Response: CERCLA places liability for releases and threatened releases of hazardous substances upon owners and operators of facilities and vessels. Owners and operators seeking protection from liability as innocent landowners, bona fide prospective purchasers, or contiguous property owners must comply with the criteria provided in the statute for attaining such protections, including conducting all appropriate inquiries. The statute requires that all appropriate inquiries include an inquiry conducted by an environmental professional. However, the responsibility for conducting the all appropriate inquiries as well as the responsibility for complying with all the other statutory criteria required to obtain protection from liabilities rests with the owner or operator.

A prospective landowner may hire an environmental professional to identify the environmental conditions of a property, but ultimate responsibility for complying with the statutory criteria rests with the property owner.

The final rule retains, as part of the federal all appropriate inquiries requirements, the consideration of any specialized knowledge or experience of the prospective landowner ( or grantee if the grantee is or will be the property owner). The final rule does not extend this requirement beyond what already was required under CERCLA since 1986 and established through case law. The final rule requires that all appropriate inquiries include the consideration of specialized knowledge held by the prospective landowner or grantee with regard to the subject property, the area surrounding the subject property, the conditions of adjoining properties, as well as other experience relative to the inquiries that may be applicable to identifying conditions indicative of releases or threatened releases at the subject property. The rule also requires that the results of the inquiries take into account any specialized knowledge related to the property, surrounding areas, and adjoining properties held by the persons responsible for undertaking the inquiries, including any specialized knowledge on the part of the environmental professional. Case law related to the innocent landowner defense shows that courts appear to have interpreted the " specialized knowledge" factor to mean that the professional or personal experience of the defendant may be taken into account when analyzing whether the defendant made all appropriate inquiries. 695 SECTION 4: Comments on the Economic Impact Analysis Commenter Organization Name: Lourie Consultants Comment Number: 0353 Excerpt Number: 3 Excerpt Text: It's my opinion that cost for complying with the proposed AAI rule will not be significantly different from the cost of performing a thorough, well conducted ESA according to current ASTM E 1527 guidelines.

Response: EPA thanks the commenter for the stated position on the burden under the rule. EPA agrees that the cost of complying with the AAI rule will not be significantly different from the cost of complying with the ASTM E1527 2000.

Commenter Organization Name: Dismukes, James Comment Number: 0416 Excerpt Number: 5 Excerpt Text: The cost analysis does not state the average cost range that was used in estimating the economic impact but the document states that in addition to commercial data the EPA used the cost for Phase I's performed on Brownfield sites. These cost are extremely high compared to the commercial property transaction Phase I costs. In our areas of operations, Phase I's average costs are between $ 900 to $ 1600 for a standard ASTM Phase I.

Response: EPA thanks the commenter for stating his position regarding the potential burden of the rule. In the Economic Impact Analysis ( EIA) for the proposed rule, EPA developed a range of unit costs for performing a Phase I ESA under the ASTM E1527 2000, where the range was based on the distribution of properties by size and type. In the EIA developed for the proposed rule, Exhibit 7 3 presents the estimated level of effort ( in hours) under the ASTM E1527 2000 by property type and size and Exhibit 8 1 presents the estimated unit costs under the ASTM E1527 2000 by property type and size. In developing the cost model, EPA estimated total incremental costs using the data on the distribution of brownfields properties by size. These data, serving as a proxy variable for the size distribution of the affected properties, were used to derive the weighted average unit cost for Phase I ESAs. Our estimated weighted average unit cost of a Phase I ESA is very close to the 2002 average price of Phase I ESA reported by the Environmental Data Recourses ( EDR). Due to data limitations, we did not adjust the weighted average unit cost for regional differences which may exist.

Commenter Organization Name: Small, Arthur Comment Number: 0424 Excerpt Number: 2 696 Other Sections: NEW  3.9  Considering commonly known or reasonably ascertainable information about the property Excerpt Text: It is through this prism that we should examine the proposed section 312.30. This section requires, as a qualifying condition for the innocent landowner defense, that a prospective buyer investigate " Commonly Known or Reasonably Ascertainable Information About the Property." In particular, it is through this prism that we should examine the open ended search requirements embodied in the new standard. As has been noted elsewhere, these new open ended search requirements effectively compel potential buyers to search through a potentially large and open ended set of possible information sources. These include unnamed " other" persons and un enumerated " other" sources.

Should these standards in fact be open ended?

First I wish to clarify a conceptual point: the decision to include an open ended search requirement should be judged on the basis of marginal costs and marginal benefits. The key questions here concern a calculation at the margin. How much additional environmental or economic benefits accrue to society ( if any) by virtue of making the standard open ended, as opposed to a closedended standard? What are the likely additional economic and environmental costs ( if any) along this margin? Is this marginal increase in search requirements justified by benefits that can reasonably be anticipated?

In this vein I wish to take issue with some of the findings of the cost benefit analysis performed by ICF Consulting. One of the authors' principle findings is an estimate that the new AAI regulations will increase the transaction costs of real estate sales by some $ 41 47 per transaction. This figure is associated with higher costs of Phase I site assessment and document search. ICF's figure may in fact be correct ( although I do have quibbles with their data collection protocols [ Footnote: It raises at least one eyebrow that ICF bases this estimate on an internal survey of its own staff. By contrast, EDR reports an estimated increase closer to $ 200 per transaction, based on a survey of over 500 environmental professionals from multiple firms who attended conferences in nine cities earlier this year. See Environmental Site Assessment Report by EDR Business Information Services, July 2004.].). But is this the right question?

I believe it is not  or at least, it is not the central question. The most important effect of making these standards open ended is probably not how they increase the costs of those transactions that eventually go through. The more important effect of the new standards concerns the possibility that they may discourage some otherwise viable transactions from being undertaken at all. Transactions may be discouraged not so much because of the small increase in transaction costs, but because of the potentially large increase in residual liability.

As experts on the subject of brownfields, I expect you don't need to be convinced that open ended liabilities have been shown to have real and negative impacts on incentives to undertake projects.

Response: The Agency disagrees with the commenter that the EIA was based solely on an internal survey of ICF Consulting's professionals. Members of the Negotiated Rulemaking Committee, including four individuals with extensive experience in conducting environmental site assessments reviewed 697 the estimated labor distribution, unit cost estimates, and other cost analysis assumptions and generally agreed with the estimates developed by ICF Consulting's professional engineers.

To address the commenter's concern that the EDR results may be more reliable than the estimates presented in the EIA, the Agency conducted a sensitivity analysis on our cost estimates. The results of the sensitivity analysis are presented in an addendum to the EIA, which is available in the docket for the final rule. We show that the final rule would not have annual impacts in excess of the $ 100 million threshold set for major rules even if the final rule results in an increase in the price of a Phase I ESA by an amount close to the EDR respondents' estimate. 698 4.1 The Impact of the Rule is Underestimated Commenter Organization Name: Morris, Michael Comment Number: 0114 Excerpt Number: 3 Excerpt Text: My final and greatest disagreement is the estimated increase in cost for an AAI assessment. The increased time, which is required to complete the additional criteria required by AAI, is far more than what was used in the official estimates. Also there is an increased requirement for a higher paid professional to perform or review the work. Finally the estimated cost for a professional doing one additional hour of the work is above the total increased cost used in the model ( for AAI comparated to the full ASTM).

Response: In the final rule, EPA modified the definition of an environmental professional. In response to the concerns raised by commenters, the final rule provides that individuals who do not meet the required educational requirement ( i. e., do not have a Baccalaureate or higher degree in a field of engineering or science from an accredited institution of higher education) will qualify as an environmental professional if they have ten ( 10) years of relevant full time experience in the conduct of all appropriate inquiries investigations, or Phase I environmental site assessments.

The more flexible qualifications within the definition of environmental professional provided in the final rule most likely will have the effect of decreasing the average incremental increase in hourly labor rates associated with the final rule activities. It is important to note that both the EIA developed for the proposed rule and the addendum estimate a weighted average incremental cost per Phase I ESA, where the increased effort under the final rule is weighted by the probability that incremental hours may be needed to address the final rule activities.

Commenter Organization Name: Worlund, John Comment Number: 0256 Excerpt Number: 17 Excerpt Text: There are several other possible impacts that were not considered.

The Review of IC's identified with in ½ mile of the property represent a considerable expansion of effort beyond current industry practice. Especially as the number of IC's increase with time. Requiring the environmental professional to review every site specific IC identified is burdensome and the cost would need to be factored into the economic analysis. An estimate of the added cost of review of an IC would be in the range of 200 to 400 dollars.

The rule does not allow the use of reports over one year old and requires updates of reports over 180 days old. This will require a substantial number of reports to be redone. I am not sure how one would get a good estimate of the number of reports that would be redone. It is probably not 699 unreasonable to assume it could be in the range of 5 to 10 % of the reports prepared if the AAI rule is widely followed.

Depending upon how the issues of data gaps, interviews with past owners and the extent of visual inspection of adjacent properties are resolved in practice, there could be significant cost impacts. If all of these activities remain in the purview of the environmental professional and are conducted as required by the principles of the current industry practice there will not be significant additional cost. Arguably all of these items can and are done now if appropriate. If, however, it is contemplated that AAI or revisions to ASTM 1527 will incorporate requirements for these specific task in all reports there will be additional cost.

Response: EPA agrees with the commenter that searching for institutional controls associated with properties located within a half mile of the subject property is overly burdensome. The final rule requires that the search for institutional controls be confined to the subject property only.

With respect to the shelf life of previously conducted all appropriate inquiries, or environmental site assessment reports, EPA clarified the language in the final rule to allow for the use of information contained in previously conducted assessments, even if the information was collected more than a year prior to the purchase date of the subject property. The final rule retains the provision that requires that many portions of a previously conducted all appropriate inquiries be updated, if the investigation was completed more than 180 days prior to the date of acquisition of the property. Because the rule allows for the use of previously collected information, the cost of updating a Phase I ESA should be lower, on average, than the cost of an initial Phase I ESA. The shelf life requirement, therefore, would not increase the average cost of conducting all appropriate inquiries investigations.

Commenter Organization Name: Carvalho, Michael Comment Number: 0257 Excerpt Number: 1 Excerpt Text: EPA's attempt at developing new regulations to satisfy the " All Appropriate Inquiry" ( AAI) standard under CERCLA, as amended by the recent Brownfields law, has resulted in a proposed rule that will significantly increase the cost and timeframe for completing environmental due diligence. Unfortunately, EPA significantly and materially understates these costs, which should be carefully considered by the regulated community and re examined by the Agency for consistency with existing federal law.

In its proposed rule published in the Federal Register on August 28, 2004, EPA states that the cost increase for completing a Phase I Environmental Site Assessment ( ESA) is " estimated to be between $ 41 and $ 47." However, an informal survey of the regulated community and literature search on the subject finds that virtually no one believes EPA's estimate. Indeed, most professionals engaged in the prEPAration and review of Phase I ESAs believe that the additional obligations imposed by the proposed rule will actually increase costs between $ 400 and $ 600 per report  an order of magnitude greater than the Agency estimate. An informal poll of attendees at 700 ASTM's AAI Conference held in Washington, DC on October 5, 2004, found support for this view. In fact, none of the Conference panelists  with the notable exception of EPA  were " on record" as supporting the Agency's cost assessment. Even EPA's own review considered  then quickly dismissed  alternative projections that put the cost increase at $ 647 per assessment. Other estimates are in excess of $ 1,500 to meet the Agency's proposed requirements.

