HARRIS & LEE ENVIRONMENTAL SERVICES

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Author: robert.harris (page 1 of 2)

Importance of Working with an ESA

$10,000,000 to learn what can happen without an ESA

A massive price to pay for avoiding the relatively minor cost of a Phase I environmental site assessment

A successful business had been operating in a relatively large building for several years.  As luck would have it, an opportunity to acquire the adjacent property presented itself. The last business went into bankruptcy.

The successful business owner took advantage of the opportunity to acquire the adjacent property for only the back taxes due, literally a steal considering the apparent value of the property.

The deal closed without an environmental site assessment.

The successful business owner was familiar with the adjacent property as far as his local experience provided but he was not acquainted with uses of the property before he became a neighbor. He did not know the adjacent property had housed several different businesses over the years.

In his haste to commence the transaction and believing that “all there is to know” about the property was known, he closed the deal to buy the property without an environmental site assessment.

What was not known to the successful business owner was the fact that 20 years ago a manufacturer of printed circuit boards had occupied the property. The operators of that business had spilled copious quantities of the chlorinated solvent, Trichloroethylene, as well as various acids and solutions of heavy metals onto the property. In fact, a regulatory agency had  issued an order to cleanup the property while the circuit board manufacturer was still operating.  However, that order was not heeded.

To make matters worse, the regulatory agency was lax in enforcing the cleanup order.

After the successful business owner acquired the property, the regulatory agency sent a notification that cleanup of the site would have to commence immediately. The new property owner, knowing nothing of the prior history, did not believe that there was a problem.                   

As time passed, the agency issued another cleanup order that they began to aggressively enforce.  The former operators of the offending business were nowhere to be found, having left the country or had died with empty estates, the ultimate escape. The successful business owner was viewed as the “Responsible Party” even though he had done nothing to directly contribute to the contamination that was now over ½ mile south of the subject property as it spread in the water table, a problem that could carry a price tag of over $10 million.

This case study is a prime example of the value of the landowner exemptions provided by the CERCLA Brownfields Amendments. Today, if the business owner rigorously followed the All Appropriate Inquiries – Environmental Site Assessment, Phase 1 Investigation while purchasing the property, he would likely be protected.

Cost Effective Analysis Plan for an ESA

Just 27 soil samples from a 100-acre site met the owner’s criteria for economic feasibility and satisfied the federal and state environmental regulators

Also see: Investigate the correct contaminant

A 100-acre site had received fill material for nearly 25 years–since the late 1960s. The majority of the fill came from large operators who had total deposits   of 10,000 to 200,000 yards. The materials were trucked to the site in loads of 10 to 20 cubic yards each and deposited at different places at different times. The source of the fill material in any given area of the site was not known.

Because it was a well-known land mass and had received a large quantity of fill, the site was investigated by the Technical Assistant Team of the EPA.                   

    • The investigation resulted in the discovery of zones of waste oil contaminated soil in the fill material deposited at the site.

The owner was directed to conduct an environmental site assessment to determine the presence of hazardous waste. The EPA suspected that hazardous oil refinery waste was included in the fill material.                   

The owner was understandably concerned about the cost of complying with the environmental regulatory agencies’ request.                    

  • For economy, he needed a site sampling and analysis plan that would utilize the minimum number of samples possible and yet still meet the close scrutiny of the federal and state regulatory agencies.    

Harris & Lee Environmental Sciences, LLC developed a cost-effective plan that satisfied the criteria of the environmental regulatory agencies. The plan was designed to collect the minimum number of samples adequate to allow accurate and precise measurement of the chemical properties of the fill material. If the measurements were accurate (free of error) and precise (repeatable), they would meet regulators’ requirements for statistically reliable estimates of conditions at the site.

  • Data supplied by the regulatory agencies was used to calculate and estimate the characteristics of a typical “hot spot.”                     
  • Next, statistical analysis was performed to estimate “consumer’s risk” and to establish the mathematical probability of not finding the typical “hot spot.”
  • Additional analysis estimated the probability of a “hot spot” existing even if none were found through sampling and the mathematical probability of finding an existing “hot spot.”
  • Together with the application of standard statistical methods, these analyses allowed determination of the adequate and reasonable number of samples.

