On April 19, 2024, the U.S Environmental Protection Agency (EPA) announced they will designate two per-and polyfluoroalkyl substances (PFAS) as hazardous substances in their final rule publication. Perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS), are being designated as hazardous substances under the under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) in an effort to protect people from the health risks.  PFAS, commonly referred to as “Forever Chemicals,” are harmful to human health, welfare and environment.

Much of the initial burden will be on municipalities and water suppliers / purveyors to sample for PFAS/PFOA compounds and report to their consumers the concentrations present in the water supply.  It is widely believed the EPA will pursue a policy of, “No detectable concentrations allowed” in drinking water.  Following sampling, these municipalities will then be required to treat their water supplies to achieve the federal mandated allowable concentration.  Following the burden on municipalities and water purveyors, the search will be on to identify sources of the compounds in drinking water.  It is expected numerous industrial property owners and businesses will be involved in this source identification similar to what we have seen with various other drinking water contaminants such as volatiles, PCBs, lead, and most recently, 1,4-Dioxane and fuel oxygenates.

Effects on Commercial Real Estate

These designations will have significant impacts on commercial real estate transactions during the environmental due diligence process. PFAs were previously outside the scope of a Phase I Environmental Site Assessment (ESA).  With these changes, PFOA and PFOS are now on the same level as other hazardous substances. Properties will now be scrutinized for potential PFAS release, and subsequently increased liability for property owners.

This also means previously reviewed properties will effectively require new evaluations for PFAS when they are undergoing new transactions. PFAS assessments during the Phase I and potentially Phase II investigations and could be identified as new Recognized Environmental Conditions (RECs).

This will likely affect property values, potential negotiations and potential liabilities during transactions. Properties with PFAS contaminations may also require additional investigations, and environmental cleanups.

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