Environmental Due Diligence

• The federal Superfund law, CERCLA, specifies that environmental liabilities associated with a property are transferred when the property exchanges hands, even though the buyers are not the original polluters. However, CERCLA provides that purchases of property that conduct “all appropriate inquiry” (AAI) prior to the transaction are exempt from CERCLA liability for any cleanup costs discovered after closing.    Since 1980, the AAI obligation underwent multiple refinements.  The most recent 2005 ruling was the EPA’s Final Rule on All Appropriate Inquiry.  The final rule became effective on November 1, 2006, one year after publication in the Federal Register.  The final rule requires that all appropriate inquiry investigations be documented in a written report.  However, the final regulations did not specify the written report’s exact format, length, or structure.

• ASTM International developed a prescriptive solution with Standard E1527-21, Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process. The ASTM E1527-21 standard is consistent with the final rule requirements and became the industry standard for AAI.  Meeting the AAI requirements secures protection from CERCLA liability either as an innocent landowner, a contiguous property owner, or a bona fide prospective purchaser.
• Real estate professionals or attorneys may be engaged to conduct title searches, property value assessments, and other real estate-related issues.
• Engineers may be needed to evaluate buildings and other physical conditions potentially affecting the reuse of the property.

• The AAI final rule requires that an Environmental Professional (EP) conduct the AAI and garner opinions. AAI activities must be performed by, or under the supervision of, an individual who meets the definition of an “environmental professional.” The AAI final rule defines an environmental professional as someone who possesses the specific education, training, and relevant experience necessary to exercise professional judgment to develop opinions and conclusions regarding conditions indicative of releases or threatened releases of hazardous substances on, at, in, or to a property, sufficient to meet the objectives and performance factors of the rule.

• The Environmental Professional (EP) may discover RECs during the Phase I ESA investigation. A REC refers to the presence or likely presence of any hazardous substance or petroleum product on a property under conditions that indicate an existing release, a past release, or a material threat of a release of any hazardous substances or petroleum products into structures on the property or into the ground, groundwater, or surface water of the property.  The term REC includes hazardous substances and petroleum products even under conditions that are compliant with laws.  The term is not intended to include “de minimis” conditions that do not threaten human health or the environment and would not be subject to enforcement action if brought to the attention of appropriate governmental agencies.

Non-Scope considerations (excluded from “all appropriate inquiry” under the standard) include substances that may be present on a property in quantities and under conditions that may lead to contamination of the property or of nearby properties but are not included in CERCLA’s definition of hazardous substances (42 U.S.C. §9601(14)) or do not otherwise present potential CERCLA liability. Non-Scope items include visual inspections or records review searches for:

• Asbestos Containing Building Materials (ACM)
• Lead-Based Paint
• Lead in Drinking Water
• Mold
• Radon
• Mercury-Containing Equipment
• Polychlorinated Biphenyl (PCB)-containing Equipment
• Chlorofluorocarbons (CFCs)-containing Equipment
• Tritium-containing Signage
• Per- and polyfluoroalkyl substances (PFOA, PFOS, and Other PFAS)

• Contaminant investigations and remediation are commonly referred to as Phase II and Phase III Environmental Site Assessments, respectively. The Phase II ESA investigates the RECs (or potential contamination) found during the Phase I ESA investigation.  Phase III ESA refers to any remediation of identified contamination found during the previous Phase II activities.  Typical contaminant investigation projects include leaking underground storage tank site assessments, soil and groundwater sampling, residual agricultural chemical presence in soil, surface water assessment, drywell inspections, leaks and spillage investigations, and dump site investigations.

• Hazardous materials building surveys are often conducted along with a Phase II ESA.  Hazardous materials surveys are used to assess, sample, and analyze suspect hazardous materials, including asbestos-containing materials (ACM), suspect lead-based paint (LBP), and complete a visual inspection to identify mercury-containing Equipment, fluorescent lights, and ballasts, Polychlorinated Biphenyl (PCB)-containing Equipment, chlorofluorocarbons (CFCs)-containing Equipment as well as any other potentially hazardous materials that may be present in any structure on the property which could present an exposure risk during renovation activities.