwater on or near the site could travel as vapors into the soil and rock above the water table, known as the vadose zone. A separate standard, ASTM E2600-22, provides a detailed two tiered process for this screening. Under ASTM E2600-22, a vapor encroachment condition either exists or does not exist, a simpler answer than the four category system in earlier versions. ASTM E2600-22 The VES has its own freshness rule. It is presumed valid if completed less than 180 days before acquisition. A VES with information collected or updated within one year may be used if five specified components were conducted or updated within 180 days. ASTM E2600-22 § 4.6

The All Appropriate Inquiries deadline and the 180 day rule

A Phase I ESA is not good forever. To serve as AAI, All Appropriate Inquiries must be conducted within one year before the date of acquisition. 40 CFR § 312.20(a) But even within that one year window, five specific components must be performed or updated within 180 days before acquisition. Those components are interviews with past and present owners, operators, and occupants, a search for recorded environmental cleanup liens, a review of federal, tribal, state, and local government records, a visual inspection of the facility and of adjoining properties, and the environmental professional’s written declaration. 40 CFR § 312.20(b)

Here is how the rule works in practice. If the Phase I was completed fewer than 180 days before closing, the report is current and no updates are needed. If it was completed between 180 days and one year before closing, the five components must be updated, but the rest of the report can stand. If it was completed more than one year before closing, a new or substantially updated Phase I is required. 40 CFR § 312.20

Who can perform a Phase I ESA?

Federal law requires that AAI be conducted or overseen by an environmental professional. 40 CFR § 312.21(a) An environmental professional must hold a current professional engineer or professional geologist license, or have a bachelor’s degree or higher in a relevant science or engineering field plus five years of full time environmental experience, or have at least ten years of relevant full time experience. 40 CFR § 312.10

How does PFAS affect Phase I ESAs for AI data centers?

Effective July 8, 2024, the EPA added two specific perfluoroalkyl and polyfluoroalkyl substances, PFOA and PFOS, to the list of CERCLA hazardous substances. EPA, Law firm analysis, Client alert, Client alert, Final rule These chemicals, often called forever chemicals, are widely used in firefighting foams and industrial processes. A Phase I ESA under ASTM E1527-21 must identify recognized environmental conditions connected to hazardous substances. So PFOA and PFOS now fall within the Phase I’s scope. Before the designation, PFAS were a non scope item that a user could ask to evaluate optionally. Law firm analysis

The reportable quantity for a release of PFOA or PFOS is one pound in a 24 hour period, the lowest weight tier under the law. EPA PFAS Enforcement Discretion Policy At the same time, the EPA issued an enforcement discretion policy. The agency said it will focus enforcement on parties that manufactured PFAS or used them in manufacturing. It does not currently intend to pursue community water systems, municipal landfills, or local fire departments. But for an AI data center site, PFAS still matter. A nearby airport or military base may have used PFAS containing firefighting foams. And while the enforcement policy may shield some owners, a buyer still needs to know whether PFAS are present to gauge cleanup risk and future regulatory direction. The EPA has also announced plans to consider listing seven more PFAS as hazardous substances. EPA, Client alert

What is a Phase II Environmental Site Assessment?

A Phase II ESA is the second step, and it is intrusive. It involves taking physical samples of soil, groundwater, soil vapor, surface water, and sending them to a laboratory. The goal is to confirm whether contamination that a Phase I flagged as a REC actually exists, and if so, to map its nature and extent.

A Phase II may be conducted when a Phase I finds a recognized environmental condition, a controlled recognized environmental condition, or a significant data gap that affects the ability of the environmental professional to identify a recognized environmental condition. ASTM E1903-19

How a Phase II is structured

The ASTM standard requires the user and the Phase II Assessor to start by writing a clear statement of objectives, the specific questions the investigation needs to answer. Then they build a conceptual site model that shows potential contaminant source areas, pathways, and receptors. Based on that model, they design a sampling plan. It specifies which media to sample, how many samples to take, where to take them, and what analytical methods to use. ASTM E1903-19 § 7.5

Field methods can include soil borings, test pits, installing groundwater monitoring wells, ground penetrating radar surveys, and vapor and air sampling techniques. The entire process must follow quality assurance and quality control procedures, such as using field blanks, duplicate samples, and accredited laboratories. ASTM E1903-19

An iterative process

One round of sampling may not provide enough data to meet the objectives. The ASTM standard is flexible. Additional rounds of investigation can follow, and the process can continue until the data are sufficient. Alternatively, the user can redefine the objectives. For example, a brownfield AI data center project might decide to avoid a contaminated area rather than fully characterize it. If the data are insufficient to meet the stated objectives, the report must disclose that fact. ASTM E1903-19 § 1.3.2

The Phase II report

The final report must include field screening results, laboratory analytical results with interpretation, and a summary of findings. It may also include recommendations for further action. Under the standard, the Phase II ESA report includes preliminary recommendations for further action, which may range from additional investigation to remediation strategies. ASTM E1903-19 § 9, Intertek summary of ASTM E1903

How much do Phase I and Phase II ESAs cost and how long do they take?

