United States: EPA "All Appropriate Inquiries" Process Revised; Vapor Intrusion Placed Front And Center

Last Updated: August 23 2013
Article by Margaret A. Hill and John J. DiChello,Jr.

On August 15, 2013, the United States Environmental Protection Agency ("EPA") published a direct final rule amending the Standards and Practices for All Appropriate Inquiries, 40 C.F.R. § 312 ("AAI Final Rule"), to reference and allow the use of the revised ASTM International standard E1527-13, the "Standard Practice for Environmental Site Assessments: Phase 1 Environmental Site Assessment Process." The AAI Final Rule sets forth the process for conducting Phase I environmental site assessments and evaluating environmental conditions at properties for purposes of qualifying for landowner liability protections pursuant to section 101(35)(B) of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and for conducting site assessments using EPA Brownfields Assessment Grants under CERCLA section 104(k)(2)(B)(ii). The EPA's direct final rule regarding ASTM E1527-13 will become effective within 90 days (November 13, 2013) if, as EPA expects, no adverse comments are received by September 16, 2013 to the identical proposed final rule inviting public input that was published on the same date in the Federal Register, 78 Fed. Reg. 49,714 (August 15, 2013).

Current EPA regulations require parties seeking to obtain protection from potential liability under CERCLA as innocent landowners, contiguous property owners, or bona fide prospective purchasers, as well as applicants for and recipients of brownfields grants, to conduct Phase I environmental site assessments pursuant to the regulatory requirements of the AAI Final Rule, or alternatively, by using two ASTM standards recognized as compliant with and equivalent to the AAI Final Rule: (1) ASTM E1527-05, which is the prior version of ASTM E1527-13, and (2) ASTM E2247-08, the ''Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process for Forestland or Rural Property." The EPA's direct final rule regarding ASTM E1527-13, once effective, will afford those parties a third recognized standard for satisfying the AAI requirements and, in turn, strengthening defenses and limiting liability under CERCLA.

Although the updated ASTM E1527-13 standard is similar in many respects to the prior version, it contains several significant changes that will impact Phase I environmental site assessment practices conducted pursuant to the standard. Most notably, ASTM E1527-13 was revised to expressly provide that Phase I environmental site assessments must consider vapor intrusion in evaluating possible Recognized Environmental Conditions ("RECs"). Vapor intrusion occurs when vapor-phase contaminants migrate from subsurface sources into buildings, thereby potentially posing health and safety risks to building occupants. Historically, it has been an area of environmental concern that was overlooked by purchasers of property, their environmental consultants, and regulatory agencies, but it has received increased attention over the past several years. Under the revised ASTM E1527-13 standard, the terms "migrate" and "migration" are specifically defined to include the movement of hazardous substances in any form, including solid, liquid, and vapor. In other words, vapor intrusion is considered a potential pathway of contamination just like groundwater and soil. Moreover, the revised standard provides that environmental consultants should assess vapor migration using the ASTM E2600-10 standard, the "Standard Guide for Vapor Encroachment Screening on Property Involved in Real Estate Transactions," or another appropriate alternative methodology. Therefore, environmental consultants conducting Phase I environmental site assessments must now determine the potential for vapors to migrate through pathways from both onsite and offsite sources and, if such a potential exists, identify it as a REC.

ASTM E1527-13's focus on the vapor intrusion risk is consistent with EPA draft guidance that requires more evaluation of vapor intrusion as part of investigations and remediation at contaminated sites. See, e.g., U.S. EPA Office of Solid Waste and Emergency Response, Final Guidance for Assessing and Mitigating the Vapor Intrusion Pathway from Subsurface Sources to Indoor Air (External Review Draft), April 11, 2013. Likewise, the revision reflects the growing trend among state regulatory agencies to require vapor intrusion to be evaluated and, if necessary, mitigated as a condition to site closure. Indeed, states such as California, New York, and Massachusetts have reopened hundreds of sites that previously received regulatory closure in order to evaluate potential vapor intrusion issues where those issues were not considered in the initial remediations. For these reasons, the investigation of vapor intrusion has become a fundamental component of due diligence in real estate transactions.

Other noteworthy revisions to the ASTM E1527 standard including the following:

  1. The definition of the term "RECs" was simplified to mean releases to the environment from substances in, on, or at a property, which is consistent with the definition of the term "release" under CERCLA. The revised definition of RECs also excludes releases that occur inside of a structure located on a property from a source within that structure, provided, of course, that the releases do not impact or pose a risk to the land beneath the structure or otherwise to the environment.
  2. The defined term "Historical Recognized Environmental Condition" ("HREC") was clarified to mean a contaminated condition that has been remediated to the satisfaction of a regulatory agency, as evidenced by the issuance of a no further action letter or regulatory closure, without any property use restrictions.
  3. The term "Controlled Recognized Environmental Condition" ("CREC") was added to refer to a REC that has been cleaned up to regulators' satisfaction, but unlike an HREC, contains residual contamination allowed to remain subject to activity and use limitations ("AULs"), other use restrictions, or institutional and engineering controls (e.g., risk-based corrective action). Inclusion of this term may reduce the likelihood that environmental consultants conducting Phase I environmental site assessments will ignore resolved environmental issues—and any continuing obligations relating thereto—and instead concentrate on active contamination only.
  4. The revised standard includes more stringent requirements for regulatory file reviews, which are searches and reviews of certain public records and files regarding property. In particular, environmental consultants must explain in greater detail in Phase I environmental site assessment reports their justification for determining whether or not a regulatory file review is warranted. This revision essentially creates a presumption, albeit a rebuttable one, that environmental consultants should conduct regulatory file reviews to identify RECs, and may result in consultants recommending regulatory file reviews more frequently than in the past.
  5. ASTM E1527-13 now requires searches for environmental liens and AULs not only in recorded land title records, but also in judicial records for jurisdictions where environmental liens and AULs are recorded therein and in any other location specified by statutes or regulations. Title companies therefore must now expand their efforts to identify the existence of environmental liens and AULs.

The new ASTM E1527-13 standard likely will expand the scope of, and drive up the costs associated with, property cleanups as well as due diligence activities conducted in connection with real estate purchases and transactions if a party opts to conduct a Phase I environmental site assessment pursuant to that standard. Any party who may be involved in such transactions in the future would be best-served updating their due diligence policies to reflect the new requirements of the ASTM E1527-13 standard, particularly with respect to vapor intrusion assessments. The increased costs, however, are far outweighed by the additional information gathered and greater understanding gained regarding releases and RECs at a site or neighboring properties, all of which would provide more certitude and finality regarding the state of environmental conditions relating to the properties.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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