Be prepared: ASTM standard changes to affect Phase I ESAs

Be prepared: ASTM standard changes to affect Phase I ESAs

Phase I Environmental Site Assessments (ESAs) provide due diligence protection to buyers and sellers of land, as well as developers. The ASTM standard for Phase I ESAs is set for an update in late 2021, and WithersRavenel environmental professionals have been following updates on the process.

For property developers, Phase I ESAs are vital. Cleanup costs and liability associated with a contaminated site can be extensive, so having full knowledge of a property is good business. David Vail, Environmental Staff Professional at WithersRavenel, said the changes likely coming to the standard are expected to remove ambiguity from parts of the process while also producing a fuller understanding of properties to clients seeking ESAs.

The ASTM E1527 standard has been generally updated every eight years. The most recent revision was 2013 – the one coming out later this year will be the 2021 standard. More than 200 professionals, from environmental consultants to commercial real estate leaders and others, are working as part of a task group on the update.

“Based on what we know so far, the ASTM E1527-21 updates should not significantly change our current Phase I ESA process, but will offer guidance on how to handle more complex sites and issues within the ever-changing real property assessment industry,” said Lindsey Woolridge, WithersRavenel’s Due Diligence Manager. “We are excited to dig into the new standard to ensure that we are giving our clients the best possible product so they are fully protected under the US EPA CERCLA – All Appropriate Inquiry (AAI) requirements.”

While changes have not been officially released yet, Vail said information shared thus far provides a glimpse at what the key changes could include.

Raising the review standard: Vail said that in the current standard, consultants are not explicitly required to look at the “big four” sources: historical aerials, historical topographic maps, city directories and Sanborn fire insurance maps. He expects the new standard will put more emphasis on this, or have the consultant explain why he or she didn’t examine a source. Additionally, within the historical review, Vail said the current standard lets the consultant decide “do I even need to bother looking at historical documents for anything surrounding my property, or can I just focus in on mine?” While WithersRavenel and some other consultants look at surrounding properties as a good rule of thumb, he expects the revision may “require you to look at the historical record for your property as well as the surrounding property to eliminate risk and have more of an overall picture.”

More emphasis on identification and analysis: Another expected change in the standard is not only taking pictures of all observations, but also including a site map of observations and analysis of individual items. An observed item that is a not a problem may be identified as de minimis, or not posing a threat to human health or the environment. Meanwhile, troubling on-site observations may be classified as a Recognized Environmental Condition (REC) or a Business Environmental Risk (BER). Vail said that sometimes consultants will simply identify items in a Phase I ESA without taking the step of analyzing the potential for risk – which can impact buyers and mortgage holders, such as lending institutions.

Additionally, the standard is expected to create a flow chart, with the goal being that consultants will come to a more uniform conclusion when identifying and analyzing Phase I ESA site items in the field. Vail said that a lot of the current determination is in the hands of the environmental professional, which can lead to different conclusions on observations. Vail said this change should not only help build consistency in Phase I ESA analysis within companies, but throughout the industry from one consultant to another.

“Some companies have a general, less intense Phase I process, and I think the standard is being geared to bring a lot of those companies up to the same playing field, get everyone on the same level,” Vail said.

Who performs the ESA: Under the previous standard, the person doing the ESA site visit was supposed to be an environmental professional or someone directly under the supervision of an environmental professional. That standard may be relaxed a bit; the change may simply require that the report be reviewed by an environmental professional.

How long the ESA will be usable: Under the new standard, the ESA will only be valid for 180 days from the start of the assessment (i.e., when the first piece of historical research data is ordered). Therefore, clients may need updates to existing ESAs, entirely new ESAs, or reliance letters if they do not close on the property within 180 days from the assessment’s start date.

PFAs: The task force group updating the standard is also looking at PFAs, a group of man-made chemicals manufactured and used in various industries since the 1940s. The chemicals don’t break down in the human body and the environment, and there’s evidence that PFAs are harmful. In recent years, incidences of PFAs in the water in North Carolina have raised health concerns among residents, public officials and environmental groups. As of now, Vail said the standard will likely include greater guidance on PFAs, and that will be an important consideration for consultants.

Overall, Vail expects the new ASTM standard to increase consistency and analysis within ESAs, providing overall benefits for buyers, sellers and developers. Vail said many of the expected changes to the standard reflect work that WithersRavenel environmental professionals already perform in the field and on reports.

“In reality, I think the changes aren’t going to require a super extensive overhaul to the Phase I process that we’re doing right now. I think turnaround time and budget should stay on track,” Vail said. We can tell our clients “you’re in good hands. We’re following along with the changes that are coming, we’re checking and keeping up with all the updates that are being put out by the task force and getting ready to revise our process as soon as they publish the final document.”

Do you need a Phase I ESA? Put WithersRavenel’s environmental professionals to work for you. Contact Due Diligence Manager Lindsey Woolridge at (919) 535-5210 or lwoolridge@withersravenel.com.