Author: Elizabeth Krol, National Client Director for EBI Consulting
An Insider’s Look as the Revision Process Nears the Finish Line
2021 is an important year for the environmental due diligence community. For the past two years, a volunteer task group of more than 350 professionals has been meeting frequently to review and propose changes to the ASTM E1527-13 Phase I Environmental Site Assessment (ESA) standard. While much work has been done, it is important to note that the proposed changes are not yet final.
The remaining timeline includes the following progression:
The Main Committee Ballot for Environmental Assessment, Risk Management and Corrective Action – E50 (21-03) just opened last week (March 3rd) and will remain open for voting by Task Group members until April 2, 2021. After that, the Task Group will conduct a final review of any negatives or comments from the latest balloting process. Then the final proposed redline will be submitted to the U.S. Environmental Protection Agency (USEPA). Upon review and approval by the USEPA, the updated standard will be published by ASTM. Acceptance of the standard by the USEPA for purposes of complying with All Appropriate Inquiry under CERCLA will be published in the Federal Register, anticipated by December 2021.
Why revise the E 1527-13 standard?
The main goal of the proposed changes is to ensure that the standard reflects good, commercial customary practice in the Phase I ESA industry. While the standard was last updated in 2013, some sections had not been subject to review during that previous round and were therefore viewed by some as outdated (e.g., the historical research section had not changed substantially since 1993). A supplemental goal of the proposed changes that are now in the redlined draft was to conduct some much-needed “housekeeping” to clean up and organize sections of the standard that needed improvement for clarity and are expected to improve the overall quality of assessments. Examples include: updating various definitions, incorporating site-specific sources into the physical setting discussion, collecting and annotating representative photographs from site reconnaissance for inclusion in the report, and confirming that PCB building materials are a non-scope consideration. While the search distances for property data record searches have not changed in this round of revisions, another improvement includes “cleaning up” the names of State and Federal databases. One important clarification was to streamline the terminology used to define the Subject Property, which is often referred to as Site, Property, and Subject Property interchangeably.
While there are no significant additions or deletions from the current standard, there have been substantial efforts to improve the readability, and therefore streamline and illuminate guidance in the document, primarily by updating definitions, clarifying language, and updating formatting. Clarifying examples include: Adding new and notable definitions, such as the addition of a Significant Data Gap, which has the potential to impact the conclusions of the report. Defining new pathways that need to be considered for the Historic Recognized Environmental Condition (HREC). Evaluating if the conditions of a Controlled Recognized Environmental Condition (CREC) would currently satisfy the regulatory requirements.Confirming the “shelf life” of Activity and Use Limitations (AULs) and Environmental Liens obtained from title records.Substantially updating the Legal Appendix during this revision process.
These updates include a careful review of the reference convention throughout the standard. Users should note that the final revisions necessitated numerical updates to the sections and associated subsections. Updated citations are identified in the redline.
Strengthening research into a property’s historical use
At the beginning of the revision process when Users and Producers worked collaboratively to compile a list of industry issues with E 1527-13, strengthening the scope of historic research was raised as an important area of focus for the Task Group (Sections 8.3 and 8.4). The focus group’s proposed revisions seek to clarify the expectation and approach of reviewing the historical sources which are typically reviewed for most assessments; colloquially referred to as the “Big Four.” These include aerial photographs, SANBORN® fire insurance maps, city directories, and historic topographic maps. The goal of the EP is to use these sources to better understand historical use of the subject property and adjoining properties. When these sources are not readily ascertainable or likely to be useful based upon the EP’s experience and professional judgment, the EP has the discretion to explain that certain historical sources were not reviewed or others were utilized. Other clarifications of historical research include highlighting that developed use back to 1940 for subject property and adjoining properties includes agricultural/fill usage.
With regard to property uses, identifying the presence of a commercial structure alone is not enough to rule out the possibility for current or past use of the building for a manufacturing, industrial, or other activity which has the potential to impact the subject property. The Focus Group also clarified that a historical resource may include a person, place, or entity with knowledge of the prior use of the subject property. A frequent refrain during the vigorous discussions regarding historical research is that “all information works in concert” to meet the overall objective of understanding the historic use of the subject property, and impact from adjoining properties and in some cases, the surrounding area. Stitching together a historical timeline aids in understanding the potential for onsite and offsite uses that may identify Recognized Environmental Conditions (RECs) at the subject property.
It is worth noting that, to ensure that a wide variety of Users and Producers participated in the process, surveys were conducted by the Task Group throughout the review and revision process. Survey responses helped to determine what is good commercial customary practice today. Survey topics included key definitions, as well as verifying whether evaluating the “Big Four” standard historical sources is current industry practice.
