Proposed Rule to Designate Two PFAS Chemicals as Hazardous Substances Stands to Up the Ante for Site Remediation

On Friday, August 26, 2022, the U.S. Environmental Protection Agency (EPA) released a pre-publication notice of a long-awaited proposed rule to designate two of the most-studied per- and polyfluoroalkyl substances (PFAS)—perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS)—as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). In an accompanying statement, EPA indicated that the proposed rule will be published in the Federal Register within the next few weeks. That publication will commence a 60-day public comment period. EPA appears to be targeting final rule promulgation by Summer 2023.

The release of the pre-publication notice occurred two weeks after the White House Office of Management and Budget (OMB) completed its review of the proposed rule on August 12, 2022. The version of the proposed rule published in the Federal Register may differ from the version released last Friday, to account for the regulatory impact analysis that OMB required EPA to perform as a condition of clearing the proposed rule for publication. OMB required this impact analysis because the contemplated regulation is “economically significant,” exceeding the threshold of $100 million that triggers the regulatory impact analysis with an annual anticipated cost of $700 million to $800 million annually for potentially responsible parties.

The proposed rulemaking reflects a significant step toward EPA’s fulfillment of an item outstanding on its regulatory agenda for several years. Specifically, both the Trump Administration’s 2019 PFAS Action Plan and the Biden Administration’s 2021 PFAS Strategic Roadmap set forth, as a priority item, the designation of PFOA and PFOS as “hazardous substances” under Section 101(14) of CERCLA (42 U.S.C. § 9601(14)). The Strategic Roadmap targeted a spring 2022 deadline for the proposed rule. (2021 PFAS Strategic Roadmap, at 17.)

Impacts of PFAS Designation
Given the reach of CERCLA and its function as the principal federal statute establishing environmental remedial liability, a final “hazardous substance” designation for PFOA and PFOS could have far-reaching implications. This is all the more true in light of the widespread former applications of these two PFAS chemicals, which have been used in, among other things, protective coatings for textiles, household and industrial cleaning products, electronic components, fire-fighting foam, and non-stick cookware. The near-ubiquitous use of PFAS could mean broad CERCLA liability exposure for a broad segment of industry, including primary manufacturers, secondary manufacturers, end users, and disposal companies, including manufacturers of chemicals, paint, carpet, firefighting foam, petroleum and coal products, paper and textile mills, waste management and remediation services, and wastewater treatment plants.1 The more notable potential implications of a final hazardous substance designation include:

  • Imposing joint and several liability under CERCLA Section 107 for PFAS contamination against the four categories of potentially responsible parties (PRPs) set forth at 42 U.S.C. § 9607(a)(1)-(4). In light of the voluminous CERCLA case law, those parties include present and past owners of a contaminated property, present and—in jurisdictions that do not recognize an exception for “passive migration”—past operators of a contaminated property, arrangers, and transporters. Under the joint and several doctrine, any single PRP that contributed to the release of hazardous substances at a CERCLA site may be responsible for all the remediation costs, natural resource damages, and expenses related to health assessments, although recent years have witnessed an increasing trend of allowing CERCLA defendants to limit their liability based on a theory of divisibility. Burlington Northern & Santa Fe Railway Co., et al. v. United States, 556 U.S. 599 (2009); United States v. NCR Corp., 688 F.3d 833 (7th Cir 2012); Von Duprin LLC v. Moran Electric Service Inc. et al., No. 1:16-cv-01942-TWP-DML, 2019 WL 53572 (S.D. Ind. Feb. 11, 2019).
  • Extending the duration and costs of active CERCLA cases. Once the “hazardous substance” designation is finalized, regulators overseeing environmental investigation and remediation projects will have greater reason to require sampling for PFOA and PFOS.2 This designation can prove problematic to remedial parties, given the interim health advisory levels that EPA recently has established for these two chemicals. In the absence of specifically codified remedial targets or Safe Drinking Water Act Maximum Contaminant Levels (MCLs),3 these health advisory levels have the potential to serve as de facto cleanup limits. It is therefore significant that the current interim levels of 4 ppq for PFOA and 20 ppq for PFOS are orders of magnitude lower than the concentrations at which most other CERCLA hazardous substances, including volatile organic compounds, are regulated. Furthermore, the interim health advisory levels are lower than the method detection limits of most laboratory equipment or the capabilities of most current remedial technologies. Thus, assuming that the interim health advisory levels remain in place and/or set the standard for future MCLs or remediation targets,4 sites with identified PFOA and PFOS contamination will require extensive effort and cost to reach these near-zero levels, if attainment is even possible within a reasonable timeframe. Among other things, the potential open-endedness of PFOA and PFOS remediation could force companies to revisit—and significantly increase—their financial reserves for contaminated sites. A potential consequence may be that remedial parties increasingly pursue conditional closure, through the imposition of engineering and institutional controls. However, this approach comes with its own drawbacks, as such controls could impair property value and marketability.
  • Triggering “reopeners” in administrative orders, settlement agreements and other documents that purport to “close out” CERCLA liabilities. Many closure documents contain exceptions for previously unidentified contamination at cleanup sites. Such provisions may be invoked were PFOA and PFOS contamination to be identified. On the whole, the likelihood of triggering a reopener is greatest for settling parties at multiparty cleanup sites that are still subject to ongoing remediation (by non-settling, performing parties), due to the lack of impetus to require further sampling at a fully remediated and closed-out property. Of course, this is a generalization, and even sites that have been fully closed out may be resampled if, for example, information were to exist to suggest PFOA or PFOS impacts at adjacent property or nearby receptors emanating from the closed-out former remedial site.
  • The establishment of federal reporting requirements. Once adopted, the rule will require any person in charge of a vessel or an offshore or onshore facility to notify the National Response Center as soon as they have knowledge of any release of a reportable quantity of either of these substances. The reportable quantity for each of PFOA and PFOS is one or more pounds of PFOA or PFOS within a 24-hour period, unless an exception applies.

