All Appropriate Inquiry – AAI

May 14, 2013

All Appropriate Inquiry or “AAI” is defined by ASTM and EPA (through CERCLA) as the process of conducting inquiry “into the previous ownership and uses of the property consistent with good commercial or customary practice…that will qualify a party to a commercial real estate transaction for one of the threshold criteria for satisfying the LLPs to CERCLA liability.” Essentially, conducting all appropriate inquiry consists of environmental due diligence conducted prior to a property transaction to determine whether a property may have been contaminated by past or current activities, in order for a user (for example, the prospective purchaser) to be exempt from liability for contamination that existed on a property prior to the property transaction.

The AAI requirement began with the CERCLA or “Superfund” law of 1980, and was refined by several later laws: the Superfund Amendment and Reauthorization Act (SARA) in 1986; the Asset Conservation, Lender Liability and Deposit Insurance Protection Act in 1996; and the Small Business Liability Relief and Brownfields Revitalization Act (“Brownfields Amendments”) in 2002. The most recent ruling regarding what composes AAI was decided in 2005 by the EPA’s Final Rule on All Appropriate Inquiries.

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Comprehensive Environmental Response, Compensation and Liability Act – CERCLA

April 30, 2013

Also known as the “Superfund” law, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) was enacted in 1980 and, among other things, gave the federal government the ability to respond to releases or threatened releases of hazardous substances, and to pursue polluters (“responsible parties”) or potential polluters (“potentially responsible parties”) for the cleanup of contaminated sites.

CERCLA created the need to conduct “all appropriate inquiryprior to a property transaction to qualify for exemption from CERCLA liability for cleanup costs.

CERCLA was amended by the Superfund Amendment and Reauthorization Act (SARA) in 1986.


Phase I Environmental Site Assessment

December 28, 2012

 

Phase I Environmental Site Assessment is a generally accepted report for evaluating the environmental liability associated with a property, and is frequently required by lenders.

An environmental consultant conducting a Phase I ESA gathers information regarding a property to evaluate whether past or present activities may have caused contamination of the soil or groundwater.  If the Phase I ESA uncovers a recognized environmental condition (REC), the environmental consultant will usually recommend a Phase II ESA, which involves invasive soil or groundwater testing. Their information sources when conducting a Phase I ESA may include the following:

 

Site Visit

-Inspection of site and observation of surrounding properties

-Note presence of hazardous materials and potential sources of contamination

-Look for evidence of past uses of the property

 

Historical Research

-Aerial photos

-City directories

-Building permits

-Topographical maps

-Oil & gas maps

-Title information

 

Geology & Hydrogeology

-Soil type

-Ground water flow

 

Regulatory Research

-Fire department and other local agencies

-State & federal environmental agencies

 

Interviews & Document Review

-Tenants, owners and property managers

-State & local regulators

-Review provided reports

 

The widely accepted standard for conducting a Phase I ESA is the American Society of Testing Materials (ASTM) 1527-2005 Standard, although specific clients and agencies may have additional requirements and standards. The ASTM E1527-05 Standard for Phase I Environmental Site Assessments has been accepted by the EPA as meeting the requirements of All Appropriate Inquiry. The EPA’s All Appropriate Inquiries Rule governing the scope of Phase I Environmental Site Assessments went into effect on November 1, 2006 and provided specific scope requirements for a Phase I ESA to meet the requirements of CERCLA’s (Comprehensive Environmental Response, Compensation and Liability Act, commonly known as the Superfund law) innocent land owner defense.


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