Publications

Vapor Intrusion: Regulatory Implications in Real Estate Transactions
By Paul Y. Cho, July 2008

There is widespread concern that at sufficiently high concentrations, vapors from soil and water contaminated with volatile (essentially, evaporating) chemicals could find their way into buildings via “vapor intrusion pathways,” and cause odors and acute health effects, such as headaches, nausea, and respiratory complications.  Some believe that long-term exposure to even low concentrations may pose the risk of chronic health effects, including cancer.  Both federal and state governmental agencies have been taking a closer look at the issue, leading to enforcement and administrative actions. 

For instance, residents of Hopewell Junction, New York, complained that vapors from a common industrial solvent, trichloroethylene, caused cancer and other health issues.  In response, U.S.EPA investigated and ultimately listed the site on the Superfund National Priorities List, a list of the most severely polluted sites in the country. 

In Bronson, Michigan, the U.S.EPA recently ordered the former owner of an industrial facility to abate and monitor soil vapor intrusion in a residential area.  In St. Louis Park, Minnesota, U.S.EPA itself installed vapor abatement systems in about forty residences, even though, according to U.S.EPA, the groundwater contamination at issue had no effect on local drinking water supplies.  And even in the absence of governmental action, private citizens are becoming increasingly concerned about potential vapor intrusion issues on their property, which may increase the risk of toxic tort claims.

The examples above clearly show effects on those who already own property above contaminated soil or groundwater.  But what about those who may be considering the purchase of property that could be affected by vapor intrusion?  Prospective buyers may wish to include vapor intrusion as part of their standard environmental due diligence and make sure that any potential residual risks lie within their comfort zones. 

Even though vapor intrusion is not now expressly included as a required area of investigation to obtain “bona fide prospective purchaser, or BFPP” status at the federal level, or a no further remediation letter, or “NFR,” under most state regulations, potential buyers of property may nonetheless be able to obtain some protection by conducting a vapor intrusion assessment prior to purchasing affected property. 

Under the Comprehensive Environmental Response and Compensation Act (“CERCLA,” better known as the federal “Superfund” statute), prospective purchasers of real estate may be shielded from Superfund liability if they perform “all appropriate inquiry” about the environmental condition of the property (“AAI”) prior to purchasing it.  (Other requirements post closing must also be observed.)  The elements of a proper AAI are set forth in a federal regulation; they are designed to demonstrate that the owner had no reason to know of the contamination.  This is somewhat ironic because BFPPs may be shielded from liability even if they did know of the contamination.  So, it would appear that prospective purchasers who look for contamination in accordance with the AAI regulation would be protected from Superfund liability whether they find it or not.  Therefore, it would stand to reason that a person who “appropriately” looks for, but does not find, potentially harmful vapors, would be protected from Superfund liability, even if the vapors later appear – as long as it can be demonstrated that the source of the vapors were present at the time of the AAI. 

Guidance published by U.S.EPA outlines a screening method for potential vapor intrusion, as does the recently published vapor intrusion assessment method by the American Society for Testing and Materials.  (ASTM is a private organization, and has also published a method that may be used to fulfill the requirements of the AAI as they currently exist, i.e., the requirements that do not expressly include vapor intrusion assessment.)  In any event, it has been suggested by some that vapor intrusion may eventually be formally added to the AAI regulation.

The draft rules mentioned at the top of this article would require vapor intrusion assessment as part of the Tiered Approach to Corrective Action Objectives (“TACO”), which have been part of the Illinois regulations for some time.  TACO outlines procedures for evaluating risks posed by environmental contamination and sets forth remediation objectives that achieve acceptable risk levels.  Under the Illinois Environmental Protection Act, satisfaction of the TACO regulations is a prerequisite for IEPA’s issuance of an NFR, which signifies a release from further remediation responsibilities under the Act.  Therefore, if the draft rules are ultimately promulgated, IEPA will issue NFRs only to those property owners who have screened for vapor intrusion in accordance with the forthcoming rules.

Pre-purchase screening for potential vapor intrusion may also make sense for another reason.  Vapor intrusion is a curable problem.  Mitigation systems can be installed that keep potentially harmful vapors away from building occupants.  Costs of such systems are likely to be higher when retro-fitting existing building, rather than designing the system into new construction.  But in either event, these costs can be estimated and fit into the calculus of the transaction in the same manner as all other anticipated costs. 

Vapor intrusion has already found its place among the “hot issues” of environmental law.  While the regulatory environment may be a bit unsettled on this issue, it may be more advantageous for potential buyers of property to conduct vapor intrusion assessments as part of their environmental due diligence, rather than waiting for the government to work out the details.