Transcript General

FEDERAL “ALL APPROPRIATE
INQUIRY” RULE:
A NEW PHASE IN PHASE Is?
August 2004
Overview
• EPA’s AAI Rule
• Future of ASTM E 1527-00 Standard
• What Does AAI Mean?
EPA’s
“All Appropriate Inquiry”
Rule
Background
Behindthe-Scenes
Negotiations
Nuts & Bolts of
Draft Rule
AAI Rule: Background-Brownfields Law
• 3 important components
1. Amended “innocent landowner defense”
2. Added two new landowner liability protections:
• contiguous property owner: protects buyer
from contamination caused by migration of
hazardous substances from off-site
• bona fide prospective purchaser: protects
buyer who knowingly purchases contaminated
property
AAI Rule: Background-Brownfields Law
Now property owners have 3 avenues of protection
IF “all appropriate inquiry” conducted before purchase
so….
• 3. Congress mandated that EPA “establish standards
and practices for the purpose of satisfying requirement
to carry out all appropriate inquiries”
- Two-year deadline (by January 11, 2004)
- Statute lists 10 criteria EPA must include…
AAI Rule: Background-Brownfields Law
10-Point Criteria for All Appropriate Inquiry Rule:
1. Results of inquiry by environmental
professional
2. Interviews with past and present owners,
operators and occupants
3. Reviews of historical sources
4. Searches for recorded environmental
clean-up liens
5. Reviews of federal, state and local
government records…
AAI Rule: Background-Brownfields Law
10-Point AAI Criteria (cont’d)
6. Visual inspections of property and adjoining
properties
7. Specialized knowledge or experience
8. Relationship of purchase price to value of
property if not contaminated
9. Commonly known or reasonably ascertainable
information about property
10. Degree of obviousness of contamination at
property
Development of AAI Rule:
Regulatory Negotiations
AAI Rule: Negotiations
• Under Federal Advisory Committee Act
(FACA), EPA chose to write AAI rule by
“Regulatory Negotiation” (reg-neg)
• Why reg-neg?
• Solicit input from stakeholders in the process
• Minimize disruption to current real estate
market
• Facilitate implementation
• Reduce significant public comments
AAI Rule: Negotiations (cont’d)
• EPA invited representatives of “affected and
interested stakeholder” groups including:
• Real estate developers
• Lenders
• Environmental professionals
• Federal, state, local and tribal governments
• Environmental interest groups
• Environmental justice community
AAI Rule: Negotiations (cont’d)
• EDR was a “Resource Participant”
– Attended all committee meetings
– Provided technical expertise and
guidance to the committee
– EDR’s Phase I ESA market data being
used in EPA’s Regulatory Impact
Analysis
AAI Rule: Final Consensus Draft
• After 8 months and more than 100 hours of
debate during 2003
• Reg-neg committee agreed on Final
Consensus Draft AAI rule on
November 14, 2003:
CFR Part 312 – Standards for Conducting
All Appropriate Inquiries
• Performance-based approach, relies on
environmental professionals’ judgment
AAI Rule:
Nuts & Bolts of Consensus Draft
Major Areas Impacting Conduct of Phase I
•
•
•
•
•
•
Definition of “environmental professional”
Expanded government records review
Historical research
Data gaps
New interview and site visit requirements
Phase I shelf life
AAI Rule: Professional Qualifications
•
•
•
Who can conduct AAI?
Committee sought to limit conduct of
environmental inquiries to those qualified to
make necessary judgment calls
Draft rule contains hotly debated, controversial
definition of “environmental professional”
AAI Rule: Minimum EP Requirements
Professional/Educational Qualifications
PE or PG license/registration
Relevant
Experience
3 years
Federal or state license/certification to
perform environmental inquiries
3 years
B.A./B.S. degree or higher in relevant
discipline (engineering, environmental
science or earth science)
5 years
B.A./B.S. degree or higher
(grandfather clause)
10 years
AAI Rule: Minimum EP Requirements
• AAI rule allows consultants who do not meet EP
definition to conduct Phase Is under AAI, provided
that:
- Inquiry is conducted “under the supervision or
responsible charge” of someone who does
- But EPA’s preamble will recommend that the site
visit be conducted by an EP!
