On November 6, 2013, ASTM revised its standard for conducting Phase I environmental site assessments, known as Standard E1527-13 (entitled “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process”). ASTM E1527-13 is the first revision to the ASTM Phase I standard since its 2005 revision of the standard (known as ASTM E1527-05).
The ASTM standards are a helpful tool for parties seeking to avoid, or at least minimize, potential liability pursuant to the federal Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA,” also known as “Superfund”). CERCLA imposes liability without regard to fault or negligence on present facility owners and certain past owners, as well as certain other parties, for any environmental contamination found on the property. This means that a purchaser and current owner of land contaminated by the actions of others could be held liable under CERCLA for the cleanup of the property. Fortunately, CERCLA has a few defenses for these situations for so-called “innocent landowners,” “bona fide prospective purchasers,” and “contiguous property owners.” However, to qualify for these defenses, CERCLA requires a property owner to conduct “all appropriate inquiries” on or before the date of acquiring the contaminated property, among other requirements.
Prior to November 2005, there was no federally approved statute or regulation defining the procedure that a prospective purchaser must follow in conducting all appropriate inquiries. However, on November 1, 2005, the United States Environmental Protection Agency (“EPA”), issued a final rule entitled the “Standards and Practices for All Appropriate Inquiries.” Effective on November 1, 2006, the All Appropriate Inquiries Rule for the first time established federal standards and practices for conducting all appropriate inquiries, as a first step to qualifying for one of the elusive CERCLA defenses.
While establishing its own standards for how all appropriate inquiries should be conducted, the most important aspect of the All Appropriate Inquiries Rule from a practical standpoint was the rule’s endorsement of the ASTM E1527-05 standard for conducting Phase I assessments. Issued the same date as EPA’s All Appropriate Inquiries Rule, the ASTM E1527-05 standard provided a blueprint for environmental consultants to follow to ensure compliance with CERCLA’s all appropriate inquiries requirements.
However, because ASTM has recently revised (and replaced) its Phase I standard, there is some ambiguity regarding the applicable standard to follow to ensure compliance with CERCLA’s all appropriate inquiries requirement.
On August 15, 2013, EPA issued a direct final rule amending the All Appropriate Inquiries Rule, effective on November 15, 2013, to approve use of the ASTM E1527-13 standard to satisfy the all appropriate inquiries requirement. The rule also continued to allow use of the 2005 standard for that purpose. That same day, EPA also issued a proposed rule that contemplated amending the All Appropriate Inquiries Rule to approve use of the ASTM E1527-13 standard to satisfy the all appropriate inquiries requirement. The proposed rule sought public comments on the rule amendment. If you are confused about EPA issuing a direct final rule and proposed rule on the same day to accomplish the same goal, you are not alone. EPA did this to allow comments, via the proposed rule, on the amendment, because it did not expect any adverse comments.
However, EPA did receive subsequent adverse public comments. Several commenters raised concerns about EPA’s decision to continue to recognize the 2005 standard as compliant with the All Appropriate Inquiries Rule. In particular, some commenters indicated that referencing two standards with different requirements, as discussed below, makes it unclear what parties such as potential real estate purchasers seeking to benefit from the All Appropriate Inquiries Rule must do. Accordingly, EPA withdrew the direct final rule on October 29, 2013, before its effective date.
On December 30, 2013, in what feels like déjà vu, EPA issued a new final rule, effective immediately, amending the All Appropriate Inquiries Rule to approve use of the 2013 standard and to continue allowing use of the 2005 standard. However, perhaps in response to the public comments described above, EPA indicated that it intends to publish a proposed rule “in the near future” that will propose amending the All Appropriate Inquiry Rule to remove the reference to the ASTM 1527-05 standard. EPA will accept public comments on that forthcoming proposed rule.
There are a few important differences between the 2005 and 2013 ASTM standards:
Vapor intrusion pathway must be considered. ASTM added a definition of “migrate/migration,” which refers to the movement of hazardous substances or petroleum products in any form, including “vapor in the subsurface.” This definition means vapor intrusion risk, which is a quickly evolving area of environmental law, must be considered in the environmental site assessment process.
Simplified definition of “recognized environmental condition” (“REC”). ASTM simplified its definition of REC in the 2013 standard to encompass conditions that suggest a release or threatened release of a hazardous substance at the property. The term is now defined as “the presence or likely presence of any hazardous substances or petroleum products in, on, or at a property: (1) due to release to the environment; (2) under conditions indicative of a release to the environment; or (3) under conditions that pose a material threat of a future release to the environment. De minimis conditions are not recognized environmental conditions.”
“Historical recognized environmental condition” (“HREC”) definition limited. ASTM now defines HREC to mean a past release of hazardous substances or petroleum products that has been addressed to the satisfaction of the applicable regulatory authority or meets unrestricted use criteria without institutional or engineering controls (i.e., property suitable for residential use). However, a past release that may have previously constituted only an HREC could constitute a REC at the time of the report if, for example, regulatory cleanup criteria have been made stricter.
“Controlled recognized environmental condition” (“CREC”) added as a new term. ASTM has added a definition for CREC, which means “a recognized environmental condition resulting from a past release of hazardous substances or petroleum products that has been addressed to the satisfaction of the applicable regulatory authority (for example, as evidenced by the issuance of a no further action letter or equivalent, or meeting risk-based criteria established by regulatory authority), with hazardous substances or petroleum products allowed to remain in place subject to the implementation of required controls.”
Stricter regulatory file review requirement. The 2013 standard imposes a stricter standard for conducting regulatory file reviews. If the subject property or an adjoining property is listed on one or more of the standard environmental record sources that must be searched (e.g., the CERCLA National Priorities List of contaminated sites, the federal Resource Conservation and Recovery Act hazardous waste generator list, etc.), then the environmental professional should review “pertinent regulatory files and/or records associated with the listing.” If the environmental professional chooses not to conduct this review, he or she must explain why in the Phase I report. As an alternative to this file review, the environmental professional can review files and records from alternative sources, such as on-site records, user-provided records, etc., and include that information in the report along with a statement that the environmental professional believes this information is sufficient to evaluate RECs, HRECs, CRECs, and de minimis conditions.
What should a practitioner do? For the time being, compliance with either the 2005 or 2013 standard will technically satisfy the All Appropriate Inquiries Rule and potentially allow parties to reap the benefits of CERCLA’s landowner liability protections. However, ASTM indicated its 2005 standard has been superseded and replaced. In addition, EPA stated in its new rule that the 2013 standard includes improvements to the previous standard and recommends that environmental professionals and prospective purchasers use the 2013 standard. So it would be wise for those parties to begin complying with the 2013 standard now to ensure maximum potential protection from CERCLA’s onerous liability scheme.