Assuming EPA's estimate that 240,000 Phase I ESAs are performed annually, the regulated community will conservatively be expected to bear an additional $ 96,000,000 to $ 144,000,000 in transactional costs. This is an important figure as regulatory burdens on the private sector in excess of $ 100,000,000, annually, trigger Secs. 202 and 205 of the Unfunded Mandate Reform Act of 1995, a position the Agency outright rejects. By undervaluing the impact of the proposed regulation, EPA's proposed rule comes in " under the radar screen" of federal law.

Why the increase in cost? Much of the increase can be directly attributed to EPA's definition of " Environmental professional" and the role such individuals play in the completion of Phase I ESAs. Currently, Environmental professionals and the companies that employ them are able to staff work based on the complexity of the property and other factors. This market driven process allows environmental consultants to develop the professional abilities of junior staff, while ensuring that more complicated sites get the attention that they deserve. However, because EPA specifically "  recommends that visual inspections  be conducted by an individual who meets the proposed regulatory definition of an environmental professional the staffing of such projects will necessarily change. The impact of such staffing requirements, particularly on " out of town" projects, will result in the higher cost environmental professional completing routine tasks that are currently completed by junior employees under the guidance of seasoned professionals. Looking forward, the inability to economically train up and coming staff will necessarily create an even more limited number of individuals who meet EPA's definition, which will result in a tendency to further restrict access to this market and, correspondingly, to increase transaction costs. The EPA's economic cost assessment fails to account for such businesses realties.

Moreover, it is widely assumed that the Certification requirements under the proposed rule, coupled with the potential liability for professional engineers and geologists, and the need to evaluate " Data Gaps" will introduce more conservatism into the ESA process and result in an increasing number of projects moving towards more complex ( and expensive) Phase II sampling and testing. The costs to complete Phase II ESAs routinely run into the thousands and, often, tens of thousands of dollars. The Agency's cost assessment ignores this issue completely.

Most federal agencies are required by law to submit their proposed regulations to the Office of Management & Budget, among others, to assess the economic impact of these rules before they are adopted. There is both good and well settled reasoning for this requirement. While EPA did retain a " Beltway economist" to prepare an evaluation of the proposed AAI regulation, the report left many environmental practitioners wondering whether the study was prepared with a specific objective in mind, rather than an impartial undertaking of such modifications on industry practice. By minimizing the real cost of EPA's proposed regulation in an attempt to meet its Congressional mandate with the least amount of scrutiny, the Agency does a disservice to the similarly mandated regulatory review process. 701 Response: In response to many comments EPA received on the proposed definition of an environmental professional, the final rule provides that individuals that do not meet the required educational requirement ( i. e., do not have a Baccalaureate or higher degree in a field of engineering or science from an accredited institution of higher education) will qualify as an environmental professional if they have ten ( 10) years of relevant full time experience in the conduct of all appropriate inquiries investigations, or Phase I environmental site assessments. EPA continues to recommend that the on site visual inspection be performed by persons meeting the qualification of an environmental professional. The definition in the final rule is less stringent than the proposed one allowing for most people currently practicing to qualify as environmental professionals. Therefore, we do not believe that the recommendation would impose any significant cost burden.

During the negotiated rulemaking process, the FACA Committee did consider the option of requiring sampling and analysis as part of the all appropriate inquiries requirements but did not adopt it. In the Economic Impact Analysis developed for the proposed rule, EPA estimated the incremental costs of requiring sampling and analysis as part of the all appropriate inquiries rule ( AAI Option 3).

The final rule does not require the conduct of analyses and investigations usually associated with Phase II site assessment standards. In fact, as shown in the economic impact analysis for the rule, the final rule includes activities that are similar to the activities required under the interim standard. The incremental costs associated with the final rule therefore are estimated to be low.

Commenter Organization Name: Carvalho, Michael Comment Number: 0257 Excerpt Number: 3 Excerpt Text: EPA's proposed AAI rule will undoubtedly increase the cost and time required to complete environmental assessments. Whether the Agency's proposed rule amounts to significant regulatory action as defined under applicable federal statutes remains to be seen. The Agency should reevaluate its cost estimates in a manner that is consistent and respectful of both federal law and business realty.

Response: The Economic Impact Analysis developed for the final rule was developed in full compliance with the Office of Management and Budget guidance provided in Circular A 4. Costs associated with conducting the incremental activities required by the proposed rule ( over those required by the interim standard) were estimated across a variety of property types and sizes. A weighted average incremental cost per property assessment was then estimated. EPA also estimated annual costs based upon an industry estimate of the total number of environmental site assessments performed annually. For a full explanation of how the cost estimates were derived, please see " Economic Impact Analysis for the All Appropriate Inquiries Regulation," August 2004, which is available in the docket for the final rule. 702 Commenter Organization Name: Miles & Stockbridge Comment Number: 0277 Excerpt Number: 1 Excerpt Text: 1. Economic Impact  In the prEPAration of our comments, Miles & Stockbridge reviewed the proposed rule's Economic Impact Analysis ( EIA), dated August 3, 2004 ( conducted by ICF Consulting). After a careful review, we have determined that the economic impact analysis has several shortcomings, such as the failure to accurately address the financial impacts that this rule will have on small businesses. Although the Agency agrees that the proposed standards on how to conduct " all appropriate inquiries" will be an additional workload burden on an innocent landowner, a contiguous property owner, or a bona fide prospective purchaser, the cost calculations are not accurately portrayed. EPA's cost estimates were in a range of $ 41 to $ 47 for this additional workload. This is unrealistic, given that this workload is associated with broader due diligence standards.

The current established practices, including CERCLA interim standards rely on due diligence standards established by the American Society for Testing and Materials ( ASTM) in its Standard E1527 ( entitled " Standard Practice for Environmental Site Assessment: Phase I Environmental Site Assessment process"). EPA's proposed rule will introduce performance based standards that are similar to the ASTM standards. However, as mentioned above, several of the new AAI standards are broader in scope. These broader standards require visual inspections, interviews with previous owners and adjoining neighbors, historical reviews, reviews of government records, searches for environmental cleanup liens, land use records, analysis and determination of whether purchase prices are reflective of fair market values, and service requirements of an environmental professional. Although, these additional requirements may not influence a large company's redevelopment efforts, it may prove to be a significant disadvantage for a small business.

2. 180 Day Time Limit  The proposed rule not only requires additional site information, but also establishes time limits associated with the date of the inquiry. Site information will warrant updates for information collected more than 180 days prior to the date of purchase of the property. Information that may potentially require updates includes: interviews with past and present owners, searches for environmental cleanup liens, review of Local, State and Federal records, visual inspections, and a declaration by an environmental professional. These tasks and attendant costs may not be a significant issue or a ' deal breaker' for a large business that usually relies on hired consultants to update this information. However, such cost will have a significant financial burden on a small business, or small innocent purchaser, if for any reason the property transaction is delayed. Earlier due diligence work would be at risk, resulting in delay, expense and replication of efforts. Unfortunately, the Economic Impact Analysis did not consider or calculate the time and/ or cost this requirement would have on replicating the inquiry efforts, especially when the property transaction is delayed. Our experience suggests that the average length of a transaction typically will exceed 180 days. The EIA needs a more thorough analysis of time that is required for a commercial property transfer. The Agency may already have a great deal of the data that could be analyzed in its internal audits and reports associated with the Brownfield's program nationally. 703 Response: EPA estimates that the final rule will not significantly impact small entities for the following reasons.

In response to many comments EPA received on the proposed definition of an environmental professional, the final rule provides that individuals that do not meet the required educational requirement ( i. e., do not have a Baccalaureate or higher degree in a field of engineering or science from an accredited institution of higher education) will qualify as an environmental professional if they have ten ( 10) years of relevant full time experience in the conduct of all appropriate inquiries investigations, or Phase I environmental site assessments. EPA continues to recommend that the on site visual inspection be performed by persons meeting the qualification of an environmental professional. The definition in the final rule is less stringent than the proposed definition, allowing for most people currently practicing to qualify as environmental professionals. Therefore, we do not believe that the recommendation would impose any significant cost burden.

With respect to historical sources review, the final rule does not require any additional sources to be reviewed that are not already within the realm of sources required to be consulted by the ASTM E1527 standard. With respect to governmental records review, we recognize that the proposed rule did extend the search for institutional controls to a one half mile radius of the subject property while the search requirement under the ASTM E1528 2000 standard is limited to the subject property. EPA, however, has revised the search requirement under the final rule by limiting the search for institutional controls to the subject property.

Under the ASTM E1527 2000 standard, it is the user's responsibility to check for environmental liens that are currently recorded against the subject property, and to report these to the environmental professional who is conducting the Phase I ESA. The requirements in the final rule are the same; therefore, there will be no incremental cost ( labor or expenses) incurred due to promulgation of the final rule.

With respect to the requirement that the environmental professional consider whether or not the property's purchase price reasonably reflects the fair market value of the property ( assuming the property is not contaminated), the final rule does not require that a real estate appraisal be conducted. Therefore, there is no reason for a more extensive search to have to be performed in response to the final rule than what is currently required under the ASTM E1527 2000.

The final rule does not explicitly require interviews with past owners and occupants, but provides that the environmental professional include interviews of past owners, operators, or occupants as necessary to meet the objectives of the rule and in accordance with the performance factors. We recognize that such interviews will need to be performed in the case of some properties and we revised the cost estimates for the final rule to properly account for the incremental burden associated with conducting additional interviews. The incremental burden, however, is expected to be minimal. The revised cost estimates are provided in the addendum to the EIA, which is available in the docket for the final rule.

With respect to shelf life of ESA reports, EPA clarified the regulatory language in the final rule to allow for the use of information contained in previously conducted assessments, even if the 704 information was collected more than a year prior to the purchase date of the subject property. EPA agrees with the commenters that the shelf life requirement may result in a small fraction of Phase I ESAs been redone. Because the rule allows for the use of previously collected information, the cost of re doing a Phase I ESA should be lower, on average, than the cost of the initial Phase I ESA. The shelf life requirements of the final rule, therefore, are not expected to increase the average cost of Phase I ESAs.

Commenter Organization Name: ENSR International Comment Number: 0314 Excerpt Number: 7 Excerpt Text: The preamble includes ( pages 52569 52572) a comparison of the cost to perform an assessment in accordance with the proposed rule to the current cost to prEPAre an ASTM 1527 00 level assessment, and states that the cost increase would be $ 41$ 47/ site, or $ 539/ site if an environmental professional performed all the work. The comparison notes the following assumptions, which were the basis for the comparison:  A reduced burden for the conduct of interviews in the cases where the property is abandoned;  An increased burden associated with documenting recorded environmental cleanup liens;  An increased burden for documenting the comparison of price vs. market value of a property, and concluding the reason; and,  An increased burden for recording degree of obviousness.

Comment: The ultimate cost difference will obviously depend on what changes occur to the proposed rule, along the lines of our comments presented here. However, based on the proposed rule as it currently exists, these costs appear to grossly underestimate the potential cost increase. We currently meet or exceed the ASTM 1527 00 standard in all reports, including performance of municipal research, which we understand is not always performed in the industry. Our comments are based on incremental increases that we see over that baseline of assessment. We have provided our comments relative to each of the assumptions, then added points which we feel were not addressed in the cost analysis.

 Interviews  In the vast majority of cases, the interview burden increases, as the requirements now include not just current owners or operators, but past owners, operators or occupants. The time required to locate and interview these individuals is likely to be anywhere from one to several hours. In the case chosen for the evaluation, the burden to interview past owners, operators and occupants is not reduced, and the need to interview the current owner, etc. is replaced by an interview of abutter( s). Therefore, we do not agree that the burden would be reduced even in this case. We feel that the price increase for this portion of the work would be in the range of $ 70  $ 210 ( assuming an average billing rate of a non environmental professional of $ 70/ hr, which holds for the remainder of these examples).

