ASTM International’s environmental assessment, risk management and corrective action committee (E50) recently revised its standard practice for Phase I Environmental Site Assessments (ESAs). The E1527 standard was initially published in 1993 to define “good commercial and customary practice” for conducting Phase I ESAs. This latest revision, published on November 15, 2021, represents over three years of work and consensus-building by a team of over 250 experienced industry professionals.
EBI Consulting’s National Client Director, Elizabeth Krol, led the Task Group’s historical research focus group, which proposed revisions and updates to reflect the current standard of care for the property due diligence industry. Here, she helps bring some clarity to the updated Standard.
Q: How often does this standard get revised? And why?
A: The E50 Chair convenes the E1527 Task Group to review and propose revisions to the standard. In line with ASTM guidelines, it’s reviewed roughly every 7 to 8 years. Because the last revision was completed in 2013, our goal was to complete the updates and publish the new standard before the end of 2021.
Q: What are some of the biggest changes in the revised standard?
A: There’s been a substantial effort to review, improve, revise, and clarify language for the benefit of both Producers (usually us Environmental Professionals) and Users (e.g., lenders, prospective purchasers). Some sections of the standard remained largely unchanged from the original 1993 standard. Because E1527 is a guidance document, we needed to revise the phrasing to reflect good and customary commercial practices today.
This newest revision is more user-friendly and accessible for assessors, flows better, and provides more guidance language. There's also a deliberate and improved legal appendix and a REC flow diagram, like a decision tree, to help assessors determine whether something meets the Recognized Environmental Condition definition. It's wonderful for the due diligence community to have a stronger, updated standard that reflects good and customary practice.
Q: What was clarified in the old standard compared to this new standard?
A: The standard is a guidance document. Some of the bankers for the major national and regional financial lending institutions, who are very active participants in this process, saw significant variability in the Phase I reports they received. Some are extremely thorough and detailed, while others are incomplete.
With the new standard, assessors should be generating more thorough reports. There's an expression, “a rising tide floats all boats,” and the Task Group members hope the new standard elevates the whole industry. Where you'll see a difference is in more consistently thorough reports. One theme throughout the new standard is better documentation to “pull the threads” of the data together to understand the current and historical use of the subject and adjoining properties.
Q: How will this new standard affect EBI Consulting and our customers?
A: We at EBI are fortunate to consistently produce high quality reports, so most clients won’t see a material difference. There will be some tweaks, but overall, as the bankers say, “a good Phase I is a good Phase I.” Our clients have come to trust us, and they know we produce high-quality reports. For our customers who source their Phase I ESAs elsewhere, they could see substantial changes.
Q: Finally, what should people know about the changes to the standard who don’t necessarily follow the industry closely?
I'm inclined to say two things to people that maybe are not as invested in this. First would be the necessity of increased written and verbal communication. There needs to be more dialogue between clients and EPs.
Second, people should be aware that this standard raises the bar, particularly around documentation. Assessors should gather pertinent information because there will be a higher expectation to identify significant data gaps, incorporate more photographs, and document the EP’s research.
The role of the assessor is to look for fact sets, gather data, and look for fact patterns, which starts to illustrate the story of the subject and adjoining properties. It’s best to go into it with the mindset of a detective and ask yourself what you’re learning, observing and documenting. I think you need to have an open mind and keep asking questions, because while the standard is flexible, it's a roadmap with guardrails. It's important to follow that process, and answer those questions, which improves the final report.
For more information, see Elizabeth Krol in a recent webinar below from LightBox Real Estate.