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Buying commercial property? Better do your homework!

Just when you thought you had figured out what a “Phase I” is, the Environmental Protection Agency (EPA) decides to change the rules of the game.

With the enactment of the Small Business Liability Relief and Brownfield Revitalization Act (the Brownfield Amendments) by President Bush in 2002, due diligence, or as it is now called “all appropriate inquiry,” for a commercial or industrial property purchase has changed. The 2002 Brownfield Amendments to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) provide conditional CERCLA liability protection to qualified individuals who perform “all appropriate inquiry” (AAI) prior to a purchase.

Congress created a provision of the Brownfield Amendments that required EPA to write the first “all appropriate inquiry” rule. EPA’s proposed rule, entitled “Standards and Practices for All Appropriate Inquiries” was signed by the EPA administrator and published in the Federal Register August 26, 2004. The proposed rule would establish specific regulatory requirements for conducting all appropriate inquiries into the previous ownership, uses, and environmental conditions of a property.

The American Society for Testing and Materials (ASTM) Standard 1527, often referred to as the “Phase I,” serves as the current standard for conducting Environmental Site Assessments (ESAs). The AAI Rule, which is expected to be adopted by year’s end, will replace the Phase I ESA Standard 1527. Congress included in the Brownfields Amendments a list of criteria that EPA must include in the AAI Rule. These criteria include:

• 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 cleanup 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 of 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.

Defining ‘environmental professional’

One of the biggest issues raised during the negotiated rulemaking process involved the definition of an “Environmental Professional.” The members of the Negotiated Rulemaking Committee, comprised of a cross-section of internal and external stakeholders, determined that it is necessary to establish minimum qualifications for persons managing or overseeing all appropriate inquiries. The Committee’s intent in setting minimum professional qualifications is to ensure that all inquiries are conducted at a high level of professional ability and ensure the overall quality of both the inquiries conducted and the conclusions or opinions rendered. The AAI Rule establishes the following requirements for an environmental professional:

• licensed or registered as a professional engineer or professional with three years of relevant experience;

• licensed or certified by the federal government, a state, tribe, or U.S. territory to perform environmental inquiries and have three years of relevant experience;

• be a college graduate in a relevant discipline of engineering, environmental science or earth science and have five years of relevant experience; or

• be a college graduate with any major and 10 years of full-time relevant experience as of the date of promulgation of the final AAI Rule.

And don’t forget that…

The AAI Rule also requires the following statements to be signed and placed in the written document (i.e., AAI Environmental Site Assessment Report) regarding his/her qualifications:

• “[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 [the AAI Rule].”

• “[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 [the AAI Rule].”

With this being said, it is probably a good idea to assess whether the folks that you use for ESAs have the appropriate qualifications under the proposed AAI Rule is critical to ensuring that you are afforded the federal CERCLA liability protections that are available under the Brownfield Amendments.

Contact MBJ contributing columnist Jere “Trey” Hess, P.E. DEE, via e-mail at jerehess@hotmail.com.

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