The plan ultimately proposed by Harris & Lee Environmental Sciences called for collection of just 27 samples from the 100-acre site.

  • The plan met the owner’s need for economic feasibility and satisfied the federal and state regulatory agencies’ criteria for the environmental assessment of the site.

Return to Environmental Site Assessments Overview

Investigate the Correct Contaminant

Inadequacies in environmental site assessment led to costly erroneous conclusion of oil contaminated soil

The application of inappropriate tests during the environmental site assessment led to erroneous conclusions of oil contamination and $100,000 down the drain

Also see: Contaminant Sleuth: Robert Harris detects toxins in food, wine, soil

A land development company in Northern California began improving a 13-acre site for inclusion in a nearby light industrial park.  The improvements included adding fill soils from various nearby locations to bring the parcel “up to grade” and retard potential flooding. When grading was accomplished, the site was put on the market and attracted the attention of a large industrial concern.

The buyer requested a Phase I site assessment that was conducted at the land owner’s expense by a local civil engineering firm. It included shallow soil borings and chemical analysis.

  • The engineering firm’s laboratory, chosen for cost reasons only, performed “customary” analyses and reported that the soils were contaminated with used motor oil.

This finding extinguished the buyer’s interest in the property and compelled the owner to undertake extensive additional soils and groundwater testing.

  • Five years later the owner had spent over $100,000 on environmental assessments and consulting without conclusive results.

The next step, he was told, was a full-scale risk assessment of the property, at a cost in excess of $250,000. At the suggestion of his bank, the property owner contacted Harris & Lee Environmental Sciences, LLC and requested an evaluation of the work done to date on the property. The bank was aware of Harris & Lee Environmental Sciences expertise in environmental chemistry and toxicology.

No oil found in the soils

In reviewing the engineering firm’s data on the site, Harris & Lee Environmental Sciences quickly determined that inadequacies in the initial environmental site assessment analysis plan led to the application of inappropriate tests and, likewise, to erroneous conclusions of oil contamination.                    

All of the analytical chemistry performed to evaluate the site for organic constituents was faulty due to application of incorrect analytical procedures.                   

  • Specifically, the California Leaking Underground Fuel Tanks (LUFT) procedure was used, even though it is only for samples taken from directly underneath a leaking tank.
  • In addition, the EPA Toxic Characteristic Leaching Procedure (TCLP) was used, even though samples from sites such as this are specifically excluded from the testing procedure.

Harris & Lee Environmental Sciences, LLC developed a new soil sampling and analysis plan for the property, one that would properly characterize the site through the use of appropriate EPA protocols. The analyses were conducted by laboratories Harris & Lee Environmental Sciences, LLC had audited and qualified as competent for these tasks. 

The resulting data showed that there was no motor oil on the site. Rather, the improper chemistry techniques of the engineering firm’s laboratory had mistakenly identified naturally occurring organic matter as petroleum compounds.

Back to environmental site assessments overview

Dry Cleaners Pose “Worst of Worst” Env Risk

by Robert S. Harris

One of the most challenging types of property to evaluate for environmental risk is the retail shopping mall or small strip center

Dry cleaners use a solvent in the cleaning process called Tetrachloroethylene (also known as Perchloroethylene, or Perc), a significantly toxic chemical. It is particularly obnoxious and difficult to remove from the environment and, over time, it degrades into a potent carcinogen.

Perc is heavier than water; it sinks to the bottom of the body of water it is in.

  • Thus, when Perc is spilled or leaks from a dry cleaner operation, it moves into the groundwater and continues to work its way down until it contaminates the deeper aquifers from which wells typically draw their water.

The result is a major contamination situation that may effect many water wells in an area and can cost up to tens of millions of dollars to clean up.

Property owners are ultimately responsible for environmental contamination

Typically, the dry cleaners that created the mess are “Mom & Pop” operations with limited financial resources, if any, to deal with the clean up. Hence, the regulators move on to the next level of responsibility, the property owner.

