Environmental Due Diligence and Contaminants of Emerging Concern
The development of a Phase 1 environmental site assessment (ESA) is commonly the first step in performing real estate environmental due diligence. The Phase 1 ESA typically relies on identifying the potential present or past uses of substances that federal law considers “hazardous.” The most commonly cited Phase 1 ESA process (ASTM International’s Standard Practice for Phase 1 ESAs [ASTM E1527-13]) defines a recognized environmental condition (REC) as, “the presence or likely presence of any hazardous substances or petroleum products in, on, or at a property…” The ASTM standard further defines a hazardous substance as, “a substance defined as a hazardous substance pursuant to Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).” Many emerging contaminants have not been listed under CERCLA and, therefore, do not meet the strict definition of a REC. It is best to keep in mind that the concern is what is emerging – not the contaminant; in many cases, the chemical has been on a property for many, many years.
The class of emerging compounds currently receiving the most attention are per- and polyfluoroalkyl substances (PFAS). PFAS are manmade chemicals that include PFOA, PFOS, and GenX. There are thousands of PFAS compounds, only a handful of which are proposed for regulation, or are being regulated from a cleanup and exposure standpoint. In addition to PFAS, other emerging contaminants include 1,2,3-trichloropropane, 1,4-dioxane, numerous other personal care product chemicals, pharmaceuticals, and nano-particles.
Emerging contaminants present unique challenges for practitioners performing Phase 1 ESAs. As part of All Appropriate Inquiry, as defined by the United States Environmental Protection Agency (US EPA), specific protocols outlined in ASTM E1527-13 are followed to evaluate whether potential environmental liabilities are present. The standard practice includes the review of reasonably available public records.
An environmental professional typically purchases a commercially available environmental database report. The database reports consist of a listing and catalog of federal and state environmental records related to the subject property. The cataloged environmental records are typically based on the storage, handling, disposal, release, or cleanup of a regulated (hazardous) compound. Since most of the emerging contaminants are either not listed as regulated compounds, or have only recently been added to the list of regulated compounds, there may be no records regarding the current use or storage of these compounds and little or no history documenting their usage.
Environmental professionals will need to stay abreast of both the regulatory and technical aspects of emerging contaminants. They will need to investigate more deeply historical property uses and will not be able to rely on a “standard” list of questions that typically cover the use of hazardous and petroleum compounds. More detailed questions regarding specific historical manufacturing and operating practices may be appropriate. Questions relating to any past fires at the subject property or adjacent properties may also be necessary as the use of firefighting foams is a common source of PFAS impacts.
Additionally, the environmental practitioner may need to justify to their client or property owner why a REC was identified for a chemical or compound that is not listed as a hazardous substance. Perhaps it’s best for an environmental professional to discuss with a client how to manage the discovery of an emerging contaminant in the earliest stages of the Phase 1 ESA project – or even at the proposal stage.
The business risks of mishandling information on emerging contaminants at a property are high, and improperly addressing these concerns can be severe. If you have any questions regarding the property due-diligence process, and how emerging contaminants might impact your transaction, feel free to contact Stephen Brower at firstname.lastname@example.org.