December 2020 - EnviroForensics | Environmental Engineering, Consulting & Remediation

Emerging Contaminant Update: PFAS Regulations Start to Develop at State Level

Posted on December 16, 2020March 20, 2023 by Alex Miller

INSIGHTS FROM THE WISCONSIN DEPARTMENT OF NATURAL RESOURCES’ EARLY REGULATION EFFORTS OF THE EMERGING CONTAMINANT AND THE IMPLICATIONS FOR DRYCLEANERS

BY: JEFF CARNAHAN

It’s time for an update on PFAS. In the January 2020 edition of the Cleaner & Launderer, I discussed an emerging contaminant group called fluorosurfactants, otherwise known as perflouoroalkyl substances or PFAS, in the article subtitled “PFAS is New Bad Guy in Town.” As a refresher, PFAS are a wide group of engineered chemicals originally created to lower the surface tension of water. This led to their use in commercially available water-proofing chemicals, which some dry cleaners used as a part of their service to customers. Additionally, retail versions of the waterproofing products became available to consumers. Environmental regulators hypothesize that during the commercial cleaning process, some of the PFAS from waterproofed garments and materials enter the waste solvent solution. As such, they postulate that anywhere an environmental release of drycleaning solvent to the subsurface has happened, the presence of PFAS is also possible because materials treated with related products may have been cleaned at the facility. Further, the drycleaning operations that actually performed waterproofing or leather treating are more suspect of potentially having contamination directly from garment treatment spills. I recommend rereading the January 2020 article, because I also presented the state of regulations at that time, and especially how they were impacting dry cleaners.

Read “Emerging Contaminant Alert for Dry Cleaners: PFAS is the New Bad Guy in Town!”

DEVELOPING PFAS REGULATION AT THE STATE LEVEL: WISCONSIN
I sat down with Rob Hoverman, EnviroForensics Northern Midwest Regional Director located in our Wisconsin office, to talk about how the State of Wisconsin is currently addressing the potential for PFAS to be associated with environmental releases of Perc and other solvents at drycleaner sites. Rob is one of our subject matter experts on PFAS issues and is currently embroiled in this issue on behalf of our Wisconsin drycleaner clients. Wisconsin is one of the states on the leading edge of PFAS regulations, and they don’t seem to be excluding anyone from the regulation process. We’re looking at this from merely a reporting standpoint, so that we can keep you informed as the PFAS regulation process develops across the country.

ESTABLISHING PFAS SCREENING LEVELS
For a chemical to be regulated, there needs to be an established concentration that provides a threshold by which to evaluate its release to the environment. These are commonly called screening levels. If the contaminant of concern is present at a concentration less than the screening level, then there likely is no need for cleanup action to be taken. If the contaminant is present at a concentration greater than the screening level, then the release needs to be addressed. The way this typically works is that the federal United States Environmental Protection Agency (U.S. EPA) creates a draft screening level based upon developing human-health based exposure studies. Once finalized, the Regional U.S. EPA offices, and subsequently, individual States use those screening levels to propose and adopt their own screening levels that are at least as stringent as the federal screening levels.

With federal screening levels still in draft form (and likely to be as such for many years), can state screening levels for PFAS be enforced? Without federal oversight and a uniform approach, the varying regulatory programs indicate the necessity to define risk, balance costs, and determine predictable remedial outcomes. This scenario is very similar to the conundrum we faced with vapor intrusion regulations ten years ago. Lack of finality at the federal level forces the states to move on their own accord using the methods they feel make the most sense. When emerging contaminants, or exposure pathways in the case of vapor intrusion, first come to light, the regulators may have a tendency to be more conservative out of an abundance of caution. I think we may be seeing some of this now with PFAS.

