Time Running Out for Forever Chemicals: EPA Gets Tough on PFAS
On October 18, 2021, the Environmental Protection Agency (EPA) announced an imminent, all-fronts attack on a class of chemical substances known as “PFAS” (perfluoroalkyl and polyfluoroalkyl substances) that, when fully implemented, will have sweeping effects on every major program administrated by the agency. The announcement came in the form of the agency’s PFAS Strategic Roadmap, which sets timelines to address harmful PFAS compounds in the environment, and utilizes existing authority and EPA programs to create a comprehensive, integrated approach to safeguard communities from PFAS contamination.
PFAS are a large group of manmade chemicals, about 4,700 in total, that do not readily degrade in the environment. These “forever chemicals” have been widely used since the 1940s and crop up in a multitude of consumer products, such as nonstick cookware, water-repellent clothing, stain-resistant upholstery and carpet, cosmetics, and grease-resistant products, to name a few. Their widespread use and their persistence in the environment have led to PFAS being present in most drinking water aquifers, and human and animal tissues. In recent years, studies of the forever chemicals have reached a clear consensus showing a strong link between PFAS and harmful effects in humans and animals.
As outlined in the Strategic Roadmap, the EPA intends to use the authority of every program under its administration to address the PFAS threat. This article focuses on two such programs that are likely to have an immediate effect on the regulated community:
- The listing of two PFAS compounds as hazardous substances under the Comprehensive Environmental Reclamation, Compensation and Liability Act (CERCLA); and
- Utilizing the EPA’s authority under the Toxic Substances Control Act (TSCA) to require PFAS manufacturers and importers to provide critical safety data on PFAS.
One of the first affirmative actions to be taken by the EPA will be listing two of the most studied PFAS compounds – perfluorooctanoic acid, or “PFOA,” and perfluorooctanesulfonic acid, or “PFOS,” as hazardous substances under CERCLA. A proposed rule listing the two compounds is expected in the spring of 2022, and a final rule is projected to be issued in the summer of 2023. The immediate effect of the designation will be to require facilities across the country to report releases or spills of PFOA and PFOS that meet or exceed the reportable quantity (RQ) assigned to the substances. In addition, the designation will grant to the EPA the authority to require investigation and remediation of PFOA and PFOS compounds at federal Superfund sites.
The statute also authorizes Potentially Responsible Parties (PRPs) to sue other PRPs for contribution for cleanup cost, which inevitably leads to protracted negotiations and litigation regarding apportionment of liability. Any time a new hazardous substance is added to CERCLA’s list, the class of PRPs at Superfund sites is potentially expanded. New PRPs are especially likely with PFAS compounds given their ubiquitous nature in the U.S. marketplace and the number of manufacturers who have used them.
In addition to expanding the scope of investigations at current federal sites, the CERCLA inclusion will potentially lead to reopening sites that are undergoing long-term operation and maintenance under approved Remedial Design/Remedial Action (RD/RA) plans. These reopeners will almost certainly lead to additional liability for PRPs who have previously settled with the EPA and other PRPs, and who have entered into consent decrees and cost-sharing arrangements for site remediation.
Most states’ remediation programs adopt by reference the federal list of hazardous substances. The effect of state adoption will be to extend PFOA and PFOS investigation and remediation obligations down to state-administered sites, which are typically smaller and far more prevalent than their federal counterparts.
Similarly, the designation may have a reopening effect on federal and state brownfield decisions. Federal and state brownfield programs can only release prospective purchasers from liability for hazardous substances that are known at the time of the application. As a result, the associated brownfield agreements will not provide coverage, and therefore liability releases, for substances not known at the time of the application. Brownfield agreements that require any form of long-term monitoring and maintenance would be especially susceptible to this type of reopener, especially if there is any reason to suspect that PFAS compounds might be present.
Due Diligence and the AAI
The hazardous substance designation will also change the face of environmental due diligence for transactions involving commercial and industrial assets. Environmental due diligence is required to establish the “innocent landowner” defense to CERCLA liability. A necessary element to establishing the defense is that purchasers conduct an “all appropriate inquiry” (AAI) into the condition and history of a property prior to purchasing it. Where the AAI standard is satisfied, a PRP can effectively assert the innocent landowner defense to CERCLA liability, which prevents the landowner from being responsible for funding future site cleanups.
The EPA has long acknowledged that the AAI rule’s requirements can be satisfied by following the practices established by the American Society for Testing Materials (ASTM) Standard E 1527, which has become the industry standard for a Phase I Environmental Site Assessment.
In response to the imminent listing of PFAS compounds, ASTM has revised its Phase I standard to address emerging contaminants such as PFAS. Under the revised standard, PFAS is identified as a “non-scope” consideration, meaning that users who commission Phase I assessments can choose to expand the scope to assess the possible presence of PFAS constituents in or on the subject property. This is the same status currently given to lead-based paint, asbestos and radon. Given the imminent nature of the CERCLA designation, however, and the fact that several states have already started including PFAS compounds in their cleanup programs, property buyers are strongly advised to including PFAS analysis in their ASTM Phase I due diligence. Of course, when PFAS compounds become federally regulated as hazardous substances, failure to include PFAS in the Phase I Assessment would result in the report not satisfying the AAI Standard, potentially making the innocent landowner defense unavailable.
