EPA's 2013 All Appropriate Inquiries Rulemaking Raises Litigation and Administrative Law Risks

• Date: 01 September 2014
• Author: Thomas A. Utzinger and Robert L. Glicksman

9-2014 NEWS & ANALYSIS 44 ELR 10763

EPA’s 2013 All Appropriate Inquiries

Rulemaking Raises Litigation

and Administrative Law Risks

by omas A. Utzinger and Robert L. Glicksman

omas A. Utzinger is in-house environmental counsel for a major energy company. He earned an LL.M. in

Environmental Law from e George Washington University Law School in 2004. Robert L. Glicksman is the J.B.

& Maurice C. Shapiro Professor of Environmental Law at e George Washington University Law School.

On December 30, 2013, the U.S. Environmental

Protection Agency (EPA) published a nal rule

(Final Rule) temporarily recognizing two dierent

“Phase I” environmental site assessment (ESA) standards

for commercial real estate and browneld due diligence

investigations.1 In a somewhat unusual administrative

maneuver, the Final Rule amended EPA’s All Appropriate

Inquiries (AAI) regulations at 40 C.F.R. §312 (AAI Rule)2

to reference two industry sta ndards that may be used to

comply with AAI requirements established under the

Comprehensive Environmental Response, Compensation,

and Liability Act (CERCLA),3 namely, ASTM E1527-05,

issued in 2005 (the 2005 Standard),4 and ASTM E1527-13,

issued in 2013 (the 2013 Standard).5 e Final Rule also

indicated that reference to the 2005 Standard in the AAI

Rule would eventually be deleted by way of a subsequent

rulemaking. EPA published a proposal to accomplish that

result in the Federal Register on June 17, 2014.6 During

this interim period, users of Phase I ESA s had an option

as to due diligence standards. As discussed below, how-

ever, EPA’s failure to proceed in accordance with optimal

administrative law principles may someday result in unex-

pected liabilities for parties who otherwise used the 2005

Standard in good faith.

1. U.S. Environmental Protection Agency (EPA), Amendment to Standards

and Practices for All Appropriate Inquiries Under CERCLA, 78 Fed. Reg.

79319 (Dec. 30, 2013) (codied at 40 C.F.R. §312.11(c)).

2. 40 C.F.R. §312.11(c).

3. 42 U.S.C. §§9601-9675, ELR S. CERCLA §§101-405.

4. ASTM International, E1527-05, Standard Practice for Environmental Site

Assessments: Phase I Environmental Site Assessment Process (2005). See also 40

C.F.R. §312.11(a).

5. ASTM International, E1527-13, Standard Practice for Environmental Site

Assessments: Phase I Environmental Site Assessment Process (2013) [hereinafter

E1527-13]. See also 40 C.F.R. §312.11(c).

6. U.S. EPA, Amendment to Standards and Practices for All Appropriate In-

quiries (Proposed Rule), 79 Fed. Reg. 34480 (June 17, 2014) (proposing

to amend 40 C.F.R. §312.11 to delete reference to the 2005 Standard and

making the change eective one year after publication of the nal rule in the

Federal Register).

Under CERCLA, compliance with the AAI Rule is

necessary for purchasers of environmentally distressed

properties to later assert one of several CERCLA liability

defenses related to preexisting or migrating contamination.

CERCLA, as amended, contains several exceptions to its

§107 liability scheme, available to t hose who satisfy the

steps for environmental due diligence set forth in the AAI

Rule.7 Specically, the “innocent landowner” defense, the

“bona de prospective purchaser” defense, and the “con-

tiguous property owner” defense all require that parties

demonstrate compliance with AAI or a recognized ASTM

standard prior to the purchase of a contaminated property.

Although satisfaction of AAI can be achieved by following

the regulatory language of 40 C.F.R. §312, the vast major-

ity of due diligence investigations conducted in commer-

cial real estate and corporate transactions use some form of

an ASTM Phase I standa rd.

e A AI Rule requires various actions to identify pa st

and present property usage, the presence or use of hazard-

ous substances, waste ma nagement and disposal act ivities,

and mea sures taken to address past and ongoing releases

of hazardous substances. Within one year prior to acquisi-

tion of a property, the AAI Rule requires: (1)an inquiry

by an environmental professional8; (2) the collection of

information such as environmental cleanup liens, special-

ized knowledge, relationship of purchase price to fair mar-

ket value, and any commonly known information9; and

(3) searches for recorded environmental cleanup liens.10

Additionally, within 180 days before acquisition, the A AI

Rule requires initia l investigation or updating of informa-

tion of the following matters: (1)interviews with past and

present owners, operators, and occupants11; (2) renewed

7. e steps for environmental due diligence under the AAI Rule are set forth

at 40 C.F.R. §§312.20-312.31.

8. 40 C.F.R. §312.20(a)(1).

9. 40 C.F.R. §312.20(a)(2).

10. 40 C.F.R. §312.20(a)(3).

11. 40 C.F.R. §312.20(b)(1).

Copyright © 2014 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.