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MASTERING THE BASICS: AAI RULE & ASTM E 1527-05

MASTERING THE BASICS: AAI RULE & ASTM E 1527-05. Internal Phase I Training Module. INSERT: DATE Company’s Name Speaker’s Name. OVERVIEW. Understanding Background on AAI and E 1527-05 AAI-Compliant Scope of Work: What’s Really Changing? [insert company name]’s Response to AAI

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MASTERING THE BASICS: AAI RULE & ASTM E 1527-05

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  1. MASTERING THE BASICS: AAI RULE & ASTM E 1527-05 Internal Phase I Training Module INSERT: DATE Company’s Name Speaker’s Name

  2. OVERVIEW • Understanding Background on AAI and E 1527-05 • AAI-Compliant Scope of Work: What’s Really Changing? • [insert company name]’s Response to AAI • Our AAI Strategy

  3. UNDERSTANDING EPA’s AAI RULE and E 1527-05

  4. AAI : ROAD TO THE FINAL RULE • First federal rule governing environmental due diligence process • Promulgated November 1, 2005 in Code of Federal Regulations • Federal reference: • 40 CFR Part 312 • Effective November 1, 2006

  5. ASTM’s Response to AAI • ASTM revised 2000 standard to satisfy EPA that it was “at least as stringent” as AAI rule • EPA’s Office of General Counsel required that certain language from AAI rule be incorporated into E 1527

  6. ASTM’s Response (cont’d) • E 1527-05 published on November 18, 2005 • Satisfied EPA as sufficiently stringent • Property owners can follow either E 1527-05 or AAI to qualify for CERCLA liability protection as of November 1, 2006

  7. AAI RULE: Who Must Comply? • Must be followed by any clients seeking CERCLA landowner liability protection as: • innocent landowner (traditional) • contiguous property owner • bona fide prospective purchaser • Be aware “surrogate regulators” will also drive AAI or E 1527-05 scopes. For example: • U.S. Small Business Administration adopted AAI • Standard & Poors announced plans to adopt E 1527-05 • Attorneys demanding AAI-compliant scopes as “current standard of care”

  8. KEY FACTS ABOUT AAI RULE • To qualify for any of the CERCLA liability protections, 10 components of AAI must be satisfied, including “inquiry by an environmental professional” • Certain components must be conducted by a qualified EP, but other steps may be the responsibility of the “user”…

  9. Inquiry by EP • must include: • Visual inspections • Interviews • Reviews of historical sources • Reviews of government records • “USER” OR EP: • Search for environmental cleanup liens • Consider “specialized knowledge” • Consider relationship of purchase price to fair market value of property, if not contaminated 10 AAI COMPONENTS • SHARED: • Consider “commonly known” information • Consider “degree of obviousness of contamination”

  10. KEY FACTS ABOUT AAI RULE (cont’d) • EPA does not require user to provide information to EP, but it is the EP who bears responsibility for developing opinions and documenting findings • EP’s report should: • document what was/was not provided • identify any of the 10 AAI steps that were not addressed in the inquiry

  11. KEY FACTS ABOUT AAI RULE (cont’d) • The AAI rule assigns 1-year shelf life from the date of purchase for Phase I reports, with 180-day life for certain components. • “Environmental professionals” have new qualifications to meet in terms of licenses, education and relevant experience. • The rule is generating a great deal of uncertainty => opportunity for consultants to educate clients!

  12. AAI-Compliant Scope of Work: What’s Really Changing?

  13. E 1527: AAI-RELATED REVISIONS Seven key areas of revision: • Scope • New Emphasis on AULs • User Responsibilities • Professional Qualifications • Core Phase I Action Items • Evaluation/Report Preparation • Phase I Shelf Life

  14. 1. SCOPE • Purpose (Section 1.1) revised to: • ADD new liability protections • “this practice is intended to permit a user to satisfy one of the requirements to qualify for the innocent landowner, contiguous property owner, or bona fide prospective purchaser limitations on CERCLA liability…” • DELETE references to Practice E 1528: • no longer qualifies property owner for CERCLA liability protection under 2002 Brownfields Law

  15. 1. SCOPE: RECs (cont’d) • ASTM’s REC definition remains unchanged: “the presence or likely presence of any hazardous substances or petroleum products…” versus • AAI’s scope: “…to identify conditions indicative of releases or threatened releases…of hazardous substances, as defined in CERCLA Section 101(14) (§ 312.1(c)).”

