The latest updates from the EPA's proposed PFAS designation.
The Environmental Protection Agency (EPA) recently issued its long-anticipated proposal to designate two per-and polyfluoroalkyl substances (PFAS) as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).
PFAS are manmade chemicals commonly referred to as “forever chemicals,” due to their inability to break down. The PFAS noted in the proposal, perfluorooctane sulfonate (PFOS) and perfluorooactanoic acid (PFOA), may now be subject to CERCLA regulations.
CERCLA is a strict and joint-liability framework for addressing hazardous substances in the environment. Any person found to be liable for a non-compliant CERCLA site may be responsible for cleanup costs. This liability extends to current and former site owners as well as those who transported or disposed of PFAS waste at a facility. In addition, the rule requires reporting to the EPA any release of substances containing PFOS or PFOA weighing a pound or greater taking place over a 24-hour period.
As a proposed designation, the ruling has no immediate effect and must go through a public comment period, which expires on November 7, 2022 (and is expected to be extended). If approved, it is anticipated that the designation may be final in summer 2023, at which time PFOS and PFOA would be added to a list of approximately 800 substances designated as hazardous under CERCLA.
The EPA has released a non-exhaustive list of potentially affected industries including airports/aviation, car washes, chemical manufacturers, and landfill operators, among others. It is likely that non-traditional entities such as utility departments treating wastewater may also be regulated.
Likewise, public or private utilities providing potable water will be required to test for concentrations of PFOS and PFOA. If detected above a certain level, utilities may be required to take steps to determine the source of contamination and abate these substances to a concentration deemed nonthreatening to human health.
Many industries and private and public sector entities may be affected by the proposed designation. This has created substantial concern for a possible increase in responsible parties that could be subjected to CERCLA-driven assessments and cleanups by the EPA or its delegated states. States with delegated CERCLA authority may implement stricter regulations and enforcement regarding managing, reporting, assessing, and cleanup for these substances through their own regulatory framework.
Likewise, there is potential for an increase in litigation against additional parties by those responsible for financial contribution regarding PFOS and PFOA contamination.
Real Estate Transactions
The proposed designation also adds potential for new due diligence considerations for companies and property owners that rely on Phase I or Phase II environmental site assessments (ESA). Prospective property buyers may be required to assess PFOS and PFOA contamination risk by conducting an “all appropriate inquiry” under CERCLA, which could bring PFOS and PFOA under the scope of bona fide prospective purchaser protection.
Industry experts predict that the current ASTM E1527-21 standard – which requires PFAS risks to be considered and is often incorporated by firms as “non scope considerations” or “business environmental risks” – will be updated to reflect that PFAS will be a “recognized environmental condition.”
Consideration of the ruling’s impact on insurance and financing for transactions involving PFAS risks will also need to be evaluated, since we cannot predict whether insurance carriers may evaluate properties with PFAS risks differently. Similarly, lenders may reconsider the way borrowers collateralize such properties.
CERCLA Response Actions
It is worth noting that cleanup technologies are in their infancy and do not clean these substances in-situ to non-detectable levels. With that, it is not clear how the EPA and state regulatory agencies will implement CERCLA-required cleanups to almost non-detectable levels.
Regardless of the final ruling, any entity that has the potential to have managed, stored, used, released, carried, or received these substances should consider evaluating their future liability related to sites potentially impacted with these substances.
While the EPA’s final rule is anticipated to be published in summer 2023, legal challenges may cause delays. Given the potential for cleanups, compliance, litigation, and other response actions, potentially affected industries and other parties are encouraged to comment on the proposed designation.
Cameron-Cole, an ADEC Innovation, specializes in assisting our clients with complex environmental liabilities. We have performed thousands of due diligence Phase I and Phase II Environmental Site Assessments (ESAs) for real estate investors, law firms, and other clients. We provide technical support to clients addressing regulatory response and litigating against the manufacturers of PFAS. Contact us for a free consultation to discuss your current and potential future obligations and how to prepare for upcoming PFAS regulations.