On April 19, 2024, the Environmental Protection Agency (EPA) finalized its long-awaited rule designating two PFAS compounds, perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS), as “hazardous substances” under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund). The final rule will take effect 60 days after EPA publishes it in the Federal Register.
Requirements of the Final Rule
In terms of immediate impacts, a CERCLA hazardous substance designation carries a two-fold significance. First and least controversially, CERCLA imposes reporting requirements on entities that release hazardous substances. Here, the final rule requires certain entities to report releases of PFOA and PFOS that meet or exceed a reportable quantity (RQ) of one pound in a 24-hour period to multiple regulatory agencies, including to the National Response Center within 24 hours. This RQ of 1 pound for PFOA and PFOS is the lowest that EPA has ever promulgated under CERCLA,[1] signifying EPA’s viewpoint regarding the risks presented by these chemicals.
The second and more significant implication of a CERCLA hazardous substance designation is the imposition of liability for cleanup of contamination. Now that PFOA and PFOS are hazardous substances, the strict, joint and several liability scheme of CERCLA may be imposed on potentially responsible parties (PRPs), including past and present owners and operators of contaminated properties, as well as transporters and arrangers.
The imposition of CERCLA liability must be considered in light of EPA’s recent rule establishing Maximum Contaminant Levels (MCLs) for PFOA and PFOS in drinking water. As previously noted, these MCLs, which are likely to serve as de facto cleanup levels, are orders of magnitude lower than for other industrial chemicals. Taken together with the practical difficulties of remediating long-chain alkyl PFAS such as PFOA and PFOS, the hazardous substance designation stands to extend the duration of PFAS related monitoring and remediation activities, and otherwise increase costs. Similarly, the new designations create the potential for EPA to reopen existing Superfund sites where remediation activities were previously thought to be complete, introducing an element of unwelcome uncertainty for businesses that prioritize budgeting and planning for environmental liabilities. The 1986 amendments to CERCLA specify Superfund settlements should be subject to certain conditions, and identification of new chemicals of concern at a site is among the standard qualifications that justify for “reopening” previously closed Superfund sites.[2]
The final rule also means that PFOA and PFOS must squarely be addressed as part of the “all appropriate inquiries” that CERCLA requires purchasers and lessees to perform in order to qualify for the affirmative defenses to Superfund liability, such as the bona fide prospective purchaser/lessee defense, the innocent landowner defense, and the contiguous property defense.
Lastly, to date states have implemented different approaches to regulating PFAS in the environment, with certain jurisdictions taking a more proactive approach than others. The federal designation is sure to move states that have not yet prioritized PFAS analysis at cleanup sites to require performing parties to account for these chemicals en route to achieving site closure.
EPA Enforcement Discretion Memo Attempts to Address Liability Risk Concern
Given the wide reach of CERCLA, EPA, concurrent with the final rule, released a memorandum titled “PFAS Enforcement Discretion and Settlement Policy Under CERCLA.” EPA stated in the memorandum that the agency intends to focus its enforcement efforts on parties that have “significantly contributed” to PFAS contamination, including “parties that manufactured PFAS or used PFAS in the manufacturing process, federal facilities, and other industrial parties.” EPA’s memorandum also provides that the agency does not intend to pursue enforcement actions against “entities where equitable factors do not support seeking response actions or costs under CERCLA, including, but not limited to,
- Community water systems,
- Publicly owned treatment works (POTWs),
- Municipal separate storm sewer systems,
- Publicly owned/operated municipal solid waste landfills,
- Publicly owned airports and local fire departments, and
- Farms where biosolids are applied to the land.”
EPA’s memorandum provides assurance to these entities that the agency will not order them to engage in investigation or cleanup activities for PFOA and PFOS contamination.
The common thread between these classes of entities is the lack of agency in using or receiving PFAS. For example, airports and fire departments have long used PFAS-containing Class B fire-fighting foam as a matter of course, while community water systems, POTWs, sewer systems, landfills, and farms are examples of “passive receivers,” as they have little control over any PFAS that they receive.
It is nevertheless important to note the limitations and ramifications of EPA’s stated enforcement discretion. For example, the Agency’s guidance does not preclude private parties from seeking CERCLA contribution from these entities, under section 113 of the statute. Second, it remains to be seen whether states—particularly those on the leading edge of PFAS litigation—will follow EPA’s lead in refraining from enforcement. Moreover, exempting these entities from CERCLA liability threatens to disproportionately increase the liability exposure of other businesses, such as private waste management companies, which perform an essential function and yet squarely match the profile of the sorts of entities that, in EPA’s opinion, should bear the brunt of the remedial costs.
Risk and Insurance Considerations
The final rule reinforces the value to businesses that may have a connection to PFAS to be proactive in terms of (i) evaluating their liability exposure, (ii) taking measures to mitigate or offset any potential liabilities identified, and (iii) implementing longer term strategies to phase out any PFAS used in manufacturing or processing operations.
Historical occurrence-based insurance policies are a potentially valuable tool for offsetting liabilities and can often be a first line of defense for funding CERCLA remediation or litigation costs, provided that the “occurrence,” “property damage” or “bodily injury” is alleged to have commenced decades ago and coverage was maintained at that time. With respect to new policies, policyholders may find it possible and worthwhile to pay higher premiums or to develop creative strategies to obtain coverage for prospective PFAS liabilities, particularly for direct exposure claims, though PFAS exclusions are becoming increasingly common. Policyholders with potential PFAS liability exposure should review their current claims-made pollution or general liability policies for such exclusions, and seek to narrow the language if overbroad or consider giving notice of circumstances if no such exclusion is included yet.
More to Come
The finalization of EPA’s hazardous substance designation for PFOA and PFOS comes as EPA is publishing the results of the Fifth Unregulated Contaminant Monitoring Rule (UCMR 5) under section 1445(a)(2) of the Safe Drinking Water Act (SDWA). The analyte list for UCMR 5 includes PFOA, PFOS and 27 other PFAS. The sampling results will therefore supplement EPA’s existing dossier of evidence regarding PFOA and PFOS contamination of the nation’s potable drinking water supply. As the ingestion pathway remains the primary, albeit not the only, concern with respect to PFAS exposure, the results of this ongoing monitoring may dictate where EPA and states focus their enforcement efforts.
Additionally, since EPA issued its proposal to designate PFOA and PFOS as hazardous substances in September of 2022, the agency’s regulatory impact analysis for the rule generated significant discussion. Public comments to the proposed rule expressed concern regarding EPA’s apparent focus only on the costs inherent in the release reporting aspect of the rule. Although the final rule is supported by an updated regulatory impact analysis, it remains to be seen whether the analysis of costs and benefits associated with the “hazardous substance” designations is adequate from the standpoint of administrative procedure. This issue is likely to be litigated in federal court now that EPA has finalized the rule.
[1] See 40 CFR § 302.4
[2] See 42 U.S.C. § 9622(f)(6)(A)
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