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EPA to Adopt Updated ASTM Standard for “All Appropriate Inquiries” for Bona Fide Purchaser (Innocent Landowner) DefenseJanuary 2, 2014 | Energy, Natural Resources & Utilities
On November 6, 2013, ASTM International (ASTM) revised the standard for conducting Phase I Environmental Site Assessments (ESAs). The revised standard, “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process” (ASTM E1527-13), replaces the prior standard adopted in 2005, ASTM E1527-05, as the industry best practice for ESAs, imposing more stringent and generally more costly procedural requirements. The Environmental Protection Agency (EPA) announced plans to publish a final rule by the end of 2013 that will include ASTM E1527-13 as an alternative standard for “all appropriate inquiries” (AAI) required for new purchasers of contaminated property to establish a bona fide purchaser (BFP) defense to liability under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. Section 9601(35)(A), et seq. The BFP exclusion was established under 2002 CERCLA amendments to benefit first-time purchasers or lessors of contaminated property who conduct AAI (as performed by a qualified environmental professional (EP)) before acquiring an interest and thereafter take appropriate measures to ensure against site-related harm to health and the environment (see O’Melveny Brownfield Handbook). The BFP amendments referenced the ASTM standards (see 40 U.S.C. Section 9601 (35)(A)(iv)) as a procedure for satisfying the AAI requirements, although EPA has promulgated its own AAI standard (see 40 CFR 312.20 et seq.).
ASTM E1527-05 first went into effect on November 1, 2006, and was adopted by the EPA at 40 CFR Part 312. ASTM E1527-05 established procedural requirements for conducting AAI in the pre-acquisition assessment or evaluation of a property in order to identify potential environmental contamination and possible liability under CERCLA. In recent years, EPA has provided grants for conducting ESAs (EPA Brownfields Assessment Grants), requiring compliance with the ASTM standards as a condition in order for a party to claim protection as an innocent landowner, a contiguous property owner, or BFP.
EPA issued a direct final rule on August 15, 2013, approving the use of the new ASTM E1527 13, in addition to ASTM-E1527-05, for purposes of satisfying the statute. EPA was required, however, to withdraw the direct final rule, effective October 29, 2013, after it received adverse comments, including a comment that use of two equally valid standards would invariably result in the use of the least-costly (2005) standard and cause confusion in the marketplace (see Comment submitted by Lawrence Schnapf, Schnapf LLC). On December 30, 2013, EPA issued a final rule (Final Rule) that endorses the ASTM E1527-13 guidance, recommends that EPs and prospective purchasers use the ASTM E1527-13 standard, and announces EPA’s intent to publish a proposed rule “in the near future” that will remove reference to the ASTM E1527-05 standard as satisfying the AAI requirements in an effort to promote use of ASTM E1527-13 and reduce confusion (see 78 Fed. Reg. 79,319 (to be codified at 40 CFR Part 312).
Under the Final Rule, BFPs will be faced with new requirements, which some predict will result in an increase of environmental conditions identified by EPs as Recognized Environmental Conditions (RECs) and raise the cost of performing AAI diligence. ASTM E1527-13 provides an updated definition of REC that is meant to be concise, easier to interpret, and more closely aligned with CERCLA and AAI, with a goal of creating more consistent findings. ASTM E1527-13 also updates the definition of “Historical Recognized Environmental Condition” (HREC) such that a past environmental condition that was remediated must meet current standards and cannot require use restrictions or engineering controls, and the condition must be classified as an REC, not an HREC. On the other hand, a condition classified as an REC in the past may now be classified as an HREC if, due to a regulatory change, an applicable regulatory limit has been raised and the former REC now meets the criteria for unrestricted use. Further, ASTM E1527-13 adds the definition of “Controlled Recognized Environmental Condition (CREC),” which applies to property with activity use limitations based on past releases upon which contamination remains, whereby ongoing obligations are imposed. A CREC, which under ASTM E1527-05 was identified as an HREC, must be identified along with RECs in the findings section of the ESA, with the purported goal of highlighting continuing obligations on property with use restrictions. The revisions may result in EPs identifying more environmental conditions as RECs, possibly out of an abundance of caution, based on the more stringent requirements in looking at historical environmental conditions under the definitions of both HREC and CREC.
Likely the most significant difference between the 2013 and 2005 standards is the addition of guidance expanding the scope of agency file and record reviews, recommending that such review occur when the property at issue or adjoining properties are listed in a public database. An EP must also state in the ESA an opinion regarding the sufficiency of the information obtained from the file review, or state an opinion as to why a review was not warranted.
Finally, ASTM E1527-13 revises the definition of “migrate/migration” to specifically include vapor migration, thereby requiring EPs to consider this contaminant pathway in determining RECs. In response to concerns that potential vapor releases are often overlooked by many EPs when conducting AAI under the ASTM-E1527-05 standard, EPA states in the Final Rule that “in its view, vapor migration has always been a relevant potential source of release or threatened release…[and] EPA anticipates that practitioners properly conducting all appropriate inquiries will consider all conditions indicative of releases and threatened releases of hazardous substances and that the revised standard will help reduce previous confusion on how to conduct a thorough and appropriate inquiries investigation.” EPs will likely need to act accordingly and evaluate the potential of vapor intrusion in their scope of work.
For the purpose of clarity, an environmental condition identified as an HREC is not an REC, but a condition identified as a CREC is an REC.
 ASTM E1527-13 also revised the scope of “User Responsibilities” to allow for greater flexibility regarding language used in the ESA conclusion statement, and clarified that the definitions of “release” and “environment” have the same meanings as they do in CERCLA.
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