United States: Updated ASTM Standard for Phase I Environmental Site Assessments Just Released
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Synopsis of Seyfarth: we noticed
earlier this year that the American Society for Testing and Materials (ASTM) was updating its Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment process. The ASTM Standard for Environmental Site Assessments phase I is evaluated every eight years, and the most recent update, ASTM E1527 – 21, has now been published.
The ASTM standard is designed to guide potential buyers of contaminated properties through the processes and practices necessary to meet “all appropriate requests” under the Comprehensive Environmental Response, Compensation and Liability Act. The new ASTM E1527-21 significantly revises a number of previous provisions of ASTM E1527-13 and clarifies a number of key terms and requirements. Important changes include:
- A requirement for improved research into the history of the subject property and adjacent properties, as well as improved site reconnaissance requirements;
- Key changes to the definition of “recognized environmental conditions” (REC); “Recognized and controlled environmental conditions” (CREC); and “Recognized Historical Environmental Conditions” (HREC), which are updated to reduce misclassifications of known or probable releases of hazardous materials and petroleum products affecting subject properties;
- Clarification as to the meaning of “Limitation of use of the property” and “Material deviation of data”;
- Clarification of the start date of the 180 day retention period of the Phase I report;
- Guidance on how to deal with emerging contaminants, such as per- and polyfluoroalkyl substances; and
- Comprehensive appendices that include revised definitions and a flowchart to identify and distinguish RECS, HREC and CREC.
The new ASTM standard is intended to provide additional information (and provide the basis for defenses against certain CERCLA-like liabilities) for protective buyers by revealing additional conditions not previously considered relevant to due diligence or defenses. However, there are important additional consequences.
For example, although the new standard clarifies that a requirement for phase II testing is not mandatory following results, many lenders (and institutional buyers / investors) will still require such testing to be performed, so which not only increases the costs of environmental due diligence obligations, but also the ultimate consequences of additional due diligence.
Particularly in states that require disclosure of known contamination discovered during due diligence, the expanded ASTM standard will force properties to cleanings that otherwise would not be necessary without the real estate transaction. This could be true even when the contamination was caused in the distant past, by an unknown party or a long-time owner / operator, or when the contamination came from an unrelated neighboring property.
This consequence of forcing more properties to clean affects not only buyers, but also sellers, as the parties will of necessity negotiate the responsibility of the due diligence costs, the clean-up costs and the administrative costs of negotiating “NFAs” and “NFR” with public bodies.
Perhaps it is time for the real estate industry to consider whether the value of CERCLA liability protections (seldom raised as a defense against cleaning liability in our considerable experience) outweighs the consequences of joining. to the new standard that requires closer scrutiny of historic operations and adjacent properties unrelated to the property in question?
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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