Environs Hot Sheet -Breaking Developments in Environmental Law
11.03.2005
Changes In Store for Environmental Assessments: EPA Releases Final “All
Appropriate Inquiry” Rule
The U.S. Environmental Protection Agency (“EPA”) on Tuesday, November 1, published its
final “All Appropriate Inquiry” (“AAI”) Rule, setting out the first federal standards for
conducting Phase I Environmental Site Assessments. Under the new AAI rule, anyone who
purchases, finances or refinances commercial or industrial property, or seeks federal grant money
for contaminated site characterization and assessment will need to comply with the rule in order
to be protected from liability under the federal Superfund law, the Comprehensive
Environmental Response, Compensation and Liability Act (“CERCLA”).
While CERCLA has provided statutory defenses for innocent landowners, bona fide prospective
purchasers and contiguous property owners, those defenses are available only if there was an “all
appropriate inquiry” into the environmental conditions of property. The statute does not define
“all appropriate inquiry,” and there were numerous lawsuits about the term. When Congress
amended CERCLA in 2002, it directed the EPA to draft rules for “all appropriate” inquiries.
Effective November 1, 2006, the AAI rule establishes detailed requirements and standards for
conducting environmental due diligence of commercial and industrial real property and
operations. It replaces the previous de facto standard for Phase I assessments performed
according to the American Society for Testing and Materials (“ASTM”) Phase I (Standard
El527-97). A copy of the new rule is available through the EPA website,
www.epa.gov/swerosps/bf/regneg.htm.
The rule contains several requirements that go well beyond the previous ASTM standard,
including:
more stringent qualification standards for environmental professionals performing due
diligence work;
formal certification, in writing, that all appropriate inquiries were performed;
interviews with past and present owners and operators, including specifically those who
were more likely to have handled hazardous substances;
if the property is abandoned, neighboring property owners and occupants must be
interviewed;
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consultants must identify any data gaps in the final report, describe steps taken to fill the
gaps, and analyze the significance of the gaps to an accurate and complete assessment;
adjoining properties must be visually inspected from the adjoining property boundary,
accessible rights-of-way, and “other vantage points;”
historical research must cover the period back to the first site development;
the Phase I must take into account the prospective purchaser’s knowledge about the
property, adjoining properties or the region, and any disparities between the value of the
property and the purchase price;
for some properties, a prospective purchaser must assess potential impacts from
controlled substances (e.g. methamphetamine labs); and
due diligence performed under the rule is only “useful” for six months before closing,
and purchaser may use a previous Phase I report if the information was collected within
the previous year so long as interviews, on-site inspections, historical reviews and lien
searches are updated within 180 days before the acquisition.
Taken together, the various components of the new AAI rule will significantly change the way
due diligence is conducted (as well as increase the cost), even for sites where CERCLA might
not be an issue.
For more information, please contact the Environmental Law Practice Group at:
Lane Powell PC:
(206) 223-7000 Seattle
(503) 778-2100 Portland
environs@lanepowell.com
www.lanepowell.com
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