By Alexander J. Bandza
On December 30, 2013, the US EPA issued its final rule [enhanced version available to lexis.com subscribers] confirming that the new ASTM E1527-13 standard, in addition to the older ASTM E1527-05 standard, is acceptable for prospective purchasers of real property to conduct "All Appropriate Inquiries" (AAI) under CERCLA [enhanced version available to lexis.com subscribers]. The Final Rule can be found here and became effective on December 30, 2013. In conjunction with the Final Rule, the US EPA issued its responses to comments, available here.
By way of background, the US EPA previously proposed regulations that would endorse E1527-13 as an additional industry standard to satisfy AAI. Specifically, entities would have the option of using E1527-13, but were still free to follow E1527-05. Anticipating that offering an additional AAI-compliant standard would be a noncontroversial action, the US EPA issued its proposed rule and an identical direct final rule in August 2013. However, after receiving adverse comments, the US EPA withdrew its direct final rule in October 2013. In general, the comments reflected a concern that the availability of both standards would create uncertainty as to the degree of due diligence necessary to satisfy AAI.
In issuing the Final Rule, the US EPA took the middle road. First, it confirmed that the newer E1527-13 standard would satisfy AAI, although it left untouched the AAI rule's endorsement of the older E1527-05 standard. Second, the US EPA stated its intent to propose a separate rulemaking to amend the AAI rule to remove the reference to the older E1527-05 standard. However, in this Final Rule, the US EPA recommended that prospective purchasers start using the E1527-13 standard now in light of its improvements and clarifications. According to the US EPA, these improvements and clarifications include:
• an updated definition of ''Recognized Environmental Condition (REC)";
• an updated definition of ''Historical Recognized Environmental Condition (HREC)";
• a new term, ''Controlled Recognized Environmental Condition (CREC)";
• a clarification to the definition of ''de minimis condition";
• a revised definition of ''migrate/migration'' to specifically include vapor migration;
• a revised definition of ''release'' to clarify that the definition has the same meaning as the definition of release in CERCLA; and
• additional guidance related to the regulatory agency file and records review requirement to provide a standardized framework for verifying agency information obtained from key databases.
In sum, practitioners advising clients on real property transactions must recognize that they now operate in a transitional period. As of today, the Final Rule confirms that both the new E1527-13 standard and the older E1527-05 standard will satisfy AAI. But, in the near future, a proposed rulemaking might eliminate the possibility of using the older E1527-05 standard to satisfy AAI. Accordingly, practitioners are encouraged to begin transitioning to E1527-13 as soon as practicable. And if their environmental consultants continue to use E1527-05 for due diligence in a real property transaction, practitioners should make it a point to confirm whether the older standard still satisfies the AAI rule.
We will provide updates on further developments when they become available.
Read more at Corporate Environmental Lawyer Blog by Jenner & Block LLP.
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