COMPLICATIONS FROM EARLY REGULATORY GUIDANCE ON PFAS
1. PFAS screening levels haven’t been finalized
In our case study of Wisconsin, the Wisconsin Department of Natural Resources (WDNR) asserts authority as defined by state statute to require the development of site-specific cleanup standards by a responsible party (e.g. the drycleaner). This, in effect, creates a situation where the state regulator serves its primary objective to protect human health and the environment from this emerging contaminant (i.e. PFAS) by demanding that sites with known releases of other contaminants assess potential use, potential release whether a primary release or secondary release associated with contamination as described above. Ultimately the WDNR can require testing for the presence of PFAS. Then, it is up to the responsible party to establish a cleanup objective using screening levels that haven’t been finalized. It’s truly a difficult and frustrating scenario.

2. PFAS compounds are costly to sample and analyze
Partly due to its newness, sampling and analyzing for the presence of PFAS is expensive; especially as compared to the cost of sampling and analyzing for Perc. The current list of PFAS compounds is at 36 and has changed continually since regulation began. The act of collecting samples costs several hundred dollars per sample and requires a minimum of three analyzed laboratory samples, which includes one field sample and two analysis blanks, per the currently accepted U.S. EPA test method. The extra quality assurance samples, like the blanks, are necessary because PFAS in groundwater have been found to be so ever-present in the environment and the extremely common nature of PFAS in clothing, personal care goods, common commercial and household goods, and food containers.

3. Drycleaners face possibility of denial of regulatory closure without PFAS assessment
According to Rob Hoverman, one of the most troublesome developments from the WDNR has been an actual denial of a regulatory closure request due to having not sampled for PFAS in groundwater at the site after reaching the remedial objectives for a release of Perc. We have some drycleaner clients who are in no hurry to receive such denials, so they’re postponing their closure request altogether until the PFAS regulatory scenario develops further. Not an ideal situation for the regulated community or the regulators.

POSSIBLE GOOD NEWS FOR DRYCLEANERS WORRIED ABOUT PFAS
There may be some reasonable news here, in that what the WDNR is asking for is an assessment of the potential for there to have been a release of PFAS along with any other release from a drycleaner operation. If we want to focus on waterproofing products as the primary source of potential PFAS problems, then a concise explanation of the operational history of a drycleaning business over the years is step one. Making a demonstration that waterproofing was not performed at the location may be sufficient to serve as that assessment. If waterproofing and other treatment services were offered, then the assessment will likely need to consist of sampling. WDNR representatives recently suggested that the current line of thinking as to the occurrence of PFAS at sites with Perc releases to the environment is correlated to mishandling of still bottoms or used filters. The logic is that since PFAS compounds are not volatile, the distillation and filtering process would have concentrated and PFAS that came from garments treated with waterproofing products within the still bottoms. As such, there could also be a reasonable argument to be made against actual sampling during a PFAS assessment if the subsurface Perc data indicates that the release originated from some source other than still bottoms.

KEEPING OUR EYES ON THE PFAS REGULATORY BEAT
As the regulation of PFAS continues to coalesce over the coming months and year, I’ll provide periodic updates in this article. Stay tuned to the Environmental Corner in 2021 for up-to-date reports on how State regulators are reacting to this important issue for dry cleaners.

As seen in Cleaner & Launderer

Jeff Carnahan, President
Jeff Carnahan, LPG, has 20+ years of environmental consulting and remediation experience. His technical expertise focuses on the investigation and interpretation of subsurface releases of hazardous substances for the purpose of evaluating and controlling the risk and cost implications. He has been a partner of the drycleaning industry for the past decade and is a frequent contributor to the national drycleaning publication Cleaner & Launderer. He is an industry leader in understanding that environmental risk includes not only cleanup costs, but also known and unknown third-party liability.

Why Phase I Environmental Site Assessments are Important for Buying or Selling a Drycleaner

Posted on December 14, 2020March 20, 2023 by Alex Miller

GET A BETTER UNDERSTANDING OF THE ENVIRONMENTAL DUE DILIGENCE PROCESS AS IT RELATES SPECIFICALLY TO BUYING OR SELLING A DRYCLEANER

BY: DRU CARLISLE

The sale of a commercial property oftentimes requires a Phase I Environmental Site Assessment (ESA) in order to account for potential liability that may be taken on by the buyer and lender during the transaction. This process is extremely important in buying or selling a drycleaning property due to the historical likelihood of contamination. And, for many drycleaners the prospect of contamination being discovered during due diligence puts artificial restraints on plans of selling their property or passing it down to the next generation.

