Why You Should Pay Attention to the Revised, Broadened ASTM Standard for Phase I Environmental Assessments

16 February 2023 Publication
Author(s): Gary S. Rovner Nicholas R. Johnson Judah C. Lieblich

On December 15, 2022, the United States Environmental Protection Agency (EPA) published a notice of a Final Rule approving the use of a new American Society for Testing & Materials (ASTM) standard for conducting Phase I Environmental Site Assessments (Phase I ESA). The new standard, ASTM E1527-21, became active on February 13, 2023. The existing standard, ASTM E1527-13, may still be used but will be phased out on February 13, 2024, after which ASTM E1527-21 will be the only standard for conducting a Phase I ESA.

The new standard could expand the scope of what is considered a Recognized Environmental Condition (REC) and provides an option to conduct an investigation into the presence of emerging contaminants, including per- and polyfluoroalkyl substances (PFAS), at a subject property. The ubiquity of Phase I ESAs in commercial transactions means that these changes will impact how environmental risk is identified and managed in commercial transactions and could make environmental matters more prominent for corporate decision-makers evaluating transaction risk. 

New, broader standards for RECs

The main focus of a Phase I ESA is to identify any RECs that could pose an environmental risk and impact the value of a subject property. Under both the ASTM E1527-13 and 1527-21 standards, the definition of a REC includes both known releases of hazardous substances and the presence of hazardous substances under conditions that pose a “material threat” of future releases. These categories capture fairly objective factual scenarios – either the documented presence of a release (i.e., based on prior subsurface testing or database documentation) or contemporaneously observed conditions onsite (e.g., a messy hazardous materials storage room with significantly cracked pavement).

The ASTM standards also sweep an additional concept within the bounds of the definition of a REC – the “likely presence” of hazardous substances at the property under conditions that present an elevated risk. Unlike a known release, the concept of “likely presence” is subjective, and more reliant on the discretion of the environmental professional conducting the Phase I. Consider, for example, a manufacturing facility that has operated for 75 years, using moderate (but not extensive) amounts of hazardous substances over that time period, and with no documented releases, but no prior subsurface investigations either. Is it “likely” that a release has occurred at this facility at some point in time such that the facility’s history alone constitutes a REC? Consultants may reasonably answer this question differently under different circumstances, and based on the professional experience each brings to the analysis.

ASTM E1527-21’s definition of REC further broadens the vague concept of “likely presence.”  Under ASTM 1527-13, RECs were defined to include the likely presence of hazardous substances due to a release or under "conditions indicative of a release." Conditions indicative of a release may include staining, stressed vegetation, and other conditions capable of delineation. In ASTM 1527-21, the language referencing conditions indicative of a release has been removed from the definition of a REC, and a REC is now defined more broadly to include the likely presence of a hazardous substance due to a "likely release." The term “likely” is defined in ASTM E1527-21 as that which is "neither certain nor proved, but can be expected or believed by a reasonable observer based on the logic and/or experience of the environmental professional, and/or available evidence, as stated in the report to support the opinion given therein."  The reliance on the expectations of the “reasonable observer” likely increases the opportunity for differing opinions among different consultants. 

It is too soon to say exactly how consultants, courts, and government entities will interpret the change in wording. However, the broad concept of the “likely presence” of hazardous substances due to a “likely release” may increase the number of RECs identified – and particularly so in cases like the hypothetical provided above. A decision to categorize a condition as a REC (as opposed to a Business Environmental Risk, or a non-ASTM-defined concept such as an “Other Environmental Consideration”) is not without practical consequences, as both lenders and insurers are well attuned to the concept of a REC. Lenders may require further investigation (e.g., a Phase II subsurface investigation) of a REC as a condition for advancement of loan proceeds, and insurers may exclude RECs from the scope of pollution legal liability and/or Representations and Warranties (RWI) policies, and potentially in cases where previously consultants may have determined not to identify vague matters as RECs in the first place. The exclusion of vague “likely presence” RECs could be broad enough to undermine the utility of an insurance policy. Such decisions may in turn delay deal/loan closings or shift the buyer/seller risk profile, if a Phase II needs to be performed or if the parties need to negotiate a separate indemnity due to a lack of insurance coverage.

Optional emerging contaminant review

Another important change in the new standard is that ASTM E1527-21 now provides for an optional emerging contaminants review as a non-scope item for a Phase I. Emerging contaminants are substances which are not defined as hazardous under CERCLA, but may be considered hazardous substances under state law or otherwise. ASTM E1527-21 expressly states that emerging contaminants include per- and polyfluoroalkyl substances, also known as “PFAS." Traditionally Phase I ESAs have included statements regarding non-scope considerations such as the possible presence of lead-based paint and asbestos-containing materials. This non-scope process is now expanded and more formalized under ASTM E1527-21, and will likely increase the number of Phase I ESAs addressing the presence of PFAS. Conducting an optional PFAS assessment will be an important tool for specific site uses which may have contributed to a PFAS release, or where a PFAS release is likely to have occurred in the past. Establishing the potential for PFAS use at a site before acquisition will likely be an important component of due diligence risk assessment considering the EPA's proposed rule to add several PFAS compounds as hazardous substances under CERCLA.

Additional Changes

The new ASTM E1527-21 also includes the following significant changes:

  • Changes to the definition of a Controlled REC (“CREC”) to provide clarification as to the treatment of regulatory closure letters and satisfaction of current unrestricted use criteria - the standard now provides greater specificity and examples of CRECs;
  • Changes to the definition of “de minimis condition”, which is now defined in terms of a condition related to a release – the new standard also provides various examples of de minimis conditions;
  • Changes to the definition of a Historical REC (“HREC”) to clarify that a site must meet current unrestricted use criteria without any property controls - the new standard provides various examples of HRECs;
  • Expansion of historical research required to be conducted to include various new sections, including requirements related to property identification history and historic uses of adjoining properties; and
  • Changes to the viability period of Phase I reports – the reports are now valid for 180 days from the date of certain report components prior to the date of acquisition, or for leases or refinancing, the date of the intended transaction, and the report must identify the dates of these components in the report.


The inclusion of "likely release" and the broad definition of "likely" indicates that the new ASTM E1527-21 standard will result in more discretion for consultants to include conditions as RECs, but less discretion to exclude conditions from consideration as RECs, particularly where there is some evidence for their presence. Whether or not to conduct the optional emerging contaminant review could have important legal implications, particularly as the regulatory landscape shifts with regard to PFAS. Having specialized legal counsel to help define the scope of a review at the start of a transaction, and which has the expertise to work with consultants during environmental diligence review before issues arise, will be critical to a successful and timely closing of a corporate or real estate transaction.

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