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Clarity & Chaos: Environmental Site Assessments
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David R. Gillay, Esq., Barnes & Thornburg LLP


The national due diligence framework was profoundly changed by the following two key developments. First, ASTM’s Committee E50 on Environmental Assessment, Risk Management and Corrective Action clarified many aspects of good commercial and customary practices for conducting environmental due diligence in its newest standard. Second, US EPA promulgated a final rule amending the standards and practices for conducting All Appropriate Inquiry or “AAI.” Notwithstanding good faith efforts to coordinate with key stakeholders, the new standard and amended rule create unnecessary chaos for environmental and legal professionals responsible for navigating their clients successfully through environmental due diligence and securing and then maintaining landowner (and tenant) liability protections.

On November 6, 2013, ASTM announced its newest edition of a Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process, (often referred to as the “new Phase I ESA” or “E1527-13”). The new Phase I ESA replaces and supersedes the previous Phase I ESA standard (“E1527-05”). The E1527-05 standard sunset after eight years and the ASTM Committee E50 worked hard to revise key aspects of that standard to ensure that its changes were timely finalized.

There are several key clarifications in E1527-13. First, the new standard simplifies the definition of “Recognized Environmental Conditions” (REC), and clarifies the definition of “Historical REC” such that the term only includes prior releases that have been cleaned up to allow unrestricted land use. E1527-13 clarifies that a Phase I ESA should consider subsurface migration of vapors from a release. The definition of ‘migration’ was specifically modified to include vapor migration. This “clarification” has spawned controversy and debate about how to address soil gas or “vapors” in a transaction. More on this controversy follows below. The ASTM Committee also added a new term, “Controlled Recognized Environmental Condition,” which refers to a release that has been remediated, but still may be the basis for ongoing or future land use or exposure control obligations, such as institutional controls. Finally, the new standard places more specific emphasis on conducting regulatory file reviews, particularly of adjacent properties. There are many other important changes and we encourage a close examination of the new standard to determine if and how this affects your individual or client’s due diligence practices.

US EPA attempted to synchronize a rulemaking effort to simply replace the old E1527-05 with the new E1527-13. See EPA’s August 15, 2013 rulemaking effort at 78 FR 49690 and 49714. The final rule was delayed due to comments and differing perspectives as to how US EPA should amend its rule. Finally, on October 6, 2014, EPA issued a rule stating that ASTM 1527-13 is equivalent to its “AAI” rule and replaced reference to the old 1527-05 standard. See 79 FR 60087. The effective date for this rule, however, is October 6, 2015. Unfortunately, the mechanisms of that approval and US EPA’s position on vapor migration have led to some uncertainty in the marketplace.

The amended rule establishes that the new E1527-13 Standard constitutes “AAI” for purposes of applying various provisions of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund), such as innocent landowner and bona fide prospective purchaser (“BFPP”) liability protections. These landowner liability protections, which also extend to tenants, are critical to the successful redevelopment of Brownfield sites across the country. Between now and October 6, 2015, when the new rule goes into effect, US EPA and several state regulators are recommending using the new E1527-13 standard. You should always carefully consider any state-specific rules that may apply to your transaction and other site-specific considerations when determining how to qualify for any applicable liability protections.

A growing number of concerns and on-going controversy flows from US EPA’s position that vapor migration was always as part of the AAI process. This has immediate and far-reaching implications for Environmental Professionals and those seeking to qualify and maintain important liability protections. During the recent rule-making process, US EPA made, among others, the following relevant statements on vapor releases and migration of vapors:

  • “EPA notes that both the AAI Rule and the ASTM E1527-05 standard already call for the identification of potential vapor releases or vapor migration at a property.” (78 FR 79319)
  • “EPA wishes to be clear that, in its view, vapor migration has always been a relevant potential source of release or threatened release that, depending on site-specific conditions, may warrant identification when conducting AAI.” Id.
  • “The scope of the AAI Rule and ASTM E1527-05 standard always included the requirement to identify all indications of releases and threatened releases of hazardous substances or ‘recognized environmental conditions (RECs)’, including indications of vapor migration or vapor releases.” (79 FR 60088). 

US EPA’s position would likely be given substantial weight and deference in litigation and warrants a critical assessment of any past or pending Phase I ESAs regarding how vapor migration was or is addressed. If it is determined that vapor migration or vapor release constitute a REC, then there may be far-reaching continuing obligations that are triggered and that must be implemented after the closing or property transfer to maintain any applicable liability protections.

The new Phase I ESA provides an excellent platform to tailor your environmental due diligence practices and strikes the proper balance among multiple purposes and objectives in connection with such activities. You should carefully consider when, where, and how to utilize the new Phase I ESA. If you don’t have a policy to address vapor migration, vapor encroachment, or vapor intrusion, we encourage you to consult experienced legal counsel and environmental professionals prior to performing due diligence or attempting to qualify for any applicable liability protections under CERCLA.

If you have any questions or would like additional information, please contact David R. Gillay, Esq., Chair of the Brownfields & Environmental Transactional Diligence Practice Groups, Barnes & Thornburg LLP, at 317-231-7474 or david.gillay@btlaw.com.

This Barnes & Thornburg article should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.

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