In this blog post, we will address when you’ll need environmental due diligence, what to expect during a Phase I Environmental Site Assessment and what might determine the need for a Phase II, how to use the results of a Phase I and Phase II in a real estate transaction, and how to use old insurance policies to offset the cost of environmental liability.

WHEN YOU NEED ENVIRONMENTAL DUE DILIGENCE
There are several reasons for a Phase I Environmental Site Assessment to take place such as if you or someone near you is:

Buying or selling a property;
Refinancing a loan;
Having road work done;
Has received a letter from a Regulatory agency; or
One of your neighbors is conducting a Phase I ESA

WHAT TO EXPECT DURING A PHASE I
A Phase I ESA is a study conducted on a property by a Qualified Environmental Professional (EP) to evaluate the likelihood of environmental contamination, which must follow the American Society for Testing and Materials Engineers (ASTM). When performed correctly, a Phase I ESA will satisfy the All-Appropriate Inquiry (AAI) requirement, which was established by the U.S. EPA to allow buyers of property to avoid taking on environmental liability accidentally. In other words, if you look at a property and actually try to find contamination and you don’t, then you can buy the property and not be responsible for a previous owner’s issue if discovered later.

Phase I Environmental Assessment process in five steps — The Phase I ESA process in 5 steps: 1. Review client questionnaire; 2. Review history to determine past use and regulatory records for site and surrounding properties; 3. Site walk and reconnaissance; 4. Interviews with site contacts and local agencies; 5. Submit report to client. Learn more about the Phase I ESA 5 step process.

WHAT HAPPENS IF RECs ARE IDENTIFIED?
If a Recognized Environmental Condition (REC) is identified, the All-Appropriate Inquiry (AAI) process mandates that a Phase II ESA be performed, which includes actual sample collection in the areas of concern. Keeping in mind that to qualify for the liability exemption, you actually have to try and find the contamination. During a Phase II, the EP investigates those areas where they believe there could be a problem and collect soil, groundwater, and/or vapor samples for laboratory analysis. They will most likely only look for the chemicals that they have cause to be concerned about. If the property is a dry cleaner, this usually means that they will need to make a hole in the floor next to current and past drycleaning machines. Other common locations are out the back door, near the current and past dumpster locations, and along the sanitary sewer corridor. If these all come back clean, you can again feel pretty good about things.

WHY ARE ENVIRONMENTAL SITE ASSESSMENTS VALUABLE?
The All Appropriate Inquiry (AAI) is defined and recognized by ASTM and EPA through the federal Superfund Law CERCLA. Essentially, it refers to the method of assessing the environmental conditions in association with a property, as well as liability for potential contamination.

If the buyer is using a bank loan to finance the deal, the bank will require a Phase I ESA so that the property can be used as collateral. They want to make sure that they don’t accidentally acquire a contaminated property if the buyer defaults on the loan. For that reason, any time an owner refinances a loan where the property is already used as collateral, the bank will require a fresh Phase I ESA.

By having the coveted AAI, it means buyers will be confident proceeding in the real estate transaction. If buying or selling, make sure that your environmental consultant knows exactly what they are doing and exactly how to use the ASTM standard to help you avoid liability.

ITEMS WITHIN PHASE I/II ESAs THAT CAN BE NEGOTIATED THROUGH LEGAL COUNSEL DURING A REAL ESTATE TRANSACTION
The first thing to understand about how to use the Phase I ESA in the buying and selling of a drycleaner is the levels of risk and liability that can be up for negotiating during the real estate transaction. The first level of risk is Operator Liability. Operator Liability is related to the managed use of drycleaning chemicals and their proper disposal. The second level of risk is Owner Liability. Property owners can be held liable for contamination even if they weren’t responsible for a spill. This is why an operator who rents their property may have additional environmental conditions in their leasing agreement that need to be met. All of this, of course can be discussed during the negotiation of the contract purchase and sale agreement.

