There is general awareness of the need to perform environmental due diligence on virtually any transaction that involves commercial/industrial property. However, even with such general awareness missteps or lack of attention to detail during the process can risk exposing a purchaser or new tenant to significant liability. Having been involved in counseling on environmental due diligence for hundreds of properties, here are four of the most common issues/questions that arise during the environmental due diligence process.

As Buyer, can I rely on Seller’s prior Phase I reports and simply avoid spending the money on a new Phase I assessment?

It depends on the age of Seller’s Phase I report and whether the prospective owner/tenant can rely on the conclusions of Seller’s environmental professional contained in the report. Under U.S. EPA’s “All Appropriate Inquiries” rule (AAI) and under the new Phase I ASTM 1527-21 standard, certain portions of a Phase I must be updated after six months. If the report is older than one year, then a new Phase I will be required under ASTM 1527-21 and AAI. Therefore, if a Seller’s prior Phase I report(s) are older than one year then is strongly recommended that a prospective buyer and/or tenant secure a new Phase I environmental assessment.

If Seller’s report is more than 180 days old but not yet one year old, then a prospective buyer/tenant should work with the Seller to allow for a Phase I update of those sections that must be updated which include:

  • required interviews must be updated;
  • searches for recorded environmental cleanup liens;
  • review of government records;
  • site reconnaissance of the subject property; and
  • the Environmental Professional [EP] Declaration.

Further, the new ASTM E1527-21 standard requires that the Phase I ESA identify the dates on which each of these components were completed and further provides that the 180-day or one year time period commences on the date when the first of these components were completed.

Finally, if Seller’s report is less than 180 days old or has been updated and is less than one year old, then Buyer must be able to rely on the Phase I report. The Phase I report will identify the “user” or “client” that may rely upon the findings and conclusions of the report. A prospective purchaser and/or tenant must be issued a so-called “reliance letter” from the Seller’s environmental consultant that allows them to rely on the report.

Is a Phase I assessment recommended for a prospective tenant of a commercial and/or industrial building?

Yes. Often times prospective tenants are under the impression they do not need to perform a Phase I assessment if they are not taking ownership of the property. However, a tenant can still be considered an “operator” and be liable for pre-existing contamination on a property especially if the tenant will be using similar chemicals as the pre-existing contamination. EPA’s AAI rule allows tenants to qualify for an environmental liability defense under CERCLA (called the “bona fide purchaser defense”) if the prospective tenant performs a Phase I prior to signing the lease.

Beyond establishing a liability defense, performance of a Phase I assessment as a prospective tenant is also advisable because it establishes a baseline condition of the property prior to commencement of the lease. Establishing a baseline condition can help prevent major disputes with the landlord as to whether tenant was responsible for contamination that may be discovered during the term of the lease. Furthermore, the baseline condition can also identify potential human health exposure issues such as vapor intrusion (i.e., soil/groundwater contamination volatilizing and creating unsafe indoor air conditions).

Does the Phase I constitute a comprehensive environmental due diligence assessment?

No. A Phase I is an examination of records, performance of interviews, review of federal/state databases and a site walkover which are designed to identify whether there has been an actual or potential release of hazardous substances on a property. The list below is not an exhaustive list of all non-scope items, but the list contains those environmental issue that arise most frequently and are not within the scope of a Phase I environmental assessment:

  • Environmental Compliance- If the buyer is purchasing an on-going business operation it is important to note that a Phase I is not a compliance audit. A Phase I will not evaluate whether the Seller’s business has all the required permits and has been filing mandatory reports with state and/or federal regulators. It will also not evaluate OSHA compliance. A separate environmental audit typically should be performed when the buyer is purchasing an ongoing industrial or manufacturing operation.
  • Asbestos– A Phase I is not an asbestos survey of the building. If any demolition and/or renovations are planed post-acquisition, then buyer/tenant should consider an asbestos survey to identify all asbestos-containing material (ACM) in a building.
  • Wetlands- A Phase I will not identify the presence of any wetlands on a property. If the property contains open areas and the buyer/tenant is considering expansion and/or new construction, then a wetlands survey would likely be appropriate.

If issues are identified in a Phase I report, what should the scope of the Phase II sampling be?

If a Phase I report identifies an actual or potential release of hazardous substances at the property or an adjacent property (i.e., so called “recognized environmental conditions” or RECs), then typically the next step in the due diligence process is to perform sampling of the property to evaluate the nature and extent of any potential contamination. The cost of a Phase II can range quite dramatically depending upon the number and type of sampling to be performed. If a prospective purchaser and/or tenant is considering a Phase II, it will be important to work with your environmental specialists and attorney closely to adequately design the scope of testing to be performed.

In discussing the scope of the Phase II with your consultant and/or attorney, you should first identify the goal of the Phase II sampling which may typically include:

  • Testing to simply determine if there is a potential issue on the property;
  • Testing to qualify for the bona fide purchase defense under AAI;
  • Testing to perform a regulatory cleanup of the property; and
  • Testing to evaluate any potential for off-property issues that could raise regulatory and/or liability issues.

Identifying the goal of the Phase II assessment upfront is key in order to ensure an adequate scope of work to achieve your goal as well as the cost-effectiveness of the proposed sampling.

In July, the Ohio General Assembly passed the Fiscal Year 2024-2025 Main Operating Budget which included another round of $350 million in funding for the Brownfield Remediation Fund. This second round of funding builds up on the very successful launch of the program in the prior State budget.

While the structure of the program largely remains the same, the Legislature did make some notable changes. The most significant changes are the following:

  • Lead Applicants– Rather than applications being directly submitted to the Ohio Department of Development (ODOD), the Legislature required all applications to flow through a local lead applicant before they can be submitted to ODOD. The budget language allows any of the following to be designated as the lead applicant:
    • For counties with a population of 100,000 or less, the County Commission Board will recommend a lead applicant to ODOD.
    • For Counties with a population of 100,000 or more, the County Land Reutilization Corporation (Land Bank) will serve as the lead applicant (if a Land Bank operates in the County).
    • If the County with a population of 100,000 or more does not have a Land Bank, the County Commission Board will recommend a lead applicant to ODOD.
  • Allocation of Funding Over Two Years– The $350 million will be split ($175 million per year) over the two years of the biennium. For each fiscal year, $1 million will be set aside per county. Each fiscal year, $87 million of the $175 million will be available for competitive granting operating in the first-come, first-serve structure.

