Clearing Up the Confusion About the ASTM E Phase I ESA Standard

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Environmental Professionals Organization of Connecticut: Clearing Up the Confusion About

Analyst, EDR Insight Pat Coyne, Vice President of Marketing, EDR Sam Haydock, LEP,

2014 Environmental Data Resources, Inc. What Just Happened to Our Standard?

1 Environmental Professionals Organization of Connecticut: Clearing Up the Confusion About the ASTM E Phase I ESA Standard Tonight s presenters: Dianne Crocker, Principal Analyst, EDR Insight Pat Coyne, Vice President of Marketing, EDR Sam Haydock, LEP, Principal-in-Charge, BL Companies Pam Elkow, Partner, Robinson & Cole LLP January 7, Environmental Data Resources, Inc. What Just Happened to Our Standard? An Update on the Market Reaction by Dianne Crocker, Principal Analyst EDR Insight 2014 Environmental Data Resources, Inc. 1

2 The Road to Final E Standard End of 2012: ASTM Phase I Task Group approved revisions to E , submitted to EPA for AAI approval August 15, 2013: EPA proposed amendment to AAI rule recognizing E September 16, 2013: Comment period ended, majority supported EPA s decision November 6, 2013 ASTM published E standard, -05 became a historical standard December 30, 2013: EPA published final rule recognizing -13 as AAI-compliant, announced intent to propose removing E reference Why Did ASTM Revise E 1527? ASTM standards have a maximum 8-year shelf life Prior E1527 publications: 1993, 1994, 1997, 2000, 2005 Careful review of the 2005 standard began in 2010 ASTM s Phase I Task Group agreed on two primary objectives: 1. Clarify existing language 2. Strengthen the deliverable 2

3 3 Key Changes for Tonight s Discussion 1. Vapor migration Adds VAPOR to the more traditional soil and groundwater pathways for evaluating contamination risk A lot of confusion/inconsistency in how to handle vapor risk in Phase I ESAs 2. RECs/HRECs (revised) CRECs (new) Revised definitions of REC and HREC New definition for controlled REC or CREC More clarity on how EPs define environmental conditions 3. Agency file reviews Always in standard but more clarity on when they need to be done and what to do if a review is not done More attention on standard environmental sources 1. Vapor Migration Language E adds new definition of migrate/migration (used in many places in E1527) as the movement of hazardous substances or petroleum products in any form, including solid and liquid at the surface or subsurface, and vapor in the subsurface. References E as a process for vapor encroachment screenings (not required). Specifically excludes contaminated vapor migration/intrusion from IAQ (which is a non-scope consideration). Reflects that CERCLA/AAI do not differentiate by form (e.g., solid, liquid, vapor) of the release to the environment. 3

4 Prior to E : Inconsistency in How Vapor is Treated in Today s Phase Is Some EPs automatically included consideration of vapor migration. Others did so only at a client s request. Likewise, some financial institutions require vapor screens on all Phase I ESAs. Others do so only on a case-by-case basis. This is changing as awareness of vapor risk grows. EPs Concerns About Vapor Don t want to be the only consultant in town suggesting to their clients that vapor migration needs to be part of an assessment. Concerns that clients will think they re trying to squeeze more money out of them. Just don t understand it well enough themselves or the process to use for assessing it properly to explain to clients. Ignored VI because it was always non-scope under IAQ exclusion. 4

Distinction Between Vapor Intrusion and Vapor Migration Vapor migration: Is there a presence or likely presence of hazardous substances or petroleum products on the property due to a release, based

5 Distinction Between Vapor Intrusion and Vapor Migration Vapor migration: Is there a presence or likely presence of hazardous substances or petroleum products on the property due to a release, based on consideration of pathways and how contamination is likely to migrate onto a property? Within the scope of a Phase I ESA. Vapor intrusion: Is vapor present inside a building as the result of a release? Never part of a Phase I, and is not now under -13. Reaction to Vapor Language: U.S. EPA EPA s final rule (Dec. 30, 2013): EPA wishes to be clear that, in its view, vapor migration has always been a relevant potential source of release or threatened release that, depending on site-specific conditions, may warrant identification when conducting AAI. EPA applauds the revisions made by ASTM International to the updated E standard regarding vapor migration. The new standard makes important revisions to the standard practice to clarify that AAI and Phase I ESAs must include, within the scope of the investigation, an assessment of the real or potential occurrence of vapor migration and vapor releases on, at, in or to the subject property. 5

Reaction to Vapor Language: LENDERS Large institutions required vapor assessments for several years already, particularly for foreclosures or purchases.

