In mid-March, the U.S. Environmental Protection Agency (EPA) issued a direct final rule endorsing ASTM International (ASTM) E1527-21 as an additional standard meeting the appropriate investigative component ( AAI) for potential liability protections as part of the comprehensive environmental response. , Compensation, and Liability Act (CERCLA). As a direct final rule, EPA’s approval of the new standard will be effective May 13, 2022, unless the agency receives adverse comments by April 13, 2022. In the unlikely event where adverse comments would be received, the final rule would be withdrawn so the comments can be addressed. At this time, the EPA’s final rule approving the new standard does not eliminate the current E1527-13 as an approved approach for conducting AAI, but instead adds ASTM E1527-21. as an additional tool. However, over time, it is likely that the EPA will rescind E1527-13 as E1527-21, with its increased emphasis on Phase I Environmental Site Assessment (ESA) due diligence investigations, becomes more widely used.

ASTM E1527-21 outlines requirements for environmental professionals conducting Phase I ESAs, typically in relation to pending real estate transactions or commercial leases. Those familiar with the previous standard will notice that the E1527-21 standard resembles the previous standard but clarifies and expands on certain elements. Among the most significant differences between the two standards are the following:

  • New definition of Recognized Environmental Conditions (REC). The conclusions of a Phase I SEA report are based on the judgment of the environmental professional, which means that different consultants can and do arrive at different classifications after assessing the same property. The revised definition of a REB apparently requires the consultant to consider risk factors that they might have overlooked under the previous standard. It will be worth watching if this change leads to more conservative conclusions (more CERs).
  • Under the previous E1527-13 standard, a REC was defined as the presence or likely presence of any hazardous petroleum substance or product in, on, or on a property: (1) due to release to the environment; (2) under conditions indicating release to the environment; or (3) under conditions that constitute a material threat of future release to the environment.
  • According to the new E1527-21 standard, a REC means (1) the presence of hazardous substances or petroleum due to release to the environment; (2) the likely presence of hazardous substances or petroleum products due to likely release to the environment; or (3) the presence of hazardous substances or petroleum products under conditions that constitute a material threat of future release to the environment. Additionally, the new standard provides clarifying discussion notes and examples to help the environmental professional apply the definition. Together, the new definition and required interpretations require a consultant to rely on the environmental professional’s experience regarding the likelihood of certain conditions causing releases, such as the long-term presence of activities commonly associated with RECs, rather than dismissing the risks associated with such activities based on the absence of “current indications of a release”.
  • Recognized Controlled Environmental Conditions (CREC) support. ASTM E1527-21 requires the Phase I report to state the environmental professional’s basis for the identified CRECs, along with copies of the underlying regulatory documentation to support that conclusion. Given the concerns of a potential buyer, this is a positive change as it will provide the user with the source documents for any continuing obligations necessary to provide protection from an applicable remedy.
  • Significant data gap requirements. While both versions of the standard require an environmental professional to identify significant data gaps, the previous version E1527-13 did not provide a definition of what makes a data gap “significant”. Revised E1527-21 now defines a significant data deficiency as one that “affects the environmental professional’s ability to identify a recognized environmental condition.” The new definition standardizes what was previously followed by most in practice. The new standard imposes additional documentation requirements for significant data gaps.
  • List of critical viability dates. Under the new standard, Phase I ESA reports will now show the dates when the five critical elements of the investigation were completed. This includes interviews, searches for registered environmental liens, review of records, visual inspection and environmental reporting. This will allow the reader to easily calculate the viability and shelf life of the report.
  • The duration of the conversation. The new standard states that the report is valid for 180 days, calculated from the date the first of these critical tasks is performed. A Phase I report can be extended to one year if each of the five specific components has been updated.
  • Standard historical sources. Several historical sources are now clearly classified as “standard historical sources” and are to be reviewed and discussed in the ESA Phase I report, including aerial photographs, fire insurance maps, local street directories , topographic maps, building department records, interviews, property tax records. , and zoning/land use records. If standard historical sources are not available or have not been reviewed, the environmental professional should include an explanation of the omission.
  • Emerging contaminants. We have previously written about contaminants of emerging concern. While many states have adopted regulatory standards for per- and polyfluoroalkyl substances (known as PFAS), the EPA has not yet done so (although it is in the process of doing so). New York State has perhaps the strictest PFAS standards in the country. Since PFAS is not yet listed as a hazardous substance under CERCLA, consultants were not required to include PFAS as a scope item when compiling a Phase I report. , the new standard specifies that emerging contaminants will be subject to ESA Phase I review once they are classified as hazardous substances under CERCLA. Until that time, parties to a transaction will likely discuss the risks and benefits of including certain emerging contaminants within the scope of the Phase I ESA with their environmental professional and environmental advisor. environment.

Because the new standard expands the scope and depth of review of existing sources and topics, an SEA conducted under E1527-21 may become more costly than under the previous standard.


William Toney – KC STUDIO


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