Biden Administration’s Intent to Designate PFOA and PFOS as CERCLA Hazardous Substances

On January 10, 2022, the U.S. Environmental Protection Agency took a significant step towards fulfilling a Biden Administration goal of bringing per- and polyfluoralkyl substances (“PFAS”) under the regulatory purview of the Comprehensive Environmental Response, Compensation & Liability Act (“CERCLA”) by submitting to the White House Office of Management and Budget a formal plan to designate two PFAS compounds – perfluorooctanoic acid (“PFOA”) and perfluorooctanesulfonic acid (“PFOS”) – as hazardous substances.

The EPA’s submittal of the proposed rule to the OMB comes after years of delay and several resets to its prior efforts to designate PFAS compounds as hazardous substances under CERCLA and triggers a 90-day review period. Provided the OMB does not take issue with EPA’s proposed rule, at the conclusion of the 90-day review period EPA can publish it in the Federal Register for public comment. Barring setbacks, the EPA could issue a final rule in the summer of 2023. This timeline matches what the Agency laid out in its October 2021 PFAS roadmap.[1] Once implemented, the final rule is likely to trigger a cascade of regulatory requirements including but not limited to release reporting. As the EPA noted in its Fall 2021 Statement of Regulatory Priorities, a hazardous substance designation “would require facilities across the country to report on PFOA and PFOS releases that meet or exceed the reportable quantity assigned to these substances [so as to] enable federal, state, tribal, and local authorities to collect information regarding the location and extent of releases.”[2] The final rule would also permit the EPA and other agencies to seek cost recovery or contribution for costs incurred in connection with cleanup of PFOA and PFOS contamination, as well as subject sites that are or were previously listed on the National Priorities List as Superfund sites to additional review for concerns related to PFAS contamination.

The recent action is yet another indication of the strong desire by the Biden Administration to implement an aggressive federal regulatory framework to address PFAS contamination. Time will tell whether and to what extent federal and state regulatory agencies are willing to utilize any forthcoming hazardous substance designations as a basis for re-engaging potentially responsible parties to fund and/or perform additional remedial measures at Superfund sites to address existing PFAS contamination.

PretiFlaherty attorneys Kevin Osantowski and Jeff Talbert contributed to this article.
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[1] See Office of Land and Emergency Management, PFAS Strategic Roadmap: EPA’s Commitments to Action 2021-2024, U.S. EPA, https://www.epa.gov/pfas/pfas-strategic-roadmap-epas-commitments-action-2021-2024#olem (last visited Jan. 12, 2022).

[2] See Office of Information and Regulatory Affairs, Fall 2021 Unified Agenda of Regulatory Actions: EPA Statement of Priorities, Executive Office of the President, https://www.reginfo.gov/public/do/eAgendaMain (last visited Jan. 12, 2022).

Achieving Bona Fide Prospective Purchaser Status: Yes, the Details Matter

The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund) provides a defense to liability to “bona fide prospective purchasers” (BFPPs), who, among other things, obtain Phase I Environmental Site Assessments (ESAs) that are timely (issued within 180 days prior to acquisition of the subject property) and conducted by a qualified environmental professional. Phase I ESAs that are more than 180 days old are “stale” and must be updated or they are considered expired and therefore ineffective for the purpose of establishing BFPP status. 

In Von Duprin LLC v. Moran Elec. Serv. (S.D. Ind., March 30, 2020), the federal district court for the Southern District of Indiana held that the defendants were not BFPPs with respect to two parcels, one that was acquired based on a 10-month old Phase I ESA and another that was first leased for 99 years based on a 14-month old Phase I ESA, but was subsequently acquired following a timely Phase I ESA. The court held that the second, fresh Phase I ESA did not cure the expiration of the pre-lease Phase I. 

The court also found that the stale Phase I ESA for the directly acquired parcel was deficient in any case because it did not observe all of the requirements for the CERCLA standards contained in 40 C.F.R. Parts 312.21 and 312.22. Specifically, the Phase I ESA was prepared for a related party that was not the nominal owner of the parcel in question and it did not include the required inquiries of the owner of the parcel regarding environmental conditions or the environmental professional’s certification of qualifications. 

The court entered a $510,000 award against the defendants, plus a declaratory judgment requiring them to pay 20% of all future cleanup costs. 

Lessons Learned

• Get a Phase I ESA before leasing or taking title to commercial/industrial property.
• Make sure the Phase I ESA is still fresh or get it updated.
• Check that every aspect of the Phase I ESA meets each of the CERCLA regulatory requirements. 

It is not uncommon for Phase I ESAs to be considered a low priority “check-the-box” exercise during a real estate transaction. The Von Duprin case is a cautionary tale. Details matter and ignoring them can be costly.