Type: Law Bulletins
Date: 07/15/2019

Imminent Regulation of "Forever Chemicals" Could Impact Today's M&A and Real Estate Deals

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. U.S. Environmental Protection Agency (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. U.S. 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 types 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, has a probable link with a multitude of serious adverse health effects. These adverse health effects include 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 the 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 U.S. 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 enormous. Unless new exemptions are enacted, 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, U.S. 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 wastewater 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 typically doesn’t include PFAS for the same reason. Even an industrial property that has been fully remediated with U.S. 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.

How can Taft help you navigate the risks and liability related to PFAS?

Taft has substantial experience with PFAS and related litigation. Taft has led and been involved in the most significant PFAS litigation in the country for more than two decades, including the very first case involving PFAS in the United States, the first class action involving PFAS and the first Multi-District Litigation in the country, helping secure settlements worth more than one billion dollars for our clients. Taft remains engaged in PFAS related matters throughout the United States for a diverse array of clients.

Taft attorneys also have been involved in Superfund litigation since the statute was first enacted in 1980. We believe that litigation involving PFAS could become as ubiquitous as the chemicals themselves.

Our experience can help you avoid or mitigate liability by:

  • Ensuring your environmental consultants include PFAS in their due diligence.
  • Advising as to potential defenses and how to comply with applicable criteria.
  • Assessing the availability of environmental insurance products.
  • Reviewing historical operations and advising as to the likelihood of PFAS issues, regardless of whether you are buying or selling a business or real estate.
  • Counseling with respect to applicability and compliance with new state and federal regulations regarding PFAS.
  • Advice regarding potential products liability since PFAS is a component of many consumer products.
  • Defending PFAS related litigation, whether initiated by the government or private parties, and pursuing claims against other potentially responsible parties for the recovery of damages or other relief arising from PFAS contamination.

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