On November 1, ASTM International (formerly known as the American Society for Testing and Materials) published a revised version of its Phase l Environmental Site Assessment Standard, now known as E1527-21. ASTM first published a standard for Phase I Environmental Site Assessments in 1993, with revisions in 1994, 1997, 2000, 2005, and 2013. The previous standard (E1527-13) was sunset eight years after its approval on November 6, 2013.
Each year, a Phase l Environmental Site Assessment is conducted in the vast majority of US commercial real estate transactions. Phase l reports also are used for a wide variety of other purposes, including to document qualification for credits under the LEED and Green Globes green building rating systems.
Purpose of Phase I Assessments
According to ASTM, the stated purpose of the E1527-21 standard process is:
to define good commercial and customary practice in the United States of America for conducting an environmental site assessment of a parcel of commercial real estate with respect to the range of contaminants within the scope of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) (42 U.S.C. §9601) and petroleum products.ASTM E1527-21
The new E1527-21 standard is not yet recognized by the U.S. Environmental Protection Agency as satisfying its “All Appropriate Inquiry” rule to obtain protections from liability under CERCLA, the federal Superfund law. That recognition is expected to happen by rulemaking at some point in 2022. Currently, a property owner would not be able to assert a CERCLA defense because its Phase l report under E1527-21 does not comply with the EPA rule.
2021 Standard Includes Changes
Among the changes, the new E1527-21 includes:
- Several “terminology revisions,” one of which is a change to the definition of “Recognized Environmental Condition” (REC). The change is a modification that may negatively impact the value of real estate. For example, guidance is provided in the standard that the past closure of a leaking underground storage tank may not constitute a Historical Recognized Environmental Condition (HREC) unless the professional conducting the Phase l assessment has evaluated the data associated with that closed tank to be sure that the sampling data meets current regulatory standards. Tying the consideration to “current” standards, as opposed to the regulator determination at the time the tank was closed, could create a major dilemma for an environmental professional and will greatly limit the valuable designation of HRECs.
- Another terminology revision of what is a Controlled Recognized Environmental Condition (CREC). CRECs arise from past release of a hazardous substance that has been addressed to the satisfaction of regulators, but carry some implementation of controls, such as drinking water restriction. This new text is supported by a new appendix that provides guidance on the REC/HREC/CREC decision process, including a flow chart and examples of each.
- Expansion of mandated historical research into the uses of adjoining properties, which may substantively impact most properties. Liability from old retail sites that are beyond the boundaries of the “subject property” (a term also now expressly defined in the new standard) encouraged the ASTM committee to broaden the mandatory scope. While many consultants already considered prior retail uses, including retail uses on adjoining sites, adding certainty should result in consistency, but also increase the costs for a 2021 Phase I Environmental Site Assessment.
- Change to the dating of the report. Right now a report is presumed current when signed and dated as completed as much as 180 days prior to acquisition of a property. The report can also be updated to make it valid for up to a year. In the new standard, it appears that the 180 days is measured from the day work commences on the Phase l assessment even if that is simply a request for governmental records on a property. It is not clear how this earlier dating of the report is advantageous to any party involved in the commercial transaction.
While the new ASTM standard is not expected to be approved by the EPA until the rule-making process is complete sometime in 2022, firms conducting Phase I Environmental Site Assessments should be aware of the requirements of the new standard.
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