The Biden Administration has pledged to designate certain PFAS as hazardous substances under federal law. What effect would the United States Environmental Protection Agency’s (EPA) designation of PFOA and PFOS as “hazardous substances” under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) have on the legal landscape? As you may recall, in a previous post we discussed the regulatory processes through which EPA can designate PFOA and PFOS as “hazardous substances.” Now, in this post we discuss what a designation means for liability for responsible parties under CERCLA and relevant reporting obligations.

Responsible Party Liability

The first immediate effect occurs in the context of a responsible party’s liability to EPA and other responsible parties. Under CERCLA section 107(a) (42 U.S.C. § 9607(a)), EPA can recover costs that it incurs addressing the release of a “hazardous substance” from responsible parties. Section 107(a) of CERCLA identifies four categories of persons who are responsible for “all costs of removal or remedial action” incurred by EPA, and those terms are defined to cover the cleanup, removal, and other remedies implemented to address a release or threatened release of a “hazardous substance” into the environment. In addition, under section 113(f) of CERCLA (42 U.S.C. § 9613(f)), a responsible party can seek contribution from other parties who are also liable for the release of a “hazardous substance” under section 107(a). Thus, designation of PFOA and PFOS as hazardous substances would both create CERCLA liabilities and afford contribution remedies to responsible parties at PFAS sites.

Reporting Obligations

The second effect involves release reporting obligations. Under CERCLA section 103(a) (42 U.S.C. § 9603(a)), a person in charge of a facility must report any release of a “hazardous substance” from the facility if the quantity of that release is equal or greater than the “reportable quantity” (RQ). Section 102(b) of CERCLA (42 U.S.C. § 9602(b)) dictates an RQ of one pound for any “hazardous substance” if EPA does not promulgate a specific quantity for that substance at 40 CFR 302.4 and 302.5.

 

For the past several years, much attention has been focused on the United States Environmental Protection Agency’s (EPA) legal authority to respond to PFAS contamination. When EPA published its PFAS Action Plan in February 2019, it discussed, among other things, designating PFOS and PFOA as “hazardous substances” through one of the available statutory mechanisms under CERCLA. A year later in its February 2020 update, EPA again noted that it “continued moving forward with the regulatory process for proposing to designate PFOA and PFOS as hazardous substances under CERCLA.”

While EPA has not recently provided additional detail on the state of its progress, as we discussed in a previous post, President-Elect Biden has indicated his administration’s priority to designate PFOS and PFOA as hazardous substances. We expect that EPA is likely to focus on this process in early 2021 to lay the administrative groundwork for rulemaking.

Next Steps: CERCLA’s Regulatory Process

As highlighted above, in its PFAS action plan EPA noted its consideration of the various available statutory mechanisms through which it can make a “hazardous substance” designation. In context, EPA is referencing the defined term “hazardous substance” under CERCLA, which automatically incorporates a substance designated as such under CERCLA regulations at 40 CFR Part 302, under the Clean Water Act at 40 CFR Part 116, listed as a “hazardous waste” under the Resource Conservation and Recovery Act (RCRA) at 40 CFR Part 261, any “hazardous air pollutant” listed under the Clean Air Act at 42 USC § 7412, and any “imminent hazardous chemical substance” under the Toxic Substance Control Act at 15 USC § 2606.

Regardless of the statutory source of authority, those regulatory options are similar with respect to their administrative processes, which generally require that EPA publish its proposal to designate a “hazardous substance” for public comment in a Notice of Proposed Rulemaking, with at least a 30-day public comment period following its publication. On occasion, EPA may first solicit information from the public through publication of an “Advanced Notice of Proposed Rulemaking” before it develops a proposed regulation. In either instance, members of the public have the opportunity to comment and provide issues for EPA to consider. Following its publication of a Proposed Rulemaking, EPA considers those public comments, makes any necessary changes to its proposed regulation, and then issues and publishes its final regulation, accompanied by EPA’s response-to-comments document.

Following a final promulgation of the designation, CERCLA identifies the substance on its “List of Hazardous Substances and Reportable Quantities” at 40 CFR 302.4. The list also includes the statutory source pursuant to which the substance was designated, the associated Chemical Abstracts Service registry number (CAS number), any relevant RCRA waste number, and any relevant reportable quantity.

We will continue to monitor EPA’s progress towards these designations and other PFAS related regulatory developments as the Biden Administration’s EPA implements its agenda.

