Environmental due diligence is on the brink of change. Some subtle. Others more substantive. The changes stem from EPA's mandate pursuant to the January 2002 Small Business Liability
Relief and Revitalization Act (the Federal Brownfields Law) to write the nation's first federal standards for conducting "All Appropriate Inquiries,” the process by which a property's potential for environmental contamination is investigated prior to purchase. Congress laid out a 10-step framework
for what constitutes AAI, and gave EPA two years to write the regulation (by January 11, 2004).
In April 2003, EPA tasked a broad-based 25-member stakeholder committee to write the rule using
a regulatory-negotiation (reg-neg) process under the Federal Advisory Committee Act (FACA).
On November 14, 2003, after more than 100 hours of discussion and debate, the reg-neg committee
reached consensus on a draft rule for the first federal standards and processes for conducting AAI. The final consensus draft rule__to be eventually codified in federal regulation, "Part 312 - Standards
for Conducting All Appropriate Inquiries"__follows the ASTM E 1527-00 standard in many areas, but it does add certain new levels of investigation. This article covers 10 key facts about the draft AAI rule (see
sidebar), including its applicability, requirements for Phase I professionals, and its most notable differences with current industry practice.

Our September

AAI Alert identified five key areas of the AAI rule for EPs to pay particular attention to when the long-awaited rule was promulgated. Now that the cloud of uncertainty about how EPA would respond to public comments has been replaced with the certainty of a final rule, below is a summary of EPA’s language in each of these key areas.

During the public comment period for the draft AAI rule, consultants raised objections to a number of areas, including the definition of “environmental professional,” the cost impacts of the regulation, a perceived lack of clarity on the significance of data gaps, as well as myriad other issues. The final rule itself, as well as the preamble which will address EPA’s response to the public comments, will undoubtedly be lengthy. Below is a list of five key areas of the rule that are likely to be of immediate interest to consultants when the AAI rule becomes public.

Although the proposed AAI rule allows individuals who do not meet the definition of “environmental professional” (EP) to contribute to a Phase I ESA under the “direct supervision or responsible charge” of a qualified EP, EPA surprised many consultants by including several strong recommendations in the proposed rule’s preamble that single out the site visit as the one critical element of AAI that requires the participation of an experienced EP.  For some firms, following EPA’s strong recommendation and sending only staff members who meet the EP definition to conduct site reconnaissance could be a significant departure from current business practice. On average, 23% of consultants cited in EDR’s 2005 Environmental Site Assessment Industry Benchmark Report indicated that the site visit is typically not conducted by someone with the qualifications in EPA’s proposed EP definition. So, for roughly one in four firms, EPA’s recommendation could affect staffing decisions—and possibly billing rates.

In writing the proposed AAI rule, EPA’s regulatory negotiation committee agreed to use a flexible, performance-based approach to the environmental inquiry. Essentially, this means that the rule will define specific objectives (e.g., identify current and past property uses and occupancies, and current and past uses of hazardous substances) and leave decisions about how far to go in the research up to the environmental consultant. If, for example, the information available during a Phase I allows a consultant to meet these objectives quickly, less work may be necessary to complete an operational history of the property to determine whether contaminants are likely to have been released on-site. If, however, data gaps are difficult to fill, more effort may be needed to conduct further research. Below is a list of ten key areas in the proposed AAI rule where the environmental consultant’s “professional judgment” comes into play.