General Publications April 29, 2022

“Enviro Assessment Rule May Help Lower Buyers’ PFAS Risks,” Law360, April 29, 2022.

Extracted from Law360

On March 14, the U.S. Environmental Protection Agency issued a proposed rule[1] and a direct final rule[2] amending the all appropriate inquiries, or AAI, rule to reference the new American Society for Testing and Materials International standard E1527-21, concerning standard practice for Phase I environmental site assessments.

The new EPA rules allow for ASTM E1527-21, which took effect on Jan. 1, to satisfy the requirements for conducting AAI under the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA — also known as the Superfund law.

This change has long been sought by purchasers of property who seek to limit their liability for per- and polyfluoroalkyl substances by use of Phase I environmental site assessments. PFAS, also known as forever chemicals, have been in use for decades, are a major source of potential contamination, and are increasingly subject to regulation.

The updated ASTM E1527-21 standard for Phase I ESAs thus offers purchasers a helpful route to potentially securing protection against PFAS liability.

ASTM E1527-21 Standard

The ASTM E1527-21 standard clarifies that Phase I ESAs are not required to include emerging contaminants, such as PFAS, in their scope of work until the emerging contaminant is regulated as a federal CERCLA hazardous substance.

However, the E1527-21 standard also provides that PFAS may be added to the scope of the Phase I ESA as a nonscope consideration if requested. Nonscope considerations are concerns that may not be necessary to investigate for CERCLA liability protections, but may result in environmental risks, and therefore be relevant to the purchaser.

E1527-21 includes a footnote suggesting that PFAS and emerging contaminants be included in ESAs to obtain state liability defenses, if states define the contaminants as hazardous substances. Some state laws already regulate emerging contaminants like PFAS, which may be relevant when considering state law impacts on environmental liabilities.

More specifically, PFAS are regulated in some states under a drinking water limit, but are not yet federally regulated as a hazardous substance.

Direct and Proposed Rules Amending AAI

The EPA published the direct final rule because the agency saw it as a noncontroversial action, and anticipated no adverse comments. The proposed rule is a mirror image of the direct final rule, and the EPA stated that it would not take further action on the proposed rule if it received no adverse comment on the direct final rule.

The new rules amend the AAI rule to reference the ASTM E1527-21 standard. The rules apply to any party that seeks liability protection by following ASTM E1527-21 to comply with the AAI provision of CERCLA.

As part of the brownfield law amendments to CERCLA in 2002, the AAI rule contains requirements for establishing whether purchasers of contaminated property are eligible for liability waivers. The new direct final rule states that E1527-21 may be used for AAI by those who "are purchasing potentially contaminated properties and wish to establish a limitation on CERCLA liability in conjunction with the property purchase."[3]

Potentially affected parties include property owners and purchasers; innocent landowners; industry sectors including real estate, insurance, banking and environmental consulting; and state, local and federal governments.

Parties may continue to use the ASTM E1527-13 standard or use the ASTM E2247-16 standard to comply with the AAI rule. The direct final rule "merely allows for the option of using ASTM International's E1527-21" instead of following the specific AAI requirements.[4]

The direct final rule was set to become effective May 13, unless the EPA received adverse comments by April 13. Because the direct final rule does not explicitly replace earlier ASTM standards (ASTM E1527-13 and ASTM E2247-16), the agency has already received comments seeking revisions to the rule, and clarification of how it intends to revise the AAI process.

If the agency determines that these are adverse comments, it is expected to withdraw the direct final rule and proceed with the proposed rulemaking.

When the rule becomes effective, whether in May or after the proposed rulemaking concludes, the EPA's AAI rule amendments should allow prospective purchasers an opportunity to limit their CERCLA liability for PFAS. This is a significant move that could provide liability relief for purchasers and other potentially responsible parties at sites contaminated with PFAS.

PFAS Liability Considerations

PFAS CERCLA liability relief is critical because the EPA is expected to soon propose adding the two most-studied PFAS — perfluorooctanoic acid and perfluorooctane sulfonic acid — as hazardous substances under CERCLA.

That proposal is not expected to be finalized until 2023. But it could significantly expand the number of Superfund sites requiring cleanup, as well as lead to reopening sites where cleanup has already concluded.

In addition to CERCLA changes, the EPA is considering numerous actions to regulate PFAS, including under the Safe Drinking Water Act, the Clean Water Act and the Toxic Substances Control Act. To that end, in the fall of 2021, the agency released a PFAS strategic road map,[5] outlining its plans to address PFAS through 2024.

The EPA intends to consider the full life cycle of PFAS, look at upstream PFAS sources and prioritize protection of disadvantaged communities. Those initiatives could result in extensive liability for companies that produced PFAS, used PFAS in manufacturing processes, sent waste containing PFAS to landfills, or sent PFAS products to third parties.

The EPA's planned initiatives could also result in liability for waste management companies — even if PFAS were properly disposed of at the time.

Relatedly, the EPA is seeking funding in 2023 to increase its PFAS compliance monitoring and its investigations of PFAS releases. This likely previews where the EPA will be targeting future enforcement actions.

PFAS in Phase I ESAs

Though not mandatory, during due diligence, potential purchasers should determine whether Phase I ESAs voluntarily assess PFAS issues. Such purchasers would be well advised to request PFAS be added to the scope of Phase I ESAs as a nonscope consideration.

Making use of the updated ASTM E1527-21 standard for Phase I ESAs provides a much-needed avenue to potentially secure PFAS liability protection. This is especially true in light of the EPA's efforts to designate perfluorooctanoic acid and perfluorooctane sulfonic acid as hazardous substances under CERCLA, which will increase risks to potential purchasers, lenders and insurers.

[1] 87 Fed. Reg. 14,224.

[2] 87 Fed. Reg. 14,174.

[3] 87 Fed. Reg. 14,175.

[4] 87 Fed. Reg. 14,176.


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