AAI Rule: Minimum EP Requirements
• To ensure accountability, EP’s report must state:
“[I, We] declare that, to the best of [my, our] professional
knowledge and belief, [I, we] meet the definition of
Environmental Professional as defined in §312.10 of 40
CFR 312.”
“[I, We] have the specific qualifications based on
education, training, and experience to assess a
property of the nature, history, and setting of
the subject property. [I, We] have developed
and performed the all appropriate inquiries
in conformance with the standards and
practices set forth in 40 CFR Part 312.”
Government Records Review
KEY AREA OF DEBATE:
How extensively do government records of nearby
or adjoining properties need to be reviewed?
Should E 1527’s search distances be used?
Two extremes on committee:
- Search out 1 mile for all databases
- Adopt ASTM E 1527-00 search distances
Government Records Review (cont’d)
For databases listed in E 1527-00, search
distances in AAI rule are consistent, except:
Database
CERCLIS
NFRAP
Delisted NPL
AAI
1/2 mile
ASTM E 1527-00
1/8 mile
1/2 mile
Target property
State brownfields
1/2 mile
n/a
Records of
registered storage
tanks
Adjoining
property
USTs: adjoining
ASTs: n/a
Government Records Review (cont’d)
INSTITUTIONAL AND ENGINEERING
CONTROLS (Activity and Use Limitations)
• Controversial issue for EPA committee:
• Availability: not all states have records
• Inconsistency across states: different
database names
• Cost/time involved in obtaining such
records
but….
Government Records: ICs/ECs
…More states developing such inventories, so
• Consensus:
Institutional controls ½ mile
Engineering controls ½ mile
• Departure from ASTM E 1527-00
Government Records: Local/Tribal
“…Federal, tribal, state and local government
records or databases of government records of
the subject property and adjoining properties
must be reviewed…” (AAI consensus draft)
• Local records review now mandatory
• Under ASTM E 1527-00, local records “may
be checked” at EP’s discretion
• If local USTs, brownfields available, state
records alone are insufficient
Government Records: Local/Tribal
•
•
•
•
Tribal records MUST be reviewed
New requirement beyond ASTM E 1527-00
Tribes maintain records of USTs, LUSTs
Some environmental records housed at tribal
offices
Review of Historical Sources
KEY AREA OF DEBATE:
How prescriptive should AAI rule be?
How much research is enough?
•
•
CONSENSUS:
Very general requirements
Leaves decisions about research timeframe,
data sources and search intervals up to
environmental professional’s judgment
Review of Historical Sources (cont’d)
Research timeframe:
- AAI: EP must “…cover a period of time as far
back in the history of the subject property as it can
be shown that the property contained structures or
from the time the property was first used for
residential, agricultural, commercial, industrial, or
governmental purposes.”
- versus
- ASTM: “…back to property’s obvious first
developed use, or back to 1940, whichever is
earlier”
Review of Historical Sources (cont’d)
• How much historical research is sufficient?
• In all areas of AAI, environmental
professionals must seek to gather
information that is:
– “publicly available;
– obtainable from its source within
reasonable time and cost constraints; and
– which can practicably be reviewed…”
Data Gaps
Extensive, NEW requirements for data gaps
1. Identify gaps
2. Identify
sources consulted
to address them
4. If data gaps prevent
EP from reaching opinion
about property,
gaps must be noted
in EP’s opinion
in written report
3. Comment on
significance of gaps
Data Gaps (cont’d)
• Data gaps language raises bar for consultants
• Emphasizes need to conduct comprehensive
research using all “reasonably ascertainable”
sources to avoid gaps
• Must demonstrate attempt to fill gaps
• Sampling may be conducted to address data
gaps, but is not required
Interviews
“…interviews with past and present owners, operators
and occupants” (10-point AAI criteria)
KEY AREA OF DEBATE:
• Strong arguments for involving community in
environmental inquiry
versus
• Concerns about:
– Time
– Cost
– Confidentiality
Interviews (cont’d)
COMPROMISE:
• Mandatory interview(s) with one or more
(as necessary) owners or occupants of
neighboring properties only in cases of
abandoned properties
• Otherwise, up to EP’s professional
judgment (similar to ASTM E 1527-00)
Visual Inspection
“…visual inspections of the facility and adjoining
properties” (10 point AAI criteria)
KEY AREAS OF DEBATE:
•
•
Will AAI require visual inspections of adjoining
properties?
