On December 30, 2013, the U.S. Environmental Protection Agency (EPA) issued its final rule approving the use of ASTM International’s revised “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process,” ASTM E1527-13, for meeting the “All Appropriate Inquiries” standard under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and its implementing regulations at 40 C.F.R. Part 312. EPA had issued a final rule approving the revised standard on August 15, 2013, but withdrew that rule due to adverse public comments. The new final rule addresses those comments and does not provide an additional comment period. The rule went into effect on December 30, 2013. Although the new rule does not prohibit the continued use of the previous ASTM E1527-05 standard, EPA states its intent to publish a proposed rule, in the near future, to amend the All Appropriate Inquiries final rule to remove the reference to the previous ASTM E1527-05 standard. The anticipated proposed rule will allow for public comment.
All Appropriate Inquiries and Defending Against Environmental Liabilities
CERCLA allows the government and private parties to recover their appropriate cleanup costs from any one of four categories of “covered persons:”(1) current owners and operators of a facility with contamination; (2) former owners and operators of a facility at the time that hazardous substances were disposed of at the facility; (3) parties that arranged for the disposal or treatment of hazardous substances to a contaminated facility; and (4) parties that accepted hazardous substances for transport to disposal or treatment facilities from which there is a release of hazardous substances.
CERCLA is a strict liability statute and three of its very limited available defenses – for innocent purchasers, bona fide prospective purchasers and contiguous property owners – all require property owners to prove that they conducted All Appropriate Inquiries into a property prior to purchase. In 2005, EPA adopted standards and procedures for meeting the All Appropriate Inquiries requirement, such as investigating past uses of the property. See 40 C.F.R. § 312. These standards provided that parties could meet the All Appropriate Inquiries requirement by complying with the ASTM standard in place at the time, ASTM E1527-05, “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process.” ASTM E1527-05 requires parties to follow specific procedures for investigating a property’s history in order to identify recognized environmental conditions (RECs) – conditions indicating a potential past release, or threatened release, of a hazardous substance – and historical recognized environmental conditions (HRECs) – conditions that would have been RECs in the past, but for one or more various reasons are no longer RECs.
Changes to the All Appropriate Inquiries Standard
In anticipation of the upcoming issuance of a revision to the ASTM standard, EPA’s final rule of August 15, 2013 approved the use of the revised standard, which ASTM International then adopted as ASTM E1527-13 on November 6, 2013. EPA’s December 30, 2013 final rule adopts E1527-13 as issued by ASTM International.
Although ASTM E1527-13 is not a significant departure from ASTM E1527-05, there are three noteworthy changes: (1) updates to the definitions of RECs and HRECs, and the addition of a requirement to identify controlled recognized environmental conditions (CRECs); (2) the addition of requirements to assess the potential for vapor intrusion; and (3) the inclusion of additional steps in the regulatory file-review process and mandatory user responsibilities.
RECs, HRECs, and CRECs
ASTM E1527-13 simplifies the definition of REC to single out conditions that indicate a release or threatened release of hazardous substances at the property. A REC is defined in ASTM E1527-13 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."
The new standard clarifies the distinction between HRECs and RECs by limiting HRECs to circumstances where the release has been remediated to the satisfaction of the applicable regulatory body, or to the level of having unrestricted residential use, without any required controls on the property, such as property-use restrictions, activity and use limitations, institutional controls, or engineering controls. Importantly, HRECs must meet the current standards for unrestricted use, and not those that were in effect at the time the release was addressed.
ASTM E1527-13 adds a new definition for a 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…"
CRECs must be identified in the findings section of a Phase I report, but must be categorized as RECs in the conclusions section.
ASTM E1527-13 also amends the definition of “de minimis conditions” to clarify that the term does not extend to RECs requiring environmental controls or use restrictions.
The new standard requires the assessment of vapor intrusion risks as part of the Phase I process. The standard explicitly includes vapor intrusion by adding a definition of “migrate/migration,” which includes the “movement of hazardous substances or petroleum products in any form, including, for example . . . vapor in the subsurface.”
Regulatory File Reviews and User Responsibilities
ASTM E1527-13 includes additional regulatory file-review requirements. If a property, or an adjoining property within the required search distance, appears on a federal, state or tribal record, the standard requires, within the environmental professional’s discretion, the review of “pertinent regulatory files and/or records associated with the listing.” If the environmental professional chooses not to conduct a file review, he/she must document the reason(s) for this decision in the Phase I report.
In addition, the client for whom a Phase I is prepared, referred to as a “user,” must search recorded land-title records and judicial records in a county clerk’s office for environmental liens and activity and use limitations, and then report such information to the environmental professional. The environmental professional may conduct this work instead of the user, but does not have an affirmative obligation to do so. These user responsibilities are now mandatory, and the user must also consider its own specialized knowledge, commonly known or reasonable ascertainable information about the property, and the degree of obviousness of the presence or likely presence of releases or threatened releases.
Impact of the New Standard
The changes to ASTM E1527-13 confirm the existing procedures for conducting Phase I Environmental Site Assessments and support the current regulatory framework requiring All Appropriate Inquiries. The revisions to the standard are relatively minor. In fact, many of the larger consulting firms routinely have been conducting the now-required environmental lien searches and regulatory file reviews, and have been evaluating vapor intrusion issues, as part of their Phase I Environmental Assessments.
Nevertheless, the revised definitions could result in the identification of more RECs, e.g., hazardous substances in vapor, and the new CREC category likely will encompass releases that had been identified as de minimis conditions or HRECs under the old standard. The CREC category may even include releases that were not identified at all under the prior standard. Moreover, because HRECs must meet the current standards for unrestricted use, and not those that were in effect at the time the release was addressed, historical releases that do not meet current cleanup standards will now need to be identified as RECs, even if they were adequately addressed in the past. We also anticipate some additional time and expense to comply with the file-review requirements, so it will be particularly important for consultants to begin those reviews as soon as possible after receiving authorization to proceed.
In sum, we expect that the use of the new standard – particularly the CREC category, and the clarification of the HREC definition – will result in more clarity in Phase I findings and will better enable the parties to a transaction to identify risks associated with purchasing contaminated properties.