Revisions to the ASTM E 1527 Standard: Three Insider’s Perspective

transcript

Presented by:

• Paul Zovic, Senior Advisor, Endpoint Solutions Corp.

• Daria Milburn, Vice President, Manager REVAL/Environmental Risk, SunTrust Banks, Inc.

• Christopher P. McCormack, Attorney, Pullman & Comley LLC

Upcoming Changes to the ASTM E1527 Standard

EP’S PERSPECTIVE

Paul ZovicSenior Advisor

Endpoint Solutions CorpMilwaukee, WI

March 28, 2013

The Phase I Standard was updated to:

Better reflect current paradigm Clarify terms Address need for more consistent deliverable Update the Legal Appendix Provide guidance on non-scope issues, especially

common BER issues

WHY CHANGE ?

Initiated in 2009 Many meetings, many iterations Cross-section of market

◦ Users (banks, developers, property owners)◦ Producers (consultants)◦ Attorneys◦ Regulators◦ Others

PROCESS

New definition for “release” and “environment”, to align with CERCLA definitions

New definition for migrate/migration, to specifically include vapor migration

Clarification that recommendations are not required by the stadard

WHAT ARE THE CHANGES?

File reviews

File reviews◦ If the property or any of the adjoining properties

is identified on one or more of the standard environmental record sources, pertinent regulatory files and/or records associated with the listing should be reviewed

◦ As an alternative, the EP may review files/records from an alternative source(s)

◦ If, in the EP’s opinion, such a review is not warranted, the EP must explain within the report the justification for not conducting the regulatory file review

Change to REC definition◦ More aligned with AAI, but retaining some of the

additional guidance from prior E1527 versions

WHAT ARE THE CHANGES ?

Change to REC definition◦ More aligned with AAI, but retaining some of the

additional guidance from prior E1527 versions

…the presence or likely presence of any hazardous substances or petroleum products in, on, or at a property: (1) due to release to the environment; (2) under conditions indicative to a release to the environment; or (3) under conditions that pose a material threat of a future release to the environment. De minimis conditions are not recognized environmental conditions.

WHAT ARE THE CHANGES ?

Change to HREC definition

Change to HREC definition◦ Redefined to limit application of HREC to past releases

that have been addressed to residential/unrestricted use (i.e. no AUL, no IC/EC)

Addition of CREC definition◦ Controlled REC to be used for risk-based closures,

where contaminants are allowed to remain under certain conditions.

◦ Clarification that “de minimis condition” is not to be used to describe CREC

Clarification of REC, HREC, CREC

File Reviews◦ Management◦ Justification◦ Communication

Educating staff and clients

CHALLENGES FOR EPS

Paul ZovicEndpoint Solutions Corp

Milwaukee, WIpaul@endpointcorporation.com

414-858-2106

ASTM 1527-13The Lender’s Perspective

Daria K. MilburnMarch 2013

DisclaimerThe views expressed in this presentation are based on my observations and experiences in both banking and

consulting.

This represents my own very humble opinion, and should not be interpreted to represent the view of

SunTrust or any other corporation.

It’s all about us.

What We DoBanks Manage RiskAreas of Focus

Originating TransactionsForeclosuresOREO Remedial ActionsFacilities

Driving ForcesPoliciesProduct ExpectationsRisk Tolerance

Every bank is different.

Effect of ASTM ChangesGreater ClarificationMore Information

Pushes towards a more complete report, but many banks have their own scopes that use ASTM as a starting point only.

The changes will not significantly affect what we do.

Remember……It’s all about us.

In the end….It all comes back to Risk Tolerance

We define our own risksLabel is irrelevant

REC HREC CREC BER

Change is GoodMany thanks to the committee

and Julie Kilgore.

Looking forward to 1527-21!(ahhh the possibilities….)