 Environmental Liens ( which ENSR understands to include Engineering and Institutional controls)  Based on the current requirement of researching these to a one half mile radius, the lack of publicly available databases for these in several states ( EDR reports that Institutional Controls databases are available in 35 states, and Engineering Controls database are available in only 13 705 states), and the implication of the need ( per the preamble) to perform extensive municipal research to obtain this information for all sites within one half mile radius, and the increased labor could range from at least several hours to over a day ( and perhaps several days in the case of an urban area). Here we are estimating this at $ 210 ( 3 hours) to $ 560 ( one day). We have hopes that the final rule will clarify that the intent is not to perform the detailed municipal research beyond the site and abutters, which would make the lower number the more likely. Add to this the likely need to perform a title search in order to be certain of the presence or absence of such a control to the subject site, and the cost per site increases by another $ 250  $ 300.

 Price vs. Market Value  As this will be a statement of the buyer's opinion, this is not considered likely to significantly impact costs, beyond that of an interview question.

 Degree of Obviousness  Again, as a statement of opinion and the inclusion of recommendations, this is not considered to add significantly to overall costs, and impact would likely be in the range of $ 35/ site ( 1/ 2 hour).

 Tribal Records  The evaluation does not consider an increased burden for researching tribal records. According to EDR, 46 states have tribal databases for USTs and LUSTs only ( via EPA records). All other tribal record research would have to be performed by interviews with the tribal government, and direct record review. If performed in concurrence with municipal research ( i. e. if the site and vicinity are in multiple jurisdictions) and the tribal government is present in the site locale, this could add up to a few hours to the process ( estimated at $ 140). If the tribal government is present at a remote location, this cost would be increased further. We have not calculated this further increase, as we understand that a minority of sites would fall under this category, although we do not expect the numbers to be insignificant.

 Data Gap Documentation  The proposed rule carries strong requirements for documentation of data gaps, efforts made to fill them, and an evaluation ( for each data gap) of whether or not this affects the environmental professional's ability to make a conclusion regarding the potential for the site to have been impacted by a release or threat of release. We expect this to add to the report writing burden at the level of one to two hours, depending on the availability of records for the site ($ 70  $ 140).

Response: EPA thanks the commenter for providing detailed explanations on the activities that would be associated with a higher level of effort under the proposed rule than estimated in the EIA.

The final rule does not explicitly require interviews with past owners and occupants, but provides that the environmental professional include interviews of past owners, operators, or occupants as necessary to meet the objectives and performance factors of the final rule. We agree with the commenters that locating past owners and occupants may be more time consuming than locating the current owners and occupants of a property and that in some cases the environmental professional will need to complete the full interview with the current owner before determining that it is necessary to interview a past owner or occupant. 706 In response to this and similar public comments, EPA revised the cost estimate developed for the proposed rule to account for the incremental burden associated with locating and interviewing past owners and occupants. The revised cost estimates are provided in the addendum to the EIA, which is available in the docket for the final rule.

With respect to the requirements to search for institutional controls, EPA agrees with the commenter that the EIA underestimated the incremental cost associated with this requirement. The proposed rule extended the search for institutional controls to a one half mile radius of the subject property, while the search requirement under the ASTM E1527 2000 standard is limited to the subject property. Had the EIA for the proposed rule properly accounted for the extended scope of the institutional controls search requirement ( as it was included in the proposed rule), the estimated average incremental cost per Phase I ESA would have been higher than $ 47. EPA, however, has revised the requirements for searching for institutional controls under the final rule by limiting the search to the subject property. This revision is in line with the commenters' recommendations and the search requirements for institutional controls in the ASTM E1527 2000 standard. Therefore, due to the revision of the requirements, the EIA does not need to be revised to account for incremental costs.

With respect to the search for environmental liens, we disagree with the commenter that this requirement would impose an incremental burden on a prospective property purchaser. The EIA developed for the proposed rule assumed that, under the ASTM E1527 2000 standard, it is the user's responsibility to check for environmental liens that are currently recorded against the subject property, and to report these to the environmental professional conducting the Phase I ESA. The requirements in the final rule are no different; therefore, there will be no incremental cost ( labor or expenses) incurred as a result of the final rule. Thus, even if the cost of a title search is explicitly accounted for under the base case and under the final rule in the EIA, the estimated average incremental cost per transaction would stay unchanged.

With respect to the requirement that the purchaser of the property consider whether or not the property's purchase price reflects the fair market value of the property ( assuming the property is not contaminated), we agree with the commenter that this requirement will not significantly impact the cost of Phase I ESAs since the final rule does not require that a real estate appraisal be conducted. The EIA did incorporate an incremental labor hour burden in the cost analysis for the rule for the environmental professional to document the results of an inquiry into the relationship of the purchase price to the fair market value of the property. The EIA assumed, however, that this requirement would impact only a fraction of the total number of properties assessed annually.

With respect to the documentation requirement regarding the degree of obviousness of contamination, the incremental burden suggested by the commenter is consistent with the EIA incremental labor hour estimate, which ranges from 0.5 to 1 hour per Phase I ESA depending on the property type/ size.

With respect to the requirement to search tribal records, EPA clarifies in the preamble to the final rule that tribal records need only be searched for and reviewed in those instances where the subject property is located on or near tribal owned lands. When such records are not available, necessary information should be sought from other sources. The EIA assumed that this requirement would be 707 fulfilled to the extent that tribal records are easily available, through, for example, the EDR database. If such records are not available, it is likely that the environmental professional will attempt to obtain the relevant information during the interview process, and therefore there will be no incremental cost associated with the requirement.

With respect to the requirement for documenting data gaps, the EIA did not explicitly account for this performance factor. Data gaps will need to be documented only in the cases in which the environmental professional cannot perform one or more of the required tasks. The EIA implicitly assumed that if the documentation of data gaps is necessary, the time saved by omitting the required tasks would offset the time needed for the documentation.

Commenter Organization Name: Rose and Westra Comment Number: 0320 Excerpt Number: 5 Other Sections: NEW  6.6  Impact of the rule on the cost of liability insurance Excerpt Text: The Pre Amble further states that the environmental professional's failure to identify an environmental condition or identify a release or threatened release may invalidate defenses to CERCLA liability. This essentially raises the standard of professional care for the environmental professional to perfection. If any condition is not identified by the environmental professional, the landowner might lose CERCLA defenses, even if the environmental professional strictly followed the AAI Rules. Certainly, the EPA is far from perfect, so how can it expect the environmental professional to be in every case? R& W recommends a specific statement addressing the environmental professional's standard of care be included in the AAI rules. Failure to do so will increase the cost of the inquiries due to the increased cost of liability insurance, and will create a need for environmental professional's to charge a risk premium relative to E 1527 Phase I ESAs due to inevitable increases in litigation. These costs were not addressed in the Economic Impact Analysis and, therefore, must be controlled in the Proposed Rules. R& W requests that the EPA remove this statement from the Pre Amble and specifically address this vital issue in any future Proposed Rules.

Response: In today's final rule, § 312.20( g) requires environmental professionals, prospective landowners, and grant recipients to identify data gaps that affect their ability to identify conditions indicative of releases or threatened releases of hazardous substances ( and in the case of grant recipients pollutants, contaminants, petroleum and petroleum products, and controlled substances). The final rule requires such persons to identify the sources of information consulted to address the data gaps and comment upon the significance of the data gaps with regard to the ability to identify conditions indicative of releases or threatened releases. Section 312.21( c)( 2) also requires that the inquiries report include comments regarding the significance of any data gaps on the environmental professional's ability to provide an opinion as to whether the inquiries have identified conditions indicative of releases or threatened releases.

In response to issues raised by commenters, we point out that the final regulation, as did the proposal, requires that environmental professionals document and comment on the significance of 708 only those data gaps that " affect the ability of the environmental professional to identify conditions indicative of releases or threatened releases of hazardous substances... on, at, in, or to the subject property." If certain information included within the objectives and performance factors for the final rule cannot be found and the lack of certain information, in light of all other information that was collected about the property, has no bearing on the environmental professional's ability to render an opinion regarding the environmental conditions at the property, the final rule does not require the lack of such information to be documented in the final report. Given the restriction on the type of data gaps that must be documented, and given that the documentation is restricted to instances where the lack of information hinders the ability of the environmental professional to render an opinion regarding the environmental conditions at the property, we disagree with the commenters who assert that the requirement is overly burdensome or will result in the inability to complete the required investigations.

The commenter is taking an extreme interpretation of EPA's discussion of the importance of conducting a sound and thorough all appropriate inquiries investigation. The intent of the preamble discussion is to note that every effort should be made to conduct a thorough all appropriate inquiries investigation so that the prospective property owner is able to comply with all of the statutory provisions required for obtaining protection from CERCLA liability. Should an undiscovered release because an issue at a later date, after a person has acquired a property, the landowner's defense may in part or in whole depend upon his or her ability to demonstrate the caliber and quality of the all appropriate inquiries investigation that was completed prior to acquiring the property.

The conduct of an incomplete all appropriate inquiries investigation, or the failure to detect a release during the conduct of all appropriate inquiries, does not exempt a landowner from his or her post acquisition continuing obligations under other provisions of the statute. Failure to comply with any of the statutory requirements may be problematic in a claim for protection from liability.

It is not clear that the insurance industry would react to the final rule as the commenter has indicated. It is also possible, for example, that insurance companies will cut premiums for all policies that might be affected by CERCLA as a result of additional liability protection the final rule will offer to prospective purchasers who follow the requirements of the final rule.

Commenter Organization Name: Rose and Westra Comment Number: 0320 Excerpt Number: 15 Other Sections: NEW  3.3.1  Scope of the review  how far back in time/ history historical records must be reviewed Excerpt Text: Furthermore, the proposed § 312.24( b) does not limit the duration of investigation for historically unimproved properties. The E 1527 00 requirement to investigate such properties back to 1940 is more economically efficient and poses virtually no threat of not identifying conditions posing material environmental risk. This has made the E 1527 00 process much more efficient. The Economic Impact Analysis failed to address the increased requirements over the E 1527 00 requirements. Therefore, it understates the impact of the Proposed Rules. R& W requests that the 709 EPA further clarify the historical research requirement to avoid needless historical investigation of vacant property ( prior to 1940). In the absence of such, R& W requests that the EPA provide a realistic economic assessment of this section of the Proposed Rules.

Response: Historical land use is typically determined through interviewing current and past property owners, but also largely through reviewing of historical fire insurance maps, aerial photographs, topographic maps, tax files, land title records, etc. These historical sources are reviewed under the ASTM E1527 2000 standard; therefore, there will be no additional labor or cost burden to collect and review these sources under the final rule. With respect to the required timeframe for reviewing historical records, the requirements of the rule are essentially the same as the ASTM E1527 2000 standard. The ASTM standard requires ( at section 7.3.2) that " all obvious uses of the property shall be identified from the present, back to the property's obvious first developed use, or back to 1940, whichever is earlier." [ emphasis added] The final rule for all appropriate inquiries requires that historical documents and recorders be reviewed " for a period of time as far back in the history of the subject property as it can be shown that the property contained structures or from the time the property was first used for residential, agricultural, commercial, industrial, or government purposes." Given that the requirements of the final rule are essentially the same as the requirements under the interim standard, there will be no incremental cost associated with the historical records review requirement of the final rule.

