In 2024, the U.S. Environmental Protection Agency (“EPA”) took significant steps to regulate per- and polyfluoroalkyl substances (PFAS), commonly known as “forever chemicals.” These persistent compounds, once widely used in manufacturing, firefighting, and food packaging, were designated as hazardous under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and became subject to maximum contaminant levels (MCLs) under the Safe Drinking Water Act (SDWA).

With increased regulatory scrutiny surrounding PFAS, understanding the evolving risks and liabilities tied to these chemicals is crucial for those involved in commercial real estate. Properties with industrial, commercial, or agricultural histories are especially vulnerable to PFAS contamination, which could affect property transactions, financial exposure, and risk management. This post outlines key EPA regulations, discusses ongoing legal challenges to those regulations, and highlights important considerations for real estate professionals navigating PFAS issues.

Key EPA Actions on PFAS in 2024

• CERCLA Rule (May 2024): The EPA finalized a rule designating PFOA and PFOS, two common PFAS compounds, as hazardous substances under CERCLA. This gives the EPA authority to require investigation and cleanup at contaminated sites, potentially holding property owners liable for cleanup costs—even if they weren’t responsible for the contamination. Although the rule is currently under legal challenge, it could set a de facto standard for groundwater cleanup at federal and state Superfund sites.
• SDWA Rule (April 2024): The EPA also set enforceable MCLs for six PFAS compounds, including PFOA and PFOS, at extremely low thresholds. Public water systems must comply within five years. While this rule primarily affects water systems, it could also affect properties relying on water contaminated with PFAS, potentially influencing groundwater cleanup requirements under CERCLA or equivalent state laws.

Ongoing Legal Challenges and the Trump Administration’s PFAS Policy

The EPA’s PFAS regulations are facing significant pushback. In American Water Works Association v. U.S. EPA, industry groups are challenging the EPA’s MCLs, arguing that they are technologically and economically unfeasible. Meanwhile, in Chamber of Commerce v. U.S. EPA, industry groups are challenging the designation of PFAS as hazardous under CERCLA, claiming that the EPA’s methodology was “fatally flawed” and that EPA failed to adequately consider the “enormous” costs associated with making the designations.

During his recent confirmation hearings, Lee Zeldin, President Trump’s nominee to lead EPA, was asked how he plans to address PFAS using the agency’s existing authorities. Zeldin mentioned that during his time in Congress, he served on a task force concerning PFAS regulation and voted in support of legislation that would have required EPA to actions under CERCLA and the SDWA similar to those implemented by the Biden Administration. This indicates that a complete reversal of the current rules is unlikely.

Implications for Real Estate Professionals

As PFAS contamination becomes a central environmental concern, CRE professionals need to incorporate PFAS risks into due diligence and risk management processes. PFAS contamination can result in substantial cleanup costs, even for property owners not directly responsible for the contamination. CRE professionals should consider the following when evaluating PFAS risk:

• Phase I Environmental Site Assessments (ESAs): PFAS contamination is increasingly flagged during Phase I ESAs. Properties with industrial or commercial histories, particularly those in high-risk areas, are more likely to identify PFAS as a recognized environmental condition (REC).
• Phase II Investigations: If Phase I ESAs flag PFAS concerns, Phase II investigations may be needed. These investigations are more invasive and often more expensive due to the specialized testing required.
• Reopening Closed Sites: In some cases, regulators could revisit sites previously closed after remediation if PFAS is discovered. Property owners could be held liable for further cleanup costs, even if the contamination was missed initially.

Addressing PFAS-Impacted Sites

Remediating PFAS contamination is both challenging and costly. Traditional methods like “dig and haul” and “pump and treat” are time-consuming and expensive. However, new technologies, such as thermal treatment and supercritical water oxidation, offer promising solutions that could be more cost-effective. The costs associated with remediation will vary depending on the chosen strategy and the evolving regulatory landscape.

While the EPA is currently focusing on only a few PFAS compounds, thousands of other PFAS chemicals could be subject to future regulation. At the state level, regulations are expected to become more stringent, further complicating the legal environment for real estate professionals. These regulatory changes could impact property values, development timelines, and investment strategies.

Given the complexities surrounding PFAS, it’s essential to work with environmental consultants, attorneys, and insurance brokers specializing in PFAS. These experts can help navigate regulatory changes, assess risks, and develop strategies to manage potential liabilities effectively.

Conclusion

As the EPA reshapes its regulatory framework for PFAS, staying informed and proactive is critical for anyone involved in commercial real estate. Understanding the legal, environmental, and financial implications of PFAS contamination is key to minimizing risk and succeeding in an increasingly complex real estate market. Whether conducting due diligence, managing existing properties, or addressing contamination concerns, navigating these new rules effectively is key to protecting assets and opening new opportunities.