How will Lead Applicants Administer the Program?

There was no real indication why the Legislature forced all applications to flow through a designated Lead Applicant. In addition, the budget language did not really mandate that Lead Applicants perform any specific review function. Rather, it is anticipated that ODOD will continue to review all applications on a “first-come first-served” basis. Furthermore, it is also anticipated that, once applications are submitted to ODOD by the Lead Applicant, so long as the Lead Applicant timely submits the application and the application meets ODOD’s criteria for funding, the project will get funded.

County Landbanks or other designated Lead Applicants would have the option to place additional requirements as part of agreeing to submit an application to ODOD. For example, a Lead Applicant could rank local projects and only elect to submit the most important local projects to ODOD. However, such an approach would seem to be directly counter to the intent that the program be operated on a “first-come first-served” basis for awarding the money. Hopefully, Lead Applicants will simply agree to submit any project in an attempt to get the most money into their area as possible.

$1 Million Reserved for Each County
The Legislature retained the reservation of $1 million in funding for each of Ohio’s 88 counties. However, unlike the first two years of the program, it effectively reserved $176 million of the $350 million in funding for the individual counties by reserving $88 million ($1 million for each county) if both fiscal year 2024 and fiscal year 2025.

It is unclear why the Legislature elected to reserve $88 million in each of fiscal years when many counties did not use any or all of the funds reserved in the prior funding rounds. Based upon a white paper from Greater Ohio Policy Center, 30 counties did not use any of the brownfield funding in the prior funding rounds. However, those same counties who had no projects in the prior funding rounds will now have $60 million reserved for their use in the next two years of the program.

Because brownfields tend to concentrate in highly populated industrial counties, the vast majority of the funding was used in these high population counties. According to the GOPC white paper, nearly 70% of the funding ($175.1 million) went to the seven Ohio counties with the highest population. These are also the counties with the greatest need so the majority of funding should go to those counties.

The reserves for each of the 88 counties will make the $87 million in general funding highly competitive, especially in Round 1. Assuming ODOD continues to review applications on a first-come first-served basis, there are likely to be some eligible projects that won’t get funded because the first round of funding will likely be oversubscribed. Hopefully, any money that was reserved for counties that was not used will be placed in subsequent rounds of funding open to projects from any county.

Next Steps

Everyone is waiting for each of the designated Lead Applicants and ODOD to release their guidelines for the $350 million in additional funding for the next two years of the program. Right now, it appears that the first round will not be open to applications until December 2023 or January 2024. However, so long as ODOD doesn’t significantly change the program from the prior funding rounds, there is no reason why the State couldn’t open the program up this Fall.

On August 29, 2023, the United States Environmental Protection Agency (U.S. EPA) and the Army Corps of Engineers (ACOE) issued a direct final rule without public comment amending the definition of the “Waters of the United States” (WOTUS) which governs the scope of federal jurisdiction under the Clean Water Act (CWA). U.S. EPA issued the rule to conform its regulations to the ruling of the U.S. Supreme Court in Sackett v. EPA which significantly reduced which wetlands are federally protected. The Court limited federal jurisdiction to only wetlands that are adjacent to navigable waters and those with a continuous surface connection to relatively permanent waters adjoining navigable waters.

The Sackett decision effectively ends decades of debate over the scope of federal jurisdiction over wetlands. There have been at least five different U.S. Supreme Court decisions involving the scope of federal jurisdiction under the CWA. These prior decisions include:

  • U.S. v. Riverside Bayview Homes (1985)- Court affirmatively decides adjacent wetlands are protected under the CWA. Does not decide the scope of federal jurisdiction other than adjacent wetlands.
  • Solid Waste Agency of Northern Cook County (SWANCC) v. U.S. ACOE (2001)- Overruled ACOE jurisdiction of isolated wetlands based upon the migratory bird rule.
  • Rapanos v. U.S. (2006)- Plurality decision which includes test adopted by Justice Kennedy known as the “significant nexus test” which extended federal jurisdiction to non-adjacent wetlands.
  • U.S. v. Hawkes (2016)- Allows challenges in court to jurisdictional decisions (JDs) issued by the ACOE.
  • County of Maui v. Hawaii Wildlife Fund (2020)- Extended federal jurisdiction to direct discharges to navigable waters or when there is a “functional equivalent” to a direct discharge.

Since the CWA was adopted in 1972, which wetlands are federally protected has been debated and various presidential administrations have attempted to adopt regulations setting for the limits of federal jurisdiction. Unlike the prior Court decisions, the Sackett decision left no ambiguity as to which wetlands are entitled to federal protection. The Court developed the new “continuous surface connection test” which includes:

  • The wetland must be adjacent to a relatively permanent body of water connected to a traditional interstate navigable waterway
  • The wetland has a continuous surface connection with the water, making it difficult to determine where the “water” ends and the “wetland” begins.

The Sackett decision effectively overturns Rapanos v. U.S. which had expanded federal jurisdiction to also include wetlands with a “significant nexus” to permanent waters. Under the significant nexus test, a wetland that was connected to a less than permanent stream (i.e. ephemeral or intermittent) were protected if impacts to the wetland could affect the chemical, physical and biological integrity of the downstream navigable water. With Sackett, the “significant nexus” test was eliminated as a basis for extending federal jurisdiction over wetlands.

To provide a visual representation of what the Sackett decision means with regard to protections of wetlands, consider the following two images used in a recent presentation I made with Dr. Michael Liptak (Enviroscience). The first slide shows wetlands and various connections to perennial or intermittent streams (i.e. potentially regulated wetlands).

The second slide shows the wetlands that will be federally protected following Sackett.

The narrow scope of jurisdiction adopted by the majority of the Court left Justice Kavanaugh to note that the Court was narrowing federal jurisdiction greater than the last eight presidential administrations.

State Protection of Wetlands

One the reasons the Court was willing to significantly reduce the scope of federal jurisdiction was to defer to the States in terms of protections of wetlands and streams. However, a recent study by the Environmental Law Institute demonstrates that most States have not adopted any regulations to protect waterways beyond the protections afforded under the CWA.

