Based on adverse public comments submitted to the U.S. Environmental Protection Agency (USEPA), on May 2, 2022, USEPA withdrew its approval of the 2021 ASTM standard for conducting Phase I environmental site assessments (ESAs). The Phase I ASTM standard is crucial to many property transactions, as it facilitates the applicability of USEPA’s all appropriate inquiries (AAI) rule, which, when followed, provides certain innocent purchaser or lessee defenses from Comprehensive Environmental Response, Compensation & Liability Act (CERCLA) liability.
Until USEPA issues a final rule and in order to attempt to meet AAI, users of a Phase I report should request that consultants comply with the 2013 standard but can also request that the consultants incorporate new procedures prescribed in the 2021 standard to the extent they are not already included in the 2013 standard. At minimum, users should comply with the 2013 standard until the 2021 standard is approved by USEPA.
Some of the changes to the ASTM standard include revised terminology, appendix updates, clarification regarding shelf-life issues, updates to the historical record and site reconnaissance requirements, improved reporting requirements and references to emerging contaminants. These changes to the ASTM standard and their potential impact on real estate transactions are outlined in Thompson Hine’s November 2021 client update.
On March 14, 2021, USEPA issued a direct final rule that approved the 2021 ASTM International’s Environmental Assessment, Risk Management and Corrective Action Committee’s revised standard practice for ESAs (otherwise known as ASTM E1527). The ASTM standard had not been revised since 2013. If adverse comments were not received, the direct rule would have been finalized on or about May 13, 2022. USEPA stated that it issued a direct final rule because it viewed the action as “noncontroversial” and did not expect adverse comments. Adverse comments were submitted, however, to USEPA by the U.S. Chamber of Commerce and legal, consulting, brownfield redevelopment and lending interests.
USEPA’s final rule, which is not subject to a second public comment period, will address the adverse comments submitted, including whether the 2013 standard should terminate upon USEPA approval of the 2021 standard and whether per- and polyfluoroalkyl substances (PFAS) should be included in a Phase I scope. The risks associated with PFAS contamination, while not formalized as part of the AAI process in the new ASTM standard, should be considered and could likely lead to additional recommendations for Phase II sampling or additional investigation.
Potential Conflicts Between Standards
USEPA indicated in its March 14, 2022, proposed rule that in addition to complying with the new 2021 standard, consultants could also continue to use the 2013 standard to satisfy AAI. As pointed out in many of the adverse comments submitted to the agency, complying with both the 2013 and 2021 standards creates confusion and likely would lead to future litigation and, potentially, future risk of liability relating to AAI defenses. Brownfield redevelopment interests argued in their comments that complying with both standards could create chaos and confusion, which would be inconsistent with the “good and customary practice” required by ASTM.
Many of the comments urged USEPA to rescind the 2013 standard upon approval of the 2021 standard. The 2021 standard is intended to clarify what is required to meet AAI and many of the public comments submitted argued the 2013 standard is no longer relevant and should be rescinded. One of the comments from a banking association pointed out that by allowing consultants to continue to use the 2013 standard, a consultant could potentially fail to identify conditions relating to historic releases of hazardous substances that would result in deficient and inadequate reports that do not include some of the more stringent 2021 requirements, and therefore would potentially jeopardize future AAI defense claims. The commenters went further to point out that allowing users to pick and choose between standards would result in a two-tier system whereby some users would comply with the older standard to save costs and others would have “higher quality assessments” that would create complications and delays for lending institutions reviewing the reports.
Treatment of PFAS
PFAS are addressed for the first time in the ASTM E1527-21 standard, though not fully incorporated into the scope of a Phase I ESA. The standard would treat PFAS as a non-scope consideration rather than a recognized environmental condition (REC). This would follow the trend of other non-scope considerations, like the review of asbestos-containing materials, which has become a common practice over the last decade.
Some of the comments requested that PFAS be excluded completely from the rule until USEPA lists PFAS as a CERCLA hazardous substance. The Chamber of Commerce noted that the business community supports cleanups but urged USEPA to wait to include PFAS in the ASTM standard (even as a non-scope consideration) until formally adopted as a CERCLA hazardous substance in order to avoid leading to additional potentially premature CERCLA liability for landowners and potential buyers.
PFAS, sometimes referred to as “forever chemicals” because of their strong chemical makeup and persistence in the environment, will remain front and center with USEPA, the Department of Defense, citizens groups and nearly every state, and therefore need to be considered in any real property transaction. PFAS compounds impact many transactions because they are ubiquitous in the environment and found in many products, including stain- and water-repellent fabric; non-stick products (e.g., non-stick cookware); certain cosmetics, shampoo, conditioners, hand creams, sunscreen, toothpaste and dental floss; polishes, waxes and paints; cleaning products; firefighting foams; aerospace/aviation products; photographic anti-reflective coatings; mist-suppressant foams for electroplating; car wax; popcorn bags; waterproof/ breathable clothing; architectural composite resins; and paper and cardboard coatings. PFAS has been phased out of production in the United States, but they are still imported in consumer products.
Given the increasing regulatory emphasis on PFAS, purchasers and lessees clearly face a liability risk associated with acquiring or leasing a property with PFAS contamination. Those who want to understand the liability risk associated with purchasing or leasing a particular property should consider evaluating whether PFAS contamination may be present on a subject property, regardless of how the revised ASTM Phase I standard addresses PFAS.
Recent legislative and regulatory trends at the state and federal levels suggest that PFAS may be included within CERCLA’s definition of a “hazardous substance” in the not-too-distant future. Additionally, this new approach to PFAS in the ASTM standard will likely aid in compliance with state PFAS programs, which appear to be another continuing regulatory trend that is moving quickly across the country. While the likely presence of PFAS at a property is not currently considered a REC, its addition as a non-scope consideration signals a major expansion in cleanup liability when/if PFAS are added to USEPA’s list of hazardous substances.
Next Steps Until USEPA Approves Final Rule
Users of a Phase I report should request that consultants at minimum comply with the 2013 standard but can also request that the consultants incorporate new procedures prescribed in the 2021 standard to the extent they are not already included in the 2013 standard. Parties should allow for additional time in the process to account for these changes and be on the lookout for formal USEPA adoption of ASTM E1527-21 into the AAI rule in the coming months. The changes to the ASTM standard add additional rigor and formality to the process of generating a Phase I report, likely resulting in a longer timeline to complete due diligence and prepare a Phase I report as environmental professionals get up to speed and implement the revised standard.
FOR MORE INFORMATION
For more information, please contact:
Heather A. Richardson
212.908.3998
216.566.5927
Heather.Richardson@ThompsonHine.com
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