Nicole TK Moore, REPA

The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), also referred to as the Superfund law, was enacted in 1980 and, among other things, gave the federal government the ability to respond to releases or threatened releases of hazardous substances, and to pursue polluters (“responsible parties”) or potential polluters (“potentially responsible parties”) for the cleanup of contaminated sites.

CERCLA also created the responsibility to conduct “All Appropriate Inquiries” prior to a property transaction to qualify for exemption from CERCLA liability for cleanup costs. This essentially consists of environmental due diligence conducted prior to a property transaction to determine whether a property may have been contaminated by past or current activities, for a property stakeholder (for example, the prospective purchaser) to be exempt from liability for contamination that existed on a property prior to the property transaction.

The Environmental Protection Agency lays out and enforces the requirements for All Appropriate Inquiries and CERCLA liability. However, the industry standard for conducting and reporting environmental due diligence is the ASTM E1527 standard (the Standard Practice for Environmental Site Assessments: Phase 1 Environmental Site Assessment Process), which was designed by ASTM International specifically to meet the AAI requirements. First released in 1993, the standard has been revised in 1994, 1997, 2000, 2005, and most recently in 2013. The evolution of the E1527 standard over the last 25 years has been significant, and reflects both the ready availability of a greater data set, and a trend towards a more narrow, clear scope of assessment. Ultimately, every new version ensures more consistency, quality and the elimination of potential loopholes that could incur CERCLA liability.

The current standard for the Phase 1 Environmental Site Assessment, ASTM E1527-13, is up for renewal.  ASTM’s renewal committee is aiming for a new E1527-21 standard to be finalized in January 2021, which would give the EPA most of the year to approve it before December 31, 2021 when the current standard sunsets. Over the course of 2018 and 2019, the committee has met on numerous occasions to propose and discuss revisions. Volunteer focus groups, consisting of environmental professionals, lenders, and environmental attorneys, have evaluated the 2013 ASTM standard for issues, feedback, new concerns, or revisions that take into consideration the need of the users (CRE stakeholders) and the producers (consultants, Environmental Professionals, and the lawyers who fall in between).

One of the central goals is to balance compliance with the continuing desire of lending institutions to get more scope, more specificity, adhere to stricter guidelines and standardize the practice, thereby lowering variability. However, these desires must be balanced with an affordable scope of work for clients, the practical capabilities of what the due diligence industry can produce, as well as being able to account for special cases and expertise. The hope is to pass a final version of the E1527-21 standard through membership ballot some time in 2020 for EPA review in 2021, with the next ASTM committee ballot scheduled for early Spring of 2020.

Some of the suggested revisions to the current ASTM E1527-13 standard reflect growing recognition of a changing commercial real estate landscape over the latter half of the decade, with new sectors and property types, integration of technology, emerging contaminants (such as Per- and polyfluoroalkyl substances (PFAS)), and the due diligence scopes that go in accordance with these evolving industry trends. For example, industrial warehousing has become a market necessity as e-commerce has transformed into a retail cornerstone, particularly in urban landscapes. Last mile logistics and flexible warehousing (with extra high ceilings and refrigeration capabilities, for example) have resulted in a lot of conversions of old industrial buildings, or buildings previously used for a completely different sector. Real-time access to historical and existing data through electronic databases, as well as greater availability of aerial photography and aggregated records, has increased scrutiny and expectations from the environmental due diligence process.

A few of the more significant proposed changes involve the following issues:

  • Expanding the scope of historical research on properties. The current guidelines might miss a complex Recognized Environmental Condition (REC) due to historical use. The current standard is written such that full historical research must be conducted on the site of interest and a suggestion of research on surrounding sites (including adjacent sites). The proposed change would mandate historical research on adjacent sites and surrounding sites, as well, but ongoing committee discussion is needed to elucidate definition of surrounding sites.
  • Clarifying the scope of site visits. This includes what type of Environmental Consultant(s) are qualified to conduct the assessment and justification language if/when Environmental Professionals-in training are sent to sites.
  • CREC examples and classification system. Clarifying classification language and providing more examples of Controlled Recognized Environmental Conditions (CRECs) which are determined to pose no risk to human health. Confusing language regarding what is defined as a CREC could pose liability issues for CRE owners or developers either in the case of re-development over an existing CREC or the re-emergence of issues needing site mitigation.

Several smaller “housekeeping” changes could include a review of State and Federal Databases, identification criteria for physical setting, polychlorinated biphenyl compounds (PCBs) in building materials as a part of the scope, and clarifications and additions to definitions. We’ll keep you posted as the new E1527-21 Standard shapes up and takes final form.