Property Due Diligence and the Consideration of PFAS

NEWS UPDATE: November 30, 2021

LAND DEVELOPMENT, ZONING & ENVIRONMENTAL | GOVERNMENT AFFAIRS

Property Due Diligence

and the Consideration of PFAS

Developers and prospective purchasers of property may soon be adding PFAS (per- and poly-fluoroalkyl substances) to the list of constituents to be evaluated when performing a Phase I Environmental Site Assessment. PFAS are a group of man-made chemicals that have been used widely since the 1940s in various products and applications. In recent years, PFAS have been the subject of increasing attention because they are pervasive in the environment do not naturally degrade, and could be attributable to adverse health effects.

In recognition of these growing concerns, the American Society for Testing and Materials (“ASTM”) has revised its Standard[1] for performing “all appropriate inquiries” (“AAI”) to include PFAS as a non-scope consideration. AAI must be performed when transferring property for a prospective property owner to qualify for the innocent landowner, contiguous property owner, or bona fide prospective purchaser defenses to CERCLA liability. The Standard requires that a Phase I identify “recognized environmental conditions” or the “presence or likely presence of any hazardous substances” on or at the property. In the revised Standard to be released in December, PFAS will be added as a non-scope consideration, meaning that it will be a voluntary consideration and a prospective purchaser is not required to consider PFAS to satisfy AAI. This is because PFAS has not been designated as a hazardous substance under CERCLA and is not regulated as such by EPA.

That is likely to change in the next few years, however. In October, EPA released its PFAS Strategic Roadmap which details its plan to regulate and study PFAS over the next three years. This ambitious plan sets forth a multi-media, multi-agency effort with the goal to reduce PFAS entering the environment, hold polluters accountable, and ensure science-based decision-making. In the plan, EPA announced it is starting the process to designate the two most studied PFAS chemicals, PFOA and PFOS, as CERCLA hazardous substances. Specifically, EPA stated that it will publish a notice of proposed rulemaking in Spring of 2022 and hopes to finalize the designation in Summer 2023. EPA is also planning the designation of additional PFAS chemicals and anticipates issuing an advanced notice of proposed rulemaking for their potential designation in the Spring of 2022.

Once PFOA and PFOS are designated as hazardous substances under CERCLA, they will have to be evaluated to satisfy the requirements of AAI. This scope consideration will have far reaching consequences as PFAS, including PFOA and PFOS, is so widespread and prevalent in the environment that it will likely be detected when analyzed, similar to arsenic in many parts of Florida and the southeast. The prevalence of the chemicals and the likely part per trillion level cleanup target level will combine to drive concerns and assessment costs – not to mention raising questions regarding potential liabilities.

Given the anticipated regulation of PFAS as a hazardous substance and potential financial risks associated with acquiring PFAS impacted property, it is likely that prospective purchasers, commercial lenders, investors and insurance companies will increasingly require the consideration of PFAS when performing Phase I investigations under certain circumstances. PFAS related concerns in any property transaction should be addressed proactively, starting with understanding the scope of the Phase I Environmental Site Assessment and its implications. PFAS risks will become an increasing concern in property and business transactions and will require creative solutions to ensure that opportunities are not lost.

Our Environmental group has substantial experience helping clients navigate complex environmental issues such as these. For more information, please contact us.

[1] International Phase I Environmental Site Assessment (Phase I) Standard E1527-13 (“Standard”).

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*Ken Metcalf, Yuliya Olvy, Chris Smith, David Smith and Cynthia Spidell are not attorneys and are not authorized to practice law.

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