The Vapor Intrusion Rub: EPA’s Adoption of ASTM’S New Phase I Standard Muddies the Waters of CERCLA Liability Once Again

Kelley Drye Client Advisory

This article appears on The Metropolitan Corporate Counsel website and in the February 2014 issue of the print publication.


On December 30, 2013, the U.S. Environmental Protection Agency adopted a final rule officially embracing the newly minted ASTM E1527-13 Standard Practice for Phase I Environmental Assessments as an acceptable method for demonstrating compliance with the Agency’s all appropriate inquiry” requirements for avoiding liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. § 9601 et seq.  ASTM’s latest iteration of its widely accepted Phase I standard contains a number of helpful improvements designed to improve the quality of Phase Is, as compared with the previous ASTM E1527-05.  But in one critical respect – the inclusion of vapor intrusion (or VI”) risk as an independent media to be addressed as part of the Phase I process – EPA’s decision to bestow the legal status of regulation on the standard may prove to be more nettlesome than its ASTM drafters intended.  This article addresses some of the consequences that could befall those who commission Phase I investigations for due diligence purposes in property transactions, as they take on the added burden of investigating (and possibly remediating) VI risk to maintain the all appropriate inquiry” defenses to CERCLA liability.

The Quest for All Appropriate Inquiry”
In 2003, concerned that the specter of CERCLA liability was discouraging real estate investment away from urban and industrialized areas, Congress grafted new liability protections onto the statute’s existing innocent landowner” defense, creating a bona fide prospective purchaser” defense and contiguous property owner” defense based on a revised set of all appropriate inquiry” (or AAI”) and due care eligibility criteria from that used previously for the innocent landowner defense, which also was made subject to the revised criteria.  These additional due care requirements, referred to as continuing obligations” in the 2003 amendments, require the party seeking the protection of one of the foregoing AAI defenses to take reasonable steps with respect to hazardous substance releases, including stopping continuing releases, preventing threatened future releases, and preventing or limiting human, environmental or natural resource exposure to prior releases.

In response to Congress’ enactment of the 2003 amendments, known as the Brownfields Revitalization and Environmental Restoration Act (the Brownfield Amendments”), EPA drafted new AAI regulations (40 CFR Part 312) and the American Society for Testing Materials, a private standard-setting body, modified its E1527 standard for Phase I environmental site assessments in 2005 to reflect the new requirements.  When EPA adopted the final AAI rule, it concluded that compliance with E1527-05 would constitute compliance with the AAI requirements in 40 CFR 312.

In the intervening years since the new AAI requirements went into effect, three important developments have transpired that led ASTM to revise E1527.  The first of these developments was the passage of time – eight years – since the adoption of E1527-05.  This is important because ASTM’s internal rules provide that its standards have a shelf life of eight years, after which time the standard must either be re-issued (and updated if necessary) or lapse.  Given the widespread use of E1527 as a protocol for ensuring compliance with the AAI requirements, and EPA’s incorporation of the standard by regulation, its expiration would have left Phase I users without an officially sanctioned protocol for ensuring AAI compliance in Phase I assessments.

The second development since the adoption of E1527-05 was that a widespread concern, if not a consensus, began to emerge within the environmental consulting community that an update of E1527 was needed to address a creeping commodification” of Phase I site assessments that purportedly led to a gradual lessening of the quality of site assessments.  Most of these concerns focused on the standard’s treatment of how potential environmental impacts resulting from historic property uses should be assessed, with many observers noting that the standard was insufficiently rigorous in requiring the environmental professional preparing the assessment to identify historic uses of the property and specifically determine the extent to which those uses may have resulted in contamination.  Consequently, the new standard contains considerably greater specificity about the extent of inquiry needed to assess the risk associated with historic property uses and how this risk should evaluated in determining whether historic operations rise to the level of a Recognized Environmental Condition” (or REC”) – i.e., a likelihood of material contamination.  For example, the new ASTM standard does away with the old confusing definition of a Historic Recognized Environmental Condition,” redefining it so that it now refers to a past release that has been addressed to the satisfaction of the applicable regulatory authority without subjecting the property to any required land use restrictions.  The new standard also adopts the term Controlled REC” (or CREC”) to refer to a past release that has been addressed to the satisfaction of the applicable regulatory authority, but which is subject to the implementation of required land use controls.

Vapor Intrusion and AAI
The third significant development since the adoption of E1527-05 was a rapid development of science, law and policy concerning the emerging issue of vapor intrusion” – i.e., the tendency of certain types of soil and groundwater contaminants to volatilize into gas and enter buildings through preferential pathways.  With EPA currently developing a final guidance document for screening criteria for vapor intrusion risk and many states already coming on line with their own VI” guidance in site remediation programs, members of the ASTM Task Group working on a revision to E1527 concluded that VI risk should be incorporated into the standard as an area of inquiry in appropriate cases.  Consequently, a number of changes were incorporated into the standard that now require the environmental professional conducting a Phase I assessment to consider whether VI risk might constitute a REC in and of itself.