All Appropriate Inquiries – Environmental Site Assessment, Phase 1 Investigation is essential when purchasing a retail mall or strip center

One of the most challenging types of property to evaluate for environmental liability risk is the retail shopping mall or small strip center, a typical location of dry cleaners – past and present. In fact, these types of commercial entities can be, and are, the most difficult of business properties to evaluate when performing an environmental site assessment. Some of the reasons for this are:

  • Small strip centers and shopping malls typically have many different small businesses that move in and out frequently.
  • Property managers change on a surprisingly regular basis; on average commercial property managers work with a specific retail property for only about 5 years. New property managers do not usually keep records of tenants that were present on a property prior to their involvement, making it difficult to recreate an accurate history of occupancy.

From this scenario come the following principles:

  • When purchasing property that is or has been used for commercial entities, the All Appropriate Inquiries Rule must be rigorously followed for the purchaser to benefit from a liability exemption under CERCLA.
  • If environmental risk insurance is available to a property owner, it is likely to be very expensive because of the likelihood of contamination and the cost of remediation.
  • Owners of a property with a dry cleaner present in one of the units should closely monitor the tenant or create an environmental liability risk management program that includes a requirement that the dry cleaner use secondary containment to include not only the dry cleaning unit itself, but all of the chemicals and filters that come in contact with the solvent. No secondary containment, or inadequate secondary containment, virtually assures that Perc will contaminate the property. In that event the property owner may well be “taken to the cleaners” himself, facing up to an 8-figure cleanup cost.

Robert S. Harris is president and senior scientist of Harris & Lee Environmental Sciences, LLC, a Santa Rosa, California environmental consulting firm serving the western United States. He holds degrees in chemistry and biochemistry, and has 32 years experience in environmental analytical chemistry and environmental toxicology.  Mr. Harris has established and operated large laboratories andhas developed several ground-breaking methodologies for environmental analysis, including the standard method for analysis of polychlorinated biphenyls in water, soils and oils. His firm has saved lending, insurance, real estate and law clients millions of dollars, including conversion of a waste costing $120,000 per month to a usable fuel.

Inadequacies in ESA Costly in Oil Contaminated Soil

The application of inappropriate tests during the environmental site assessment led to erroneous conclusions of oil contamination and $100,000 down the drain

Also see: Contaminant Sleuth: Robert Harris detects toxins in food, wine, soil

A land development company in Northern California began improving a 13-acre site for inclusion in a nearby light industrial park.  The improvements included adding fill soils from various nearby locations to bring the parcel “up to grade” and retard potential flooding. When grading was accomplished, the site was put on the market and attracted the attention of a large industrial concern.

The buyer requested a Phase I site assessment that was conducted at the land owner’s expense by a local civil engineering firm. It included shallow soil borings and chemical analysis.

  • The engineering firm’s laboratory, chosen for cost reasons only, performed “customary” analyses and reported that the soils were contaminated with used motor oil.

This finding extinguished the buyer’s interest in the property and compelled the owner to undertake extensive additional soils and groundwater testing.

  • Five years later the owner had spent over $100,000 on environmental assessments and consulting without conclusive results.

The next step, he was told, was a full-scale risk assessment of the property, at a cost in excess of $250,000. At the suggestion of his bank, the property owner contacted Harris & Lee Environmental Sciences, LLC and requested an evaluation of the work done to date on the property. The bank was aware of Harris & Lee Environmental Sciences, LLC’ expertise in environmental chemistry and toxicology.

No oil found in the soils

In reviewing the engineering firm’s data on the site, Harris & Lee Environmental Sciences, LLC quickly determined that inadequacies in the initial environmental site assessment analysis plan led to the application of inappropriate tests and, likewise, to erroneous conclusions of oil contamination.                    

All of the analytical chemistry performed to evaluate the site for organic constituents was faulty due to application of incorrect analytical procedures.                   

  • Specifically, the California Leaking Underground Fuel Tanks (LUFT) procedure was used, even though it is only for samples taken from directly underneath a leaking tank.
  • In addition, the EPA Toxic Characteristic Leaching Procedure (TCLP) was used, even though samples from sites such as this are specifically excluded from the testing procedure.

