Published in MNCBIA’s Jan/Feb 2014 Builder Magazine
by Samuel J. Stevenson, Geo-Technology Associates, Inc.
“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” – Charles Darwin
“Change is such hard work.” – Billy Crystal
In many business sectors, changing regulations can pose distinct challenges, and environmental regulations are certainly no exception. In the realm of environmental studies, two key changes in the industry are worthy of discussion.
Change #1: ASTM’s Phase I ESA Standard has been revised. Make sure yours complies!
Most property transactions and refinances entail evaluating the property for environmental contamination. This process usually starts with a Phase I Environmental Site Assessment (ESA), and may go on to include a Phase II ESA (e.g., sampling and analysis of soil and/or groundwater) and possibly remediation. The point of a Phase I ESA is to identify whether the site has any recognized environmental conditions (RECs): essentially whether contamination is/isn’t likely to exist.
Phase I ESAs are performed using the ASTM Standard (designated E1527), which has existed since 1993. E1527 was updated as recently as 2005, culminating in the most recent version (E1527-13) published on November 6, 2013. E1527-13 is significantly different in several respects, mostly in an effort to clarify the practice. The main changes with E1527-13 are:
- The REC definition is clarified and streamlined.
- The “de minimis” definition is clarified
- A potential REC that is relatively minor and exempt from fully being a REC.
- The Historical REC (HREC) definition is clarified.
- Something that previously would have been a REC but has been remediated with regulatory sign-off, or to an unrestricted use standard.
- The term Controlled REC (CREC) is introduced.
- A REC that has an engineering or other control, with regulatory sign-off.
- Several additional items are more clearly addressed, including vapor migration considerations, regulatory records reviews, and user responsibilities.
The development of E1527-13 also affects the EPA’s “All Appropriate Inquiries” (AAI) Rule. EPA established the AAI Rule in 2005, based on the concept that a property owner can be held strictly liable for contamination based solely on property ownership, without regard to fault, unless the owner can establish the “innocent purchaser” defense (i.e., they did not know and had no reason to know about contamination at the time of purchase). To do so, a person must have performed “all appropriate inquiries” prior to acquisition of the property.
EPA initially stated that both E1527-05 and E1527-13 will satisfy their AAI Rule; however, they are now reconsidering that determination. A final ruling is expected by year-end.
Change #2: Maryland inches closer to requiring reporting of hazardous substances. Your transaction, your property, and/or your development may be affected!
In 2008, the Maryland General Assembly passed HB 977, which would require “Responsible Persons” to report known releases of hazardous substances to the Maryland Department of the Environment (MDE). HB 977 is generally thought to have spawned from the Swann Park situation in Baltimore, where decades-old arsenic contamination existed at a park with athletic fields, unbeknownst to the public.
The bill instructed MDE to publish regulations detailing when a “release” needs to be reported. The requirements pertain not only to releases in the conventional sense (spills, leaks, etc.), but also to something as simple as possessing a report, laboratory analysis result, etc., showing a substance above MDE’s reporting threshold. Once the information is reported, MDE will conclude (a) no further action is warranted, (b) further investigation is necessary, or (c) remediation is necessary.
After several years of delays, discussions with stakeholders, and revisions, MDE appears to be moving forward with the reporting requirements. The regulation is expected to present myriad complications relating to property transactions, environmental assessments, and liability. Some of these complications are presented below.
- Reporting is required of a Responsible Person, the definition of which is complex. Current owners/operators are pretty clearly included, but prior owners can also be included in the definition, even if not currently involved with the property.
- A Responsible Person’s reporting obligation is triggered by “possessing” a sample result, something owners may try to avoid. For example, sellers may not allow buyers to collect samples at all.
- The regulation has no “grandfathering” clause, so an old sampling result in an old file can trigger a reporting requirement by the Responsible Person.
- MDE is not held to any specific timeframes for responding, except to acknowledge receipt of the release report within 48 hours. When reporting is necessary, project and transaction delays are likely. Many transactions may end up in limbo waiting for an MDE response while a buyer is (or isn’t) waiting.
- MDE will likely be inundated with reports and may not be able to handle the initial wave of submissions in a reasonable timeframe.
The outcome of MDE’s efforts remains to be seen.
These changes present both major and minor changes to the environmental assessment process, which can then affect property transactions and developments. Involving a knowledgeable environmental consultant in your project team can help ease the “hard work” of these changes.
Mr. Stevenson is an Associate with Geo-Technology Associates, Inc. (GTA) and has over 20 years of environmental consulting experience. GTA’s staff of over 225 provides geotechnical, environmental, drilling, and construction observation and testing services. Mr. Stevenson can be reached at 410-792-9446 or firstname.lastname@example.org.