Unlocking brownfield projects with forever liabilities

The discovery of perfluoroalkyl and polyfluoroalkyl substances contamination can delay or abort development projects and leave landowners with stranded assets. “Forever liabilities” can remain with sellers and developers after planning is discharged and there are increased risks of negligence claims against professional advisers. Should underwriters stay clear of the regulatory enforcement and litigation risks, or exploit this lucrative market? Higher-risk chemicals Man-made PFAS have been widely used since the 1930s in fire-fighting foams and as water and grease repellents in consumer applications and industrial processes. PFAS chemicals have unique properties and are stable under intense heat. They are slow to degrade and have greater mobility and persistence in the environment. Originally associated with fire training grounds, legacy PFAS contamination has been identified across a wide range of land uses: chemical and manufacturing sites, textiles, leather, carpets, packaging, landfills, wastewater treatment plants and land spread with sewage sludge or biosolids. An investigation by journalists using freedom of information requests across Europe has identified more than 17,000 sites across the continent that are contaminated by PFAS, including 1,500 in the UK. Technical challenges The discovery of toxic PFAS chemicals can threaten the viability of a project. Reports submitted with planning applications often need to be revisited. An initial “clean” environmental survey is no comfort when regulators discover that PFAS has not been tested for adequately. The regulatory environment is rapidly changing. Although there is currently no widely used UK-specific guideline against which to compare results for human health assessment, we are expecting new human health interim assessment values to be published in the first quarter of 2024, which may change analysis requirements. New PFAS are constantly being discovered and highlighted as risks – mainly from breakdown of longer chain versions. This means that remediated sites, previously looked at as safe for well-known PFAS (or PFOA PFOS) may become at risk to newly identified PFAS depending on how industry and global government agencies decide to go. Forever liabilities The main liability trigger for PFAS remediation is at the time of redevelopment. Given the lack of confidence with PFAS remediation strategies, regulators will often err on the side of caution, requiring additional investigations, extra remediation and years of post-remediation monitoring. Developers also face the risk of discovering new PFAS hotspots or groundwater impacts that can further delay the project. The legal liability risks outside planning control are significant too. “Causer” liabilities can result from contractors mobilising PFAS contaminants, or even by heavy rain or groundwater flooding washing contaminants offsite. Possession of PFAS reports will create “knowing permitter” liabilities under the main environmental liability regimes. These liabilities remain with site owners and developers forever unless successfully transferred. In addition to regulatory action under planning controls and environmental laws, there are risks of civil claims against site owners responsible for the release of PFAS into the environment. Unacceptable risks? Enforcement under the Contaminated Land Regime almost ground to a halt when the Contaminated Land Capital Grants Scheme closed in 2014. This is likely to change as more PFAS sites are detected by the Environment Agency and local authorities’ and regulatory requirements change. Local authorities have a statutory duty to investigate and secure remediation when land poses “unacceptable risks” to human health or water. The contaminated land statutory guidance defines the highest category of harm to human health as “life-threatening diseases (eg cancers) and diseases likely to have serious impacts on health, serious injury, birth defects and impairment of reproductive functions”. PFAS has been linked to a range of cancers, thyroid disease, Alzheimer’s and Parkinson’s disease, immune system disorders, fertility issues and birth abnormalities. Environmental liabilities at PFAS legacy sites Site owners Buyers Sellers • Liable as class B owner when no class A persons can be found • Accounting provisions if there is a legal or contractual obligation to remediate • Liable as knowing permitter or new innocent class B owner • Take on the seller’s liabilities if site is “sold with information” • Retain causer and knowing permitter liabilities after sale • Liability bounce-back if developers mobilise contamination Developers Contractors Professional advisers • Years of additional investigations and monitoring • Likely to have enhanced legal and contractual liabilities • Aggravate existing contamination and create extra liabilities • Risk that remediation techniques will not work • Consultants fail to test for PFAS or identify likely sources • Lawyers don’t correctly use the statutory exclusion tests Navigating the environmental liability minefield Every party in a brownfield project, including professional advisers, face extra liability risks if there is identified or presumed PFAS legacy contamination. The table above shows environmental liabilities at PFAS legacy sites. Professional advice from the whole transaction team will therefore fall under the spotlight. Environmental consultants can be sued if they don’t test for PFAS or fail to identify likely PFAS sources, such as adjoining landfills. Real estate and development lawyers could breach Solicitors Regulation Authority rules if they incorrectly draft the statutory exclusion tests and agreements on liabilities or fail to obtain environmental liability advice. A key issue for professional indemnity claims is the date of “presumed” knowledge of PFAS contamination. There is likely to be presumptive PFAS contamination at sites associated with PFAS-containing waste (landfills, wastewater treatment plants, land spreading) and certain industrial sites (leather, carpets and packaging, etc). In addition, the standard of care and presumed knowledge for environmental consultants working at aviation sites and military facilities will be much higher as there have been international case studies associated with fire training grounds. Remedial solutions for sites affected by PFAS Redevelopment and remediation of PFAS-impacted sites require certainty. However, this is a challenge in the face of the emerging regulatory positions, rapid technological development and growing awareness and concern among the general public on the topic. Various specialist remediation techniques are available, both in situ pathway interruption, such as granular activated carbon, reverse osmosis and ion exchange resins and ex situ treatment approach to destruction, mainly via abstraction, excavation and incineration. A number of different techniques may be required to treat the site effectively. Individual sites need to have a bespoke remediation solution depending on the cocktail of PFAS contamination and the surrounding environment. Can you get insurance for PFAS “forever liabilities”? Where a chemical is known to be present and causing a potential liability, it is usual for an insurance programme to be built around the remedial strategy. Unfortunately, with US class action lawsuits like 3M and DuPont, many insurers are treating PFAS risks like the bubonic plague. It is currently a difficult market for PFAS, and specialist advice is required. Limits of liability, premiums and deductibles will be much higher than normal and additional steps are required to satisfy insurance concerns. Increasingly, quotes for PFAS-contaminated sites are being offered on the basis that independent legal and technical experts (outside of the brownfield project team) review the risk profile for the insurers: Third-party environmental liability assessment of sale contract provisions to clarify the liability risks for onsite and offsite PFAS and non-PFAS contamination; and PFAS technical expert review of key technical reports and remediation strategy to provide insurers with a materiality assessment. Layers of protection Despite the higher liability risks and costs, there is hope for unlocking development sites with PFAS contamination. Concerned parties should choose PFAS consultants with a proven track record and obtain an environmental liability and insurance appraisal at the outset of the transaction to reduce the likelihood of uncovering nasty surprises later on. Industry insights Treating PFAS like any other contaminant is not appropriate – nothing else is as widespread or as hazardous at inconceivably low concentrations. Stakeholders will continue to lack confidence that it can be dealt with successfully. Insurance is an appropriate method of financial provision against residual liabilities, but only when the consultant and contractor have appropriately understood the issues. – Duncan Spencer EDIA Ltd, environmental insurance broker We’re agreeing a ‘best endeavours’ approach to PFAS-impacted sites, knowing that legislation may change – so effectively getting the Environment Agency to agree at the time of analysis, our results are showing the site is free from significant PFAS based on detection limits at the current time. So longer term when laboratory limits of detection may lower and flag an issue, our client is unlikely to be forced to undertake significant remediation works. – Richard Colin, technical lead for PFAS, RSK Geoscience  Keith Davidson is a partner and an environmental liability specialist at Irwin Mitchell Image © Maureen McLean/Shutterstock