How purchasers and lenders seeking to conduct AAI should interpret the risk presented by the presence of PFAS remains uncertain. The health effects of PFAS are still being studied and are largely unknown. At this early stage in their regulatory life, there is little precedent for analyzing the risk presented by PFAS when they are detected in the environment. Current health-based drinking-water standards for PFAS are measured in parts per trillion rather than the parts per million typically seen with other hazardous compounds. As a result, target cleanup levels are expected to be quite low, making health-based remediation actions difficult and very expensive to complete. Given this uncertainty, and a lack of experience in the environmental industry in dealing with PFAS-contaminated sites, it will be difficult for environmental professionals to provide accurate risk assessment analysis. This uncertainty will likely have a cooling effect on purchasers’ and lenders’ willingness to consider transactions where PFAS are potentially present.
The primary tool the EPA intends to use to collect information on PFAS and their health effects is the Toxic Substances Control Act (TSCA). In 2020, Congress directed the EPA to utilize its authority under TSCA to develop a process for prioritizing which PFAS should be subject to additional research. To gather the data needed to develop PFAS priorities, the EPA is utilizing the Chemical Data Reporting (CDR) rule under TSCA. The CDR rule requires manufacturers (including importers) to provide the EPA with information on the production and use of chemicals in U.S. commerce.
In response to the 2020 congressional directive, in January of 2021, the EPA proposed new reporting requirements for PFAS under the CDR. The proposed rule amendment is designed to enhance reporting, and to eliminate exemptions that were previously available to PFAS compounds. The amended rule will require companies that manufacture or import PFAS compounds to report their uses, production volumes, disposal records, exposures and hazards for hundreds, or potentially thousands, of PFAS substances dating back to January 1, 2011.
The new reporting rule will cover a vastly expanded class of manufacturers and importers, as the EPA removed exemptions that would normally be applicable. Notably, the rule does not contain an exemption for “articles.” Generally, the purpose of the article exemption is to make clear that manufactured goods themselves are not considered “chemical substances” subject to the CDR requirements, even though they may contain or be made up of chemicals that are subject to CDR. Removing the article exemption for manufactured goods containing PFAS will impact entirely new segments of the supply chain that handle articles containing PFAS who have not previously fallen under TSCA’s regulatory regime.
Additionally, under the proposed rule, there is no exemption for “small manufacturers and processors” who are otherwise exempt from the CDR rules. TSCA defines “small manufacturer” as one with total sales, combined with those of the parent company, of less than $12 million; or total sales with the parent company of less than $120 million and annual production volume of a qualifying chemical substance that does not exceed 100,000 pounds at any individual plant site. Under the proposed rule, this definition is inapplicable, and all companies could be required to report on PFAS use, placing a significant regulatory obligation on very small manufacturers.
The EPA will also use its authority under TSCA Section 4 to require manufacturers and importers to fund and conduct studies on the health risks presented by priority PFAS compounds. Under Section 4, EPA has broad authority to require manufacturers (including importers) or processors to test chemical substances and mixtures.
This testing is required to develop data about health and environmental effects when there is insufficient data for the EPA to be able to determine whether a chemical substance or mixture presents an unreasonable risk to human health or the environment. Normally, testing is done by and at the expense of a manufacturer or importer who seeks to introduce a new chemical into commerce or has a new use for a chemical substance already registered under TSCA.
Section 4 review will be used to ensure that all new PFAS compounds, and all new uses for existing PFAS compounds, are safe before entering commerce. EPA will also use its authority under Section 4 to require review of existing PFAS that have already undergone Section 4 review to assure that they are not being used in harmful ways. Finally, Section 4 review will be used to prevent resumed production of harmful “legacy” PFAS – PFAS chemicals that have previously undergone Section 4 review, but are no longer in commercial use – without conducting appropriate health-based analysis based on the latest information and knowledge. The data collected will be used by the EPA in future listing decisions under CERCLA, and in setting health-based standards under other programs administered by the agency such as the Clean Air Act, the Clean Water Act and the Safe Drinking Water Act.
The EPA’s PFAS Plan outlines a very ambitious and broad approach to identify and eliminate environmental and health hazards posed by PFAS in the environment. This article focused on just two of the prongs of the EPA’s Strategic Roadmap, which are likely to take effect in the very near future and have an immediate regulatory effect on the U.S. marketplace. In the same Roadmap, the EPA has stated its intent to address drinking water contamination, set industrial effluent discharge limits and air pollution limits, and establish waste handling practices under the Resource Conservation and Recovery Act.
At a bare minimum, companies involved in the chemical, manufacturing and industrial sectors need to carefully examine their chemical usage and supply chains and find substitutes for and eliminate the use of PFAS altogether. In addition, in all transactions where environmental due diligence is warranted, prospective buyers should consider adding PFAS review to the scope of the Phase I Environmental Site Assessment in order to assess the potential for the property or the business operating on the property to have used or released PFAS chemicals in the past. As outlined in the EPA’s Plan, a substantial amount of regulation concerning PFAS is coming. Businesses must start making plans now to avoid costly enforcement actions and litigation in the future.