Commenter Organization Name: Rose and Westra Comment Number: 0320 Excerpt Number: 20 Other Sections: NEW  3.9.2  The Agency should provide additional guidance Excerpt Text: Section 312.30, Commonly Known or Reasonably Ascertainable Information about the Property, is not workable in its current form. The implication to interview owners and occupants of adjoining property poses the same confidentiality and security law issues as mentioned previously about interviewing past owners, occupants, etc. The suggestion that the environmental professional should review or consult " Others with knowledge of the subject property; and other sources of information [ e. g., newspapers, websites, community organizations, local libraries, and historical societies]" is too vague in the absence of some further guidance. ASTM Committee E 50 addressed this with practically reviewable and likely to be useful limitations. The sources cited in the example cannot be reviewed on the property by property basis. For example, does the EPA contemplate microfilms of newspapers be searched back to the beginning of the collection for each property having some form of a data gap? The Economic Impact Analysis suggests no further costs will be incurred by the proposed AAI rules than with E 1527 00. Thus, the Analysis is clearly not consistent with the Proposed Rules and, therefore, understates the impact of the Proposed Rules. R& W requests that the EPA reform the Proposed Rules to include specific limitations similar to E 1527 00.

Response: The final rule requires that the environmental professional to supplement the searches and reviews of historical and governmental records with commonly known or reasonably ascertainable 710 information about the subject property. This requirement was included in the previous provisions for the CERCLA innocent landowner defense and, therefore, is not an incremental burden imposed by the final rule. The final rule provided a few examples of where commonly known or reasonably ascertainable information may be found. The final rule does require that the suggested sources be used, only that commonly known or reasonably ascertainable information be accounted for during the inquiries.

Commenter Organization Name: Rose and Westra Comment Number: 0320 Excerpt Number: 21 Excerpt Text: In addition to the technical issues raised above, the Economic Impact Analysis ( EIA) is fundamentally flawed. ICF Consulting derived hourly cost of staff and consulting experience with Phase I ESAs from only one source: itself. The EIA cites several polls conducted by EDR, but fails to cite the recent poll of environmental professionals by EDR. These polls indicate that the vast majority of environmental professionals and associated consulting staff interviewed believe the cost of the AAI inquiries as proposed will increase by greater than 10% over the current E 1527 00. This would be approximately four times the increase estimated by the Economic Impact Analysis. R& W requests that the EPA perform a new Analysis to address this, as wells as other flaws and omissions described previously.

The EIA also states, " The proposed regulation also should not result in any increase in the amount of work performed by those individuals who meet the environmental professional definition  " R& W cannot speak to nationwide practices, but in the midwestern states, it is common to use experienced environmental staff who may not meet the definition of environmental professional to perform site observations on low risk properties ( e. g., vacant land, commercial office buildings, etc.). While the Proposed Rules do not require it, the Pre Amble specifically recommends that site observations be performed by an environmental professional. R& W restates its request that the EPA obtain an EIA that includes all the requirements of the Proposed Rules and guidance in the Pre Amble.

The EIA suggests that review of federal, state, tribal, and local government records "  is not likely to impose any additional burden hours above the current environmental assessment practices  " This does not account for the fact that reasonably ascertainable lists of brownfield sites, engineering controls and institutional controls are not available. The EIA does not describe how this additional information is going to be obtained at no cost increase compared to the E 1527 00.

The EIA makes similar discounting of the commonly known or reasonably ascertainable requirements of the Proposed Rules. Without qualifications such as ' likelihood to be useful' and ' able to be searched by property,' this requirement is a significant expansion over the E 1527 00 practice. The EIA patently ignores this.

As stated above, the proposed scope of the AAI historical investigation is significantly more vague and more onerous than E 1527 00, but the EIA states, " The proposed regulation will not impose any additional burden hours above the current environmental assessment practices." R& W restates 711 its request that the EPA obtain an Analysis that includes all the requirements of the Proposed Rules and guidance in the Pre Amble.

The EPA claims that the Proposed Rules will increase the cost of the " all appropriate inquiry" by $ 46. This is clearly understated, as described above. Furthermore, the Proposed Rules require property developers or investors to consult with a title company in order to consider whether the purchase price of a property reasonably reflects the fair market value of the property, should the property be contaminated. Property developers or investors could incur costs estimated at $ 300 to complete this single requirement. R& W requests that the EPA re evaluate the increase in cost that the Proposed Rules will create.

Response: EPA thanks the commenters for providing detailed explanations on the incremental burden under the proposed rule.

To address the commenter's concern that the EDR results may be more reliable than the estimates presented in the EIA, the Agency conducted a sensitivity analysis in the addendum to the EIA. We show that if the EDR survey results are correct, the incremental cost of the final rule may be higher than we originally estimated. However, the final rule would not have annual impacts in excess of the $ 100 million threshold set for major rules even if the final rule increases the cost per Phase I ESA by an amount close to the EDR respondents' estimate.

In response to many comments EPA received on the proposed definition of environmental professional, EPA modified the definition in the final rule to provide for persons who have 10 years of full time relevant experience, but do not have a Baccalaureate degree, to qualify as environmental professionals. Although EPA continues to recommend that the on site visual inspection be performed by persons meeting the qualification of an environmental professional, the definition in the final rule is less stringent than the proposed one and will allow for most people currently practicing to qualify as environmental professionals. Therefore, EPA estimates that no additional, or incremental cost, is associated with the need to hire an individual who meets the definition of environmental professional to oversee the conduct of the all appropriate inquiries.

With respect to requirements in the final rule to review federal, state, tribal, and local government records, the final rule requires that governmental records of engineering controls and institutional controls be searched only for information on engineering and institutional controls at the subject property. The rule is, therefore, consistent with the current industry practices and the ASTM E1527 2000 standard. There is no incremental cost or burden associated with the requirement to search for institutional or engineering controls.

The final rule requires environmental professionals to supplement the searches and reviews of historical and governmental records with commonly known or reasonably ascertainable information about the subject property. This requirement was included in the previous provisions for the CERCLA innocent landowner defense and, therefore, is not an incremental burden imposed by the final rule. 712 With respect to the requirement that the purchaser of the property consider whether or not the property's purchase price reflects the fair market value of the property ( assuming the property is not contaminated), we disagree with the commenter's assertion that this requirement will significantly impact the cost of Phase I ESAs. First, the final rule does not specifically require that a real estate appraisal be conducted. Therefore, the EIA assumed that a more extensive search would not be required beyond what is currently required under the ASTM E1527 2000 standard. Second, the EIA did account for the incremental labor hour burden for the environmental professional to document the results of an inquiry into the relationship of the purchase price to the value of the property. This requirement, however, is expected to impact only a fraction of the properties ( i. e., those properties where there is a significant difference between the purchase price and the fair market value of the property). Lastly, it is the current industry practice to perform a search for environmental cleanup liens. Also, the ASTM E1527 2000 standard includes a requirement to identify environmental cleanup liens, but identifies the search as the responsibility of the " user," or prospective property owner. In the final rule, the search for environmental cleanup liens may be assigned to either the prospective property owner or the environmental professional. Therefore, the cost for conducting a search for environmental cleanup liens does not represent an incremental cost associated with the requirements of the final rule.

Commenter Organization Name: Holm, Wright, Hyde, & Hays Comment Number: 0323 Excerpt Number: 3 Excerpt Text: Comment 1: While the CERCLA definition of releases ( and threatened releases) is very broad, typically a release can be identified ( although past air emissions can be a challenge where the plume " touched down"). Threatened releases on most properties are reasonably identifiable ( e. g., rusting drums, and USTs no longer in service without any closure report) but become much more difficult with the transfer of ongoing manufacturing operations along with the property. With the transfer of ongoing manufacturing operations, generally, operations experts representing the buyer review the condition of equipment but not relative to a threatened release to the environment.

In fact, the experience of environmental professional, is that a review of major permits and all spill/ release/ response plans is frequently performed ( 20% of the time in 2004) to identify items that may constitute a threatened release at " ongoing operations" to be transferred. The time it takes to perform this activity averages 16 hours. In addition, more in depth reviews of key operations took place about 2% of the time and required about 40 hours of effort of highly skilled professionals ( more costly per hour). While certain environmental professionals may not focus as heavily as the norm on standard transfers that have value almost entirely because of planned future redevelopment ( the prime focus of Brownfields activities), it is expected that the AAI regulations and any revised ASTM Standards that follow will set the standard and will be followed by most environmental professionals for all types of transfers.

Recommendation:

1) Reflect the above in the upper end of the AAI cost range and the maximum annual cost increase in foot note 4 on page 52573 of the August 26, 2004 Federal Register. 713 2) Recognize in the preamble that meeting these new standards may be particularly difficult for sites with ongoing operations so that appropriate expectations are set for all likely stakeholders.

Response: The definition of releases and threatened releases included in the final rule is the same as defined in CERCLA. CERCLA liability attaches to releases and threatened releases of hazardous substances. Therefore, the scope of the all appropriate inquiries investigation always has been relative to identifying releases and threatened releases of hazardous substances. The final rule does not change the scope of the CERCLA liability provisions, nor does EPA have the authority to modify the scope of the CERCLA liability in the all appropriate inquiries rule. Additionally, the final rule does not impose any additional burden associated with the scope of CERCLA liability.

The fact that the commenter points out that a review of major permits and spill response plans is frequently performed when conducting a site assessment points to a conclusion that the activity does not represent an incremental cost associated with the final rule.

Commenter Organization Name: FAA Comment Number: 0334 Excerpt Number: 25 Excerpt Text: INCREASED LIABILITY COSTS 1) Requiring a statement and signature of the environmental professional on the AAI report will lead to increased costs as environmental professionals will seek increased liability protection for possible errors and/ or omissions in their judgments and identification of data gaps. The estimated $ 41$ 47 increase over current ASTM 1527 2000 costs does not take into account the increased costs that environmental professionals will charge based on their increased liability. FAA does not believe that EPA has addressed this added cost effectively in the economic impact section of the proposed rule and would like EPA to include this fact in their calculations.

Response: EPA thanks the commenters for their suggestions. The final rule requires that the written report include two signed declarations by the environmental professional. One declaration must state that the environmental professional meets the professional criteria as defined by the final rule under § 312.10. The second required declaration must state that all appropriate inquiries have been carried out in accordance with the rule's requirements. We disagree with the commenter's suggestion that these declaration requirements would lead to an increase in the cost of Phase I ESAs since they are not significantly different from what is required under the ASTM E1527 2000 standard.

In response to issues raised by commenters, we point out that the final regulation, as did the proposal, requires that environmental professionals document and comment on the significance of only those data gaps that " affect the ability of the environmental professional to identify conditions indicative of releases or threatened releases of hazardous substances... on, at, in, or to the subject property." If certain information included within the objectives and performance factors for the final rule cannot be found and the lack of certain information, in light of all other information that 714 was collected about the property, has no bearing on the environmental professional's ability to render an opinion regarding the environmental conditions at the property, the final rule does not require the lack of such information to be documented in the final report. Given the restriction on the type of data gaps that must be documented, and given that the documentation is restricted to instances where the lack of information hinders the ability of the environmental professional to render an opinion regarding the environmental conditions at the property, we disagree with the commenters who assert that the requirement is overly burdensome or will result in the inability to complete the required investigations.

