PFAS: How Emerging Regulations and Recent Litigation Are Affecting Buyers, Sellers, and Developers of Real Property

Per- and polyfluorinated alkyl substances (PFAS) are a class of emerging environmental constituents that need to be considered as part of real estate and corporate transactions. The commencement of anticipated PFAS regulation as early as 2023 will result in additional considerations associated with the management of environmental risk at properties impacted by these substances, as supported by an emergence of litigation by landowners seeking recovery of future anticipated cleanup costs from manufacturers of PFAS and PFAS-containing products.

More PFAS lawsuits are expected to emerge as the Environmental Protection Agency implements regulations that are expected to trigger evaluation and potential cleanup of these emerging contaminants as early as 2023. As explained in more detail below, while much has been written about the recent trend of lawsuits targeting manufacturers of products containing PFAS (rather than merely manufacturers of the chemicals themselves), a lesser discussed but emerging trend is litigation by landowners seeking damages associated with PFAS contamination even when such contamination has not impacted public or private drinking water sources (which have been the primary focus of PFAS regulation to date). In advance of acquiring and selling properties where PFAS may have been used and/or produced—such as airports, firefighting training grounds, and a wide variety of manufacturing facilities—evaluation of PFAS should be considered as a component of environmental due diligence.

Introduction to PFAS

The class PFAS consists of thousands of chemicals, the most well understood of which are PFOA (perfluorooctanoic acid, first produced by DuPont and used to produce Teflon) and PFOS (perfluorooctanesulfonic acid, first produced by 3M and used in Scotchgard). Over recent years, PFAS have attracted major attention from regulators and the public due to their high mobility in groundwater, resistance to degradation, and widespread use in many industries.

Emerging Regulations

The EPA anticipates issuing a final regulation designating certain PFAS (including PFOA and PFOS) as hazardous substances under the federal Comprehensive Environmental Response, Compensation, and Liability Act[i] (CERCLA, the federal Superfund law) by the spring of 2023. This designation would effectively incorporate these chemicals within the scope of Phase I Environmental Site Assessment Reports, which are required to satisfy “all appropriate inquiries” in order to obtain liability protections under CERCLA. Regulation of PFAS may also trigger cleanup where PFAS are detected above certain standards, which have yet to be finalized by the EPA and by most states. More specifically, the most recent Phase I Environmental Site Assessment standard (ASTM E1527-21) contemplates the future regulation of PFAS.[ii] These impending developments have the potential to affect property transactions from the perspective of acquisition, disposition, and financing. Importantly, even though only a small subset of PFAS are expected to be designated, many other PFAS are known to degrade into these constituents.

The EPA also anticipates finalizing drinking water standards for PFOA and PFOS by the fall of 2023. These standards are expected to be orders of magnitude lower than standards applicable to more well-known contaminants; to illustrate, while the drinking water standard (known as a “maximum contaminant level” or MCL) for the common dry-cleaning solvent PCE is set at 5 parts per billion, the EPA recently established non-enforceable drinking water health advisories of 4 and 20 parts per quadrillion for PFOA and PFOS, respectively.[iii] Evaluation of remedial technologies for cleanup of PFAS remains ongoing, and many groundwater remedies effective for more well-understood contaminants (such as petroleum and chlorinated solvents) have yet to be proven effective for PFAS.[iv] Accordingly, the need to remediate PFAS in groundwater has the potential to complicate cleanup at properties where PFAS are detected, especially if groundwater at such properties may be impacted with other constituents.

Thus, by 2023, there will be increasing attention on the assessment and investigation of PFAS, which will, in turn, affect environmental due diligence associated with real estate and corporate transactions. Consideration of PFAS constituents as part of Phase I Environmental Site Assessments may result in subsurface environmental investigations at properties where impacts are suspected and potential cleanup when impacts are identified. Apparently in recognition of this shifting regulatory landscape, the PFAS litigation landscape has begun to shift as well.

Shifting Landscape of PFAS Litigation

Since the first PFAS-related claim was filed in 2010, the majority of lawsuits—and all identified major settlements—have involved contamination of water supplies (both private wells and public water sources). Such claims generally involve plaintiffs seeking recovery for (i) alleged injuries resulting from ingestion of contaminated water, (ii) costs of treating water impacted with PFAS, and/or (iii) diminution in property values caused by loss of a drinking water source. Primary defendants at this point include PFAS manufacturers and downstream manufacturers incorporating PFAS into secondary products (e.g., textiles, electronics, food packaging).

This initial litigation is expanding, however, as more recent claims go beyond contamination of drinking water sources and involve landowners seeking recovery of investigative and remedial costs due to the mere existence of PFAS contamination. Examples include a California airport and a Florida firefighting academy where PFAS were detected at levels exceeding provisional cleanup standards set by those states.[v]

Even more significantly, an airport in South Carolina—a state which has yet to adopt any standards for PFAS, provisional or otherwise—filed suit on January 6, 2022, seeking recovery of future investigative and cleanup costs related to PFAS contamination at its property. Unlike the lawsuits referenced above, where investigations were either mandated or led by the state, the impetus for the subsurface investigation that identified PFAS may indicate a forward-looking strategy.

The number of lawsuits seeking recovery of PFAS-related investigation and remediation costs is poised to increase as assessment and cleanup of these chemicals becomes a standard part of due diligence. However, it should be noted that an increasing number of cases are being transferred to a multi-district litigation in Charleston, South Carolina—set up to handle claims relating to PFAS-containing firefighting foam. This increase has reportedly led to recent complications and delays.

Conclusions

With just over a year before the above-referenced federal regulations are expected to be finalized, landowners undertaking assessment or cleanup activities at properties where PFAS contamination is suspected should be proactive in evaluating environmental impacts as well as environmental risk.

Experienced legal counsel can assist in first identifying whether PFAS evaluation is warranted at a property and then, to the extent applicable, quantifying and mitigating associated environmental risks.

• If significant historical manufacturing or use of PFAS is suspected at a property, environmental sampling for PFAS should be considered, especially in a pre-acquisition context. Particular attention should be paid to the specific constituents sampled and the consequences such sampling may have on future regulatory requirements.
• Identification of PFAS may be beneficial as part of entry into Brownfield and Voluntary Cleanup Programs, due to the liability protections that often attach under these programs for pre-existing environmental conditions. Discussing property-specific PFAS concerns with regulators upon program entry—even before the above-referenced federal regulations take effect—may help ensure the broadest-based liability protections and minimize associated risks of re-opener occurring upon future regulation. 
• Contractual environmental risk allocation (e.g., indemnities, releases, escrow agreements) should be considered for properties suspected or known to be affected by PFAS. 
• Litigation trends are emerging for landowners affected by PFAS contamination that should continue to be monitored. As noted above, the ongoing multi-district litigation has recently experienced significant challenges and associated delays.

Heather T. Friedman is a partner and Brian A. Remler is an associate at Morris, Manning & Martin, LLP.