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Impacts of ‘forever chemicals’ on real estate transactions – Reuters

March 11, 2022 – There has been much coverage of PFAS, the “forever chemicals,” in the past year. These emerging contaminants have spiked concern because of their pervasiveness in the environment and our relatively limited understanding of their impacts on human health. And while it seems there are more questions than answers surrounding PFAS as of now, the growing awareness of their detrimental impact could lead to increased environmental regulations and future liabilities for the real estate industry as these forever chemicals seem to live on in building materials and ground substances.

Therefore, it’s important for those acquiring or building real estate to understand PFAS, the changing regulatory landscape surrounding them and what proactive measures can be taken to minimize future potential regulatory burdens or litigation risks.

Per- and polyfluoroalkyl substances (PFAS or PFOAS) are a family of more than 7,000 synthetic chemical compounds that have been in use since the 1930s and whose application has significantly expanded over the past century. PFAS are highly effective surfactants, lowering the surface tension between two liquids or between a liquid and a solid. They are also extremely resistant to heat.

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PFAS are useful in a variety of applications, especially in nonstick and waterproof coatings — for example, in your favorite pan for making scrambled eggs — as well as in firefighting foam, food packaging, structural resins in building materials, umbrellas, polishes, waxes, cleaning products, and myriad other household and industrial uses.

PFAS and PFOAS with longer molecular chains tend to be the most persistent in the environment, meaning they take a long time to break down, hence the nickname “forever chemicals.” This slow degradation process poses a risk to human health, among other environmental concerns, because it provides a continuous source of exposure, which increases the opportunity for bioaccumulation — or environmental “sticking power.”

PFAS are also resistant to common remediation technologies such as chemical oxidation and bioremediation used to address other pervasive contaminants, making them expensive and difficult to remove from the environment.

The long-term risks of exposure to PFAS are not fully understood, nor have the exposure pathways been completely evaluated. Studies suggest that exposure to PFAS is associated with ulcerative colitis, thyroid disease, testicular cancer, kidney cancer, pregnancy-induced hypertension, increased cholesterol and decreases in infant birth weights. However, scientists and health experts are still evaluating the concentrations at which PFAS pose increased risks to humans and the environment.

To date, research has focused on the risks of PFAS in drinking water, but humans can also be impacted by PFAS in air, soils, groundwater, and as PFAS particles attach to surfaces, although the degree of risk associated with each of these exposure pathways is not fully understood.

The regulations on PFAS and PFOAS are shifting rapidly, and there will likely be significant regulatory developments at the state and federal level over the next two to three years. At present, the bulk of the guidance applies to drinking water, but this will likely change.

At the federal level, the Environmental Protection Agency (EPA) has taken steps to advance monitoring and regulation of PFAS in drinking water and groundwater. The EPA has issued regulations requiring the sampling and monitoring of concentrations of PFAS in the nation’s drinking water supplies.

The EPA has also initiated a rulemaking procedure that may enable the agency to label certain PFAS as “hazardous waste” under the Resource Conservation and Recovery Act (RCRA) and strengthen the EPA’s ability to require remediation of PFAS through the RCRA corrective action process. President Joe Biden’s Environmental Justice Plan has also committed to setting “enforceable limits for PFAS” in the Safe Drinking Water Act.

Further, if the EPA lists PFAS as a hazardous substance under CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act), as well as adding to the list of regulated substances under RCRA, potentially responsible parties can expect enforcement action from EPA at Superfund sites. This could increase remedial action costs and complicate cost contribution and cost recovery actions.

These initiatives have the potential to trigger significant and potentially costly remediation efforts in the future. Although the EPA has issued non-binding guidance on the suggested permissible concentrations of PFAS in drinking water, there is uncertainty around the degree of concentrations of PFAS that would be sufficient to trigger cleanup efforts, and whether these cleanups would extend to other media besides water.

States are also taking a more active role in regulating PFAS. A number of states have established guidelines on permissible concentrations of PFAS in drinking water. State environmental agencies are also reviewing and issuing guidance on PFAS as hazardous substances, meaning that high concentrations in other environmental media such as soils, groundwater, and sediments, might be sufficient to trigger state-mandated remedial actions.

Regulations for PFAS in drinking water are unlikely to have significant impacts on most privatesector standard real estate transactions. However, the developing guidance on PFAS as hazardous substances in other environmental media could result in unexpected future liabilities, particularly with respect to liabilities resulting from RCRA and CERCLA regulations and their state corollaries.

There are a few measures asset acquisition teams can take now to better evaluate and mitigate potential risks from these emerging contaminants:

•Ask your environmental consultant to add a review of PFAS to the pre-purchase Phase I investigation. The new Phase I investigation standards allow for the consideration of potential impacts from emerging contaminants, like PFAS, as “non-scope considerations.” Getting this information during due diligence will be useful in evaluating potential liabilities that might surface years after closing.

•Consider purchasing insurance to mitigate potential risks from future PFAS liability. Although standard environmental policies can be of questionable value, coverage for PFAS is still nascent, and there are some options that offer potentially valuable coverage.

•Manage prospective liability with careful attention to the representations and warranties, indemnities, and release provisions in the purchase and sale agreement and other acquisition documents. For sites with clear impacts or potential liability, consider a holdback or reimbursement agreement.

•Consult environmental counsel about potential impacts to the property from developing regulations on PFAS. Federal and state laws are shifting rapidly, and counsel can provide insight to existing and anticipated regulations that will impact the property, particularly with respect to rules that impact soils, sediments and groundwater.

•Understand whether developing PFAS regulations might be a “reopener” for a cleaned-up site. Sites that have been remediated and received regulatory closure may be subject to new regulations on PFAS and require additional remediation.

Alexandra Kleeman is a regular contributing columnist on environmental law for Reuters Legal News and Westlaw Today.

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Westlaw Today is owned by Thomson Reuters and operates independently of Reuters News.

Alexandra Kleeman is a partner at Stoel Rives LLP. Her practice focuses on transactional and litigation support on real estate and environmental matters, including disposition and acquisition of contaminated sites, redevelopment and cleanup of contaminated properties, and resolution of cleanup liability disputes. She has extensive experience with the investigation and remediation of complex contaminated sites arising under CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act) and the Model Toxics Control Act, Washington state’s environmental cleanup law, and advises potentially liable parties and stakeholders on investigation strategies, agency coordination, allocation of past and future cost liabilities, and navigating historic insurance coverage issues. She may be reached at: alexandra.kleeman@stoel.com.

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