The U.S. District Court in the Western District of North Carolina recently held in Colony Insurance Co. v. Buckeye Fire Equipment Co. that an insurance company must defend personal injury claims arising from direct exposure to Aqueous Film Forming Foams (AFFF) under a Commercial General Liability (CGL) Policy despite the policy containing a “Hazardous Materials Exclusion.” That exclusion requires a discharge into the environment and, generally, may not be applied to injuries caused by something other than traditional environmental pollution.

Defendant Buckeye Fire Equipment Co. (Buckeye) has been sued in hundreds of underlying cases related to Buckeye’s manufacture of fire equipment containing AFFF, which have been consolidated into Multi-District Litigation in the United States District Court for the District of South Carolina (i.e., the AFFF Products Liability Litigation, MDL No. 2873, U.S. Dist. Ct. of S.C., or the “AFFF MDL”). Plaintiffs in the underlying cases have sued Buckeye and others for bodily injury or property damage caused by both “traditional environmental pollution” (e.g., a release into the environment) and direct contact with or exposure to AFFF. Approximately a third of the underlying cases allege harm from both direct and environmental exposure. The District Court provided a representative example of the allegations from one of the underlying cases: “During [underlying plaintiff’s] employment as a firefighter instructor, he was significantly exposed to elevated levels of PFOS and PFOA in their concentrated form as a result of regular contact with [d]efendant’s AFFF products and through PFOS and PFOA having contaminated the Fire College well system.”) (emphasis in original). Buckeye requested insurance coverage for the underlying cases alleging direct exposure. Plaintiff Colony Insurance Co. (Colony) sought a declaratory judgment that it has no duty to defend.

In its Motion for Summary Judgment, Colony alleged that it had no duty to defend any of the underlying lawsuits alleging direct or environmental exposure because the “Hazardous Materials Exclusion” excludes coverage for injuries “which would not have occurred in whole or in part but for actual, alleged, or threatened discharge, dispersal, seepage, migration, release or escape of ‘hazardous materials’ at any time.”

The District Court disagreed and held that Colony could not deny coverage to the underlying complaints that allege direct exposure because the injuries were caused by “something other than traditional environmental pollution.” Under North Carolina case law, an insurer cannot deny coverage based on a pollution exclusion if the occurrence and resulting injury are not “prototypical environmental harms” to which a pollution exclusion is generally applied. The terms “discharge,” “dispersal,” “release,” and “escape” are particular environmental terms of art in this context, and a “discharge, dispersal, release, or escape” of a pollutant must be into the environment to trigger the pollution exclusion clause and deny coverage. The Court cited to W. Am. Ins. Co. v. Tufco, 409 S.E.2d 692 (N.C. Ct. App. 1991), where it was held that “‘vapors or fumes released from the chemicals used by [the insured] during’ the insured’s routine business operations” were not discharges into the environment and thus not excluded from coverage.

Finally, it is important to note the limitation of the holding. Both parties agreed that the issue of indemnification was not ripe and the District Court limited its analysis to the issue of Colony’s duty to defend underlying cases alleging direct exposure. Buckeye also conceded that Colony has no duty to defend any of the underlying actions that allege solely environmental exposure.

In September 2020, the New Mexico Environment Department (NMED) finalized the settlement of an enforcement action against Cannon Air Force Base (CAFB), a federal facility, relating to the facility’s discharge of PFAS-containing wastewater to groundwater without a permit. According to the allegations of an administrative compliance order (ACO) issued in January 2020, CAFB had an existing groundwater discharge permit that was due for renewal, but the permit renewal application did not disclose the presence of PFAS in the facility’s discharge. Accordingly, NMED refused to administratively continue the permit without CAFB first submitting a renewal and modification application that reflected the presence of PFAS. As a result, CAFB’s groundwater discharge permit expired on March 31, 2019, and its subsequent discharges were therefore unpermitted. (It is notable that several months prior to the enforcement action, the Air Force and NMED had sued one another in federal court; the Air Force sued seeking a declaratory judgment that New Mexico’s state standard was arbitrary and capricious, while NMED alleges in its federal lawsuit that AFFF usage at the bases since approximately 1970 is the source of the PFAS found in area soils and groundwater, asserting claims under state law and RCRA.)

NMED alleged that the Air Force had failed to appropriately notify the agency of the change in the quality of CAFB’s discharge occasioned by the presence of PFAS, and also had been unlawfully discharging its wastewater without a groundwater discharge permit since April 1, 2019. It assessed a civil penalty against the Air Force totaling $1.7 million for multiple violations of state environmental regulations. After CAFB submitted a complete renewal and modification application, the State agreed to accept “an administrative fee” of about $250,000 in full resolution of the civil penalties assessed in the ACO.

