Scarinci Hollenbeck, LLC
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201-896-4100 info@sh-law.comFirm Insights
Author: Scarinci Hollenbeck, LLC
Date: January 7, 2022
The Firm
201-896-4100 info@sh-law.comOn November 1, 2021, the American Society for Testing and Materials (ASTM) Committee on Environmental Assessment, Risk Management and Corrective Action (E-50) revised its standard for conducting Phase I Environmental Site Assessments (ESAs). Phase I ESA’s facilitate commercial property transfers that satisfy the U.S. Environmental Protection Agency (EPA) All Appropriate Inquiries Rule (AAI Rule), as defined by the federal Superfund law (CERCLA), and 40 C.F.R. § 312.11. They also aid in the underwriting of mortgage loans and inform prudent risk management and decision-making.
The AAI process evaluates a property’s environmental conditions and assesses potential liability for any contamination. The 2002 Brownfields Amendments to CERCLA required the EPA to promulgate regulations establishing standards and practices for conducting AAI. The AAI final rule provides that the current versions of ASTM International Standard E1527 “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process” and E2247 “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process for Forestland or Rural Property” are consistent with the requirements of the final rule and can be used to satisfy the statutory requirements for conducting AAI.
CERCLA provides liability protections for certain landowners and potential property owners who did not cause or contribute to contamination at the property and can demonstrate compliance with specific provisions outlined in the statute, including conducting AAI into present and past uses of the project. AAI requirements specifically apply to any party who may seek to claim protection from CERCLA liability as an innocent landowner, contiguous property owner or bona fide prospective purchaser. Additionally, parties who receive grants under EPA’s Brownfields Program must comply with the AAI rule when using grant funds to assess or characterize properties.
ASTM’s Phase I Standard was first published in 1993 to define “good commercial and customary practice” for conducting ESAs. The prior version of the standard was incorporated by reference into the EPA’s AAI Rule. Its latest update, known as “E1527-21 – Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process,” represents more than three years of ongoing collaboration by more than 150 industry professionals, according to ASTM.
Like its predecessor, the ASTM E1527-21 Standard outlines what constitutes “good commercial and customary practice for conducting an environmental site assessment of a parcel of commercial real estate in the United States of America with respect to the range of contaminants within the scope of the Comprehensive Environmental Response, Compensation & Liability (CERCLA) Act (42 U.S.C. 9601) and petroleum products.” Below is a brief summary of the substantive changes in the updated version:
Now that ASTM has approved the ASTM E1527-21 Standard, the EPA must revise the AAI Rule to incorporate the changes. The EPA’s rulemaking process can take up to one year to conclude, which can raise questions about what standard to use in the interim.
The first option is to continue using and citing the ASTM E1527-13 Standard, which is currently incorporated into the AAI. However, buyers, environmental professionals, and others may elect to use the more modern standard, which will likely become compulsory sometime in 2022 in order to satisfy the requirements of the AAI Rule and qualify for the applicable CERCLA defenses. Finally, it is also possible to use a hybrid approach by citing the ASTM E1527-13 Standard, while also stating that the Phase I ESA includes procedures set forth in the new ASTM E1527-21 Standard.
The changes reflected in the ASTM E1527-21 Standard will impact how commercial property purchasers and environmental professionals conduct environmental due diligence. We encourage impacted entities to thoroughly review the updated standard and contact a member of the Scarinci Hollenbeck Environmental Law Group with any questions.
If you have any questions or if you would like to discuss the matter further, please contact me, Monica Schroeck, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
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