  16. 1. SCOPE: POLLUTANTS • New language on “controlled substances” • If client is EPA brownfields grantee, EP must include controlled substances “…to the extent directed in the terms and conditions of the specific grant or cooperative agreement” (Section 1.1). • Otherwise, outside scope of E 1527, unless client specifically requests it

  17. 2. EMPHASIS ON AULs • Activity and Use Limitations (AULs): • Include engineering and institutional controls • Used on sites with residual contamination • Have new relevance under Brownfields Law as component of “continuing obligations” • Significant efforts are underway to ensure enforcement over time

  18. 2. EMPHASIS ON AULs (cont’d) • ASTM added new Section 5 on AULs: • Defines need for landowner compliance • Addresses variability of finding AULs • Distribution of responsibility: • Land title records (user responsibility) • State IC/EC registries (EP responsibility)

  19. 3. USER RESPONSIBILITIES • Under AAI, greater onus on “user” to perform certain components of inquiry: • Search for environmental cleanup liens • Consider relationship of the purchase price to the fair market value of property, if not contaminated • Consider specialized knowledge or experience on the part of the purchaser • Consider commonly known or reasonably ascertainable information about the property (shared with EP) • Consider degree of obviousness of contamination (shared with EP)

  20. 3. USER RESPONSIBILITY: Environmental Cleanup Liens • Liens are “a charge, security or encumbrance upon title to a property to secure the payment of a cost, damage, debt, obligation or duty arising out of response actions, cleanup, or other remediation of hazardous substances or petroleum products” • AAI and E 1527-05 require the user to search for liens in: • Land title records • Lien records filed under federal, tribal, state or local law, including judicial records

  21. 3. USER RESPONSIBILITY: Purchase Price • User must consider purchase price relative to fair market value if not affected by hazardous substances or petroleum products • AAI rule emphasizes that appraisal is not required for fair market value estimate • Designed as “red flag” indicator of potential environmental concern

  22. 3. USER RESPONSIBILITY: Specialized Knowledge • Addresses whether purchaser has any personal knowledge or experience with relevance to site condition • If: • Purchaser is in same line of business as operations at target property and may know of chemicals or other substances in use there • Or owns property next door already

  23. 3. USER RESPONSIBILITIES • Failure of “user” to meet responsibilities could result in forfeiture of CERCLA protection • Critical that consultants alert clients of responsibilities • Add documentation to Phase I reports • NEW Appendix X3: User Questionnaire (E 1527-05)

  24. 4. PROFESSIONAL QUALIFICATIONS Definition of “environmental professional” revised - from ASTM’s traditional: “a person possessing sufficient training and experience necessary to conduct site reconnaissance, interviews and other activities in accordance with this practice…” - to incorporation of EPA’s: “a person meeting the education, training and experience requirements as set forth in [the AAI rule]….”

  25. 4. PROFESSIONAL QUALIFICATIONS • Under AAI and E 1527-05, qualified EPs have: • PE or PG license AND 3 years of relevant experience; • License or certification by government agency AND 3 years of relevant experience; • Baccalaureate (or higher) degree in engineering or science AND 5 years of relevant experience; or • 10 years of relevant experience.

  26. 4. PROFESSIONAL QUALIFICATIONS • “Relevant experience” includes: • ESAs, other investigations and remediation • understanding of surface and subsurface environmental conditions • proven experience using professional judgment to develop opinions regarding releases or threatened releases of hazardous substances

  27. 4. PROFESSIONAL QUALIFICATIONS • Who does what? • E 1527-05 mirrors EPA’s language • Junior staff can participate if “under supervision or responsible charge” of qualified EP • At least one qualified EP must: • Review and interpret information • Sign off on report, declaring that federal rule was followed

  28. 5. CORE PHASE I ACTION ITEMS:a) RECORDS REVIEW Four categories of AAI-driven revisions to E 1527: • Revisions to certain standard federal sources • Addition of engineering controls, institutional controls search • Addition of mandatory tribal government records search • Addition of mandatory local government records search

  29. a) RECORDS REVIEW: Federal • Specific AAI-related revisions to federal sources: • NEW - Delisted NPL site list (½ mile) • Federal CERCLIS NFRAP site list modified from: • property/adjoining • To • ½-mile search radius

  30. a) RECORDS REVIEW: ICs/ECs 2. Institutional and engineering controls: • EPA originally proposed: ICs/ECs to ½ mile radius • EPA revisions in final AAI rule: • ICs – target property only • ECs – ½ mile radius • HOWEVER: EPA’s AAI preamble states that: • “The final rule requires that…[ICs/ECs] be searched only for information on such controls at the subject property.” • ASTM E 1527-05: • Federal IC/EC registries—property only • State/tribal IC/EC registries—property only

  31. a) RECORDS REVIEW: Tribal 3.E 1527-05 expands search to: • State and tribal equivalent NPL • State and tribal equivalent CERCLIS • State and tribal landfill and/or solid waste disposal site lists • State and tribal leaking storage tank lists (above- and underground) • State and tribal registered storage tank lists (above- and underground) • State and tribal voluntary cleanup sites • State and tribal brownfield sites

  32. a) RECORDS REVIEW - Tribal • EPA’s preamble states that tribal records need only be searched and reviewed in instances where subject property is located on or near tribal-owned lands • If not available, necessary information should be sought from other sources (e.g., interviews)

  33. a) RECORDS REVIEW - Local • Local government records now mandatory under E 1527-05 From: “One or more additional state sources or local sources of environmental records may be checked…” To: “…local records and/or additional state or tribal records shall be checked…”

  34. a) RECORDS REVIEW • EP professional judgment still drives decisions about sources to include: (1) Is it reasonably ascertainable? (2) Might it be useful? (3) What is customary practice with peers?

