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ASTM International defines vapor intrusion (VI) as the migration of vapors from a chemical of concern in subsurface soil or groundwater to the indoor air environment of an existing or planned structure. Regulators and industry groups have increasingly focused on developing standards for evaluating VI risks in recent years because of a greater understanding of the risks and because the quality of air we breathe in our homes and places of work is a particularly sensitive environmental issue.

For example, VI concerns received renewed publicity earlier this year when the Oregon Department of Environmental Quality modified its Heating Oil Tank (HOT) Program in response to the Environmental Protection Agency’s reclassification of naphthalene and ethylbenzene as carcinogens. The new screening levels adopted by the DEQ will be more protective of human health; but at added cost and complexity, especially for homeowners with HOTs that have leaked.

In commercial real estate transactions, managing potential environmental liabilities through the phase I/phase II environmental site assessment (ESA) process has become almost second nature for real estate professionals. The current ASTM standard (E 1527, last updated in 2005) and EPA’s All Appropriate Inquiry rule have provided a reasonably clear road map for evaluating recognized environmental conditions (RECs).

A REC is the presence – or likely presence – of any hazardous substance or petroleum product on a property under conditions that indicate an existing release, a past release or a material threat of a release of any hazardous substance or petroleum product into structures on the property or into the ground, groundwater or surface water of the property.

On March 1, 2008, the ASTM approved a standard practice (E 2600-08) for assessing VI into structures in real estate transactions. A stated objective to the adoption of this standard is to supplement a phase I ESA conducted in accordance with Practice E 1527. Importantly, in adopting Practice E 2600, ASTM concluded that vapor intrusion, as a contributing indoor air quality issue, is a non-scope consideration in a phase I conducted in accordance with Practice E 1527. Effectively, this creates a special case for assessing VI in commercial property transactions where volatile chemicals have been released into the environment near a structure.

Although Practice E 2600 is intended to be used on a voluntary basis to supplement a phase I ESA and, substantively it provides a tiered approach to assessing potential VI risks, the practice may also add costs to transactions and create problems and confusion.

The purpose of Practice E 1527 is to define good commercial and customary practice for conducting an ESA on commercial real estate with respect to the range of contaminants regulated under the federal Superfund statute (or “CERCLA”) and petroleum products. These contaminants include volatile chemicals that are the source of VI concerns.

While phase I ESA reports may not include any evaluation of indoor air quality, a phase I ESA report complying with Practice E 1527 and satisfying the AAI rule should identify potential risks from volatile chemicals on or near a property, whether or not the chemicals may pose an indoor air quality risk. A consultant should not dismiss the presence or likely presence of source chemicals as an REC on the basis that an assessment of indoor air quality is a non-scope item.

Because of possible confusion regarding responsibility for evaluating indoor air quality given the ASTM’s statements in adopting Practice E 2600, purchasers should discuss and develop an appropriate scope of work for all phase I ESAs. The discussion should clarify all scope and non-scope items, expanding Practice E 1527, if necessary, in order to identify all relevant environmental issues.

Additionally, the completed phase I ESA report should be drafted to preserve the landowner liability protections afforded under CERCLA and the AAI rule even though ASTM has concluded that the assessment of indoor air quality is not a scope item under Practice E 1527.

Sellers should carefully consider the scope of environmental due diligence allowed in a purchase and sale agreement (PSA) and specifically whether it is appropriate to permit a VI investigation under Practice E 2600. Unlike a phase I ESA, which broadly identifies RECs with no attempt to assess the nature of any risks presented, the completion of a VI investigation under Practice E 2600 results in a type of completed risk assessment.

The nature of the risks evaluated are potentially very sensitive, due to the quality of indoor air in a structure breathed by its occupants. The nature of the risk assessment conducted is a screening tool that is not tied to specific legal requirements as Practice E 1527 is tied to the AAI rule, but the ultimate finding could be that an unacceptable risk to human health is believed to exist. Accordingly, sellers should draft due diligence provisions in PSAs to avoid inadvertently permitting the creation of evidence that could be interpreted to create immediate and costly legal obligations.

As the Oregon HOT example suggests, state and federal regulators are regularly reviewing and changing regulations and guidance documents as better information concerning VI risks is developed. In any real estate transaction where VI is a potential issue, each party should consult with its respective counsel and environmental consultant to insure that VI concerns are properly addressed.

Peter Sergienko is a partner at Davis Wright Tremaine, a law firm in Portland.  He specializes in environmental law, with an emphasis on permitting in real estate, telecommunications, energy and business transactions. Contact him at 503-241-2300 or [email protected].