New ASTM Standard for Commercial Real Estate Phase I Environmental Site Assessments
By: Karen L. Karr & Ellen M. Hames
On November 1, 2021, the American Society of Testing and Materials (ASTM) International released its revised standards for conducting an environmental site assessment of a parcel of commercial real estate. The new standard updates the previous standard released in 2013. Now referred to as ASTM E1527-21, the ASTM standard is widely used to satisfy the “All Appropriate Inquiries” requirements under the U.S. Environmental Protection Agency (EPA) rules that allow parties of commercial property transactions to establish certain defenses to liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) (42 U.S.C. § 9601).
The new ASTM E1527-21 has been submitted to the EPA for review but has not yet been formally adopted. ASTM International expects EPA approval sometime within the next year. In the interim, environmental professionals have the option to continue using and citing ASTM E1527-13 or conduct Phase I in compliance with and cite to both standards – which will likely be the preference of clients and users.
Shelf Life of a Phase I
Most notably, the updated standard adds more detail – and complexity – regarding the shelf life of a Phase I Environmental Site Assessment (ESA). The new standard provides that the report will be presumed valid if it is conducted within 180 days prior to the date of acquisition. In addition, the new standard provides that a report conducted within one year prior to the date of acquisition will be valid, if the following five components of the report are updated within 180 days prior to the date of acquisition:
- interviews with owners, operators, and occupants;
- searches for recorded environmental cleanup liens;
- reviews of federal, tribal, state, and local government records;
- visual inspections of the subject property and of adjoining properties; and
- the declaration by the environmental professional responsible for the assessment or update.
The date that each of the above tasks was performed must be included in the report. This change means that the 180-day clock begins to run on the date that the first of these tasks was completed, not the date of the final report.
Updated Definition of “Recognized Environmental Condition” (REC)
The goal of a Phase 1 ESA is to identify “Recognized Environmental Conditions” present at the subject property. The updated definition of a REC is similar to the 2013 standard, but is clarified to achieve more consistent results when applied by environmental professionals preparing the reports. The previous standard defined a REC as “the presence or likely presence of any hazardous substances or petroleum products in, on or at a property: (1) due to a release to the environment; (2) under conditions indicative of a release to the environment; or (3) under conditions that pose a material threat of a future release to the environment.” To provide more context to the use of the phrase “likely presence,” the ASTM review committee updated the definition to only apply likely to item (2). Thus, the updated definition reads:
(1) the presence of hazardous substances or petroleum products in, on or at the subject property due to a release to the environment; (2) the likely presence of hazardous substances or petroleum products in, on or at the subject property due to a release or likely release to the environment; or (3) the presence of hazardous substances or petroleum products in, on or at the subject property under conditions that pose a material threat of a future release to the environment.
The updated standard also includes an example in the Appendix to clarify each phrase in the definition as well as provide examples of what constitutes a REC. Appendix X4, Example 2 explains that the opinion that a release is or was likely is subjective and should be based on the environmental professional’s experience and observations.
The new standard clarifies and extends the user obligation and search title records to identify any land use or activity restrictions or environmental liens on the subject property. The user of the site assessment report must have a title search performed regarding the possible existence of environmental liens and Activity and Use Limitations (AULs) that have been filed or recorded against the subject property. The standard specifies that the title search must involve reviewing the relevant records from 1980 until the present. The new standard stresses that reviewing land title records for AULs and environmental liens is a user responsibility.
Changes to the review of historical sources
The new standard requires that the environmental professional review the following four historical records in association with the subject property and adjoining properties, if based on the judgment of the environmental professional they are reasonably ascertainable, likely to be useful, and applicable to the subject property: (1) aerial photographs, (2) fire insurance maps, (3) local street directories, and (4) historical topographic maps. This type of research may have already been performed by many environmental engineering firms, but this framework will result in a more consistent level of detail among Phase I ESAs going forward.
The new standard references “emerging contaminants” and acknowledges that there may be state law requirements that are at play beyond the scope of the new standard. This is highlighted by the fact that per- and polyfluoroalkyl substances (PFAS) have not yet been designated as “hazardous substances” by the USEPA, and so technically those compounds are not within the scope of the new standard, even though PFAS may be subject to state regulation. It is important for practitioners to be aware that the new standard adds emerging contaminants to the list of non-scope considerations in Section 13, with additional discussion provided in Appendix X6. The new standard clarifies that until a contaminant is listed as a hazardous substance under CERCLA, it is not within the scope of the standard, and as such, is not required to be discussed in a Phase I.