As we noted in a prior post, linked here, US EPA has proposed to designate two per- and polyfluoroalkyl substances (PFAS) as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also known as “Superfund.” CERCLA provides the Federal government with the authority to respond to releases or threatened releases of hazardous substances in order to protect public health, welfare, and the environment.
PFAS, including the types covered by this proposal – PFOA and PFOS, are human-made chemicals that have been used in industry and consumer products since the 1940s. This significant proposal will likely, if finalized, have significant impacts on many aspects of new projects that should be taken into consideration during the initial stages of project development.
Why is this a concern?
PFAS, including PFOA and PFOS, are common because of their use since the 1940s and their transportability and resistance to degradation. A hazardous substance designation could affect an unknown number of sites, and cleanup costs could be significant for sites that contain PFAS.
Designation of PFAS as hazardous substances under CERCLA could significantly affect real estate transactions. PFAS has been detected at sites with no known history of PFAS use or disposal. Therefore, parties should ensure that research about the property captures not only the property that is the subject of the transaction, but the nearby properties as well, particularly if it is an area known for industrial activity. If the rule is finalized, environmental assessment will include questions regarding PFAS presence as a required component. If there is risk of PFAS contamination at the site, parties will likely need to consider sampling and analysis to inform their actions going forward or agree as to how such issues will be handled if PFAS are later discovered at the site.
Under CERCLA, existing or historic Superfund sites could be reopened to investigate PFAS contamination, actions that could add millions in unanticipated costs. Therefore, parties should be aware of whether the real property in question is currently or has ever been designated as a Superfund site and take steps to understand the risk of PFAS contamination being discovered at the property.
PFAS such as PFOA and PFOS are used in a variety of building materials because of their useful properties: weatherproofing, corrosion prevention, and resistance to stains, grease, and water. For example, PFAS are used in roofing, paints and coatings, floorings, sealants and adhesives, and glass. While the rule does not prohibit the use of such materials, it would likely add downstream risks that parties may need to address before a project is finalized. If PFAS is designated as a hazardous substance under CERCLA, the release of one pound or more of PFAS triggers a reporting requirement obligating the person in charge of the site to notify the National Response Center, among others. This means that parties will need a method of identifying and measuring releases of PFAS. Parties seeking to quantify or eliminate these substances may need to request that manufacturers of building materials disclose product components. Further, because CERCLA requires hazardous substances to be regulated by the Department of Transportation (DOT), a person who transports PFAS would be subject to DOT regulations governing the transportation of those substances.
The proposed designation of PFAS as a hazardous substance is also likely to have ripple effects that will be seen in secondary aspects of the construction industry. US EPA’s proposal does not include cleanup standards for sites with PFAS contamination. Accordingly, there are still many uncertainties in regard to potential costs and how to calculate them, but it is likely that costs would increase throughout the supply chain to account for concerns about the need to address PFAS contamination – in particular, it is expected that sectors essential to construction such as wastewater utilities, solid waste disposal facilities, and drinking water utilities will face potential liability resulting in increased costs for services.
In addition to the more tangible effects of PFAS in the construction process and real property transactions, the designation of PFAS as a hazardous substance under CERCLA may also impact project financing. As noted above, the scope of due diligence will likely expand to ensure the risk of PFAS contamination at or from the project site is sufficiently investigated, particularly at projects involving current or historical industrial operations. Risk could also source from demolition of structures comprised of PFAS-containing materials if such activities trigger a reportable release of PFAS into the environment; parties should consider what precautions may be needed prior to beginning any physical demolition. Because CERCLA authorizes joint and several liability among PRPs, this could present a significant financial risk of which parties should be aware.
While EPA’s proposal involves many uncertainties in terms of application, we would expect that a final designation of PFAS as a hazardous substance would have significant impacts on nearly all aspects of global projects. Parties should also be aware of additional federal and state legislation that is in effect or under consideration to minimize the health effects of PFAS and plan accordingly. Squire Patton Boggs will continue to monitor this important issue as it develops.
Squire Patton Boggs has an international team focusing on the Infrastructure Sector. For further advice on this topic, please contact the authors.