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Revised Phase I ESA Standard Released – ASTM E1527-21

Revised Phase I ESA Standard Released

ASTM-E1527-21

On November 1^st, the American Society for Testing and Materials (ASTM) released a revised standard for conducting Phase I Environmental Site Assessments (Phase I ESAs). The new standard – ASTM E1527-21 – establishes new requirements for complying with the “All Appropriate Inquiry” (AAI) rule in 40 CFR Part 312. The AAI is an essential element of environmental due diligence used to protect prospective buyers, lenders, and owners from liability related to environmental contamination. E1527-21 will not be a required part of the AAI rule until the US EPA adopts it through a formal rulemaking. Nevertheless, those involved in environmental due diligence and transactions should start to become familiar with E1527-21 and begin to incorporate its requirements into Phase I ESAs.

While E1527-21 contains several changes from the prior ASTM standard for Phase I ESAs, these new additions are not as significant as those made the last time the standard was revised in 2013. The following provides a brief summary of several of the more noteworthy updates:

The terms Recognized Environmental Condition (REC); Controlled Recognized Environmental Condition (CREC); and Historical Recognized Environmental Condition (HREC) have all been updated with important clarifications, including:
- Offsite issues without the potential to impact the subject property are now clearly excluded from the definition of REC;
- The Findings and Opinions section of a Phase I ESA must now include the rationale for finding a condition is a CREC or a HREC; and
- For each HREC, the environmental professional must also state whether the HREC still qualifies as an HREC.
Definitions for “Property Use Limitation” and “Significant data gap” are now available.
Emerging contaminants, such as PFAS, are now included on the list of non-scope items, at least until they are classified as a CERCLA hazardous substance. However, the non-scope issues appendix now includes a discussion of emerging contaminants and states that where the Phase I ESA is performed to satisfy both federal and state requirements the environmental professional should consider and discuss these substances if they are considered hazardous under applicable state law.
The historical records review section now reflects common industry practice, including subject and adjoining property identification, use, and research objectives.

Numerous updates and additions to the appendices, including a flowchart and guidance to help properly classify conditions as RECs, CRECs, or HRECs, a revised report outline, and a discussion of business environmental risks.

If a revised Phase I ESA ASTM standard was not enough reason to remind you of the importance of properly and timely conducted Phase I ESAs, then a recent decision from the U.S. Court of Appeals for the Seventh Circuit should help. In September, the Seventh Circuit affirmed the District Court’s finding that a party was not entitled to assert the bona fide prospective purchaser (BFPP) defense under CERCLA because the party’s Phase I ESAs did not comply with the AAI (Von Duprin LLC v. Major Holdings, LLC, No. 20-1711 (7th Cir. Sep. 3, 2021)).

The District Court had found that the environmental professional failed to make the required inquiries with the property owner and failed to include the necessary certifications in a Phase I ESA for one property. In connection with a second property, the court found that the Phase I ESA was completed within the appropriate timeframe (180 days) prior to the party’s purchase of the property, however the party started a 99-year lease of the same property six years prior to it purchasing the property. Thus, the party became an operator under CERCLA at the start of its lease and had not satisfied the AAI rule at that time because the Phase I ESA the party conducted prior to signing the lease was not completed or updated within the 180 days before the start of the lease, as required by the AAI rule.

All parties involved in commercial real estate transactions, including leases, should continue to familiarize themselves with the AAI rule and the newly revised ASTM standard (E1527-21). Complete and timely Phase I ESAs remain a staple of commercial real estate transactions. Failure to fully comply with the AAI can have long-lasting and significant consequences.

By Jon Schaefer on November 16th, 2021
Robinson+Cole’s Environmental Law

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Revisions To CERCLA Due Diligence Requirements

CERCLA Due Diligence Requirements Revised to Reflect Updated Phase I Standard for Forested and Rural Land

Spencer Fane LLP
Paul Jacobson
July 11th, 2017

Purchasers of rural and forested land need to be aware of a recent change in EPA’s environmental due diligence rules. On June 20, 2017, EPA published a Direct Final Rule in the Federal Register, amending the All Appropriate Inquiries (AAI) Rule, 40 CFR Part 312, to reflect 2016 updates to ASTM E2247, a standard for Phase I investigations on rural and forested land.

