Environmental Enlightenment #158
By Ami Adini -
Reissued September 19, 2016

This is a SHORT, LIGHT and SIMPLE newsletter. Its purpose is to rekindle in the initiated terminology they have once learned, and enlighten the uninitiated on terms they may have heard but never known the meaning of.

All Appropriate Inquiry

Before the beginning there was a residential community built on abandoned toxic waste pits in a place named Love Canal; a neighborhood in the southeast LaSalle district of the City of Niagara Falls, New York, USA.

And the people became ill.

In the beginning and forever after, Congress enacted the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) to identify, assess and remove all such other abandoned toxic pits and landfills, that the case of Love Canal won’t recur. In so acting, Congress allocated one billion US dollars to pay for the investigation and cleanup of the largest and most contaminated sites in the country; thus “Superfund.” Superfund was born in 1980.

Administration of the Superfund program was assigned to US Environmental Protection Agency (EPA).

Superfund created a liability to land owners; a liability that was strict, retroactive, joint and several.

 

STRICT LIABILTY means that fault is not required for an entity to be held responsible. Under Superfund, a purchaser would be liable for contamination even if the contamination occurred prior to their ownership and without their knowledge.

JOINT AND SEVERAL LIABILITY allows a plaintiff to sue one or more of the parties to such liability separately, or together with all other such parties, at the plaintiff's option; all defendants, separately and/or together are wholly liable for negligence; any responsible party or parties can receive liability disproportionate from their responsibility; a legal doctrine permitting recovery from any of several co-defendants based on ability to pay, rather than the degree of negligence.

The musketeer would say, "All for one, one for all."

Superfund was onerous: It would hold a person liable for acts that were committed generations ago, by historic owners, acts that this person never knew about and had no reason to know about; acts that were legal in their time.

In 1986, Congress amended Superfund (Superfund Amendment and Reauthorization Act, aka SARA) to add the "Innocent Landowner Defense."

 

SARA provided that an owner of contaminated property can establish a defense to Superfund liability if:

  1. the property was acquired after the hazardous substance was disposed there; and

  2. at the time of acquisition, the owner "did not know and had no reason to know" that the hazardous substance was disposed on the property.
Further, an owner can establish that he or she had "no reason to know" only if he or she has undertaken, at the time of acquisition, all appropriate inquiry into the previous ownership and uses of the property consistent with good commercial or customary practice in an effort to minimize liability.
SARA did not get into outlining good commercial or customary practices that would constitute an “all appropriate inquiry.” The legislators left it to be evolved through commerce and market forces  
  In an attempt to fill the void, in 1997, the American Society for Testing and Materials (ASTM) developed the “Standard Practice for Environmental Site Assessment: Phase I Environmental Site Assessment Process” (Designation E1527), which became an industry-wide standard for conducting all appropriate inquiry for commercial real estate transactions.

A theoretical weakness with the ASTM Standard Practice was that there was no congressional act to back it up; it could be challenged in court by the EPA if they so deemed fit. Its strength, however, was that it was formulated by broad consensus of lenders, attorneys, consultants and regulators. It held the strength of a “voluntary consensus standard.”

Development of voluntary consensus standards by private industries is encouraged by the Executive Office of the President of the United States, Office of Management and Budget (OMB), whenever practicable and appropriate. It is intended to achieve goals such as:

  • Eliminate the cost to the Government of developing its own standards.
  • Provide incentives and opportunities to establish standards that serve national needs.
  • Encourage long-term growth for U.S. enterprises and promote efficiency and economic competition through harmonization of standards.
  • Further the policy of reliance upon the private sector to supply Government needs for goods and services.


The 1986 SARA law provided the Innocent Landowner Defense (ILD) to protect innocent purchasers of contaminated land; however, and a BIG HOWEVER it was, the ILD would not protect he or she who would knowingly purchase contaminated land. They could be held wholly liable for the cleanup.


The resulting scenario was that multitudes of contaminated properties across the US could not be sold or bought or financed, and were left to rust and rot. Thus, the name “Brownfields” was coined.

A brownfield is a property where the expansion, redevelopment, or reuse may be complicated by the presence or potential presence of hazardous substances or contaminants. It is estimated that there are more than 450,000 brownfields in the U.S. (https://www.epa.gov/brownfields/brownfield-overview-and-definition)

The brownfields, in turn, became an eyesore the prevented redevelopment of commercial or industrial properties; worse, they degraded the surrounding neighborhoods.

