New Phase I ESA Standard Will Affect Environmental Due Diligence

After years of review, revisions and discussions, the new ASTM E1527 Phase I Environmental Site Assessment (Phase I ESA) standard has been published. The new standard includes updates to definitions, clarifications on processes and requirements, and guidance for emerging contaminants.

The Phase I ESA standard identifies the “standards and practices” for conducting environmental due diligence required of prospective purchasers of commercial or industrial properties to obtain legal protection under the Comprehensive Environmental Response, Compensation & Liability Act (CERCLA).

For those prospective purchasers, or financial institutions evaluating real estate risk, below is a summary of key changes to, and impacts from, the new ASTM E1527 Phase I ESA standard. It is noteworthy that a number of material changes have been made to the standard including the discernable roles and significance of a qualified Environmental Professional.

Emerging contaminants are substances that are known or suspected to cause adverse effects to human health and/or the environment, but may not yet be regulated. The new ASTM E1527 Phase I ESA standard confirms that substances not defined as hazardous substances under CERCLA are not considered within the scope of a Phase I ESA. However, the new standard recognizes that these substances, most notably per- and polyfluoroalkyl substances (PFAS), may pose a significant environmental risk to prospective purchasers or financial institutions.

Therefore, in situations where emerging contaminants are considered a hazardous substance under applicable state laws (e.g., Michigan, New Jersey, etc.), or where the Phase I ESA user directs the environmental professional to do so, emerging contaminants may be discussed as a “non-scope consideration”, referred to as a Business Environmental Risk (BER).

The terms used in Phase I ESA to indicate the presence, likely presence, or past presence of contamination at the subject property are Recognized Environmental Condition (REC), Controlled Recognized Environmental Condition (CREC), and Historical Recognized Environmental Condition (HREC). The definitions of these terms have been updated for clarification with no material changes to the bases of these conditions. A supplemental appendix has been added explaining the definition of a REC and a flow diagram to assist in the determination of a REC.

The updated definitions exclude off-site issues that do not have the potential to impact the subject property from being a REC; CRECs and HRECs must include the rationale for identifying these conditions; and it must be confirmed that each HREC is still an HREC.

The new Phase I ESA standard includes revisions to the historical research section that mostly clarifies the efforts an environmental professional should take when reviewing historical research resources. These resources include aerial photographs, topographic maps, fire insurance maps and city directories, assuming they are applicable to, and useful in the evaluation of, the subject property and are reasonably ascertainable. In addition, the environmental professional must use the same resources to evaluate adjoining properties and take into consideration previous changes in property use, address or layout.

Although the changes imply an increase in effort related to the historical research, no additional effort will likely be needed for consultants with established quality management programs.

The new ASTM E1527 Phase I ESA standard updated the typical components of the Phase I ESA reports. Photographs and a site plan of the subject property should be included in all reports. The site plan and photographs should present the layout, features, and uses, and conditions indicative of RECs, de minimis conditions, and other relevant items.

– The date for each Phase I ESA component (interviews, environmental lien search, site reconnaissance, review of records, and environmental professional statement) must be included, and the “shelf-life” begins at the earliest of those dates, and

– For consistency, the standard encourages the use of “subject property” when referring to the property that is the subject of the Phase I ESA.

The environmental professional is required to opine whether additional investigation(s) may be appropriate; however, a recommendation of additional investigation that provides a specific course of action is not required unless specifically requested by the user of the Phase I ESA.

Other revisions of the ASTM 1527 Phase I ESA standard include the site reconnaissance section, requiring a description of what was and was not present at the subject property; updates to definitions, including “property use limitations” and “significant data gaps”; clarifying that the future intended uses of the subject property be considered by the environmental professional as part of the assessment; and revised appendices, specifically the legal appendix and the suggested table of contents appendix.

The new standard has been submitted to the US Environmental Protection Agency (USEPA) for review for compliance with the federal All Appropriate Inquiry (AAI) rule; approval is expected by the end of 2022. TRC recommends citing and using the existing E1527-13 standard until AAI approval is granted but can incorporate the changes in the new E1527-21, where appropriate.

Although the revisions and updates described above may seem significant, you are unlikely to see many changes in Phase I ESA reports, especially from quality consultants, such as TRC. Should you have any questions or would like more information, please contact Josh Morris (908-988-1671 or at jmorris@trccompanies.com) or Mike Kurinsky (216-505-6612 or at mkurinsky@trccompanies.com).