Ohio did enact protections of wetlands beyond the CWA. Following SWANCC v. U.S. ACOE, Ohio enacted protections for so called isolated wetlands under Ohio Revised Code 6111.021 to 6111.028. The term “isolated” refers to wetlands that are not directly adjacent to permanent or navigable waterways. Therefore, in Ohio, a permit is still needed in order to impact isolated wetlands that are not protected under the CWA.

What is left to decide following Sackett?

While Sackett clearly defines the limits of federal jurisdiction of wetlands under the CWA, there remains an open question as federal jurisdiction over intermittent and ephemeral streams. While the Court did not directly address intermittent and ephemeral streams in Sackett, the Court did determine that only wetlands that are adjacent to a “relatively permanent body of water connected to traditional interstate navigable waters” are protected. This language suggests the Court will decide both ephemeral streams (those with flow only when it rains) or intermittent streams (those with flow only during certain times of year) are not protected under the CWA. However, we will have to wait and see when this issue inevitably reaches the Supreme Court.

On March 14th, U.S. EPA released its advanced pre-publication notice of proposed rulemaking which, if finalized, will establish for the first time national drinking water standards for PFAS under the Safe Drinking Water Act (SWDA).  While many states have adopted drinking water standards, the U.S. EPA has yet to establish any national drinking water standards for PFAS.  The implications if this rule is finalized will be very significant as discussed below.

What is the anticipated timing of the draft and final rule?

The proposed rule has not yet been published in the federal register but is scheduled to published on March 29th.  Once it is published, U.S. EPA will have a sixty (60) day public comment period.  U.S. EPA has stated their goal is to finalize the standard by the end of 2023.

What standards is EPA proposing and for which PFAS compounds?

When establishing new drinking water standards, U.S. EPA first establishes a Maximum Contaminant Level Goal (MCLG), which are non-enforceable public health goals.  The MCLG is based on current scientific analysis of the risk presented by the chemical compound. With regard to PFOA and PFOS, EPA’s review of the scientific literature resulted in it designation of PFOA and PFOS as likely carcinogens (specifically liver and kidney cancer).  EPA’s proposed rulemaking concludes that the MCLG for the PFOA and PFOS compounds is zero.  EPA has determined that there is “no dose below which either chemical is safe.” 

While the MCLG is based on a determination of the level of exposure which is determined to be safe, the actual regulatory standard –  Maximum Contaminant Level (MCL) – takes into consideration two additional practical considerations when establishing the standard: 1) what is the lowest detection level that labs across the country can reliably detect (i.e., the lab analytical detection limit); and 2) the level proven treatment technologies are capable of achieving.

From the U.S. EPA’s proposed rulemaking, the primary driver in establishing the MCL for PFOA and PFOS was the lab analytical detection limit using EPA’s recognized laboratory procedures (i.e., EPA methods 533 and 537.1).  In theory, this means that if labs get more sophisticated in reliably measuring levels of PFOA and PFOS below 4 ppt, the standards could go even lower.

Here is a summary of the proposed standards:

CompoundsProposed Maximum Contaminant Level
PFOS4 parts per trillion (4.0 ng/l)
PFOA4 parts per trillion (4.0 ng/l)
PFHxSHazard Index = 1.0
GenX ChemicalsHazard Index = 1.0
PFNAHazard Index = 1.0
PFBSHazard Index = 1.0

What is the Hazard Index? 

EPA concludes that persons exposed to a mixture of PFAS compounds can have a so called “dose additive” response, which means health impacts can occur at lower levels than if exposed to that compound alone.  To address the risk of exposure to a mixture of PFAS compounds, EPA decided to propose a drinking water standard tied to a hazard index of 1.0 for the remaining four PFAS compounds.

Every drinking water system would measure the levels of these four compounds in their system.  The levels would be compared to the following Health-Based Water Concentration (HBWC), which is the level no health effects are expected for that specific compound. Because EPA determined the MCLG for PFOA and PFOS is zero, both of these compounds are not considered in the health index analysis.  

The measured value is divided by the HBWC then those four values are added together.  If the total sum of those values is greater than 1.0 it is considered a violation of the standard.  The HWBC’s for each of the four compounds are as follow:

CompoundHBWC (ppt)
GenX Chemicals10

If the rule goes final what requirements will apply to public drinking water systems?

Initial monitoring of the system will be required within three years after the rule’s promulgation.  Systems must be in compliance with the MCL and health index within three years.  Due to the engineering planning and construction timeframes, public drinking water systems will likely need to initiate engineering shortly after the rule is final in order to have treatment systems in place within the three year time period allowed for compliance.  There are recognized treatment systems that are effective in removing PFAS compounds, including activated carbon, anion exchange (AIX) and high-pressure membrane technologies.  All of these treatment systems are expensive to install and have ongoing operation & maintenance (O&M) costs.  Another issue is that the material used to filter PFAS, such as carbon filter, must be managed as a PFAS containing waste, which increases disposal costs.  As discussed below, due the large number of public drinking water systems that could be affected, the rule will result in very significant compliance costs during the 2024-2026 time period.

EPA’s analysis of cost of compliance and anticipated health benefits

When developing new MCLs under the Safe Drinking Water Act, U.S. EPA is required to analyze the anticipated health benefits and cost of compliance of the proposed rule.  EPA estimates there are approximately 66,000 public drinking water systems that could be affected by the rule.  The proposed rule includes a very detailed cost/benefit analysis of the proposed rule.  EPA used a time period of 80 years to evaluate the annual cost and annual health benefit of the proposed rule.  EPA’s analysis included a range of estimated annualized compliance costs of between $700 million to $1.3 billion dollars.  While this is an oversimplification from EPA’s proposed rule, over an 80 year time frame, the total cost would have estimated range of between $56 billion to $104 billion.  However, those costs will be front loaded because the most significant engineering and construction costs will be in the early years as drinking water systems install treatment. 

What is the next significant regulatory action anticipated by EPA regarding PFAS?