  On January 11, 2002, President Bush signed the Small Business Liability Relief and Revitalization Act ("the Brownfields Law").

The Act provided defenses to prospective purchasers who wanted to redevelop contaminated properties.

One condition for such defenses was that prospective purchasers would conduct “All Appropriate Inquiry” relative to the purchased land. The Brownfields Law required EPA to develop regulations establishing standards and practices for how to conduct all appropriate inquiry by January 2004.

On November 1, 2005, EPA finalized Rule 40 CFR 312 which stated that after November 1, 2006, those seeking to limit liability as an innocent landowner must comply with the requirements of All Appropriate Inquiries Final Rule, or follow the standards set forth in the ASTM E1527 standard of 2005 (E1527-05) Phase I Environmental Site Assessment Process (Phase I ESA), to satisfy the statutory requirements for conducting all appropriate inquiries.

ASTM standards must be renewed every 8 years. The process of the most recent updating of ASTM E1527 started in 2010 with participation of EPA to ensure conformity with the CERCLA All Appropriate Inquiry (AAI) regulation. The revised standard, E1527-13, was published in November 2013, and in December 2013 EPA modified the AAI regulation 40 CFR Part 312 to reference the updated E1527-13 standard.

Ten main criteria form the AAI process:

  • The results of an inquiry by an environmental professional;
 
  • Interviews with past and present owners, operators, and occupants of the facility for the purpose of gathering information regarding the potential for contamination at the facility;
 

  • Reviews of historical sources, such as chain of title documents, aerial photographs, building department records, and land-use records, to determine previous uses and occupancies of the real property since the property was first developed;
 

  • Searches for recorded environmental clean-up liens against the facility that are filed under federal, state, or local law;

  • Reviews of federal, state, and local government records, waste disposal records, underground storage tank records, and hazardous waste handling, generation, treatment, disposal, and spill records concerning contamination at or near the facility;
 
  • Visual inspections of the facility and adjoining properties;
 
  • Specialized knowledge or experience on the part of the defendant;
  • The relationship of the purchase price to the value of the property if the property was not contaminated;
  • Commonly known or reasonably ascertainable information about the property; and
  • The degree of obviousness of the presence or likely presence of contamination at the property and the ability to detect the contamination by appropriate investigation.
 

Shelf Life

Under the AAI final rule, a prospective property owner may use a previously conducted Phase I ESA report:

  • If the Phase I ESA report was prepared as part of a previous all appropriate inquiries investigation for the same property; and
  • If the information was collected or updated within one year prior to the date of property acquisition; and
  • Interviews, on-site visual inspections, the historical records review, and the environmental lien search are conducted or updated within 180 days prior to the date of property acquisition.
 

Summary:

The AAI final rule and ASTM E1527-13 require extensive inquiry and offer a strict definition for “environmental professional”. The EPA describes the AAI final rule as being “performance based” since findings and conclusions rely heavily on the environmental professional’s own personal judgment.

Caveat:

This letter is written for general education of readers that possess rudimentary knowledge of environmental liabilities in transactions involving industrial or commercial properties.  It is not intended as legal advice; the writer does not practice law, and this letter includes statements that may be legally incorrect.

You can find past issues of "Environmental Enlightenment" at www.amiadini.com Wealth of information about environmental site assessments in the real estate transactions and issues concerning assessment and cleanup of contamination in the subsurface soil and groundwater.

Call me if you have any questions. There are no obligations.

Ami Adini Environmental Services, Inc.
Environmental Engineering Consultants & Contractors
Underground Storage Tank Experts
California Lic. #1009513 A B HAZ ASB
818-824-8102; mail@amiadini.com
www.amiadini.com

Ami Adini is a mechanical engineer, California Registered Environmental Assessor, Level II (Exp.), and president of AMI ADINI ENVIRONMENTAL SERVICES, INC. (AAES), an environmental engineering consulting firm and general contractors specializing in all phases of environmental site assessments, rehabilitation of contaminated sites and upgrading of underground storage tank facilities. AAES provides practical solutions to environmental concerns using the highest standards of ethics and integrity while providing its clients with maximum return on their investments.

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