EPA Designates PFOA and PFOS As CERCLA Hazardous Substances

The US Environmental Protection Agency (EPA) on April 19 released the pre-publication version of the final rule (Rule) designating perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS) as “hazardous substances” under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). This is the first time EPA has directly designated any substance as a hazardous substance under its CERCLA 102(a) authority.

The designation of PFOA and PFOS,[1] including their salts and structural isomers, as hazardous substances will have immediate and significant impacts across industries and provides EPA with new tools to wield in its efforts to collect additional data on PFAS through increased reporting and information gathering authorities under CERCLA, address and clean up PFAS contamination, and shift costs for addressing releases to private parties through CERCLA’s strict, and joint-and-several liability scheme. This rulemaking, EPA’s second final PFAS rule in as many weeks[2], falls against the backdrop of its broader whole-of-agency approach to address PFAS as set out in EPA’s October 2021 PFAS Strategic Roadmap.

As part of its justification of the new designation, EPA states that the designation of PFOA and PFOS as hazardous substances “best achieves CERCLA’s dual objectives—the timely cleanup of contaminated sites and ensuring that those responsible pay for cleanup.”[3] Specifically, the designation enables EPA to pursue its “enforcement first” policy by giving the agency the tools to seek to recover cleanup costs from potentially responsible parties (PRPs) or to require such parties to conduct the cleanup, which EPA describes as a benefit of the designation by enabling hazardous sites to be addressed more promptly, as well as consistent with the “polluter pays” principle underlying CERCLA. The new designation will also enable potentially responsible parties to seek contribution from each other for cleanup costs associated with PFOA and PFOS releases.

Direct and Indirect Impacts of CERCLA Designation

What EPA identifies as direct impacts of the new designation are limited. First, EPA’s final rule requires reporting of releases of PFOA and PFOS, the two most-studied per- and polyfluoroalkyl substances (PFAS). Specifically, any person in charge of a vessel or facility (either onshore or offshore) that identifies a release at or above the “Reportable Quantity” of one pound or more—the default statutory reportable quantity—within a 24-hour period must immediately report such releases to the federal, state, tribal, and local authorities. Once EPA has collected more data on the size of releases and the resulting risks to human health and the environment, it may consider adjusting the reportable quantities for PFOA and PFOS through a formal notice and comment rulemaking pursuant to section 102(b) of CERCLA.

In addition, federal agencies selling or transferring real property will also be required pursuant to CERCLA 120(h) to provide notice, and, in some circumstances, covenant that any necessary remedial action to address PFOA and PFOS has been taken, and any future remedial action will be taken, by the United States. The US Department of Transportation will also be required to list and regulate these two substances as hazardous materials. 

As a practical matter, what EPA identifies as “indirect” impacts will be much farther reaching, affecting a broad range of industries and operations, not just those most commonly associated with the manufacture and use of PFAS. Owners of sites with PFOA and PFOS contamination from historical use by unknown entities, for example, could be held responsible for cleanup of legacy contamination on their properties that they did not cause. In addition, PFOA and PFOS are ubiquitous in environmental media because of the use of PFAS in a large variety of industrial and consumer products and processes, and PFOA and PFOS can be expected to be found at sites with no history of manufacture or use.

Their presence would subject owners of those properties, or PRPs addressing other contamination on those properties, to CERCLA liability that would require them to clean up (or pay to clean up) this PFOA and PFOS contamination. The hazardous substance designation means that PFOA and PFOS will also need to be part of Phase I inquiries, which could lead to the identification of historical and/or background PFOA and PFOS contamination that may now need to be addressed and result in hurdles to transactions.

Questions also remain about what to do with the waste once it is removed from a contaminated site. Comments received by EPA to the proposed rule raised concerns about the availability of adequate destruction and disposal capabilities. While EPA recently issued updated interim guidance on the disposal and destruction of PFAS,[4] this new guidance does not significantly advance the issue from the prior 2020 version, leaving PRPs to choose from a limited number of imperfect options.

Enforcement Discretion and Settlement Policy

The designation was accompanied by a much-anticipated PFAS Enforcement Discretion and Settlement Policy Under CERCLA (Enforcement Policy), pursuant to which EPA explains that it “does not intend to pursue otherwise potentially responsible parties where equitable factors do not support seeking response actions or costs under CERCLA,” including entities falling within five specifically enumerated categories:

• Community water systems and publicly owned treatment works (POTWs)
• Municipal separate storm sewer systems (MS4s)
• Publicly owned/operated municipal solid waste landfills
• Publicly owned airports and local fire departments
• Farms where biosolids are applied to the land[5]

EPA also leaves the door open to extend enforcement discretion under the policy to additional parties outside the enumerated categories, based on specific equitable factors set forth in Section IV.B of the Enforcement Policy—including whether the entity is or works for state, local, and tribal governments; whether the entity performs a public service role similar to the enumerated entities; whether the entity manufactured PFAS or used PFAS as part of an industrial process; and whether, and to what degree, the entity is actively involved in the use, storage, treatment, transport, or disposal of PFAS.

