The Phase I Environmental Site Assessment has long been a required element of every tax credit program and an essential tool to help tax credit investors identify and assess potential environmental risks. A Phase I is a non-invasive assessment of property performed to understand the related environmental issues and to identify, if necessary, any future evaluation or remediation necessary at that property. Pursuant to the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), EPA is charged with establishing the rules governing how pre-purchase “all appropriate inquiries”, i.e. Phase I assessments, are conducted. In 2005, EPA endorsed by regulation the ASTM E1527-05 standard for Phase I reports.
As a result of the passage of time and some changes to current practices for Phase I assessments, in 2013 ASTM revised the 2005 standard, publishing its new ASTM E1527-13 standard for Phase I reports in November 2013. EPA reviewed the new 2013 standard and issued a final rule adopting it effective December 31, 2013. In the final rule, EPA indicated that while currently reports performed under the 2005 standard are still acceptable, it “intends to publish a proposed rule” removing all references to that former standard shortly.
The fundamentals of a Phase I assessment are essentially the same under the new 2013 ASTM standard. The primary changes include some revisions to definitions, addition of a new definition—a “Controlled Recognized Environmental Condition”, clarification regarding evaluation of potential vapor intrusion, and additional regulatory file review requirements in certain situations.
EPA’s final rule endorsing ASTM E1527-13 may be found here.
A further discussion of the changes in the new 2013 standard may be found here.
Given EPA’s intention to make ASTM E1527-13 the sole standard for Phase I assessments, best practice is to instruct developers and their environmental consultants early in the transaction to use the 2013 standard for preparing all Phase I assessments going forward.