ASTM Standard For Phase 1 Site Assessments Is Revised
 
March 13, 2001
 

One of the most coveted features long sought by purchasers of real property has been qualifying for the “innocent landowner” defense under the federal Superfund law, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). CERCLA generally imposes liability on owners of contaminated property even if they did not cause the contamination. However, the innocent landowner defense provides that if a buyer performs “all appropriate inquiry” into a property prior to purchase and, notwithstanding such investigation, contamination is subsequently discovered on such property, the purchaser generally will not be held liable for cleanup. While the definition of “all appropriate inquiry” often depends on the circumstances of each transaction, the minimum threshold has recently been measured by the American Society for Testing and Materials (ASTM) Standard E-1527— 00 (Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process) (ASTM Standard). The ASTM Standard recently was revised in several substantive ways. Prospective purchasers of property and lenders should be aware of such changes, as described below.

The four basic requirements for an ASTM Standard assessment have remained unchanged: site reconnaissance, review of records related to the property and surrounding area, interviews with site owners and local officials, and report preparation. In addition, the objective of an assessment remains the identification of “recognized environmental conditions” (RECs). RECs are generally those conditions indicating the presence or likely presence of petroleum products or hazardous materials. However, the new ASTM Standard requires that the site assessor, or “Environmental Professional,” perform a much more rigorous analysis of the information gathered during the assessment than previously required.

The revised ASTM Standard requires that an Environmental Professional provide a well-reasoned opinion of the impact on a property of known or suspect environmental conditions. Specifically, the ASTM Standard requires that the “logic and reasoning” used by the Environmental Professional in evaluating information collected during the investigation be discussed. In addition, the opinion must include the Environmental Professional’s rationale for concluding that “a known or suspect environmental condition” is or is not currently a REC. The revised ASTM Standard further requires that all “findings, opinions and conclusions in the Phase I Environmental Site Assessment report . . . be supported by documentation” or that a reason be provided for not including such documentation.

The revised ASTM Standard also requires, for the first time, that “historical recognized environmental conditions” be identified. Historical RECs generally consist of prior environmental issues that, by the time of the assessment, may no longer represent current RECs. For example, evidence of the removal of an old underground storage tank might be considered an historical REC. However, an Environmental Professional might also consider such historical REC to be a current REC if, for example, the UST removal were undocumented and the possibility remained that there was contamination associated with the former UST.

The revised ASTM Standard explicitly provides that RECs do not include de minimis conditions. De minimis conditions are those “that generally do not present a material risk of harm to public health or the environment and that generally would not be the subject of an enforcement action if brought to the attention of appropriate government agencies.” Such definition gives Environmental Professionals the leeway to diminish in significance minor environmental issues that do not pose genuine risks to the property.

As a result of these changes to the ASTM Standard, Phase I reports are more likely to serve as stand-alone documents that clearly set forth the rationales for the conclusions reached, including documentation supporting such conclusions and greater discussion of historical environmental concerns. Hopefully, such changes will result in more uniform reports that demonstrate more analytical rigor than has historically been present in Phase I reports. Purchasers of real property and lenders should ensure that these new requirements are met when Phase I assessments are performed.