EPA has indicated it will propose a rule designating PFOA and PFOS as “hazardous substances” under CERCLA sometime in the summer of 2023.  If PFOA and PFOS are defined as hazardous substances under CERCLA, it will provide clear legal authority to those seeking cleanup of property contaminated by PFAS.

On January 30, 2023, Phase 2 of the Biden Administration’s rule making revisions to Nation Environmental Policy Act (NEPA) were sent by the White House Council on Environmental Quality (CEQ) to the Office of Management and Budget (OMB). Once OMB completes its review the proposed rule will be published in the Federal Register for public comment. The proposed rules are expected to be released sometime this spring.

According to the National Law Review, the Phase 2 rules are likely to be more controversial as they are expected to address: consideration of environmental justice, public participation, and efforts to still streamline the process by imposing deadlines.

Biden Administration Rollback of the Trump Administration’s Overhaul to NEPA

The Trump Administration enacted a massive overhaul of the landmark regulation which went into effect on September 14, 2020. The revisions were the first substantive changes to NEPA since the 1970s. The major focus of the overhaul was twofold: 1) to speed up NEPA reviews for most projects; and 2) to reduce the overall scope of impacts considered under NEPA. Here is a quick summary of the changes the Trump administration enacted:

  • Cumulative Effects- Consideration of impacts from the proposed action together with other actions were eliminated. One such impact eliminated was consideration of the action as contributing to climate change.
  • Eliminated Federal Agency Rulemaking and NEPA Policies- CEQ has the authority to promulgate framework NEPA regulations that all federal agencies must follow. However, many federal agencies enacted their own supplemental rules and adopted NEPA policies govern reviews performed by their Agency.
  • Reduced Scope of Significant Effects– The rule eliminated consideration of effects that were remote in time, geographically remove, or the product of a lengthy causal chain.
  • New Definition of “Major Federal Action”- Excluded projects that have “minimal federal funding or minimal federal involvement” thereby reducing the number of projects that would trigger NEPA.
  • Indirect Effects- Eliminated consideration of ‘indirect effects” which are those caused by the action at a later time or farther removed in distance.
  • Purpose and Need- NEPA historically required federal agencies to consider “reasonable alternatives not within the jurisdiction of the lead agency.” The reforms instructed agencies to limit the range of alternatives to only those that were consistent with the applicant’s goals and the agency’s statutory authority.

Biden Administration’s Phase I Rule Revisions

Phase I of the rollback of the Trump Administration’s NEPA reforms went into effect on May 20, 2022. The Phase I rules restored the following: restored the scope of review under “Purpose and Need” to how it was performed historically, reestablished CEQ regulations as the “floor” with the federal agencies able to enact their own regulations, and restored the requirement to consider both indirect and cumulative impacts.

Reducing the Length of NEPA Reviews

The primary objective of the Trump Administration’s overhaul to NEPA was to reduce the timeframes for NEPA reviews. According to a review performed by CEQ, the average time to complete an Environmental Impact Study (EIS) was 4.5 years. A review by CEQ of the average length of an EIS found that most reports were over 600 pages.

While the Biden Administration’s Phase 2 rules are supposed to include revisions to help streamline the NEPA process. However, with the restoration of the scope of review required under NEPA and the possibility additional potential impacts requiring analysis, such as environmental justice, it will be a challenge for the Administration to expedite reviews.

With the Biden’s Administration $1.2 trillion dollar investment in the nation’s infrastructure, NEPA will be front and center on how quickly those improvements to the nations roads, bridges, water infrastructure and grid resilience will occur. How will the Administration be able to balance meaningful NEPA reviews with the equally important goal of implementing much needed improvements to the nation’s infrastructure? All eyes will be on the Phase 2 NEPA rules package when it is released this spring.

On December 16, 2022, Governor DeWine announced $88 million in grant funding for 123 brownfield remediation projects. This marks the third round of funding. Collectively, the three rounds of funding have resulted in a total of $341 million in grant funding awarded in one year. Of the $341 million in grant funds provided $19.2 million were assessment grant dollars (6%
of the total allocation) and $321.9 million were cleanup/remediation dollars (94%). 125 projects were awarded assessment dollars, and 188 projects were awarded cleanup/remediation grant dollars

The Ohio Brownfield Remediation Program (OBRG)is a truly transformational program. Many heralded the Clean Ohio brownfield grant program, which operated from approximately 2001 to 2012, as the “golden age” of brownfield cleanup and redevelopment in Ohio. During the 14 years Clean Ohio it awarded $400 million in grants for assessment and cleanup. The Ohio Brownfield Remediation Program will result in close to the same amount of funding in only one year. This truly is the golden age of brownfield redevelopment in Ohio.

Greater Ohio Policy Center released an excellent white paper that provides some great insights into the OBRG as well as the future for brownfield redevelopment in Ohio. Some of the key findings in the white paper include:

More Brownfield Funding is Needed– Even after $340 million in funding in one year there is still robust demand to address underutilized and contaminated sites across Ohio. The OBRG program was oversubscribed. The program was set up to be “first come first served” program. This meant applications that met the funding criteria were awarded funding in the order the applications were received until the funding ran out. Round 3 closed in just three days once the Department received requests for all remaining funding. I personally know of multiple projects that did not receive funding because applications were submitted after this three day period.

125 Projects are Poised for the Next Funding Cycle- Of the projects funded, 125 were assessment grants. This means these sites received funding for sampling to determine level of contamination on the property. Cleanup funding will be needed to put these projects back into productive use.

Ohio has the opportunity to build on this momentum by renewing the OBRG in the next budget cycle this July. This is an opportunity for Ohio to move past its “rust belt” moniker by addressing these legacy sites.

On December 15, 2022, the U.S. Environmental Protection Agency (EPA) issued a final rule that endorses ASTM E1527-21 which provides a uniform standard for performing Phase I Environmental Assessments. The new rule will have an effective date of February 13, 2023. The EPA endorsement of the new ASTM Phase I standard means that the procedures established in the new standard are now deemed to satisfy that U.S. EPA “All Appropriate Inquiries” rule (AAI). EPA’s AAI rule establishes the level of environmental due diligence necessary to qualify for certain CERCLA liability defenses, such as the Bona Fide Purchaser Defense (BFPD). The BFPD protects innocent purchasers from liability for historical contamination on property they buy or lease.  

