On August 15, 2013, USEPA published a direct final rule in the Federal Register approving use of new ASTM Standard E 1527-13, “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process” to satisfy the All Appropriate Inquiry (AAI) requirements under Section 101(35)(B) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and set forth in 40 CFR 312.20. Performing environmental due diligence in compliance with the AAI requirements provides a basis for property purchasers to assert certain defenses to environmental remediation liability under CERCLA as an innocent purchaser, bona fide prospective purchaser or contiguous landowner. The rule becomes effective November 13, 2013 unless USEPA withdraws the approval based on adverse public comments, which appears unlikely.
In the rulemaking, USEPA made clear that the existing ASTM Standard E1527-05 can still be used to satisfy AAI requirements. Depending on the cirumstance, ASTM E1527-05 may be less costly and take less time to complete than following the new standard. Therefore, purchasers, developers, lenders and investors will have the opportunity to consider whether compliance with new ASTM E1527-13 or the existing ASTM E1527-05 standard will provide the most benefit and least burden on a particular Phase I process. Some of the more significant changes adopted in ASTM E1527-13 that may impact time and costs are:
- The new recommendation to review regulatory files if the target property or adjoining properties appear in a public database listing. This could require several extra days/weeks as well as additional consultant travel and review time as compared to ASTM E1527-05, which does not contain this specific recommendation and often resulted in consultants relying only on public database search results to make environmental risk conclusions.
- The new specific requirement to evaluate the potential for hazardous vapors to migrate onto the target property.
- The revised definition of Historical Recognized Environmental Conditions (HREC) as a past release that has been addressed to the satisfaction of a regulatory authority or meets unrestricted use criteria. ASTM E1527-05 allowed a consultant more discretion in determining whether a condition is an HREC. Consequently, conditions considered as an HREC under ASTM E1527-05 may be considered a REC under ASTM E1527-13, triggering additional investigation.
Practically speaking, a consultant preparing Phase I ESAs consistent with ASTM E1527-05 should have been conducting file reviews and vapor assessments when circumstances warranted. The new standard now requires these actions, which takes some discretion away from the environmental consultant, but also results in a more thorough analysis of environmental conditions that should help ensure compliance with the AAI rules. Performing the additional due diligence actions up-front pursuant to ASTM E1527-13 also may actually save time since these actions were often only conducted under ASTM E1527-05 based on client or attorney recommendations to address issues identified in, or shortcomings of, a Phase I report after it was finalized. Lenders, too, may appreciate a more thorough look at environmental concerns under ASTM E1527-13. For these reasons, we will likely soon see ASTM E1527-13 as the industry norm.