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FEDERAL “ALL APPROPRIATE INQUIRY” RULE: A NEW PHASE IN PHASE Is? August 2004. Overview. EPA’s AAI Rule Future of ASTM E 1527-00 Standard What Does AAI Mean?. EPA’s “All Appropriate Inquiry” Rule. Background. Behind- the-Scenes Negotiations . Nuts & Bolts of Draft Rule .

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Presentation Transcript
  • EPA’s AAI Rule
  • Future of ASTM E 1527-00 Standard
  • What Does AAI Mean?


“All Appropriate Inquiry”






Nuts & Bolts of

Draft Rule

aai rule background brownfields law
AAI Rule: Background-Brownfields Law
  • 3 important components
    • Amended “innocent landowner defense”
    • Added two new landowner liability protections:
      • contiguous property owner: protects buyer from contamination caused by migration of hazardous substances from off-site
      • bona fide prospective purchaser: protects buyer who knowingly purchases contaminated property
aai rule background brownfields law5
AAI Rule: Background-Brownfields Law

Now property owners have 3 avenues of protection

IF “all appropriate inquiry” conducted before purchase so….

  • 3. Congress mandated that EPA “establish standards and practices for the purpose of satisfying requirement to carry out all appropriate inquiries”

- Two-year deadline (by January 11, 2004)

- Statute lists 10 criteria EPA must include…

aai rule background brownfields law6
AAI Rule: Background-Brownfields Law

10-Point Criteria for All Appropriate Inquiry Rule:

1. Results of inquiry by environmental professional

2. Interviews with past and present owners, operators and occupants

  • Reviews of historical sources
  • Searches for recorded environmental clean-up liens
  • Reviews of federal, state and local government records…
aai rule background brownfields law7
AAI Rule: Background-Brownfields Law

10-Point AAI Criteria (cont’d)

6. Visual inspections of property and adjoining properties

7.  Specialized knowledge or experience

8. Relationship of purchase price to value of property if not contaminated

9. Commonly known or reasonably ascertainable information about property

10. Degree of obviousness of contamination at property

aai rule negotiations
AAI Rule: Negotiations
  • Under Federal Advisory Committee Act (FACA), EPA chose to write AAI rule by “Regulatory Negotiation” (reg-neg)
  • Why reg-neg?
    • Solicit input from stakeholders in the process
    • Minimize disruption to current real estate market
    • Facilitate implementation
    • Reduce significant public comments
aai rule negotiations cont d
AAI Rule: Negotiations (cont’d)
  • EPA invited representatives of “affected and interested stakeholder” groups including:
    • Real estate developers
    • Lenders
    • Environmental professionals
    • Federal, state, local and tribal governments
    • Environmental interest groups
    • Environmental justice community
aai rule negotiations cont d11
AAI Rule: Negotiations (cont’d)
  • EDR was a “Resource Participant”
    • Attended all committee meetings
    • Provided technical expertise and guidance to the committee
    • EDR’s Phase I ESA market data being used in EPA’s Regulatory Impact Analysis
aai rule final consensus draft
AAI Rule: Final Consensus Draft
  • After 8 months and more than 100 hours of debate during 2003
  • Reg-neg committee agreed on Final Consensus Draft AAI rule on November 14, 2003:

CFR Part 312 – Standards for Conducting All Appropriate Inquiries

  • Performance-based approach, relies on environmental professionals’ judgment
major areas impacting conduct of phase i
Major Areas Impacting Conduct of Phase I
  • Definition of “environmental professional”
  • Expanded government records review
  • Historical research
  • Data gaps
  • New interview and site visit requirements
  • Phase I shelf life
aai rule professional qualifications
AAI Rule: Professional Qualifications
  • Who can conduct AAI?
  • Committee sought to limit conduct of environmental inquiries to those qualified to make necessary judgment calls
  • Draft rule contains hotly debated, controversial definition of “environmental professional”
aai rule minimum ep requirements17
AAI Rule: Minimum EP Requirements
  • AAI rule allows consultants who do not meet EP definition to conduct Phase Is under AAI, provided that:

- Inquiry is conducted “under the supervision or responsible charge” of someone who does

- But EPA’s preamble will recommend that the site visit be conducted by an EP!

aai rule minimum ep requirements18
AAI Rule: Minimum EP Requirements
  • To ensure accountability, EP’s report must state:

“[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 §312.10 of 40 CFR 312.”

