Posted on August 29, 2011 by Kenneth Gray
ASTM has just given birth to a new standard for contaminated property – E2790-11 – the Standard Guide for Identifying and Complying with Continuing Obligations, which might become the most important American Society for Testing and Materials (“ASTM”) standard for contaminated property after its Phase I and II Standard Practices. Its six-year gestation involved the consensus building labor of the usual parties and midwives, including consultants, private and government landowners, lenders, EPA, and private practitioners.
Who needs another ASTM standard? CERCLA and similar state superfund statutes require landowners to comply with “continuing obligations” after discovery that property is contaminated, whether discovered before or after acquiring real property, as a condition of maintaining the landowner liability defenses. Since EPA is not authorized to undertake rulemaking on continuing obligations and because of concern that courts unfamiliar with environmental practices might take decades to develop a useful body of law to guide landowners, the ASTM E50 subcommittee on Real Estate Assessment and Management got to work.
Several of CERCLA’s six continuing obligations are straightforward and are therefore not addressed (e.g., legally required notices) in this Standard which focuses on the three continuing obligations that cover compliance with land use restrictions, institutional controls, and “taking reasonable steps” with respect to releases of hazardous substances and petroleum. The new Standard notes that the nature and extent of the continuing obligations should be proportional to the nature, extent, and complexity of the release and the potential for exposure at the property in question. It then describes a sequential process for determining whether continuing obligations apply, starting with identification of any recognized environmental conditions and then the review and evaluation of those conditions and activity and use limitations at the property (AULs are defined to include Institutional Controls, Land Use Restrictions, and Engineering Controls). This important evaluation step may in turn identify the need for a “Phase II” assessment or other detailed environmental sampling to gain a clear understanding of releases and exposure pathways, and consideration of whether the landowner should take additional remedial steps, or adopt or upgrade existing activity and use limitations.
If recognized environmental conditions do not qualify as continuing releases, threatened releases, or releases that could cause unacceptable exposure (and there are no land use restrictions or institutional controls), the procedures set forth in the Standard do not apply (other than documenting that determination). Otherwise, the next task is to prepare a “Continuing Obligations Plan” for developing or maintaining the AULs and reasonable steps for addressing releases of chemicals of concern, and a periodic “Continuing Obligations Monitoring and Evaluation Report.” Time is not on the contaminated property owner’s side: continuing obligations arise upon acquiring contaminated property under the bona fide prospective purchaser defense.
The ASTM Standard for Continuing Obligations is not intended to, and cannot replace, legal advice, and the Standard calls out the need to seek legal advice countless times. Intended for “users” (read: real property owners), a primary audience will be environmental consultants who will find the step-by-step process of the standard and the report outline comforting. Nevertheless, the Standard recognizes that continuing obligation determinations will be highly site-specific, providing another source of work for environmental consultants.
Of course, clients are keenly interested in what continuing obligations they must take to retain their landowner liability protections, and can be expected to ask what the law (or a court) may require. Consultants should fear to tread, and counsel will tread carefully.
EPA’s extant guidance on “reasonable steps” to stop and prevent hazardous substance releases is almost too general to be useful. In some cases, EPA has suggested that reasonable steps can include additional investigation (environmental testing), or steps to limit exposure (such as fencing or drum removal).
Does this ASTM Standard help clarify what is a “reasonable step” for addressing contamination? It does provide a next level of detail, and properly focuses on whether releases result in unacceptable exposures, but the Standard will in some cases require significantly more effort than some property owners envisioned with respect to analyzing potential future exposures and contaminant migration (e.g., the Standard mentions contamination of and migration in utility corridors), as well as ecological receptors and “species that may routinely inhabit the property or may seasonally migrate through the property” – not to mention evaluation of intended property development.
The Standard also contemplates a careful review of whether AULs exist or should be adopted to address unacceptable exposures or protect remedies, and how they should be maintained. The review may also require consideration of whether additional activity and use limitations should be adopted, and whether existing AULs should be improved.
The Standard does note one issue that historically has not been part of the environmental lawyer’s beat: a determination of whether prior recorded interests (such as an easement or mortgage) can potentially compromise or otherwise defeat a land use restriction or institutional control. Those familiar with recorded Environmental Covenants under the recent Uniform Environmental Covenants Act will recognize this issue, but real estate law governing recorded interests can impact all AULs recorded after the prior interest. The continuing obligation duty in some cases may require obtaining consent for a land use restriction from an outstanding interest holder. Can you say “subordination”?
By publishing a Standard, ASTM is providing a ready reference as courts weigh whether these three continuing obligation elements of the CERCLA defense have been established. Depending on the complexity of the site and the issues, clients would be wise to consider the investigation and documentation processes. Of course, the Standard is not a legal requirement, but environmental practitioners may wish to identify sites and transactions where the Standard can be helpful to clients in limiting unwanted exposures and liability – recognizing that whether continuing obligations are satisfied will be evaluated with the benefit of hindsight.