EPA drew criticism when it previously allowed both the old ASTM E-1527-13 standard and the new ASTM E-1527-21 standard to both meet AAI. Traditionally, when the ASTM procedures are updated the expectation has been the “new and improved” procedures should be followed in all cases. Allowing two different ASTM standards to meet AAI created confusion with environmental professionals. When EPA’s new rule goes into effect on February 13, 2023, only Phase I assessment performed in accordance with ASTM E1527-21 will qualify for AAI.

What is a Phase I Assessment?

Phase I assessments are a review of federal/state environmental databases, a review of historical records related to the property, interviews of regulators and the current property owner and a site walkover to look for any evidence of the “confirmed presence, likely presence or a material threat of the presence of a hazardous substance or petroleum products” at the property. Any evidence of a release or likely release is called a “recognized environmental conditions” (RECs). Depending on the nature of the transaction, a finding of a REC on the property potentially triggers the need for sampling pursuant to a Phase II environmental assessment.

Why is compliance with the new ASTM 1527-21 important?

There are a number of important changes brought about by the new ASTM standard. Because under AAI, the burden to establish a CERCLA liability defense is on the prospective purchaser or tenant, it is critical to review the Phase I report for compliance with AAI and the new ASTM E1527-21 standard.

What are some of the noteworthy changes included in ASTM E1527-21?

Some of the most noteworthy changes included in the new ASTM standard include the following:

  • Emerging Contaminants– AAI is focused on due diligence to establish CERCLA defenses. CERCLA liability pertains to contamination from substances that have been designed “hazardous substances” under the statute. Largely driven by the growing concern surrounding per- and polyfluoroalkyl substances (PFAS), which are not yet designated as “hazardous substances,” the new ASTM E1527-21 standard provides for an optional review for “emerging contaminants.” These so called “emerging contaminants” are substances that are known or suspected to cause adverse effects to human health and/or the environment, but may not yet be regulated. EPA has announced its intention to list PFOS and PFOA (two PFAS compounds) as “hazardous substances” under CERCLA at some point in 2023. Even if those compounds are listed, there are thousands of PFAS compounds which are being evaluated and would still be considered emerging contaminants even after PFOA and PFOS are listed. While the new ASTM standard provides the option to review for “emerging contaminants,” given the significant public health and liability concerns associated with contaminants such as PFAS, it is highly recommended that you discuss with your environmental attorney and/or Environmental Professional (EP) whether to include review of emerging contaminants (especially PFAS) as part of your Phase I assessments. For example, in states which currently regulate PFAS, serious consideration should be given to including a review of PFAS compounds as part of your Phase I assessment.
  • Expiration of a Phase I– The old ASTM standard established that a Phase I report was still valid if it was completed no more than 180 days prior to acquisition or up to one year if certain portions of the reports are updated after six months. However, the old standard did not require the report to specify when certain portions of the report were completed. The new ASTM standard requires a date to be specified for the five components that are especially time sensitive- interviews, searches for recorded environmental cleanup liens, review of government records, site reconnaissance of the subject property and the declaration by the Environmental Professional. The revised standard also clarifies that the clock begins to tick for the 180 day time period when the first of these time sensitive critical tasks were performed.
  • New REC Definition- The new ASTM standards tweaks the definition of what constitutes a REC. The different definitions are shown below. The key change surrounds the addition of the qualifier “likely” in front of “release to the environment.” The comments in the new ASTM standard suggest this change is an attempt to reduce the variation in REC findings between EPs. Some EPs would only make a REC finding if the due diligence confirmed there was a release at the property. However, some EPs would make a REC findings if, based on their experience, the historical use of the property resulted in a high probability of releases. For example, a dry cleaner operating in a strip mall for decades. The EP must include in the Opinions Section the basis for their conclusion that a release was “likely.”
    • Under ASTM E1527-13, a REC is defined as the presence or likely presence of any hazardous substances or petroleum products in, on, or at a property: (1) due to release to the environment; (2) under conditions indicative of a release to the environment; or (3) under conditions that pose a material threat of a future release to the environment.
    • Under ASTM E1527-21, a REC means (1) the presence of hazardous substances or petroleum due to a release to the environment; (2) the likely presence of hazardous substances or petroleum products due to a likely release to the environment; or (3) the presence of hazardous substances or petroleum products under conditions that pose a material threat of a future release to the environment.
  • Historical Document Review- The new ASTM standard expressly requires the EP to review certain historical sources of information related to the property. Specifically, the EPA must review aerial photographs, topographic maps, fire insurance maps and local street directories. If one of these historical sources is not reviewed or not available, the EP must include an explanation as to why that source was not reviewed. Also, these same historical sources must be reviewed for properties adjoining the target property.
  • Findings, Opinions and Conclusions– There has been a lot of variation as to the content of the Findings, Opinions and Conclusions Section of Phase I reports among EPs. The new ASTM standard clarifies what should be included in each portion. The Findings Section should summarize the key facts discovered as part of the review which may lead the EP to conclude either a REC is present or no RECs are present on the property. The Opinions Section can be combined with the Findings section and should set forth the EPs explanation for its finding of whether there are RECs present or no RECs present on the property. Finally, the Conclusions Section must clearly identify all RECs, controlled CRECs and any significant data gaps.
  • Recommendations for a Phase II assessment- The new ASTM standard does require the EPA to opine as to whether a Phase II assessment may be necessary. However, specific recommendations by the EP to perform a Phase II are still optional.
  • Basis for Controlled Recognized Environmental Conditions (CRECs)- The definition of a CREC was clarified to be any REC that was addressed using a “property use limitation” (Example: deed restriction to commercial/industrial standards). The new ASTM standard requires the EP to specify the basis of its finding of a CREC along with any regulatory documents that relate to the finding of a CREC. For example, if a No Further Action Letter was issued that includes engineering controls, the EP must include the NFA as part of the Phase I so the User understands its obligations going forward relative to the property post-acquisition.
  • Definition of “Significant Data Gap”- If certain information was not available to the EP in performing the Phase I assessment, the EP is supposed to evaluate whether the missing information (referred to as a “data gap”) rises to the level of being significant. The new ASTM standard includes a definition of “significant data gap” which means “affects the ability of the environmental professional to identify a recognized environmental condition.”
  • Title Searches- The new ASTM standard clarifies that it is the User’s obligation to search title for activity and land use restrictions or environmental liens, the EP doesn’t necessarily have to perform the review. A title review must go back to 1980.
  • Examples of HREC and CRECs- To provide greater clarity of the differences between “Historical Recognized Environmental Conditions” and CRECs, the new ASTM standard provides examples. For an HREC, a release of “hazardous substances” must be addressed without any restrictions and any remaining contamination must be below residential cleanup standards.

