Update: EPA Accelerates Adoption of New Phase I Environmental Site Assessment Standard | Buchalter

UPDATE: At the time Buchalter released its Customer Alert regarding the new ASTM standard for Phase I Environmental Site Assessments (Phase I ESAs), we noted that the new ASTM standard would not be considered “All Appropriate Inquiries” for the purpose of establishing defenses under CERCLA until the Environmental Protection Agency (EPA) amends its regulations to incorporate the new standard. On March 14, 2022, the EPA published its “direct final rule” in the Federal Register, stating that it had reviewed the standard and determined that it was equivalent to the agency’s requirements. The rule adopting the new standard will go into effect on May 13, 2022, unless the EPA receives adverse comments by April 13, 2022. The EPA took this action because it believed the proposed rule was not not controversial and wanted to speed up the approval process. The original alert, modified to reflect the current situation, describes the changes and their impact below.

Commercial Real Estate Professionals (CRE) are well aware that a Phase I ESA is required when acquiring commercial property. Originally intended to demonstrate that the buyer had undertaken “all appropriate investigations” necessary to establish certain defenses against CERCLA’s liability, Phase I ESAs have become an integral part of commercial real estate, required by lenders, insurers and as standard practice.

Since the adoption of ASTM E1527-13 in 2013, it has been the “road map” that environmental professionals must follow when performing a Phase I ESA for commercial properties. ASTM standards are regularly updated and this one was just updated in November 2021. In the nomenclature used by ASTM, the updated standard is E1527-21.

The biggest question for most CRE professionals is whether the changes will increase the cost and time required to complete a Phase I ESA. The likely answer is yes, but the degree may vary from property to property. ‘other. The 2021 version of the standard will require more historical review than the 2013 version, which will increase costs for some properties. E1527-21 requires review of the four basic historical documents – aerial photos, topographic maps, city directories, fire insurance maps – for the property in question. If the property has been used for manufacturing, industry or retail, additional historical records will need to be reviewed. The 2013 version allowed the reviewer to review only the historical records they deemed necessary, resulting in increased workload and costs for vendors.

The 2021 standard also requires an increased historical review of adjacent properties, not just the property in question. At a minimum, key historical documents will need to be reviewed for adjacent properties, regardless of the results of the review of the property in question. For an isolated commercial property with no adjacent commercial, industrial or retail properties, the increased time and cost should be minimal, but for an industrial property centrally located in an industrial area with a long history, the additional time required could be important. Note that a big reason for the increased emphasis on historical research and adjacent properties is due to cases where dry cleaners that have gone out of business have not been identified in a Phase I SEA.

E1527-21 revised or included definitions of a number of terms, such as Recognized Environmental Condition (REC), and provided an appendix in an effort to bring consistency to the determinations of what a REC is. This shouldn’t add cost or time and hopefully will eventually eliminate the frustrating situation where a consultant looks at a set of facts and determines that they don’t constitute a BCR but a second consultant (usually hired by a potential buyer) looks at the same facts and calls it a REC, requiring further investigation and potentially benefiting from a price adjustment from the seller.

The 2021 revision requires a title search to be revisited back to 1980 for environmental liens and deed restrictions, whereas the 2013 version had no fixed date, so that’s another area that can increase costs and time. Other changes, such as what should be included in the report, are unlikely to have much impact, as most consultants have already started including everything they have reviewed as an appendix (as evidenced by the report size).

The ASTM committee has resisted pressure to include the presence or probable presence of emerging contaminants that are not yet listed as hazardous substances under CERCLA as the basis for a REC. This has recently become a point of contention with PFAS and related substances. The presence of PFAS on a property may be identified as a business risk, such as mold or asbestos in buildings, but it is not within the primary scope of ESA until it is Added to the CERCLA Hazardous Substance List.

As noted above, the EPA’s proposed rule incorporating the revised ASTM E1527-21 will become effective May 13, 2022, unless the EPA receives adverse comments by April 13, 2022. ESAs Phase I tests conducted under current E1527-13 before the proposed rule actually takes effect will satisfy the relevant requirements of “All Appropriate Investigations” for the purpose of establishing one of the “Landowner’s Liability Defences” under the responsibility of CERCLA.

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