The AAI Rule sets forth requisite practices for satisfying CERCLA § 101(35)(B) so as to obtain CERCLA liability relief, i.e. the innocent landowner defense, bona fide prospective purchaser liability protection, and contiguous property owner liability protection. The AAI requirements also apply when conducting site characterizations and assessments with the use of a Brownfields grant, under CERCLA § 104(k)(2)(B).

For years, the AAI Rule has referenced two voluntary industry standards for conducting Phase I site investigations, both published by the standards setting body ASTM International. One of these standards, ASTM E2247, only applies to forestland and rural property, and the other standard, E1527-13, is not limited in applicability to only certain types of property. The AAI Rule has allowed purchasers to establish compliance with the requirements of the AAI Rule by adhering to these industry standards (as makes sense, parties may not use the E2247 standard for property other than forestland and rural land). The June 20 Direct Final Rule merely replaces the reference to the 2008 version of E2247 with a reference to the updated 2016 version. No changes are made regarding the other ASTM standard referenced by the AAI Rule, E1527-13.

A summary of the differences between the 2008 and 2016 versions of E2247 is available here. One notable difference is that the 2016 version does away with the requirement that the site be at least 120 acres, so that the 2016 version applies to rural or forested properties of any size. E2247 in some ways requires less rigorous site investigation than E1527-13, so this widening of the applicability of E2247 is a welcome change to property purchasers. Individuals interested in obtaining a copy of the 2016 E2247 standard can do so from ASTM International at this link.

Purchasers of forested or rural land will not be required to use the 2016 version of E2247. Rather, this standard will merely be an allowed alternative to walking through the actual requirements of the AAI Rule itself. Nevertheless, once the Direct Final Rule goes into effect, property owners should ensure that their environmental consultants are not using the 2008 version of E2247, because it will no longer satisfy the AAI Rule.

EPA views the incorporation of the 2016 version of E2247 as noncontroversial, and thus published it as a Direct Final Rule, without a prior proposed rule. The Direct Final Rule will go into effect on September 18, 2017, unless EPA receives adverse comments by July 20, 2017. If EPA does receive adverse comments, the Direct Final Rule will not take effect. Rather, EPA would address the comments before issuing a subsequent final rule.

This post was drafted by Paul Jacobson, an attorney at Spencer Fane LLP.

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NY State Sales and Use Tax may Now Be Applied to Environmental Testing

In the recent trial of Exxon Mobil Corp. v. State of New York Tax Appeals Tribunal, 2015 WL 919788, 2015 N.Y. Slip Op. 01840 (3d Dep’t March 5, 2015), the appellate court ruled that environmental testing services are a large part of taxable remediation activities and cannot be listed as a tax exempt service by clients in need of environmental services. The tax law currently differentiates between services that are providing a capital improvement to a commercial property and services that repair or maintain a property. The trial of Exxon Mobil Corp. v. State of New York Tax Appeals Tribunal found that ascertaining the current environmental condition of a site via testing and monitoring was a major part of taxable aspects of a site’s remediation.

The sales tax in question was approximately $500,000 owed to the state for environmental monitoring services used from 2000 through 2004 and were deemed as “activities that relate to keeping real property in a condition of fitness, efficiency, readiness or safety or restoring it to such condition”. To understand whether or not a service provided is taxable or not, one would have to consider many factors about the service; is the site testing performed as an integral part of a capital improvement program; or is a part of the environmental work tax exempt while other parts are not? These questions can be answered by considering what type of project it is, the time between the completion of environmental work at a site and the completion of the capital gains work, and how the environmental services are referred to in contracts, work orders, and other paperwork relating to the project.

Source: law.justia.com/cases/new-york/appellate-division-third-department/2015/517504.html

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Recent Redevelopment

Local News
New York City and, even more so, Brooklyn is currently seeing a large volume of real estate development and redevelopment. With recent rezoning actions many neighborhoods are being redeveloped for new housing and commercial purposes. American Environmental has been helping in this effort by providing environmental services to numerous clients. Click here to see how we can help you.

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Community Outreach

American Environmental employee Eugene Kuksa, Environmental Scientist, helped our local community by volunteering at Mt. Sinai Beth Israel for over 150 hours over the past year as part of our company-wide effort to make our environment a better and healthier place.

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