by Elizabeth Krol
2022 is an important year for the environmental due diligence community. For the past three years, a volunteer task group of more than 300 industry professionals met frequently to review and propose changes to the ASTM E1527-13 Phase I Environmental Site Assessment (ESA) standard. The updated standard, E1527-21, was published by ASTM in December 2021. While much work has been done, review by the United States Environmental Protection Agency (USEPA) for purposes of complying with All Appropriate Inquiry (AAI) is ongoing currently, and upon acceptance will be published in the Federal Register.
The primary goal of the standard is to reflect good commercial and customary practice in the Phase I ESA, the primary guidance document utilized by both environmental professionals (EPs, or “Producers”), as well as potential buyers of commercial real estate (“Users”), who seek to conduct all appropriate inquiry to ensure liability protection during transactions. While the standard was last updated in 2013, some sections had not been reviewed during the last revision cycle, and did not reflect the current standard of care, such as the historical research section that had not changed substantially since the original standard was published in 1993.
A supplemental goal was to organize sections of the standard for clarity, thereby improving overall quality of Phase I assessments. Examples include incorporating site-specific sources into the physical setting, presenting photographs from the site reconnaissance, and confirming that PCB building materials are non-scope considerations. While the search distances have not changed, another improvement includes updating the names of state and federal databases. One important clarification was to streamline the terminology used to define the Subject Property, which had been previously referred to as Site, Property, and Subject Property interchangeably.
While there are no significant additions or deletions from 1527-13, there have been substantial efforts to improve the readability to streamline and illuminate guidance, primarily by clarifying language:
- Adding new and notable definitions, such as the addition of a Significant Data Gap, which is has the potential to impact the conclusions of the report.
- Defining new pathways to be considered for the Historic Recognized Environmental Condition (HREC).
- Evaluating if the conditions of a Controlled Recognized Environmental Condition (CREC) would currently satisfy the regulatory requirements.
- Confirming the “shelf life” of Activity and Use Limitations (AULs) and Environmental Liens obtained from title records.
- Substantially updating the Legal Appendix.
Users of Phase I ESAs should be aware that reports may have variable utility when conducted for different purposes, such as acquisition, financing, investment, or divestiture, based upon the user’s role as a lender, borrower, investor, or seller. Understanding how quality due diligence enables your team to assess potential risk prior to completing a property transaction is the mightiest tool in the environmental management toolbox.
Elizabeth Krol
Elizabeth Krol is national client director at EBI Consulting.
