All Appropriate Inquiry
EPA’s New Environmental Due Diligence Program
Pursuant to the Small Business Liability Relief and Revitalization Act (also known as the Brownfields Law)
enacted by Congress in 2002, the U.S. EPA recently set out to tackle the subject of environmental due diligence
(i.e., the procedures that must be undertaken to protect an innocent party from potential environmental liabilities
prior to a real estate transaction). EPA’s new environmental due diligence program will be supported by pending
federal regulation and is referred to as All Appropriate Inquiry (AAI).
With the Brownfields Law, Congress intended to stimulate the redevelopment of under-utilized properties that
have contributed to blighted conditions in many urban areas. Consistent with this vision, EPA’s recent activity
related to environmental due diligence is intended to help clarify issues related to the Innocent Landowner
Defense and to establish new legal defense strategies to better protect buyers when acquiring commercial and
industrial real estate (including residential real estate used for commercial purposes).
Currently, a consensus document published by the American Society for Testing and Materials (ASTM), referred
to as ASTM Standard Practice for Phase I Environmental Site Assessments (ESA’s) or ASTM E1527-00,
establishes the elements of a typical Phase I ESA meeting current standards of environmental due diligence.
Under the current non-regulatory program, environmental due diligence is performed to identify recognized
environmental conditions that may be associated with a specific parcel.
Recognized environmental conditions are defined by the ASTM as the presence or likely presence of any
hazardous substances or petroleum products on a property under conditions that indicate an existing release,
past release, or a material threat of a release of any hazardous substances or petroleum products into structures
on the property or into the ground, ground water, or surface water of the property. AAI will focus efforts with the
intention to identify conditions indicative of releases or threatened releases of CERCLA (aka, Superfund)
hazardous substances.
Under AAI, the EPA will replace the existing concept of environmental due diligence with a similar, but farther-
reaching standard. In April 2003, EPA assembled a negotiated rulemaking committee of twenty-five stakeholders
to debate and draft a set of rules for conducting AAI. A draft rule, to be codified in federal regulations under
CERCLA Part 312 – Innocent Landowners, Standards For Conducting All Appropriate Inquiry; Standards for
Conducting All Appropriate Inquiries, was prepared for discussion purposes in October 2003. Upon promulgation
of the final rule (anticipated in 2005), the EPA standards will require Phase I ESA’s under AAI for all commercial
and industrial real estate transactions where the purchaser wishes to preserve one of three environmental liability
defenses. These include:
1) Innocent Landowner Defense (current liability defense under CERCLA); and two new liability protections:
2) Bona fide Prospective Purchaser Defense - provides liability protection for property owners who knowingly
purchase contaminated property, as long it is documented that the contamination occurred prior to the purchase
of the site; and,
3) Contiguous Property Owner Defense - provides liability protection for owners of property whereby
contaminants originating from another (adjacent) property were identified after the time of purchase.
The required elements of the new draft standards resemble many of the procedures outlined in ASTM E1527-00;
however, an Environmental Professional (EP), as re-defined by the standard, must perform the assessment
procedures outlined. The regulatory definition of the EP was reportedly a strongly-contested issue within the
rulemaking committee; however (briefly), the AAI standard defines an EP as a degreed, relevantly-experienced,
and/or government-entity-licensed/certified professional capable of providing judgment and opinions needed in
the evaluation of environmental issues and risks associated with commercial and/or specific residential
properties.
As with the ASTM standard, the EP must obtain and review historic information and publicly available federal and
state government records. Two additional record review requirements are included under AAI:
1) records related to Engineering Controls and Institutional Controls must be searched for properties within ½-
mile of the subject site. Currently, such records may not be reasonably ascertainable in every state; and
2) records of the site and adjoining properties maintained by Indian tribes and local government agencies
that are reasonably ascertainable. The previous ASTM standard leaves the review of local government records to
the discretion of the EP.
If data gaps exist during the review of historical sources to adequate document the site’s history back to first use,
the EP must identify the data gaps and explain the reasons for each gap. If the gaps are so significant that the EP
cannot reach an opinion regarding the subject site, the basis for the inability to compile an opinion must be
detailed in the ESA report.
The EP must interview the current owner and/or occupant of the property; however, if the property is abandoned,
the EP must interview at least one owner/operator of a neighboring property that was in a position to have been
able to observe the abandoned property to provide relevant historical information.
Phase I ESA reports under AAI will be valid for up to six months. There are provisions to allow for an ESA less
than 1-year-old to be used by a prospective buyer; however related government record searches, interviews, and
visual inspections must not be older than 180 days.
The new AAI standard is intended to stimulate the redevelopment of abandoned or under-utilized properties and
should provide prospective purchasers of commercial/industrial properties with greater comfort relative to
potential environmental liabilities associated with acquired properties. Shield Environmental Associates will
assure our clients that applicable procedures and methods will be utilized to maintain and preserve landowner
liability protections.