  35. 5. CORE PHASE I ACTION ITEMS: b) HISTORICAL USE INFORMATION AAI Rule: • Very basic requirements • Environmental professional determines: • Research timeframe • Data sources used • Search intervals • Effect of data gaps on findings

  36. b) HISTORICAL USE INFORMATION • Research timeframe: AAI: “…from the time the property was first used for residential, agricultural, commercial, industrial, or governmental purposes.” • ASTM: “All obvious uses of the property shall be identified from the present, back to property’s first developed use, or back to 1940, whichever is earlier.”

  37. b) HISTORICAL USE INFORMATION Search intervals • ASTM: No change to five year intervals • Review at less than five year intervals not required under E 1527-05

  38. b) HISTORICAL USE INFORMATION • Minor revisions to standard historical sources • “Other historical sources” broadened to include: • internet sites, • community organizations, • local libraries and historical societies, and • current owners/occupants of neighboring properties

  39. b) HISTORICAL USE INFORMATION • How much research is sufficient? • EP should use as many standard historical sources as are: • reasonably ascertainable, and • likely to provide useful information to identify prior uses of the property. • “Data failure” exists if these two criteria are not met for a given source.

  40. b) HISTORICAL USE INFORMATION • Past ASTM E 1527-00: • Report must • document data failure, and • give reasons sources were excluded. • New ASTM E 1527-05 adds new considerations: • Does data failure significantly affect ability to identify RECs? • If so, EP must meet new AAI requirements for addressing “data gaps” (to be covered in later section)

  41. 5. CORE PHASE I ACTION ITEMS: c) SITE RECONNAISSANCE • AAI: • EPA’s preamble strongly recommends that site visit be conducted only by qualified EPs • BUT it is not a requirement in the rule • ASTM E 1527: • Always required EP to do site visit and interviews • BUT EP definition tightened under AAI

  42. c) SITE RECONNAISSANCE • Revisions to E 1527’s site reconnaissance language: From “..the EP shall visually and physically observe the property…” To “..the property shall be visually and physically observed…” by “a person with sufficient training and experience necessary…”

  43. c) SITE RECONNAISSANCE • Observation of adjoining properties EPA required ASTM E 1527modification from: “To the extent that current uses of adjoining properties are visually and/or physically observed…” To: “To the extent that current uses of adjoining properties are visually and/or physically observable…”

  44. 5. CORE PHASE I ACTION ITEMS d) INTERVIEWS • NEW AAI requirement to interview past owners, operators, occupants • E 1527-05: • EP must interview past owners, operators and occupants likely to have material information about the property only if: • They have been identified, and • Information likely to be obtained is not duplicative of information from other sources.

  45. d) INTERVIEWS Interviewing neighbors: • Under AAI, discretionary except in special cases involving abandoned properties • ASTM compelled to mirror AAI language in E 1527-05…

  46. d) INTERVIEWS Abandoned: “Property that can be presumed to be deserted, or an intent to relinquish possession can be inferred from the general disrepair or lack of activity thereon…” IF AND “Evidence of unauthorized uses or uncontrolled access to the property” THEN One or more (as necessary) interviews with neighboring property owners or occupants must be conducted.

  47. d) INTERVIEWS • What if you have a confidentiality agreement with your client? • ASTM treats as user-imposed limitation • REVISED Section 12.10: • “All deletions and deviations from this practice shall be listed individually and in detail, including client-imposed constraints, and all additions should be listed.”

  48. d) INTERVIEWS • Adds interviews with state officials: • “The objective of interviews with state and/or local government officials is to obtain information indicating RECs in connection with the property…” • To standard types of agencies, ASTM is adding: • “local agencies responsible for issuance of building permits or groundwater use permits that document the presence of AULs”

  49. 6. EVALUATION/REPORT PREPARATION • Under AAI, report must include: • Staff qualifications: • Qualifications of EP(s) and person(s) who conducted site reconnaissance and interviews • Declaration language from AAI rule: • I/We declare that I/we meet definition of EP… and • I/We developed and performed the AAI in conformance with the federal rule.

  50. REPORT-DATA GAPS 2. Documentation of data gaps, defined in AAI as: “a lack of or inability to obtain information required by the standards and practices listed in the regulation despite good faith efforts by the EP or prospective landowner to gather such information.” EP’s report must: 1. Identify data gaps and document attempts to fill them 2. Comment on their significance, whether gaps affect overall findings

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