New Industry Standard for Phase I Environmental Site Assessments of Forest Lands and Rural Property
A new rule proposed by the Environmental Protection Agency should provide a measure of relief to prospective purchasers of large tracts of property. It removes any doubt that a Phase I environmental site assessment ("ESA") conducted under the E2247-08 standard will be a reliable component of an "innocent purchaser" defense against potential Superfund claims.
In December 2008, the EPA issued a proposed rule that would allow, but not require, prospective purchasers of property to use a certain industry standard, designated E2247-08, when performing a Phase I environmental site assessment as part of the environmental due diligence process. Phase I ESAs are "above-ground" property inspections that include a review of the property's historical use, ownership and aerial photographs, a site visit, and interviews of owners and local government officials. They do not involve testing the soil or groundwater. EPA's proposed rule would amend its "All Appropriate Inquiries" rule, one of the components of a defense to liability under Superfund and which imposes strict liability for environmental contamination on current property owners and operators. If the proposed rule becomes final without delay, which the EPA considers likely, it will take effect on March 23, 2009.
ASTM International (originally known as the American Society for Testing and Materials) publishes the standard for conducting Phase I ESAs of forestland or rural property 120 acres or greater. Consequently, the parties that likely will be most affected by this new ruling include purchasers of large tracts of forested lands or large rural properties that intend to claim one of three protections. These include:
- The innocent landowner defense (no knowledge of contamination after completion of the Phase I ESA);
- The bona fide prospective purchaser liability protection (knowingly purchasing contaminated property); and
- The contiguous property owner liability protection (groundwater or soil contaminated by releases from other property).
The proposed rule will clarify uncertainty for purchasers of forestland or rural property because the only standard that is currently approved by EPA (and which remains valid under the proposed rule), is a standard for conducting Phase I ESAs of commercial property. The procedures under this standard, while for the most part very similar to the new standard are not all practical for large rural properties.
Post authored by Jeanette Schuster, attorney practicing in the Sustainability and Real Estate and Land Use Groups.
