On March 14, 2022, the U.S. Environmental Protection Agency (“EPA”) released a Proposed Direct Final Rule, which changes the Standards and Practices for All Appropriate Investigations (“AAI”) by making referencing ASTM E1527-21 Phase I. Adopted by the American Society for Testing and Materials (“ASTM”) in November 2021. The EPA’s proposed rule offers potential purchasers of goods the possibility of using either the new ASTM E1527-21 standard or the continued use of ASTM E1527-13 to comply with CERCLA AAI requirements and thereby establish a defense against CERCLA liability. If no negative comments are received by April 13, 2022, the EPA will take no further action on the proposed rule and the direct final rule will go into effect. If adverse comments are received by the date, EPA will withdraw the direct final rule and address the public comments in any subsequent final rule based on the proposal.
The ASTM standard is reviewed and updated every eight years using a consensus-based process, which includes input from environmental professionals conducting Phase I and report users such as proponents and lenders. The ASTM E50.02 task force began revising the existing standard in 2018. The revisions to ASTM E1527-21 are intended to address what were seen as shortcomings in the implementation of the current standard and to provide a greater consistency in the language of the standard.
When the EPA proposed revisions to the AAI rule at 40 CFR Part 312 in 2013, it followed the same path by issuing a direct final rule that called for users to establish a CERCLA defense by following the requirements of ASTM E1527 -05 then in effect. standard or proposed standard STM E1527-13. The EPA also said that if no adverse comments were received during the comment period, the proposed rule would become final, allowing the use of ASTM E1527-05 or ASTM E1527-13. In 2013, the EPA received 41 comments during the comment period both supporting the proposed rule and raising concerns about the EPA’s decision to continue recognizing the former ASTM standard ASTM E1527 -05 as a complaint with the AAI rule. The EPA ultimately agreed that the revised ASTM E1527-13 standard included improvements over the previous standard and would result in greater clarity for potential purchasers regarding potential contamination to a property. In response to the comments, the EPA issued a final rule that amended the standards and practices for operating an AAI by removing reference to ASTM E1527-05 and replacing it with ASTM E1527-13. It appears that stakeholders need to act again to prevent a proliferation of IAA approaches or any dilution of confidence in the reports generated by buyers, sellers, lenders or other stakeholders in real estate transactions.
The ASTM E1527-21 standard contains many improvements, including clarifications of key terms, an expansion of the scope of historical research, clarification of the report retention period, and recognition of emerging contaminants than the ASTM E1527-13 standard. does not. Anyone with experience reviewing Phase I reports knows that, according to ASTM E1527-13, three different environmental professionals could look at the conditions at a site and end up with three completely different opinions about whether and why Recognized Environmental Conditions (RECs) exist at a site. . The objectives of the review process were to provide more clarity to the requirements of ASTM E1527-13, update current good business and customary practices to produce a higher quality report, and improve the standard to address deficiencies. identified as a result of litigation and insurance claims. The new ASTM E1527-13 standard includes revisions to the definition of a REC in order to achieve more consistent results. The revised definition is complemented by a new appendix intended to provide examples for placing parameters around terms such as ‘release to the environment’ and ‘significant threat’. Another notable change is the use of more robust historical research to identify conditions at a site. The existing standard (2013) states that the environmental consultant is only required to review as many historical sources as necessary to “achieve the objectives” of identifying whether past uses could have led to an CER. The 2021 revised standard requires review of at least the “Big 4” historical sources for the property in question (aerial photographs, topographic maps, fire insurance maps and city directories) – provided that they are reasonably verifiable, applicable to the property in question, and likely to be useful in determining whether activities have occurred that should result in a release. Additionally, if the property’s use is industrial, manufacturing, and (now) commercial, review of additional resources (including building department records, property tax files, maintenance, and zoning) may be necessary if they are easily verifiable and likely to be useful. While many consultants already meet these requirements for subject property research, these changes will raise the bar for those who provide less in-depth reports as well as commercial properties as a whole.
Lenders, investors, developers and others who may acquire an interest in real estate should support a full transition to using ASTM E1527-21 rather than allowing parties to continue to rely on the standard ASTM E1527-13.
Copyright © 2022 Womble Bond Dickinson (US) LLP All rights reserved.National Law Review, Volume XII, Number 77