“[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 40 CFR Part 312.”

government records review
Government Records Review


How extensively do government records of nearby or adjoining properties need to be reviewed?

Should E 1527’s search distances be used?

Two extremes on committee:

  • Search out 1 mile for all databases
  • Adopt ASTM E 1527-00 search distances
government records review cont d
Government Records Review(cont’d)

For databases listed in E 1527-00, search distances in AAI rule are consistent, except:

government records review cont d21
Government Records Review (cont’d)


  • Controversial issue for EPA committee:
    • Availability: not all states have records
    • Inconsistency across states: different database names
    • Cost/time involved in obtaining such records



Government Records: ICs/ECs

…More states developing such inventories, so

  • Consensus:

Institutional controls ½ mile

Engineering controls ½ mile

  • Departure from ASTM E 1527-00
government records local tribal
Government Records: Local/Tribal

“…Federal, tribal, state and local government records or databases of government records of the subject property and adjoining properties must be reviewed…” (AAI consensus draft)

  • Local records review now mandatory
  • Under ASTM E 1527-00, local records “may be checked” at EP’s discretion
  • If local USTs, brownfields available, state records alone are insufficient
government records local tribal24
Government Records: Local/Tribal
  • Tribal records MUST be reviewed
  • New requirement beyond ASTM E 1527-00
  • Tribes maintain records of USTs, LUSTs
  • Some environmental records housed at tribal offices
review of historical sources
Review of Historical Sources


How prescriptive should AAI rule be?

How much research is enough?


  • Very general requirements
  • Leaves decisions about research timeframe, data sources and search intervals up to environmental professional’s judgment
review of historical sources cont d
Review of Historical Sources (cont’d)

Research timeframe:

  • AAI: EP must “…cover a period of time as far back in the history of the subject property as it can be shown that the property contained structures or from the time the property was first used for residential, agricultural, commercial, industrial, or governmental purposes.”
  • versus

- ASTM: “…back to property’s obvious first developed use, or back to 1940, whichever is earlier”

review of historical sources cont d27
Review of Historical Sources (cont’d)
  • How much historical research is sufficient?
  • In all areas of AAI, environmental professionals must seek to gather information that is:
    • “publicly available;
    • obtainable from its source within reasonable time and cost constraints; and
    • which can practicably be reviewed…”
data gaps
Data Gaps

Extensive, NEW requirements for data gaps

3. Comment on

significance of gaps

1. Identify gaps

2. Identify

sources consulted

to address them

4. If data gaps prevent

EP from reaching opinion

about property,

gaps must be noted

in EP’s opinion

in written report

data gaps cont d
Data Gaps (cont’d)
  • Data gaps language raises bar for consultants
  • Emphasizes need to conduct comprehensive research using all “reasonably ascertainable” sources to avoid gaps
  • Must demonstrate attempt to fill gaps
  • Sampling may be conducted to address data gaps, but is not required

“…interviews with past and present owners, operators and occupants” (10-point AAI criteria)


  • Strong arguments for involving community in environmental inquiry


  • Concerns about:
    • Time
    • Cost
    • Confidentiality
interviews cont d
Interviews (cont’d)


  • Mandatory interview(s) with one or more (as necessary) owners or occupants of neighboring properties only in cases of abandoned properties
  • Otherwise, up to EP’s professional judgment (similar to ASTM E 1527-00)
visual inspection
Visual Inspection

“…visual inspections of the facility and adjoining properties” (10 point AAI criteria)


  • Will AAI require visual inspections of adjoining properties?
  • What if consultant cannot get access to target property?
visual inspection cont d
Visual Inspection (cont’d)


  • visual on-site inspection of the subject property must be conducted; and
  • visual inspection of “adjoining properties from the subject property line, public rights-of-way, or other vantage point.”

