Before purchasing real property, especially commercial property, parties routinely perform what is called a “Phase I” environmental site assessment. The purpose of the Phase I is to look for environmental conditions and lay the groundwork for an innocent purchaser defense under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), commonly referred to as Superfund. Since 2005, the EPA has used an “all appropriate inquiry” standard to determine whether the buyer was an innocent and judged that by the American Society of Testing and Materials (ASTM) standard 2005 ASTM E1527-05.  That standard has now changed.

On November 6, 2013, ASTM issued an updated standard, ASTM E1527-13, for Phase I studies. And EPA has changed its rule for “all appropriate inquiry” to allow use of the new ASTM standard via regulations promulgated December 30, 2013. Moreover, the EPA has indicated that in the near future it will amend its rules again to prohibit use of anything but the new 2013 ASTM standard. So, the question is: What changes do the new Phase I standards adopt? Following are five things you should know about the new “all appropriate inquiry” standard based on the ASTM 1527-13 protocol.

  1. For the time being, parties are allowed to use either the 2005 or the 2013 protocol. As noted, EPA will at some point enact rules disallowing any further use of the 2005 standard.
  2. Vapor intrusion is now a mandatory consideration. As an example, a nearby leaking underground tank may lead the consultant to recommend further investigation if it is reasonable to believe that vapor migration to the property  in  question  could  be occurring. Vapor intrusion has been an up-and-coming area of  environmental assessment  for  several  years.
  3. The rules are now clearer for historical conditions that have been addressed, with a new definition of “historical recognized environmental condition” or “HREC” added. HREC is a past release of a hazardous substance or petroleum that was addressed to the satisfaction of the applicable agency (e.g., Texas Commission on Environmental Quality) or that meets residential use criteria.   Note, however, that if the standards have changed since the agency issued its closure letter, the HREC may become a recognized environmental condition in need of further assessment.
  4. There are tougher rules for file review if the database search finds a listing for the property or adjoining properties, e.g., an adjacent property is listed on the leaking petroleum storage tank database.  The consultant should review “pertinent regulatory files and/or records associated with the listing” and provide an analysis in the Phase I report or indicate why the analysis was not performed. A key question with this new criterion will be whether or how much costs will be affected for a Phase I report because of additional file review.  Parties also should note that a file review will add to  the length of time it takes to get a Phase I report if it is required.
  5. Finally, there is a new definition of “controlled recognized environmental condition” or “CREC”.  A CREC is a recognized environmental condition from a past release that has been addressed to the satisfaction of the relevant agency, where hazardous substances or petroleum were allowed to stay in place, but which has institutional controls that must be met.  An example would be a deed recordation requirement along with a mandate that groundwater cannot be used

Overall, the new standard does not make dramatic changes but streamlines and clarifies definitions. Nonetheless, anyone involved in real estate needs to understand the new standards, and to make sure their Phase 1 consultant does, too.