D.C. Circuit Upholds the EPA's Designation of PFOA and PFOS as Hazardous Substances Under CERCLA

Background 

In May 2024, the EPA designated PFOA and PFOS as “hazardous substances” under CERCLA. (89 Fed. Reg. 39,124, 39,125). Petitioners’ challenge to the “hazardous substance” designation was based on the arguments that the EPA’s interpretation of “hazardous substances” was contrary to law, the cost-benefit analysis was arbitrary and capricious, and the decision to regulate the substances in the face of uncertainties was arbitrary and capricious.

In determining whether the EPA’s interpretation of “hazardous substances” was contrary to law, the D.C. Circuit analyzed the meaning of the phrase “may present substantial danger to the public health or welfare or the environment” as stated in Section 102 of CERCLA. The D.C. Circuit sided with the EPA’s interpretation, determining that the EPA must not prove that substantial danger will occur, but only that substantial danger is possible if released to the environment. The court noted that Congress intended CERCLA to rely on the basis of scientific knowledge and information about health and environmental risk, and that such scientific information is typically based on probability, not certainty. The court also rejected nondelegation and vagueness challenges, finding that Congress provided an “intelligible principle” and that industry participants in a heavily regulated sector had fair notice of potential designation.

Petitioners alleged that the EPA failed to provide adequate notice that it would pursue a cost-benefit analysis in the final rule and, even if notice was provided, it was not sufficient because the Economic Assessment provided in the notice of proposed rulemaking (87 Fed. Reg. 54,418, n. 4) “bore no resemblance” to the RIA published with the final rule. The court disagreed, finding that the final RIA was a “logical outgrowth” of the proposed rulemaking and Economic Assessment. The proposed rule expressly solicited comment on whether the EPA should conduct a quantitative cost-benefit analysis, and petitioners provided comment on differing models for cost calculation and impacts on private parties. The court held that although the RIA included additional data and basic calculations, those additions amounted to mere supplementation of information that had previously been provided in the Economic Assessment.

The court rejected six additional challenges to the EPA’s cost-benefit analysis, finding that its methodology was reasonable and well-supported. The court found that the:

• EPA conducted a reasoned review of record evidence and its real-world experience to adequately explain its conclusion that designation of PFOA and PFOS would not dramatically increase its estimate of cleanup costs at sites with only PFOA and PFOS contamination.
• EPA reasonably estimated the number of sites not currently on the National Priorities List (NPL) where it anticipated seeking enforcement and adequately explained its rationale.
• EPA’s estimate of cleanup costs at federal facilities was reasonably explained but, even if a miscalculation was made, it would not affect petitioners.
• EPA adequately considered costs to the waste management and recycling industries by acknowledging that received waste and sludge may contain PFOA and PFOS and reiterating limitations on liability under CERCLA. The court determined that reasoned decision-making does not require a “deep-dive” cost-benefit analysis into the indirect impacts faced by a potentially affected industry.
• EPA did not treat certain costs as benefits by considering CERCLA’s shifting of costs from taxpayers to private industry.
• EPA did not violate the Regulatory Flexibility Act because consideration of indirect effects on a certain sect of small businesses is contingent upon multiple intervening and uncertain events.

The court rejected petitioners’ assertion that the EPA did not “carefully assess and [did] not understand” the consequences that may stem from the designation in the face of uncertainties as to location and quantities of PFOA and PFOS, the economic costs that will be incurred, and unintended consequences of the designation, including impacts on real estate transactions. The EPA acknowledged that uncertainties exist regarding PFOA and PFOS. 

However, the court pointed out that the designation is only the first step in the regulatory process, site-specific factors must be examined, and “numerous” additional regulatory steps must take place before liability attaches to a responsible party. For remedial actions, the EPA must still complete Hazard Ranking System scoring, state prioritization, NPL placement (through its own notice-and-comment process), remedial investigation, feasibility study, and plan selection. The court noted that only approximately 3% of 53,400 assessed sites have been placed on the NPL since 1980. 

Further, the designation of PFOA and PFOS may be mitigated, in part, by EPA’s enforcement discretion and liability protections explicitly afforded under CERCLA, including safeguards against unwarranted liability, defenses for acts of God, and innocent landowner defenses.

Key Takeaways for Companies After EPA’s PFOA and PFOS CERCLA Designation

• The PFOA/PFOS hazardous substance designation is here to stay. Companies should consider whether evaluation of current or historic use or handling of PFOA or PFOS is warranted in light of CERCLA’s reporting, disclosure, and cleanup implications. The designation opens the door for cost recovery for cleanup costs from responsible parties. However, CERCLA provides built-in protections, and the court acknowledged the EPA’s enforcement discretion as an additional buffer against liability.
• The EPA’s authority to designate a substance as a hazardous substance under CERCLA is broad and does not require scientific certainty, which may lead to future designations of additional PFAS compounds.