PFAS Regulation: Business Should Plan Now for Financial Impacts

Insurers and corporations have spent the last few years attempting to determine the projected impact of PFAS regulation on future business interruption and loss projections, and an associated timeline under which to consider them.

There is no one answer for every business as to how significant and on what timeline PFAS changes under the Biden administration will be on business interests. However, one significant change businesses can plan for that will have an enormous impact is PFAS regulation under the Safe Drinking Water Act (SDWA).

Safe Drinking Water Act and PFAS

The SDWA requires the Environmental Protection Agency to publish a Contaminant Candidate List (CCL) every five years and explain why various contaminants are or are not in need of regulation. In February 2020, the EPA included two types of PFAS—PFOA and PFOS—on its CCL. The EPA must propose a maximum contaminant level (MCL) and a National Primary Drinking Water Regulation (NPDWR) within 24 months for PFOA and PFOS.

Businesses, municipalities, and states should expect the Biden administration’s EPA to accelerate this timetable and propose a MCL and NPDWR soon—likely the third quarter or fourth quarter of 2021.

Once the proposals are published, the EPA will have 18 months to publish a final MCL and NPDWR. Biden’s EPA will likely want to truncate the 18-month timeline; however, it will not do so at the risk of judicial scrutiny that may overturn the final MCL and NPDWR.

The EPA will need to ensure it spends adequate time considering public comments and that it has a sound scientific backing for the final regulations. A reasonable time frame within which the EPA could do this and by which it could issue a final MCL and NPDWR is mid-2022.

PFAS Drinking Water Laws Will Trigger Violation Notices

Thousands of companies are already permissibly discharging effluent into waterways that may ultimately feed drinking water sources. While discharges that contain some amounts of PFAS are, at the moment, permissible in many states, downstream contamination issues may lead to costly violation and cleanup notices by state arms of the EPA within the next two years.

Many states are already setting PFAS drinking water standards and companies are seeing the result to their business interests. State regulatory agencies finding elevated levels of PFAS in drinking water sources are aggressively seeking any and all potential polluters and sending violation notices to companies that may have contributed to the contamination.

The violations lead to costs for attorneys, licensed site professionals, remediation companies, and potential fines (anywhere from $25,000 to $250,000). Companies cannot assume state agencies will only look to polluters from the time of the enactment of regulations forward—to the contrary, regulatory agencies look to past polluters to contribute, as well.

Direct effluent dischargers, though, are not the only companies that need to conduct full compliance audits for PFAS issues to properly plan for near-term financial impacts.

Indirect Dischargers Also Need to Plan

Waste management companies and private site landfill owners will also be early targets for the EPA or state-level regulatory agencies. Leachate from landfills is already being tested in several states and PFAS is being found. Leachate often finds its way over time to local waterways and drinking water sources.

Companies must recognize that the EPA or state-level agencies will want the drinking water source cleaned up, as well as the site from which the contamination originates.

Due to the sheer size of landfills and the complexity of cleanup of landfill sites, remediation costs can easily be in the high six figures or seven figures. While these costs will be spread out over time (at least two years, and likely more), the financial impact can be mitigated with proper pre-planning.

Finally, even businesses with no direct link to PFAS need to follow news regarding PFAS regulations. For example, has the property on which a business sits ever had fires that required a local fire department to extinguish flames using foam (historically, a PFAS containing product)? What did the prior site owner use the site for? Did due diligence reports and tests when purchasing the property take PFAS into consideration?

Companies need to know if PFAS were a contaminant on the land where they operate. Local environmental agencies will pursue cleanup costs from businesses regardless of knowledge or intent, and regardless of whether the PFAS issues resulted from a prior business.

Our prediction is that 2021 will see federal-level PFAS regulation with respect to drinking water, with associated final rules by mid-2022. This will require states to act, as well. Both the federal and the state level regulations will impact businesses and industries of many kinds, even if their contribution to drinking water contamination issues may seem on the surface to be de minimus.

Once the Safe Drinking Water Act PFAS limits become a final regulatory limit, companies can expect to see direct impact to their business and finances by the end of 2022 or early 2023. However, proper planning now can mitigate or even eliminate the future business interruption and financial losses associated with PFAS contamination.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.