Commenter Organization Name: Montana DEQ Comment Number: 0335 Excerpt Number: 9 Excerpt Text: Unfunded Mandates Reform Act: DEQ believes EPA must conduct a more detailed cost benefit analysis. This proposed rule will result in expenditures to State, local and Tribal governments and to the private sector. As stated earlier, DEQ will have to contract AAI investigations to outside contractors because not all of its project officers would be qualified to conduct AAI investigations under the proposed definition of an " Environmental professional." This will result in much larger costs per investigation. EPA has stated that an " Environmental professional" does not have to perform all of the AAI investigation, but DEQ cannot take qualified " Environmental professional" project officers off of high priority enforcement sites to review work by other project officers. DEQ believes that EPA must conduct a more detailed cost evaluation to determine whether this proposed rule will result in expenditures to State, local and Tribal governments and to the private sector in amounts over $ 100 million. It appears the cost evaluation discussed in the Summary of Regulatory Costs did not take into account the affect the definition of an " Environmental professional" will have on the cost of an AAI investigation.

Response: In response to the many comments EPA received on the proposed definition of environmental professional, EPA modified the definition in the final rule to provide for persons who have 10 years of full time relevant experience in performing ESAs, but do not have a Baccalaureate degree, to qualify as environmental professionals. Although EPA continues to recommend that the on site visual inspection be performed by persons meeting the qualification of an environmental professional, the definition in the final rule is less stringent than the proposed one allowing for most people currently conducting environmental site assessments to qualify as environmental professionals.

Commenter Organization Name: CBPA Comment Number: 0344 Excerpt Number: 2 Excerpt Text: We also believe that the additional cost of the new procedures will greatly exceed the estimate provided by EPA. 715 Response: Please see response to comment 0344, excerpt 5.

Commenter Organization Name: CBPA Comment Number: 0344 Excerpt Number: 5 Other Sections: NEW  3.8.1  The environmental professional should not be required to consider the relationship of the purchase price to the value of the property Excerpt Text:  Proposed § 312.29 " The Relationship of the Purchase Price to the Value of the Property, if the Property was not Contaminated" Imposes a new Requirement for a Property Valuation Analysis and Unduly Intrudes Into Market Transactions Proposed § 312.29 requires that purchasers " must consider whether the purchase price of the subject property reasonably reflects the fair market value of the property, if the property were not contaminated."

With this requirement in place, failure to commission a valuation analysis of the property would expose prospective purchasers to subsequent claims that the purchase price was below market and should have alerted the purchaser to the presence of contamination. Although the preamble of the proposed rule states that a formal appraisal is not necessary, it states that the intent is to determine if the " price paid for the property is reflective of its market value," and may be accomplished by retaining a " real estate expert" to conduct a " comparability analysis" ( page 52567). It is often difficult to ascertain market value without making various adjustments to comparable sales, such as size, location, availability of parking, rail or truck access, etc. Given the potential exposure to second guessing, prudent purchasers will probably commission appraisals, and in any event it is not likely that the non appraisal market valuation envisioned by proposed rule will differ much in scope or cost from a formal appraisal. Therefore, the cost of an appraisal should be included in the additional costs associated with the rule The rulemaking committee may believe that § 312.29 is required by the Brownfields Act of 2002, which does recite the phrase " the relationship of the purchase price to the value of the property, if the property was not contaminated." However, this element of All Appropriate Inquiry remains unchanged since 1986 and to the extent that EPA may believe that it is a statutorily required element of future All Appropriate Inquiries, it is already covered by ASTM El 527. ASTM El 527 properly limits " the relationship of the purchase price to the value of the property" to " actual knowledge that the purchase price is significantly less than the purchase price of comparable properties." ASTM El527 00 § 5.4 There is no requirement that the purchaser ascertain and consider the price of comparable properties or ascertain and consider the fair market value of the subject property. Hence, existing practice does not intrude into market transactions and does not require an appraisal.

Response: The statute requires that the federal regulations for all appropriate inquiries include a requirement to consider the relationship of the purchase price to the value of the property. This provision has 716 been part of the statutory requirements for all appropriate inquiries since 1986, it is not a new or incremental requirement. The provision is not limited to " actual knowledge." The statute requires that the relationship between purchase price and market value be considered in case of all properties, without limitation.

The final rule, however, does not require that a real estate appraisal be conducted to achieve compliance with this criterion. Although some commenters requested that the final rule require that a formal appraisal be conducted and we acknowledge that there may be potential value in conducting an appraisal, we determined that a formal appraisal is not necessary for the prospective landowner or grantee to make a general determination of whether the price paid for a property reflects its fair market value. In the case of many property transactions, a formal appraisal may be conducted for other purposes ( e. g., to establish the value of the property for the purposes of establishing the conditions of a mortgage or to provide information of relevance where a windfall lien may be filed). In cases where the results of a formal property appraisal are available, the appraisal results may serve as an excellent source of information on the fair market value of the property.

In cases where the results of a formal appraisal are not available, the determination of fair market value may be made by comparing the price paid for a particular property to prices paid for similar properties located in the same vicinity as the subject property, or by consulting a real estate expert familiar with properties in the general locality and who may be able to provide a comparability analysis. The objective is not to ascertain the exact value of the property, but to determine whether or not the purchase price paid for the property generally is reflective of its fair market value. Significant differences in the purchase price and fair market value of a property should be noted and the reasons for any differences also should be noted.

In the EIA for the proposed rule, EPA assumed that a more extensive search would not be required under the rule to document the reasons for discrepancies between the purchase price and the fair market value of a property ( assuming it were not contaminated) than what is currently required under the ASTM E1527 2000 standard. The EIA did incorporate an incremental labor hour burden in the cost analysis for the rule for the environmental professional to document the results of an inquiry into the relationship of the purchase price to the fair market value of the property. The EIA assumed, however, that this requirement would impact only a fraction of the total number of properties assessed annually.

Commenter Organization Name: Grand Rapids C of C Comment Number: 0345 Excerpt Number: 6 Excerpt Text: The Grand Rapids Area Chamber of Commerce remains concerned with the economic impacts associated with the proposed rule on investors and the real estate industry. The EPA claims that the proposed rule will increase the cost of the " all appropriate inquiry" by $ 46. It is our belief that this figure is severely underestimated. The various additional requirements in the proposed rule would increase the cost of " all appropriate inquiries" by a much larger dollar figure. For example, the proposed rule requires that property developers or investors may have to consult with a title 717 company in order to consider whether the purchase price of a property reasonably reflects the fair market value of the property should the property be contaminated. Property developers or investors could incur costs estimated at $ 300 to complete this single requirement. In addition, the increase in property investigations and background checks, will result in a lengthy interview process requiring additional manpower and expenses paid by the investors. Therefore, the Grand Rapids Area Chamber of Commerce requests that the EPA re evaluate the increase in cost that the proposed rule will create.

Response: EPA thanks the commenters on their suggestion that the estimates of the costs under the AAI rule should be reevaluated. With respect to the requirement that the purchaser of the property consider whether or not the property's purchase price reflects the fair market value of the property ( assuming the property is not contaminated), we disagree with the commenter's assertion that this AAI requirement will significantly impact the cost of Phase I ESAs.

The final rule does not require that a real estate appraisal be conducted to achieve compliance with this criterion. Although some commenters requested that the final rule require that a formal appraisal be conducted and we acknowledge that there may be potential value in conducting an appraisal, we determined that a formal appraisal is not necessary for the prospective landowner or grantee to make a general determination of whether the price paid for a property reflects its fair market value. In the case of many property transactions, a formal appraisal may be conducted for other purposes ( e. g., to establish the value of the property for the purposes of establishing the conditions of a mortgage or to provide information of relevance where a windfall lien may be filed). In cases where the results of a formal property appraisal are available, the appraisal results may serve as an excellent source of information on the fair market value of the property.

In cases where the results of a formal appraisal are not available, the determination of fair market value may be made by comparing the price paid for a particular property to prices paid for similar properties located in the same vicinity as the subject property, or by consulting a real estate expert familiar with properties in the general locality and who may be able to provide a comparability analysis. The objective is not to ascertain the exact value of the property, but to determine whether or not the purchase price paid for the property generally is reflective of its fair market value. Significant differences in the purchase price and fair market value of a property should be noted and the reasons for any differences also should be noted.

In the EIA for the proposed rule, EPA assumed that a more extensive search would not be required under the rule to document the reasons for discrepancies between the purchase price and the fair market value of a property ( assuming it were not contaminated) than what is currently required under the ASTM E1527 2000 standard. The EIA did incorporate an incremental labor hour burden in the cost analysis for the rule for the environmental professional to document the results of an inquiry into the relationship of the purchase price to the fair market value of the property. The EIA assumed, however, that this requirement would impact only a fraction of the total number of properties assessed annually.

Lastly, it is the current industry practice to perform a search for environmental cleanup liens. Also, the ASTM E1527 2000 standard includes a requirement to identify environmental cleanup liens, 718 but identifies the search as the responsibility of the " user," or prospective property owner. In the final rule, the search for environmental cleanup liens may be assigned to either the prospective property owner or the environmental professional. Therefore, the cost of conducting a search for environmental cleanup liens does not represent an incremental cost associated with the requirements of the final rule.

Commenter Organization Name: Potter and Adams Comment Number: 0351 Excerpt Number: 1 Excerpt Text: The anticipated incremental cost increase of less than $ 50, as stated in the Preamble section V. A. 2, is lower than the actual incremental cost increase anticipated by this firm. Certain assumptions in Section 5 of the Economic Impact Analysis for the Proposed All Appropriate Inquiries Regulation ( August 3, 2004) (" EIA") do not accurately reflect the increased burden of the proposed AAI. For example, a) Section <IP_ADDRESS> of the EIA states an assumption that half of the time spent interviewing local government officials is completed during the site visit. This does not reflect usual practice nor is it practical.

b) Section 5.6.4 of the EIA includes direct costs of up to $ 25 per property associated with obtaining state and local records. For an industrial property, direct costs greater than $ 150 are typical. This section also includes direct costs of up to $ 25 per property associated with obtaining historical source records. Typical costs for obtaining Sanborn maps and aerial photographs are greater than $ 200. Additional costs would be incurred if a title search were performed.

c) Section <IP_ADDRESS> of the EIA, footnote 21, suggests that when interviews of past owners/ occupants are required, this activity serves as a substitute for interviews of current owners/ occupants rather than an additional activity. Practically speaking, however, interviews of current owners/ occupants must first be performed to identify a data gap and to identify other persons to interview, and then the additional interviews may be conducted. Tracking down past owners/ occupants is a time consuming activity. This represents an additional burden not captured in the EIA.

d) Section <IP_ADDRESS> of the EIA states an assumption that it will take approximately a half hour to compose, review and edit text regarding explanations of purchase price/ market value discrepancies. Section <IP_ADDRESS> of the EIA states an assumption that it will take approximately ½ to 1 hour to compose, review and edit text regarding the user's environmental lien and institutional control search results. Section <IP_ADDRESS> of the EIA states an assumption that it will take approximately onehalf to 1 hour to compose, review and edit text regarding the degree of obviousness of the presence or likely presence of contamination and recommendations for next steps that the user should consider in the ESA process. These activities alone account for a minimum increased burden of 1.5 hours labor, which cannot be accomplished in most firms for less than $ 50. The EIA assumes an average billing rate of $ 67 per hour.

e) The EIA does not address the increased burden of additional documentation requirements for data gaps. The ASTM 1527, which is considered the base case, requires documentation of data gaps 719 specifically with regard to historical use research, while the proposed AAI places no limits on the requirement for documentation of data gaps. Furthermore, the AAI will carry the weight of federal law, which places even greater liability on the environmental professional in an already litigious industry. Therefore, even in cases where a fully " compliant" ASTM 1527 is the base case, the proposed AAI will induce additional burden on the environmental professional to document procedures and results of inquiries.

f) As noted above, clarification is needed regarding the role of the environmental professional in conducting the site visit. In some cases, requiring environmental professional to conduct site visit will have a significant effect on the cost, which is not addressed in the EIA.

