By Kathryn Peacock, Principal; Suzi Rosen, PG, CHg, Principal & Managing Director; and Steve Luzkow, Technical Director | Partner Engineering and Science, Inc.
Originally Published in the 2024 EBA Journal, Summer Edition
In April 2024, the EPA issued a final rule to designate two of the most widely used categories of PFAS, perfluorooctanoic acid (PFOA) and perfluorooctane sulfonate acid (PFOS), and their isomers and salts, as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) also known as Superfund.[1] This rule became effective as of July 8, 2024.
PFAS has now joined other chemicals classified as hazardous substances that could expose real estate investors, developers, owners, and operators to cleanup obligations and costs. Additionally, they may face environmental damages and liability for human health risks from exposure to these substances. This means that in order to have certain liability protections afforded under CERCLA, prospective purchasers must evaluate PFAS within the scope of the All Appropriate Inquiries (AAI) standard established under the CERCLA Act (42 U.S. § 9601). As a result, PFAS risk is now evaluated in Phase I Environmental Site Assessments (ESAs) in the same manner as other hazardous substances.
PFAS can be released into the environment in many ways, including through wastewater and stormwater discharges, accidental releases, use for metal dust suppression, air emissions, and solid waste. Some of the most widely known PFAS-contributing industries include commercial printing, electronics, plating, fabric and textiles, cosmetics manufacturers, fire protection, food packaging, mining, airports, and potentially carwashes, drycleaners, and laundries. The Association of State Drinking Water Administrators publishes a list of NAICS codes identified as PFAS manufacturers,[2] which serves as a great starting point when identifying PFAS risk. However, keep in mind that if an industry is on this list, it does not automatically mean there is a recognized environmental condition (REC) or a release of PFAS.
When evaluating PFAS risk in a Phase I ESA, the following factors are typically considered:
These factors are not exhaustive, and the presence of other PFAS forms as emerging contaminants may also need to be considered based on state-specific criteria and future regulatory changes. In addition to traditional factors used to determine risk in a Phase I ESA, such as groundwater depth, groundwater gradient, and other physical setting features, the existing and future use of the property need to be considered when assessing PFAS risk.
Phase II Environmental Site Assessments for sites known or suspected to be impacted by PFAS present unique challenges that differentiate them from those performed for other hazardous materials. These challenges, include:
Evolving Remediation Technology: Due to its inherent chemical stability, PFAS is resistant to many traditional remediation technologies, such as chemical oxidation/reduction or bioremediation, that are normally used for other common contaminants. This makes “old school” methods like dig-and-haul for soil and pump-and-treat for groundwater the most obvious cleanup options, though both can be quite expensive. More sophisticated remediation technologies—such as thermal treatment, injection of carbon substrate materials, and supercritical water oxidation—are already on the market and proven to be effective. However, these technologies are often more expensive, time-consuming, and challenging to implement compared to remediation for other contaminants like volatile organic compounds or petroleum hydrocarbons. Of course, remediation technology is evolving right alongside regulations. The good news is that these PFAS remediation technologies will generally also remediate other common co-contaminants.
Monitoring as a Mitigation Measure: Since PFAS remediation can be both expensive and lengthy due to the current state of remediation technologies and uncertainties with regulatory closure criteria, alternative options may be considered when PFAS is present at a property. One such option is longer-term monitoring of sites with PFAS-impacted groundwater. While full remediation can be costly, monitoring a PFAS groundwater plume to ensure it does not migrate toward water bodies or potable supply wells, along with some limited groundwater injection for transport control, can be an option when performed in conjunction with regulatory agency oversight. Although this approach is not true remediation, it can be considered as part of its feasibility analysis.
Wastewater Effluent: Above-ground technologies for managing wastewater streams, treating groundwater as part of a pump-and-treat remediation system, and/or treating private water supplies are well-established. These technologies typically use carbon or other absorptive/adsorptive media to remove PFAS from the waste stream. While effective, they still include disposal costs for the PFAS-impacted waste media, often resulting in significant disposal costs. These methods are typically utilized at sites such as plating facilities, airports, drycleaners and laundries, and sites that use or manufacture PFAS.
Remedial Cost Estimating: Because of PFAS’ unique chemical makeup, addressing PFAS as a contaminant cannot be a simple “add-on” to proposed or existing remediation approaches used for other contaminants, such as chlorinated solvents or petroleum hydrocarbons which are commonly found at dry cleaners, gas stations, or historical industrial sites. When PFAS is present as a contaminant, it will drive the overall remediation strategy and associated cleanup costs. Due to the rapidly evolving regulatory environment and uncertainty about reaching regulatory closure for PFAS sites, industry professionals can expect a higher level of uncertainty and wider ranges within remedial cost estimates (RCEs).
A major challenge with PFAS is the lack of regulatory closure criteria and precedence for remediating and closing sites with PFAS as hazardous substances under CERCLA. While the EPA has set six MCLs for groundwater and some states have soil and/or groundwater cleanup levels, the overall process (including timing and cost) for achieving No Further Action (NFA) or regulatory closure status for PFAS sites is still largely in development across the United States. Due to PFAS being newly regulated, even at the state level, predicting closure costs presents unique challenges due to the uncertainty surrounding closure criteria.
Insurance: In many cases, policies without a PFAS exclusion are still attainable. However, factors such as previous use and geographic location may play a role in the carrier’s decision to include or exclude PFAS coverage. When a policy without a PFAS exclusion is available, coverage typically extends to remediation, third-party liability, legal defense, transportation, and non-owned disposal sites. For policies with a PFAS exclusion, it may be possible to limit the exclusion to only apply to certain areas of coverage.
Lender liability policies remain widely available without a PFAS exclusion. This is because these policies are typically underwritten based on the borrower’s financials and provide protection solely to the lender. Since these policies are only triggered in the event of default and the discovery of a pollution condition, Environmental Lender Liability policies can be a good option for banks that want to forgo a Phase II ESA and still keep the loan on the books.
When it comes to PFAS risk and liability, assembling a team of experts is crucial. It is advisable that you rely on the expertise, guidance, and insights of an experienced environmental consultant, a knowledgeable environmental attorney, and a skilled insurance broker familiar with emerging contaminants. As with other emerging issues, it is of paramount importance to stay abreast of the rapidly changing regulatory environment. In addition, being proactive and engaged with the regulatory community helps in understanding potential exposures and liabilities. Having a team of trusted advisors is important to help guide you through how the dynamics of this ruling will impact your business, offering expertise in due diligence, monitoring, treatment, cleanup, and other technologies.
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[1] Environmental Protection Agency. (2024, April 17). Designation of PFOA and PFOS as hazardous substances under CERCLA release reporting requirements factsheet. Retrieved from https://www.epa.gov/epcra/designation-pfoa-and-pfos-hazardous-substances-under-cercla-release-reporting-requirements
[2] Association of State Drinking Water Administrators. (2020, May). PFAS source water protection guide and toolkit: Technical appendix. Retrieved from https://www.asdwa.org/wp-content/uploads/2020/05/ASDWA-PFAS-SWP-Technical-Appendix_FINAL3.pdf
[3] Environmental Protection Agency. (2024, April 10). Biden-Harris Administration finalizes first-ever national drinking water standard to protect 100M people from PFAS pollution. Retrieved from https://www.epa.gov/newsreleases/biden-harris-administration-finalizes-first-ever-national-drinking-water-standard