KMK Law Real Estate Blog

On December 30, 2013, U. S. EPA issued a final rule, 40 CFR 312.11, amending the “all appropriate inquiry” (AAI) rules adopted under the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to recognize that the performance of a Phase I Environmental Site Assessment (ESA) under the new ASTM E1527-13 “Standard Practice for Environmental Site Assessments:  Phase I Environmental Site Assessment Process” (ASTM E1527-13) will satisfy the AAI requirements under CERCLA for innocent and bona fide prospective purchasers and contiguous property owners who are purchasing or leasing potentially environmental contaminated properties.  The effective date of this final rule is December 30, 2013. 

Background

Transactions involving the purchase or lease of potentially environmentally contaminated real properties are often preceded by a Phase I Environmental Site Assessment to satisfy the AAI rules under CERCLA.  The performance of a Phase I ESA establishes that the purchaser or tenant undertook “all appropriate inquiry” of the previous ownership, use, and environmental condition of the Property prior to purchase or lease of the property to establish a defense to CERCLA liability.  Compliance with ASTM Standard E1527-05 had been recognized by EPA as satisfying the AAI requirements. Earlier this year, EPA had proposed to recognize the then yet to be issued ASTM E1527-13 as being AAI compliant in addition to ASTM E1527-05.  Due to objections that allowing both standards to satisfy the AAI requirements would create confusion and conflicting standards, EPA withdrew its prior final rule in late October 2013.  ASTM Standard E1527-13 was issued in November 2013.

Rule Changes

U.S. EPA amended the AAI rules to recognize that compliance with ASTM E1527-13 would satisfy the AAI requirements. While EPA indicated in the preamble to the final rule that ASTM E1527-05 should now be viewed as a historical standard, it will address the reference to that standard in the AAI rules in a future rulemaking.

Key Revisions to ASTM Standard

The key revisions to ASTM E1527-05 that are now incorporated in ASTM E1527-13 are:

1. update to definition of “Recognized Environmental Condition.”
2. update to definition of “Historical Recognized Environmental Condition.”
3. added definition of “Controlled Recognized Environmental Condition.”
4. added clarification to definition of “de minimis condition.”
5. revised definition of “migrate/migration” to include vapor migration. 
6. revised definition of “release” to have same meaning of “release” definition in CERCLA.
7. added guidance related to the requirement to perform regulatory agency record and file review.

Conclusion

Persons seeking to qualify for defenses to CERCLA liability for prior releases of hazardous substances should perform a Phase I Environmental Site Assessment that complies with the AAI rules prior to purchasing or leasing potentially contaminated properties.  The AAI rules now recognize ASTM E1527-13 as being AAI compliant.  While the current AAI rule also recognizes the historical standard, ASTM E1527-05, EPA stated a clear preference for the use of ASTM E1527-13 and the Agency indicated it will address the reference to the historical standard in a future rulemaking.

Should you have any questions or need guidance about EPA’s All Appropriate Inquiry Rules, environmental due diligence, engaging consultants to perform such due diligence, or with respect to the purchase or lease of potentially environmentally contaminated properties, please contact Brian Babb at (513) 579-6963 or at bbabb@kmklaw.com.