The average ASTM 1527 Phase I ESA cost of $ 2,132 in Exhibit 8 1 of the EIA is in line with national average pricing surveys conducted by Environmental Data Resources (" EDR"). However, the incremental cost increase of $ 47 is not. EDR's survey of consultants who perform Phase I ESAs shows that the vast majority of consultants predict an incremental cost increase due to AAI, with 45% of consultants anticipating an increase of 10 20% or more, which translates to a $ 200 to $ 400 or more incremental cost increase. Our firm believes this estimate is more accurate than the estimate presented in the EIA.

Response: EPA thanks the commenters for providing detailed explanations on which particular activities would be associated with a higher level of effort under the proposed rule than estimated in the EIA.

With respect to interview( s) with the local government officials, the timing of the interview( s) largely depends on the location of the subject property relative to the environmental professional's office or base location. Based on ICF Consulting's experience, when significant travel is required ( e. g., plane ride, multiple hour drive), interviewing local officials is more efficiently done in conjunction with the site visit, and supplemented by telephone interviews. In person interviews of local officials also are likely to occur when searching for local historical documentation, as often times the documentation is in the same location as the local officials that need to be interviewed. We do not believe that the commenters' remark warrants a revision to the cost assumptions and burden estimates presented in the EIA conducted for the proposed rule.

Sanborn maps and aerial photographs are often times included as an additional product that is ordered along with the standard environmental database report. Based on our communications with EDR at the time the EIA was prepared, the costs of database search reports typically ranged from approximately $ 160 ( for the standard database search report) to approximately $ 315 ( for the standard database search report, plus up to four historical sources, which could include Sanborn maps, aerial photographs, historical topographic maps, city directories, or other various sources). With respect to other direct costs ( ODCs), the EIA assumed, both under the base case and the final AAI rule, $ 250 for the database search report, plus an additional $ 45$ 75 for historical use information, state and local environmental records, and documents provided by the client. Therefore, the EIA estimates of the average total ODCs for the database report, historical, and governmental records range from $ 295 to $ 325 and are very close to the ODC estimates suggested by the commenter. 720 The commenter suggests that the title search would be an incremental cost under the AAI rule. The EIA assumed that, under the current ASTM standard, it is the user's responsibility to check for environmental liens that are currently recorded against the subject property, and to report these to the environmental professional conducting the Phase I ESA. The final rule's requirements for environmental lien searches are no different; therefore, there would be no incremental cost ( labor or expenses) incurred as a result of the final AAI rule. Thus, even if the cost of a title search is explicitly accounted for under the base case and under the final regulation, the average incremental cost per transaction would stay unchanged.

With respect to the requirement to interview past owners and occupants, we agree with the commenter that the environmental professional may need to complete the full interview with the current owner before determining whether the interview with past owner and occupants would be necessary. In response to this and similar public comments, the EIA was revised to account for the incremental burden associated with locating and interviewing past owners and occupants. The revised cost estimates are provided in the addendum to the EIA, which is provided in the docket for the final rule.

The commenters failed to recognize that the documentation requirements in the final rule regarding the purchase price of the property and the degree of obviousness of the presence or likely presence of contamination at the property would not need to be satisfied in the case of each property or site assessment. The EIA weighted the increased effort under the final rule by the probability that the incremental hours may be needed. In many cases, there will be no discrepancy between the purchase price and the fair market value of the property, therefore no documentation of the reasons for the discrepancy will be necessary.

With respect to data gaps, the EIA did not explicitly account for this performance factor. Data gaps would need to be documented only in the cases in which the environmental professional cannot perform one or more of the required tasks. The EIA implicitly assumed that if the documentation of data gaps is necessary, the time saved by omitting the required tasks would offset the time needed for the documentation.

With respect to the on site visual inspection requirement, EPA continues to recommend that the onsite visual inspection be performed by persons meeting the qualification of an environmental professional. However, EPA modified the definition of environmental professional in the final rule to provide for persons who have 10 years of full time relevant experience in performing ESAs, but do not have a Baccalaureate degree, to qualify as environmental professionals. The definition in the final rule is less stringent than the definition included in the proposed rule and allows for most people currently conducting environmental site assessments to qualify as environmental professionals. Therefore, we do not believe that the recommendation will impose any significant incremental cost burden. 721 To address the commenters' suggestion that the EDR survey results may be more reliable than the estimates presented in the EIA, the Agency conducted a sensitivity analysis in the addendum to the EIA. We show that the final rule will not have annual impacts in excess of the $ 100 million threshold set for major rules even if the final rule increases the cost per Phase I ESA by an amount close to the EDR respondents' estimate.

Commenter Organization Name: Greenlining Institute Comment Number: 0354 Excerpt Number: 17 Excerpt Text: VI. ICF's ESTIMATE OF ADDITIONAL TRANSACTION COSTS AND TIME IS NOT CREDIBLE, AND THE RULE WILL DISPROPORTIONATELY IMPACT LOW INCOME AND MINORITY COMMUNITIES, AND SMALL ENTITITES  A. The New Rule will Significantly Increase the Cost and Time Involved in Conducting Phase One Site Assessments ICF Consulting prepared the Economic Impact Analysis for the proposed rule and contends that the new rule will result in an average additional cost for conducting a phase one site assessment of $ 47. This is simply not credible. In California, a good quality phase one costs between three and five thousand dollars. The environmental consultants in the San Francisco Bay Area we have consulted have informed us that under the new rule it will increase to five to ten thousand.

An industry leader in providing environmental site assessments located in Seattle, Washington has carefully analyzed the new rule and concluded that costs may increase by up to 50%. See Comments on Proposed Rule All Appropriate Inquires, submitted by Geomatrix Consultants Inc. ( Nov. 30, 2004).

ICF's Economic Impact Analysis chose to disregard a survey of five hundred environmental consultants in nine cities that concluded that cost of the new rule would raise the cost of a phase 1 by at least 10%. See EDR Business Information Services, Environmental Site Assessment Report ( July 7, 2004). Even this figure is very low but it is almost five times ICF's estimate and throws off all of ICF's other economic calculations.

The Economic Impact Analysis does not account for many cost impacts that will be associated with the new rule. It does not allow any time or cost for the conduct of an appraisal or market valuation analysis. It only allows a modicum of time for the environmental professional's consideration of the market analysis. This market valuation requirement is new. It is not currently performed and its added cost should be included in any valid economic impact analysis. Because purchasers will be conducting All Appropriate Inquiry in order to gain liability protection, we do not believe they will leave themselves exposed by electing not to conduct a market valuation or by not requiring the environmental professional to consider it. Yet ICF includes time for the environmental professional to consider the valuation in only 15% of cases. 722 The depth of review and number of historical sources that must be reviewed under the new rule are both greatly increased, but ICF allows no additional time. There is also no additional time allotted for the expanded review of local government records, nor is any additional time allowed for the expanded adjoining property analysis.

We also believe that the increased number and scope of tasks required, combined with the performance based approach, will increase the time required to complete All Appropriate Inquiry. We think that it will not be possible in many real estate transactions to comply with the new rule under the time constraints imposed by purchase and sale closing deadlines. We think the time factor makes the new rule impracticable.

We believe meaningful public comment on the proposed rule is not possible until a realistic Economic Impact Analysis is prepared. We request that EPA consider our comments and the comments of others regarding the cost impact and use the information in these comments to commission a new Economic Impact Analysis that realistically assesses the new rule. We believe you will find that the overwhelming, if not unanimous, opinion is that ICF's analysis does not provide meaningful information. We request that public comment be extended or reopened to allow public consideration of the new Economic Impact Analysis before any final decision is made.

Response: EPA thanks the commenters on their position on the burden under the proposed AAI requirements. To address the commenters' concern that the EDR survey results may be more reliable than the estimates presented in the EIA, the Agency conducted a sensitivity analysis in the addendum to the EIA. We show that the final rule would not have annual impacts to the economy in excess of the $ 100 million threshold set for major rules even if the final rule increased the average cost per Phase I ESA by an amount close to the EDR survey respondents' estimate.

The final rule does not require that a real estate appraisal be conducted to achieve compliance with this criterion. Although some commenters requested that the final rule require that a formal appraisal be conducted and we acknowledge that there may be potential value in conducting an appraisal, we determined that a formal appraisal is not necessary for the prospective landowner or grantee to make a general determination of whether the price paid for a property reflects its fair market value. In the case of many property transactions, a formal appraisal may be conducted for other purposes ( e. g., to establish the value of the property for the purposes of establishing the conditions of a mortgage or to provide information of relevance where a windfall lien may be filed). In cases where the results of a formal property appraisal are available, the appraisal results may serve as an excellent source of information on the fair market value of the property.

In cases where the results of a formal appraisal are not available, the determination of fair market value may be made by comparing the price paid for a particular property to prices paid for similar properties located in the same vicinity as the subject property, or by consulting a real estate expert familiar with properties in the general locality and who may be able to provide a comparability analysis. The objective is not to ascertain the exact value of the property, but to determine whether or not the purchase price paid for the property generally is reflective of its fair market value. Significant differences in the purchase price and fair market value of a property should be noted and the reasons for any differences also should be noted. 723 In the EIA for the proposed rule, EPA assumed that a more extensive search would not be required under the rule to document the reasons for discrepancies between the purchase price and the fair market value of a property ( assuming it were not contaminated) than what is currently required under the ASTM E1527 2000 standard. The EIA did incorporate an incremental labor hour burden in the cost analysis for the rule for the environmental professional to document the results of an inquiry into the relationship of the purchase price to the fair market value of the property. The EIA assumed, however, that this requirement would impact only a fraction of the total number of properties assessed annually.

With respect to the requirements to review historical sources of information, the final rule does not require any additional historical sources to be reviewed that are not already within the realm of sources consulted under the ASTM E1527 2000 standard.

With respect to the adjoining property analysis, the EIA underestimated the incremental cost associated with the proposed requirement to search for institutional controls. The proposed rule extended the search for institutional controls to a one half mile radius of the subject property while the search requirement under the ASTM E1527 2000 standard is limited to the subject property. Had the EIA properly accounted for the extended scope of the search requirement for institutional controls under the proposed rule, the estimated average incremental cost per Phase I ESA would have been higher than $ 47. EPA, however, has revised the search requirement for institutional controls in the final rule by limiting the search to the subject property. Therefore, the EIA does not need to be revised to account for additional incremental costs associated with the search for institutional controls.

Although EPA received comments that raised issues relative to the assumptions and results presented in the EIA conducted for the proposed rule, very few commenters provided data or documentation to support their claims. We did conduct a sensitivity analysis using the limited information provided from the results of the EDR customer survey. In addition, EPA received a significant number of comments from parties who conduct environmental site assessments stating that they generally agreed with the results of our cost analysis. Therefore, EPA did not develop a new or additional cost analysis or re open the public comment period.

Commenter Organization Name: NPCA Comment Number: 0403 Excerpt Number: 15 Excerpt Text: EPA estimates that the average incremental cost relative to Phase I ESAs under the ASTM El 527 2000 of the new standards will be $ 41 to S47 dollars. NPCA strongly disagrees with this assertion. As outlined above the additional expenses related to the much expanded and prolonged title and record searches, the real possibility that sampling, testing and analysis will have to take place and the need to continually update much of the information within the time periods specified, will greatly increase the cost under the new AAIs above traditional Phase I ESAs. In addition, NPCA reiterates that the added cost of hiring an environmental professional, as defined in the Proposed Rule, alone will greatly increase price of Phase 1 ESAs under the proposed AAIs. 724 Response: With respect to the title and historical records search, the final rule does not require any additional sources to be reviewed that are not already within the realm of sources required to be considered under the ASTM E1527 2000 standard. EPA revised the search requirement for institutional controls that was included in the proposed rule. In the final rule, the required search for institutional controls is limited to the subject property. Therefore, the search requirement in the final rule is the same as required under the ASTM E1527 2000 standard.