Updating site visit language
The “site recon” Focus Group clarified language regarding the expectations of the site visit, as well as interviews with onsite personnel who have knowledge of the subject property. An extensive review of the standard’s current language regarding who can conduct site reconnaissance included the consideration of a Responsible Charge (RC) under the direct supervision of the EP, with explanation of the RC’s experience and qualifications. An additional definition included that the site observations reflect a “snapshot” of a point in time at the subject property. An emphasis on observations as well as negative observations is included in the proposed redline. Interestingly, the Focus Group is also seeking to update the means of conducting site assessments to reflect the good commercial customary practices currently being implemented, which has evolved to include occasional use of Aircraft and/or Drones to conduct site visits. Consideration of virtual site visits conducted remotely using various video camera technology was also reviewed by the Focus Group.
Modifying language on Findings, Opinions, and Conclusions
The proposed changes include clarification regarding Findings, Opinions, and Conclusions in a report, including the EP’s opinion on whether additional investigation is warranted. The redline also indicates that Findings and Opinions can be combined at the EP’s discretion and that Conclusions should include RECs/CRECs/Significant Data Gaps. Strengthened language regarding the logic, reasoning, and rationale for RECs, CRECs, HRECs, and de minimum conditions is an important area of focus. The redline also distinguishes Significant Data Gaps and asks that the EP comment on the potential for release, as well as the likelihood of drawing a conclusion if missing information becomes available. For Users of the Phase I ESA reports, customized lender scope requirements and/or institutional investor scopes of work should be reviewed and compared to the proposed and future approved revisions and understand any potential impacts to scope, schedule, and budget.
What Environmental Professionals should know
Environmental consultants should be aware that the revised standard could include changes to the suggested Table of Contents and formatting recommendations. It will also include a new REC logic flow chart and example case studies, which should be reviewed by Environmental Professionals (EPs). It will also be important for EPs to keep an eye on how the new standard addresses emerging and natural contaminants (e.g., PFAS, 1,4-dioxane, methane), particularly as these contaminants are currently under consideration by the USEPA and state regulators. Whether you rely on Phase I ESAs or conduct them, it is critical to review your Phase I ESA scopes of work to ensure that they reflect good commercial customary practice and are in conformance with the version of the E1527 standard in effect at the time the assessment is completed.
As noted in the section, Considerations Beyond Scope, “The use of this practice is strictly limited to the scope set forth in this section. Section 13 of this practice identifies, for informational purposes, certain environmental conditions (not an all-inclusive list) that may exist on a subject property that are beyond the scope of this practice, but may warrant consideration by parties to a commercial real estate transaction.”
Thus, it may be valuable for lenders, investors, and others who utilize Phase I ESA reports to be aware that reports may have been conducted for different purposes than CERCLA liability protections, such as acquisition, financing, or divestiture. The lens through which the information pertaining to the subject and adjoining properties is obtained, reviewed, and evaluated may result in varying recommendations based upon whether the user is a lender, borrower, investor, or seller. Understanding how due diligence information can help your team to assess potential risk before acquiring, financing, investing, or divesting a property is the mightiest tool in the environmental risk management toolbox.
As the proposed revisions are reviewed and approved by USEPA, look for industry resources posted on the EDR®/LightBox ASTM Resource Center and through trade associations such as the Environmental Bankers Association (EBA), and of course, USEPA and ASTM International. Your trusted advisors in environmental consulting and environmental attorneys will likely also be communicating these updates to you in 2021.
About the Author
Elizabeth Krol is National Client Director for EBI Consulting and is both a Professional Geologist (PG) and an ASTM-designated Environmental Professional (EP). As an active member of the ASTM E 1527 Task Group, Elizabeth leads the technical focus group dedicated to strengthening historic research in the Phase I Environmental Site Assessment guidance document. Her expertise is providing high-quality, comprehensive property due diligence services to premier commercial real estate owners/operators and investors, legal and financial service companies who are considering an acquisition, divestiture or financing/refinancing or other transaction, often on an expedited basis. As a trusted advisor, she works collaboratively with clients to protect their interest by identifying and mitigating potential environmental risk and property deficiencies on an expedited, cost-effective basis, thereby creating value without undue expense. Elizabeth has been honored with the EDR®/LightBox PRISM Industry Influencer Award and the CREW Boston Esprit de Coeur award, as well as being recognized as Woman of Influence and CRE Consultant/Advisor by GlobeSt.com and Real Estate Forum for three consecutive years (2017-2019), the New England Real Estate Journal’s Women in Real Estate Spotlight in 2017-2020 and One to Watch in 2020. She also supports emerging professionals through the LightBox Developing Leaders Mentoring program.