• Looking for That Needle: Harder to Find, or Easier? US EPA Adopts ASTM Standard for Large Parcel All Appropriate Inquiry
  • May 19, 2009 | Author: John R. Embick
  • Law Firm: Thorp Reed & Armstrong, LLP - Philadelphia Office
  • Several years ago I wrote about a rule promulgated by the US Environmental Protection Agency (“US EPA”) revising the standard that prospective property purchasers are advised to follow if they wish to take advantage of the innocent landowner defense (and other defenses) to liability under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”). The rule, colloquially known as the “All Appropriate Inquiry Rule” (“AAI Rule”), became effective on November 1, 2006, and was codified at 40 CFR Chapter 312.

    The new rule was significant due to broad scope of liability under CERCLA relating to landowners: current owners or operators of a site with a release of hazardous substances (as well as the owners or operators who owned the site at the time of disposal of hazardous substances) “enjoy” strict liability for remediation of the site (state nuisance law also makes the landowner responsible for abating any nuisance condition on their property, regardless of fault). Accordingly, a prospective purchaser of property on which an unknown contamination condition also risks purchasing a significant Superfund liability along with the parcel.

    Fortunately, Superfund currently contains an “Innocent Landowner” defense, in which a landowner may escape liability by claiming that he acquired the property after hazardous substances were placed upon it, and did not know, or have reason to know, of the polluting conditions (the defense addresses (a) innocent landowners; (b) contiguous landowners, and (c) bona fide prospective purchasers). To qualify for the defense, a person must perform “all appropriate inquiry.” However, no standard for “all appropriate inquiry” was contained in CERCLA. In this vacuum, an ASTM (the acronym for the American Society of Testing and Materials) standard (E1527, and its progeny, specifically E1527-05) was developed and was used in the interim, and is targeted towards evaluation of commercial properties.

    With the amendments to CERCLA in 2002 (the Small Business Liability Relief and Brownfields Revitalization Act), Congress required EPA to set specific standards for all appropriate inquiry, and the 2006 rule was EPA’s response. Upon passage of the AAI Rule, there were essentially two ways to comply with the AAI standard: (1) comply with the new AAI Rule; and (2) comply with the ASTM Standard E1527-05. There are differences between the two “standards,” and practitioners needed to understand both “standards.”

    Over the years, it became evident that the evaluation of very large parcels of forested or rural land posed challenges to the AAI consultants (and risks to their clients), with the main issue relating to how thoroughly each parcel had to be evaluated.

    ASTM again went out in front on this issue and adopted a standard specifically tailored for the evaluation of large parcels, and named it: E2247-08 – Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process for Forest Land or Rural Property.

    So now there are essentially three ways to comply with the AAI standard: (1) comply with the AAI Rule; (2) comply with the ASTM Standard E1527-05; and (3) comply with the ASTM Standard E2247-08. Compliance with the ASTM methods is not required; this is merely an option.

    As before, there are differences between the AAI Rule and ASTM Standard E2247-08. In fact, some consultants argue that E2247-08 is more difficult to satisfy than the AAI Rule.

    Some of the differences are as follows:

    • The AAI rule was designed to apply to all property; and the ASTM E2247-08 standard was specifically designed for parcels exceeding 120 acres in size of undeveloped rural or forestlands;
    • The ASTM E2247-08 standard provides for the evaluation of isolated areas of different land uses that may be contained within large areas of undeveloped rural land or forestland;
    • The ASTM E2247-08 standard accommodates evaluation of non-contiguous parcels, though the parcels should all be part of the same commercial transaction and have substantially the same land use;
    • The ASTM E2247-08 standard requires historical records review back to 1940, or the property’s first developed use, (and “use” includes agricultural or forestry uses or placement of fill);
    • The ASTM E2247-08 standard lists a more comprehensive list of governmental and historical records that must be reviewed than the AAI rule;
    • The ASTM E2247-08 standard offers guidance on certain assessments (arguably beyond the scope of the AAI Rule) often of concern with respect to evaluations of rural property or forest lands, including endangered species and non-point source discharge assessments.

    The recognition of the new ASTM standard may provide certainty regarding evaluation of large rural and forested properties; however, the addition of a new option may add another layer of confusion or complexity for purchasers and environmental professionals. The best advice, we think, is to become familiar with all of the options and understand the differences.