On May 8, 2024, the U.S. Environmental Protection Agency (EPA) published in the Federal Register its final rule designating perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS) as hazardous substances under the Comprehensive Environmental Response, Compensation & Liability Act (CERCLA). The final rule, which EPA announced on April 17, 2024, and which will take effect July 8, 2024, is the first time EPA has ever invoked CERCLA Section 102 to designate a new substance as a hazardous substance via regulation. The publication of the rule starts the clock for any challenges to the rule, giving industry and other parties 90 days from publication to file any applicable legal challenges. Publication also triggers a congressional review period under the Congressional Review Act, giving Congress 60 "legislative days" to review the rule. EPA's decision to release the rule now is noteworthy in that the review period likely will expire before the general election in November and potential changes in control of the House, Senate and White House.
With respect to the new CERCLA designation, in addition to several other new reporting obligations, designation of PFOA and PFOS will trigger release-reporting requirements under CERCLA and the Emergency Planning and Community Right-to-Know Act. Facilities will be required to immediately report releases of PFOS and PFOA above a one-pound reporting threshold within a 24-hour time period as soon as they have knowledge of any such release (other than a federally permitted release). The designation also means that the Department of Transportation will regulate these substances in accordance with the Hazardous Materials Transportation Act and that disposal costs will likely increase. Further, the release of PFOA or PFOS at a facility will trigger potential CERCLA liability for those deemed responsible parties, including current owners/operators, past owners/operators at the time the release occurred, and arrangers and transporters of the hazardous substance. The designation will also bolster regulatory enforcement powers, providing regulators with enhanced authority to order cleanups and recover response costs.
In the proposed rule issued back in September 2022, EPA took the position that CERCLA does not require EPA to consider costs when deciding whether to list a substance. Industry groups argued that CERCLA and the Administrative Procedure Act require a proper analysis of the costs of the proposed designation. In the final rule, EPA appears to have side-stepped the issue by conducting a "totality of the circumstances" analysis, in which EPA claims to have "identified and weighed the advantages and disadvantages of designation relative to CERCLA's purpose alongside the formal benefit-cost analysis, including quantitative and qualitative benefits and costs." According to EPA, its analysis "confirmed EPA's conclusion that designation is warranted because the advantages of designation outweigh the disadvantages." Many believe the EPA's use of the "totality of the circumstances" analysis is an attempt to shield the rule from attacks that the agency did not properly consider the costs associated with the new rule.
While EPA's Q&As about the rule tout that the heightened enforcement powers under the new rule "ensure[] that the polluters, not taxpayers, pay for or conduct investigations and cleanup, when possible," industry groups and others have voiced concerns that the costs of cleanup will be borne by "passive receivers," such as water systems, airports, firefighting companies, farms and publicly owned treatment works. In an attempt to address these concerns, EPA has released its PFAS Enforcement Discretion and Settlement Policy, pledging to focus its CERCLA enforcement efforts on "entities who significantly contributed to the release of PFAS into the environment, including parties that manufactured PFAS or used PFAS in the manufacturing process, federal facilities, and other industrial parties." The policy states that EPA "does not intend to pursue entities where equitable factors do not support seeking response actions or costs under CERCLA, including, but not limited to, community water systems and publicly owned treatment works, 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."
Notwithstanding EPA's position, owners and operators of facilities and tenants in those facilities where a PFAS issue exists can be held strictly liable under CERCLA, and given this concern it would behoove them to consider appropriate risk mitigation strategies including insurance, indemnification, credit support for obligations surviving a closing where an issue exists and obtaining applicable representations and warranties from a seller of real estate in this regard.
Other concerns with the designation of PFOA and PFOS as hazardous substances include the likely increase in litigation at CERCLA sites across the country and complications at ongoing and previously closed cleanup sites. Given the widespread use of the substances and the miniscule levels at which these substances are being regulated, cleanups are expected to be more expensive and more time consuming than ever before. The more expensive the cleanup, the more likely responsible parties will pursue litigation over these cleanup obligations, potentially asserting divisibility defenses, instead of working cooperatively in responsible party groups to complete the cleanup. Responsible parties are also concerned about the potential costly revisions to cleanups that are underway and potential reopening of completed cleanups through the use of five-year reviews, amendments to records of decision or the authority EPA generally reserves in orders and settlements to require additional work at closed sites, leaving those in the regulated community with many questions regarding what were thought to be long-closed matters.
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