In addition to the above, it is important to note that CERCLA is a model for state remediation statutes, many of which incorporate the CERCLA hazardous substance list by reference. Therefore, designation of these PFAS as hazardous substances may result in cascading PFAS regulation at the state level. The expectation is that several states will list PFAS substances in their analogous laws with similar or more stringent reportable quantities, leading to an increasingly complex regulatory landscape.

Rule Promulgation
The proposed designation of PFOA and PFOS as CERCLA hazardous substances implements EPA’s earlier commitments in the PFAS Action Plan and Strategic Roadmap, and, once finalized, stands to have potential impacts to businesses operating across different industries. This important step toward finalizing the hazardous substance designation provides all the more reason for businesses to consider the value of developing strategies to evaluate their own potential nexuses to PFAS and, if possible, to mitigate PFAS-related liabilities.

Businesses interested in taking such steps may wish to conduct internal investigations or supply chain and process audits under privilege. Risk mitigation measures may be complex and multi-faceted, featuring measures such as the substitution of “green chemistry” products for those containing PFAS, the contractual allocation of PFAS-related liabilities to businesses in the supply chain, seeking/invoking third-party indemnities, and making claims under insurance policies. Identifying the insurance policies that may apply and whether coverage is available will depend on the liability faced by a particular business and the insurance purchased over time. Pillsbury practitioners are experienced at handling all the investigations and tasks identified above.

1 A list of potentially affected U.S. industrial activities and the corresponding NAICS codes is in the pre-publication notice at pages 10-12.

2 On March 14, 2022, EPA amended the Standards and Practices for All Appropriate Inquiries under CERCLA to reference the updated American Society for Testing and Material (ASTM) E1527-21 “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process.” The updated standard adds “emerging contaminants” to the list of non-scope considerations, including PFAS. Further, the Inflation Reduction Act has resurrected the Superfund excise tax on petroleum importers and manufacturers, anticipated to free up potentially more than $12 billion in 2023 for CERCLA cleanups, which could further enforcement and PFAS-contaminated sites.

3 Revising the MCLs also is contemplated in 2021 PFAS Strategic Roadmap at pages 12-13.

4 These health advisory levels are now the subject of federal litigation challenging their adoption. American Chemistry Council v. EPA, No. 22-1177 (D.C. Cir. July 29, 2022) (challenging the health advisory levels for PFOA and PFOS); The Chemours Co FC LLC v. EPA, et al., No. 22-2287 (3rd Cir. July 13, 2022) (challenging the health advisory levels for GenX chemicals).