Sumpin’ New on All Appropriate Inquiries

Since the last blogs on what one needs to do when acquiring an interest in real estate, there have been a change or two which are kind of important. See examples 1, 2 and/or 3. The most significant is that there is a new ASTM 1527 standard; ASTM 1527-13 to be exact. In the event one does not know why we get to do an environmental site assessment with each acquisition of any interest in real estate, just re-read the above posts, or read the following brief review.

The Brief Review

In 2002, amendments to Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) created the brand, spankin’ new “Bone Fide Prospective Purchaser” (BFPP) defense. In exchange for a pass on liability as a current owner or operator of property which is contaminated, someone taking an interest in property had to take specific steps before they finalize the deal. Those in the business call that due diligence, and that due diligence had to comply with regulations promulgated by EPA.

Now, ASTM jumped in an updated its 1527 standard in 2005 and cleverly entitled it ASTM 1527-05. The 05 standard was approved by EPA as compliant with the regulations. So since 1995, if the purchaser did a 1527-05 Phase I report, they passed go and collected $200 on their way to asserting the BFPP defense.

But, ASTM requires that standards be updated every eight years, so they promulgated a new ASTM 1527-13 standard last year. After much wailing and gnashing of teeth, EPA approved the standard as compliant with its regulations.

There are some issues worth discussing regarding the approval, but that will have to wait until next time. This blog is dedicated to the differences between the two standards.

Although ‘13 is similar to ‘05, there are some pretty important changes; important enough that you need to understand things to make sure you (or your attorney) properly review the Report to make sure you are able to pass go.

The top three most significant changes are: in the definitions, requirements in vapor intrusion considerations, and the records review requirements. All three address issues which raised some confusion with the ‘05 standards.

#1

The 05 standard had only one definition which described Recognized Environmental Conditions (REC). It was a veritable “one size fits all” REC regardless of whether it was current, past, or subject to ongoing obligations. They fixed that by clarifying what a REC really is and then added two brand spankin’ new definitions: Historical Recognized Environmental Condition(HREC) and Controlled Recognized Environmental Condition (CREC).

An REC was clarified to make clear it matched the CERCLA definition of a release; i.e., there is evidence of a current release. The operative word here is “current.”

An HREC is a release that has been addressed, like a release which had been addressed through a voluntary clean-up program. Those RECs are HRECs.

Similar to an HREC, but something that is different is a CREC. This type of a REC is an REC where on-going obligations exist, like when the prior owner was allowed, by the voluntary clean-up program, to leave some contamination in place so long as it remained capped and that the cap remains in good condition.

#2

The second kind of important change involves vapor intrusion. In case you aren’t sure what this means, a simple explanation is that that as certain contaminants volatilize, there is a risk that those vapors, which may not be good for you, may enter into buildings in which people live and work; not really a good thing. So, ’13 requires some information on the risk of vapor at the site. The ’05 standard did not include, or at least did not clearly include, any assessments with respect to vapor.

The ’13 standard focusses on assessing the risk associated with vapor; not testing for it. It makes clear that the definitions of a “release” and of “migration” to include vapors. So, the Environmental Professional (EP) must decide if vapor is another potential problem. But, ‘13 does not require the vapor be sampled, although it does provide her discretion to decide if the risk needs to be further assessed in accordance with a different ASTM standard.

Last, and Certainly Not Least

Lots of things in ’05 are gone and now stricken in favor of requiring review of records at a “reasonable time and cost.” So, if the EP can get the records within twenty (20) calendar days from the person the request was sent to, and there isn’t much of a cost charged by the person to retrieve and duplicate the records, then those records must be reviewed as part of the Phase I report.

Something new in ’13 is that if the next door neighbor’s property shows up on “standard environmental record sources,” then the EP should review the records for the next door neighbor too. If she doesn’t, then she must explain in the Phase I Report why she didn’t.

This is Kind Of Important Too.

Because, 1527 really never required the EP to consider if the prior use of the property have caused a release on the property, unless there was evidence of release (like when a junk yard operated on the property thirty years before release reporting was required and because there are no release reports the junkyard could not be an REC). ’13 requires the EP to exercise professional judgment and consider whether having a junk yard (or any other operation) on the site before the environmental laws were enacted which required recordkeeping and reporting, might give rise to a RECs.

There are other changes to the ’13 Standard that are important too, but a blog can only be so long. But let me highlight a thing or two. There are other definitional changes, the User of the report has to do some things, and the EP, when visiting the site and preparing her Report, has to do some more things. It bears repeating that if you don’t do all these things, you can’t be a BFPP. The report then is more than a technical document. It also requires at least a quick legal review to make sure that the requirements of all appropriate inquiry are met. So you might just want to ask a lawyer that has some experience to review the Phase I.

We’ll talk about some of the other issues next time.