INSIGHT: Boomerang Properties—Avoiding Dark Waters Risks

In recent years, some commercial real estate properties otherwise believed to be safe from environmental issues have encountered new or unexpected compliance hurdles and liabilities.

A property can trigger new concerns because of newly discovered information, changes in use, due diligence for sale or financing, changes in regulatory standards, or enhanced methods for detecting pollutants and contamination.

A prime example is the recent emergence of very serious concerns over a large family of related chemical compounds know as PFAS chemicals (the name is an abbreviation for per- and polyfluoroalkyl substances).

One of these chemicals, perfluorooctanoic acid (PFOA), has a staring role in the recent movie Dark Waters. The movie is based on actual events and depicts the legal case that arose out of the injuries alleged to have been caused by the PFOA contamination. In this respect, it breaks new ground compared to prior acclaimed environmental legal thrillers Erin Brockovich and A Civil Action in that it highlights and calls attention to the impacts from a new and emerging chemical in a way that was not present in those earlier movies.

The emergence of awareness about, and concern over, PFAS chemicals is a key example of an emerging trend in environmental law— “Boomerang Properties.” A Boomerang Property is one that had been determined to be free of environmental contamination, or to have had such contamination adequately addressed, which has unexpectedly become subject to new contamination concerns or clean-up requirements.

Remediated Properties Not Tested for PFAS

PFAS compounds are the subject of fast-moving state and federal efforts to regulate their presence and potentially require their cleanup even at very low concentrations. They key issue here is that any property that was investigated or underwent remediation more than a few years ago likely would not have tested for the potential for PFAS contamination.

PFAS chemicals have been used in hundreds of industrial processes and consumer products since the late 1940s, including non-stick and stain resistant products, food packaging, electronics, paints and waxes, medical supplies, and notably, in firefighting foams used by the military, airport authorities, and local fire and rescue agencies.

The potential for PFAS contamination is lurking at almost every property where other pollutants have already been addressed and the property has been declared to be clean enough. As such, PFAS compounds present a classic boomerang situations.

Another example of a boomerang property situation is a property with a vapor intrusion concern. Vapor intrusion results from subsurface contamination, primarily volatile substances such as petroleum materials or solvents, that migrates into enclosed space in a home or building from below.

Awareness of vapor intrusion is a relatively recent development, and most properties that were investigated or remediated more than 10 years ago would not have been evaluated for this issue, or would not have received nearly the same amount of scrutiny as is now being applied. The Environmental Protection Agency is even reopening closed Superfund sites to revisit potential vapor intrusion issues.

How to Avoid or Minimize Boomerang Risks

Planning ahead is key to controlling boomerang triggers in many instances. The best time to plan is before selling or purchasing a property.

The seller/owner and the buyer/lessee each have a role in eliminating the risk of a possible boomerang property. Here are some strategies for buyers/lessees and owners/sellers to consider.

For a buyer or lessee of property:

• Purchasers or lessees of commercial property should conduct a Phase I Environmental Assessment. A Phase I includes a review of the records, a site inspection, and interviews with local government officials. It does not require any sampling. Conduct of an appropriate Phase I provides protection under federal law for pre-existing contamination.
• Conduct sampling of soil and groundwater when a Phase I or other due diligence efforts raise concerns about potential historical contamination.
• Recognize that prior remedial work, and any clearance or closure approval from a local or state environmental agency likely does not provide protection from boomerang risks.
• Ensure that contract terms provide an appropriate allocation of risks, and indemnity against potential future costs.

For a property owner:

• Be aware that changing regulatory standards could result in contamination levels that were previously acceptable being deemed to be above revised limits and standards.
• Maintain the property in accordance with current regulations and supervise the use of the property to ensure that pollutants aren’t being introduced.

For a property seller:

• Be aware that the process of selling may bring the risk of new issues being uncovered.
• Manage the buyer’s access and the scope of buyer’s investigation of the property. A buyer who unexpectedly uncovers a new environmental issue may walk away from the property, and leave the seller to deal with the new information that otherwise would have remained unknown.
• Avoid consultants who might have independent reporting obligations. In some states, and under certain programs, environmental professionals can have mandatory reporting obligations to the government if contamination is discovered. It is always preferred if the unwelcome discovery of such contamination can avoid triggering an immediate reporting obligation.

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

Author Information

David A. Rockman is a member of Eckert Seamans Cherin & Mellott LLC, a national law firm with headquarters in Pittsburgh. Rockman is chair of the firm’s Environmental Practice Group.