ASTM's Proposed Definition of CREC May Jeopardize Landowner Liability Protections Under CERCLA

Highlights

ASTM International (ASTM) has proposed redefining a Controlled Recognized Environmental Condition (CREC). The ASTM's definition, as drafted, confuses risk-based decision-making with the implementation of institutional controls, undermining 20 years' worth of other ASTM and U.S. Environmental Protection Agency (EPA) work on institutional controls.

The proposed CREC definition raises significant questions as to when "continuing obligations" will apply and therefore how prospective purchasers can maintain their landowner liability protections (LLPs) under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).

This Holland & Knight alert discusses some of the questions surrounding the ASTM's proposed definition of CREC and what it may mean if implemented.

What Is a CREC?

ASTM currently proposes to define CREC as:

controlled recognized environmental condition—a recognized environmental condition affecting the subject property that has been addressed to the satisfaction of the applicable regulatory authority or authorities with hazardous substances or petroleum products allowed to remain in place subject to implementation of controls (e.g, property use limitations or activity and use limitations). For examples of controlled recognized environmental conditions, see Appendix X4.3.2.17.1 Discussion—Identification of a controlled recognized environmental condition is a multi-step process that must be reflected in the report's Findings and Opinions sections, as described in sections 12.5 and 12.7, including the environmental professional's rationale for concluding that a finding is a controlled recognized environmental condition:

(1) When determining whether a recognized environmental condition has been "addressed to the satisfaction of the applicable regulatory authority or authorities with hazardous substances or petroleum products allowed to remain in place," the environmental professional shall review reasonably ascertainable documentation, such as no further action letters (or similar certifications or approvals) issued by the applicable regulatory authority or authorities, or, in the case of self-directed actions (where allowed), documentation and relevant data that satisfy risk-based criteria established by the applicable regulatory authority.

(2) In determining whether a recognized environmental condition is "subject to implementation of controls (e.g., property use limitations or activity and use limitations)," the environmental professional shall identify the documentation providing the property use limitation or activity and use limitation that addresses the recognized environmental condition in the report's Findings and Opinions section(s).

(3) When the environmental professional determines that a recognized environmental condition is "subject to implementation of controls (e.g., property use limitations or activity and use limitations)," this determination does not imply that the environmental professional has evaluated or confirmed the adequacy, implementation, or continued effectiveness of the property use limitation or activity and use limitation.

(4) A past release that previously qualified as a controlled recognized environmental condition may no longer constitute a controlled recognized environmental condition at the time of the Phase I Environmental Site Assessment if new conditions or information have been identified such as, among other things, a change in regulatory criteria, a change of use at the subject property, or a subsequently identified migration pathway that was not previously known or evaluated. As noted, the report's Findings and Opinions section(s) shall include the environmental professional's rationale for concluding that a condition at the subject property is or is not currently a recognized environmental condition or controlled recognized environmental condition.

Discussion. The CREC term is not required by EPA's All Appropriate Inquiries (AAI) Rule, 40 CFR Part 312.

The ASTM E50 Task Group introduced the phrase, property use limitation, as part of the CREC definition. Property use limitation is not a recognized term of art. The phrase is not used in the AAI rule, nor by EPA, nor by any other recognized industry standard, and it is not well defined in the Phase I standard itself. Instead, ASTM attempts to explain this phrase through non-binding examples in a non-binding appendix to the Standard. Activity and Use limitations (AULs), on the other hand, is a recognized term of art that has been widely used by ASTM for 20 years and is well understood and accepted to encompass both institutional and engineering controls. See ASTM E2091.

Why Does ASTM Do It This Way?

It would appear that ASTM knows that several of the examples in the non-binding appendix would be voted down if they were included in the mandatory Standard.

Why Is This Important?

The CREC definition, as drafted, confuses risk-based decision-making with the implementation of institutional controls. ASTM recognized these steps to be separate but related actions more than 20 years ago. There are no "controls" as part of risk-based decision-making. ASTM had decided that a separate standard was needed in order to ensure that the implementation of institutional controls (E2091) – after risk-based decision-making had been completed (E2081). This has been the practice for the past 20 years. The controls are implemented separately. It should be noted that cleanup to a commercial or industrial use standard is not a "control," even though that is part of a risk-based cleanup process.

For ASTM to suddenly decide now that there are "controls" as part of risk-based decision-making may undermine all of the work that ASTM and EPA have done to implement robust systems for the establishment of institutional controls at contaminated sites for the past 20 years. And it may cause substantial confusion as to when continuing obligations may apply. Under AAI, and EPA's 2019 Common Elements Guide, continuing obligations should apply only when there are institutional controls or land use restrictions. So how does the CREC definition fit in with these terms? There are no institutional controls or land use restrictions, e.g., at a self-implemented cleanup to risk-based cleanup standards, as ASTM's definition would make it appear under its non-binding examples in the non-binding appendixes. Yet ASTM muddies this issue through its interjection of the property use limitation (CREC) concept.

Likewise, ASTM's action undermines the work that has been done over the past several years when the Continuing Obligations Standard Guide (E2790) was developed regarding the importance of placing the prospective property owner on notice via the use of binding land use restrictions and institutional controls. This type of notice will not occur in the context of self-implemented cleanups in which the prospective owner frequently will have no notice of the cleanup or any potential continuing obligations. The potential lack of notice raises due process and takings issues.

Importantly, ASTM's language is inconsistent with the position taken by EPA in its recently updated Common Elements Guide (Guide). EPA clarified in that Guide that land use restrictions must be legally binding restrictions or limitations on the use of land or resources, that bind both current or future owners and users. ASTM is apparently trying to breathe meaning into the phrase "property use limitation" that it simply doesn't have under the law. Otherwise, there would have been no need for EPA, the National Conference of Commissioners on Uniform State Laws (NCCUSL), states and others to spend so much time over the past 20 years building robust systems for implementing, monitoring and enforcing institutional controls.

Similarly, when NCCUSL developed the Uniform Environmental Covenants Act (UECA) in 2003, it emphasized that this type of institutional control could only be used where there was regulatory oversight. An environmental covenant cannot be used at self-implemented cleanups. So the concept of a self-implementing cleanup is inconsistent with the concept of controls.

Many in the industry would agree that the ASTM's CREC concept is unnecessary under the Phase I standard and, as currently drafted, may cause significant confusion as to when continuing obligations may be triggered. Environmental practitioners, brownfield redevelopers and real estate lawyers are encouraged to become actively involved in the ASTM Task Force's efforts to update the Phase I Environmental Site Assessment (ESA) standard to try to get these efforts back on track.

What Can You Do?

There appears to be a decided lack of balance between Users and Producers on the Phase I ESA Task Group. It is critically important that more environmental attorneys, brownfields redevelopers and real estate attorneys become involved in this process. Interested parties are encouraged to join the ASTM E50 Task Group and actively participate in the E50 Task Group meetings, including the next one on Wednesday, Oct. 28, 2020, from 10 a.m. to 4 p.m. EDT via WebEx. Opponents of this ASTM proposed change should submit comments to support deletion of the term "property use limitation" from the definition of CREC, as well as the deletion of the non-binding examples in the non-binding appendix.