Step by step, inch by inch.  Slowly but diligently, the U.S. Environmental Protection Agency has been working to clarify what standards and practices may be used for conducting “all appropriate inquiries” (AAI) under the federal Superfund law, or the Comprehensive Environmental Response, Compensation and Liability Act “CERCLA.”  Prospective purchasers of contaminated property are eagerly awaiting a final rule that will clarify what standards apply to Phase I Environmental Site Assessments, the “gold standard” for identifying the potential presence of hazardous substances on, under or around a property prior to acquisition.

In a proposed rule published in the Federal Register on June 17, 2014, EPA seeks to amend its current AAI Rule to reflect that ASTM International’s current E1527-13 “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process” should be used in lieu of ASTM’s prior E1527-05 Standard in order to satisfy CERCLA’s AAI requirements.  EPA has given the public 30 days to comment on the proposed rule, with comments due by July 17, 2014.  Depending on the comments it receives, EPA indicates that it “may” publish a final rule to remove the existing reference to the ASTM E1527-05 Standard in the AAI Rule.  This final rule, if promulgated, would take effect one year later, in approximately mid-2015.  Until then, EPA has made it clear that parties conducting Phase I Environmental Site Assessments may continue to utilize either ASTM Standard – E1527-05 or E1527-13 – to comply with AAI requirements.

By way of background, prospective purchasers seeking liability relief under CERCLA’s landowner liability protections (i.e., innocent landowners, bona fide prospective purchasers and contiguous property owners), as well as recipients of EPA Brownfields grants for conducting site assessments, must comply with various standards and practices for conducting AAI. When EPA promulgated its AAI Rule in 2005, EPA expressly acknowledged at that time that prospective purchasers conducting due diligence could use the procedures included in ASTM Standard E1527-05 to comply with AAI requirements.  In 2013, ASTM updated its 2005 Phase I Standard by providing, among other things, clarifications to its definition of “Recognized Environmental Conditions,” new requirements for assessing vapor release and migration conditions, and additional procedures for conducting agency file reviews. While the E1527-13 Standard is expected to enhance the identification of historical releases and recognized environmental conditions at a property as compared against the prior E1527-05 Standard, environmental consultants generally acknowledge that it will be more costly and time consuming to perform Phase I assessments using the updated 2013 Standard as opposed to using the 2005 Standard. 

In earlier rulemakings in August 2013 and December 2013, EPA recognized both 2005 and 2013 ASTM Standards as satisfying AAI requirements, creating confusion among the regulated community and consulting industry as to which standard should be used in conducting Phase I assessments. With this current proposed rulemaking, EPA now seeks to promote the use of ASTM’s updated E1527-13 Standard and “reduce any confusion associated with the regulatory reference to a historical standard that is no longer recognized by its own promulgating organization as meeting its standards for good customary business practice.” However, until EPA issues a final rule removing the E1527-05 reference from the AAI Rule, confusion will likely continue regarding the appropriate ASTM Standard to use for performing Phase I Environmental Site Assessments, as prospective purchasers and their consultants will still have the option of using the E1527-05 Standard to meet their AAI obligations. 

So, what ASTM Standard should prospective purchasers use to satisfy their AAI obligations? Conducting a Phase I based on the E1527-05 Standard is still acceptable, and may be less time consuming and less costly to perform as compared to using the E1527-13 Standard. However, prospective purchasers should keep in mind that other parties involved in their transactions (e.g., investors, lenders, prospective tenants) may be expecting or even requiring a more rigorous environmental assessment to be performed based on ASTM’s updated E1527-13 Standard.