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March 22, 2022

The Change Could Do You Good: Adopting the 2021 Phase I ESA Standard

By Nicole TK Moore, REPA

THE CHANGE COULD DO YOU GOOD: ADOPTING THE 2021 PHASE I ESA STANDARD

It’s Official – EPA Approved the 2021 ASTM Standard for Phase I ESAs

On March 14, the EPA officially accepted the new ASTM Standard E1527-21 for conducting Phase I Environmental Site Assessments (ESAs) as meeting the requirements of All Appropriate Inquiries (AAI). Since most commercial real estate (CRE) transactions require a Phase I ESA, the change is big news for anyone who buys, sells, invests in, or lends on CRE. Many ESA users have been waiting for EPA’s decision to make the switch to the new standard.

This ruling is effective May 13, 2022, unless the EPA receives negative comments during the public comment period ending April 13th. To help you get prepared, here are answers to the top questions we’re hearing about this change.

Didn’t EPA reference both the old and new ASTM standards?

That’s correct. In its ruling, the EPA references both the current and the prior standard, E1527-13, allowing either the 2021 or 2013 standard to be used to satisfy AAI requirements for liability protection under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). EPA also references an alternative Phase I ESA standard, ASTM E2247-16, which is only intended for use on large tracts of forestland or rural property. This allows users some flexibility in choice, at least for a transitional period.

Can I keep using the 2013 ASTM standard indefinitely?

Not likely. We expect that the 2013 standard will eventually be phased out altogether. The last time the ASTM standard for ESAs changed in 2013, the EPA took a similar approach and referenced both the then-current 2013 standard and the prior 2005 standard as meeting AAI requirements, but only for a period of time. About one year later, EPA officially removed its reference to the older 2005 standard. We expect history to repeat itself and that EPA will eventually revise the current ruling to phase out E1527-13, probably within a year, give or take.

What’s the difference between the 2013 and 2021 standards?

The most significant changes in the 2021 Phase I ESA Standard include expanded historical research requirements for the subject and adjoining properties, as well as more comprehensive title searches. Other changes include revised definitions and guidance on how environmental risks should be classified, clarification on the shelf life of a Phase I ESA, among other changes. Read a summary of changes to the standard here.

Why did ASTM make these changes?

The purpose of a Phase I ESA is to assess exposure to environmental risk. With the development of the new standard, the ASTM Committee—comprised of approximately 1,000 members—agreed upon measures that would elevate the quality and consistency of environmental site assessments. Increased research requirements mean more data gathered, fewer data gaps, greater clarity, and a more thorough understanding of risk. In other words, the changes in E1527-21 were written to better serve Phase I ESA users seeking to manage risk and qualify for CERCLA protection.

When should I adopt the new ESA standard?

We expect to see clients make the switch to the new 2021 ASTM standard within the coming months. If you are looking for guidance on your approach to transitioning to the 2021 standard, talk to your Partner relationship manager.

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Click here to learn about the changes made to the 2021 ASTM standard This recorded webinar discusses what has changed, why, and what it means to you Partner has assisted in environmental policy writing for lenders throughout the country Talk to your Partner relationship manager to set up a lunch ‘n learn training

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