Federal EPA recently published a final rule (the Rule) designating for the first time two per- and polyfluoroalkyl substances (PFAS) as hazardous substances under the federal Superfund law. If the Rule becomes effective as expected on July 8, 2024, it will profoundly impact the commercial real estate industry.
PFAS, popularly referred to as “forever chemicals” due to their stable and persistent qualities, have been widely manufactured and used for decades. Environmental testing across the country has identified PFAS in soil, groundwater, and surface water, at all types of properties ranging from industrial to residential. Despite decades of widespread use, PFAS have only recently caught the attention of EPA and many state agencies as the human health impacts of PFAS and their persistence in the environment is becoming better understood.
For the commercial real estate industry, EPA’s Rule would create a host of challenges, including:
1. Liability and Re-Opener
EPA’s Rule will open the door for property owners to be held strictly liable for PFAS contamination existing on their property, regardless of when it occurred. Although EPA has indicated it will prioritize pursuing parties who significantly contributed to the PFAS contamination, “innocent” property owners may nonetheless face potential liability and will need to ensure that they qualify for certain liability defenses.
Another critical issue is how federal and state agencies will view PFAS in connection with sites that have attained regulatory closure. Depending on agencies’ enforcement priorities, certain regulators may seek to re-open sites that have been remediated and/or redeveloped if those sites are suspected to contain PFAS impacts (which were likely not addressed previously).
2. Preparing for Phase I ESAs’ Consideration of PFAS
As of the Rule’s effective date, all Phase I ESAs will be required to evaluate the potential presence of the two PFAS to be designated as hazardous substances under the federal Superfund law. This new requirement will cause several challenges for real estate transactions, including more costly and time-consuming environmental due diligence, as well as the potential for PFAS-related issues to be identified at sites with a prior “clean” Phase I ESA, which could complicate disposition or re-financing efforts.
3. Addressing Redevelopment-Related Challenges
Real estate developers will also need to account for potential costs, additional permitting requirements, and delays associated with PFAS impacts, including in connection with soil export (particularly for net-cut sites) and construction dewatering (if the water table may be encountered during development). Heightened disposal costs may occur as an increasing number of landfills refuse to accept PFAS-impacted soil, and dewatered groundwater may require special management, treatment and disposal measures (including potential permit requirements).
4. Uncertainty Regarding State Regulation
With limited exceptions, most states have waited to see how EPA regulates PFAS under the federal Superfund law before enacting state requirements. Once EPA’s rule takes effect, however, many states are anticipated to enact their own laws and regulations governing PFAS cleanup. There is significant uncertainty regarding how different state regulators will handle the investigation and cleanup of PFAS, including, as noted above, at “closed” sites.
Conclusion
While the Rule is expected to become effective July 8, 2024, the US Chamber of Commerce and two trade groups recently filed a petition to challenge the Rule. It remains to be seen if the challenge will seek and obtain a stay of the Rule (which would delay the Rule’s effectiveness). The results of the upcoming presidential election could also change the course of PFAS regulation at the federal level. Despite this uncertainty, the commercial real estate industry should begin preparing for these landmark changes surrounding PFAS to avoid being caught flat-footed when they take effect.
MMM’s Environmental Group is an industry leader and expert in PFAS and stands ready to assist with regulatory, transactional, and litigation issues arising from PFAS. If you have any questions or would like additional information, please contact the authors.