In order to try to prevent major environmental issues at abandoned or closed factories, Ohio adopted a program known as the “Cessation of Regulated Operations” (CRO). While this program has been around since 1996, there are misconceptions among businesses and developers as to what it means when a property goes through CRO.

Ohio EPA’s fact sheet for the CRO program opens with an example of what the CRO program is intended to prevent:

“In 1987, vandals entered the closed Dayton Tire & Rubber facility to remove copper cores form several large transformers remaining at the facility.  This vandalism resulted in the discharge of Askerol (PCB oil) from transformers to Wolf Creek.  Cleaning up and demolishing the site took three years and cost approximately $8 million.”

At its core, the goal of the CRO program is to prevent releases of chemicals onsite after operations cease.  CRO requires the owner or operator to remove chemicals and drain equipment after operations are terminated in order to prevent releases of those chemicals since the facility will no longer be operating.

What types of facilities must go through CRO?

Ohio EPA estimates there are 7,000 operating facilities in the State that if they ceased operating would have to complete the CRO process.  Any facility that must submit annual chemical inventory reporting to the State Emergency Response Commission (SERC) is potentially subject to CRO with some limited exceptions.

Facilities that store “extremely hazardous substances”, “hazardous substances”, “flammable substances” and “petroleum” above certain thresholds (i.e. “Threshold Quantity” or TQ) trigger the SERC chemical inventory reporting requirement.  The TQ for hazardous chemicals is 10,000 pounds.  The Threshold Planning Quantity (TPQ) for extremely hazardous substances is 500 pounds.  While there are TQs for gasoline and diesel fuel, if fuel is stored in underground storage tanks, such Bureau of Underground Storage Tank Regulation (BUSTR) regulated facilities are exempt from CRO.

What CRO requires

For any facilities covered by the CRO requirements, the owner or operator of that facility must notify the Ohio EPA, the local emergency planning committee and the fire department that operations have ceased within thirty (30) days.  In addition to filing notice, the owner or operator that has permanently ceased operations must perform a number of other steps.

  • Within 30 days they must do the following:
    • Designate a contact person
    • Secure the facility-
      • Secure all windows and doors
      • Provide fencing
      • Provide lighting and a surveillance system
    • post warning signs around where chemicals are stored
  • Within 90 days the owner or operator must do the following:
    • Submit its most recent chemical inventory to Ohio EPA
    • Submit the current OSHA chemical list or MSDSs for all hazardous substances at the facility
    • Describe where each stationary vat, tank, electrical transformer, or vessel is located and what chemicals are stored within
    • Drain and remove regulated substances from vats, tanks, electrical transformers and vessels, including the piping
    • Remove off-site to another operating facility or to a licensed disposal facility all debris, non-stationary equipment, furnishings, containers, motor vehicles and rolling stock that contain or are contaminated with regulated substances
    • Certify to Ohio EPA that the actions above were performed

Misconception #1- A property is not “clean” just because it went through CRO

In performing due diligence for transactions, I have had multiple clients state that they understood certification of completion of CRO by the former owner or operator to mean the property is “clean.”  This is one of the major misconceptions regarding the program.  All certification of completion of CRO means is that chemicals stored onsite that had the potential to be released have been removed.  It does not mean the property is free of contamination.  Historical releases could have occurred that contaminated soil or groundwater even if the former owner/operator certified completion of CRO requirements.  Any party contemplating purchasing a property that was subject to CRO should still obtain a Phase I environmental assessment to evaluate whether there are any indications that releases historically occurred onsite.

Misconception #2- Upon certifying completion of CRO a facility has completed all its regulatory obligations

Simply because a company has completed the CRO process does not mean that it has completed all regulatory obligations associated with the property.   The most common regulatory obligations for a facility outside of CRO include:

  • Hazardous Waste Units (RCRA Units)- Any property that operated a hazardous waste unit is subject to investigation and cleanup requirements referred to as RCRA Closure.
  • Underground Storage Tanks- Any property that had underground storage tanks must complete proper closure of those tanks through the Bureau of Underground Storage Tank Regulation (BUSTR).
  • Environmental Permits- The owner or operator should terminate any permits applicable to the facility, including but not limited to: air permits, indirect discharge permits, NPDES discharge permits, NPDES stormwater permits, etc.  Each permit should be reviewed to determine the process necessary to terminate its effectiveness.  Terminating permits is in the owner/operators interest to stop reporting and record keeping obligations that may apply under such permits.

Misconception #3-  CRO only applies to owners/operators

CRO also applies to the holder of the first mortgage or the fiduciary for the facility.  The holder or fiduciary has the obligation to secure the facility, including posting warning signs if the operator fails to perform those tasks.  The holder and/or fiduciary must also submit a notice of abandonment to Ohio EPA and the local emergency planning committee.

Misconception #4- CRO ensures all hazardous substances are removed once operations cease

While CRO is an important tool that has reduced risks of releases of chemicals at numerous sites, it is not a guarantee such environmental problems do not exist.  Unfortunately, owners/operators may run into financial problems and do not have the funds to comply with the CRO requirements.  As a result, the building may simply be abandoned with chemicals stored onsite or left in equipment.  In such instances, U.S. EPA may have to step in and remove hazardous wastes using its Superfund (CERCLA) removal authority.

Cuyahoga County has been engaged in a long search for a new jail.  The preferred location is property on Transport Road, which was also the site of Rockefeller’s Standard Oil Refinery #1.  A significant part of the controversy surrounds whether the site is safe for redevelopment given its industrial past.  The debate surrounding the site shows the stigma we still associate with brownfields.  This despite the fact that approximately 700 sites, many much more contaminated than the site on Transport Road, have been successfully remediated in Ohio.

