Impact of CERCLA’s PFAS Designation on the Commercial Real Estate Industry
In April 2024, the United States Environmental Protection Agency (US EPA) finalized a critical rule designating perfluorooctanoic acid (PFOA) and perfluorooctane sulfonic acid (PFOS) as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). These two chemical compounds are the most commonly used types of per- and polyfluoroalkyl substances (PFAS). The US EPA published the ruling in the Federal Register on May 8, 2024, and the rule will become effective on July 8, 2024.
The US EPA began the process of evaluating PFAS via their PFAS Strategic Roadmap in 2021. This action plan focuses on researching the human health effects of PFAS, regulating the discharge of PFAS into the environment, and remediating PFAS that are present in the nation’s water, soil, and air. Designating PFOA and PFOS as CERCLA hazardous substances is a significant step toward the regulation of PFAS in the United States.
Section 107(a) of CERCLA allows for any of the following entities to be liable for the costs and/or performance of a hazardous substance:
- Current owners or operators of a facility where hazardous substances are present;
- Prior owners or operators of a facility at the time hazardous substances were disposed;
- Generators and parties who arranged for the disposal or transport of hazardous substances; and
- Transporters that selected the property where hazardous substances were brought for disposal.
The addition of PFOA and PFOS to CERCLA’s hazardous substance list will affect the commercial real estate market, state and local governments, wastewater treatment plants, landfills, and airports, among many other sectors (e.g., the agricultural industry, which occasionally uses wastewater biosolids-derived fertilizers). The strict liability and joint and several liability clauses of CERCLA, which originally led to the creation of the environmental due diligence industry, will immediately impact the commercial real estate market as lenders and purchasers must now understand whether PFAS may be present in the soil and groundwater on commercial real estate properties.
Consultants performing Phase I Environmental Site Assessments will need to investigate the potential presence of industries using PFAS at a property and assess the likelihood of PFAS discharge into the environment. In addition, consultants will need to research local, state, and federal databases to determine the possibility of PFAS migration through soil and groundwater from nearby spills, landfills, and Superfund sites impacted by PFAS. State and federal databases used in the environmental due diligence industry to make these determinations for other regulated hazardous substances are presently in their infancy with regard to PFAS. Furthermore, such databases do not exist in some states that have not previously regulated PFAS.
Due to the widespread prevalence of PFAS in the environment, the US EPA has issued an enforcement discretion policy. This policy allows US EPA staff to use discretion when seeking response actions and costs under CERCLA from facilities and agencies in cases where PFAS may be discovered but the impacts are considered unintentional and passive in nature, stemming from sources other than large-scale PFAS manufacturing, distribution, or industrial use. Entities that fall under this category include public water supplies, public wastewater treatment plants, publicly owned and operated landfills, public airports and fire departments, and farms where biosolids are applied to the earth. The enforcement discretion policy does not protect these parties from third-party lawsuits that may be filed or state cleanup requirements that may be developed, nor does the policy exempt these parties from reporting PFAS discharges under CERCLA.
While the enforcement discretion policy will likely be welcomed by wastewater treatment plants and landfills, it will create a level of uncertainty in other entities. For example, purchasers of commercial real estate may need to determine whether the property’s prior use as a receiver of PFAS waste streams or the utilization of PFAS compounds would meet the criteria for US EPA enforcement discretion.
LaBella has been conducting PFAS investigations, managing cleanup efforts, and designing PFAS treatment systems across multiple states that have regulated PFAs for years. We are prepared to provide our clients with practical guidance and innovative solutions as PFAS regulations expand nationwide. Additionally, we are in the process of modifying our environmental due diligence offerings to include recognized environmental conditions associated with the presence or probable presence of PFAS. The availability of these updated offerings will coincide with the CERCLA hazardous substance designations for PFOA and PFOS becoming enforceable on July 8, 2024.