Harris & Lee Environmental Sciences developed a new soil sampling and analysis plan for the property, one that would properly characterize the site through the use of appropriate EPA protocols. The analyses were conducted by laboratories Harris & Lee Environmental Sciences had audited and qualified as competent for these tasks. 

The resulting data showed that there was no motor oil on the site. Rather, the improper chemistry techniques of the engineering firm’s laboratory had mistakenly identified naturally occurring organic matter as petroleum compounds.

CERCLA Historical Background

2013: ASTM E 1527-13: The standard methodology for performing Phase I’s has been updated for the first time since 2005. The new standard became official on November 13, 2013.  The major changes in the new revision include the following:

  • New definitions for Recognized Environmental Conditions (RECs)
    • Historical RECs – must be cleaned up so that no “activity or use limitations” remain on the property. This means that the site must at least meet residential use contamination screening limits, or the former HREC will now be considered an REC
    • Controlled RECs – this is a new term created for past contamination that has been remediated to the satisfaction of the oversight agency, but some contamination remains on the site that pose “activity or use limitations.” Examples could be a site that  could not be converted to residential use or have subsurface disturbance without additional environmental investigation, oversight or controls. The Controlled REC is listed under the recognized environmental condition
    • RECs – the definition has been simplified and the new category of Controlled REC has been added.
  • Files Reviews are No Longer Discretionary
    • In the past, some environmental firms, in an effort to minimize cost and/or time, have skipped performing agency file reviews. This step is no longer discretionary in the new standard. (Note: HLENV has always performed agency file reviews for Phase I Reports.)

2005: ASTM E 1527-05: The Federal EPA  finalized “Standards and Practices for All Appropriate Inquiries,” published in the Federal Register, Part III Environmental Protection Agency, 40 CFR Part 312 dated November 1, 2005.

  • The effective date for these regulations is November 1, 2006. The EPA specified ASTM 1527-00 for Phase I Site Assessments as the designated “interim standards.”
  • After November 1, 2006  only ASTM E 1527-05 will meet the AAI regulations.

2002 Brownfields Amendments: The passage of the Small Business Liability Relief and Revitalization Act, the Federal “Brownfields Act,” an amendment to CERCLA, required EPA to develop standards and practices for conducting “all appropriate inquires.” The ASTM E-1527-97 and -00 were found to be inconsistent with applicable law because neither met the statutory criteria.

  • The 2002 Brownfields Amendments added potential liability protections for “contiguous property owners” and “bona fide purchasers” who also must demonstrate they conducted all appropriate inquiries, among other requirements, to benefit from the liability protection.

1993: American Society for Testing and Materials (ASTM) published the ASTM E-1527 Standard Practice for Phase I Environmental Site Assessments and ASTM E-1528 Standard Practice for Transaction Screens. These standards were the accepted standards for the minimum levels of environmental due diligence within both the environmental consulting, legal, and financial services industries.

1986: Congress passed the “Superfund Amendment Reauthorization Act,” aka, SARA. As part of SARA, the EPA included liability protection known as the “innocent landowner provision” for purchasers of property, as long as the purchaser completed “All Appropriate Inquiry” consistent with “good commercial real estate practices.” Congress created the “innocent landowner” provisions in 1986.

1980: The Comprehensive Environmental Response Compensation and Liability Act (CERCLA) passed by Congress, aka, SuperFund. The law gave the EPA broad powers to investigate and remediate the worst contaminated sites in the country. The initial investigation consisted of a detailed review of the available background information, inspection of the off-site area and inspection of the on-site area. This process was known as “Preliminary Environmental Site Assessment” or “environmental due diligence.” This is the precursor to the Phase I Environmental Site Assessment process.

  • CERCLA contained a concept called “strict liability” – liability without fault. This meant that an “innocent purchaser” of a property could be held liable although they did not cause the contamination.

CERCLA Liability Limits

Key Points

Under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), persons may be held strictly liable for cleaning up hazardous substances at properties that they either currently own or operate or owned or operated at the time of disposal. Strict liability in the context of CERCLA means that a potentially responsible party may be liable for environmental contamination based solely on property ownership and without regard to fault or negligence.

