EPA Approves ASTM E1527-21 Phase I ESA Standard for All Appropriate Inquiry
Energy, Infrastructure & Environment Alert 03/29/22 Lauren Harpke, Michael Mostow, George Marek, Jeremy Lite
On March 14, 2022, the United States Environmental Protection Agency (EPA) issued a direct final rule approving ASTM International (ASTM) Standard E1527-21 as an additional standard meeting the all appropriate inquiry (AAI) component for potential liability protections under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). As a direct final rule, EPA’s approval of the new standard will take effect on May 13, 2022, unless the agency receives adverse comments by April 13, 2022, in which case the final rule will be withdrawn so the comments can be addressed. 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.
ASTM E1527-21 outlines requirements for environmental professionals performing Phase I Environmental Site Assessments (ESAs), often in connection with anticipated real estate transactions or commercial leases. ASTM Standards for Phase I ESAs must be updated every eight years, and the existing ASTM E1527-13 Standard was set to expire on December 31, 2021.
ASTM 1527-21 retains much of the substance and form of the previous standard but clarifies and expands on certain details. Notable differences between the two standards include:
- Revised Definition of Recognized Environmental Condition (REC). Conclusions of a Phase I ESA report rely on the judgment of the environmental professional, meaning different consultants can, and do, arrive at different classifications after evaluating the same property. The revised definition of a REC arguably requires the consultant to consider risk factors that the consultant could have ignored under the older standard. Whether the change will result in a uniform shift to more conservative conclusions, i.e., more RECs, remains to be seen.
- Under ASTM E1527-13, a REC is defined as the presence or likely presence of any hazardous substances or petroleum products in, on, or at a property: (1) due to release to the environment; (2) under conditions indicative of a release to the environment; or (3) under conditions that pose a material threat of a future release to the environment.
- Under ASTM E1527-21, a REC means (1) the presence of hazardous substances or petroleum due to a release to the environment; (2) the likely presence of hazardous substances or petroleum products due to a likely release to the environment; or (3) the presence of hazardous substances or petroleum products under conditions that pose a material threat of a future release to the environment. Further, the new standard provides clarifying discussion notes and examples to assist the environmental professional in applying the definition. Together, the new definition and interpretations direct a consultant to rely on the environmental professional’s experience regarding the likelihood of certain conditions resulting in releases, such as the long term operation of a dry cleaner, instead of discounting that professional experience based on the lack of current “indications of a release.”
- Support for Controlled Recognized Environmental Condition (CREC). ASTM E1527-21 requires the report to include the environmental professional’s rationale for a CREC conclusion, in addition to including copies of the underlying regulatory documentation supporting that CREC conclusion. From the perspective of a prospective purchaser, this is a positive change because it will provide the user with the source documents for any continuing obligations required to ensure protectiveness of an implemented remedy.
- Significant Data Gap Requirements. While both versions of the standard require an environmental professional to identify significant data gaps, the prior E1527-13 version did not include a definition of what elevates a data gap to “significant” status. The revised E1527-21 version now defines a significant data gap as one that “affects the ability of the environmental professional to identify a recognized environmental condition.” The new definition likely formalizes what was previously implemented in practice. However, the new standard does include additional documentation requirements for significant data gaps.
- Clarity on Environmental Liens and Activity Use Limitation (AUL) Searches. The new standard clarifies that the environmental lien and AUL searches are not performed by the environmental professional (unless specifically contracted for in the engagement), but a requirement of each user of the Phase I ESA report. The standard also clarifies that the environmental professional’s search of institutional and engineering control databases do not meet the intent of the rule for this component, but instead one must review (1) transaction-related title insurance documentation such as preliminary title reports and title commitments; or (2) title search information reports from third party vendors provided that the reports meet certain specifications.
- List of Critical Viability Dates. One of our favorite revisions is the requirement for a Phase I ESA report to now include a list of dates on which the critical components of the investigation were performed, specifically, the interviews, records review, visual inspection, and environmental declaration. This requirement allows a reader to easily calculate report viability. The date of environmental lien search is also relevant to viability date calculations but, as it is a requirement of the user and not the environmental professional, it is not required to be documented in the report. The revised standard also makes abundantly clear that the shelf life of a Phase I ESA is 180 days, calculated from the date the first of these critical tasks is performed.
- Historical Research. Several historical sources are now clearly classified as “standard historical sources” and must be reviewed and discussed in the Phase I ESA report, including aerial photographs, fire insurance maps, local street directories, topographic maps, building department records, interviews, property tax files, and zoning/land use records. If standard historical sources are not available or otherwise not reviewed, the environmental professional must include an explanation for the omission.
- Use of Adjoining Property. ASTM 1527-21 specifies the requirements of the environmental professional in evaluating the past and current uses of adjoining properties, including the review of a subset of the standard historical sources. The requirements applicable to evaluating adjoining properties are more expansive than the approach under ASTM 1527-13.
- Site Plan. While most consultants already include a site plan showing the approximate locations of relevant features, uses, and conditions of the subject property, the revised ASTM 1527-21 Standard requires inclusion of that helpful figure.
- Findings, Opinions, Conclusions. Expectations for the Findings, Opinions, and Conclusions Sections were given some much-needed clarification. The Findings section is intended to present the underlying facts, including features, activities, and uses that may indicate the presence or likely presence of hazardous substances or petroleum. The Opinion section, which can be combined with the Findings Section at the discretion of the environmental professional, shall include the environmental professional’s opinion on the likelihood of impact to the property from the findings, along with the rationale for concluding the findings are or are not a REC. Last, the Conclusions section must clearly list all RECs, controlled RECs, and significant data gaps.
- Emerging Contaminants. As with the existing standard, substances that may pose a risk to human health or the environment but are not currently defined as hazardous substances under CERCLA (often referred to as “emerging contaminants”) are not covered under ASTM 1527-21 Standard for Phase I ESAs. However, the new standard clarifies that emerging contaminants will become subject to Phase I ESA review once they are classified as hazardous substances under CERCLA. Before such time, a prudent purchaser will want to discuss the risks and benefits of including certain emerging contaminants under the scope of the Phase I ESA (e.g., PFAS) with their environmental professional and environmental counsel.
Ultimately, the ASTM 1527-21 Standard clarifies the scope and depth of review of existing sources and topics. However, enhanced aspects of the new standard may increase the cost of an ESA.
Last, while EPA’s final rule approving E1527-21 as AAI-compliant does not rescind EPA’s existing approval of E1527-13, entities performing AAI may wish to adopt the new standard given its beneficial components to a prospective purchaser. Additionally, while the final rule states that both standards are viable options to achieving AAI at present, EPA’s history suggests that EPA will rescind the E1527-13 Standard in the future, after consultants are given sufficient time to update their practices and templates.
For more information on the EPA's final rule approving E1527-21, please contact your local Quarles & Brady attorney or: