For nearly two years, a task force comprised of various environmental professionals has been working on revisions to the American Society for Testing and Materials (ASTM) International Phase I Environmental Site Assessment (Phase I) Standard E1527-13, which is used by prospective purchasers in real estate acquisitions in order to satisfy the All Appropriate Inquiries (AAI) requirements under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).
Purchasers must meet the AAI requirements in order to establish the innocent landowner, contiguous property owner, or bona fide prospective purchaser defenses under the federal statute, which can limit a purchaser’s liability for historic contamination that pre-dates its ownership. The Phase I ASTM standard defines good commercial and customary practice for conducting environmental due diligence as part of commercial real estate transactions.
On November 1, 2021, ASTM announced that revisions to the Phase I standard have been approved, and the new standard is expected to be published before the end of the calendar year. Since the existing standard is referenced in the Environmental Protection Agency regulations, it is likely that there will be a transition period for substituting in the new version in place of the 2013 version, but anyone involved in commercial real estate transactions should become familiar with the key revisions, which include the following:
- New language defining “Recognized Environmental Condition” (REC); “Controlled Recognized Environmental Condition” (CREC); and “Historical Recognized Environmental Condition” (HREC), to reduce misclassifications of known or likely hazardous material and petroleum product releases, along with an appendix to offer guidance on the REC/CREC/HREC decision process, a flow chart, and representative examples of each;
- The addition of new definitions for the terms “Property Use Limitation” (PUL); and “significant data gap” to provide a more formal recognition of these concepts;
- Updates to the historical records review section to conform to modern good commercial and customary practices and which clarify subject and adjoining property identification, use, and research objectives; and the establishment of new parameters for the use of standard historical sources;
- The addition of detailed site reconnaissance requirements to reinforce existing good commercial and customary practice;
- Revised reporting requirements to strengthen the deliverable, including consistent use of the term “subject property;” identification of RECs, CRECs, and significant data gaps in the conclusion section; photos of site reconnaissance items; and a site map; and
- Updates to the appendices including discussion of business environmental risks relating to per- and polyfluoroalkyl substances (PFAS).
The final item is noteworthy since, although PFAS are not considered RECs, the substance is part of the “non-scope issues” to be considered under the AAI, similar to the treatment of asbestos, lead-based paint, mold, etc., and which will raise awareness as to the presence of PFAS at a particular property, and whether it should be addressed before an acquisition becomes final. If and when PFAS are designated as hazardous substances under CERCLA, which is expected to be the case by summer 2023, then these chemicals would fall within the scope of the new ASTM standard.