In its notice adopting the ASTM standard, EPA stated that assessment of VI risk was arguably already included under ASTM E1527-05, and that the updated standard served to clarify coverage of VI risk under the standard.  However, since coverage of VI risk was not explicitly mentioned in the 2005 version of the standard, it remained an open question whether such risks were required to be analyzed as an independent REC, as opposed to an adjunct risk to soil or groundwater contamination.  In the latter case, while VI risk might be considered a desirable area of inquiry, it was not necessarily a required element of a Phase I site assessment requiring investigation independent of known on-site soil or groundwater contamination.  Moreover, the prevailing practice among environmental consultants and parties contracting for Phase I services has been to not include VI risk as an investigational element in Phase I site assessments.  According to data collected by the ASTM task group, currently, only about 22 percent of consultants conducting Phase I site assessments include VI risk in their assessments.

There are obvious benefits to including VI risk in the Phase I assessment process – not the least of which is that VI risk assessment will undoubtedly serve to protect prospective purchasers of property against the folly of unwittingly closing on commercial or industrial properties that may contain unsafe levels of chemical constituents in indoor air.  Especially in transactions involving mixed residential and retail uses, in which historic impacts from past or ongoing on-site activities (e.g., dry cleaning operations) could have given rise to soil or groundwater contamination and attendant VI risks, it is important for purchasers to understand not only the risk and magnitude of potential remediation liability under CERCLA and similar state statutes, but also whether the purchaser could expose itself to possible tort liability as the owner of residential units, office spaces or work areas containing unsafe levels of indoor air contamination.

Notwithstanding the foregoing benefits, however, incorporating a VI risk assessment requirement into ASTM E1527-13, and EPA’s incorporation of the same into the regulatory sphere, also a carries with it a number of new challenges for parties involved in transactions, as well as existing property owners whose properties have been impacted by releases of hazardous substances on contiguous properties.  The most obvious of these challenges will be the cost of the Phase I.  The analysis of VI risk entails a considerable degree of complexity, as it involves many dynamic factors that influence how soil gas moves through varying types of soils and other geologic characteristics.  Individual building construction characteristics, heating and air conditioning systems, air exchange rates, time of year and even tidal effects can greatly affect vapor infiltration into a building.  Unless measured concentrations fall below default criteria, a thorough analysis of these issues and, if necessary, the development of site-specific risk values can be expected to add significant cost to a standard Phase I.

An even greater challenge that Phase I users may face, however, is in deciding whether to perform mitigation of any confirmed vapor intrusion of hazardous substances above applicable criteria.  To the extent that mitigation is required in order to satisfy the continuing obligations” requirement for maintaining an AAI defense, EPA’s formal regulatory adoption of ASTM E1527-13 arguably can be seen as tantamount to a further expansion of CERCLA liability, since its essential effect is to saddle a purchaser with the obligation to perform mitigation of a confirmed VI problem.

The following questions cover some of the more thorny legal issues that will no doubt need to be wrestled with as a consequence of making VI risk assessment a required element of AAI defenses:

1.  Which, if any, criteria should be applied in determining whether a potential VI risk constitutes an REC – i.e., a likelihood of material contamination requiring mitigation?  The regulation of VI risk has developed rapidly in recent years, spurred by discoveries of contaminated indoor air in buildings located at or near sites with contaminated soil or groundwater.  Because the federal government has generally left it to the states to regulate VI risk as part of their site remediation programs, an uneven patchwork of varying state requirements has emerged ranging from regulatory guidance to actual regulation.  Some states (like California, New Jersey and New York) have developed broad guidance to address VI risk in the context of site remediation activities.  In most cases, states have adopted a multiple lines of evidence approach” to assessing VI risk.  This approach begins with a determination of whether known soil or groundwater contamination involving volatile constituents exists in excess of prescribed default levels within specified distances (lateral or vertical) of a building.  Once one of these screening” levels has been exceeded within a prescribed distance of a building, a review may be conducted to rule out preferential pathways providing a route of transmission into buildings.  In addition, less-conservative site-specific risk values based on actual site characteristics may be developed.  Investigation consisting of sub-slab soil-gas measurements and/or an indoor air quality survey may then be required in order to determine whether there is an exceedence of the default or site-specific vapor risk criteria.  Actual indoor air sampling may be required, as well.  If these concentrations are above applicable criteria, mitigation may be required in order to depressurize and/or vent sub-slab air so that it will not migrate into the building.

