The document summarizes recent changes to the standards for conducting environmental due diligence. It outlines revisions to key definitions like Recognized Environmental Condition (REC), Historical REC, and Controlled REC. Regulatory records reviews are now emphasized. User responsibilities in the due diligence process are also clarified. Vapor intrusion is addressed directly and considered no differently than contaminated groundwater. The new standards aim to provide clearer guidance on evaluating and classifying environmental risks at properties.

1. Recent Developments in
Environmental Due Diligence
Pasadena Bar Association, Real Estate Section
May 27, 2014
PRESENTED BY
Eddie Arslanian, PE
ENVIRON International
Corporation
Emily Murray, Esq.
Allen Matkins Leck Gamble
Mallory & Natsis LLP

2. Agenda
• Background
• Revised or New Definitions
• Characterization of Environmental Conditions
• Other Considerations
• Vapor Intrusion

3. Background
What is environmental due diligence?
• Environmental due diligence is the pre-transaction (purchase, lease, sale,
finance) investigation of environmental conditions and history of the subject
property
• Good commercial and customary practice for environmental due diligence
for real property is a Phase I environmental site assessment (ESA)

4. Background (continued)
Why conduct environmental due diligence?
• Liability protection under federal law
• Evaluate potential environmental risks and costs
• Plan development based on any environmental restrictions

5. Background (continued)
Liability protection
• The Comprehensive Environmental Response, Compensation, and Liability
Act (CERCLA) provides statutory defenses for innocent land
owners/operators, contiguous property owners/operators, and bona fide
prospective purchasers/tenants (BFPP)
• To qualify for these statutory defenses, the owner/operator must conduct
“All Appropriate Inquiry” (AAI) prior to transaction

6. Background (continued)
AAI/ASTM Standard
• In 2005, the federal Environmental Protection Agency (USEPA) adopted its
AAI Rule, which endorsed the Phase I ESA standard promulgated by the
ASTM to satisfy the statutory requirements for conducting AAI
• ASTM updates the standard every eight years
• In 2013, ASTM finalized ASTM E1527-13, which updated the prior
standard ASTM E1527-05
• On December 30, 2013, USEPA issued a new final rule amending the AAI
Rule to include a reference to the new ASTM Standard E1527-13

7. Background (continued)
AAI/ASTM Standard (continued)
• USEPA’s new final AAI rule provides that the new ASTM Standard E1527-
13 can be used to satisfy AAI
• The new rule does not prohibit the use of the previous ASTM Standard
E1527-05, although the preamble strongly suggests that the new standard
should be employed
• A future USEPA rule making is anticipated that will eliminate the reference
to the previous standard

8. Key Changes
• Revised or new definitions for:
– Recognized Environmental Condition (REC)
– Historical Recognized Environmental Condition (HREC)
– Controlled Recognized Environmental Condition (CREC)
• Emphasis on regulatory file reviews
• Revisions to user responsibilities
• Vapor intrusion clarification

9. Revised Definitions: REC
Recognized Environmental Condition (REC)
2013: The presence or likely presence of any hazardous substances
or petroleum products in, on, or at a property:
1) due to any release to the environment
2) under conditions indicative of a release to the environment
3) under conditions that pose a material threat of a future release to the
environment

10. Revised Definitions: HREC
Historical Recognized Environmental Condition (HREC)
• 2013: An HREC is a REC that has been addressed to the satisfaction of a
regulatory agency or meets unrestricted use criteria without subjecting the
site to controls, such as property use restrictions, activity and use
limitations (AULs), institutional controls, or engineering controls
• Requires confirmation by an environmental professional (EP) that finding is
no longer a REC (i.e., standards have not changed)—applicable when
updating a previous Phase I report

11. New Definitions
Controlled REC (CREC)
• An REC that has been addressed to the satisfaction of a regulatory agency
or meets risk-based criteria
• Hazardous substances or petroleum products allowed to remain in place
subject to implementation of controls (e.g., AULs, engineering controls)
• CRECs must be identified in the conclusions section of the report
• Evaluation of adequacy of controls is not required of EP
• CREC identification important for satisfying post-acquisition continuing
obligations of property owner
De Minimis Condition
• Now a stand alone definition (pulled out of REC definition)

12. REC-HREC-CREC Relationship
Contamination in, at
or on the target
property
Is it
de minimis?
Would
regulatory
officials view
cleanup as
adequate
today?
Are there
‘controls,’
such as use
restrictions?
REC
De Minimis
CREC
HREC
YES
YES
YES
NO
NO
NO
YES
NO
Has it been
addressed?

13. Other Considerations (Records Review)
• If property or adjoining property is listed on standard environmental
record source (e.g., database search), regulatory records/files
should be reviewed
• EP may conclude that regulatory review is not warranted,
but must explain justification in report
• Alternate sources of information (e.g., site records/files, user-
provided information, interviews) can be used in place of regulatory
records/files
• EP shall include an opinion regarding the sufficiency of information
obtained from regulatory files/records, or alternate sources must be
included in report

14. Other Considerations
(User Responsibilities)
• User responsibilities are required of:
– Parties seeking landowner liability protections
– USEPA brownfield assessment and characterization grantees
• Lists the tasks required to be performed by the “User,” although not
required to be provided to EP
– EP must request the user to provide the results
– If not provided, EP should consider the significance of the
data gap

15. Vapor Intrusion – Clarified
• Vapor intrusion: migration of hazardous vapors from a subsurface
contaminant source (e.g., soil or groundwater) through the vadose
zone and into the indoor air
• Significant and challenging environmental remediation issue
• Vapor migration is clarified and considered “no differently” than
contaminated groundwater migration

16. Vapor Intrusion – Clarified
Indoor air
Vadose Zone
Soil Gas
{
{Soil
Contamination
(residual or
mobile NAPL)
Chemical Vapor Migration
Groundwater
Contamination
basement crawl space
slab

17. Vapor Intrusion – Clarified
• Migrate/migration defined in new standard:
– “refers to the movement of hazardous substances or petroleum
products in any form, including, for example, solid and liquid at
the surface or subsurface, and vapor in the subsurface.”
• Indoor Air Quality exclusion as a non-scope consideration clarified:
– “unrelated to releases of hazardous substances or petroleum
products into the environment”
• ASTM E2600-10 Standard Guide for Vapor Encroachment Screen
on Property Involved in Real Estate Transactions now referenced

18. Vapor Intrusion – Summary
• Vapor migration should be treated no differently than the way
contaminated groundwater migration is considered in
a Phase I
• EP can evaluate vapor migration using whatever methodology the
EP determines to be appropriate (if not E2600-10, then EP needs
to document “alternative” methodology and include documentation
in the Phase I)
• Site-specific vapor intrusion evaluation more useful in real estate
transactions than following the E2600-10
• When evaluating vapor intrusion, note that there are differences
between Cal/EPA and USEPA methodologies

19. Contact Information
Emily Murray
emurray@allenmatkins.com
+1 213 955 5584
Eddie Arslanian
earslanian@environcorp.com
+1 213 943 6326