Phase 1 Standard for All Appropriate Inquiries in Limbo
It is hugely significant that the Phase l Environmental Site Assessment standard is in limbo because that assessment is conducted in the vast majority of the 5.6 million commercial real estate transactions each year in the United States (i.e., including for a real estate purchaser to avoid liability under the Superfund law).
The U.S. Environmental Protection Agency had proposed to amend the practice for “All Appropriate Inquiries” to reference the new version of the standard practice made available by ASTM International on November 1, 2021, but ..
Specifically, EPA proposed to amend the All Appropriate Inquiries rule to provide that ASTM International’s E1527-21 “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process” (a new 2021 version in lieu of the 2016 and 2013 versions of the standard) could be used to satisfy the requirements for conducting All Appropriate Inquiries under the Comprehensive Environmental Response, Compensation, and Liability Act.
EPA proposed amending the All Appropriate Inquiries rule to reference ASTM International’s E1527-21 standard practice as a “direct final” rule without a prior proposed rule. That is, using a procedure EPA has rarely found successful, after publishing in the Federal Register if the Agency received adverse comment before April 13, 2022, the direct final rule would not take effect and EPA would publish a timely withdrawal in the Federal Register.
EPA subsequently received adverse comment on that direct final rule (.. much to anyone’s surprise?) and effective May 2, 2022, it was withdrawn.
There is no announced timeline for further EPA action. As stated in the direct final rule and a parallel proposed rule, EPA will not institute a second comment period at this time.
Of great import, the proposed final rule did not disallow the use of the previously recognized versions of the standard (ASTM E1527-13 or ASTM E2247-16), and it will not alter the requirements of the previously promulgated All Appropriate Inquiries rule. Significantly, that proposal would have increased flexibility for some parties who may make use of the new standard, without placing any additional burden on those parties who prefer to use either the ASTM E1527-13 or the ASTM E2247-16 standard or to otherwise follow the requirements of the All Appropriate Inquiries rule when conducting all appropriate inquiries. This is a big deal having large financial implications.
And that prior versions of the Standard were not being retired or replaced was the subject of several of the 14 public comments that EPA received. More than one commenter expressed concern on how the option of using the old or new standard at the discretion of the parties would create confusion in assessment and transactions [.. but that had been the practice with past standard approvals?].
We blogged last year about some of the key changes in the new version, including that the valuable use of Historic RECs is all but eliminated, in Updated Phase 1 Environmental Site Assessment is Published But .., so the ability to select the 2016 standard has significant financial import.
Some legal commentators have suggested that comments about PFAS not being included in this new standard, as we blogged some months ago, PFAS in a Phase l Environmental Site Assessment, was a reason for withdrawal by EPA, but a review of the 14 comments debunks that.
For the unenlightened, .. this is all significant because a Phase l Environmental Site Assessment is conducted in the vast majority of the 5.6 million commercial real estate transactions in the U.S. each year (including bank loans secured by real estate), and also because Phase l reports are used for a wide variety of other purposes, including as ESG data for a company to demonstrate third party verified compliance with the E in ESG, and also to qualify for credits under the LEED and Green Globes green building rating systems.
Additionally, we expect to blog in the coming days about the Maryland Department of the Environment adopting regulations for the first time requiring the person conducting an environmental assessment, even when they are not the owner of the property (e.g., possibly a prospective contract purchaser of land or a consultant engaged in a lending transaction) to report suspected oil to MDE immediately, but not later than 2 hours after the visual detection of free product or within 48 hours of receiving an analytical laboratory report that shows a petroleum constituent.
Again, EPA withdrew the approval of the new ASTM E1527-21. The prior versions of the Phase 1 standard remain available for use and we can assist you in creating value and prospering with your selection of an environmental site assessment standard during this period of regulatory change and into the future .