US EPA Approves 2013 Amendments to Standards and Practices for All Appropriate Inquires

Environmental Law

 

On December 30, 2013, the United States Environmental Protection Agency (“EPA”) took direct final action to amend the Standards and Practices for All Appropriate Inquiry (“AAI”) Rule regarding ASTM International’s E1527-13 “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process,” 78 Fed. Reg. 79319 (Dec. 30, 2013). This final rule allows for the use of E1527-13 to satisfy the requirements for conducting AAI under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). Further, EPA intends to remove all reference to ASTM E1527-05 in the AAI rule and recommends that all environmental professionals and prospective purchasers use the ASTM E1527-13 standard.

EPA had originally issued a direct final rule on August 15, 2013, however the rule was withdrawn after EPA received negative comments during the public comment period. Simultaneous with the issuance of the direct final rule, EPA had also issued a proposed rule to amend the Standards and Practices. EPA then relied on this proposed rule to respond to comments and proceed to this final rule.

AAI is a process of evaluating a property’s environmental conditions and assessing whether any contamination exists. A purchaser of potentially contaminated property must follow prescribed AAI standards and practices in order to receive the liability protections under Section 101(35) of CERCLA for bona fide prospective purchasers, contiguous property owners, or innocent landowners, as set forth in the Small Business Liability Relief and Brownfields Revitalizations Act (the “Brownfield Amendments”). The Brownfield Amendments require EPA to develop regulations establishing standards and practices for AAI. EPA issued a Final Rule (40 C.F.R. § 312) establishing standards and practices for conducting AAI in November 2005.  Under the 2005 Final Rule, Bona fide prospective purchasers, contiguous property owners, and innocent landowners could either conduct Phase I environmental site assessments pursuant to the AAI Final Rule or, alternatively, by complying with two ASTM standards recognized as equivalent to the AAI Final Rule: ASTM E1527-05, “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process,” and ASTM E2247-08, “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessments for Forestland or Rural Property.”

ASTM E1527-13 is the latest replacement option for bona fide prospective purchasers, contiguous property owners, and innocent landowners to use. This Phase I environmental standard updates its 2005 predecessor by clarifying and revising definitions of Recognized Environmental Condition (“REC”), Historical Recognized Environmental Condition (“HREC”), and Controlled Recognized Environmental Condition (“CREC”). The most notable updates concern the revised definition of “migrate/migration” to specifically include vapor migration. This change now makes it necessary for environmental professionals to identify as a REC a release that migrates onto a subject property via a vapor pathway.

Further, guidance was added to ASTM E1527-13 at section 8.2.2, Regulatory Agency File and Records Review. The new standard for file and record review recommends that environmental professionals make efforts to review and document the validity of information taken from searches of agency databases. The goal is to increase validity in Phase I ESA reports. Because this new standard is more comprehensive than its predecessor and represents the current industry standard, prospective purchasers and users can be more confident in the ESA results. 

Although the final rule approving ASTM E1527-13 does not explicitly supersede or replace ASTM E1527-05, EPA strongly recommends that entities use the ASTM E1527-13 standard for the purposes of CERCLA landowner protections. EPA notes, however, that “[i]n the near future, EPA intends to publish a proposed rulemaking to remove the reference to ASTM E1527-05 standard in the All Appropriate Inquiries Rule.” EPA’s intent is clear: “to promote the use of the current industry standard and reduce confusion associated with the regulatory reference to a standard no longer recognized as current by ASTM International and no longer marketed by the standards development organization as reflecting its current consensus-based standard.”

Although the updated standards provide a more comprehensive assessment of environmental site history and conditions, complying with E1527-13 may be more costly and may increase the time needed to complete an ESA report than under E1527-05. However, the benefits will likely outweigh the possible increased cost. This new standard will provide a more comprehensive review of the historical environmental conditions at a property as well as risk of vapor migration and intrusion. A potential purchaser and user of the report will now have more confidence in the ESA report.