Here are several quotes from recent articles discussing the controversy surrounding the site.  The highlighted quotes show the stigma still assigned to brownfield sites:

Cuyahoga County’s preferred location for a new jail has been mired in controversy over whether toxic conditions can be remediated for safe use, but county officials say it’s the only property that meets all their criteria. (Cuyahoga County officials explain how they narrowed jail search to toxic Transport Road site (

Executive candidates Chris Ronayne and Lee Weingart issued letters this week calling for council to pause jail planning, suggesting there are better options than the proposed $750-million, 1,900-bed facility at a potentially toxic site. Both have also said they will not put a jail at 2700 Transport Road, even if council votes to buy it. (Cuyahoga County executive candidates ask council to stop jail planning, lay out concerns, alternatives –

 It has a toxic past and a recent environmental study revealed there remains oil deposits in the ground, as well as explosive methane and cancer-causing benzene gases that would require continuous remediation to prevent serious health risks. (

The discussion and debate surrounding the potential jail site shows the stigma and challenges of overcoming public perception even after nearly 30 years of brownfield redevelopment in Ohio.

The steps being proposed to address the issues at the potential jail site include:

  • Restriction on use of groundwater
  • Vapor mitigation system
  • Two feet of clean cap material
  • Completing a cleanup through Ohio EPA’s Voluntary Action Program (VAP) and obtain a legal release upon completion (i.e. VAP covenant-not-to-sue)

The list of remediation techniques outlined for the site are common and used at hundreds of brownfield sites across Ohio.  In terms of restrictions on use of groundwater, a large portion of the City of Cleveland is already subject to what is called an “urban setting designation” which prohibits use of groundwater due to impacts from prior industrial use.

I work on many brownfield redevelopment projects.  Many projects in the City of Cleveland typically involve vapor mitigation systems, which are similar to a radon mitigation used in homes.  The VAP has been used over 700 times in Ohio previously to protect owners from liability from pre-existing contamination.  Other high profile sites in the County are currently undergoing far more complex cleanups under the VAP, such as the former Ford plants.

Ohio just completed the highly successful Ohio Brownfield Remediation Program that included $350 million dollars for brownfield redevelopment.  The three rounds of funding were oversubscribed.  The first round of funding alone saw:

  • $252.6 million in funding
  • 116 cleanups the vast majority of which if not all will use the VAP
  • 74 assessment projects

If after decades of successful brownfield redevelopment we still cannot overcome the stigma associated with such sites, it leads to urban sprawl and neglect for our urban centers.  The map below highlights the issues with urban sprawl in Cuyahoga County:

Developed Land 2002

The first image shows the total developed land in Cuyahoga County in 1948.  The second image shows developed land in 2002.  The key fact is that the population between 1948 and 2002 is roughly the same. (Images courtesy Western Reserve Land Conservancy)  This is a classic demonstration of urban sprawl.

It is easier and often less costly to develop on greenfield property.  Those dynamics is what leads to neglect of our urban cores and the secondary issues associated with sprawl.

While the focus on the environmental debate seems to be the classic stigma associated with brownfield redevelopment, equal consideration should be given to our neglect of our urban core and the dynamics that contribute to sprawl.  Finally, with a successful track record of remediating and reuse of former industrial sites across the state we should be way past the debate whether such property can be successfully and safely redeveloped.

The term “game changer” has been thrown around quite a bit with regard to EPA’s intention to list PFOS and PFOA as “hazardous substances” under CERCLA.  The reason it is a game changer is that it will greatly simplify the evidence needed to support cleanup claims at any site where PFOS or PFOS contamination exists.  Furthermore, as detailed on EPA’s webpage, CERCLA liability is:

  • Retroactive – Parties may be held liable for acts that happened before Superfund’s enactment in 1980.
  • Joint and Several – Any one potentially responsible party (PRP) may be held liable for the entire cleanup of the site (when the harm caused by multiple parties cannot be separated).
  • Strict – A PRP cannot simply say that it was not negligent or that it was operating according to industry standards. If a PRP sent some amount of the hazardous waste found at the site, that party is liable.

Furthermore, CERCLA liability extends to all “potentially responsible parties” (PRPs).  Under CERCLA, PRPs are broadly defined as the following groups:

  • Any current owners of property where hazardous substances were released regardless of whether they released those substances
  • Any past owners or operators of a facility that released hazardous substances
  • Generators of hazardous substances
  • Any transporter of hazardous substances
  • Any person who arranged for the disposal of hazardous substances

Whereas most of the PFAS suits seeking cleanup that are being filed are being brought against manufacturers of PFOS and PFOA, CERCLA  makes: 1) establishing liability much easier for Plaintiffs; and 2) casts a much wider net of potential liability.  In addition, CERCLA allows one liable party to seek contribution from other PRPs, which will likely means many more defendants being named than have currently been targeted in suits seeking cleanup of PFOS and PFOA contamination.

Finally, PFOS/PFOA contamination is very widespread, including at most airports, many military bases, manufacturing sites and any landfills that accepted consumer products.  Therefore, the potential number of sites that could be pulled into CERCLA or possibly CERCLA cleanups that could be reopened to address PFOS/PFOA contamination are numerous.

For these reasons, listing PFOS and PFOA as “hazardous substances” will clearly be a game changer.

What action is EPA taking?

On September 6th, EPA published its proposed rule to designate PFOS and PFOA (as well as related salts and structural isomers) as “hazardous substances” under CERCLA.  As discussed below, EPA is basing its designation on a finding that the compounds pose a “substantial danger to public health or welfare or the environment” pursuant to its authority under CERCLA  Section 102.  This is the first time EPA has ever directly listed a compound as a hazardous substance using its authority under CERCLA Section 102.

What is the regulatory impact of EPA’s designation?

