It’s Official! ASTM E1527-21 is the New Phase I Environmental Site Assessment Standard
February 27, 2023
The Phase I Environmental Site Assessment (“ESA”) is the quintessential environmental diligence tool for transactions involving real property. A Phase I ESA includes a site inspection and review of current and past uses and ownership, among other things, to evaluate actual and potential environmental conditions. If performed in accordance with the All Appropriate Inquiry Rule (“AAI Rule”), a Phase I ESA serves as the initial step to establish affirmative defenses to potential liability imposed by the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”).
As outlined earlier in our prior post, ASTM Adopts New Phase I ESA Standard – Impact to Environmental Diligence and CERCLA Affirmative Defenses | Long Island Land Use and Zoning (lilanduseandzoning.com), ASTM updated and adopted a new Phase I ESA standard in late 2021. Despite the adoption by ASTM, the legal diligence standard to satisfy the AAI Rule and the threshold criteria to qualify for affirmative defenses under CERCLA remained the historic ASTM E1527-13 standard.
After undergoing multiple rounds of public comment, the United States Environmental Protection Agency (“EPA”) issued a final rule on December 15, 2022 to adopt the ASTM E1527-21 “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process” (“New Phase I ESA Standard”). EPA’s final rule confirmed the New Phase I ESA Standard was consistent with the statutory requirements to satisfy the AAI Rule, and thereby the baseline requirement to avail prospective purchasers of the innocent landowner, contiguous property owner and bona fide prospective purchaser defenses to CERLCA. The New Phase I ESA Standard became effective on February 13, 2023.
In addition to authorizing the New Phase I ESA Standard, EPA’s final rule put a sunset on the historic ASTM E1527-13. According to the final rule, reference to the historic ASTM E1527-13 as compliant will be removed from the AAI Rule one year following publication of the EPA final rule, or December 15, 2023. However, the reference provision that will be added to the AAI Rule, reflecting the sunset, states that the historic ASTM E1527-13 shall remain valid, “until February 13, 2024…” While the discrepancy in the period of applicability for the historic ASTM E1527-13 is something to be aware of when evaluating compliance with the AAI Rule, the New Phase I Standard represents best practices, and prospective purchasers should strongly consider employing the new standard, despite the lingering applicability of the historic standard.
The New Phase I Standard is more rigorous than the historic ASTM E1527-13 standard, broadening the scope of particular investigation and analysis. As highlighted in our earlier post, the new Phase I Standard modifies the scope of historical reviews for adjoining properties, expands title search standards, revises definitions for Recognized Environmental Conditions (“RECs”), Controlled RECs and Historic RECs, and provides for evaluation of emerging compounds like PFOA/PFAS, among several other procedural reporting and definitional clarifications.
Requesting a Phase I ESA has become a routine pre-acquisition diligence item. There is risk in relying on a non-compliant Phase I ESA, misinterpreting findings and conclusions, or failing to take appropriate action upon notice of an environmental condition. Knowledgeable environmental counsel can assist in navigating these issues and defining options to achieve specified outcomes.
It’s time to turn the page and close the chapter on the expiring ASTM E1527-13 as the recognized ESA standard. Long live ASTM E1527-21!