The table below shows typical cost ranges and timelines based on current market data. All numbers are estimates and depend on the site.

Aegis Environmental, Provident Data Centers white paper, ECI Environmental

A Phase I ESA can be completed in under a week if needed, but the standard turnaround is about two to four weeks. The shelf life rules described above mean that even a recent Phase I may need an update if the acquisition takes longer than expected. A Phase II ESA adds substantial field work and laboratory time, and the iterative nature can stretch a complex site to several rounds.

Diesel generators and environmental risks at AI data center sites

Backup diesel generators are the most common environmental risk specific to AI data center sites. U.S. AI data centers had an estimated 55 GW of diesel generator capacity as of 2024. Better Data Center Project, March 2026, Latitude Media, March 2026 In Virginia alone, over 10,500 permitted generator units totaled 27 GW by the end of 2025. Better Data Center Project, March 2026 Diesel fuel is stored on site in underground storage tanks or aboveground tanks. A Phase I ESA treats diesel as a petroleum product. If a tank is older, lacks tightness testing records, or shows signs of a leak, the Phase I will flag it as a recognized environmental condition. That can trigger a Phase II investigation and possible source removal. Diesel tanks may also require a Spill Prevention, Control, and Countermeasure (SPCC) plan if aboveground storage exceeds 1,320 gallons. SPCC rule, 40 CFR Part 112

Real spills prove the risk is real. A 2008 leak at an AT&T data center in Bothell, Washington released 15,000 gallons of diesel, contaminating groundwater and requiring more than a decade of remediation. Better Data Center Project, March 2026 More recent spills include a 3,600 gallon leak at an Evoque data center in Massachusetts in 2023 and a 250 gallon spill during construction at a Microsoft site in Washington in 2024. Better Data Center Project, March 2026

Federal air regulations limit non emergency diesel generator operation to 100 hours per year for maintenance and testing, with up to 50 of those hours allowed for demand response. Emergency use during grid outages is not capped. Inside Climate News Despite the large number of generators, actual emissions from those rare test runs are often a small share of regional pollution. Virginia’s JLARC found that AI data center generators contributed less than 4 percent of regional NOx emissions. Engine Technology Forum

However, air permitting rules are tightening. Virginia has proposed a requirement for new AI data center air quality permits submitted after June 30, 2026 to use Tier 4 generators, which cut emissions by up to 90 percent compared to the older Tier 2 models. Better Data Center Project, March 2026 Community opposition can also derail projects. In April 2026, a public hearing in Port Washington, Wisconsin raised concerns that a planned AI data center campus could exceed one hour national NOx standards, sparking health objections. Daily Reporter, April 23, 2026

From a due diligence standpoint, the point is clear. Diesel storage tanks and the area around them require close inspection during a Phase I ESA, regardless of the generator tier.

Brownfield sites as AI data center locations

Brownfield sites are former industrial or commercial properties where real or perceived contamination is an issue. They can offer AI data center developers significant advantages. They often have existing electrical service, reinforced floors, high ceilings, and are near demand centers. One Northern Virginia example involved a former manufacturing facility that kept its 15 kV electrical service, 30 foot ceilings, and 250 psf floor capacity. Reusing the structure saved an estimated $1.8 million in upgrades and shaved four months off the schedule. Provident Data Centers white paper

But brownfields come with the liability risk explained earlier. The EPA estimates there are over 450,000 brownfield sites in the United States. EPA Typical contaminants include petroleum hydrocarbons from underground tanks, heavy metals, volatile organic compounds, PCBs from old electrical equipment. Provident Data Centers white paper

The EPA has recognized the opportunity. In response to a July 2025 Executive Order on accelerating federal permitting of AI data center infrastructure, the EPA issued guidance in January 2026 on redeveloping Superfund and brownfield sites as AI data centers. EPA guidance A well known success is the Meta Forest City Data Center in North Carolina. Two former textile and manufacturing brownfield parcels became a 500,000 square foot, 30 MW campus with LEED Gold certification. EPA Brownfields assessment funding supported the site reuse. EPA

States also run voluntary cleanup programs. Texas’s TCEQ Voluntary Cleanup Program can take 12 to 36 months and cost $95,000 to $2.1 million-plus in total costs, not counting TCEQ oversight charges. Provident Data Centers white paper Virginia’s Brownfields Restoration and Economic Redevelopment Assistance Fund had $2.25 million funded for fiscal year 2026. Assessment and planning grants go up to $50,000, and site remediation grants up to $500,000, each requiring a 1:1 match. Virginia also has a Voluntary Remediation Program. Virginia DEQ

The track record is not all success. Three infill AI data center projects failed in 2024 and 2025, representing what would have been $2 billion in combined spending. Provident Data Centers white paper

Business environmental risks beyond the Phase I scope

ASTM E1527-21 identifies several conditions that a standard Phase I ESA does not have to investigate. These are called non scope considerations or business environmental risks. They can still be critical for an AI data center project, and the user can agree to evaluate them as extra services. The list includes asbestos containing building materials, lead based paint, radon, mold, wetlands, threatened and endangered species, and indoor air quality. ASTM E1527-21 § 13

For an AI data center, several site specific risks matter. If the property sits in a floodplain, equipment vulnerability and insurance costs increase. Seismic zone classification affects structural design. Wetlands or other waters of the United States on the property trigger Clean Water Act permitting, especially Section 404 for fill and Section 401 for water quality certification. Endangered species can trigger Endangered Species Act consultation. U.S. Fish and Wildlife Service These factors do not determine CERCLA liability, but they do determine whether the site is buildable at all.