In an apparent effort to address concerns about potential cost recovery and contribution claims by third parties (who are not governed by EPA’s Enforcement Policy), EPA also explains that “in CERCLA settlements with major PRPs, EPA will seek to require those settling parties to waive their rights to sue parties that satisfy the equitable factors.”[6] Separate settlements between EPA and entities that meet EPA’s equitable factors will also provide those entities with contribution protection against third-party claims. Absent a settlement that provides contribution protection, however, EPA’s enforcement discretion will not protect such parties from third-party claims.

EPA also emphasized both in the Rule and in the Enforcement Policy that its enforcement focus will be on holding PRPs that “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”[7] (emphasis added). What constitutes a “significant” contribution remains to be seen, although responsible parties at sites where PFOA / PFOS contamination is found that neither manufactured nor used PFAS may be able to argue they were not a significant contributor. EPA’s Enforcement Policy does not address the inequity of providing enforcement discretion to parties that would otherwise be subject to CERCLA liability to the other parties that would then be required to cover that liability. In addition, the Enforcement Policy is not a regulation, and is vulnerable to modification in the future. 

‘Totality of the Circumstances’

Costs associated with the proposed rule were a focus for critics of designation of PFOA and PFOS as hazardous substances under CERCLA. In both the proposed rule and the Rule, EPA asserts that consideration of cost is not required in order to designate PFOA and PFOS as hazardous substances under CERCLA. The Office of Management and Budget designated the proposed rule as “economically significant,” however, which meant it was expected to have more than $100 million in economic impacts.

This designation required EPA to conduct a regulatory impact analysis (RIA)—including consideration of the Rule’s potential costs (both direct and indirect) and benefits. Direct costs include costs tied to reporting requirements; indirect costs include costs associated with cleanup (among other things). EPA ultimately sidestepped the issue by concluding that designation was supported “either by examining the health- and environmental-based criteria alone [i.e., with no consideration of cost] or by examining these criteria along with the broader totality of the circumstances [where benefits outweigh costs].”

EPA defends its designation of PFOA and PFOS as hazardous substances by pointing to evidence that those compounds may present a substantial danger to human health or welfare or the environment. Specifically, EPA points to the persistence of PFOA and PFOS in the environment, which can result in long-term exposure, as well as the mobility of those chemicals, which can lead to widespread impacts. EPA also cites the epidemiological and animal toxicological studies relied upon by EPA both for its recently finalized National Primary Drinking Water Regulation for six PFAS (including PFOA and PFOS), as well as in its 2022 proposed rule under CERCLA.[8]

EPA also considered both qualitative and quantitative costs associated with the Rule, and concluded that it did not expect a substantial increase in new sites being added to the National Priorities List (NPL) or a significant increase in cleanup costs as a result of the designation. While EPA acknowledges that “designation will result in new litigation regarding PFOA and PFOS releases for responsible parties,” it concludes that “designation should not result in unusual CERCLA liability or litigation outcomes for parties who did not significantly contribute to the contamination as a result of this designation, and, therefore, the potential for litigation should not be a barrier to designation.”[9]

These conclusions may be optimistic given the ubiquity of PFOA and PFOS in the environment, CERCLA’s strict liability scheme, the recently finalized regulation under the Safe Drinking Water Act, and EPA’s recognition that its estimates were limited by the fact that “every site is unique and the extent of action necessary to mitigate risks depends on many factors, which leads to uncertainties regarding response activities and associated costs.”[10] In reality, the Rule will almost certainly result in the addition of new sites to the NPL, complicate ongoing cleanups at many current sites, and potentially lead to the re-opener of the remedy at sites subject to five-year reviews to address these two PFAS. 

Challenges

This new rule is the first time EPA has directly designated any substance as a hazardous substance under its CERCLA 102(a) authority, making it vulnerable to scrutiny. Historically, substances have been added to CERCLA’s list of hazardous substances through their designation in other statutes identified in CERCLA Section 101(14) (such as by designation as a Hazardous Waste under RCRA Section 3001 or a Hazardous Air Pollutant under Section 112 of the Clean Air Act). Presumably in recognition of the unprecedented nature of this new rule, EPA provided lengthy justifications for the first-time direct listing of a hazardous chemical both in the proposed rule and the Rule.

In addition to considering whether PFOA and PFOS “may present a substantial danger to public health welfare or the environment” within the meaning of section 102(a), EPA also states that it “weighed the advantages and disadvantages of designation, including quantitative and qualitative benefits and costs.”[11] Ultimately, however, EPA acknowledges that this designation required an exercise of discretion on the agency’s part.

It can be expected that the Rule will face legal challenges, as well as continued pressure for legislation that carves out certain sectors, thereby narrowing the universe of potentially responsible parties. Also of note, EPA’s designations of each of PFOA and PFOS are expressly “independent, and severable from the others,” likely in anticipation of potential challenges to one or both of the new designations. 

The designation will become final 60 days from the date of publication of the rule in the Federal Register.