ASTM PFAS Changes Mean Significant Impact On Dealmakers

In June 2021, we predicted that the American Society for Testing and Material (“ASTM”) would revise its current “gold standard” for environmental due diligence – the Section I environmental website evaluation – to replace sure definitions, advisable processes, and for the primary time embody a reference to PFAS. Our prediction on the time was that the ASTM PFAS modifications would possible acknowledge that whereas PFAS are a “non-scope issue,” they don’t rise to the extent of acknowledged environmental contaminants.

On November 1, 2021, the ASTM’s environmental evaluation, threat administration, and corrective motion committee (the E50 committee) launched E 1527-21, which revises sure parts of the Section I Environmental Web site Evaluation protocol. The ASTM modifications are important for a big selection of entities, together with buyers, lenders, banking, insurers, and any events considering an M&A. Notably, E 1527-21 does embody a reference to PFAS. Whereas the ASTM PFAS modifications might not go so far as some wished, the change nonetheless alerts to anybody within the Section I Environmental Web site Evaluation course of that they need to start conducting PFAS assessments voluntarily. Monetary world dealmakers should pay shut consideration to the brand new ASTM proposal to guard their investments as they transfer ahead.

ASTM PFAS Changes Below E 1527-21

The ASTM change to the Section I Environmental Web site Evaluation set new necessities for complying with the All Applicable Inquiries (AAI) rule, which units sure necessities for figuring out environmental situations on a property and the presence of contaminants. If a possible purchaser follows the AAI rule, it might doubtlessly be capable to avail itself of sure defenses underneath the Complete Environmental Response, Compensation, and Legal responsibility Act (CERCLA) or any comparable state regulation. A part of the AAI rule requires events to have carried out a Section I Environmental Web site Evaluation in accordance with governing ASTM requirements. If a Section I identifies environmental points or contaminants of concern, the events ought to proceed to the Section II course of, underneath which remediation of the difficulty(s) takes place. Apart from with the ability to argue sure defenses if the property at situation turns into the topic of an environmental enforcement motion or litigation, following the AAI rule additionally serves a sensible functions for events concerned within the transaction, because it permits them to higher know the complete scope of the dangers of the deal that shall be entered into.

A few of the extra notable modifications underneath E 1527-21 embody:

  • The location examination necessities add additional duties on the events to bolster customary practices now in place for the reason that prior rule was promulgated;

  • A number of modifications to the knowledge that should be contained within the written report;

  • The assorted hazard classes had been extra clearly outlined in order to cut back confusion or misclassification of hazardous substances which are or could also be current on the property;

  • The part detailing tips on how to search historic information is considerably modified to incorporate new requirements for the usage of historic sources, in addition to basic modifications to language and definitions from the prior rule; and

  • A footnote that means together with PFAS and different rising contaminants in Section I Environmental Web site Assessments if states through which the Section I is carried out outline PFAS a “hazardous substances.

ASTM PFAS Changes – Implications To Dealmakers

The ASTM modifications, together with the PFAS change, are anticipated to be printed by the ASTM in December 2021, at which period the EPA will contemplate the revisions for adoption. Nevertheless, events concerned in M&As or offers involving property acquisition ought to strongly contemplate continuing as if the proposed modifications are in full impact. The discharge of E 1527-21 places entities within the deal course of on discover as to the “standard of care” that shall be anticipated underneath due diligence processes with respect to PFAS.

Monetary world events (lenders, banks, fairness corporations) that historically obtain Section I Environmental Web site Assessments as a part of their due diligence or threat evaluation course of should start to ask whether or not the assessments voluntarily thought-about PFAS points. Even higher, they need to contemplate demanding the the assessments comprise a PFAS analysis part. Some states already classify sure PFAS as “hazardous substances.” The EPA’s PFAS Strategic Roadmap units the clear purpose to designate sure PFAS as “hazardous substances” underneath CERCLA. In doing so, CERCLA enforcement could be utilized to air pollution points pre-dating the “hazardous substance” designation. EPA-mandated cleanups of websites on which there are “hazardous substances” can value anyplace from a whole bunch of 1000’s to hundreds of thousands of {dollars}. Such important prices place the steadiness of lending put forth for a property deal into jeopardy, enhance dangers to insurers masking the events to the transactions, and enhance monetary dangers to the events to the deal. One of the best ways to guard a deal and an funding within the long-term is to make sure that sufficient PFAS issues are going down right this moment earlier than the deal is finalized.

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