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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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