However, the CERCLA Brownfields Amendments provides three landowner liability exemptions:

  • Innocent landowner
  • Bona fide  purchasers
  • Contiguous property owners

There is no protection under CERCLA for a current property owner when hazardous substances are released.

CERCLA Background

Overview of All Appropriate Inquiries (AAI) Requirements for Phase I Site Assessments

Innocent Landowners, Standards for Conducting All Appropriate Inquiries: 40 CFR Part 312

Innocent Landowner Protection

In 1986, the Superfund Amendments and Reauthorization Act (SARA) created an “innocent landowner” defense to CERCLA liability by adding Section 101(35)(B). This section states: “for those persons who could demonstrate, among other requirements, that they “did not know and had no reason to know” prior to purchasing a property that any hazardous substance that is the subject of a release or threatened release was disposed of on, in, or at the property. Such persons, to demonstrate that they had “no reason to know” must have undertaken, prior to, or on the date of acquisition of the property, “all appropriate inquiries” into the previous ownership and uses of the property consistent with good commercial or customary standards and practices.

Brownfields Amendment Liability Limitations

The Brownfields Amendment clarified liability provisions for innocent landowners and added protections from liability for bona fide purchasers and contiguous property owners who meet certain statutory requirements. The All Appropriate Inquiries Rule issued by the U.S. Environmental Protection Agency on November 1, 2005 established the specific regulatory requirements and standards for conducting All Appropriate Inquiries.

Generally, under the CERCLA Brownfields Amendments, the following conditions would minimize a purchaser’s exposure to liability for past environmental contamination. The advantage for lenders is that these landowner exemptions protect the borrower and collateral in commercial real estate loans.
For the Innocent Landowner Exemption:

  • Did not cause or contribute to hazardous substances
  • Property acquired by inheritance or bequest
  • After completing All Appropriate Inquiries & ASTM E 1527-05 did not know and had no reason to know of “release or threatened release” at the time of acquisition

For the Bona Fide Purchaser Exemption:

  • Acquires ownership after 1/1/05
  • Hazardous substances released before purchase
  • No potential liability or connection with Potentially Responsible Party other than through purchase agreement
  • Rigorously completes All Appropriate Inquiries & ASTM E 1527-05
  • Appropriate care in dealing with hazardous substances
  • Cooperates with regulatory agency’s mandated remedial work, contractors, etc.

For the Contiguous Landowner Exemption:

  • Adjacent Property Owner
  • Did not cause, contribute, or consent to release or threatened release
  • After completing All Appropriate Inquiries & ASTM E 1527-05 did not know and had no reason to know of “release or threatened release” at the time of purchase
  • No potential liability or connection with neighboring Potentially Responsible Party

Harris & Lee Environmental Sciences, LLC strongly recommends purchasers seek legal advice before acquiring a property with known environmental damage. This information should not be construed as legal interpretation or legal advice. Our intent is to simply point out that these exemptions exist.

Residential Uses

In the case of property acquired by a non-governmental entity or non-commercial entity for residential or other similar uses, the current standards (ASTM and AAI) may not be applicable. For those cases, the Brownfields Amendments to CERCLA establish that a “facility inspection and title search that reveal no basis for further investigation shall be considered to satisfy the requirements for all appropriate inquiries”.

  • The definition of “facility inspection” is open to conjecture. It can mean more than just inspecting; it may include an investigation into nearby environmentally active sites.

Environmental liability & risk management of commercial real estate loans

Knowledge of the environmental status of a business or commercial property can assist lenders in making rational judgments as to the environmental liability inherent in a real estate loan.Also see: Know and follow ownership / liability tests to maintain EPA lender liability exemption


Affiliate Member

CERCLA Lender Liability Exclusion

Banks are immune from direct environmental liability for properties on which they have made loans provided they follow a set of guidelines as outlined in the 1996 reauthorization of CERCLA (Comprehensive Environmental Response Compensation and Liability Act).  Prior to this legislation it was not uncommon for lenders to be viewed as a “deep pocket” and end up footing the costs for environmental investigation and cleanup on those properties where the borrower could not, or would not, meet his environmental responsibility.

