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INTRODUCTION
On November 1, 2005, the U.S. Environmental Protection Agency ("EPA") issued the widely anticipated "All Appropriate Inquiry" rule ("AAI rule"), which establishes the standard for environmental diligence by a purchaser of property seeking to obtain certain defenses to liability under the Superfund law (commonly known as "CERCLA"), or brownfields grants. The AAI rule does not apply to all real estate transactions. For purchasers, it pertains to the evaluation of potential contamination by what CERCLA defines as "hazardous substances"; whereas for brownfields grant recipients, the AAI standards apply to additional substances, including petroleum. Nonetheless, the AAI rule, which takes effect on November 1, 2006, has significant implications for current and prospective landowners alike.
BACKGROUND OF CERCLA AMENDMENTS AND INNOCENT LANDOWNER DEFENSE
CERCLA makes current property owners potentially liable for cleaning up contamination, even if it was caused by former owners or operators of the property. Importantly, the CERCLA Amendments of 1986 established the "innocent landowner defense," which creates a shield to liability if the owner "did not know and had no reason to know" about the contamination on the property prior to the purchase.
The 2002 Brownfields Amendments clarified the innocent landowner defense to include bona fide prospective purchasers and contiguous property owners who conducted "all appropriate inquiry" into the potential contamination of the property. The key phrase "all appropriate inquiry" was defined for interim purposes as compliance with the American Society for Testing and Materials ("ASTM") Standard E1527-97 (later E15270 -00) for Phase I Site Assessments. The statute charged the EPA with issuing a final rule establishing standards and practices for conducting "all appropriate inquiries," and the AAI rule is the fruit of this statutory mandate.
AAI RULE: THE KEY CHANGES TO THE STANDARDS FOR PERFORMING SITE ASSESSMENTS
The AAI rule establishes regulatory requirements for an important aspect of environmental due diligence: the scope of inquiry into the previous...