The ASTM Phase I Update: Here At Last

The July 2021 issue of HETI Horizons provided an overview of anticipated changes in the 2021 update to American Society for Testing and Materials (ASTM) E1527, “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process”. In this edition, some 18 months later, we present some of the major final revisions – which become effective this month.

In March 2022, the Environmental Protection Agency (EPA) issued a direct final rule (87 FR 14174) stating that it would continue to recognize the old ASTM Standard E1527-13 as well as the new Standard as satisfying the All Appropriate Inquiries (AAI) provision in the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Then in May, EPA withdrew the direct final rule after receiving objections to continued use of ASTM E1527-13. Commenters argued that ASTM E1527-21 was developed with input from industry professionals, users, and regulators; and since it represents “good commercial and customary business practice” it should, therefore, replace ASTM E1527-13 altogether. Furthermore, commenters stated that using both the 2013 and 2021 Standards could generate confusion and add a level of complexity for users – as they would have to evaluate differences in costs/benefits of using one Standard over the other when reviewing multiple bids from environmental consultants.

In response to the concerns raised by commenters, EPA issued a new direct final rule (87 FR 76578) on December 15, 2022, stating that only the newer Standard should be used moving forward. However, to allow users to become accustomed to the new Standard, EPA is providing a sunset period of one year for ASTM E1527-13. The effective date of publication of EPA’s final rule is February 13, 2023 – meaning that the 2013 Standard will continue to satisfy AAI until February 13, 2024.

Definition Changes

The definition of a “Recognized Environmental Condition” (REC) was revised in an effort to clarify the term as it relates to the presence of hazardous substances or petroleum products at a property. A REC is now defined as (1) the presence of hazardous substances or petroleum products in, on, or at the subject property due to a release to the environment; (2) the likely presence of hazardous substances or petroleum products in, on, or at the subject property due to a release or likely release to the environment; or (3) the presence of hazardous substances or petroleum products in, on, or at the subject property under conditions that pose a material threat of a future release to the environment.

The new Standard now describes circumstances that elevate a “data gap” to the level of “significant data gap,” which is now defined as “a data gap that affects the ability of the environmental professional to identify a recognized environmental condition.” It also clarifies that a “data gap” – defined as “a lack of or inability to obtain information required by this practice despite good faith efforts by the environmental professional to gather such information” – is not inherently significant. Therefore, if a data gap does not affect the environmental professional’s ability to identify a REC, it does not constitute a “significant data gap.”

ESA Report Content & Viability Changes

ASTM E1527-21 now promotes the consistent use of “Subject Property” in a Phase I ESA report when referring to the property that is the subject of the environmental site assessment. Many environmental consultants use various terms like “subject property”, “site”, “target”, or “property” interchangeably in their reports; so, referring to the property undergoing the Phase I as “subject property” will reduce confusion among report readers and users.

The revised Standard requires the environmental professional to document in the report whether or not the features and conditions specified in the Site Reconnaissance section of the new Standard (§9.4.1 through 9.4.28) were observed. A blanket statement that “no RECs were observed at the Subject Property” will not meet the site description requirements in the revised Standard. This change in the ASTM Standard promotes good business practices as it shows the user or reader of the report that the environmental professional searched for all of the features and conditions specified in the Standard, and clearly describes their presence or absence in the ESA report.

The new Standard also clarifies the time frame for continued viability of an ESA report. The validity of a report, or the report’s expiration, depends on the earliest date at which certain components of the ESA were conducted. These include (1) interviews with owners, operators, and occupants; (2) searches for recorded environmental cleanup liens (a user responsibility); (3) reviews of federal, tribal, state, and local government records; (4) visual inspection of the Subject Property; and (5) declaration by the environmental professional. These components must be conducted within 180 days prior to the transaction date, and the dates at which they were conducted (except for environmental lien searches which are the user’s responsibility) must be identified in the report. This update to ASTM 1527-21 means that an ESA report is valid for 180 days from the date at which the first of these components was completed.

Although many environmental consultants have been including site plans in their ESA reports prior to the 2021 update, the new Standard now explicitly requires the inclusion of a site plan. The update further specifies that the following features must be included in the site plan: a north arrow; the approximate scale; all major structures; occupant/business names or land uses; and locations of features, activities, and conditions at the subject property and adjoining properties.

The old ASTM Standard stated that the environmental professional should exercise professional judgement in determining what historical sources should be reviewed to identify historical uses of the Subject Property. The new Standard specifically requires the review of four Standard Historical Sources – identified as aerial photographs, local street directories, topographic maps, and fire insurance maps – if reasonably ascertainable, likely to be useful, and applicable to adjacent properties. The environmental professional should exercise professional judgement and review additional historical sources to identify past uses that may indicate a REC in connection with the subject property.

ASTM E1527-21 clarifies that environmental lien and activity and use limitation (AUL) searches are to be completed by users and searches for land title records must be completed from the present back to 1980.

The new Standard addresses the growing concern regarding “emerging contaminants” such as per- and polyfluoroalkyl substances (PFAS), by indicating that once these emerging contaminants are classified by EPA as hazardous substances under CERCLA, they will be evaluated within the scope of ASTM E1527. This suggests that users may want to consider the risks of emerging contaminants at the subject property, and request that the environmental professional address the potential for emerging contaminants in the ESA report as a non-scope issue.

What It All Means

Overall, the aim of the new Standard is to strengthen the framework for environmental due diligence by clarifying the scope and the depth of review for an ESA and revising certain terms and definitions to make them more concise and eliminate potential confusion.

For a property owner, lender, consultant, or other interested party, it is important to be aware of these changes and to understand the new requirements set forth in ASTM E1527-21. Effective implementation of this ASTM Standard plays a critical role in managing                 environmental liability and financial risk. Ultimately, adherence to E1527-21 will assist a   property owner with qualifying for landowner liability protections (LLPs) against contamination and remediation requirements under CERCLA; and promote increased uniformity and transparency of Environmental Site Assessment reports prepared by environmental professionals.

HETI staff are well-versed in the ASTM Standard for environmental assessment of commercial real estate and are ready to support our clients as questions arise regarding the usage and interpretation of the new ASTM 1527-21.