EPA approves new ASTM E1527-21 standard
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January 19, 2023 - For nearly the last decade, the American Society for Testing and Materials (ASTM) has been using a standard for environmental due diligence and environmental site assessments (ESAs) for property acquisitions, property divesture, etc. as part of Phase 1 site assessments. On December 15, 2022, the U.S. Environmental Protection Agency (EPA) issued a final ruling adopting the use of the updated ASTM E1527-21 standard for conducting those assessments.
Environmental liabilities and costs can have a significant impact on property value. That’s why Phase I ESAs are a critical tool for lenders, investors, purchasers, and developers alike, to help them identify potential environmental risks and liabilities associated with a property. A thorough understanding of the technical aspects of the new ASTM standard is essential for effective planning for commercial property acquisitions, divestitures, acquisitions, and other commercial transactions.
The new E1527-21 standard contains some significant changes from the previous version including:
- “Recognized Environmental Condition” (REC): The new definition of REC eliminates some confusion by removing the word “likely” from the three phases contained in the 2013 definition. The new definition reads as follows: “(1) the presence of hazardous substances or petroleum products in, on or at the subject property due to a release to the environment; (2) the likely presence of hazardous substances or petroleum products in, on or at the subject property due to a release or likely release to the environment; or (3) the presence of hazardous substances or petroleum products in, on or at the subject property under conditions that pose a material threat of a future release to the environment.”
- Shelf Life of a E1527-21 Phase I Report: A Phase I report remains valid for six months from the date of acquisition, or up to one year, if five specific components of the report are updated (e.g., interviews, searches for recorded environmental cleanup liens and government records, site reconnaissance of the subject property, and the environmental professional’s “Declaration”). The new standard also incorporates a requirement that the dates in which each of the five components were completed be identified in the Phase I Report, and that the 180 day or one-year time period begins with the date upon which the first of these components was completed.
- Use of Standard Historical Sources: The new standard prescribes that environmental professionals review, at a minimum, the following four historical sources: 1) historical aerial photographs, 2) historical fire insurance [Sanborn] maps, 3) historical city directories, and 4) historical topographic maps for the subject property and any adjoining properties.
- Significant Data Gap: There has often been confusion among environmental professionals as to what is considered a data gap significant enough to impact the objectives of a Phase I ESA. The new standard now includes a definition of what constitutes a significant data gap, defining it as, “a data gap that affects the ability of the environmental professional to identify a recognized environmental condition (REC).”
- More Comprehensive Title Searches: The title records are now required to be researched back to 1980 to identify any land use, activity restrictions, or environmental liens on the subject property. It should be noted that the cost for the expanded scope is likely to increase significantly due to the extra level of work necessary to appropriately research the subject property.
- Emerging Contaminants: The update addresses “emerging contaminants,” specifically referencing per- and polyfluoroalkyl substances (PFAS). Under the new standard, until an emerging contaminant is regulated as a federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) hazardous substance, these substances are not required to be included in the scope of a Phase I ESA. Although these substances are not currently regulated as hazardous substances, these changes also allow for consideration of these substances as “non-scope considerations” if the user of the Phase I wishes for them to be included in the report.
Approval of the ASTM E1527-21 standard becomes effective on February 13, 2023, and use of the previous ASTM E1527-13 standard will be phased out over a period of one year. As a result, the use of either the E1527-21 standard practice or the E1527-13 standard practice is allowed until February 13, 2024. After February 13, 2024, only the E1527-21 standard practice will be recognized as meeting the All Appropriate Inquiry (AAI) Rule for protection from liability for contamination under the federal Superfund law (CERCLA).
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