It is hard to believe, but more than a year has passed since ASTM finalized its vapor intrusion standard. By now, most environmental professionals are familiar with the indoor air quality issue, and with ASTM's guidelines, which establish a prescriptive screening methodology for those who wish to consider a property's potential for a vapor intrusion problem. However, according to a recent survey, those who stand to benefit the most from having a vapor intrusion screening conducted – namely property owners, investors and lenders – remain largely in the dark about the risks that this condition can present.

Indeed, while environmental professionals grapple with hot-button issues such as choosing mitigation alternatives and deciding what to charge for their services, perhaps the biggest vapor intrusion challenge they face is educating clients about this potential risk, and why it is so important to address it as part of traditional environmental due diligence.

Vapor intrusion: the basics

Vapor intrusion occurs when volatile chemicals in contaminated soil or groundwater off-gas and migrate into the indoor air of overlying structures. The condition can cause eye irritation, respiratory problems, headache or nausea. Long-term exposure can raise a person's chances of developing cancer.

Besides harming human health, vapor intrusion can impact every stakeholder in a property transaction. Site owners – and investors in particular – can find themselves stuck with a property that has a vapor intrusion problem that was not discovered prior to purchase. This can lead to liability, a decline in the property's value and even stigma damages.

Because awareness of vapor intrusion issues is still relatively new, early risk-based cleanups have not taken the pathway into consideration. Now that the risks are becoming better understood, some state regulators are reopening formerly closed properties to examine for the condition, and property owners are often stuck footing the bill.

For lenders, the concern is fourfold:

1. A vapor intrusion condition can adversely impact the value of the property used as collateral.
2. It can have a negative impact on a borrower's creditworthiness and ability to repay a loan.
3. The condition can lead to complications should foreclosure occur; and
4. A vapor intrusion claim can damage a bank's reputation.

For insurance companies, a vapor intrusion problem can increase property pollution liability and re-opener policy claims, not to mention error and omission claims against Phase I consultants accused of missing a vapor intrusion problem.

ASTM's E 2600 standard

Designed to be used "reasonably and early on" in a real estate transaction, E 2600-08: Standard Practice for Assessment of Vapor Intrusion into Structures on Property Involved in Real Estate Transactions, benefits real estate stakeholders in several ways. Most notably, it:  

 
• Clarifies that a vapor intrusion assessment is not part of a traditional ASTM Phase I ESA;
 
• Provides a prescriptive methodology for anyone interested in screening a property for a potential vapor intrusion condition;
 
• Helps property owners avoid the cost of possible future investigations that state regulators may require post-acquisition;
 
• Protects property owners from future liability, including toxic tort litigation arising from tenant suits or third party suits;
 
• Helps property owners provide a safer environment for occupants and avoid property devaluation, stigma and broken leases;
 
• Helps lenders avoid any impact on their borrowers' creditworthiness and ability to repay the loan;
 
• Helps lenders avoid potential foreclosure complications arising from a vapor intrusion problem, and
 
• Reduces vapor intrusion-related claims for insurance companies.
 

  Made up of four tiers, ASTM's standard is intended as a screening tool to identify the potential for a vapor intrusion problem on a property involved in a real estate transaction. To that end, Tiers 1 and 2 are the prescriptive screening tiers, designed to help users quickly and inexpensively identify whether a potential vapor intrusion condition (pVIC) exists. If users cannot rule out a pVIC using the methodology outlined in the first two tiers, they can proceed to Tier 3, which describes more sophisticated testing, but, rather than being prescriptive, directs the user to follow applicable government guidance and regulation. Tier 4 describes a variety of general mitigation alternatives, and like Tier 3, it leaves the selection of an appropriate solution up to the user. A user may proceed to any of the tiers at any time without the need to proceed sequentially.

Marketplace experience

Because federal vapor intrusion guidelines are outdated, and existing state standards are so varied, many industry experts predict that E 2600 will be used in conjunction with a Phase I to assess pVICs at most urban and many suburban properties. To gauge the market's reaction to – and use of – the standard thus far, Environmental Data Resources' Market Research Group, at the request of the ASTM Vapor Intrusion Task Group, conducted a survey of environmental professionals approximately six months after the standard was published. Of the 1,407 environmental professionals who participated in the September 2008 survey, only 34 percent said their clients had begun requesting vapor intrusion screens. When asked to speculate why clients were not demanding vapor intrusion expertise, most indicated an overall lack of awareness about the standard's existence. "They're clueless," penciled in one consultant. "Only the more sophisticated and experienced clients ask about it," wrote another.

Others speculated that the current economic situation may be to blame. "The lack of implementation could be a direct result of the credit crunch and the associated downturn in commercial real estate transactions," said Elizabeth Krol, P.G., Northeast Due Diligence Manager for Shaw Environmental & Infrastructure Group.

