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Much has been written during the past several months, including by this author, regarding the United States Environmental Protection Agency’s impending all appropriate inquiry rule, and appropriately so. That rule, which will be effective Nov. 1, will establish a new standard practice for environmental due diligence. While the all appropriate inquiry (AAI) rule will not dramatically change the overall process for due diligence or the types of information to be searched and relied on, it will change several important details regarding how due diligence is performed. It is critical that prospective purchasers of property comply with the new standard or they will jeopardize their ability to assert the bona fide purchaser defense available under federal law and risk their Phase I environmental assessment report being rejected by their lender. It is also critical, however, that prospective purchasers keep in mind that Phase I environmental assessments do not ordinarily address several important issues for environmental due diligence. This has been true under the prevailing American Society of Testing and Materials (ASTM) 1527 standard, and will continue to be true under the new AAI standard. This is because both the existing and the new standard focus on issues relevant to liability for contamination and establishing defenses to liability; they do not address other environmental issues potentially relevant to the value of the property and the client’s ability to develop it as they hope. Common examples of such issues are radon, asbestos, lead-based paint, wetlands and other protected areas. Many developers and lenders are used to considering these issues during due diligence and include them in their standard scopes for environmental assessments. Another issue that has received increasing attention recently and is likely to soon become a standard part of Phase I assessments in vapor intrusion. What is Vapor Intrusion? Certain chemicals when released to soil or groundwater in liquid form at sufficient concentrations will volatize, producing vapors that migrate upward through the soil. If the distance to the surface is short enough, those chemicals may be emitted to the air. If a structure is located above the soil or groundwater contamination, particularly a structure with a basement, the vapors may enter it through cracks or seams. Once vapors enter a basement, typically their path is blocked and they will collect there. If the vapors continue to accumulate, they may reach concentrations that pose a risk to the health of people breathing the air. They may even reach concentrations that pose a risk of fire or explosion. Vapor intrusion is most typically associated with petroleum compounds, volatile organic compounds such as solvents, and organic waste. Consequently, vapor intrusion is most commonly an issue at or near gas stations, petroleum terminals, storage facilities, refineries, landfills, manufacturers of metal components and facilities where these compounds have been disposed of, both active ones and those that have been closed. Vapor intrusion can even be an issue at facilities where a cleanup was performed without consideration of the potential for vapor intrusion. Since even governmental agencies have only recently begun to consider the potential for vapor intrusion, there are many properties that fall in this category. Where the potential for vapor intrusion has been identified, the risk of harm is often relatively easy to address. As with radon, the key is to prevent the accumulation of vapors at dangerous levels. Short of remediating the soil and/or groundwater contamination from which the vapors emanate, vapor intrusion can be addressed by installing barriers and vents around subsurface structures or venting the air within them. If the potential for vapor intrusion is recognized at the time of the design and construction of the subsurface structure installed such devices it is relatively easy and inexpensive. Obviously doing so in an existing structure is more difficult and expensive. Remediation Policies To date, vapor intrusion has been addressed almost entirely in the context of remediation of subsurface soil and/or groundwater contamination. Whereas in the past remediation was considered complete when the appropriate concentrations were attained in the contaminated media, today it is likely that the party conducting remediation will be required to determine the potential for vapor intrusion (often referred to as a pathway) and, if necessary, implement the types of remedial measures described above, before the overall site remediation will be considered complete. The EPA adopted a vapor intrusion policy in 2002 and several states, including Pennsylvania, New Jersey and New York, have since followed suit. These are all policies; i.e., there is no independent statutory or regulatory requirement for the vapor intrusion pathway to be considered and no governmental agency can institute an enforcement action against a property owner or remediator for failing to address vapor intrusion. There is also no requirement that sites where cleanups were completed before these policies were instituted be evaluated for the potential of vapor intrusion. Rather, the property owner/remediator will not be able to obtain agency approval of the cleanup they are conducting without addressing the vapor intrusion pathway. In a situation where a cleanup must be conducted in order to redevelop the property this may be tantamount