We can now talk about the proverbial elephant in the PFAS room that has been lingering for a while. On April 19, 2024, the Environmental Protection Agency (EPA) announced it will list the so-called "forever chemicals" perfluorooctane sulfonic acid (PFOS) and perfluorooctanic acid (PFOA) as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). EPA did not (at least for now) list an additional seven proposed PFAS substances, but it did issue an enforcement policy that will give certain public entities some relief from the CERCLA liability scheme. The rule could have a big impact on existing and future CERCLA settlements and will also change how PFAS are addressed in real estate transactions as part of Phase I Environmental Site Assessments (ESAs).

EPA's PFAS Strategy

In October 2021, EPA announced its PFAS Strategic Roadmap, laying out timelines by which the agency planned to take action to safeguard public health, protect the environment, and hold polluters accountable. Since then, EPA has moved to adopt rules regulating PFAS under the Resource Conservation and Recovery Act (RCRA) and the Toxic Substances Control Act, and EPA recently finalized national drinking water standards for PFAS. EPA also announced nearly $1 billion in new funding to help states and territories implement PFAS testing and treatment and issued a variety of guidance documents to address PFAS pollution, including a memo providing direction under the NPDES permitting program to restrict PFAS at their source. The CERCLA rule was the last major missing piece of EPA's strategic roadmap and will allow the agency to shift its focus to one of its priorities under that roadmap: holding polluters accountable.

The CERCLA Rule and PFAS

CERCLA, also known as the Superfund statute, aims to hold polluters accountable by forcing those polluters to fund cleanup and remediation of hazardous substances at uncontrolled or abandoned sites and to address accidents, spills, and other emergency releases of pollutants and contaminants into the environment. CERCLA allows EPA to go after responsible parties and assure their cooperation in the cleanup.

Reporting requirements

Listing PFOA and PFOS as hazardous substances under CERCLA means that any entity that releases PFOA or PFOS above the reportable quantity – one pound within a 24-hour period – must immediately notify the National Response Center of such release under section 103(a). In addition, facility owners and operators will have to immediately notify their community emergency coordinator for local emergency planning committee (LEPC) and the State Emergency Response Commission (SERC). Section 111(g) of CERCLA also requires owners or operators to "provide reasonable notice to potential injured parties by publication in local newspapers serving the affected area" of any release of these substances.

Liability risks

CERCLA imposes joint and several liability on current or past owners and operators of a site as well as arrangers and transporters of hazardous substances for costs associated with cleanup and potential natural resources damages (NRDs). As a result, entities that may potentially be liable for PFAS contamination at Superfund sites include PFOA/PFOS manufacturers, processors, manufacturers of products containing PFOA/PFOS, downstream users of PFOA/PFOS, downstream users of products containing PFOA/PFOS, waste management, and waste treatment facilities.

As a result of this designation, EPA may have the authority to "reopen" past settlements at Superfund sites that did not account for PFAS contamination and designate new Superfund sites to specifically address PFAS contamination. PFAS contamination presents several unique challenges that the agency will need to address, however. PFAS are now found everywhere and come from a variety of sources. They have been found in the blood of virtually every American tested and are frequently found in rugs, carpets, food packaging, cookware, cosmetic products, textiles, and firefighting foam, to cite only a few products. Because they do not biodegrade easily, they also tend to accumulate in the environment and move great distances through the air, rivers, and the food chain. Accordingly, accurately delineating a contaminated site for PFAS purposes and determining sources of contamination will prove to be extremely difficult and could result in enormous Superfund sites to adequately cover all potential sources of contamination.

Due diligence

A direct consequence of the listing is that PFOA and PFOS will now be considered "in-scope" for Phase I ESAs as part of real estate transactions. Consultants will be required to assess potential PFOA/PFOS contamination when preparing a Phase I ESA. Because of the prevalence of PFAS in the environment and the ubiquity of potential sources, it may be very difficult to rule out potential contamination, resulting in virtually all Phase I ESAs pointing out the risk for PFAS contamination, which is not very helpful information for prospective purchasers. Instead, PFAS testing may be required to provide clients with a baseline understanding of PFAS contamination and potential liability at a specific property. This creates significant uncertainty for current and future owners and operators of PFAS-contaminated sites due to yet unknown cleanup levels for commercial, industrial, or residential exposure. For reference, EPA did finalize maximum contaminants levels for PFOA and PFOS in drinking water at 4.0 parts per trillion, a standard that is widely believed to be extremely difficult to achieve and for which the American Water Works Association estimates the cost of compliance to be approximately $37 billion initially and another $650 million annually.

EPA's enforcement policy

As part of the CERCLA listing, EPA also adopted a PFAS Enforcement Discretion and Settlement Policy, aimed at addressing concerns raised by public water utilities and landfills about their potential liability as entities receiving PFAS-containing substances from other entities. The policy describes how EPA will focus enforcement action on entities that have significantly contributed to the release of PFAS in the environment, including PFAS manufacturers, parties that use PFAS in their manufacturing process, federal facilities, and other industrial parties. In contrast, EPA "does not intend to pursue entities where equitable factors do not support seeking response actions or costs under CERCLA, including but not limited to, community water systems and publicly owned treatment works, municipal separate storm sewer systems, publicly owned/operated municipal solid waste landfills, publicly owned airports and local fire departments, and farms where biosolids are applied to the land." For those parties, EPA will use its CERCLA statutory authority to enter into settlements that provide contribution protection from third-party claims.

Anticipated litigation

The listing of PFOA and PFOS as hazardous substances under CERCLA is a major development in the federal regulation of PFAS. However, the rule may be challenged on substantive and procedural grounds, with opponents arguing that the danger to public health, welfare or the environment from PFOA and PFOS has not been sufficiently established and that EPA did not appropriately consider the impact on the economy of listing PFOA and PFOS as hazardous substances under its regulatory impact analysis. The U.S. Chamber of Commerce estimates that the annual costs associated with the listing are between $700 million and $800 million, or a total of $11.1 billion to $22 billion.