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Environmental Update: New Phase I ESA Standard Effective Today


Anyone looking to acquire, finance, or re-finance property this year should know that the federal EPA approved a new Phase I Environmental Site Assessment (ESA) Standard (ASTM-E1527-21) to satisfy the "All Appropriate Inquiry" standard and obtain certain liability defenses under the federal Superfund law, also known as the Comprehensive Environmental Response, Compensation, and Liability Act or CERCLA. 

The new standard tweaks, among other things, the definition of "recognized environmental condition" and requires consultants to review, at a minimum, specific historical sources for the subject property and adjacent properties.  However, the most significant aspect of the new ASTM-E1527-21 Standard is what it did not change. A review of potential emerging contaminants, such as per- and poly-fluoroalkyl substances (PFAs), remains at least for now outside of the scope of a Phase I ESA review. This could change soon, as the new ASTM-E1527-21 Standard specifically provides that any emerging contaminant identified in the future by the federal EPA as a "hazardous substance" under CERCLA will need to be evaluated as part of the Phase I review process.  EPA proposed designating certain PFAs as hazardous substances last year and some environmental insiders have predicted that a formal designation could come as soon as this year. 

The new ASTM-E1527-21 Phase I ESA standard becomes effective today, February 13, 2023.  While the old standard (ASTM-1527-13) is still technically available for use through February 12, 2024, when it will be phased out, we predict that most equity sources and lenders will require the use of the new standard on any transactions after February 13th of this year.  Therefore, going forward, anyone needing a Phase I ESA from an environmental consultant should request that their consultant use the new ASTM-E1527-21 Standard. Finally, in light of the growing regulatory scrutiny surrounding PFAs, parties should consider requesting that the environmental consultant evaluate potential PFAs risks as an added non-scope Phase I activity, particularly at sites located in states that already regulate PFAs and/or at sites that come with a heightened PFAs risk (e.g., fire training facilities and historic textile and metal finishing facilities). 

If you have any questions about this legal update please contact any member of the Environmental group.