PFAS: Real Estate Owners Beware
I. Introduction
The U.S. Environmental Protection Agency has recently taken several important steps to address hazards posed by per- and polyfluoroalkyl substances, known generically as “PFAS” but popularly referred to as “forever” chemicals given their mobility and persistence in the environment. Thousands of distinct compounds qualify as PFAS, and decades of widespread use in a variety of products and contexts mean that some of them may also soon be known as “everywhere” chemicals.
In light of the EPA’s assessment that PFAS are linked to multiple types of cancer, metabolic disorders, and other serious health conditions, the EPA has now:
- Set very low drinking water standards for six PFAS and PFAS mixtures;
- Listed two PFAS as CERCLA/Superfund “hazardous substances”;[1]
- Updated its guidance on PFAS disposal and destruction options;
- Initiated steps to include PFAS in RCRA’s “cradle to grave” framework;[2] and
- Issued guidance on PFAS enforcement priorities and discretion.
The EPA’s recent activities justify very low cleanup levels while also making CERCLA’s expansive cost recovery tools available to governmental agencies and private parties. Due to their chemical structure, it is difficult and very expensive to remediate PFAS contamination with current technologies. Coupled with low cleanup thresholds, costs of remediation at affected sites are expected to be significant. The EPA’s recent actions thus create widespread vulnerabilities and potentially costly impacts related to managing PFAS contamination (and related litigation) for property owners, managers, and developers.
Many common property uses create heightened PFAS risk—plating, bulk storage of flammable material, and waste disposal including agricultural land to which PFAS-containing biosolids have been applied. Any site where firefighting foam was used or stored is similarly at risk. So too are sites located in close proximity to groundwater impacted by a PFAS release. Previously remediated sites, even those with “no further action” status, are at risk of being “re-opened” during routine reviews by regulatory agencies seeking to address PFAS-related issues.
The EPA’s recent actions and others likely to follow put a premium on careful and strategic thinking about all the following:
- Transactions: All Appropriate Inquiries and Phase II diligence, insurance underwriting for new coverage, and the possibility of coverage under existing environmental policies;
- Site Closure: Pursuing “no further action” status from federal, state and local regulators, as well as re-openers and five-year reviews at closed remediation sites;
- Litigation: Cost recovery and allocation litigation, and the scope and effect of indemnity provisions in historical mergers and acquisitions and other transactional documents; and
- Disclosures: Product-labeling, emissions, releases, and workplace regulations.
Below we describe the EPA’s recent actions, and their effect on real estate owners, operators, managers, and developers, in more detail.
II. The EPA’s PFAS in Drinking Water Standards Likely to Drive Strict Cleanup Thresholds
A. Goals and Maximum Contaminant Levels for Drinking Water
In April 2024, the EPA issued final drinking water goals and related maximum contaminant level thresholds, known as “MCLs,” for certain PFAS chemicals, creating the first nationwide, legally enforceable drinking water limits for the identified compounds. The EPA set enforceable MCLs for five PFAS chemicals: PFOA, PFOS, PFHxS, PFNA, and HFPO-DA.[3] Because PFAS are often found together and in combinations or mixtures that can create additive health impacts, the EPA also set an MCL for mixtures of two or more of the following: PFHxS, PFNA, HFPO-DA and PFBS. The MCL for mixtures is based on a “hazard index,” which evaluates risk associated with exposure to multiple related chemicals (an approach similar to that taken with PCBs and some other chemical groups).
The new MCLs are very low, reflecting the EPA’s belief that exposure to PFAS at any level presents serious health risks. In fact, for PFOA and PFOS, the EPA established a maximum contaminant level goal (an “MCLG,” which is not an enforcement standard) of zero, concluding that current science shows that “there is no level of exposure to these contaminants without risk of health impacts, including certain cancers.” Given that goal and rationale, the MCL for both PFOA and PFOS is 4 parts per trillion, the lowest level current technology can reliably detect. (For some reference, one part per trillion expressed in units of time would be one second out of nearly 32,000 years.) For each of the other identified PFAS chemicals, the MCL (and the related goal) is 10 parts per trillion. The MCL for mixtures is a hazard index of 1.0.
B. Ramifications of Setting MCLs: Longer & More Expensive Cleanups for Real Estate Owners and Developers
For public drinking water systems, the rule requires initial monitoring for PFAS (by 2027), ongoing compliance monitoring thereafter, and, starting in 2029, compliance with MCLs. The EPA estimates compliance costs for drinking water systems at approximately $1.5 billion annually. Given that costs associated with necessary monitoring, communication, and treatment are expected to be significant, various stakeholders can be expected to evaluate, and perhaps to undertake, significant efforts to address PFAS contamination upstream from drinking water systems and related surface and groundwater resources.
