3 Questions After EPA's New Water Contamination Action

As the U.S. Environmental Protection Agency studies the possibility of regulating the levels of per- and polyfluoroalkyl substances in water, states, industry and the public are jostling for influence and preparing for potential new liability concerns in M&A and real estate transactions, as well as court fights over site cleanups.

Thursday’s announcement of the EPA’s action plan for PFASs showed the agency is still in the early stages of what will likely be a long process to regulate chemicals that have been used for decades in a variety of products such as food packaging and firefighting foam. In the meantime, states will continue to regulate — or not regulate — on their own, and attorneys, businesses, and environmental and public health groups will work to adapt to the changing landscape.

EPA Acting Administrator Andrew Wheeler and Water Office chief David Ross both said Thursday they plan on setting drinking water standards for two types of PFASs — perfluorooctane sulfonate, or PFOS, and perfluorooctanoic acid, or PFOA.

They also said they are looking into designating PFOA and PFOS as hazardous substances under federal law, which could lead to required cleanups of contaminated land and developing groundwater cleanup recommendations. But they gave no timetable for when these regulatory actions might be proposed.

“There are a lot of questions out there still, so this is going to be an ongoing process,” Jeffrey Longsworth, a partner at Barnes & Thornburg said. “This is a good milestone, but it’s just one milestone in what’s going to be a multiyear process.”

Here are three questions raised by the EPA’s announcement about its PFAS action plan:

How Will States React?

The EPA has established health advisories for PFOA and PFOS, which say that adverse health effects are not expected to occur over a lifetime of exposure to the chemicals at or below 70 parts per trillion.

But that’s merely guidance and doesn’t carry the weight of regulation that’s gone through the formal rulemaking process, so some states have gone ahead and created their own regulations. Some have adopted the EPA standard, while others have set much lower standards, such as Vermont, which set a groundwater standard of 20 ppt.

Jeffrey Dintzer, a partner at Alston & Bird LLP, noted that while in California PFOA and PFOS have been listed as carcinogens under state drinking water law, no standard has yet been set.

“We are expecting that they’re going to come up with a pretty low number,” he said.

Meanwhile, other states haven’t set any standards, creating a regulatory patchwork. Dintzer said a national standard from EPA would go a long way toward providing certainty to businesses that need to plan ahead and also reassuring the public that the proper research has been done to set a safe limit.

And Tammy Helminski, a partner at Barnes & Thornburg LLP, noted states are addressing PFAS contamination in ways other than drinking water standards, such as groundwater standards and other types of guidance.

“They’re addressing it in so many different ways. It makes it difficult to even track it and to keep up with what all the states are doing let alone to communicate to people what their requirements are,” she said.

Green groups in particular will be pushing hard for a tough national standard.

“The EPA must set enforceable, science-based standards to protect communities across the country from PFAS exposure, rather than continuing to place the burden on states and local communities to clean up the mess created by industry and government inaction,” Genna Reed, the lead science and policy analyst at the Union of Concerned Scientists, said in a statement Thursday.

How Will Uncertainty Affect Regulated Entities?

While the EPA is researching PFASs, attorneys and their clients in the regulated community are trying to read the tea leaves and plan ahead. Wheeler and Ross gave a pretty good indication there will eventually be some kind of standard. That wasn’t a surprise, as the agency held a PFAS summit of sorts last year and has been inundated with requests from Republican and Democratic politicians to act.

That’s been enough to trigger some serious changes in the transactional landscape, said Alexandra Farmer, a partner at Kirkland & Ellis LLP. She said that just in the last year, she’s seen mergers and acquisitions and real estate deals fall through solely because of PFAS issues.

“Ultimately, I think that’s only going to become more prominent,” she said. “There’s going to be more scrutiny on a facility’s location, its historical use and the drinking water status of the entire community.”

Farmer also said the insurance industry has been adapting quickly, and providers are now including wholesale exclusions for PFASs in pollution policies, something she said used to be common only for asbestos and PCBs.

“And that’s just been in the last six months,” she said. “It’s not every insurer, but it is the insurers who seem to be leading the charge in this area.”

Jeffrey Longsworth, a partner at Barnes & Thornburg LLP, said there has been some effort to develop PFAS alternatives, but in many cases they haven’t proved to be feasible, particularly with regard to the firefighting foam that’s used by the military and airports to address large conflagrations.

“Whether you put a fire out in 45 seconds or 20 seconds may seem not a big deal, but for the Department of Defense, if they have a fire on an aircraft carrier with a plane with ordnance on it, the difference between 20 and 45 seconds might be significant,” he said.

What Will New Standards Mean?

Dintzer said once national standards have been established, and if some PFASs are designated as hazardous substances, it will trigger fights over cleanups. He said in California, for example, many water authorities have jurisdiction over drinking water sources that may be found to need cleanups, and then they’ll have to figure out how to pay for it, which might mean enforcement or even taking businesses to court.

“They’re not going to spend their ratepayers’ money cleaning up contamination that they didn’t put in the ground,” he said. “Who are they going to look to? They’re going to look to the people who manufacture the PFAS in the first place, use them in products, or airports, refineries or the federal government.”

A lot more information about PFASs is going to become public as the EPA goes through its regulatory process, Farmer said, and that will not only lead to new business practices, but will open the door for plaintiffs who may be looking to establish that a particular chemical has caused harm.

“That’s the link that we’re missing right now, because there is no well-established value upon which people can prove they’ve been caused a negative health impact as a result of an exposure,” she said.

And any rulemaking by the EPA will also be subject to litigation on its own, which could come from states, environmentalists or industry members. Dintzer said the EPA is clearly taking its time on the issue and seems dedicated to a thorough process, which could give greater support to whatever rules it finally promulgates.

“There’s still a lot of information that we need in terms of the human health and ecological effects,” Dintzer said.