A common variable in real estate transactions is the involvement of a third party bank or lender. The lender will typically have their own environmental requirements relating to the condition of the property. In many instances, the lender may require that certain steps be taken by the buyer on the property to address environmental problems. And, oftentimes, the bank or lender will bring their own environmental consultant in to do their due diligence. From the buyer’s perspective, it’s very important to coordinate these efforts so there isn’t any confusion or duplication of work between the consultants. Some legal counsel will even recommend using the same consultant for both the buyer and the lender, to avoid the duplication issue.

It’s important to be mindful of the various state requirements. A drycleaner will want to make sure their due diligence efforts address both state and federal regulations. For instance, some states will require a buyer to report an environmental impact discovered during due diligence, other states don’t have that requirement because the buyer isn’t technically an owner or operator yet. Some states place restrictions on the type of consultants that are allowed on a property during the sales process. A good rule of thumb is to have legal counsel look into both state and federal requirements and communicate those requirements to the environmental consultant to increase the likelihood of satisfying the AAI requirement.

HOW TO USE OLD INSURANCE TO OFFSET ENVIRONMENTAL COSTS
If there are environmental impacts found during the due diligence process, finding old insurance coverage through insurance archeology can be one way to prevent a deal from falling through. Old policies, or even just evidence of insurance coverage can provide a defense against a claim or suit. In some states, that can be either a letter from the regulatory agency or a neighboring property owner demanding a response to the identified environmental contamination.

Once a Commercial General Liability (CGL) policy is triggered, it can be used to cover legal fees, defense against claims, site investigation, remediation/cleanup, interim remedial measures, building a legal case, potentially responsible parties (PRP) search, interfacing with agencies, and cost recovery for prior remediation measures.

Learn more about Commercial General Liability policies and how they can be used to pay for environmental cleanup

NEXT STEPS FOR DRYCLEANERS PLANNING ON BUYING OR SELLING

Now that some of the Phase I Environmental Site Assessment process has been demystified, and you’re ready to kick off a real estate transaction, we recommend following these four steps:

1. Look into insurance archeology to locate your old coverage
If you’ve sat in on any of our webinars or presentations, you’ve probably heard us preach that looking into your old insurance policies should be the first thing you do. Period. Finding out how much money you have available to you from a source other than your own bank account will help lay the groundwork for how to address contamination should it be found at your site.

2. Find an environmental consultant that has experience with drycleaners
It’s important when choosing an environmental consultant to make sure that the consultant you choose to work with has extensive experience with investigating and remediating chlorinated solvent contamination. Truly understanding historic drycleaning operational history as well as experience with investigating dry cleaner sites is needed to be able to locate true source areas..

3. Find an environmental attorney who understands real estate law, environmental law, and how to use insurance
It’s also important when hiring legal counsel that you look for an attorney who not only understands environmental law, but who also understands the nuances of using insurance. Every state’s case law is different in how they apply real estate laws, environmental laws and statutes, and also in how they interpret key insurance coverage points as they relate to using old insurance policies to help cover cleanup costs, and having legal counsel to help you navigate all of this will be key.

4. Carefully prepare for the transaction
It’s important to carefully prepare for your transaction – both as a buyer and as a seller – consult an attorney, consult your environmental consultant, make sure your team is coordinating, and make sure you cover all of your bases so surprises don’t derail your deal.

Watch the National Clothesline webinar “Why Phase I Environmental Site Assessments are Important for Buying or Selling a Drycleaner”

Dru Carlisle, Director of Dry Cleaner Accounts
For over 10 years, Dru has helped numerous business and property owners facing regulatory action, navigate and manage their environmental liability. Dru has vast experience in assisting dry cleaners in securing funding for their environmental cleanups through historical insurance policies. Dru is a member of numerous drycleaning associations in addition to serving on the Midwest Drycleaning and Laundry Institute (MWDLI) advisory council and on the Drycleaning & Laundry Institute Board (DLI) as an Allied Trade District Committee Member.