The long-anticipated new ASTM standard concerning Phase I environmental site assessments (ESAs), which was finally expected to go into effect mid-May, is in limbo while the U.S. Environmental Protection Agency (EPA) considers unexpected adverse comments the agency received on its rule on the new standard.

Last fall, on November 1, 2021, ASTM International approved a new version of ASTM E1527 (ASTM E1527-21), which governs how Phase I ESAs are conducted to meet U.S. EPA’s All Appropriate Inquiries (AAI) standard for liability protection under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). This standard includes a number of changes compared to the 2013 ASTM E1527-13 standard, which sets forth a more detailed explanation of how to meet the AAI standard under 40 C.F.R. § 312. U.S. EPA issued a rule on March 14, 2022, adopting ASTM E1527-21, and the rule was set to become final on May 13, 2022, if no adverse comments were received by April 13, 2022.

However, things did not go according to plan. As explained in this post by U.S. EPA, the agency received a number of adverse public comments in response to the rulemaking. The majority of the comments focused on issues raised by the continued allowance of the 2013 standard even once the new standard is adopted. U.S. EPA’s intention, post-adoption of the new standard, was that either the 2013 standard or the new standard could be used by parties, and that compliance with either ASTM standard would constitute compliance with AAI. Commenters expressed concerns that allowance of two completely different standards would cause chaos and confusion in the marketplace for parties trying to determine how to comply with AAI. U.S. EPA responded to these comments by withdrawing its final rule on May 2. The agency is now working to address the comments in a subsequent final action, although this action will not involve a second comment period.

If U.S. EPA can overcome the adverse comments and finalize the rule – likely with some effect on the ability to use the 2013 standard – here are some of the major changes that are expected to be included under the new ASTM E1527-21 standard:

Definitions: The definitions of Recognized Environmental Condition (REC), Controlled REC (CREC), and Historical REC (HREC) have all slightly been changed, mostly for clarity. One distinction clarifies that contamination located off-site does not constitute a REC unless it is believed the contamination has migrated to the subject property (side note: target property has changed to subject property). Additionally, the definitions clarify the difference between a CREC and an HREC, providing that a CREC may still have some contamination in place along with land use limitations or land use controls, while an HREC does not continue to have these types of limitations. The new standard also contains Appendix X4, which provides a breakdown of these definitions for Environmental Professionals (EPs) to use when determining which, if any, may apply to a property.

Historical Sources: The new standard specifically requires review of (1) aerial photographs, (2) fire insurance maps, (3) local street directories, and (4) historical topographic maps, if these are reasonably ascertainable, likely to be useful, and applicable. Additionally, if any or all of these sources are used by the EP, then they must also be reviewed to identify the past and current use of the adjacent properties, if likely to be useful and are applicable to the adjacent properties.

Emerging Contaminants: These are explicitly not within the scope of the new standard but may be mentioned as an environmental concern, which at the moment includes per- and polyfluoroalkyl substances (PFAS). Until a substance is defined as a hazardous substance, it cannot be considered the reason for a REC. EPs may list emerging contaminants as a Non-Scope Consideration though, allowing them to show up in the report as more of a business concern.

Expiration of the Report: EPs have long stated that their reports expire 180 days after their issuance. However, this conflicts with the regulations’ requirement that certain portions of the report be conducted within 180 days of the transaction (meaning closing for most). The new standard clarifies that a report’s expiration is dependent on the date that certain items were conducted, including (1) owner and operator interviews; (2) governmental records search; (3) site reconnaissance; and (4) EP certification. Each of these components must be conducted within 180 days of the transaction, in addition to conducting the title search for environmental liens. Additionally, the new standard clarifies that all other elements of the Phase I ESA must be conducted within one year of the transaction. And most importantly, the dates that all critical items were completed must now be identified in the report.

Significant Data Gaps: Previously, a significant data gap was not defined, but it is now defined as: “a data gap that affects the ability of the environmental professional to identify a recognized environmental condition.” The new standard requires the EP to explain how the gap affected the EP’s ability to identify RECs and requires some additional documentation, requiring the resources and/or sources of information that allowed the EP to identify the data gap to be identified in the report.

Title Searches: The new standard requires the user of the Phase I ESA perform the environmental lien and activity use limitation searches, and clarifies that these searches are not to be performed by the environmental professional (the consultant) unless specifically contracted for in their engagement with the user.  Specifically, the user must search for “land title records,” which includes, but is not limited to “deeds, mortgages, leases, land contracts, court orders, easements, liens, and AULs” that could be located “within the recording systems or land registration systems created by state statute in every state and ordinarily administered in the local jurisdiction.”

Other Changes: The new standard has rolled out updates of other aspects of the Phase I ESA. The EP must provide their rationale for concluding that the subject property has a CREC along with copies of the regulatory documentation. A site plan must be included in the Phase I ESA showing the approximate locations of features, activities, uses, and conditions on the subject property. Finally, color photographs of the exterior and interior, significant features, RECs, and adjoining or nearby properties of note must also be included.

These changes would add much-needed clarity and consistency on some of the obscure Phase I ESA requirements. For now, while parties await further direction and action by U.S. EPA, the previous standard, ASTM E1527-13, will continue to be a viable option, until and unless the 2013 standard is withdrawn by U.S. EPA – a possibility given the adverse comments received. Even though the 2013 standard is still acceptable, we anticipate the ASTM E1527-21 standard will be finalized shortly by U.S. EPA and recommend that new Phase I ESAs that are prepared going forward use the 2021 ASTM standard rather than the 2013 standard.

Please reach out to Daniel Fanning or another member of Husch Blackwell’s Environmental team if you have any questions about Phase I ESAs and other environmental due diligence issues.