Krol said there may be an uptick in vapor intrusion assessments that directly correlates with an increase in commercial real estate transactions once the market starts moving again, and added that assessments will also likely increase as state regulators hone their requirements, and ASTM updates the E 1527-05 Phase I standard, "possibly to include the vapor intrusion screen as a non-scope consideration, business environmental risk issue, or both."

According to the survey, the vapor intrusion screens that are being conducted are driven principally by liability concerns (54 percent) and business environmental risk considerations (46 percent); and to a lesser extent by lender requirements (31 percent), awareness of the ASTM standard (28 percent), all appropriate inquiry rule compliance (25 percent) and attorney recommendations (23 percent). Specific drivers include potential on-site contamination (74 percent), historical risk factors on site (72 percent) and potential nearby contamination (69 percent). (Multiple answers were allowed.)

The survey also yielded the first-ever data on how much environmental consultants charge for conducting a vapor intrusion screening in accordance with the new standard. Most respondents charge between $100 and $400 for a Tier 1 assessment; that number jumps to between $500 and $1,000 for a Tier 2 non-invasive screen.

Vapor intrusion education

Although E 2600 was published in March 2008, considerable stakeholder confusion still remains. Anthony Buonicore, P.E., and chairman of the ASTM Vapor Intrusion Task Group, said he is not surprised. "ASTM focused its training on the environmental industry first. Now that that's done, we are focusing on lenders, attorneys, insurers, property owners and investors, so it may take some time before vapor intrusion screening becomes routine. This is no different than what we experienced when the E 1527 Phase I standard was first published."

In the meantime, Buonicore said environmental professionals need to make sure their clients are aware of vapor intrusion risks so they can take steps to protect themselves. "Property owners, investors and lenders count on environmental professionals to advise them about environmental risks, including vapor intrusion," he said. "Clearly, the greatest challenge environmental professionals face is educating the marketplace about the issue."

Joseph Derhake, P.E., an environmental professional with Partner Engineering and Science, said the task might not be so easy because many clients feel the issue should be addressed in the Phase I ESA. "Lenders believe that a Phase I should include an assessment of all environmental risks, whether from vapor intrusion or soil or groundwater contamination. Rarely have my clients asked that I parse my analysis and consider only vapor intrusion; therefore, I have received few requests for vapor intrusion analysis via the ASTM E 2600 standard."

Cody Taylor, a national client manager with Krazan & Associates, said clients typically will not opt to sample for vapor intrusion unless the consultant (or bank) recommends it, but noted that it is the consultants' job to make sure they know about the risks. "If vapor intrusion is suspected, a summary of the case and option for sampling should be made available to clients so they can make an informed decision," he said.

Of course, some clients are more sophisticated than others when it comes to liability issues; these clients can make the consultants' job easier. "Educated clients want you to screen, but uneducated clients typically don't want to know about vapor intrusion unless an assessment is required by regulators," said Sandra Gaurin, ERM, an environmental professional with Tetra Tech Inc. "It's up to us as consultants to make these clients understand that if they ignore a vapor intrusion problem they can later face claims for hundreds of thousands or even millions or dollars." She noted people panic when they learn they may have been exposed to toxic air, and panic can lead to lawsuits. "Contaminated soil and water are easy…you can cut off the exposure pathway, but you can't tell people not to breathe. People easily panic, especially if there are kids involved."

Spurred by the release of ASTM's standard, Gaurin said her company is hosting a seminar to bring clients up to speed about vapor intrusion regulations, technical aspects, and litigation and liability issues. Regardless of size, she says other companies should follow suit. "It's good for the environmental consulting community to educate clients, but even if your firm has limited resources, you can host a brown bag lunch – we did it at my former firm, and we had only 100 employees. What's important is that clients understand their risk – not that you spend a lot of marketing dollars."

Bottom line

As the risks associated with vapor intrusion become better understood, deals are being compromised, or even killed, when the condition is present. It may take more than a few lawsuits before clients are routinely including ASTM vapor intrusion screens as part of environmental due diligence, but in the meantime, the environmental community has a responsibility to make sure property stakeholders have enough information about the condition to make informed decisions – and that their own information is current.

"Vapor intrusion is on regulators' radar screens," said Krol. "We need to educate our clients about the risks in terms of health effects to employees and tenants, as well as liabilities associated with property transfer." Once property owners become more aware of the potential regulatory and tort liability issues, she said, they can determine their risk tolerance and associated need for screening. "For property stakeholders, working with an experienced consultant and a skilled environmental attorney is the best insurance against a vapor intrusion condition going undetected during a transaction and subsequently becoming a liability."

"When it comes to protecting assets and minimizing risk, awareness and education are key," she added. PE