Key takeaways

• Current owners of contaminated property face strict CERCLA liability even if they did not cause the release. Conducting All Appropriate Inquiries before acquiring the site is the only reliable shield.
• A Phase I ESA under ASTM E1527-21 is the recognized tool for AAI. Any report following the older ASTM E1527-13 cannot satisfy AAI after February 13, 2024.
• The Phase I must be completed within one year before the acquisition. Five specific components must be updated within 180 days if the report is older than that. Do not let a deal delay push the report past its shelf life without an update.
• The environmental professional must meet federal qualifications. The user, not the EP, must perform the cleanup lien and land use restriction search.
• PFAS PFOA and PFOS are now CERCLA hazardous substances. Phase I ESAs must evaluate them. Watch for PFAS at sites near airports, military bases, or fire training areas.
• If a Phase I finds a recognized environmental condition, a Phase II ESA with physical sampling is the next step. The Phase II is iterative and can uncover costly contamination, but it reduces unknowns.
• Diesel backup generators are the biggest AI data center specific environmental risk. Underground storage tanks and the potential for spills must be examined carefully. Real spills have reached thousands of gallons.
• Brownfield sites can shorten the path to power and lower structural costs, but contamination risk can quickly outweigh those savings. State voluntary cleanup programs and EPA guidance provide pathways, but remediation can cost more than $2 million and add years.
• Non scope conditions like wetlands, endangered species, and floodplains can stop a project even when the Phase I comes back clean. Treat them as part of the overall site feasibility review.

Frequently asked questions

Q:What is the difference between a Phase I and a Phase II ESA?

A:
A Phase I ESA is a non intrusive records review and inspection that identifies signs of contamination. A Phase II ESA involves taking physical samples of soil, groundwater, or vapor and sending them to a laboratory to confirm whether contamination is present. ASTM E1903-19

Q:Does a Phase I ESA require soil or water sampling?

A:
No. A Phase I ESA is entirely non intrusive. If sampling is needed, that becomes a Phase II ESA. ASTM E1903-19

Q:How long is a Phase I ESA valid?

A:
All Appropriate Inquiries must be conducted within one year prior to the date of acquisition, provided that five specified components are updated within 180 days before the acquisition. If the inquiries were completed more than one year before acquisition, they no longer satisfy the requirement. 40 CFR § 312.20

Q:Can I rely on a Phase I ESA prepared for a previous buyer?

A:
It depends. If the report is recent, § 312.20(d) lets you use a Phase I prepared for another person, though many firms require a reliance letter and fee as a commercial matter. More importantly, you must still satisfy the AAI timing rules. If the report is near the 180 day mark, updates will be needed. And All Appropriate Inquiries must include a search for recorded environmental cleanup liens. 40 CFR § 312.20

Q:What happens if my Phase I finds a recognized environmental condition?

A:
ASTM E1903-19 provides the standard process for a Phase II ESA, which tests for the presence or likely presence of contamination through sampling and laboratory analysis. ASTM E1903-19

Q:Are PFAS now part of a Phase I ESA?

A:
Yes. Since July 8, 2024, PFOA and PFOS have been hazardous substances under CERCLA. An ASTM E1527-21 Phase I ESA must consider them as potential recognized environmental conditions. EPA

Q:Do I need a Phase I ESA if I am only leasing the property for an AI data center?

A:
The 2018 BUILD Act extended the BFPP liability protection to certain commercial tenants who conduct AAI. Even if you are leasing, a Phase I ESA may help you qualify for that protection. ASTM E1527-21 § 4.2.2, Note 1 You should consult counsel to assess the specific lease terms and risks.

Q:What is the biggest environmental risk unique to AI data center sites?

A:
Diesel fuel storage for backup generators. Belly tanks are the most common on-site diesel storage at AI data center campuses, and leaks can cause significant soil and groundwater contamination. Spills at operating data centers are documented events. Better Data Center Project, March 2026

Q:Are brownfield sites a good idea for AI data centers?

A:
They can be. They often have existing power infrastructure and structural advantages that save money and time. But the contamination risk is real. EPA guidance requires environmental due diligence (All Appropriate Inquiries) before owning a brownfield site, emphasizes careful alignment to cleanup standards as critical for success, and points to state and federal brownfields assistance programs as key resources. EPA

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Junde Liu, JD, LL.M. (Taxation) candidate at UF Law. Originally published on Compute Law Blog. This article is general information and does not constitute legal advice. Reading it does not create an attorney client relationship. The reader should not act on the basis of any content here without first consulting a licensed attorney in the relevant state. Last reviewed for accuracy May 23, 2026.