In the past few years a family of thousands of chemicals, known as PFAS, which have been used in various industries since the 1940s, have been determined to be a significant health and environmental hazard. US EPA recently announced that it would move forward with the process toward listing two PFAS chemicals, PFOA and PFOS, as Superfund hazardous substances by the end of 2019. US EPA has also announced that it intends to move forward with the process to determine whether to establish a drinking water Maximum Contaminant Level, or MCL, for PFAS chemicals in the near future. Several States, such as New Jersey, Vermont, Michigan, New Hampshire, and New York, are already moving forward with setting MCLs or other type of drinking water standards or guidelines for one or more PFAS chemicals. Congress has gotten involved in the effort to address PFAS emissions and exposures as well. However, it’s not clear if and when PFAS legislation will be enacted.

PFAS have been dubbed "forever chemicals" because they tend to persist in the environment and don’t degrade for millions of years. They also bioaccumulate in plants, animals and humans. Several years ago, an independent panel of scientists, known as the C8 Science Panel, after years of study, confirmed that one such PFAS chemical, PFOA, can cause a multitude of serious adverse health effects, including kidney cancer, testicular cancer, ulcerative colitis, thyroid disease, pregnancy-induced hypertension/preeclampsia and high cholesterol, among people exposed to the chemical at low levels in their drinking water. Those scientific findings have spurred serious concern as to the effects of the thousands of related chemicals in the same PFAS family.

These scientific and regulatory concerns have led to an ever-increasing number of activities at the state, national, and even international level to regulate and limit human exposures to and environmental impacts from PFAS.

So why is this a big deal?

Here are a few of the reasons:

  • State and federal drinking water limits or standards for PFAS are likely going to be in the low parts per trillion (ppt) range. Since US EPA announced a 70 ppt health advisory in 2016, regulators have been proposing even lower and lower limits. For example, Vermont has recommended a 20 ppt limit for PFOA in drinking water, New Jersey 14 ppt, New Hampshire 12 ppt, New York 10 ppt, and Michigan recently proposed an 8 ppt limit for PFOA in drinking water. For context, consider that one of the most toxic chemicals, vinyl chloride, has an MCL of 2 parts per billion – which is 2000 ppt.
  • PFAS are expensive to remediate. Although carbon treatment has been effective for treating longer-chain PFAS, such as PFOA and PFOS, in drinking water, more expensive treatments methods may be needed for many of the shorter-chain PFAS. All of these systems can be expensive, not only to design and install, but to operate and maintain. PFAS also tends to move faster in groundwater than most other contaminants, leading to more expansive contamination zones.
  • If PFOA and PFOS become listed hazardous substances, the impact will be significant. Generators, current owner/operators and owner/operators at the time of a release will each be individually liable for the entire cleanup. As a result, US EPA (or state regulators) can just pick the deepest pocket and require them to investigate and remediate an entire site even if others have contributed to the contamination. Private parties whose land is contaminated can also sue under Superfund to compel remediation.
  • Listing PFAS chemicals as hazardous substances will have a retroactive effect with respect to liability. In other words, owners, operators and generators will be liable under Superfund even if all their involvement took place before PFAS were regulated.
  • PFAS are ubiquitous, they are everywhere. They have been used not only in manufacturing but are also found in numerous consumer goods and products.
  • PFAS don’t degrade and have contaminated aquifers throughout the United States. Also when discharged in industrial waste water they often pass through municipal treatment plants resulting in contamination of streams and rivers, or possibly land if concentrated in biosludge that is then land-applied for agricultural purposes.
  • PFAS historically have been used in many industries and products including:
    • Chrome plating, textiles and leather, firefighting foam, industrial surfactants, the semiconductor industry, paper and packaging, and wire manufacturing.

Why is this a concern for mergers and acquisitions and commercial real estate deals?

This development is significant for deals because many environmental consultants and lawyers aren’t looking for PFAS in their due diligence. Phase I Environmental Site Assessments generally don’t consider PFAS because they are typically not regulated. Similarly, Phase II testing doesn’t include PFAS for the same reason. Even an industrial property that has been fully remediated with US EPA or state regulatory approval probably has completely missed PFAS contamination. A buyer needs to be especially wary if residential properties nearby utilize drinking water wells or if a municipal well field is nearby.