Commercial Real Estate Alert: New Jersey’s New PFAS Soil Standards Shake Up Cleanups & Closings | Cole Schotz

The New Jersey Department of Environmental Protection (NJDEP) kicked off the week with publishing the long-anticipated, immediately effective Interim Soil Remediation Standards for four kinds of PFAS chemicals. The following Q&A provides preliminary guidance on whether this might affect you and some helpful background information.

What does this mean for a New Jersey property undergoing remediation and/or subject to an open ISRA case?

As of October 17, 2022, any property in New Jersey that is undergoing remediation and/or subject to an open Industrial Site Remediation Act (ISRA) case and where sampling has uncovered any of the regulated PFAS chemicals (ie., PFOA, PFOS, PFNA, and GenX) above their new applicable standard will have to remediate in accordance with the NJDEP Technical Regulations.

For each of those properties, we expect that the Licensed Site Remediation Professional (LSRP) of record will need to evaluate the likelihood of whether any of these four PFAS chemicals could be present in the soil and/or soil leachate. That evaluation may result in the determination that a new soil investigation is now warranted, which could lead to a new soil remediation case. This is especially possible for any property with an ongoing PFAS groundwater case (NJDEP established groundwater remediation standards for PFNA, PFOS, and PFOA a few years ago, but not GenX).

How do I know if there might be PFAS at the property? Do I have to sample?

This can get tricky because there are a lot of potential sources of PFAS. There are a few reasons for this. First, these manmade chemicals are heavily engineered to have several unique properties that make them very attractive for use in many industries, manufacturing processes, and consumer products. This means they have been in use on a global scale since the 1940s and 1950s. Second, PFAS chemicals don’t naturally break down in the environment and are highly mobile, which means they are found practically everywhere. Even Antarctica. And especially New Jersey.

This means it can be easy for an LSRP or a buyer, lender, or insurer to find a reason to sample. If the property has a history of any of the potential sources or uses in the chart below and there is a potential pathway to soil and/or groundwater, PFAS sampling may be warranted. This list is not exhaustive, but it is a good starting point. It is also not conclusive. A close analysis of the facts is needed to evaluate each property’s PFAS risk profile.

At the end of the day, if you have an ongoing remediation and/or are under ISRA review, your LSRP will have to take the facts through the NJDEP site investigation regulations and guidance to evaluate whether sampling is necessary. Your environmental attorney should be involved at each step of this analysis.

How about environmental diligence? And my exit strategy in a few years?

First and foremost, prospective purchasers and their professionals should ensure that the scope of both their Phase I Environmental Site Assessment and their Preliminary Assessment (i.e., New Jersey’s version of a Phase I) include an evaluation of the potential for groundwater and soil impacts for PFNA, PFOA, PFOS, and GenX.

The decision of whether to conduct diligence sampling is driven by multiple factors and should be carefully considered with the guidance of an environmental consultant and environmental attorney knowledgeable about the nuances of each property’s unique PFAS risk profile in the context of the transaction under review, the business case for the deal, and the exit strategy for the property.

Properties with ongoing remediation and/or under ISRA review will of course involve a close look at PFAS, but also keep in mind questions that your lender, tenant, insurer, and future buyer may ask, especially after federal regulations become effective as early as 2023. Diligence for construction or redevelopment projects involving offsite disposal of soils or groundwater should also take into consideration additional disposal costs and liability risks.

I think this might affect my deal, property, cleanup, and/or ISRA case. What are the next steps?

In most cases, the best next step is a call with your LSRP or environmental consultant, as well as your environmental attorney to evaluate your options. Given the widespread historical and current uses of many PFAS chemicals, especially these four, it is easy to be overly cautious.

The number one rule here is to deal with the actual facts for the specific property – your professionals should be looking closely at the unique PFAS risk profile and thinking strategically about how to meet your business goals. For example, just because there was a fire at the property doesn’t mean fire-fighting foam containing PFAS was used. It is entirely possible that the fire was extinguished with good old-fashioned water. Another example is metal plating, which is generally considered high risk for PFAS use, but not all plating operations are the same and many don’t use PFAS.

On the insurance front, while many carriers are increasingly insisting on excluding PFAS from coverage, the market is in flux and an insurance broker that specializes in environmental policies can be a valuable member of the risk management team. Additionally, many existing policies do not have the PFAS exclusions and could help buttress the overall risk mitigation package.

How do I be PFAS smart?

PFAS liability is a serious issue that is not specific to New Jersey and is not going away. In addition to the patchwork of regulations in many other states, the U.S. Environmental Protection Agency is steadily pursuing federal regulations slated to become effective as early as 2023. There are a lot of moving pieces, with both legal and technological developments day to day, and the market is responding and evolving in kind.

In this brave new world, being PFAS smart essentially boils down to staying focused on the facts and the goals and creatively using the tools already available to the commercial real estate industry.

By the way, what is PFAS?

PFAS is short for “per- and polyfluoroalkyl substances” and is an umbrella terms that refers to a class of thousands of manmade chemicals that have several unique properties that make them especially attractive to use in many industries and consumer products. Think Teflon, Scotchguard and Goretex.

PFAS are found throughout the global environment and in the blood of nearly 99% of the U.S. population. They are nicknamed “Forever Chemicals” because they don’t naturally break down in the environment, which makes them very difficult and expensive to remove and remediate.

PFAS have been used on a global scale since the 1940s and 1950s and largely escaped any environmental regulation until certain toxicity studies became public through litigation in the late 1990s and early 2000s. There are no enforceable federal remediation standards for any PFAS chemicals today, but the U.S. Environmental Protection Agency is steadily pursuing regulations that are expected to become effective as early as 2023.

What is GenX?

Previously thought to be safer than other PFAS, GenX was used as a substitute for PFOA after manufacturers voluntarily phased out production of PFOA and PFOS in the early- to mid-2000s. However, subsequent toxicity assessments, including those conducted by the U.S. Environmental Protection Agency (see U.S. EPA, Drinking Water Health Advisory for GenX Chemicals, June 2022), have found that GenX can be more toxic than PFOA. Given that GenX is used in many industries including medical, automotive, electronics, aerospace, energy, telecommunications, chemical processing, and semiconductor, it is largely expected to be as ubiquitous in the environment as PFOA and other PFAS chemicals.

Why is it notable that GenX now has a remediation standard?

While NJDEP established groundwater remediation standards for PFOA, PFOS, and PFNA a few years ago, this is the first time NJDEP is regulating GenX. This means that, for the most part, no prior environmental audits, investigations, or remediations would have looked for, let alone addressed, potential impacts from GenX. The new remediation standard makes GenX the ultimate x-factor in the commercial real estate world.

PFAS Interim Soil Remediation Standards

A very special thanks to the invaluable contributions from Inga Caldwell and Erin Palmer for this piece.