This matter points to the difficulty that states around the country are having in enforcing state PFAS standards against the U.S. Department of Defense – the entity that in many states is seen as a significant potentially responsible party with respect to PFAS contamination related to AFFF usage. The Department of Defense has raised numerous defenses and objections to state enforcement and litigation efforts, from sovereign immunity to arguments based on the absence of PFAS from the list of CERCLA hazardous substances, to (as in New Mexico) challenges to the validity of state regulatory standards for PFAS. Interestingly, in the settlement with NMED the Air Force also managed to avoid admission of any of the factual allegations in the ACO or of liability. For now, the friction between state PFAS regulation and enforcement and the Department of Defense continues.

On October 13, 2020, North Carolina, acting through its Attorney General, filed suit in state court against DuPont, Chemours and related companies seeking costs to investigate, assess, remediate, restore and remedy PFAS contamination “across a broad swath of North Carolina.” The complaint alleges that the defendants contaminated the land, air, water and natural resources of North Carolina as a result of releases of GenX and other PFAS from the Fayetteville Works facility. The suit seeks damages for injuries to natural resources, property damages, economic damages, punitive damages, restitution and disgorgement. The complaint, which requests a jury trial, seeks to void the spinoff of Chemours and enjoin the transfer of assets that belonged to “Old DuPont” on the basis the “Old DuPont knew that Chemours was undercapitalized and could not satisfy the massive [PFAS] liabilities that it caused Chemours to assume.”

According to a press release from the Attorney General’s Office, in August the Attorney General announced a formal investigation into those responsible for PFAS contamination in North Carolina and this suit is the first case as a result of that ongoing investigation. In addition to the Attorney General, the complaint was filed by a number of private law firms on behalf of North Carolina. The complaint was filed one day after court approval was received on an Addendum to a Consent Order between the North Carolina Department of Environmental Quality and Chemours that requires Chemours to a take action to reduce PFAS entering the Cape Fear River through residual groundwater contamination from the Fayetteville Works facility. The suit raises a number of interesting issues including the effect of past settlements, the ability to challenge corporate reorganizations, and the Attorney General’s ability to act as a trustee of the state’s natural resources using private law firms.

In July 2020, we posted on takeback disposal options for some PFAS-containing firefighting foams, with a caveat about recent actions taken by the New York State Department of Environmental Conservation (NYDEC) to suspend incineration of AFFF that the U.S. Department of Defense (DoD) had sent to a hazardous waste facility in Cohoes, NY, pending the results of environmental sampling in the nearby community. In late August 2020, the United States Environmental Protection Agency (EPA) announced a partnership with DoD and state and local partners to identify innovative ways to destroy PFAS in AFFF. The “Innovative Ways to Destroy PFAS Challenge” may sound like the latest television reality competition show, but the aim is to support the development of non-thermal technologies to destroy PFAS. A prize of up to $50,000 is being offered for “the best design concept to safely destroy the chemical” – that is, technologies and approaches that can remove at least 99 percent of PFAS in unused AFFF, without creating any harmful byproducts. EPA says that the ideal technology that it hopes to see developed as a result of the Challenge would:

  • Perform onsite destruction of at least 99 percent of PFAS in AFFF formulations;
  • Be currently on the market or near market;
  • Destroy parent PFAS compounds;
  • Destroy short-chain PFAS byproducts if volatilization occurs;
  • Destroy or neutralize any unkdwanted byproducts that would need to be incinerated or landfilled in a hazardous waste facility;
  • Be more cost effective than thermal destruction;
  • Have good environmental and public health outcomes (e.g., does not transfer PFAS or any unwanted byproducts into other media, and does not create other toxic residues after destruction of PFAS);
  • Be potentially applicable to other PFAS waste streams (e.g., biosolids, contaminated ground water, etc.).

More information can be found at EPA’s dedicated webpage for the Challenge, including eligibility requirements and judging criteria.

States continue to develop standards, guidance and goals for PFAS. The ITRC has updated its table for PFAS in groundwater, drinking water and surface water/effluent to reflect the values in effect as of August 31, 2020. https://pfas-1.itrcweb.org/fact-sheets/. A graphic depicting the states that have set standards, guidance or goals is set forth below.