Vapor really signifies a transition in property due diligence a transition away from the traditional way of thinking about environmental due diligence only in terms of contaminated soil and

6 Reaction to Vapor Language: LENDERS Large institutions required vapor assessments for several years already, particularly for foreclosures or purchases. Less common at smaller banks, still coming up to speed. Vapor really signifies a transition in property due diligence a transition away from the traditional way of thinking about environmental due diligence only in terms of contaminated soil and groundwater. ~Mike Tartanella, Capital One at EDR s DDD Long Island We like the E 2600 process for vapor because it ensures a consistent process for vapor across states we lend in. ~regional New England lender Reaction to Vapor Language: ATTORNEYS CERCLA and the AAI rule do not allow EPs to overlook the vapor migration pathway and simply consider contamination in the soil and groundwater in making a determination about the presence of RECs in, on or at a property. Attorney Bill Wagner, Taft, Stettinius and Hollister LLP Consultants should not sign a report, in my humble opinion, that a complete Phase I ESA was done if at least the suggestion was not made that vapor be looked at. Stuart Lieberman, Lieberman & Blecher LLP Nothing in the underlying law (i.e., CERCLA or the AAI rule) allows for carving hazardous substances or petroleum products in vapor form out of the REC term in the Phase I standard. If an EP disclaims all consideration of vapors in the Phase I ESA report, then it is not an AAIcompliant report. Christopher Roe, attorney at Fox Rothschild LLP 6

7 2. Family of REC Definitions REC definition simplified HREC definition revised New definition for controlled RECs (CRECs) Applies where past release has been addressed, but residual contamination remains subject to control Allows for the EP to classify a condition on the site using a less threatening term Avoids stigma associated with RECs Impact of New CREC Term Signals to potential purchasers of properties that not all RECs are necessarily bad or warrant abandoning the deal. New emphasis on continuing obligations under CERCLA. Failure to satisfy these continuing obligations could result in forfeiture of otherwise available future CERCLA liability defenses. 7

8 Industry Response to New REC Terms Some confusion on how to make REC vs. HREC vs. CREC determinations. Generally positive response from users, especially lenders, who are responding favorably to the added clarity. 3. Regulatory Agency File Review E contains new section that indicates the EP should do an agency file review if a subject property or adjoining property is identified in any of the standard environmental records sources. If the EP decides not to undertake such a file review, the justification must be included in the Phase I ESA report. As an alternative, E also has language ( ) that allows the EP to rely on alternative sources (e.g., onsite records, local government agencies, etc.) and document the findings in the report. 8

9 Reactions from EPs Impact varies based on what each firm is currently doing. Huge variability in level of effort. Major challenge in factoring cost/time of research into original proposal. File reviews with the long turnaround times will be an issue. File reviews are a BIG unknown for each project until you get into the work. Makes competitive bidding a losing game. Overall Expectations on Pricing/ Turnaround Time 9

10 EPs Score Key Revisions (Time/Cost Impact) Overall EP Reactions Most of this will be client education. Many of the changes are relatively minor. The lenders don t understand what they want at this point. It makes it difficult for us to format for them. Our company has a formal training program. We will be expected to learn about the new changes independently, outside of the office. [We] already consider all of these issues; for us, it s just a change in definitions. We have been doing file reviews for 20 years and anticipate no cost impact. Vapor will require some tweaking. REC-HREC-CREC should actually help simplify some reports. 10

11 One Lender s Reaction All of the revisions in -13 are already standard in our scope and expectations. The section I like the most is the one on AFRs. There is no complete Phase I ESA without a file review, in my opinion. And vapor was never not a risk. For us, these changes are not monumental. ~regional lender Summary of Impact of E on Pricing Area of Change REC-HREC-CREC evaluation Expected Impact No impact on price Vapor migration screening Additional time (up to 6 hours), added cost (up to $ ) Regulatory file review Additional time/; highly variable 11

