EPA Amends All Appropriate Inquiries Standard for Phase I Environmental Site Assessments

Key Takeaways

• Effective February 13, 2023, parties may rely on ASTM E1527-21 to satisfy All Appropriate Inquiries (AAI) under the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, 42 U.S.C. § 9601 et seq. (CERCLA).
• The U.S. Environmental Protection Agency (EPA) is phasing out its acceptance of the prior version of the standard, ASTM E1527-13, which will no longer be acceptable for All Appropriate Inquiries purposes as of February 13, 2024.
• Purchasers of potentially contaminated forestland or rural property may rely on either E1527-21 or the existing ASTM E2247-16, as is current practice, to show All Appropriate Inquiries into those properties.

What Happened

On December 15, 2022, EPA issued a final rule amending the All Appropriate Inquiries Rule (AAI Rule), 40 CFR part 312, to recognize the updated ASTM International standard for conducting Phase I environmental site assessments (ESAs), ASTM E1527-21, “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process.” The final rule becomes effective on February 13, 2023. To reduce confusion that may result from having two acceptable standards, EPA is sunsetting its acceptance of the prior standard known as ASTM E1527-13 one year after the new standard’s effective date, or February 13, 2024.

All Appropriate Inquiries under CERCLA are investigations into the previous ownership and uses of a facility conducted “in accordance with generally accepted good commercial and customary standards and practices,” as defined under CERCLA 101(35)(B). All Appropriate Inquiries are important because they are a key element to certain CERCLA liability defenses: the bona fide prospective purchaser, innocent landowner, and contiguous property owner defenses. A landowner asserting these defenses has the burden of proof to show that it conducted AAI before acquiring the property.

CERCLA requires EPA to establish by regulation the standards and practices that may be adhered to when carrying out All Appropriate Inquiries. CERCLA 101(35)(B). This amendment provides EPA’s recognition that the updated ASTM standard may satisfy AAI elements under 40 CFR §§ 312.23–312.31. The Phase I ESA standard identifies a process for determining a property’s environmental condition by evaluating commonly known and reasonably ascertainable information about the property. Using the ASTM E1527-21 standard is not mandatory; rather, it is an option to establish fulfillment of AAI.

EPA received adverse public comments about an aspect of ASTM E1527-21: its reference to “emerging contaminants” as an “out of scope” consideration. In response, EPA declined to comment on the ASTM standard’s out of scope considerations substantively. Instead, EPA states that it “does not consider these additional elements as a reason to avoid recognition of the revised E1527-21 standard as compliant with the All Appropriate Inquiries Rule.” Further, EPA acknowledges that “industry standards may include elements that are not within the scope of the All Appropriate Inquiries Rule” and that the ASTM standard itself “is not an EPA regulation.” EPA’s approach enables a person conducting AAI to decide whether to task its environmental professional with assessing optional “out of scope” considerations in a Phase I ESA. Some common out of scope considerations (as referenced in prior ASTM Phase I ESA standards) include assessing cultural and historic resources, and health and safety.

Procedurally, this final rule has been in the works for most of 2022. On March 14, 2022, EPA published a direct final rule, 87 FR 14174, to establish ASTM E1527-21 as compliant with the AAI Rule. EPA promised to withdraw the direct final rule if the public raised adverse comments. EPA received adverse comments and withdrew the direct final rule on May 2, 2022. The final rule is substantively similar to the March 14, 2022, direct final rule insofar as it adopts ASTM E1527-21 as the new standard for compliance with the AAI Rule, but as noted above, it sunsets the prior standard.

Conclusion

Effective February 13, 2023, parties seeking to satisfy AAI Rule requirements to establish CERCLA landowner liability limitations may follow ASTM E1527-21. Potential purchasing parties, contiguous landowners, innocent landowners, and brownfields developers should familiarize themselves with ASTM E1527-21 for existing and future commercial real estate projects. Forestland and rural property purchasers can still use ASTM E2247-16 to satisfy the AAI Rule.

Beveridge & Diamond offers extensive environmental expertise in transactions and due diligence, insurance and bankruptcy recovery, and contaminated site remediation. The firm’s Superfund, Site Remediation, and Natural Resources Damages practice group assists clients in litigation and allocation of CERCLA sites, including complex, large-scale sites. We counsel clients on developing case law and requirements under CERCLA and state-equivalent hazardous waste laws. Our Transactions and Due Diligence practice group frequently helps clients identify, quantify, and mitigate the most critical liabilities in transactions involving complex environmental issues.