EPA final action on ASTM International’s E1527-21 “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment is currently in limbo. On March 14, 2022, after this blog post, EPA took direct final action to amend the Standards and Practices for All Appropriate Inquiries to reference ASTM International’s E1527-21. The rule was to have been effective May 13, 2022, but EPA received adverse comments on its final action and is now addressing those comments. The new standard is not yet approved by EPA.

The Phase l Environmental Site Assessment Standard E1527-13 will sunset in late 2021, eight years from its approval on November 6, 2013.

This is hugely significant because a Phase l Environmental Site Assessment is conducted in the vast majority of the 5.6 million commercial and industrial real estate transactions in the United States each year, so you need to be aware of the revised standard expected to be issued later this year.

The stated purpose of the ASTM Standard E1527-13 Phase I Environmental Site Assessment process is “to define good commercial and customary practice in the United States of America 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) (42 U.S.C. §9601) and petroleum products.” Importantly, the ASTM E1527 is recognized by the U.S. Environmental Protection Agency as satisfying its All Appropriate Inquiry rule to obtain protections from liability under CERCLA, the federal Superfund law.

ASTM first published a standard for Phase I Environmental Site Assessments in 1993, with published revisions in 1994, 1997, 2000, 2005, and 2013, so that the standard is being again revised is not surprising, but some of the changes warrant heightened scrutiny.

The ASTM E50.02 Task Group, after more than a year of work, has balloted a draft revised standard and results are expected as early as next week. The initial draft includes:

What purports to be an only modest change to REC definition is proposed, but this modification to that ultimate defined term risks negatively impacting the value of hundreds of millions of dollars of real estate each year. The new definition would read,

“The term recognized environmental condition means (1) the presence of hazardous substances or petroleum products in, on, or at the subject property due to a release to the environment; (2) the likely presence of hazardous substances or petroleum products in, on, or at the subject property due to a release or likely release to the environment; or (3) the presence of hazardous substances or petroleum products in, on, or at the subject property under conditions that pose a material threat of a future release to the environment. A de minimis conditions is not a recognized environmental condition.”

The new definition is explained in an appendix. But that Appendix X4 is not without controversy when it provides guidance that the past closure of a leaking underground storage tank, for example, may not constitute an Historical Recognized Environmental Condition (HREC) unless the environmental professional conducting the Phase l has evaluated the data associated with that closed tank to be sure that the sampling data meets current regulatory standards for unrestricted use and whether there is an open vapor exposure pathway. Some believe this tying the consideration to “current” standards, as opposed to the regulator determination at the time the tank was closed, creates a Faustian bargain for the environmental professional, and will greatly limit the supremely valuable designation of HRECS.

I blogged some weeks ago, PFAS in a Phase l Environmental Site Assessment, and concluded, as does this Task Group, that because PFAS is not a CERCLA nor a RCRA listed hazardous substance, it should not be identified in a Phase l. It is a non-scope matter.

There is also an attempt to clarify by way of examples in Appendix X4, what is a controlled recognized environmental condition (a CREC). There is no doubt that the uninitiated have been confused that a CREC is a subset of a REC, but the examples are problematic in that they stray into the category of HRECs, which are not RECs. CRECs arise from a past release of a hazardous substance that has been address to the satisfaction of regulators, but carry some implementation of controls, like a drinking water restriction. This new text only exacerbates a prior bad word choice.

The proposed change to the shelf life of a Phase l report is curious when currently a report is presumed current when signed and dated as completed and more than 180 days prior to acquisition of a property which may be updated to be valid for up to a year, but what is proposed is 180 days from the day work commences on the Phase l even if that is simply a request for governmental records on a property. It is not clear how this back dating of a dated report is advantageous (to anyone other than environmental professionals who will now have to prepare more reports)?

A potential positive for anyone who has found the word choice in the ultimate conclusion awkward, is the new,

12.7.1 “We have performed a Phase I Environmental Site Assessment in conformance with the scope and limitations of ASTM Practice E1527-21 of [insert address or legal description], the subject property. Any exceptions to, or deletions from, this practice are described in Section [ ] of this report. This assessment has revealed no recognized environmental conditions, controlled recognized environmental conditions, or significant data gaps in connection with the subject property”

Time is short for the 350 member Task Group to finalize a draft, for EPA to act to approve the new E1527-21 and for ASTM to then issue it before the end of the year, but that also means time is also short for purchasers of land, their lenders and others to become familiar with a not yet available standard, so it is incumbent upon all to monitor the new standard, not to mention legal counsel, including me. Last August, I blogged, I just read my 1000th Phase l Environmental Site Assessment this year, so we will not only track the final revisions, but report on them in a future post here.