All Appropriate Inquiries (AAI)

Or Phase I Environmental Assessment

Also see related page on:
 Brownfields and their Remediation (this sites Home Page)
Remediation of Brownfields in Oklahoma

  
       
  All Appropriate Inquiries (AAI) is a term used in the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to describe the process of evaluating a property for potential environmental contamination and assessing potential liability for any contamination at the property.  The AAI rule is codified in the federal regulations at 40 C.F.R. Part 312.  Additionally, the American Society for Testing and Materials (ASTM) has issued a Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process, which the federal Environmental Protection Agency (EPA) has incorporated by reference into its AAI rule.      
 

Meeting the AAI or Phase I standards (having the environmental assessments completed before closing on the purchase of property) is critical for landowners seeking to:
  • Comply with: 
    • rating agency requirements for property securitizations
    • a Brownfields revitalization grant for characterization and assessment
  • Establish the Innocent Landowners Defense - applied to property purchased after 1986 and assumes that property owner "did not know and had no reason to know" of contamination at the time of purchase (42 USC § 9601, et seq. (CERCLA))
  • Obtain Contiguous Property Owner Liability Protection - (pursuant to CERCLA) applied to property purchased after 2002, provides that the owner of property adjacent to property with pollution is not liable provided they did not contribute to pollution and are not related to liable party
  • Obtain Bona Fide Prospective Purchaser Liability Protection - (pursuant to CERCLA) applied to property purchased after January 11, 2002, provides that someone can purchase property knowing of environmental contamination, and not be held liable

In order to claim any of the above defenses, the purchaser must have conducted an AAI or Phase I Environmental Assessment before  purchase has closed, and comply with any prior environmental based "continuing obligations" or other land use restrictions that may have been established.  Also assumes that no disposal or waste management activities occurred on the property after purchase.   

  
       
  Under CERCLA, without a Phase I assessment or AAI, liability for environmental cleanup is joint and several, meaning that businesses that had no part in creating the contamination may be liable for part or all of the cleanup cost.   Additionally, to maintain protection, a purchaser must exercise appropriate care  by taking responsible steps to stop continued releases, prevent any threatened future releases, prevent or limit human, environmental or natural resource exposure to any previously released hazardous substances, comply with land use restrictions, and cooperate with people authorized to conduct response actions or natural resource restorations.   

Prior to the 2002 CERCLA amendments, any property owner could be held strictly, and jointly and severally, liable for any prior contamination of the property. In other words, prior to 2002, any owner within a property's chain of title could be held liable for contamination at a property, regardless of whether any particular owner caused the contamination.   

Lender Liability - AAI rules doe not apply to lenders, when acting only as a lender.  If lender assumes any role in the management of the property, the liability exclusion is voided.  CERCLA defines "participation in management" as actually participating in the management or operational affairs of a facility and not merely having the capacity to influence or the unexercised right to control facility operations.  In general, lenders may do those management activities that are necessary to maintain their security interest, but nothing more.  

Grand applicants who acquire property involuntarily or by imminent domain do not have to conduct AAI prior to purchase.  

  
 

Requirements for a Phase I or AAI assessment

While the requirements for an AAI or Phase I are slightly different, they may both used interchangeably.  Outside the Oklahoma Department of Environmental Quality's Brownfields program there is no supervision by a regulatory agency concerning the AAI or Phase I assessments; property owners should review any AAI or Phase I assessments for the following: 

  • Must be completed within one year prior to date that property purchase was closed
  • Certain aspects must be conducted or updated within 180 days prior to date of acquisition such as interviews with adjacent property owners, current and past tenants, previous property owners, records review, site inspection and lien search
  • Results of a Phase I assessment must be documented in a written report
  • Person who supervised or oversees the assessment must meet the definition of an Environmental Professional (EP), credentials must be part of the written report
  • Report must include an opinion as to whether the inquiry has identified conditions indicative of release or threatened release of hazardous substances  
  • Report must be signed by the Environmental Professional

In general, there is little Oklahoma Brownfields case law.  Therefore, there is general uncertainty in divining prospective judicial interpretation regarding what constitutes sufficient AAI or Phase I assessment, and appropriate post closing duties.  

  
 

ODEQ Brownfields Program

A successful ODEQ Brownfields Program results in participants obtaining a "Brownfields Certificate" which releases participants, their lenders, lessees, successors and assigns, from most future civil penalty actions by ODEQ or the US Environmental Protection Agency.  

  
    

Potential Liability and other Pitfalls

When relying on AAI or Phase I audits outside an Oklahoma DEQ Brownfields project, remember:

  • We (the property owner) don't know what we don't know
  • We don't know whether what we do know is sufficient
  • It is nobody's job to tell us
  • Yet, the burden of proof is the property owners
  • SO BE VERY CAREFUL and create very clear records

Neither ODEQ Brownfields Certificate, a Phase I Environmental assessment,  nor AII precludes a citizen-suit under provisions of the Resource Conservation and Recovery Act (RCRA, 42 U.S.C. § 6972), the federal statute regulating hazardous waste management. Citizen-suit remedies may be available to private parties to compel cleanup actions under RCRA not only as to on-site conditions but also concerning conditions causing adverse effects in adjoining areas.

Other legal issues that require damages to be proved include:

  • Migration of groundwater contamination through another's property may be deemed "trespass" that is "continuing"
  • Failing to mitigate groundwater contamination and allowing it to migrate to another's property may be deemed "nuisance."
  
       

The information contained on this page is the opinion of its author and does not constitute legal advice.  
If something is not understood you should contact your attorney.

Acknowledgements:  Much of the information on this page, not directly referenced by the Websites identified, was obtained from the Oklahoma Brownfields Conference 2006, held November 30 to December 1, 2006.  The Conference was organized by the Oklahoma Department of Environmental Quality and the City of Oklahoma City (Jimmie Hammontree, Brownfields Coordinator).  Conference presenters include: Charles Bartsch, ICF International; Johathan Markley, PhD, Economic Development Administration; Patricia Overmeyer, EPA; Susan Savage, Oklahoma Secretary of State; Mary Ellen Ternes, McAfee & Taft; Miles Tolbert, Oklahoma Secretary of the Environment.