In our prior blog, we announced that the Environmental Protection Agency (“EPA”) would publish a proposed rule and direct final rule proposing to amend and amending the All Appropriate Inquiries rule (“AAI”) to reference the revised ASTM E1527-21 ‘‘Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process’’ (“E1527-21”) and allowing it to be used to satisfy the AAI requirements.
If EPA does not receive any adverse comments within the 30-day public comment ending on April 13, 2022, the direct final rule will become effective. If EPA receives adverse comment, it will withdraw the direct final rule and proceed with the proposed rulemaking. Unfortunately, EPA’s approach is fatally-flawed because it fails to remove the reference to the superseded E1527-13. As a result, the agency will be receiving negative comments.
The legislative history of CERCLA and numerous judicial opinions are clear that Congress intended AAI to reflect evolving notions of “good commercial and customary practice.” E1527-21 represents what the industry now considers to be “good commercial and customary practice”. Thus, EPA’s action will actually contravene its direction from Congress that AAI reflect “good commercial and customary practice”.
The ASTM task force that is responsible for E-1527 spent several years reviewing the standard against current industry practices (full disclosure- I served as co-chair of the task force legal committee). ASTM standards generally are renewed every 8 years. The E1527 Task Force could have simply re-issued E1527 with no changes. However, the E1527 Task Force determined that E1527 needed to be revised because of the proliferation of inconsistent and deficient reports as well as to reflect current industry practices, particularly involving the scope of research into the historic use of properties. The E1527 revisions were also informed by some recent litigation involving deficient Phase I reports issued since E1527-13 became effective. See prior blogs discussing some of these cases here, here and here.
In its March 14th federal register announcements, EPA said it was retaining the reference to E1527-13 to provide greater flexibility to brownfield developers and brownfield grantees. However, the only flexibility EPA’s rulemaking will accomplish will be to provide more freedom to low-cost phase 1 “shops” to issue deficient reports. Under EPA’s approach, property owners and brownfield grantees will become confused over how best to comply with AAI. This will unnecessarily inject further uncertainty about liability concerns over brownfield sites, which already have a host of challenges.
EPA’s decision to recognize E1527-21 while also allowing E1527-13 to remain as an acceptable alternative for complying with AAI will create chaos in the marketplace and create a two-tier phase 1 system. By allowing E1527-13 to continue be used to satisfy AAI, EPA will be enabling low-cost providers to continue to skimp on the kind of critical historical research that E1527-21 clarifies is necessary and consistent with “good commercial and customary practices”. By retaining the reference to E1527-13, EPA will sanction the very shoddy work that the ASTM E1527 Task Force tried to address when it issued E1527-21.
Other omissions and errors that may continue to be present in Phase I reports if performed to the E1527-13 standard include misunderstandings regarding the definition and application of Recognized Environmental Consultants (RECs), Controlled RECs (CRECs) and Historic RECs (HRECs), deficient searches for environmental liens, continued misunderstanding regarding the 180-day and one-year validity of a Phase I, inadequate analysis of significant data gaps and inappropriate inclusion of recommendations. Phase 1 reports that inappropriately contain RECs unduly stigmatized brownfield sites since many developers and lenders are wary of sites with RECs.
It is unfathomable that EPA would adopt the approach reflected it proposed and direct final rule. When the agency tried to follow this approach in 2013 when it proposed to recognize E1527-13 while retaining the reference to E1527-05, the agency received adverse comments. This forced EPA to withdraw its final direct rule and agree to remove the outdated version of E1527 as a method for satisfying AAI. See 79 FR 60087- 60090 ( October 6, 2014). A definition of insanity is doing the same thing and expecting a different outcome. At the very least, the proposed rule and final direct rule are arbitrary and capricious.
As a result, the author along with others will be submitting negative comments asking EPA to follow the process it previously used by withdrawing the direct final rule and issuing a new proposed rule recognizing that E1527-21 may be used to satisfy AAI while removing the reference to E1527-13. Like it did in 2014, EPA should provide that parties that completed phase I reports or commenced inquiries in conformance with E1527-13 prior to the effective date of the rule should be deemed to have complied with AAI .