Similar to ASTM E 1527-00 except….

visual inspection cont d34
Visual Inspection (cont’d)
  • In “unusual circumstance” of inability to gain site access, EP must:

1. Visually inspect property from “nearest accessible vantage point”

2. Document efforts taken and explain reason for failure

3. Document other sources of information consulted and comment on significance of failure to conduct visual on-site inspection

aai shelf life
AAI: Shelf Life
  • Under AAI,
    • Phase I valid without updating if not more than 180 days old
    • 180 days to 1 year, certain components must be updated:
      • interviews;
      • reviews of government records;
      • visual inspections; and
      • declaration of EP.
aai shelf life cont d
AAI: Shelf Life (cont’d)
  • If more than one year has passed since environmental inquiry was conducted, all information must be “…collected or updated within one year prior to the purchase date of the subject property.”
  • “Previously collected information must be updated to include relevant changes in the conditions of the property…”
  • Under ASTM, it is acceptable to update only select components of “old” Phase Is
aai rule next step
AAI Rule: Next Step
  • Ball in EPA’s court:
    • Prepared draft rule using Final Consensus Document
    • Wrote preamble with guidance, interpretation
    • Provided OMB with final Economic Impact Analysis (cost impacts)
    • Published proposal package in Federal Register on August 26, 2004
    • 60-day public comment period expires October 25, 2004
    • Final rule by late 2005 (tentative)
astm e 1527 00 current status
ASTM E 1527-00: Current Status
  • Until EPA finalizes AAI rule, ASTM E 1527-00 (and ASTM E 1527-97) will satisfy AAI requirement
  • E 1527 (as revised) could be recognized by EPA in AAI rule if standard is “fully compliant” with final AAI rule
  • Next milestone is “pre-compliance review” of revised E 1527 by EPA
  • ASTM hopes to publish updated E 1527 as EPA finalizes AAI rule (mid 2005-tentative)
aai rule the bottom line
AAI Rule: The Bottom Line
  • What we know:
    • Environmental due diligence will change
    • Consultants have to do more, document more
  • What we don’t know:
    • How much of an impact?
    • Who will be required to comply?
    • More Phase Is?
    • Fewer providers?
aai rule consultants expectations
AAI Rule: Consultants’ Expectations
  • Mixed reactions from consultants:
    • Significant increase in level of effort
    • Little effect, already go beyond E 1527 standard
    • Could increase insurance costs due to flexibility in AAI rule
    • More Phase IIs conducted to fill data gaps
predictions about aai rule s price impact
Predictions About AAI Rule’s Price Impact
  • More than 60% of EDR’s DDD attendees in 6 cities predict price increase of 11% or more




Los Angeles



aai rule market impact
AAI Rule: Market Impact
  • Impact will extend beyond CERCLA liability concerns
  • Likely to see trickle down effect in market
  • Rating agencies (Moody’s, S&P, Fitch) could adopt AAI/ASTM converged standard
  • Federal agencies could require AAI and…
  • State governments may adopt AAI rule
  • Some users still plan to predominantly use E 1527 for detailed guidance, standardization of process
aai rule market impact45
AAI Rule: Market Impact
  • ASTM E 1527 will be revised to reflect new AAI requirements and remain the “de facto” standard practice for environmental due diligence
  • AAI could result over time in higher quality Phase Is because of the more stringent EP definition and the price of Phase Is will increase slightly (10-15%)
what can you do now
What Can You Do Now?

Read consensus draft for familiarity with possible changes, terminology, new defenses

Read EPA’s proposed rule at www.edrnet.com/aai/FR_AAIproposedrule.pdf

Prepare for modifying your services as necessary to meet AAI, revised E 1527

Be cautious!