PFAS - State Survey Litigation Map

Source: ITRC PFAS Fact Sheets updated as of August 31, 2020 https://pfas-1.itrcweb.org/fact-sheets/

Highlights are as follows:

24 states have standards, guidance or goals

  • 17 states have promulgated standards
    • Alaska, California, Colorado, Indiana, Iowa, Massachusetts, Michigan, Minnesota, Montana, New Hampshire, New Jersey, New York, North Carolina, Oregon, Rhode Island, Texas and Vermont
  • 7 states have guidance or clean-up goals
    • Connecticut, Delaware, Florida, Maine, Nevada, Ohio, and Pennsylvania

9 states have standards, guidance or goals for only PFOA/PFOS

  • Alaska, California, Delaware, Florida, Iowa, Montana, New York, Pennsylvania, and Rhode Island

14 states have standards, guidance or goals for PFAS in addition to PFOA/PFOS

  • Colorado, Connecticut, Massachusetts, Michigan, Maine, Minnesota, Nevada, New Hampshire, New Jersey, North Carolina, Ohio, Oregon, Texas, and Vermont (Indiana regulates only PFBS)

Groundwater standards vary greatly

  • The PFOA drinking water standard in Michigan is 8 ppt and in North Carolina it is 2,000 ppt

The trend is to set more stringent standards – recent standards are among the lowest

  • Michigan MCLs effective August 3, 2020 are PFOA 8 ppt, PFOS 16 ppt, and PFNA 6 ppt

New York MCls effective August 26, 2020 are PFOA 10 ppt and PFOS 10 ppt

In a previous post, we noted the New Hampshire Superior Court’s issuance of a preliminary injunction enjoining the New Hampshire Department of Environmental Services (NHDES) from implementing final maximum contaminant levels (MCLs) and ambient groundwater quality (AGQS) standards for four PFAS compounds.  On July 23, 2020, Governor Chris Sununu signed into law legislation that set maximum contaminant levels for drinking water (MCLs) for the four compounds:

PFOA 12 ppt
PFOS 15 ppt
PFHxS 18 ppt
PFNA 11 ppt

In doing so, the Governor and the Legislature decided not to wait for State’s courts to resolve the appeal of the standards promulgated by NHDES.

That appeal and the preliminary injunction had turned on whether NHDES had conducted an adequate cost-benefit analysis. It appears from review of the fiscal notes associated with the legislation that the legislature considered, and acted on, the same financial information considered by NHDES, though the legislation also added funding to defray the impact.

Background

On November 26, 2019, the Superior Court of New Hampshire had issued a preliminary injunction enjoining NHDES from implementing the final rules that contained MCLs and Ambient Groundwater Standards for the four PFAS. The Court held that the appellants were likely to succeed on their claim that NHDES did not conduct an adequate cost-benefit analysis. The Court stated that the agency needed to do more than simply “consider” costs and benefits.

Following the November injunction, and likely in response to it, the New Hampshire legislature introduced HB1264 in early January 2020, which proposed to establish by statute the four new PFAS MCLs, and, among other things, to appropriate $50,000,000 to NHDES for the purpose of providing low-interest loans to community water systems and non-profit, non-transient public water systems for remediation efforts.

Notably, the fiscal note for HB1264 uses the same costs identified by NHDES in its cost-benefit analysis, which estimated treatment costs for public water systems ranging from $65 million to $142.8 and operating and maintenance (O&M) costs from $6.9 million to $13.4 million. As for “landfills, contaminated sites and groundwater discharge sites,” the fiscal note states that costs for compliance are “indeterminable,” but estimated “Corrective Action Costs” for different types of facilities such as “Active Hazardous Waste Sites” ($2.3 to $4.4 million), “Municipal Landfills” ($935k to $1.75 million) and “Groundwater Discharge Permit Sites” ($5 million). Again, these estimated “Corrective Action Costs” appear to be based on NHDES’ cost-benefit analysis, which had been found inadequate in the injunction proceedings.

Earlier this year, North Carolina’s Department of Environmental Quality proposed a new rule to the Environmental Management Commission’s Groundwater Committee to set the groundwater standards for PFOA and PFOS at a combined allowed level of 70 parts per trillion (or 0.07 parts per billion).  Currently, there are no standards for PFOS, and the interim standard for PFOA established in 2006 is 2,000 parts per trillion. As of July 2020, the EMC has not set the proposed rule for public notice and hearing.

On August 10, 2020, the N.C. Attorney General announced a formal investigation into PFAS contamination in North Carolina.  This follows NCDEQ’s complaint in 2017 against Chemours Company FC, LLC alleging violations of N.C. water quality laws arising out of the discharge of PFAS including GenX, which prompted the parties to enter a consent order in 2019.  In May 2020, over 200 residents near the Chemours factory filed a federal lawsuit alleging contamination of their property and water supplies.

It’s clear that North Carolina is eager to further regulate PFAS, but hasn’t found a solution everyone can agree on yet.