With respect to shelf life of ESA reports, EPA clarified the regulatory language in the final rule to allow for the use of information contained in previously conducted assessments, even if the information was collected more than a year prior to the purchase date of the subject property. However, most aspects of a site assessment completed more than 180 days prior to the date of acquisition of the subject property must be updated to reflect current conditions and current property specific information. This requirement may result in the redoing of a small fraction of Phase I ESAs. Because the rule allows for the use of previously collected information, the cost of re doing a Phase I ESA should be lower, on average, than the cost of the conducting an initial Phase I ESA. The shelf life requirement, therefore, would not increase the average cost of Phase I ESAs.

The final rule does not require that sampling and analysis be conducted as part of all appropriate inquiries.

In response to many comments EPA received on the proposed definition of environmental professional, EPA modified the definition in the final rule to allow persons who have 10 years of full time relevant experience, but do not have a Baccalaureate degree, to qualify as environmental professionals. The definition in the final rule is less stringent than the definition in the proposed rule and allows for most people currently conducting Phase I environmental site assessments to qualify as environmental professionals.

Commenter Organization Name: CCLR Comment Number: 0415 Excerpt Number: 5 Excerpt Text: CCLR has carefully reviewed the Economic Impact Analysis ( EIA) prepared by ICF Consulting, and have discussed its contents with numerous environmental professionals and community developers. We also had an opportunity to discuss the cost impact of the proposed rule with participants at the St. Louis 2004 Brownfields Conference. The consensus is that the EIA does not accurately reflect the additional cost and time that will be involved in conducting All Appropriate Inquiry according to the proposed rule.

In our discussions with environmental professionals, we have found a consistent opinion that existing phase I costs in California under ASTM E1527 vary between $ 3,000 and $ 5,000, and that under the proposed rule, these costs will increase to a range of $ 5,000 to $ 10,000. Given the openended nature of the new performance based approach and lack of actual experience with the new 725 rule, we believe the holistic estimates provided by seasoned front line phase I providers offer a more accurate estimate than the EIA provides.

The EIA contains carefully drawn paragraphs and box charts that attempt to analyze tasks required in the preparation of a phase I report down to the fraction of an hour. However, as it is based on the following assumptions: 1) there is not much that was not already required by ASTM E1527; 2) the tasks required have definite boundaries; and 3) the new rule will increase certainty; it is our opinion that the EIA does not accurately reflect the additional cost and time inherent in the proposed rule. These issues are discussed below.

 Concern 1: The EIA assumes many tasks are not new  The EIA assumes that the valuation analysis is already routinely prepared and will involve no new costs. Although The EIA allows some time for the environmental professional to consider the valuation analysis, it does not allow any cost for a real estate expert or appraiser to prepare the analysis because it believes a valuation analysis already exists. This is an inaccurate assumption, and contradicts EPA's rejection of ASTM E1527 on grounds that it does not require a valuation analysis. In the hundreds of phase I reports we have reviewed, we have never seen a valuation analysis. The EIA also assumes that environmental professionals will have to take time to consider valuation analyses in only 15% of the cases. Every brownfield redeveloper we have spoken with claims that it will be absolutely necessary to conduct a valuation analysis in every transaction, because failure to do so would expose them to plaintiff's claims that purchase price should have alerted them to contamination. Plaintiffs will hire appraisers to make their point in court so community developers will have to hire appraisers as a part of their ' defensive phase I." The appraisal will be transmitted to the environmental professional because it is required by the new rule. And the new rule requires the environmental professional to consider it. EPA should add the cost of the appraisal and allow time for the environmental professional to consider it in 100% of transactions.

 The EIA also allows no additional time or cost for review of historical sources under the new rule. Yet EPA concludes that ASTM E1527 isn't thorough enough in its requirements for historical source review. Under the new rule all uses and occupancies, not just obvious ones, must be identified. If there is a difference between all uses and only obvious uses, there must be more time involved in finding all uses instead of just obvious ones. The new rule also greatly expands the universe of information that must be searched.

 The EIA allows no extra cost for more frequent sampling and analysis. The performance based approach requires the environmental professional to keep looking until answers are found. In many cases this will require sampling and analysis. ASTM E1527 requires the environmental professional to consult enumerated sources and report on what is found. This does not produce the need to use the sampling and analysis process to produce answers. The EIA estimates that the additional cost of limited sampling is $ 1439. Based on our experience with phase I assessments as they are currently conducted and familiarity with many transactions, and our interviews with brownfield redevelopers who have reviewed the proposed rule, we estimate that sampling and analysis will be triggered by the new rule in 50% of transactions. We recommend that EPA add at least $ 700 in average transaction costs for this item. 726  The EIA allows no extra cost for review of local government records. Section 312.26 of the proposed rule states that " local government records. . . must be reviewed," and represents an expanded scope and liability exposure because it, too, is " performance based." The point of this performance based approach is to make it more thorough and searching than ASTM's checklist approach, however, no additional time was allotted to the estimate.

 The EIA allows no time for the new " adjoining and nearby" property analysis. This is a sweeping new requirement, and an appropriate average time should be allotted for this.

 Concern 2: The EIA treats performance based tasks as if they have definite boundaries  The EIA presents charts with precise hour estimates even though it is not clear that anyone with industry experience conducted a test of the new tasks under the performance based approach. A representative set of phase I reports under the new rule and under the old rule to provide the actual time spent along with the reports produced would be of great assistance. This would allow for meaningful public comment by brownfield redevelopers on how much time is really needed to produce a " performance based" phase I that truly lessens their fear of CERCLA liability, as Congress intended. The assumptions in the EIA unfortunately provide little real world information. The EIA cannot know how long it will take to keep going until the answers are found in a way that reduces the potential for a plaintiff's criticism on the phase I. And there is no meaningful way to judge this question until qualified lawyers have the opportunity to have input into the cost estimate process by gauging the re[ orts that are produced. The EIA's presentation unfortunately does not contain sufficient research to provide a realistic basis for evaluating what is actually involved in the new rule.

 Concern 3: The EIA makes an assumption that the new rule produces certainty  The EIA assumes without discussion or supporting documentation, that the new rule will provide more certainty for brownfield redevelopers.

Lastly, the EIA does not include the impact of the increased time involved in tracking down many new sources of information and continuing performance based searches until definitive conclusions are reached. The increased time involved in sampling and analysis is also not included in the estimates. Based on our experience, we believe that the new rule could potentially add weeks to the time required to complete a phase I on average, and in some cases will extend the time to an extent that will make it impossible to complete the phase I on schedule to meet closing deadlines.

The increased time involved in the performance based approach will reduce the possibility of successfully conducting the required research within impending deadlines of escrow, financing, government permitting, and the business needs of buyers and sellers.

In many cases, it will probably be impossible to complete the phase I within the standard 30 day closing period of commercial real estate transactions. Unless the rules can be modified to meet this standard business practice, the performance based rules will not support successful transactions. 727 Response: With respect to the requirement that the environmental professional consider whether or not the property's purchase price reflects the fair market value of the property ( assuming the property is not contaminated), we disagree with the commenter's assertion that the requirements of the final rule will significantly impact the cost of conducting Phase I ESAs. To comply with the provisions of the final rule, a prospective property owner does not have to conduct a formal appraisal of the property. A formal appraisal is not necessary for the purchaser to make a general determination of whether the price paid for a property reasonably reflects its fair market value. Additionally, the requirement to consider the relationship between the purchase price and the fair market value of a property, if the property were not contaminated, is not a new or incremental requirement imposed by the final rule. This provision has been part of the requirements for conducting all appropriate inquiries since CERCLA was amended to include the innocent landowner provisions in 1986. Therefore, the economic impact analysis includes no additional costs for complying with this provision.

The commenter claims that Phase I ESA reports typically do not include property valuation analyses. This observation is consistent with the Agency's understanding of the requirements of the ASTM E1527 2000 standard; unlike the final rule, the ASTM E1527 2000 standard does not require the environmental professional to document any information about the relationship between purchase price and the fair market value of the property in the ESA report. The documentation requirement is new to the final rule and costs associated with the documentation requirement have been accounted for into the EIA for the final rule.

The commenters failed to recognize that the final rule requires that the environmental professional document the inquiries about the property's purchase price only in those cases in which the prospective purchaser found that the purchase price is significantly different from the fair market value of the property ( if it were not contaminated). It is not reasonable to assume, as the commenters have suggested, that this requirement would impact 100 percent of transactions.

With respect to historical sources review, the final rule does not require any additional historical sources be reviewed that are not already within the realm of sources required to be consulted by the ASTM E1527 2000 standard.

The final rule does not require that sampling and analysis be conducted to comply with the all appropriate inquiries requirements. Therefore, no incremental costs to conduct such activities were included in the economic impact analysis.

With respect to review of local government records, the final rule requires that local government records be reviewed to the extent necessary to achieve the objectives and performance factors specified under the rule. While the current ASTM E1527 2000 standard does not specifically require the review of local records, it does state under 7.2.2 Additional Environmental Record Sources: State or Local that "[ o] ne or more additional state sources or local sources of environmental records may be checked, in the discretion of the environmental professional, to enhance and supplement federal and state sources identified above." In practice, a properly performed ASTM Phase I ESA ( which is the assumed baseline approach for the EIA) typically includes a review of at least some local records ( either as part of or in conjunction with 728 interviewing local government officials and reviewing local historical sources). Therefore, in conducting the EIA, EPA assumed a similar level of effort would be conducted to comply with the final rule as is currently undertaken when conducting an environmental site assessment in compliance with the ASTM E1527 2000 standard.

With respect to analyses of conditions of " adjoining and nearby" properties, the final rule does not require any additional investigations that are not already within the scope of the ASTM E1527 2000 standard. Sections <IP_ADDRESS>, <IP_ADDRESS>, and <IP_ADDRESS> of the ASTM E1527 2000 standard require that an evaluation and documentation ( in the ESA report) of the current uses of adjoining properties, past uses of adjoining properties, and current or past uses in the surrounding area be performed to the extent that the uses are visually and/ or physically observed on the site visit, or are identified in the interviews or record review.

With respect to the commenter's remarks on the EIA methodology and a need for an input from lawyers ( concern 2), the FACA Committee members, including individuals with a background in law, were provided with opportunities to review and comment on the EIA methodology.

We disagree with the commenter that the Agency did not discuss the benefits under the rule. The benefits of the final rule were discussed in the EIA, at Chapter 6.

With respect to the commenter's concerns regarding the Agency's statements that the final rule will increase certainty, the Agency points out that the final rule establishes certainty with regard to what a prospective property owner must do to comply with the statutory requirements relative to conducting all appropriate inquiries. The promulgation of a final rule will establish federal standards that are easily accessible. In addition, the final rule and preamble provide the public with guidance regarding EPA's interpretation of the statutory criteria for conducting all appropriate inquiries.

Certainty with regard to CERCLA liability is beyond the provisions of the final all appropriate inquiries rule. All appropriate inquiries are only one of many criteria imposed by the statute to obtain protection from CERCLA liability. Property owners must comply with all statutory criteria to obtain liability protection.