For property impacted by PFAS, the new MCLs will affect cleanup activities and regulatory oversight where PFAS have been identified and the site has any substantial potential to impact groundwater. MCLs are designated as “applicable, relevant and appropriate requirements” or “ARARs”, and by designation and otherwise serve as default cleanup standards. As such, the extremely low MCLs will tend to result in costlier and lengthier cleanups. In a similar vein, cleanup plans relying on monitored natural attenuation will likely face greater scrutiny from regulatory agency staff and more challenges during public comment processes.
III. PFAS Designation as “Hazardous Substances” Activates CERCLA Liability Framework for Property Owners & Others
A. CERCLA Designation as Hazardous Substance Puts PRPs on Notice
On April 19, 2024, the EPA announced that it has finalized a rule to designate two of the most widely used PFAS compounds – PFOA and PFOS (including their salts and isomers) – as hazardous substances under CERCLA (also known as the Superfund statute). CERCLA provides a powerful, comprehensive statutory liability framework that is strict, retroactive, and generally joint and several.
By designating PFOA and PFOS as CERCLA hazardous substances, the EPA has made the statute’s enforcement, cost recovery, and cost allocation tools available to address PFAS contamination, thereby shifting considerable investigation and cleanup costs from taxpayers to so-called PRPs (potentially responsible parties, and within that group to those PRPs with the most culpability for the PFAS contamination). PRPs include (1) most current owners and operators of a contaminated site; (2) those who owned or operated a site as it became contaminated; (3) those whose operations generated the contaminants at a site; and (4) certain parties that transported hazardous substances to a contaminated site.[4]
B. EPA Enforcement Discretion Focused on Major PRPs
Concurrent with releasing the rule designating PFOA and PFOS as hazardous substances, the EPA issued a policy memorandum stating it would exercise its enforcement discretion to pursue certain classes of PRPs for response actions or costs that address PFAS contamination. Pursuant to the policy, the EPA will “focus on holding accountable those parties that have played a significant role in releasing or exacerbating the spread of PFAS into the environment, such as those who have manufactured PFAS or used PFAS in the manufacturing process, and other industrial parties [referred to in the memorandum as “major PRPs”].” The EPA also declared its intention to pursue federal agencies or facilities that are responsible for PFAS contamination. That pursuit may implicate a variety of federal contractors.
By contrast, the EPA does not intend to pursue PRPs where it believes “equitable factors” dictate restraint, e.g., community water systems, municipal separate storm sewer systems, publicly owned/operated municipal solid waste landfills, publicly owned airports and local fire departments, and farms where biosolids have been applied to the land. To protect such parties from cost recovery suits brought by major PRPs, the EPA intends to rely on its traditional settlement tools and will “seek to require those settling parties to waive their rights to sue parties that satisfy the equitable factors.” The EPA also endorses the use of settlements to provide contribution protection to parties that satisfy the equitable factors.
The EPA’s traditional settlement tools, the related guidance, and the caselaw on CERCLA contribution protection present their own complications. While the EPA’s new enforcement policy may provide some comfort to smaller PRPs at large EPA-led cleanup sites, it does not alleviate statutory liability; nor does it constrain private parties or other regulatory agencies from bringing cost recovery and cost allocation suits. And in states like California that have robust nuisance doctrines and statutes, declarations of federal policy may have no practical impact at all.
C. Ramifications for Owners and Developers of Contaminated Property
Designating PFOA and PFOS as hazardous substances will have wide-ranging and, in some instances, substantial effects on contaminated property and related acquisition, development, cleanup, and management activities. The inventory of regulated cleanup sites seems destined to increase at least some, and the duration and cost of remediation may increase quite substantially. Some closed sites at which remediation is complete will likely be reopened. At other sites, the five-year review process—which per EPA guidance provides an opportunity to evaluate whether existing remedies remain protective of public health and the environment—will likely trigger new cleanup measures or extend the duration of existing measures.
With additional, lengthier, and more costly cleanups, we anticipate significant impacts on PRPs as well as property owners who structured their acquisition and ownership around one of CERCLA’s defenses, California’s CLRRA program, or similar measures in other jurisdictions. CERCLA liability can be onerous, as joint and several liability can expose even small contributors to the entirety of the cleanup costs at a given site. Even those with a defense to liability face significant litigation costs and settlement expense. Businesses that have used or manufactured PFAS, their corporate successors, and owners of PFAS-impacted sites are at risk for enforcement, private litigation, and, for property developers, potentially costly and lengthy construction delays. By contrast, both immunized and non-immunized owners of contaminated property, as well as non-owner PRPs, can now wield CERCLA’s powerful cost recovery and equitable allocation tools to deflect PFAS-driven costs.
IV. The EPA’s Interim Guidance Underscores the Ongoing Challenges in Managing PFAS
On April 8, 2024, the EPA also released for public comment an update to its 2020 Interim Guidance addressing the destruction and disposal of PFAS and PFAS-containing materials. The new edition directs decisionmakers managing the ultimate disposition of PFAS chemicals and PFAS-containing materials to technologies that have a lower potential for release of PFAS to the environment.
