Revisions to the ASTM E 1527 Standard: Three Insider’s Perspective

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Remember when the U.S. Environmental Protection Agency’s All Appropriate Inquiries rule was promulgated in 2005? For the first time since then, there will soon be a new revision to the ASTM E 1527 Standard and the time to begin preparing your staff and educating your clients is now.

The E 1527-13 revision is the result of three years of discussion and debate among many dedicated stakeholders who spent countless hours at ASTM Phase I ESA Task Group meetings and on conference calls examining all parts of the standard and hammering out every word of the revision. The most significant revisions are in the areas of: REC definitions, agency file review, vapor migration/intrusion, user responsibilities and more.

For this event, EDR Insight is fortunate to have the input of three professionals—an environmental professional, a commercial real estate lender and an attorney—who were active with the revision process and who each devoted significant time and expertise to shaping the new revisions.

Join us for this important and timely event as the commercial lending and property risk management industry prepares to transition away from the -05 standard to E 1527-13.

Target Audience:
• Environmental due diligence professionals
• Environmental risk managers at financial institutions

Benefits to attendees:
• Insights into specific areas of revision and a deeper understanding of what drove the changes
• More clarity on REC-HREC-CREC definitions
• More clarity on agency file review
• An end user perspective from the lending sector
• An attorney’s take on what the changes mean in the construct of CERCLA liability and commercial property transactions
• Advice on how EPs and lenders should be preparing for E 1527-13
• Potential changes that end users may see in their Phase I ESA reports when E 1527-13 takes effect

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Revisions to the ASTM E 1527 Standard: Three Insider’s Perspective

