Now Reading
New Phase I Environmental Site Assessment Standards Highlight Transactional Risk in PFAS Treatment | Latham & Watkins LLP

New Phase I Environmental Site Assessment Standards Highlight Transactional Risk in PFAS Treatment | Latham & Watkins LLP

Treatment of PFAS Under New Phase I Environmental Site Assessment Standards Highlights Transactional Risk | Latham & Watkins LLP

A revised standard emphasizes that parties must consider non-scope factors when conducting environmental assessments of transactions.

American Society for Testing and Materials’ (ASTM) Committee on Environmental Assessment, Risk Management and Corrective Action released a revised standard for Phase I Environmental Site Assessments (ESAs) recently. The ASTM E1527-21 standard has been updated. It includes specific instructions on how emerging contaminants such as per- and polyfluoroalkyl substance (PFAS) may be addressed in ESAs. Parties conducting due diligence or involved in transactions for which an ESA will likely be used to assess more than just the “all appropriate inquiry” component of a CERCLA defense should be aware of what the new standard requires for PFAS, especially as regulatory standards evolve or are adopted on a state and federal level. Parties should know that the new standard does NOT require that Phase I ESAs address PFAS. This is because EPA has yet to list the specific PFAS as a CERCLA hazardous substances.

In Appendix X6.10, ASTM E1527-21 clarifies that “hazardous substances” are limited to those compounds identified as hazardous substances under CERCLA. Emerging contaminants, therefore, are addressed as “non-scope items,” similar to asbestos, radon, lead paint, and mold. The ASTM E1527-21 standard expressly identifies PFAS as a category of emerging contaminants and explains that, “[i]In these cases, a [Phase I ESA]It is performed to fulfill both federal-state requirements, or as directed and ordered by the user. It is permissible to include analysis and/or discussion of these substances in the same manner as any other Non-Scope Consideration.” [ASTM E1527-21 at App’x X6.10 (emphasis added).] The standard then provides that “[i]f and when such emerging contaminants are defined to be a hazardous substance under CERCLA, as interpreted by EPA regulations and the courts, such substances shall be evaluated within the scope of this practice.” [Id.]

ASTM E1527-21’s treatment of PFAS, and emerging contaminants generally, highlights some important considerations for transactional diligence. Parties should consider the standard when defining the scope of work before hiring a Phase 1 consultant, and when reading a completed phase I ESA when assessing business risks and liabilities. The standard, if applied strictly, allows for PFAS and other emerging contaminants to be treated in two distinct ways — either the emerging contaminants are regulated as hazardous substances under CERCLA and should be addressed in the Phase I ESA or they are not regulated and inclusion in the Phase I ESA is optional. This dichotomy can lead to a Phase I ESA missing a significant environmental concern for a transaction. This risk is compounded with the existence of thousands PFAS that could be subjected to different regulatory standards.

FirstCERCLA does not currently regulate PFAS as hazardous substances. Therefore, a Phase 1 ESA may not address emerging contaminants or PFAS unless it is excluded from the scope. A Phase I consultant can still certify that an ASTM compliant Phase I ESA is compliant, even if there are no mitigations under applicable state law or any other business risks.

SecondOnly certain PFAS are being evaluated for listing as CERCLA dangerous substances. Federal attention has been mainly focused on perfluorooctanoic (PFOA), and perfluorooctane sulfuronic acid (PFOS). The US Environmental Protection Agency (EPA) has recently released its PFAS Strategic Roadmap. It stated its intention to designate PFOA/PFOS and other PFAS as CERCLA-hazardous substances by 2023. To complete an ASTM-compliant Phase I ESA, PFOA, PFOS and any other PFAS that are CERCLA-listed as hazardous substances, these PFAS must be addressed. However, this Phase I ESA will not address any other types PFAS, even if they are still under EPA scrutiny.

Third, though Appendix X6.10 specifically references the potential designation of PFAS as hazardous substances under state law and the possibility that a Phase I ESA may be “performed to satisfy both federal and state requirements,” designation of a PFAS as a hazardous substance under state law does not affect whether the PFAS will be addressed in the Phase I ESA. Currently, a PFAS must be identified as a nonscope item in order to be included in a Phase I ESA unless it is regulated under CERCLA as a hazardous substance.

FourthA Phase I ESA may only address certain types of PFAS a state considers to be hazardous substances. However, other PFAS might not be listed in the state. Given that PFAS is an umbrella term covering thousands of specific chemicals, only certain PFAS are or will be subject to state regulatory standards — and those standards vary significantly by state. Michigan, for example, has established maximum contaminant levels (MCLs) of 420 parts for perfluorobutane sulfonic acids, 51 ppt perfluorohexane sulfonate and 400,000 ppt perfluorohexanoic acids, 6 ppt perfluorononanoic acids, 16 ppt PFOS, 8 ppt PFOA. New York has a stricter MCL, 10 ppt, for the sum of all PFOA/PFOS concentrations.

See Also
Working in a hybrid environment? Here's how to deepen relationships between team members, leaders, community – ThePrint

Takeaways

ASTM E1527-21 clarifies the ways Phase I ESAs can address PFAS or other emerging contaminants. However, it does not require that such contaminants be addressed under Phase I ESAs unless and until EPA lists the specific PFAS in question as a CERCLA dangerous substance. Until EPA acts, even an ASTM-compliant Phase I ESA may not identify PFAS-related risks or liabilities, and it may be necessary to include them as a specific non-scope component for the consultant’s scope of work. Further, the reader or user of a Phase I ESA needs to understand the consultant’s scope of work and cannot simply equate the absence of any Recognized Environmental Conditions with the absence of concerns related to PFAS or other emerging contaminants.

There are many types of PFAS. Buyers, sellers, and lenders need to be aware of the differences in PFAS regulations from one state to another. Parties to transactions may face significant risks associated with specific types of PFAS which may not be — but perhaps for risk assessment or mitigation purposes should be — considered for a particular transaction. Parties should know what information is available about specific types of PFAS. Parties should not assume a general discussion of PFAS within a Phase 1 ESA covers all of the relevant PFAS risks.

View Comments (0)

Leave a Reply

Your email address will not be published.