EPA updates AAI rules to reflect Superfund liability standards
The recent update of ASTM International’s industry standard for a Phase 1 environmental site assessment caused the EPA to amend its “All Appropriate Inquiry” (“AAI”) rule to include both the older and new standards. As a result, purchasers of contaminated property looking to take advantage of certain defenses to liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) should review these changes in order to maximize their defenses and better manage the environmental due diligence process.
CERCLA is a U.S. federal law created to enforce the cleanup of sites contaminated with pollutants and other hazardous substances. The law permits natural agencies, individual states and Native American tribes the right to collect natural resource damages caused by the release of pollutants. The key differentiator between hazardous and non-hazardous environmental substances is that the former can be ordered to be cleared by unilateral administrative order, while the latter cannot. CERCLA is often referred to as “Superfund”, and imposes certain liabilities on purchasers of real property to comply with the laws standards.
According to the EPA, Superfund liability is triggered if:
- Hazardous wastes are present at a facility
- There is a release (or a possibility of a release) of these hazardous substances
- Response costs have been or will be incurred, and
- The defendant is a liable party
In order to defend against Superfund liability, buyers of contaminated properties must conduct an All Appropriate Inquiry (“AAI”) prior to the purchase. AAI’s involve conducting a Phase 1 Environmental Site Assessment to meet standards of ASTM’s E1527-05 standard. However, on December 30, 2013, ASTM updated to a new standard (E1527-13). The most noticeable changes are an update in the definition of “migrate/migration” to include soil vapor, and that environmental professionals are now strongly encouraged to review pertinent regulatory files that concern the property. The EPA responded to the update by ruling that a report meeting either standard will qualify for CERCLA defense. However, the agency stated that it prefers the new and improved upon standard, and that it is considering removing the AAI’s reference to the -05 standard in the future.
While it appears unlikely that the new rule will change the way environmental assessments are completed in most cases, experts say it is still critical for purchasers to make sure that all Phase 1 assessments are done right, regardless of which standard is used. In order to ensure CERCLA liability protection, it’s important to start the process early, hiring experienced consultants who are able to thoroughly review and analyze the site. Buyers should also obtain their own reports of these site reviews, rather than rely on the seller to provide second-hand reports. Finally, once the Phase 1 assessment is complete, purchasers must continue with appropriate follow-through to resolve any discoveries of hazardous substances found on the property, including stopping and/or preventing the their release and protecting against human and environmental exposures to these contaminants.
About the Author
Ray Roach is a Senior Vice President at WGA, with over 30 years of experience in the insurance industry. Throughout his career, he has worked with in various aspects of environmental risk and insurance including loss control, underwriting, marketing, product development, captives and alternative risk products.