The Commercial Real Estate Industry Is Transitioning to the New ASTM Phase 1 ESA Standard—but It’s Not There Yet

THE COMMERCIAL REAL ESTATE INDUSTRY IS TRANSITIONING TO THE NEW ASTM PHASE 1 ESA STANDARD—BUT IT’S NOT THERE YET

  1. A LightBox survey found the new standard is being used by almost a quarter of respondents, and others are preparing for change.
  2. Lenders are likely to drive adoption, which should increase with EPA recognition of the standard
  3. Survey respondents are training their internal teams and adjusting processes and report templates in preparation for the shift

Last year, the American Society for Testing and Materials (ASTM) Committee on Environmental Assessment, Risk Management and Corrective Action approved a new standard, E1527-21, for conducting Phase I Environmental Site Assessments (ESAs), modifying the earlier standard, E1527-13. The new standard will affect a range of areas, including report writing, definitions, historical research, data gaps, user requirements, site visits, interviews, emerging contaminants, per- and polyfluoroalkyl substances, and shelf life.

In a recent survey, LightBox invited environmental consultants, engineers, lenders, and other risk-management professionals to share their responses to a series of questions about the industry’s transition to the new standard, which was published in November 2021. Representing the first look into how the environmental risk-management industry is responding, the survey indicates how widespread adoption is to date, and how providers are preparing for adoption.

A total of 277 environmental professionals (EPs) and a handful of lenders responded to the LightBox survey during a three-week period. The participants had registered for LightBox’s ongoing series of webinars on E1527-21, suggesting a higher-than-average awareness of the revisions process than would be the case with a random sample of EPs.

 

Adoption Begins to Grow, and Others Prepare for Change

At the time the survey was conducted in late February/early March, 21 percent of EPs were following it exclusively, and another 10 percent were leaving it up to their clients to choose between -13 and -21.

A more significant 32 percent are taking a wait-and-see approach, pending the U.S. Environmental Protection Agency’s recognition of the standard as compliant with the All Appropriate Inquiries rule under the Comprehensive Environmental Response, Compensation, and Liability Act for the purposes of assisting a property owner seeking to qualify for landowner liability protection. Another 23 percent of respondents are still in the process of getting their staff, processes, and report formats revised in accordance with the latest round of changes.

Several respondents reported they are referencing both standards in their reports at least until the EPA’s rule takes effect, which should spur more widespread adoption. Once that happens, purchasers seeking landowner liability protection under CERCLA may follow the new standard to meet AAI.

Additional key findings:

  • Lenders are likely to drive adoption of the standard; outside of some lenders, EPs report that most clients are either not yet aware of the standard or are waiting for the EPA to recognize it as AAI-compliant.
  • During the interim period before the EPA rule’s effective date, respondents are preparing their internal teams and adjusting processes and report templates rather than educating clients about the changes.
  • The survey results indicate the industry expects more client requests to add PFAS risk assessments to the scope of work for Phase I ESAs; one quarter of respondents have already added a report section in their assessments for emerging contaminants, and others expect to do so in response to future federal policy changes.

 

What’s Happening Now and What Lies Ahead as the Industry Prepares for Transition

During the period before adoption is more widespread, environmental due diligence firms are taking numerous steps to prepare their staff, processes, procedures, and report formats. The survey results indicate that EPs are more focused on educating staff than on external efforts to educate their clients on what’s changing and how they’ve prepared. Educational efforts include attending webinars like the LightBox series, ASTM training classes, and conference sessions.

EPs said various clients were requesting information about the new standard, including attorneys, state and local government agencies, homebuilder land departments, industrial clients, school districts selling excess land, and other clients.

It’s important to note that the extent to which any firm must change its Phase I ESA procedures in response to recent revisions to the standard practice will hinge on its own baseline. Some EP firms may require little or no adjustment to transition, while for others, significant changes may be necessary. Many respondents are already conducting historical research on adjoining properties, while others are expanding their focus to include them.

Commenters said there could be added levels of effort associated with:

  • More database reviews for adjoining properties (e.g., city directories)
  • Site plan preparation
  • Local records requests from city building departments and fire departments
  • Slightly longer report preparation
  • More attention on emerging contaminants

What effects will the changes have on EPs’ businesses? According to one respondent, “The only potential for cost change would be if the purchase of the title search was deemed requisite by me, the consultant, instead of provided by or being the responsibility of the report user as indicated in -21.” Another said: “We were already doing Phase I ESAs that basically complied with -21 so no additional timing is necessary.”

In the end, additional assessment investigations could take more time, but clients may not want to pay more for the extra effort, and assessors may end up doing more work with no increase in compensation.