A REC is a REC,Right? Wrong!
A Recognized Environmental Condition, or REC for short, is a term everyone involved in a commercial property transaction is familiar with. It is a potential problem area for the perspective commercial property buyer, a red flag to the lender, and often a headache for the seller and buyer both. Officially defined by ASTM International (ASTM, E-1527-05) as “the presence or likely presence of any hazardous substances or petroleum products on a property under conditions that indicate an existing release, a past release, or a material threat of a release of any hazardous substances or petroleum products into structures on at the property or into the ground, groundwater, or surface water of the property. The term includes hazardous substances or petroleum products even under conditions in compliance with laws”.
RECs are most commonly identified by an Environmental Professional during the performance of a Phase I Environmental Site Assessment, or ESA, of a property, prior to a sale or transfer. The ESA, and the identification of RECs, is an integral part of the buyer’s due diligence efforts and is generally conducted towards providing the buyer with the “innocent landowner, contiguous property owner, or bona fide prospective purchaser” liability limitations under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), or Superfund.
Now while it seems obvious that any well-qualified environmental professional would identify a potential environmental problem area, or REC, on a property (for example leaking oil drums, oil-stained soil, old leaking fuel tank), not all Environmental Professionals see things the same way. One person’s REC is another’s “other issue” or in some cases, not identified as an issue at all. While the ASTM E-1527-05 guidance document and the recent All Appropriate Inquiry guidance recently put forward by the EPA (40CFR 312.10) are the generally accepted standards for conducting an ESA, both guidance documents make it clear that decisions regarding the identifications of RECs are up to the sound, professional judgment of the Environmental Professional conducting the ESA.
Over the last several years I have conducted hundreds of Phase I ESAs and have reviewed hundreds more ESA reports prepared by Environmental Professionals from around the globe. During this time I have often been surprised at what some Environmental Professional identify, or do not indentify, as RECs, and what some might identify as “other issues” or may not even bother mentioning at all. The most common example of this discrepancy in REC identification is that related to underground storage tanks, or USTs. Is a legally installed, double-walled UST, outfitted with interstitial monitoring, overfill sensors, spill devices and a state-of-the-art continuous leak detection monitor, installed at a properly licensed gas station, a REC? Does this UST present a “material threat of a release”? Many Environmental Professionals say yes but many other equally qualified and experienced Environmental Professionals, apparently, would say no. Who is right?
I would make that the argument that a UST is a REC. In my opinion, a material threat of release does indeed exist when thousands of gallons of petroleum product, or other chemicals, are stored on a property, either underground, or above ground, in a single-walled tank, a double-walled tank, in a bunker, in drums, in whatever.
Not to diminish the importance of a qualified Environmental Professional’s ability to use experience, training and professional judgment to make the REC call, but in the interest of industry standardization and clarity for users of the ESA, I would suggest that a UST is REC is a REC is a REC!