As most folks in the commercial real estate industry know, the Bona Fide Prospective Purchaser exemption from liability under the federal Superfund law is a very useful tool. Accordingly, a Phase I Environmental Site Assessment is standard practice for nearly every purchase of commercial real estate because it helps to satisfy EPA’s “All Appropriate Inquiries” requirement for obtaining BFPP status and avoiding the often harsh liability associated with Superfund.
However, a final rule published by the EPA on October 6, 2014 clarifies the acceptable protocol for a Phase I ESA. Effective October 6, 2015, EPA’s AAI regulations will only reference the 2013 standard procedure for a Phase I ESA (ASTM E1527-13). EPA is formally removing the reference to the 2005 standard (ASTM E1527-05) from the AAI regulations due to confusion over what the 2005 standard required. Even so, EPA has delayed the effective date of the rule by one year so that any ongoing Phase I ESAs using the 2005 standard can be concluded.
As reported on the Periconi, LLC Environmental Law Blog earlier in 2014, EPA’s regulations had previously recognized both the 2005 and 2013 Phase I ESA standards as acceptable for fulfilling AAI. However, in its December 30, 2013 proposed final rule, EPA “strongly encourage[d] prospective purchasers of real property to use the updated ASTM E1527-13 standard when conducting all appropriate inquiries.” It also indicated that it would soon propose a new rule to remove the 2005 standard from its AAI regulations. With its October 6 final rule, EPA has fulfilled its promise.
One of the major differences between the 2005 and 2013 standards is that the 2013 standard explicitly requires the identification of any “Recognized Environmental Conditions” arising from the migration of contaminated soil vapor. While EPA has taken the position that the 2005 standard implicitly required such identification, it seems to have conceded that the implicit requirement wasn’t clear enough to ensure that vapor was addressed in every Phase I.
According to EPA, the 2013 standard “remove[s] any confusion regarding the need to identify all RECs,” and the removal of any reference to the 2005 standard will “reduce any confusion associated with the regulatory reference to a historical standard [i.e., the 2005 standard] that is no longer recognized by its originating organization as meeting its standards for good customary business practice.” EPA is also cautious to point out that the October 6 final rule will not affect any party who purchased property between November 1, 2005 and October 6, 2015.
The bottom line is that if you purchased property in the past and used the 2005 Phase I ESA standard, you won’t likely be affected by EPA’s October 6 final rule. However, if you are considering purchasing contaminated property in the near future, you should confirm that your environmental consultant plans to use the 2013 standard. And while you’re at it, don’t forget that a Phase I ESA is only part of the requirement for obtaining and retaining BFPP status. As we’ve previously reported here on the Periconi, LLC Environmental Law Blog, additional requirements include cooperating with ongoing response actions and stopping any ongoing releases of hazardous substances at the property.
For more information on the BFPP exemption from Superfund liability, contact one of the environmental attorneys at Periconi, LLC, and stay tuned to the Periconi, LLC Environmental Law Blog for future updates.