Many banks limit the need for full Phase 1 environmental investigations because of the Lender’s Liability Exclusion. However, this “Lender’s Liability Exclusion” does not protect the money that the bank lent to the borrower in the first place. If the borrower ends up in financial difficulties because of environmental or worker safety and health issues and becomes unable to repay his loan, the bank could be in a position of losing on that loan.

According to a survey conducted by Environmental Data Resources, Inc.

  • 1 in 10 banks experienced losses due to environmental factors in 2002.
  • 1 in 13 Phase I environmental site assessments revealed environmental issues that warranted further investigation.

Knowledge of the environmental status of the business or commercial property can assist the bank in making rational judgments as to the environmental risks inherent in any real estate loan.

Harris & Lee Environmental Sciences, LLC can assist the bank in several ways:

Desktop Review (DTR)

Banks can screen low cap loans for potential environmental risk with a “snapshot” of the property through an Environmental Desktop Review (DTR) with a letter of interpretation from Harris & Lee Environmental Sciences, LLC . This is the most cost-effective option for initial environmental screening of properties. The DTR is used by many clients as a standard screening tool for all commercial financing.

  • Environmental Radius Reports are performed within the ASTM scope of requirements. If issues are apparent, these issues are communicated to the bank verbally and in written form in an effort to assist the bank in dealing with them properly.

Records Search with Risk Assessment (RSRA)

The Records Search with Risk Assessment (RSRA) is a more comprehensive desktop report that meets SBA Lender and Development Company Loan Programs (SOP 50 10 (5)) Requirements for environmental due diligence. The RSRA augments the DTR with two historic reports that include a Sanborn and one other historic report such as a City Directories Report or a Historic Aerial Photography Report. As with the DTR, a written discussion of the data in these various reports is prepared by an Environmental Professional.

  • When SBA financing is involved or when historical property usage is of concern.  

Modified or abbreviated Environmental Site Assessment Report

Our abbreviated environmental site assessment report is an intermediate tool devised by Harris & Lee Environmental Sciences, LLC that includes an Environmental Radius Report, a brief site reconnaissance, and limited investigative inquiries into historical use.

  • It is performed in conformance with ASTM protocol, and when performed by experienced senior personnel to draw comprehensive conclusions, it will indicate additional environmental conditions which warrant a Phase 1 environmental site assessment.

Not only is the lender assured costs will be kept to a minimum, but the report can be expanded if considerations require additional detail.

Though components of the modified assessment are done in compliance with ASTM standards, it does not technically meet ASTM standards because it is abbreviated. Even so, this abbreviated environmental site assessment will satisfy due diligence requirements for the first phase of the Lender’s Exemption rule.   

All Appropriate Inquiries – Environmental Site Assessment, Phase I Investigation

The “Brownfields Amendments” to CERCLA in 2002 clarified liability provisions for innocent landowners and added protections from liability for bona fide  purchasers and contiguous property owners who meet certain statutory requirements.  Known as the All Appropriate Inquiries (AAI) Rule, the requirements were finalized by the U.S. Environmental Protection Agency on November 1, 2005.

Only those purchasers who rigorously perform All Appropriate Inquiries prior to purchase can benefit from these protections. The advantage for lenders is that these landowner exemptions protect the borrower and collateral in commercial real estate loans.

The purchase of contaminated property no longer necessarily means the purchaser is the new Responsible Party IF the AAI requirements are rigorously followed.Because AAI completion is a threshold step to qualify for one of the three landowner liability exemptions, it is important for the lender to understand how and when All Appropriate Inquiries must be completed under the final AAI rule. It is worth noting that these limits of liability have yet to be tested in court and they may well end up in state or Federal Supreme Courts.

Harris & Lee Environmental Sciences, LLC performs All Appropriate Inquiries – Environmental Site Assessments, Phase 1 Investigations using ASTM E 1527-05 standards and practices. More  

Tenant Environmental Compliance Audits

Harris & Lee Environmental Sciences, LLC assists lenders in monitoring ongoing environmental compliance at tenant facilities. The most important aspect of tenant monitoring on a regular and agreed upon basis is to identify and document potential environmental problems which will or may devalue the property, or cause the extension of liability ownership to the lender.

