The EPA Approves New Environmental Due Diligence Standard

By:  Patrick Paul

On December 30, 2013, the United States Environmental Protection Agency (EPA) issued its final rulemaking recognizing the newly amended ASTM standard practice for Phase 1 Environmental Site Assessments, E 1527-13 as satisfying the agency’s All Appropriate Inquiries (AAI) rule at 40 C.F.R. Part 312.  Curiously, EPA did not remove the existing reference to the prior E1527–05 standard.  In fact, EPA specifically provided that “today’s rule does not require that any party use this standard.”  Rather, the new rule at least temporarily provides an additional method to achieve AAI without altering the existing requirements or otherwise mandating new requirements.  Consequently, until future rulemaking, either standard will be accepted as satisfying AAI.  EPA confirmed that the future rulemaking likely would eliminate the ability to utilize ASTM E- 1527–05 to satisfy the AAI rule.

AAI is vital to establish landowner liability defenses under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund).  Although known for its strict liability scheme, CERCLA provides defenses for current property owners who might acquire contaminated property but are not otherwise responsible for the contamination and do not impede the required remediation.  The common thread necessary to avail of these defenses is AAI, namely, a demonstration that prior to acquiring the property the landowner undertook reasonable inquiries to determine whether the property had existing contamination.

In its final rule, EPA recommends use of the updated 2013 standard as being more rigorous in identifying potential and threatened releases of hazardous substances at commercial and industrial properties.  In evaluating future property purchases, prospective buyers must be aware of the amended standard and are strongly encouraged to conform to its requirements in the conduct of required due diligence activities.

For those familiar with prior ASTM standards, the most significant amendments to the 2013 standard include:

–          A requirement that a vapor intrusion pathway must be considered.  More particularly, the definition of “migrate” under the new standard now includes releases that migrate in the subsurface as vapor.  Environmental professionals are required to assess possible indoor air quality impacts from vapor intrusion pathways if there is subsurface soil or groundwater contamination at or near the property.

–          A new definition, “controlled recognized environmental condition” (CREC), applies to hazardous substance releases that have been addressed to the satisfaction of the applicable regulatory agency via a no further action letter or something similar, or pursuant to risk-based restrictions such as engineering or institutional controls.

–          Regulatory file reviews are required when a prospective property is identified in a government records search.  If the environmental professional determines that such a review is not necessary, it must provide its reasoning in the Phase 1 report.

In summary, a new due diligence standard has been approved and although there are currently two standards buyers can avail of as they seek protection from liability for existing contamination, prospective purchasers would be wise to require their environmental professional to conduct its diligence in conformance with ASTM E1527-13.  This standard is expected to be the sole standard used to meet AAI later this year.   For more information, please see:


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