On March 14, 2022 EPA published a Direct Final RuleAnd a Proposed Rule that would incorporate ASTM International’s (“ASTM”) updated standard for conducting Phase I Environmental Site Assessments (“Phase I ESAs”) into EPA’s “All Appropriate Inquires” regulations.
As background, ASTM 1527 is designed to provide a consistent standard for satisfying EPA’s All Appropriate Inquiries (“AAI”) Rule when assessing current environmental conditions as part of the purchase or financing of commercial property. Compliance with the AAI Rule is an essential element in obtaining protection from liability under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) as an innocent landowner, a contiguous property owner, a secured creditor, or a bona fide prospective purchaser (“BFPP”). While EPA’s AAI Rule is separate from the ASTM 1527 standard, the AAI Rule provides that compliance with ASTM 1527-13 also satisfies the Rule, and therefore satisfies CERCLA’s requirements for environmental due diligence.
ASTM’s Standard ASTM 1527 was revised on November 1, 2021. This was to correct inconsistencies in current environmental due diligence practices and improve the quality of Phase I ESAs. We discussed key changes in the new standard – ASTM 1527-21 – in our previous article which can be accessed Here.
EPA has included ASTM 1527-21 in its AAI rule as part of this rulemaking process. EPA views ASTM 1527-21 as sufficiently similar to ASTM 1527-13 that use of either standard would satisfy EPA’s AAI rule. This is consistent with our previous article where we noted that, “practitioners should feel comfortable using either … standard[.]”
The standards are so similar that EPA considers the Direct Final Rule noncontroversial. It anticipates no adverse remarks. The Direct Final Rule will take effect May 13, 2022 if no adverse comments have been received by April 13, 2022. EPA published a Proposed Rule to achieve the same goal as its Direct Final Rule, should it receive adverse public comments. If the Direct Final Rule is not approved by the public, EPA will rescind it and use the Proposed Rule as a way to address the public’s comments in a future final rule.
Despite the similarities between the standards, practitioners should expect that EPA will be subject to adverse comments on its Direct Final Rule. EPA received adverse comments during its previous update (from ASTM 1527-05 t 1527-13). Nonetheless, whether adverse comments are received or not, we expect ASTM 1527-21 to be incorporated into EPA’s AAI regulations through either rulemaking process. Project proponents will have to choose which standard to use.
Either will satisfy EPA’s AAI regulations, so the choice may depend on the specific transaction. Parties may choose to use ASTM 1527-21 if they are more concerned about emerging contaminants, adjacent properties, and/or if they prefer a more structured approach to categorizing historical contamination. Parties who have a shorter timeline and have a higher risk tolerance may prefer the ASTM 1527-13. Moreover, parties should consider whether the Phase I ESA will satisfy a requirement other than EPA’s AAI rule, such as state or lender requirements that are better addressed by one of the two standards, or which may mandate a particular standard.
