AAI – Phase I

All Appropriate Inquiries’ requirements must be rigorously followed and completed to qualify for CERCLA landowner liability protection.

A Phase I Environmental Site Assessment, often referred to as “environmental due diligence,” is utilized by purchasers and lenders to evaluate a property for potential environmental contamination and to assess the potential liability for contamination present at the property.

In November 2013 the EPA issued a revised All Appropriate Inquiries (AAI) Rule – Environmental Site Assessments, Phase I Investigations(ASTM E 1527-13) that revised the specific regulatory requirements and standards for conducting All Appropriate Inquiries to qualify for one of the three Landowner Liability Protections (CERCLA Liability Limits) under the CERCLA Brownfields Amendments.

• Only those purchasers who rigorously follow the All Appropriate Inquiries Rule prior to purchase may benefit from the CERCLA innocent landowner, bona fide purchaser or contiguous landowner liability exemption.

The All Appropriate Inquiries Rule requires in part:

• Certification that the inquiry into the property and the resulting report was prepared by a qualified “Environmental Professional” with requisite experience in accordance with the final AAI Rule;
• Visual inspections of the property and adjacent properties by the Environmental Professional;
• Interviews with past and present owners, operators, occupants and the prospective purchaser;
• Reviews of historical sources back to the first obvious use of the property;
• Review of government records;
• Commonly known or reasonably attainable information, including an evaluation of the purchase price of the property;
• An evaluation of commonly known or reasonably attainable information, including the degree of obviousness of the presence of contamination and the ability to detect the presence of such contamination;
• Data gaps, and the significance of those data gaps in the Environmental Professional’s opinion;
• An inquiry by the purchaser of the property for any environmental cleanup liens filed against the property, whether the person has any specialized knowledge or experience, the relationship of the purchase price to the fair market value of the property, if the property was not contaminated, and any commonly known or reasonably ascertainable information about the property; and
• All appropriate inquires must be conducted within one year prior to the date on which a person acquires a property. If any inquiry was completed more than 180 days prior to the date of acquisition of the property, certain components, including interviews with past and present owners, operators and occupants, searches for environmental liens, and visual inspections of the property and adjoining properties must be updated within 180 days prior to the acquisition date of the property.

Quality is the key in Phase I environmental assessments

Sophisticated commercial real estate purchasers and their lenders require Phase I environmental site assessments when arranging a property loan, just as they require a title search. It might seem logical, then, to buy a Phase I investigation as a pre-defined and itemized package to achieve a cost saving. However, pre-planning and generic procedure are antithetical to a proper Phase I environmental site assessment.

The investigator using a pre-defined, tightly budgeted process, one not keyed to the specific property or geographic area, can’t afford to pursue the unique aspects of a property. Buyers and lenders lulled by the apparent security of a unit price and generic procedures run significant peril if the Phase I assessment they accept does not meet the standards and practices defined by the final All Appropriate Inquiries Rule.

• Even proper procedure performed at the wrong type of property or in the wrong type of building can create enormous liabilities for a property owner.

• Meeting all requirements dictated by the final AAI Rule is a threshold step to qualify for CERCLA landowner liability protection.

• Even without a lien, a lender can become entangled in an environmental dispute through a business loan. For example, if a lender becomes involved in management of a business, the law then considers the lender a material participant in the business and a partner to environmental liability. It is critical that lenders routinely appraise processes at businesses on owned properties through procedures that do not run the risk of being viewed as material involvement.  See article, Lenders can Maintain CERCLA Exemption by Following Ownership/Liability Tests, by Robert S. Harris

AAI – Phase I Environmental Site Assessments – performed by Harris & Lee Environmental Sciences, LLC follow the AAI / ASTM E 1527-13 standards of practice and are more likely to result in discovery of potential problems during the assessment process before purchase, as well as to hold up in court if contamination is found at any time post-purchase.