Commenter Organization Name: Dismukes, James Comment Number: 0416 Excerpt Number: 4 Other Sections: NEW  <IP_ADDRESS>  Search distance for institutional and engineering controls Excerpt Text: Review of Industrial Controls within ½ mile of the property is a considerable expansion of the effort beyond the current industry practice that significantly increases costs without yielding information useful to the process. IC's are very specific to the properties they affect. The most common form of an institutional control is a risk based closure that allows for residual contamination to remain on site given the current site specific property use. In many areas these IC are plentiful, particularly with respect to leaking underground storage tanks. Requiring review of 729 every site specific IC identified within ½ mile is overly burdensome, the cost of which is not factored into the economic analysis. It is recommended that the requirement be limited to searching for IC on the subject site and the adjoining properties.

Response: EPA agrees with the commenter that searching for institutional controls associated with properties located within a half mile of the subject property is overly burdensome. The final rule requires that the search for institutional controls be confined to the subject property only and, thus, does not differ from the current industry practice.

Commenter Organization Name: Tryon, Bill Comment Number: 0418 Excerpt Number: 6 Other Sections: NEW  3.13.4  Shelf life should be extended beyond 180 days/ one year Excerpt Text: Age of Due Diligence  The rule does not allow for the use of prior reports that are older than one year. Some industry publications have suggested that this means a Phase I ESA literally expires after one year and a completely new inquiry is required. The specified level of effort to be conducted within 6 months is precisely the scope of work that would need to be conducted if the report were six months old or six years old. The rule should 1) remove the one year requirement, 2) specifically state that reports older than one year can be used, or 3) the economic analysis must account for the thousands of reports that will need to be re created.

Response: In the final rule, EPA clarified the regulatory language to allow for the use of information contained in previously conducted environmental site assessments, even if the information for the assessment was collected more than a year prior to the purchase date of the subject property. Information from previous ESA reports may be used. However, the final rule requires that most information be updated if the information was collected more than 180 days prior to the date of acquisition of the property. All appropriate inquiries investigations must include an assessment of the current conditions of a property, or the conditions of the property at the point in time that the property is acquired.

Commenter Organization Name: Tryon, Bill Comment Number: 0418 Excerpt Number: 7 Other Sections: NEW  <IP_ADDRESS>  Search distance for institutional and engineering controls Excerpt Text: Institutional Controls  Review of ICs identified within ½  mile of the property is a considerable expansion of effort beyond the current industry practice that significantly increases costs without yielding information useful to the process. ICs are very specific to the properties they affect. The most common form of an institutional control is a risk based closure that allows for residual contamination to remain on site given a current site specific property use. In a highly industrialized 730 area, these ICs are plentiful, particularly with respect to leaking USTs. Requiring the environmental professional to review every site specific IC identified within ½  mile is overly burdensome, the cost of which is not factored into the economic analysis. I recommend that the requirement be limited to searching for ICs on the subject site and adjoining properties.

Response: EPA agrees with the commenter that searching for institutional controls associated with properties located within a half mile of the subject property is overly burdensome. The final rule requires that the search for institutional controls be confined to the subject property only and, thus, does not differ from the current industry practice.

Commenter Organization Name: Westward Environmental Comment Number: 0429 Excerpt Number: 6 Excerpt Text: Regarding the heading of Summary of Regulatory Costs on page 52571 of the proposed rule:

 it states "  the average incremental cost of the proposed rule relative to  is estimated to be between $ 41 and $ 47."

 This incremental cost estimate is less than one half hour of time from a typical environmental professional fee schedule. Although many similarities exist between the proposed rule and ASTM E1527, just becoming aware of the differences will far exceed the estimated incremental cost difference.

 As noted in the Requirements for Public Comments on page 52568 of the proposed rule, the EPA is requesting comments on at least 23 topics in the proposed rule. This request suggests that something more or different in these 23 topics than what is currently suggested in ASTM E1527. Just assuming a minimum of one half hour is required to adequately address each topic ( which we believe is a very conservative estimate) and an average environmental professional fee of $ 75/ hour, this would result in an additional cost of $ 862.50.

Response: The cost of becoming familiar with the final rule would be a one time cost for environmental professionals. The environmental professionals would likely pass some or all of that cost onto their customers. The more Phase I ESAs an environmental professional performs, all other things equal, the lower would be the average cost per Phase I ESA passed through by that environmental professional. Therefore, we expect that this one time activity would have a negligible impact on the average cost of Phase I ESAs. Further, once the final rule is promulgated, the new environmental professionals' education/ training would be based on the final rule's requirements.

EPA requested public comments on the standards and practices included as part of the proposed rule. The list of topics included in the Federal Register was intended to aid the public in commenting on the proposed rule and was not suggestive of the activities or tasks in which the proposed rule differed from the current ASTM E1527 2000 standard. 731 Commenter Organization Name: Geomatrix Consultants Comment Number: 0433 Excerpt Number: 6 Excerpt Text: The EPA's Economic Impact Analysis for the proposed AAI rules state that the average incremental cost for an AAI compliant ESA versus an ASTM compliant ESA would increase up to $ 47 per assessment. We believe the average incremental costs would be much more than that amount. As discussed above, greater costs will be incurred during an AAI compliant ESA for ( 1) the expanded research requirements ( review of government records and historic sources), ( 2) the need for additional interviews ( especially tracking down neighboring property owners), ( 3) the requirement for written justification of the environmental professional's interpretation of the rules ( professional discretion), and, perhaps, ( 4) liability insurance premiums. We estimate that the costs for an AAIcompliant ESA may be as much as 50% greater than for an ASTM compliant ESA.

Additional costs for the prospective buyer include the need to obtain a full chain of title to search for possible environmental cleanup liens. The costs for a full chain of title may run several hundred dollars and should be included in the economic impact analysis for the proposed AAI rules.

Response: With respect to historical sources review, the final rule does not require any additional sources to be reviewed that are not already within the realm of sources required to be consulted under the ASTM E1527 2000 standard.

With respect to governmental records review, we recognize that the proposed rule did extend the search for institutional controls to a one half mile radius of the subject property while the search requirement under the current ASTM E1527 2000 standard is limited to the subject property. EPA, however, has revised the requirement to search for institutional controls in the final rule by limiting the search to the subject property.

The final rule does not explicitly require interviews with past owners and occupants, but provides that the environmental professional include interviews of past owners, operators, or occupants as necessary to meet the proposed objectives and in accordance with the proposed performance factors. EPA recognizes that locating past owners and occupants may be more time consuming than originally assumed in the EIA developed for the proposed rule. Therefore, we revised the cost estimates in the EIA to account for the incremental burden associated with locating and interviewing past owners and occupants of the subject property. The revised cost estimates are provided in the addendum to the EIA, which is included in the public docket for the final rule.

We disagree with the commenter's assertion that the requirement to locate neighboring property owners will impose a significant burden under the final rule. Neighboring property owners will need to be interviewed only if the subject property is abandoned. Although the current ASTM E1527 2000 standard does not have explicit requirements for abandoned properties, it is reasonable to assume that the environmental professional would try to locate past owners and occupants of 732 such properties. In most cases, locating neighboring property owners should be less time consuming then locating the past owners and occupants of the subject property.

With respect to the environmental professional signature requirements, the final rule requires that the written report include two signed declarations by the environmental professional. One declaration must state that the environmental professional meets the professional criteria as defined by the final rule under § 312.10. The second required declaration must state that all appropriate inquiries investigation was conducted in accordance with the requirements of the final rule. We disagree with the commenter's suggestion that these declaration requirements will lead to an increase in the cost of conducting a Phase I ESA. The requirements are not significantly different from what is required under the ASTM E1527 2000 standard.

With respect to the comment regarding liability insurance, it is not clear that the insurance industry will react to the final rule as the commenter indicates. It is also possible, for example, that insurance companies will cut premiums for all policies that might be affected by CERCLA as a result of additional liability protection the statute offers to prospective purchasers who follow the standards of the final rule.

With respect to the requirement to search for environmental cleanup liens, we disagree with the commenter that this requirement imposes an incremental burden on a property purchaser. Under the current ASTM E1527 standard, it is the prospective property owner's responsibility to search for environmental liens that are currently recorded against the subject property, and to report these to the environmental professional conducting the Phase I ESA. The requirements in the final rule are no different; therefore, there will be no incremental cost ( labor or expenses) incurred under the final rule. Thus, even if the cost of a title search is explicitly accounted for under the base case and under the final rule, the average incremental cost per transaction would stay unchanged.

Commenter Organization Name: Hearn, J Clark Comment Number: 0434 Excerpt Number: 1 Excerpt Text: At issue herein are selected cost factors as evaluated in the " Economic Impact Analysis for the Proposed All Appropriate inquiries Regulation as prepared by ICF Consulting and dated August 3, 2004. This document renders a bottom line determination of an expected increase in Phase I costs to the marketplace as being less than $ 50 per report. It is the unanimous opinion in our office that this result is not only invalid but that the formulations on which it is based are also fundamentally flawed.

A recently conducted survey by Environmental Data Resources, Inc. addressed the anticipated cost impacts of the EPA AAI proposed rules on Phase 1 assessments. The survey included more than 500 Phase I providers in nine U. S. cities. The majority of respondents ( or 60%) anticipate cost increases of more than 10%, with 16% predicting increases of more than 20%. A companion survey also indicated that most consultants in the private sector marketplace charge between $ 1,700 to $ 2,300 for a Phase 1 report, depending factors such as type of property and geographic area. The 733 anticipated cost increases relating to the proposed rules are obvious and substantial. The question arises, how can so many front line providers of Phase 1 reports be wrong. I submit that they are not. In my opinion the cost for a phase 1 will increase by at least 15 to 20% if the new rule goes into effect. Because the proposed rule is vague and untested it is hard to give an exact estimate, but I am confident it will be at least this much.

Response: The Agency based its cost estimates on an evaluation of the differences between the proposed standards for the rule and the content of the ASTM E1527 2000 standard. EPA identified the technical differences between the proposed rule and the ASTM E1527 2000 standard and then estimated the costs associated with conducting those regulatory activities that represent tasks over and above those conducted in implementing the ASTM standard.

To address the commenter's concern that the EDR survey results may be more reliable than the estimates presented in the EIA, the Agency conducted a sensitivity analysis using the alternative cost estimates and presents the results in an addendum to the EIA developed for the proposed rule. The addendum is available in the public docket for the final rule. Our sensitivity analysis shows that the final rule would not have annual incremental cost impacts in excess of the $ 100 million threshold set for significant regulatory actions even if the average incremental costs per Phase I ESA were of the magnitude suggested by the EDR survey respondents.

Commenter Organization Name: Hearn, J Clark Comment Number: 0434 Excerpt Number: 2 Excerpt Text: As the table acknowledges, " All" property types will affect, however, no incremental increase in labor costs is expected. This is because ICF states that the proposed rule does not require any more review of these record sources than current ASTM practice. This assumption is incorrect. ASTM E1527 limits records reviews to standard enumerated sources. The new rule, on the other hand, requires a " performance based" review that is essentially open ended. The new rule will require searching substantially more records and will take many additional hours. Once again, using Environmental Data Resources as a reference, their website presently posts that in response to the AAI proposed rules that they have " added 475 new databases and counting" so as to assist their clientele in dealing with the upcoming AAI rules. While we cannot give an exact number, it is reasonable to assume that a significant number of additional database records will be added. The resulting bottom line labor costs impacts are related to the significantly increased labor time in the review, and more importantly the evaluation of the additional information. Additionally, the new source research item must be added to the resulting due diligence report along with the written evaluation of the result.