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In the Spotlight: Final Rule for 'All Appropriate Inquiry' in Environmental Assessments

By Michael J. Quinn

The U.S. Environmental Protection Agency (“EPA”) has issued its final rule defining “all appropriate inquiry” for environmental due diligence necessary to qualify for the defenses to liability contained in the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA” or “Super-fund”). This new rule, published in the Federal Register on Nov. 1, 2005, will apply to all property acquisitions that close on or after Nov. 1, 2006. Although the final rule dropped some of the harsher provisions of EPA's proposed standard, the new rule differs from the industry standard ASTM Standard E 1527-00 in several significant respects, which may have a significant effect upon the cost and scope of environmental site assessments conducted as part of property acquisitions. Prospective purchasers failing to follow the requirements of the final rule will not qualify for the “innocent purchaser,” “adjacent landowner” or “bona fide prospective purchaser” defenses to liability under CERCLA in any post-closing litigation.

Like the proposed rule, the final rule adopts “objectives” and “performance standards” that must be met to constitute “all appropriate inquiry.” The objectives of “all appropriate inquiry” include identification of current and past uses and occupancies, current and past uses of hazardous substances, waste management and disposal activities, engineering and institutional controls, and risks from adjoining properties.

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