EPA Formally Recognizes New Environmental Due Diligence Standard
On December 30, 2013, the United States Environmental Protection Agency (EPA) published a final rule in the Federal Register recognizing the new ASTM E1527-13 Phase I standard as satisfying EPA’s All Appropriate Inquiries (AAI) rule at 40 C.F.R. Part 312. While EPA declined to delete the existing reference to the prior E1527-05 Phase I standard from the AAI rule, in amending the AAI rule, EPA stated in its preamble to the final rule that “EPA views these enhancements and clarifications to the ASTM standard as valuable improvements and strongly encourages prospective purchasers of real property to use the updated ASTM E1527-13 standard when conducting all appropriate inquiries.” EPA also states in the preamble that it intends to soon publish a rule to remove reference to the E1527-05 standard.
As we have previously indicated in our Legal Intelligencer article from November 2013, ASTM E1527-13 significantly revises the framework for environmental due diligence and includes the following changes:
1. Revised Definition of “Recognized Environmental Conditions”: ASTM E1527-13 revises the existing definition of “Recognized Environmental Condition” ("REC"), changes the definition of “Historic Recognized Environmental Condition” and creates a new definition for “Controlled Recognized Environmental Condition,” which would be defined as a REC resulting from a past release of hazardous substances that has been addressed to the satisfaction of the applicable regulatory authority with hazardous substances allowed to remain in place subject to the use of institutional or engineering controls.
2. Vapor Intrusion Considerations: A new definition of “migration” makes clear that vapor intrusion issues are to be assessed during the Phase I process and are not to be deemed “non-scope" indoor air quality issues by environmental professionals. ASTM’s E2600-10 Standard (Standard Guide for Vapor Encroachment Screening on Property Involved in Real Estate Transactions) is also referenced in ASTM E1527-13 as an appropriate method for environmental professionals to assess vapor intrusion considerations during the Phase I process. This revision is likely to bring vapor intrusion concerns to the forefront of many environmental assessments.
3. Regulatory File Reviews: If a property that is the subject of a Phase I review (or any adjoining property) is identified in a government records search, a pertinent review of regulatory files and or records associated with the listing should be reviewed. If the environmental professional concludes a file review is not warranted, it must provide justification for that decision in the Phase I report. Since the lengthy time involved in requesting and reviewing agency files can often conflict with the “deal time” considerations of a Phase I, this revision and its implications should be considered early in the Phase I process.
In publishing its final rule recognizing E1527-13 as satisfying AAI, it is unclear as to why EPA ultimately decided to retain the reference to the prior E1527-05 standard in the AAI rule. However, given the strongly worded language set forth in the preamble urging the use of E1527-13 and its stated intention to publish a new rule in the near future to remove the reference to the E1527-05 standard, entities seeking to qualify for one of the limited defenses to Superfund liability should strongly consider utilizing the E1527-13 Phase 1 standard.