July 2004
C. Jones
EPA’s New Environmental Due Diligence Program
Pursuant to the Small Business Liability Relief and Revitalization Act (also known as the Brownfields Law)
enacted by Congress in 2002, the U.S. EPA recently set out to tackle the subject of environmental due diligence
(i.e., the procedures that must be undertaken to protect an innocent party from potential environmental liabilities
prior to a real estate transaction). EPA’s new environmental due diligence program will be supported by pending
federal regulation and is referred to as All Appropriate Inquiry (AAI).
With the Brownfields Law, Congress intended to stimulate the redevelopment of under-utilized properties that
have contributed to blighted conditions in many urban areas. Consistent with this vision, EPA’s recent activity
related to environmental due diligence is intended to help clarify issues related to the Innocent Landowner
Defense and to establish new legal defense strategies to better protect buyers when acquiring commercial and
industrial real estate (including residential real estate used for commercial purposes).
Currently, a consensus document published by the American Society for Testing and Materials (ASTM), referred
to as ASTM Standard Practice for Phase I Environmental Site Assessments (ESA’s) or ASTM E1527-00,
establishes the elements of a typical Phase I ESA meeting current standards of environmental due diligence.
Under the current non-regulatory program, environmental due diligence is performed to identify recognized
environmental conditions that may be associated with a specific parcel.
Recognized environmental conditions are defined by the ASTM as the presence or likely presence of any
hazardous substances or petroleum products on a property under conditions that indicate an existing release,
past release, or a material threat of a release of any hazardous substances or petroleum products into structures
on the property or into the ground, ground water, or surface water of the property. AAI will focus efforts with the
intention to identify conditions indicative of releases or threatened releases of CERCLA (aka, Superfund)
hazardous substances.
Under AAI, the EPA will replace the existing concept of environmental due diligence with a similar, but farther-
reaching standard. In April 2003, EPA assembled a negotiated rulemaking committee of twenty-five stakeholders
to debate and draft a set of rules for conducting AAI. A draft rule, to be codified in federal regulations under
CERCLA Part 312 – Innocent Landowners, Standards For Conducting All Appropriate Inquiry; Standards for
Conducting All Appropriate Inquiries, was prepared for discussion purposes in October 2003. Upon promulgation
of the final rule (anticipated in 2005), the EPA standards will require Phase I ESA’s under AAI for all commercial
and industrial real estate transactions where the purchaser wishes to preserve one of three environmental liability
defenses. These include:
1) Innocent Landowner Defense (current liability defense under CERCLA); and two new liability protections:
2) Bona fide Prospective Purchaser Defense - provides liability protection for property owners who knowingly
purchase contaminated property, as long it is documented that the contamination occurred prior to the purchase
of the site; and,
3) Contiguous Property Owner Defense - provides liability protection for owners of property whereby
contaminants originating from another (adjacent) property were identified after the time of purchase.
The required elements of the new draft standards resemble many of the procedures outlined in ASTM E1527-00;
however, an Environmental Professional (EP), as re-defined by the standard, must perform the assessment
procedures outlined. The regulatory definition of the EP was reportedly a strongly-contested issue within the
rulemaking committee; however (briefly), the AAI standard defines an EP as a degreed, relevantly-experienced,
and/or government-entity-licensed/certified professional capable of providing judgment and opinions needed in
the evaluation of environmental issues and risks associated with commercial and/or specific residential
properties.
As with the ASTM standard, the EP must obtain and review historic information and publicly available federal and
state government records. Two additional record review requirements are included under AAI:
1) records related to Engineering Controls and Institutional Controls must be searched for properties within ½-
mile of the subject site. Currently, such records may not be reasonably ascertainable in every state; and
2) records of the site and adjoining properties maintained by Indian tribes and local government agencies
that are reasonably ascertainable. The previous ASTM standard leaves the review of local government records to
the discretion of the EP.
If data gaps exist during the review of historical sources to adequate document the site’s history back to first use,
the EP must identify the data gaps and explain the reasons for each gap. If the gaps are so significant that the EP
cannot reach an opinion regarding the subject site, the basis for the inability to compile an opinion must be
detailed in the ESA report.
The EP must interview the current owner and/or occupant of the property; however, if the property is abandoned,
the EP must interview at least one owner/operator of a neighboring property that was in a position to have been
able to observe the abandoned property to provide relevant historical information.
Phase I ESA reports under AAI will be valid for up to six months. There are provisions to allow for an ESA less
than 1-year-old to be used by a prospective buyer; however related government record searches, interviews, and
visual inspections must not be older than 180 days.
The new AAI standard is intended to stimulate the redevelopment of abandoned or under-utilized properties and
should provide prospective purchasers of commercial/industrial properties with greater comfort relative to
potential environmental liabilities associated with acquired properties. Shield Environmental Associates will
assure our clients that applicable procedures and methods will be utilized to maintain and preserve landowner
liability protections.
July 2004
C. Jones
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