Among the most misunderstood term in a Phase I environmental site assessment is the Historical Recognized Environmental Condition.
The environmental professionals who perform these assessments by and large do not take heed of Eduardo Galeano’s quote, “History never really says goodbye. History says, ‘see you later.’”
By way of background, a Phase I environmental site assessment is the process of evaluating a property’s environmental conditions and assessing potential liability for contamination.
More precisely, ASTM International Standard E1527-13 Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process describes good commercial and customary practice for conducting an environmental site assessment of a parcel of commercial real estate with respect to the range of contaminants within the scope of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and petroleum products.
The purpose of a Phase I is almost universally to permit a user to satisfy one of the requirements to qualify for the innocent landowner, contiguous property owner, or bona fide prospective purchaser limitations on CERCLA liability. That is, a Phase l constitutes all appropriate inquiries into the previous ownership and uses of the property as defined in the EPA issued rule.
It has been estimated there were more than 800,000 Phase Is completed last year in the U.S. I wrote a blog post in January about the huge expansion in the space, Phase I Assessments for Tenants are the Hottest Environmental Issue in 2020.
And in another blog post last month, I wrote, I Just Read my 1000th Phase I Environmental Site Assessment this Year. A properly drafted Phase I can create huge dollar advantages serving as a marketing piece in an associated real estate transaction, be it a sale, a lease or a loan secured by real estate or .., while a poorly worded report can imperil the deal.
ASTM E1527 – 13 describes an Historical Recognized Environmental Condition as ..
“a past release of any hazardous substances or petroleum products that has occurred in connection with the property and has been addressed to the satisfaction of the applicable regulatory authority or meeting unrestricted use criteria established by a regulatory authority, without subjecting the property to any required controls ..”
Some context is useful. A Recognized Environmental Condition (a REC) is “the presence or likely presence of any hazardous substances or petroleum products in, on, or at a property: (1) due to any 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.” The presence of a REC can thwart a contemplated real estate transaction.
And an Historical Recognized Environmental Condition is distinct from the Controlled Recognized Environmental Condition (a CREC) which applies to an environmental condition on a site that has received regulatory closure but are still subject to controls. A CREC is a subset of a REC.
Significantly, an Historical Recognized Environmental Condition is not a REC. To be clear an Historical Recognized Environmental Condition is not a recognized environmental condition for the purposes of a Phase I.
It is almost that simple. For a past REC to be determined an Historical Recognized Environmental Condition, the release or other condition must have been previously cleaned up or now meet current regulatory standards without clean up.
Additionally, in the event of prior regulatory intervention related to the condition, that the final action did not require use restrictions or engineering controls (restrictions on using water for drinking or a cap or the like).
A good example of an Historical Recognized Environmental Condition that is very common is when a regulatory agency issues a “no further requirements” determination as an UST is properly abandoned in place.
And to be an Historical Recognized Environmental Condition, the condition must meet current regulatory standards.
Note, some conditions identified as an Historical Recognized Environmental Condition under the prior version ASTM E1527-05 will no longer meet this determination under the revised express language of current, 2013, version ASTM E1527-13.
Arguably, for the vast number of properties, a Phase I identifying an HREC is a very good thing because it means the property has been managed in that the historic environmental issue “has been addressed to the satisfaction of the applicable regulatory authority.”
Again, an Historical Recognized Environmental Condition (an HREC) is not a Recognized Environmental Condition for the purposes of a prospective purchaser seeking protection from potential liability under CERCLA.