The designation has three primary regulatory impacts:

  1. Reportable Quantity (CERCLA 103(a)) EPA is proposing to establish a reportable quantity (RQ) of 1 lbs in 24 hours.  The RQ designation requires any entity that releases PFOA or PFOS above the RQ threshold to report the spill to EPA and local emergency response officials.  Under CERCLA, 1 lbs is the default RQ.  EPA suggest it intends to issue a future rulemaking on the RQ which would presumably lower the RQ threshold.
  2. Federal Property Transfers (CERCLA 120(h))– Any time the federal government transfers property with PFOS and/or PFOA contamination it must notify the transferee of the contamination.  Either the contamination must be addressed prior to the transfer or the federal government must continue to remediation post transfer.
  3. Hazardous Materials designation under the Hazardous Materials Transportation Act (CERCLA 306(a))–  As designated as a hazardous materials certain requirements related to transportation of such chemicals.  These include recordkeeping, placards on trucks as well as other requirements.
  4. Government Cleanups– U.S. EPA can require cleanup of sites with PFOA and PFOS contamination and seek recovery from potentially responsible parties (PRPs).
  5. Private Party Cleanups– Private parties that conduct cleanup consistent with the Nation Contingency Plan (NCP) can recover cleanup costs from potentially responsible parties (PRPs).

What parties are affected by the proposed rulemaking?

The rulemaking list various manufacturers or businesses that may be impacted by the rule.  The categories include:

  •  PFOA and/or PFOS manufacturers (including importers and importers of articles)
  • PFOA and/or PFOS processors
  • Manufacturers of products containing PFOA and/or PFOS
  • Downstream product manufacturers and users of PFOA and/or PFOS products
  • Waste management and wastewater treatment facilities

It is important to note that the list of parties potentially affected by the rule is purely for information purposes.  Any party that is a “potentially responsible party” or PRP under CERCLA, releases PFOS/PFOA above RQs or transports PFOS/PFOA will be covered by CERCLA.

What is the legal basis for designation of PFOS/PFOA?

There are two different ways a chemical or compound can be designated as a “hazardous substance” under CERLCA.  There is automatic designation under CERLCA 101(14) if a compound is listed under the following environmental regulations:

  • Clean Water Act section 311(b)(2)(A) hazardous substances;
  • Resource Conservation and Recovery Act section 3001 hazardous wastes;
  • Clean Water Act section 307(a) toxic pollutants;
  • Clean Air Act section 112 hazardous air pollutants; and
  • Toxic Substances Control Act section 7 imminently hazardous chemical.

Alternatively, EPA can designate a chemical or compound as a “hazardous substance” using its authority under CERCLA Section102 under the following criteria:

(1) “such elements, compounds, mixtures, solutions, and substances”

(2) “which, when released into the environment”

(3) “may present substantial danger”

(4) “to the public health or welfare or the environment.”

EPA has not designated compounds previously using its CERCLA Section102 authority.  Therefore, outside of the major ramifications of listing PFOS/PFOA as hazardous substances, this action is also significant because it will be the first time EPA presents its interpretation of its legal authority under CERCLA Section 102 which can have significant consequences for listing of future compounds.

What was the basis EPA used to support its conclusion PFOS/PFOA “may present substantial danger to public health or welfare or the environment?”

EPA categorizes concerns related to PFOS/PFOA into the following categories and provides an overview of scientific evidence related to each category:

  • Chemical/Physical Characteristics– EPA cites to studies showing the chemicals are persistent and bioaccumulate.  The water solubility allows the chemicals to migrate readily from soil to groundwater.
  • Toxicity and Toxic kinetics– EPA cites to its revised Health Advisory Level and its review of over 400 peer –reviewed studies regarding the toxicity of the compounds.  EPA provides an overview of the conclusions from these studies in the draft proposed rulemaking.
  • Environmental Prevalence– EPA discusses how widespread the contamination can be found.  EPA discussing AFFF as a major source of contamination in soil and groundwater where AFFF was released.

Did EPA consider the costs associated with designating PFOA/PFOS as “hazardous substances?”

No. EPA determined that it does not need to consider costs when designating a hazardous substance using its CERCLA Section102 authority.  Given the fact that this is the first designation of a chemical/compound under CERLCA Section 102(a), EPA’s interpretation that it should not consider costs when designating a compound as a “hazardous substance” under Section 102(a), will likely be an area that will be challenged by industry.  There have been multiple cases that have gone up to the U.S. Supreme Court regarding the Clean Air Act and other environmental statutes as to whether EPA is required to consider costs when promulgating a rule. In some cases the Court ruled EPA cannot consider costs and in some cases the Court rule cost is a relevant consideration.  It appears likely that EPA’s rejection of cost considerations through this designation will be challenged.

While EPA states it does not have any obligation to consider costs in designating PFOS/PFOA as “hazardous substances,” EPA states in its proposed rule that direct costs would be related to the RQ reporting requirement and would be minimal (estimated at $370,000 annually from reporting of releases).  However, EPA states indirect costs associated with required cleanup is difficult to quantify.

What is Industry’s view of the proposed action to list PFOS/PFOA as “hazardous substances?”

When the proposed rule was under OMB review, the U.S. Chamber of Commerce sent a letter with a supporting study on the cleanup costs that will be imposed on industry stating costs should be considered.  The Chamber commented:

  • Private party compliance costs for this rulemaking are estimated to be between $11 billion and $22 billion.
  • Corresponding annualized private party PFOS/ PFOA cleanup costs at non-federal sites are estimated to be between $700 million to $800 million

Why was a Regulatory Impact Analysis Required by OMB?

The U.S. Chambers’ cost estimates greatly exceed the $100 million threshold requiring EPA to prepare a full regulatory impact analysis (RIA) consistent with EO 12866 and the fulfillment of additional statutory requirements under the Congressional Review Act and Unfunded Mandates Reform Act.  EPA is preparing a RIA analysis that will likely draw heavy scrutiny from industry.  EPA’s forthcoming RIA will be called the Economic Assessment of the Potential Costs and Other Impacts of the Proposed Rulemaking to Designate PFOA and PFOS as Hazardous Substances.   .

What are the next steps in the EPA process?

There is a 60 day public comment period which commenced on September 6th when the proposed rule was published in the Federal Register.  Parties will have until November 7, 2022 to comment on the proposed rulemaking.  It is anticipated EPA will receive a very large volume of comments on the proposed rule.  EPA says it is targeting finalizing the rule in the Summer of 2023.