In states with mature regulatory programs in place for addressing VI risk, it may be a relatively straightforward proposition for the environmental professional conducting a Phase I assessment to determine, on the basis of existing soil or groundwater data, whether prescribed risk levels have been exceeded.  However, in states with less well-developed VI risk programs, or no programs at all, an environmental professional will have to fall back on either EPA regulatory guidance (which as of this writing is still in draft form) or other generally available methodologies for assessing such risk.  In these cases, no matter which set of factors the consultant chooses to employ, in the absence of a directly applicable official state program, his or her determination will be open to second-guessing by anyone seeking to challenge the assertion of the AAI defense.  Reliance on EPA’s guidance, even in draft form, may forestall any challenge by EPA to the consultant’s determination, but that may not be the case if the challenger is a private party asserting a CERCA claim.  If such a challenge is sustained in a court proceeding, the party who relied on the Phase I assessment report may find itself exposed to CERCLA liability that it thought it was avoiding by commissioning the Phase I report in the first place.

2.  What is a purchaser required to do to maintain an AAI defense post-closing if a consultant determines that VI risk constitutes an REC in order to secure and maintain an AAI defense?  One of the more problematic aspects of Congress’s 2003 Brownfield Amendments to CERCLA is that while they created a new defense to liability (the bona fide prospective purchaser liability”), they simultaneously raised the bar on what previously was a general due care” requirement needed to maintain protection from CERCLA liability for otherwise innocent property owners and applied the new continuing obligations” to all three AAI defenses (i.e,. the innocent landowner, BFPP, and contiguous property owner defenses).  As noted above, one of the requirements for complying with the continuing obligations” is that the owner take reasonable measures to stop any ongoing releases that present a risk to human health or the environment.  It is, of course, not clear from this language what a property owner is required to do, short of actually remediating the contamination which the defense is intended to avoid, in order to bring such risks under control.

EPA issued regulatory guidance in 2003 (known as the Common Elements Guidance”), designed to clarify the extent and scope of the activities that an owner would be required to perform in order to satisfy its continuing obligations and thereby maintain any of the AAI defenses.  According to the guidance, property owners seeking protection of the defenses will not as a general matter” be required to perform the same extent of remediation as a liable party, though EPA said there may be exceptions in some cases, such as where a party otherwise entitled to assert an AAI defense is the only entity in a position to prevent an immediate hazard.  With respect to groundwater contamination, the guidance states that parties entitled to assert an AAI defense generally would not be required to perform full scale groundwater remediation, though they may be required to investigate the extent of the contamination.  It is unclear, however, how the Common Elements Guidance would apply to the issue of VI risk, since the guidance makes no mention of VI risk.  Moreover, it is unclear how persuasive the EPA guidance would be in any event in a case involving private party claims under CERCLA.

Unfortunately, little guidance can be derived from court rulings, as well, concerning how far a party relying on an AAI defense must go in addressing VI risk before it will be deemed to have satisfied the continuing obligations due care requirement.  The only significant court ruling to date to address the question, Ashley II of Charleston, LLC v. PC Nitrogen, Inc., et al., Slip Op., No. 2:05-cv-2782-MBS (September 30, 2010), did not do much to quell concerns about the open-ended nature of the continuing obligations requirement.  In that case, the court ruled that the presence of contaminants in and around concrete slabs of demolished buildings voided the bona fide prospective purchaser defense due to the likelihood that rain events caused ongoing disposals” of the contaminants at the site.  (Since the court found that new disposals” occurred during the defendant’s period of ownership that rendered the BFPP inapplicable,  it did not reach the issue of whether the defendant had satisfied the continuing obligations requirement.  However, the court undoubtedly would have reached the same result in addressing the analogous issue of whether Ashley had taken reasonable measures to stop any ongoing releases.)

Against the foregoing backdrop of uncertainty, the addition of VI risk as an independent potential REC can be sure to add more variables into the mix of uncertainty.  Because an assessment of VI risk is now a required element of the Phase I assessment process, a consultant performing a Phase I assessment presumably will be required to identify VI risk as an REC at least in cases where soil or groundwater contaminants exceed the screening requirements adopted by the state in which the subject site is located.  What is less clear is how far a property owner will have to go in investigating (and even mitigating) the condition once a VI risk is deemed an REC in order to satisfy the continuing obligations requirement.   Unlike groundwater contamination, there is no EPA guidance in existence clarifying whether – and to what extent – a purchaser or owner of property that is found to have been impacted by contaminated soil gas intrusion into buildings will be required to undertake mitigative measure to control such risks.  Consequently, until the courts weigh in on this issue, there is at present little for prospective purchasers to rely on for assurance that anything less than a full investigation and mitigation of soil vapor impacts will suffice to maintain the bona fide prospective purchaser defense once a finding has been made that the VI risk at the site is an REC.