  1. 1. Revisions to the ASTM E 1527 Standard:Three Insider’s PerspectivePresented by:• Paul Zovic, Senior Advisor, Endpoint Solutions Corp.• Daria Milburn, Vice President, Manager REVAL/Environmental Risk, SunTrust Banks, Inc.• Christopher P. McCormack, Attorney, Pullman & Comley LLC © 2011 Environmental Data Resources, Inc.
  2. 2. EP’S PERSPECTIVE Paul Zovic Senior Advisor Endpoint Solutions Corp Milwaukee, WI March 28, 2013
  3. 3. The Phase I Standard was updated to: Better reflect current paradigm Clarify terms Address need for more consistent deliverable Update the Legal Appendix Provide guidance on non-scope issues, especially common BER issues
  4. 4.  Initiated in 2009 Many meetings, many iterations Cross-section of market ◦ Users (banks, developers, property owners) ◦ Producers (consultants) ◦ Attorneys ◦ Regulators ◦ Others
  5. 5.  New definition for “release” and “environment”, to align with CERCLA definitions New definition for migrate/migration, to specifically include vapor migration Clarification that recommendations are not required by the stadard
  6. 6.  File reviews
  7. 7.  File reviews ◦ If the property or any of the adjoining properties is identified on one or more of the standard environmental record sources, pertinent regulatory files and/or records associated with the listing should be reviewed
  8. 8.  File reviews ◦ If the property or any of the adjoining properties is identified on one or more of the standard environmental record sources, pertinent regulatory files and/or records associated with the listing should be reviewed ◦ As an alternative, the EP may review files/records from an alternative source(s)
  9. 9.  File reviews ◦ If the property or any of the adjoining properties is identified on one or more of the standard environmental record sources, pertinent regulatory files and/or records associated with the listing should be reviewed ◦ As an alternative, the EP may review files/records from an alternative source(s) ◦ If, in the EP’s opinion, such a review is not warranted, the EP must explain within the report the justification for not conducting the regulatory file review
  10. 10.  Change to REC definition ◦ More aligned with AAI, but retaining some of the additional guidance from prior E1527 versions
  11. 11.  Change to REC definition ◦ More aligned with AAI, but retaining some of the additional guidance from prior E1527 versions…the presence or likely presence of any hazardous substances orpetroleum products in, on, or at a property: (1) due to release to theenvironment; (2) under conditions indicative to a release to theenvironment; or (3) under conditions that pose a material threat of afuture release to the environment. De minimis conditions are notrecognized environmental conditions.
  12. 12.  Change to HREC definition
  13. 13.  Change to HREC definition ◦ Redefined to limit application of HREC to past releases that have been addressed to residential/unrestricted use (i.e. no AUL, no IC/EC)
  14. 14.  Addition of CREC definition ◦ Controlled REC to be used for risk-based closures, where contaminants are allowed to remain under certain conditions. ◦ Clarification that “de minimis condition” is not to be used to describe CREC
  15. 15.  Clarification of REC, HREC, CREC File Reviews ◦ Management ◦ Justification ◦ Communication Educating staff and clients
  16. 16. Paul Zovic Endpoint Solutions Corp Milwaukee, WIpaul@endpointcorporation.com 414-858-2106
  17. 17. Daria K. Milburn March 2013
  18. 18. DisclaimerThe views expressed in this presentation are based on my observations and experiences in both banking and consulting. This represents my own very humble opinion, and should not be interpreted to represent the view of SunTrust or any other corporation.
  19. 19. It’s all about us.
  20. 20. What We Do Banks Manage Risk Areas of Focus  Originating Transactions  Foreclosures  OREO Remedial Actions  Facilities
  21. 21. Driving Forces Policies Product Expectations Risk Tolerance Every bank is different.
  22. 22. Effect of ASTM Changes Greater Clarification More InformationPushes towards a more complete report, but many bankshave their own scopes that use ASTM as a starting pointonly.The changes will not significantly affect what we do.
  23. 23. Remember……It’s all about us.
  24. 24. In the end…. It all comes back to Risk Tolerance  We define our own risks  Label is irrelevant  REC  HREC  CREC  BER
  25. 25. Change is Good Many thanks to the committee and Julie Kilgore. Looking forward to 1527-21! (ahhh the possibilities….)
  26. 26. ASTM E1527 2013 STANDARD REVISIONS Liability Perspectives:CERCLA, All AppropriateInquiry and the Evolving Phase I Assessment Christopher P. McCormack March 28, 2013
  27. 27. CERCLA Context: Defenses and“All Appropriate Inquiries” CERCLA (Superfund) liability framework – Strict – joint and several – Based on “release” – “Response costs” or injunction/consent order Defenses/LLPs: knowledge of and role in causing contamination – Innocent landowner: “did not know, had no reason to know” – Bona fide prospective purchaser: buys with knowledge, did not cause – Contiguous property owner: did not know, did not cause
  28. 28. CERCLA Context: Defenses and“All Appropriate Inquiries” “… made all appropriate inquiries into the previous ownership and use of the facility in accordance with generally accepted good commercial and customary standards and practices…”
  29. 29. CERCLA Context: Defenses and“All Appropriate Inquiries” “All Appropriate Inquiries” - 2002 statutory criteria: – Inquiry by environmental professional – Interviews to gain information regarding potential for contamination – Review historical information re property use since development – Search recorded cleanup liens – Review regulatory records re haz mat, haz waste, spills at/near facility – Visual inspection – Specialized knowledge of “defendant” – Purchase price vs. value if uncontaminated – Commonly known or reasonably ascertainable information – Degree of obviousness of presence or likely presence of contamination, ability to detect with appropriate investigation
  30. 30. CERCLA Context: Defenses and“All Appropriate Inquiries” “All Appropriate Inquiries” - 2005 Developments – Federal AAI Rule: 40 C.F.R. Part 312  Performance standard (categories/areas of inquiry)  Tracks statutory criteria – ASTM E1527-05  Procedure standard (like E1527-97: procedures inquiry must follow)  Corresponds to and expands upon statutory criteria  Endorsed as alternative to AAI: 40 C.F.R. § 312.11(a)
  31. 31. CERCLA Context: Defenses and“Continuing Obligations” Post-Acquisition Actions to Maintain Defenses – IPO:  “reasonable steps” to stop/prevent release, prevent/limit exposure  “due care” re hazardous substances in light of all facts and circumstances – BFPP:  Take “appropriate care” to stop/prevent release, prevent/limit exposure  Cooperate with response actions  Comply with use restrictions, institutional controls – CPO:  “reasonable steps” to stop/prevent release, prevent/limit exposure  Cooperate with response actions  Comply with use restrictions, institutional controls
  32. 32. 2013 E1527 Revisions: Changes thatEnhance Alignment with AAI User obligation to do (or contract for) search for Environmental Liens, Activity and Use Limitations (E1527 Section 6.2) – Express reference to 40 C.F.R. §§ 312.20, 312.25 – Complements EP search of institutional and engineered control registries (E1527 Section 8.2) User inform EP if User believes price is below market due to contamination (E1527 Section 6.5) User must gather information as needed to identify conditions indicative of a release or threatened release (E1527 Section 6.6) User must consider degree of obviousness (E1527 Section 6.7)
  33. 33. 2013 E1527 Revisions:“Professional Judgment” EP “shall, based on professional judgment, evaluate the relevant lines of evidence obtained as a part of the Phase I ESA process to identify recognized environmental conditions in connection with the property” (Section 7.3.1) EP “shall exercise professional judgment and consider the possible releases that might have occurred at a property in light of the historical uses and, in concert with other relevant information gathered as part of the Phase I process, use this information to assist in identifying recognized environmental concerns” (Section 8.3.1)
  34. 34. 2013 E1527 Revisions: Changes toImprove Classification of Conditions E1527-05: – “de minimis” – “historical recognized environmental condition” – “recognized environmental condition” – Classification problem scenario: “regulatory closure” with contamination in place subject to …  Institutional (land use) control  Engineered control (cap)  Self-executing legal status, informal “closure” (e.g. UST)
  35. 35. 2013 E1527 Revisions: Changes toEnhance Classification of Conditions Solution: CREC
  36. 36. 2013 E1527 Revisions: Changes toEnhance Classification of Conditions Revised HREC Definition:
  37. 37. 2013 E1527 Revisions: Changes toEnhance Classification of Conditions REC definition: “de minimis” IS NOT a REC
  38. 38. Conclusions and Comments Incremental changes and improvements Improved alignment with statutory framework Clarity on REC/CREC/HREC/de minimis Some more AAI-like (performance based) concepts Using E1527 if …. – CERCLA defenses/LLPs aren’t a priority – You’re not seeking a brownfields grant
  39. 39. Contact Information Christopher P. McCormack Pullman & Comley, LLC 850 Main Street Bridgeport, Connecticut 06601-7006 Tel: 203 330 2016 Fax:203 576 8888 Email: cmccormack@pullcom.com
  40. 40. BRIDGEPORT | HARTFORD | STAMFORD | WATERBURY | WHITE PLAINS www.pullcom.com
  41. 41. Q&A © 2011 Environmental Data Resources, Inc.

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