Potential environmental risk is minimized when, prior to lease development; a visit is made to the potential tenant’s existing facility to review the hazardous waste materials management plan and tools and determine how well it is followed. This is the best indicator of how the operation will be run once the tenant is situated on the new property. Specific issues regarding future compliance can be identified for coverage in the lease agreement.

Because previous tenants and lenders can be assessed penalties by the EPA, lenders are urged to have pre-exit and pre-lease termination assessments of the property. Doing so minimizes the owner and lender exposure by documenting the tenant’s departure activities. On occasion it may be prudent to require a tenant to develop a comprehensive closure plan, and to police the implementation of that closure plan, as well as to monitor the effectiveness of such a plan. It is helpful to stipulate and draw a prospective tenant’s attention to this lender option in the lease. The intention is that tenants who are aware they will be monitored are more likely to be well-prepared, and lease termination may be more manageable.

Educational environmental seminars for banks and other financial institutions

Staff training is an integral part of a bank’s environmental management system. Harris & Lee Environmental Sciences, LLC provides informative seminars and other training sessions that are customized to meet the needs of our clients. The cost is modest; the benefits begin with improved judgments of environmental risk.

CERCLA Historical Background

2013: ASTM E 1527-13: The standard methodology for performing Phase I’s has been updated for the first time since 2005. The new standard became official on November 13, 2013.  The major changes in the new revision include the following:

  • New definitions for Recognized Environmental Conditions (RECs)
    • Historical RECs – must be cleaned up so that no “activity or use limitations” remain on the property. This means that the site must at least meet residential use contamination screening limits, or the former HREC will now be considered an REC
    • Controlled RECs – this is a new term created for past contamination that has been remediated to the satisfaction of the oversight agency, but some contamination remains on the site that pose “activity or use limitations.” Examples could be a site that  could not be converted to residential use or have subsurface disturbance without additional environmental investigation, oversight or controls. The Controlled REC is listed under the recognized environmental condition
    • RECs – the definition has been simplified and the new category of Controlled REC has been added.
  • Files Reviews are No Longer Discretionary
    • In the past, some environmental firms, in an effort to minimize cost and/or time, have skipped performing agency file reviews. This step is no longer discretionary in the new standard. (Note: HLENV has always performed agency file reviews for Phase I Reports.)

2005: ASTM E 1527-05: The Federal EPA  finalized “Standards and Practices for All Appropriate Inquiries,” published in the Federal Register, Part III Environmental Protection Agency, 40 CFR Part 312 dated November 1, 2005. 

  • The effective date for these regulations is November 1, 2006. The EPA specified ASTM 1527-00 for Phase I Site Assessments as the designated “interim standards.”
  • After November 1, 2006  only ASTM E 1527-05 will meet the AAI regulations.

2002 Brownfields Amendments: The passage of the Small Business Liability Relief and Revitalization Act, the Federal “Brownfields Act,” an amendment to CERCLA, required EPA to develop standards and practices for conducting “all appropriate inquires.” The ASTM E-1527-97 and -00 were found to be inconsistent with applicable law because neither met the statutory criteria.

  • The 2002 Brownfields Amendments added potential liability protections for “contiguous property owners” and “bona fide purchasers” who also must demonstrate they conducted all appropriate inquiries, among other requirements, to benefit from the liability protection.

1993: American Society for Testing and Materials (ASTM) published the ASTM E-1527 Standard Practice for Phase I Environmental Site Assessments and ASTM E-1528 Standard Practice for Transaction Screens. These standards were the accepted standards for the minimum levels of environmental due diligence within both the environmental consulting, legal, and financial services industries.

1986: Congress passed the “Superfund Amendment Reauthorization Act,” aka, SARA. As part of SARA, the EPA included liability protection known as the “innocent landowner provision” for purchasers of property, as long as the purchaser completed “All Appropriate Inquiry” consistent with “good commercial real estate practices.” Congress created the “innocent landowner” provisions in 1986.

