This year has seen significant development in the area of environmental due diligence for those involved in real property transactions. And major development continues as we approach year-end.
First, the U.S. Supreme Court declined to review the first appellate decision interpreting the “bona fide prospective purchaser” (“BFPP”) defense under the Comprehensive Environmental Response, Compensation, and Liability Act. PCS Nitrogen Inc. v. Ashley II of Charleston, LLC, No. 13-139 (U.S. Nov. 4, 2013). The Supreme Court left intact the Fourth Circuit Court of Appeals’ decision that exemplified the importance of a prospective purchaser’s compliance with each element of the BFPP defense before the purchaser can be exempt from cleanup liability. For a detailed discussion of that decision, click here.
Second, the non profit organization that develops environmental review standards, ASTM International, recently approved an updated version of its standard for Phase I environmental assessment, now known as ASTM E1527-13. For a discussion of ASTM E1527-13, click here.
ASTM E1527-13 is a refinement of ASTM E1527-05, which has been the commercial standard for Phase I environmental review that is used in many transactions concerning potentially contaminated real properties. While ASTM has adopted E1527-13 as the new standard, the U.S. Environmental Protection Agency (“EPA”) has not adopted it as the standard for meeting all appropriate inquiries (“AAI”) under an element of the BFPP defense, as discussed in the above-referenced article. Therefore, ASTM E1527-05 remains the acceptable commercial standard for AAI under EPA’s regulations.
In the near future, EPA is expected to finalize its proposed changes to the AAI regulations that would adopt ASTM E1527-13. Now that ASTM has formally adopted E1527-13, and EPA is nearing adoption, a prospective purchaser should consider relying on ASTM E1527-13 for its Phase I environmental review. In so doing, it should also make sure that the qualified environmental professional conducting the review certifies that the review also complies with EPA’s AAI regulations.