ASTM E15272013 STANDARD

REVISIONS

Liability Perspectives: CERCLA, All

Appropriate Inquiry and the Evolving Phase I

Assessment

Christopher P. McCormack

March 28, 2013

CERCLA Context: Defenses and “All Appropriate Inquiries”

CERCLA (Superfund) liability framework– Strict – joint and several

– Based on “release”

– “Response costs” or injunction/consent order

Defenses/LLPs: knowledge of and role in causing contamination– Innocent landowner: “did not know, had no reason to know”

– Bona fide prospective purchaser: buys with knowledge, did not cause

– Contiguous property owner: did not know, did not cause

“… made all appropriate inquiries into the previous ownership and use of the facility in accordance with generally accepted good commercial and customary standards and practices…”

“All Appropriate Inquiries” - 2002 statutory criteria:– Inquiry by environmental professional

– Interviews to gain information regarding potential for contamination

– Review historical information re property use since development

– Search recorded cleanup liens

– Review regulatory records re haz mat, haz waste, spills at/near facility

– Visual inspection

– Specialized knowledge of “defendant”

– Purchase price vs. value if uncontaminated

– Commonly known or reasonably ascertainable information

– Degree of obviousness of presence or likely presence of contamination, ability to detect with appropriate investigation

“All Appropriate Inquiries” - 2005 Developments– Federal AAI Rule: 40 C.F.R. Part 312

Performance standard (categories/areas of inquiry)

Tracks statutory criteria

– ASTM E1527-05 Procedure standard (like E1527-97: procedures inquiry must follow)

Corresponds to and expands upon statutory criteria

Endorsed as alternative to AAI: 40 C.F.R. § 312.11(a)

CERCLA Context: Defenses and “Continuing Obligations”

Post-Acquisition Actions to Maintain Defenses– IPO:

“reasonable steps” to stop/prevent release, prevent/limit exposure

“due care” re hazardous substances in light of all facts and circumstances

– BFPP: Take “appropriate care” to stop/prevent release, prevent/limit exposure

Cooperate with response actions

Comply with use restrictions, institutional controls

– CPO: “reasonable steps” to stop/prevent release, prevent/limit exposure

Cooperate with response actions

Comply with use restrictions, institutional controls

2013 E1527 Revisions: Changes that Enhance Alignment with AAI

User obligation to do (or contract for) search for Environmental Liens, Activity and Use Limitations (E1527 Section 6.2)– Express reference to 40 C.F.R. §§ 312.20, 312.25

– Complements EP search of institutional and engineered control registries (E1527 Section 8.2)

User inform EP if User believes price is below market due to contamination (E1527 Section 6.5)

User must gather information as needed to identify conditions indicative of a release or threatened release (E1527 Section 6.6)

User must consider degree of obviousness (E1527 Section 6.7)

2013 E1527 Revisions: “Professional Judgment”

EP “shall, based on professional judgment, evaluate the relevant lines of evidence obtained as a part of the Phase I ESA process to identify recognized environmental conditions in connection with the property” (Section 7.3.1)

EP “shall exercise professional judgment and consider the possible releases that might have occurred at a property in light of the historical uses and, in concert with other relevant information gathered as part of the Phase I process, use this information to assist in identifying recognized environmental concerns” (Section 8.3.1)

2013 E1527 Revisions: Changes to Improve Classification of Conditions

E1527-05: – “de minimis”

– “historical recognized environmental condition”

– “recognized environmental condition”

– Classification problem scenario: “regulatory closure” with contamination in place subject to … Institutional (land use) control

Engineered control (cap)

Self-executing legal status, informal “closure” (e.g. UST)

2013 E1527 Revisions: Changes to Enhance Classification of Conditions

Solution: CREC

Revised HREC Definition:

REC definition: “de minimis” IS NOT a REC

Conclusions and Comments

Incremental changes and improvements

Improved alignment with statutory framework

Clarity on REC/CREC/HREC/de minimis

Some more AAI-like (performance based) concepts

Using E1527 if …. – CERCLA defenses/LLPs aren’t a priority

– You’re not seeking a brownfields grant

Contact InformationContact Information

Christopher P. McCormack Pullman & Comley, LLC 850 Main Street Bridgeport, Connecticut 06601-7006 Tel: 203 330 2016 Fax:203 576 8888 Email: cmccormack@pullcom.com

BRIDGEPORT | HARTFORD | STAMFORD | WATERBURY | WHITE PLAINS

www.pullcom.com

Revisions to the ASTM E 1527 Standard: Three Insider’s Perspective

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