Unlike soil or groundwater contamination, which can be present without creating an ongoing risk to human health or the environment, VI risk is by its nature an uncontrolled risk unless and until mitigative measures are adopted to control it.  Consequently, if VI risk is determined to constitute an REC and is then determined to be in excess of applicable risk criteria, it may prove difficult to maintain an AAI defense without performing a full-scale investigation and mitigation of the risk in order to satisfy the continuing obligations requirement.  And since the determination of whether the defense may be asserted will be made by a court months or years after the fact, there is no mechanism by which the purchaser will be able to obtain any assurance of protection in the absence of a full investigation and performance of mitigative measures.

3.  What is an existing property owner required to do to avoid liability for a soil-gas plume emanating from a contiguous property?  Another vexing problem is how the addition of VI risk to the Phase I site assessment protocol is to be applied in the context of the contiguous property owner” defense.  Implicit in the 2003 Brownfield Amendments is the threat that a property owner could be held responsible for the costs of remediating contamination even where the contamination in question has migrated from a contiguous property and the owner did not conduct all appropriate inquiries prior to its acquisition of the property, or did not take appropriate measures to control risk to human health or the environment.  While this problem has been ameliorated to some extent by EPA’s groundwater guidance (discussed above), it is unclear whether the same considerations would apply to any soil gas component associated with a groundwater plume that has migrated onto the property.

Even more problematic, however, is how the continuing obligations requirement will apply to the migration of a soil gas plume across a property boundary by itself – i.e., without an accompanying groundwater plume.  Since EPA has issued no relevant guidance similar to the groundwater guidance to address this issue, inclusion of VI risk as an AAI investigatory requirement creates an additional area of uncertainty regarding the lengths to which the property owner is required to go to assess, and possibly to mitigate, VI risk associated with releases on contiguous properties.  At present, owners of properties adjacent to release sites have little, if anything, to go on to determine whether a duty has been triggered to assess VI risks on their properties presented by a release on a contiguous property.  For example, it is unclear whether mere knowledge of a release on an adjacent property involving volatile constituents is enough by itself to warrant an assessment of VI risk or whether the need to perform such an assessment arises at some later point when more is known or communicated to the property (i.e., via public notification requirements), such as whether applicable screening criteria have been exceeded.  In the absence of EPA or judicial guidance to clarify these issues, property owners sharing a border with a release site face the uncertain prospect of incurring CERCLA liability for a possible soil gas plume if they do not take concrete steps to assess potential impacts of such releases on indoor air quality and, if warranted, mitigate the same.

Addressing VI Risk in Transactions
Inasmuch as the assessment of VI risk has the potential to add significant cost to the due diligence process, parties who commission Phase I site assessments should inform themselves as early as possible of the potential for VI risk to become a concern for the target property.  For example, if the target property is a likely candidate for VI risk based on its location or past uses, it may be beneficial to conduct a preliminary screen to determine if soil or groundwater have been impacted by volatile constituents, whether such groundwater is within approximately 100 feet of the surface, the apparent direction of groundwater flow based on surface topography and the juxtaposition of buildings on the target property to any known groundwater contamination.  In cases where these risk factors are present, the party commissioning the Phase I may wish to factor in associated time and costs for completing a VI risk assessments into the due diligence process.

In cases in which the user is commissioning the Phase I report for a purpose other than ensuring its entitlement to an AAI defense (i.e., refinancing, stock purchase or merger, etc.), the user may wish to consider whether to carve out VI risk assessment from the Phase I consultant’s scope of work.  In such cases, since retention of an AAI defense does not apply for the purposes of the Phase I assessment, determinations of VI risk may be less relevant unless desired for purposes of ensuring the safety of building residents or workers.


ASTM’s updated standard, and EPA’s official approval of it, ventures into heretofore unchartered territory – i.e., building indoor air – that previously was not routinely investigated in Phase I site assessments.   In addition to the obvious impact of adding to the cost of Phase I assessments, the inclusion of VI risk to the ASTM Phase I protocol could have the unintended effect of broadening CERCLA’s liability web to property purchasers if the party relying on the Phase I does not undertake the full extent of inquiry, and possibly even mitigation, that a court acting in hindsight could conclude was needed in order to maintain one of CERCLA’s AAI defenses.  Where a consultant determines that VI risk rises to the level of a Recognized Environmental Condition, a careful evaluation of the need for and extent of further investigation and, possibly, mitigation in light of applicable regulatory criteria and guidance should be undertaken in consultation with qualified environmental experts and counsel.