12 Who Has Adopted E At This Point? Many larger institutions switched when E became new industry standard in November. Others assume the new standard will necessitate an update to their policies, were waiting on EPA or are relying on their environmental consultants to tell them what they need to do. Federal agencies: Freddie Mac is requiring E since their Guide requires use of the most current standard. U.S. SBA is allowing a grace period where reports meeting either E or E will be accepted. Fannie Mae will require the use of E on any reports ordered on or after February 1, Education and Awareness Are Key 12

Plan for any necessary changes to the internal Phase I ESA process, scope of work and report format, addressing any expected

13 What You Should Be Doing Attend events dedicated to the E 1527 revisions. Ensure that internal staff are aware of the key areas of change, and ready to implement them consistently across office. Plan for any necessary changes to the internal Phase I ESA process, scope of work and report format, addressing any expected changes in pricing. Take online courses to get trained. Educate clients on areas of revision, working with them to update policies to reference current industry standard Page 26 13

Email: dcrocker@edrnet.com Phone: 203.783.

14 For More Information EDR s ASTM Toolkit EDR Insight Contains all past research on E and vapor risk Questions? dcrocker@edrnet.com Phone: EPOC Demystifying Agency File Reviews Presented by: Patrick Coyne EDR 2014 Environmental Data Resources, Inc. 14

15 Agency File Review What s in them? Source files Other examples Page 30 15

16 Beyond the database report This is what was in the DB Report Details Two waste oil tanks 500 & 250 gallons Removed in 91 Filled w/ sand & gravel Oversight by FD ESA performed No contamination observed 16

17 Driver of Agency File Reviews Best practice for fully understanding a site 60% of Phase I s always or very often include the EP seeking agency files. How many EP s have conducted one? It is a core ASTM 1527 data element. New clarification in the ASTM standard ASTM

18 ASTM Property or adjoining hit in any database Agency files should be reviewed Subject to (reasonably ascertainable, reasonable time and cost) If not warranted, EP must explain Alternative sources Shall include summary of the information reviewed EP must comment on sufficiency Challenges Operational Disparate No standardization Multiple programs Different accessibility Not to mention local Report templates Business Educating clients Fees 18

19 Market Research Survey of EP s. Calling campaign to all 50 state agencies to document processes. ASTM task group participation. EP interviews Discussions with lenders Survey 335 total complete surveys 60% of respondents very often or always perform agency file reviews in conjunction with their Phase I s. Only 7.2% rarely or never 26% of respondents state that their agency files are available online. 18% of respondents said they have to travel zero distance, because they can access files online. 19

20 When do you do it? When do they conduct them? 62% with the Phase I 31% afterwards How far? 20

21 Available Online? Once you re there I had to make an appointment 76% Hours are limited 37% 56% make copies 60% review and abstract 21

22 Subject or Adjacents? What are they looking for? Not adjoining properties only Either subject property, or both TP and adjoining Is it a pain? Respondents don t think travelling to the agency office is a pain point. 65% respond that travel to the location is extremely easy or moderately easy. 22

23 A lot of variability In reading the qualitative responses, a majority of the respondents mention a very high variability in information available, quality of information, access to information. How long does it take? 23

How do you charge for it? Questions Lenders are asking EP Firms Remind me are you completing AFR s as a standard part of the Phase I scope of work you conduct for me?

24 How do you charge for it? Questions Lenders are asking EP Firms Remind me are you completing AFR s as a standard part of the Phase I scope of work you conduct for me? Will completing a file review affect the TAT and price of my Phase I? Should we be revising our scope of work to make it more clear whether we expect AFR? Regardless of the answers, they want to feel confident that their EP partner has a rock solid understanding of the details of the changes. 24

25 NFA: Questions? Pat Coyne, EDR Phone

ASTM E Standard Update. Key Revisions to E Impacting Phase I Investigations

ASTM E Standard Update. Key Revisions to E Impacting Phase I Investigations ASTM E1527-13 Standard Update The ASTM published the new standard for conducting Phase I Environmental Site Assessments, ASTM E1527-13 on November 6th, 2013. ASTM E1527-13 is in effect and replaces the