For many years, it has been standard practice for prospective purchasers and even tenants to conduct a Phase I Environmental Site Assessment (“ESA”) before acquiring a new property interest. This is for two important reasons: (1) to learn the environmental condition of the property, and (2) to create an affirmative defense against what could otherwise be strict liability for existing environmental contamination or contamination that migrates from an adjacent property. Under the Comprehensive Environmental Response, Compensation and Liability Act, (“CERCLA”), otherwise known as Superfund, and similar state laws across the country, a new owner or operator of a contaminated property can be held liable for releases caused by others unless it has performed reasonable due diligence on the property prior to obtaining or beginning operations on the property. Under CERCLA, the amount of due diligence that is necessary to avoid strict liability is called All Appropriate Inquiry (“AAI”). If AAI has been performed, then a property owner or operator will be protected even if the assessment missed a problem during due diligence. Performing AAI is thus key to limiting risk, but the Environmental Protection Agency (“EPA”) recently caused confusion on exactly how this can be achieved.
The American Society for Testing and Materials (“ASTM”) created a standard for performing such due diligence in the form of a Phase I ESA (if called for, a Phase II may also be necessary for full due diligence). ASTM updates the Phase I standard every five years based on collective experience and concerns, as well as new technology. Typically, EPA then officially adopts the updated ASTM standard by rule, deeming it sufficient to achieve AAI. Thereafter, property owners and operators can trust that a Phase I ESA performed in accordance with the adopted ASTM standard will afford a defense to potentially unlimited liability.
ASTM adopted a new Phase I standard in 2021, ASTM E1527-21, to replace the previous standard, ASTM E1527-13, which currently serves as the AAI standard for EPA. The two standards are not contradictory, but the newer standard contains additional considerations. EPA followed suit by proposing a direct final rule in the Federal Register in March 2022, to adopt E1527-21 as constituting AAI. The rule was set to become final unless EPA received adverse comments from the public. There were, in fact, several strong objections to the updated standard, including the addition of an assessment of per-and polyfluoroalkyl substances (PFAS) chemicals. EPA just withdrew the proposed rule to further examine the standard, leaving the required standard for performing a Phase I in limbo. Until EPA resolves the status of ASTM E1527-21, we recommend that property owners and operators direct their environmental consultants to conduct a Phase I ESA in compliance and consistent with both ASTM E1527-13 and E1527-21. This will cover all bases and ensure that they are protected under AAI.
For more information, please contact AGG Environmental partner Brooke F. Dickerson.