More than one in five California sites with permitted above-ground storage tanks (ASTs) are in elevated flood risk areas, according to analysis by AEI Consultants using data from climate risk data provider ClimateCheck and environmental consulting firm ERIS.
“Containing Risk: Climate Data and Phase 1 ESAs - A Case Study of ASTs in High Flood Risk Regions” raises concerns about physical risk to ASTs containing hazardous substances or petroleum products going undetected, hampering prevention of environmental contamination. The paper, published in the Environmental Bankers Association’s bi-annual EBA Journal, argues that recognizing climate-driven flood risk to ASTs as part of Phase 1 Environmental Site Assessments (ESAs) could have “colossal implications in commercial real estate.”
"For many sites that FEMA classified as 'minimal' flood risk, ClimateCheck's more comprehensive data identified 'high' or even 'extreme' flood risk due to climate change. FEMA maps aren't designed to account for future flood risk," said ClimateCheck CEO Cal Inman.
FEMA flood maps can include outdated information and incomplete data, and they only track some types of flooding. ClimateCheck’s data, which was used in the paper’s analysis, uses a wide range of statistical models and climate data sources to paint a more accurate, complete picture of risk for real estate investors and real estate investment trusts (REITs).
The paper argues that risk of potential flood could qualify as a recognized environmental condition (REC) as part of Phase 1 ESAs. If there were consensus within the environmental consulting and environmental banking industry to recognize potential flood risk to a property as a REC, the paper says the shift would serve as “the first domino in a long line of consequential outcomes,” starting with Phase 1 ESAs identifying a higher number of RECs.
More RECs would require real estate investors to spend more time and resources updating anchoring and containment systems for ASTs. Lenders would need to expand the scope of consideration for underwriting CRE loans. Guides, standards and regulations for assessing risk would also need to be revised.
For deeper analysis and exploration of implications for commercial real estate, read the full paper, “Containing Risk: Climate Data and Phase 1 ESAs - A Case Study of ASTs in High Flood Risk Regions,” in EBA Journal.