Environmental Law: Revised Standards Impact Environmental Due Diligence
• New requirement to consider vapor intrusion issues (this could result in Phase I assessments identifying more environmental conditions than under the 2005 standard).
• The definition of a "Recognized Environmental Condition" (REC) was simplified and de minimis conditions are not RECs.
• New definition of a "Controlled REC" which includes conditions when there have been past releases that have been addressed by allowing contamination to remain in place (this change may allow parties to view a deal as less risky by being able to differentiate between CRECs and RECs).
• Specific guidelines for when an environmental professionals must perform a regulatory agency file review, and if one is not conducted the environmental professional must include a justification as to why in the report.
While the changes to the ASTM are not "game-changers," there are potential issues that sellers, buyers and lenders should be aware of as they hire consultants to prepare Phase I reports and when the review recently issued reports as part of due diligence. The additional information required by the 2013 revised ASTM standard should enable parties to better assess risk and have more information for deal evaluation.
However, the additional tasks may also result in increased costs and time for the consultant to prepare the report to meet the new standard. If a report ultimately does not satisfy AAI, the potential buyer may lose protections it assumed it had under CERCLA. Depending on a purchaser's goals and needs for the deal, attention must be paid to the exact scope of work that the consultant provides for a Phase I report. The regulated community should be on the lookout for the EPA final rule which is anticipated to be published sometime around the end of year. However, no one is certain what the final outcome will be in terms of reconciling ASTM E1527-05 and ASTM E1527-13 for purposes of AAI.•