EPA Announces Approval of New Phase I Environmental Site Assessment Standard

Environmental Alert

On December 30, 2013, the U.S. Environmental Protection Agency (EPA) announced that, effective immediately, it was amending the rule impacting the type of due diligence necessary to avoid Superfund liability as a prospective purchaser of contaminated property.

In particular, EPA amended the All Appropriate Inquiries rule under the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as "CERCLA" or "Superfund," to give parties purchasing potentially contaminated property the option to use the 2013 Phase I Environmental Site Assessment standard (ASTM E1527-13) in lieu of the 2005 standard (ASTM E1527-05).

Under CERCLA, purchasers of property must have undertaken "all appropriate inquiries" prior to acquisition of contaminated property in order to assert the "innocent landowner" and the "bona fide prospective purchaser" defenses to CERCLA liability. ASTM, an organization that develops and publishes voluntary consensus technical standards, developed standards for Phase I assessments, including the 2005 standard, which EPA incorporated into the All Appropriate Inquiries rule in November 2005.

When ASTM initially developed the 2013 standard, EPA proposed to allow use of either the 2013 or the 2005 standard to meet the requirements of the All Appropriate Inquiries rule. Subsequently, in the face of comments indicating that having two standards would be confusing to the public, EPA withdrew this proposal.

EPA intends to issue a proposed rule in the near future to remove reference to the 2005 ASTM Phase I standard, leaving ASTM E1527-13 as the sole standard. In the meantime, EPA strongly encourages use of the 2013 standard by prospective property owners and environmental professionals. EPA regards the new standard as an improvement over the 2005 standard. Among other things, under ASTM E1527-13, Phase I environmental site assessments must specifically include an assessment of vapor migration and vapor releases potentially affecting the subject property.

Somewhat contradictorily, EPA also stated that the All Appropriate Inquiry rule and ASTM E1527-05 always called for the identification of potential vapor releases or migration where indicative of a potential hazardous substance release. This raises the concern that Phase I site assessments conducted under the 2005 ASTM standard that did not include evaluation of possible vapor releases or migration may be deemed insufficient to establish CERCLA liability protections under the All Appropriate Inquiries rule. For parties that relied on Phase I site assessments conducted under the 2005 ASTM standard, including buyers of contaminated properties and their lenders, as well as the Phase I consultants who conducted environmental assessments on their behalf, this is potentially troubling news.

For additional information regarding the new ASTM E1527-13 standard and EPA's rulemaking, contact Sharon Newman with Preti Flaherty's Environmental Practice Group.