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New Standards for Phase I Environmental Site Assessments

On November 6, 2013, the American Society for Testing and Materials (“ASTM”) published new standards for Phase I Environmental Site Assessments (“ESA”). Phase I ESAs are conducted to assess the environmental condition of commercial real estate for potential buyers. The ASTM’s E1527-05 standard has been approved by the Environmental Protection Agency (“EPA”) to satisfy the “all appropriate inquiry” standard required under the Comprehensive Environmental Response, Compensation and Liability Act, however, ESAs are often used to meet other federal and state regulations.

The ASTM standard requires a records review of the history and usage of the property, a visual inspection of the site, and interviews with current and previous owners, occupants, neighbors, and government officials to establish if there are any releases or potential releases of hazardous material on the property. An ESA must be performed by an environmental professional. If potential releases are found, a Phase II ESA will be conducted, which consists of actual site inspection for further information.

The new standards published by the ASTM, E1527-13, include a few substantive changes to Phase I ESAs. First, the definition of Recognized Environmental Conditions (“RECs”) now focuses on the release of hazardous material, not the presence of such material. Second, the ASTM has more narrowly defined Historical Recognized Environmental Conditions as conditions remediated to an unrestricted residential standard and has created the new Controlled Recognized Environmental Conditions to cover conditions that have been remediated, but require future controls. Third, a new definition of migrate/migration was created to address potential vapor intrusion/migration, which should now be considered a REC. Fourth, the standards clarify that environmental professionals should more rigorously review regulatory records or explain why such review is not necessary. Finally, the new standards make many of the responsibilities for disclosing information about the property mandatory, where they were once discretionary.

EPA has issued a proposed rule to allow satisfaction of the “all-appropriate inquiries” requirement by E1527-05 or E1527-13 and plans to issue the final rule shortly.

The attorneys at Lieberman Blecher & Sinkevich have long worked with clients whose commercial transactions involve environmentally sensitive or impacted properties for which a Phase I is often just a first step in the process of understanding potential environment impediments. Follow up assessments are sometimes necessary and clients must be appropriately advised of the nature and extent of the financial and other risks inherent to transferring or obtaining property with known or suspected environmental impediments. The attorneys on our Real Estate & Redevelopment team are available to discuss these issues and advise individuals, organizations, and investors in the important areas of environmental liability.

 

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