United States: Keep It Clean: EPA Endorses New ASTM Standard For Conducting ESAS

The United States Environmental Protection Agency (EPA) recently proposed a rule to recognize the updated standard of the American Society for Testing Materials (ASTM) as sufficient to satisfy the EPA's requirements for conducting an "all appropriate inquiries" investigation under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). ASTM E1527-13, issued as the environmental assessment industry's standard for Phase I Environmental Site Assessments (ESAs), changes the old ASTM E1527- 05 standard with regard to the following matters:

• Implementation of a new category of Recognized Environmental Condition (REC), known as a Controlled REC (CREC). CRECs are specifically designed to identify environmental conditions which are controlled, but could still give rise to obligations for the property owner in the future. Therefore, the category of Historical RECs (HREC) now covers only those historical RECs that are completely addressed, with no future restrictions. This new category resolves the ambiguity with regard to HRECs that may give rise to future obligations, as opposed to completely remedied HRECs.
• Expansion of the obligations of an environmental professional when conducting an ESA to include (i) searches of the judicial records in a county clerk's office to locate and report environmental liens (ELs) and activity and use limitations (AULs), and (ii) a heightened reporting requirement regarding regulatory file reviews. Previously, environmental professionals and title companies routinely searched real property deed records for ELs and AULs, but not judicial records. This posed the risk that certain ELs and AULs might not be identified for the property owner. Also, environmental professionals previously were permitted to forgo reviews of regulatory files for adjacent properties. ASTM E1527- 13 does not require that such reviews take place in every instance, but does require the environmental professional to explain, in detail, why such a review is not warranted in each instance where one is not conducted.
• " Increased focus on vapor migration risk for properties. In recent years, vapor migration on properties has been increasingly important for lenders, among other parties. Often, it was unclear whether an ESA should include an analysis of vapor risk. ASTM E1527-13 amends the definition of "release" and "migration" to include vapor contamination, in addition to contamination of the soil and groundwater. Going forward, environmental professionals will likely treat vapor migration risk more directly in ESAs rendered on properties, though the new standard does not include any requirement that an ASTM E2600 screen assessment for vapor be conducted in every instance.

The EPA accepted comments on the new standard, and a final rule is forthcoming. Property owners should note that the EPA is not requiring that all ESAs be conducted in accordance with the ASTM E1527-13 standard. The prior standards (including the EPA Final Rule (40 CFR part 312), ASTM E1527-05, and ASTM E2247-08) are still acceptable for purposes of satisfying EPA requirements in conducting ESAs. But, for purposes of meeting the EPA's "all appropriate inquiry" standard under CERCLA to establish the bona fide prospective purchaser, contiguous property owner, and innocent landowner liability protections, ESAs conducted in accordance with the new ASTM E1527-13 standard will entitle the property owner to CERCLA's landowner liability defenses.

The new standard should give property owners and ESA providers more clarity as to the best-practice scope of an ESA, as well as clarify some ambiguities that were present under the old standards. While the new standard may result in some additional cost to the property owner resulting from additional investigative work, owners will now have the benefit of additional information about the property, or at minimum a reasoned explanation from the ESA provider as to why such further investigation was not required. Even though the EPA does not specifically require the ASTM E1527-13 standard today, some state environmental agencies have adopted a policy of requiring the latest ASTM standards. As a practical matter, it is advisable to have all new ESAs conducted in accordance with the ASTM E1527-13 standard in order to avoid potential issues with state environmental agencies that may require the latest standards.

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