Seyfarth Synopsis: The ASTM is in the process of updating its Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process.
A Phase I Environmental Site Assessment is a report, following ASTM Standards, that identifies recognized environmental conditions (RECs) on real property to evaluate environmental risks and liabilities associated with the property. It is often referred to as a “Phase I ESA” or simply a “Phase I,” and is an important part of the real estate due diligence process. Completing the Phase I process is necessary if a landowner or purchaser wants to claim the “innocent landowner, ” bona fide prospective purchaser, or other third party defenses available under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for purchasers, and to a lesser extent tenants, of real property.
The current (E1527-13) version of the ASTM Phase I standard, used by EPA and the states to determine whether sufficient environmental due diligence has been conducted for a purchaser to utilize CERCLA defenses, is scheduled to be updated this year. While the revised standard has not been finalized, several possible changes of potential significance have been proposed.
The key areas of the ASTM standard where we anticipate significant revision include:
- Addition of a new “non-scope” section. Non-scope provisions are those areas of environmental inquiry that, while potentially helpful to a prospective purchaser, are not explicitly required in order for the purchaser to use the CERCLA defenses. The new non-scope section will focus on “emerging chemicals of concern,” including Perfluoroalkyl Substances (PFAS). Considering the EPA’s increasing focus on PFAS, and the likelihood of more regulations respecting PFAS, having a section to discuss potential PFAS contamination at a Site would provide pertinent information to potential buyers and creditors.
- Modifications to the protocol for historic searches. Currently, the standard requires a historic search of the subject property itself. The revisions suggest that this should be expanded to include not only the subject property, but also surrounding properties. While broadening the area of inquiry may be helpful to purchasers in terms of providing them more information about nearby properties, for sellers, expanding inquiries to adjacent properties it is problematic because it very provides an opportunity for consultants to identify offsite concerns that need further testing or evaluation. Expanding concerns to offsite properties also impacts purchasers who are financing the transaction, because heightened inquiry into offsite properties raises issues of concern for lenders that the purchaser may need to investigate further through Phase II testing.
- The new standard may require an analysis of how data gaps may affect the ability to identify RECs, and may require a discussion of how data gaps may be addressed through other resources. Currently, data gaps are routinely ignored unless flagged as significant.
- Standards for identifying RECs at service (gas) stations or dry cleaners may change. For historic cleaners and service stations, this includes a recognition that contamination is reasonably likely to be present, despite lack of any spill or release documentation. This will most certainly result in recommendations by consultants that all properties formerly associated with dry cleaning operations or service stations on site (or off-site) undergo Phase II testing.
Feel free to reach out to the author, one of Seyfarth Shaw’s Environmental Compliance, Enforcement & Permitting team members, or your Seyfarth attorney with any questions on this important topic.