The EPA’s Interim Guidance focuses on, and directs decision makers to, three currently available technologies: underground injection (in Class I UIC wells),[5] landfill disposal (in hazardous waste landfills),[6] and incineration (under certain conditions).[7] Each of the currently available management methods have significant drawbacks and costs.[8]
The Interim Guidance underscores the need for further research with respect to existing methods and in developing and testing new technologies. At present, the current state of technology highlights the ongoing difficulty and expense of appropriately managing PFAS chemicals and PFAS-containing substances and wastes. For property owners and those conducting cleanup, identifying cost effective solutions for managing PFAS remediation activities will be critical.
V. PFAS Regulations Highlight the Need for Strategic Thinking
Given the stakes associated with the EPA’s recent PFAS rules, legal challenges to them are surely possible, but they seem quite unlikely to provide “forever” protection. The new PFAS rules add complexity and costs to various stages throughout the real estate life cycle. As a result, owners, operators, managers, and developers of real property need to critically evaluate their exposure to PFAS-driven risks and costs, especially considering the potential liabilities associated with being implicated at contaminated sites and the potential need to clean up (to very low levels) a contaminant that is widespread and, under current technology, is difficult to manage and destroy.
From a practical perspective, the EPA’s recent actions are likely to result in the following:
- Low MCLs becoming groundwater cleanup requirements, via ARARs and comparable state regulatory action;
- More sites subject to regulatory cleanup requirements and more expensive and lengthier cleanups;
- Reopening of previously remediated sites, including those that achieved “no further action” status;
- Increased use of CERCLA’s cost recovery and equitable allocation mechanism, as well as common law nuisance and trespass claims to mitigate PFAS-driven costs;
- Intensive review of pollution legal liability policies and historical CERCLA settlement agreements for re-opener and emerging contaminant provisions; and
- PFAS-focused due diligence to undergird bona fide prospective purchaser status and insurance underwriting.
Cox Castle’s environmental practice group represents clients on PFAS-driven regulatory, transactional, and litigation issues at an array of sites, including regional aquifers, industrial facilities, and brownfield developments. They also counsel developers, lenders, municipalities, policy holders, and litigants on all sides of CERCLA and similar litigation matters.
For additional information contact: Ira J. Klein and Keith Walker in Los Angeles or Robert Doty in San Francisco.
[1] CERCLA is the acronym for the Comprehensive Environmental Response, Compensation, and Liability Act.
[2] RCRA is the acronym for the Resource Conservation and Recovery Act.
[3] The full names of the five chemicals are as follows: perfluorooctanoic acid (“PFOA”), perfluorooctane sulfonic acid (“PFOS”), perfluorohexanesulfonic acid (“PFHxS”), perfluorononanoic acid (“PFNA”), and hexafluoropropylene oxide dimer acid (“HFPO-DA). A sixth chemical, perfluorobutane sulfonic acid (“PFBS”), does not have its own MCL but is regulated if it is present as part of a mixture with the other five PFAS chemicals.
[4] The designation also carries implications beyond remediation liability. For example, the new rule requires entities to immediately report releases of PFOA and PFOS that meet or exceed the reportable quantity of 1 pound in 24 hours and it will trigger regulation by the Department of Transportation under the Hazardous Materials Transportation Act. It will similarly impact transfers of federal facilities, which are subject to notification and cleanup certification requirements that will now extend to PFOA and PFOS impacts.
[5] PFAS-containing liquid wastes can be injected deep below the ground surface in a Class I underground injection control (“UIC”) well in compliance with the UIC program. Such a well must protect underground sources of drinking water. While UIC may be an option for managing PFAS-containing fluids, Class I wells may not necessarily be widely available nor cost-efficient. New Class I wells are subject to permitting, construction, operation, and monitoring costs.
[6] New evidence indicates that landfills release more PFAS to the environment than previously understood. As a result, the EPA recommends using hazardous waste landfills (as opposed to other less highly regulated landfills) because such landfills tend to have protective systems designed to limit leachate migration, thereby reducing the risk of release of PFAS to the environment. Disposal costs at hazardous waste landfills are frequently substantially higher than sites not approved for hazardous wastes, and in some areas, capacity is deficient.
[7] Thermal treatment, i.e., incineration, under certain conditions is effective at destroying PFAS. Most municipal solid waste combustors are not capable of destroying PFAS under normal conditions. Additional research, especially regarding PFAS air emissions and the risks associated with incomplete combustion, is critical to evaluate its efficacy and related risks.
[8] The EPA also acknowledges that “interim storage with controls,” may play a role despite the fact that it is neither a destruction nor disposal technology. But if RCRA’s cradle to grave framework is extended to any significant number of PFAS, the utility of “interim storage with controls” may prove limited due to permit requirements and short storage windows.