to a requirement. The state policies have many similarities, but a few important differences. All identify a distance from a subsurface source of volatiles, typically 100 feet, as a trigger of evaluation of the vapor intrusion pathway. All, except New York, establish risk-based screening levels based groundwater and soil gas results. All, again except New York, allow for a risk-based approach to remediation, meaning that the general type of use of the structure and occupancy of basements are considered in determining target remediation levels. All require evaluation of preferential pathways and regard a winter sampling event to be a worst-case scenario. New York, compared to other states, places a greater emphasis on actual indoor air sampling results rather than allowing use of soil and groundwater screening levels and modeling. Both New York and New Jersey require sampling for a longer list of compounds than other states. Due Diligence To date very little attention has been paid to the potential need to address vapor intrusion during environmental due diligence. However, considerable momentum is building in support of an effort to make evaluation of the vapor-intrusion pathway part of customary due diligence. A recent experience illustrates why in some circumstance doing so is prudent. A client was considering purchasing a large suburban office complex. The Phase I report the client commissioned did not identify any recognized environmental conditions and the client was ready to complete acquisition. However, the Phase I report identified a former government facility adjacent to and upgradient of the property that had created a large plume of solvents in groundwater. As part of its investigation the government agency in charge placed a monitoring well at the far downgradient boundary of the property being considered for acquisition. Analysis of samples from that identified levels of a solvent that were well in excess of the applicable remediation standard. Investigation was continuing and it was expected that additional monitoring wells would be placed on the property in question. The Phase I report did not identify the solvent plume as a recognized environmental condition, because the responsible agency was obligated to complete any necessary cleanup. Since the property was connected to public water, the report concluded that the plume posed no risk to the property and did not recommend any further investigation. The Phase I report did not address the potential for vapor intrusion whatsoever. Pursuant to both existing practice and the AAI rule the conclusions in the Phase I report were appropriate. The client could have proceeded with the acquisition, based in part on the Phase I, only to later discover hazardous levels of vapors resulting from the solvent plume in the basements of the office buildings. As owner of the property, the client would potentially have been liable for any damages suffered by occupants of the building and likely would have needed to incur the expense of installing venting systems to dissipate the vapors to safe levels. Fortunately, the client requested that its consultant evaluate the vapor-intrusion pathway. The consultant was able to model the vapor levels likely to occur in the basements of the office buildings based on available data and conclude that no risk existed. The analysis was quick and inexpensive. As a result, the client was able to proceed based on real information. Impending ASTM Standard Because of scenarios such as this one, the ASTM has established a task group to develop a standard for assessing vapor intrusion in the context of property transactions. It is hoped that a draft will be available later in 2006 and a final standard during 2007. The focus of the task group will be to “establish where there is reasonable probability vapor intrusion presents an environmental risk and liability, and then provide guidance for alternative courses of action.” The goal of ASTM is to develop a reasonable approach that does not impose an undue cost burden or materially increase the time required for an assessment, while identifying genuine issues through a screening process like those developed for the state policies described above. Such an ASTM standard will undoubtedly be of great assistance to clients and consultants conducting Phase I environmental assessments of properties potentially containing subsurface volatile contamination. In the meantime, it is important for prospective purchasers to keep in mind that neither the existing ASTM standard nor the pending EPA AAI standard address several issues potentially relevant to the value of and ability to develop property. In particular, if based on former and adjacent uses the potential for subsurface volatile contamination is present, it is important to evaluate available information to determine whether a risk of vapor intrusion exists. If the potential for subsurface volatile contamination is present, but the Phase I report does not address the vapor intrusion pathway, the client would be well served to ask the consultant to evaluate it. Often a simple, quick and inexpensive analysis will allow the client to avoid or address a potentially significant liability. KERMIT L. RADER is a partner in Wolf Block Schorr & Solis Cohen’s Environmental & Land Use Practice Group. His practice focuses on the environmental aspects of real estate and corporate transactions, regulatory compliance counseling and remediation issues.

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