The USEPA has published its final rule approving use of the new ASTM Standard E1527-13 when conducting a Phase I environmental site assessment to satisfy the All Appropriate Inquiry (“AAI”) requirements set forth in section 101(35)(B) of CERCLA, and 40 C.F.R. 312.20. When environmental due diligence is conducted in compliance with AAI, property purchasers are able to assert certain defenses to CERLCA liability, such as innocent purchaser, bona fide prospective purchaser and contiguous landowner.
Though USEPA has adopted the new standard, it also determined that the existing ASTM E1527-05 standard could still be used to satisfy AAI requirements. This means that parties will have to determine which standard to use for each individual transaction. Although the new ASTM E1527-13 standard is based on and contains almost identical provisions as ASTM E1527-05, the new standard has several substantive additions that are likely to have an impact on the number of Recognized Environmental Conditions (“REC”) that are identified during the Phase I.
In addition, ASTM E1527-13 adds a new defined term for “Controlled Recognized Environmental Condition” (“CREC”), which references a release that is controlled by an engineering or institutional control. The definition of a Historical Recognized Environmental Condition (“HREC”) has also been modified by the new standard, such that it applies only in situations where the past contamination has been cleaned up to unrestricted residential standards.
The addition of the new requirement to consider vapor intrusion and the new and modified definitions for CREC and HREC, respectively, will likely not only increase the number of Recognized Environmental Conditions identified in Phase I reports, but may also mean that purchasers, lenders and sellers will be at odds over which standard should be used to complete the due diligence.