What if consultant cannot get access to target
property?
Visual Inspection (cont’d)
CONSENSUS:
1) visual on-site inspection of the subject
property must be conducted; and
2) visual inspection of “adjoining properties
from the subject property line, public
rights-of-way, or other vantage point.”
Similar to ASTM E 1527-00 except….
Visual Inspection (cont’d)
• In “unusual circumstance” of inability to
gain site access, EP must:
1. Visually inspect property from “nearest
accessible vantage point”
2. Document efforts taken and explain reason
for failure
3. Document other sources of information
consulted and comment on significance of
failure to conduct visual on-site inspection
AAI: Shelf Life
• Under AAI,
– Phase I valid without updating if not more than
180 days old
– 180 days to 1 year, certain components must be
updated:
• interviews;
• reviews of government records;
• visual inspections; and
• declaration of EP.
AAI: Shelf Life (cont’d)
• If more than one year has passed since
environmental inquiry was conducted, all
information must be “…collected or updated
within one year prior to the purchase date of
the subject property.”
• “Previously collected information must be
updated to include relevant changes in the
conditions of the property…”
• Under ASTM, it is acceptable to update only
select components of “old” Phase Is
AAI Rule: Next Step
• Ball in EPA’s court:
• Prepared draft rule using Final Consensus
Document
• Wrote preamble with guidance, interpretation
• Provided OMB with final Economic Impact
Analysis (cost impacts)
• Published proposal package in Federal Register
on August 26, 2004
• 60-day public comment period expires
October 25, 2004
• Final rule by late 2005 (tentative)
Future of ASTM E 1527-00
Standard
ASTM E 1527-00: Current Status
• Until EPA finalizes AAI rule,
ASTM
E 1527-00 (and ASTM E 1527-97) will
satisfy AAI requirement
• E 1527 (as revised) could be recognized by
EPA in AAI rule if standard is “fully
compliant” with final AAI rule
• Next milestone is “pre-compliance review”
of revised E 1527 by EPA
• ASTM hopes to publish updated E 1527 as
EPA finalizes AAI rule (mid 2005-tentative)
What Does AAI Rule
Mean?
AAI Rule: The Bottom Line
• What we know:
– Environmental due diligence will change
– Consultants have to do more, document more
• What we don’t know:
– How much of an impact?
– Who will be required to comply?
– More Phase Is?
– Fewer providers?
AAI Rule: Consultants’ Expectations
• Mixed reactions from consultants:
- Significant increase in level of effort
- Little effect, already go beyond E 1527 standard
- Could increase insurance costs due to flexibility
in AAI rule
- More Phase IIs conducted to fill data gaps
Predictions About AAI Rule’s Price Impact
• More than 60% of EDR’s DDD attendees in
6 cities predict price increase of 11% or more
25%
23%
21%
20%
22%
Chicago
18%
Dallas
Houston
15%
Los Angeles
10%
5%
Minneapolis
8%
Scottsdale
5%
3%
0%
No
1-5%
6-10% 11-15% 16-20% 21% and
Change Increase Increase Increase Increase above
Other
AAI Rule: Market Impact
• Impact will extend beyond CERCLA liability
concerns
• Likely to see trickle down effect in market
• Rating agencies (Moody’s, S&P, Fitch) could
adopt AAI/ASTM converged standard
• Federal agencies could require AAI and…
• State governments may adopt AAI rule
• Some users still plan to predominantly use E 1527
for detailed guidance, standardization of process
AAI Rule: Market Impact
• ASTM E 1527 will be revised to reflect new AAI
requirements and remain the “de facto” standard
practice for environmental due diligence
• AAI could result over time in higher quality
Phase Is because of the more stringent EP
definition and the price of Phase Is will increase
slightly (10-15%)
What Can You Do Now?
Read consensus draft for familiarity with
possible changes, terminology, new defenses
Read EPA’s proposed rule at
www.edrnet.com/aai/FR_AAIproposedrule.pdf
Prepare for modifying your services as
necessary to meet AAI, revised E 1527
Be cautious!