Although ASTM E1527-05 has not yet been removed as a standard to conduct AAI, it is not recommended that environmental professionals continue to use this standard. An environmental professional could face claims of professional negligence because EPA has clearly indicated that E1527-13 is now the current industry standard. Therefore, if a consultant fails to conduct an assessment of the real or potential occurrence of vapor migration and vapor release at a property, and such was later discovered, that consultant could face liability. For many environmental professionals, this change will not result in any material difference in the manner in which they conduct their Phase I ESAs. Nevertheless, all environmental consultants should review the new standards carefully and ensure their reports reflect the additional requirements.

This direct final rule became effective on December 30, 2013. Prospective purchasers and environmental professionals should now use ASTM E1527-13 in conducting Phase I Environmental Site Assessments to comply with the AAI rule and to be eligible to claim limitations on CERCLA liability in conjunction with a property purchase.

For more information on the new ASTM E1527-13 or liability protections under CERCLA, please contact Miriam Villani or Jason Kaplan.

Posted by Miriam Villani

New York Green Bank to Kickstart Clean Energy Investment

Environmental Law

 

The State of New York wants to jump start investment in clean energy projects.

In Governor Andrew M. Cuomo’s 2013 State of the State address, he proposed the New York Green Bank (“NY Green Bank”), a financing mechanism to spur private sector investment in “commercially-proven energy efficiency, renewable energy, and other clean technologies.”

On December 19, 2013, the New York Public Service Commission (“PSC”) approved $165 million in funding of the NY Green Bank. This funding was combined with $45 million previously allocated to it from emission allowance sales under the Regional Greenhouse Gas Initiative (“RGGI”) and created an initial $210 million reserve to achieve the Bank’s objectives.

The NY Green Bank will not operate like your typical bank; you won’t be able to make deposits or get a free water bottle when you open an account. Rather, the NY Green Bank will partner with “financial institutions and industry participants such as energy service companies, developers and equipment manufacturers to support economically viable clean energy projects.”

The State realized that the current system of providing subsidies and grants to incentivize clean energy was not working. New York State entities spend approximately $1.4 billion annually towards clean energy development and implementation, yet despite this level of spending, clean energy goals were not being reached. That model was not sustainable. The hope is that this one is.

The NY Green Bank will leverage private capital to finance its initial investments, and once those investments mature, the capital will be returned to the bank to be reinvested in other new clean energy projects. There are many “economic and creditworthy” renewable energy projects throughout New York that cannot get the financing. Several barriers prohibit private sector capital from flowing to these projects, namely “federal policy uncertainty, the absence of standardized contracts and underwriting criteria, and limited loan repayment and project performance data.”

To overcome these barriers, the NY Green Bank will operate with the following objectives:

  1. To enhance total market participation by providing credit support and/or aggregation mechanisms designed to scale clean energy generation and energy efficiency projects.
  2. To partner, rather than compete, with market intermediaries — such as project developers, energy service companies, or financial institutions—that are already making progress in the market, but where that progress is constrained by the lack of availability of reasonably priced financing.
  3. To leverage both the capital and institutional capabilities of its private sector partners.
  4. To not be in the subsidy business, but rather will earn a return on investments to preserve and grow its capital base, recycling that capital into new clean energy projects when its initial investments mature, ultimately creating a fully self-sustaining $1B support system for the clean energy finance market.[1]

 

With the establishment of the NY Green Bank, New York has set itself up to compete in the renewable energy future and to attract cleantech and sustainable energy projects to the Empire State. The NY Green Bank compliments New York’s other clean energy objectives, such as the New York Renewable Portfolio Standard which is New York’s goal to reach 30% renewable energy supply by 2015.

A positive sustainability loop has been created for renewable energy in New York. As these programs boost finance and development of clean energy projects throughout the state, there will be real short and long-term benefits for the economy and environment; our dependence on fossil fuels are reduced, jobs are created, air quality is improved, consumer energy bills are reduced, and our energy system as a whole is more resilient. New York’s energy future appears to be very bright.

The NY Green Bank expects to begin engaging potential partners in January 2014.

For more information on clean energy investment and the New York Green Bank, please contact Miriam Villani or Jason Kaplan.


[1] New York Green Bank, Summary, Available at http://www.governor.ny.gov/assets/documents/GBBackgrounder91013.pdf.

Posted by Miriam Villani