Articles

IAEP Member Lawrence Falbe Testifies Before Congress on PFAS Concerns in Real Estate

Photo Credit: ICSC

By Lawrence Falbe

As most environmental professionals are well aware, last year’s designation by US EPA of two types of PFAS compounds, PFOA (perfluorooctanoic acid) and PFOS (perfluorooctane sulfonic acid), as CERCLA hazardous substances has thrown the world of environmental due diligence into turmoil.  PFOS and PFOA must now be accounted for in the scope of Phase I Environmental Site Assessments (Phase I ESAs) under ASTM Standard Practice E1527-21.  Given the stringent federal drinking water standards (MCLs) and cleanup levels adopted by many states (down to the parts-per-trillion), and the ubiquitous nature of PFAS chemicals in the environment, the appearance of PFOS/PFOA as potential concerns in Phase I ESAs has also caused concern in the real estate transactional market. 

With this background, in my capacity as Chairman of the International Council of Shopping Centers (ICSC) Environmental Policy and Land Use Committee, I was invited to provide testimony before the Environmental Subcommittee of the US House of Representatives Energy and Commerce Committee, on December 18, 2025.  Since before the US EPA designation of PFOS and PFOA as CERCLA hazardous substances, the ICSC Environmental Committee has been working on Capitol Hill with various members of Congress, their staff, and relevant Congressional committees to raise awareness of the potential chilling effect on real estate transactions that would be caused by the direct addition of PFAS compounds to the CERCLA hazardous substance list.  Primarily, we were concerned that under CERCLA’s joint-and-several, no-fault liability scheme, real estate owners and developers (and lenders) would find themselves confronting potential liability for legacy contamination that was not directly attributable to any actions of the property owner (i.e., causing a release of hazardous substances).  Under the Biden administration, our concerns came to pass, and PFOS and PFOA were added to the list of CERCLA hazardous substances with an effective date of July 8, 2024 (the rule was formally published in the Federal Register on May 8, 2024). 

I believe our work on the ICSC Environmental Committee has been key in raising Congressional awareness of the concerns specific to real estate; while other interest groups involved with drinking water supply, wastewater treatment, aviation and land application of biosolids had previously made their concerns known, real estate was a late-comer in explaining how the new designation could harm our industry.  I believe the hearing on December 18^th was prompted, in part, by our committee work, and I was greatly honored to testify. 

Among other issues raised in my testimony, I noted that EPA’s direct designation of PFOS and PFOA as CERCLA hazardous substances using its authority under CERCLA § 102(a), differs from how nearly all other hazardous substances (over 800 total) have been designated in CERCLA’s 45-year history.  In the past, CERCLA hazardous substances have been incorporated from designations under other environmental statutes, such as the Clean Air Act (CAA), Clean Water Act (CWA), Resource Conservation and Recovery Act (RCRA) and the Toxic Substances Control Act (TSCA).  Typically, other substances have undergone extensive analysis and consideration in their parent statutes; here, however, EPA’s direct designation may well have been precipitous, and already has been challenged in court as an overreach of EPA’s statutory authority.  Additionally, none of these statutes share CERCLA’s strict, joint and several liability scheme; rather, in most cases, liability rests with the party that generated hazardous wastes or caused a release of such substances into the environment.  I think that a different regulatory scheme, such as that for managing hazardous wastes under RCRA, would have been more appropriate, and would not trigger the same problems caused by CERCLA’s strict liability regimen. 

Part of the problem for real estate specifically is that PFAS contamination often originates off-site, from upstream industrial sources.  For example, historic uses of firefighting foams at airports, or municipal biosolids—and migrates via groundwater or infrastructure into commercial areas.   There is mounting evidence of other pathways for passive deposition of PFAS compounds, such as air or precipitation.  Shopping centers rarely use PFAS intentionally, but can be swept into CERCLA Potential Responsible Party (PRP) status due to the presence of PFAS on properties, especially if the property has neighboring or prior industrial uses – or even something as mundane as a fire for which PFAS-containing foam was used to extinguish it.  If PRP status is conferred, as current owners and/or operators, then liability for the contamination and remediation costs can be imposed– even if the party had nothing to do with the contamination – under CERCLA’s strict and joint liability. 

I testified that since PFOA and PFOS have been designated CERCLA hazardous substances, any Phase I performed after the designation must include an assessment of such risks.  If a consultant determines that PFOA or PFOS are likely present on the target property, they will be identified as a Recognized Environmental Condition (REC), which may trigger the need to sample for such contaminants – an expensive and time-consuming process.  Sometimes, a deal dies at the Phase I stage, simply because a buyer is spooked by the potential risk that PFAS compounds could be present.  Many buyers (and sellers) become concerned that if PFAS is detected, the costs of investigation and remediation will quickly outweigh the value of the property itself.  The lack of federal cleanup standards for PFAS remediation and the current patchwork of inconsistent (and non-existent) state cleanup standards only add to the risk and uncertainty.  And, what cleanup standards do exist are generally at the parts-per-trillion level, as noted above, suggesting challenges in even successfully performing a remediation. 

More unintended consequences may be on the way: in early December 2025, EPA doubled-down on the significance of PFAS with respect to qualifications for Brownfield grant money.  According to the updated EPA website, “a grant recipient must establish liability protection for any release of PFOA or PFOS at a Brownfield site. For example, All Appropriate Inquiries investigations conducted on a Brownfield site must now consider conditions indicative of releases or threatened releases of PFOA and PFOS to establish liability protection under CERCLA.”  How this new guidance will actually be implemented and applied is anyone’s guess, as Phase I reports generally do not make legal determinations, which is the essence of establishing defenses under CERCLA.  This new guidance is sure to add to confusion to an already-perplexing process. 

My testimony concluded by noting that real estate owners, particularly in the retail sector, do not fit the CERCLA responsible party profile, but can become easily ensnared, due to CERCLA’s strict liability scheme and the pervasiveness of PFAS in the environment (and the very low levels that trigger liability concerns).  On behalf of ICSC, we asked for relief from Congress in the form of a CERCLA “passive receiver” exemption that would enable the industry to avoid the uncertainty and risk that are anathema to successful real estate deals.  Model precedent for exempting a category of otherwise liable party can already be found in CERCLA under the Secured Creditor Exemption, which provides protection from liability for lenders, as long as they meet certain well-defined requirements.  I also noted that noted that EPA’s Enforcement Discretion Policy, while not extending far enough to protect certain passive owners from third-party liability, at its core evidenced EPA’s acknowledgement that parties that did not cause pollution should not face unlimited CERCLA liability.  Congress can take the next logical and appropriate step by enlarging that policy to include passive real estate owners, and enacting it into law through a passive receiver exemption. 

Testifying before Congress was a challenging, yet exhilarating, experience.  I am hopeful that my testimony and our work on the ICSC Environmental Committee will help pave the way for some common-sense legislative reform to mitigate the impacts of EPA’s PFOS/PFOA hazardous substance rule on passive property owners. 

Lawrence Falbe is a Senior Principal in the Chicago office of the international law firm Miller Canfield Paddock and Stone, PLC.  His testimony and opinions expressed at the hearing and in this article are his own opinions, and not attributable to Miller Canfield or its clients.  Mr. Falbe is a past president of IAEP.