1980: The Comprehensive Environmental Response Compensation and Liability Act (CERCLA) passed by Congress, aka, SuperFund. The law gave the EPA broad powers to investigate and remediate the worst contaminated sites in the country. The initial investigation consisted of a detailed review of the available background information, inspection of the off-site area and inspection of the on-site area. This process was known as “Preliminary Environmental Site Assessment” or “environmental due diligence.” This is the precursor to the Phase I Environmental Site Assessment process.

  • CERCLA contained a concept called “strict liability” – liability without fault. This meant that an “innocent purchaser” of a property could be held liable although they did not cause the contamination.

Key Differences: AAI and ASTM E 1527-00

Key differences between AAI and ASTM E 1527-00:

The EPA specified ASTM E 1527-00 for Phase I Site Assessments as the designated “interim standards.” Since then ASTM issued the ASTM E 1527-05 which meets and surpasses the new regulations.

The key differences between All Appropriate Inquiries standard specification and the old ASTM E 1527-00 are summarized in the table below. 

CERCLA Background
Overview of All Appropriate Inquiries Requirements for Phase 1 site assessments
AAI & ASTM E 1527-00: Key Points | Chart of Key Differences
AAI & New ASTM E 1527-05: Key Difference – Petroleum
40 CFR Part 312: Standards and Practices for All Appropriate Inquiries

Table 1. Key Differences between the Final All Appropriate Inquiries Regulation Specification and the Previous Specification Standard

Investigative Criterion AAI Specification November 1, 2006

Previous Specification (ASTM E1527-2000)

Definition of Environmental Professional Specific certification / license, education and experience requirements. No specifications
Interviews of current owner and tenants Mandatory. A “reasonable attempt” had to be made.
Interviews with former owners and occupants Interviews must be conducted to achieve the objectives and performance factors of the AAI and E-1527-05 § 312.20 (e-f) Not required, but must inquire about past uses of the subject property when interviewing current owner and occupants
Interview with neighboring or nearby property owners or occupants Mandatory at abandoned properties Discretionary
Review of Historic Sources: Period to be covered From the present to when the property first contained structures or was used for agricultural, residential, commercial or any other purpose. Formerly the historic investigation was to first use or 1940.
Records of Activity and Use Limitations (e.g., Engineering and Institutional Controls) and Environmental Cleanup Liens No requirement as to who is responsible for the search; however, results must be reported to the environmental professional. This was the user’s responsibility with results reported to the environmental professional.
Scope of environmental cleanup lien search includes those liens filed or recorded under federal, state, tribal or local law.
Government Records Review Records from Federal, State, Local and Tribal sources are to be investigated. Federal and State records were required with local records being at the discretion of the investigator.
Site Inspection Visual inspection of subject property and nearby properties is required; some exceptions are allowed if property cannot be visually inspected. No specific requirement to inspect nearby properties.
Contaminants of Concern For parties seeking CERCLA protection, the CERCLA hazardous substances are considered. CERCLA hazardous substances and petroleum products only.
Brownsfields Grant Recipients: CERCLA hazardous substances, petroleum and petroleum products, controlled substances.
Data Gaps Requires identification of sources consulted to fill data gaps and an explanation of why there are gaps and if they are significant. Historic investigation was subject to the discretion of the investigator and sources that produced no findings had to be documented
Shelf life of the Written Report One year with updates after 180 days. Updates of specified activities after 180 days.

CERCLA All Appropriate Inquiries compared to ASTM E 1527-05 Key Difference: Petroleum

The basic difference between CERCLA All Appropriate Inquiries and the new ASTM E 1527-05 is the extent of the definition of hazardous substances. Under the petroleum exclusion of CERCLA Section 9601(14), petroleum and crude oil have been explicitly excluded from the definition of hazardous substances. However, ASTM E 1527-05 includes petroleum products  because they are of concern in many commercial real estate transactions and current custom and usage is to include an inquiry into the presence of petroleum products in an environmental site assessment.

As noted above, the State of California now recognizes the Innocent Landowner Protection, the Contiguous Landowner Protection and the Bonafide Purchaser Protection. Thus, while CERCLA does not include petroleum products, that omission is picked up by the State of California.

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