The Phase I ESA (Environmental Site Assessment) plays a crucial role for lenders, buyers, investors, and other stakeholders by assessing environmental risks associated with commercial real estate and providing landowner liability protections. Certainly such an important document needs a consistent process, one which is established in the Phase I ESA ASTM Standard Practice, a document updated every seven years.
On December 15, 2022, the USEPA issued its final rule amending the All Appropriate Inquiries (AAI) Rule under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and approving the use of the ASTM International E1527-21 Standard Practice for Phase I Environmental Site Assessments. In the USEPA’s final rule, which takes effect on February 13, 2023, the USEPA additionally indicated that ASTM E1527-13, which was issued in 2013, would be sunset on February 13, 2024. This marks a significant change from the USEPA’s March 14, 2022, draft ruling recognizing both Standards as meeting AAI. This initial ruling was subsequently withdrawn on May 2, 2022, following adverse comments, including comments from LaBella.
As one of only 14 commenters, LaBella argued that the continued use of the dated E1527-13 Standard would create market confusion among users. Specifically, as the updated standard continued to build upon the best practices consultants should be following when completing a Phase I ESA, LaBella contended that the use of both standards could be detrimental to users in assessing the overall environmental risk associated with a piece of real estate. The primary issue was that while the updated Standard identified specific levels of research to be completed for both the Subject Property and adjacent properties, the dated standard left some aspects of research to the opinion of the Environmental Professional. This discrepancy would have created the potential for environmental concerns to go unidentified in the Phase I ESA meeting the out-of-date Standard. Furthermore, LaBella noted in its comment to the USEPA that key definition changes and the inclusion of significant data gaps within the 2021 standard would allow for inconsistencies in overall report findings when compared to the 2013 standard.
LaBella was an early adopter of the updated standard and has completed Phase I ESAs satisfying both the dated ASTM E1527-13 Standard and the updated E1527-21 Standard since February 2022. We have extensive experience with the updated Standard and anticipate a seamless change in service in February 2023, at which time Phase I ESAs completed by LaBella will be in accordance strictly with the E1527-21 Standard and remove references to the dated 2013 Standard.
The landowner liability protections afforded by a Phase I ESA under CERCLA should be paramount to prospective purchasers, developers, lenders, and other parties associated with such transactions. The USEPA’s final ruling approving ASTM E1527-21 as meeting AAI reflects a step forward in quantifying the steps that should be taken to assess environmental risk prior to taking ownership of a property. While the final ruling approves the continued use of the dated E1527-13 standard until early 2024, LaBella strongly recommends that parties begin relying on Phase I ESAs completed to the recently released E1527-21 Standard as of February 13, 2023, to ensure that the level of research completed and classification/discussion of environmental concerns is commensurate with current customary practices as outlined in the updated standard.
For a detailed review of the changes in the new Standard, please click here.
