A new environmental risk is reshaping due diligence for real estate developers in Pennsylvania who purchase agricultural land for residential or commercial conversion.

For decades, farms across the Commonwealth received land applications of biosolids — treated sewage sludge used as fertilizer — that may contain PFAS, a class of synthetic chemicals now designated as hazardous substances by the U.S. Environmental Protection Agency. The implications for developers are significant, touching everything from Phase I site assessments to remediation strategy under Pennsylvania's Act 2 brownfield program.

I’ve worked on many real estate development projects in Pennsylvania that involved the purchase of agricultural land to be converted into residential or commercial uses. Until now, the primary concern addressed during due diligence would be the use of commercial pesticides and fertilizers that may have contained arsenic or lead. Now, there is another risk that needs to be addressed, which is the possibility that biosolids (i.e., sewage sludge) may have been land applied on the property and those biosolids may have contained PFAS.

The PFAS Factor

The first question is whether or not the Phase I environmental site assessment for the farm property has to consider whether or not PFAS may be present. The answer is yes.

Several types of PFAS compounds, including PFOA, PFOS and PFNA, are now designated as hazardous substances by the U.S. EPA. As a result of that designation, those substances are also considered regulated substances for purposes of Pennsylvania’s Land Recycling and Environmental Remediation Standards Act, known as Act 2. Act 2 is Pennsylvania’s award-winning brownfield program, which allows remediators to obtain a release of liability from the state upon demonstrating attainment of an Act 2 remediation standard. Accordingly, when an environmental consultant performs a Phase I on agricultural property in PA, that consultant has to consider whether or not biosolids may have been land applied on the property, because research has shown that biosolids may contain PFAS compounds, and several PFAS compounds are now considered regulated substances under PA Act 2.

Flagging the REC

The second question is whether prior land application of biosolids on a farm property would be considered a Recognized Environmental Condition (REC) in a Phase I report. The answer to that is also yes.

Since biosolids may contain PFAS, the placement of those biosolids on a farm property could give rise to a release of hazardous substances. So I would expect that in these circumstances, a consultant that finds that a farm property had a history of land application of biosolids would identify that as a REC, and then the question would be whether or not a Phase II would be needed to determine whether PFAS was present at levels above the applicable Act 2 statewide health standards in soil and/or groundwater.

Proceed or Pause?

Here is where some business decisions likely would need to be made. If a Phase II is done and it identifies PFAS as being present in the soil and/or groundwater at levels above the applicable Act 2 statewide health standards (and the groundwater standard is set very low for PFOA and PFOS at 4 parts per trillion), the site developer would then need to consider the risks of proceeding further.

For a long time, PADEP took the position, as a matter of policy, that a farm property could not be entered into the Act 2 program solely as a result of contamination arising from the historical application of commercial pesticides or fertilizers. As noted above, that normally involved lead or arsenic being present in the soil above applicable Act 2 standards. In those circumstances, even without the ability to go through Act 2, developers of commercial properties, in which the redevelopment involved capping the entirety of the property with concrete foundations, asphalt parking lots and two feet of clean fill, could choose to proceed knowing they could eliminate all potential exposure pathways, since those substances were only present in the soil and typically not in the groundwater and there was no risk of off-site migration or vapor intrusion.

Into Act 2

With regard to PFAS and land application of biosolids, I’ve been told by PADEP that those farm properties may be entered into the Act 2 program, because PFAS contamination arising from the land application of biosolids would be considered a “release” since PFAS inclusion in the biosolids was not authorized by PADEP. So, since PADEP has said that a farm may be eligible for Act 2 if there is a history of land application of biosolids, the question would then be what are the challenges/issues that might arise in attempting to take a farm property through Act 2 when the only regulated substance being addressed is PFAS.

Sampling the Unknown

Here is what I see as the Act 2 issues as it relates to a farm property with a history of land application of biosolids. First is the issue of Act 2 site characterization. Ordinarily, when a Phase I assessment is performed, the consultant will identify areas of concern where hazardous substances may have been used, stored or disposed. That helps to narrow the areas where sampling would need to be performed. In the case of a farm with a history of land application of biosolids, you’d have to know whether the entirety of the farm had land application of biosolids or just a portion of the farm. Determining that would likely require asking the farm owner, checking to see what was said in any PADEP permit application submitted to obtain authorization for the land application, or looking at the farm’s conservation plan, which is something generally required when land application of biosolids is performed.

Without such information, it is likely that the entirety of the farm property would need to be randomly sampled for the presence of PFAS compounds and that relates directly to potential sampling costs. If the sampling is limited to soil sampling and no PFAS compounds are detected in the soil, the question would be whether any groundwater sampling is required. I think it would depend. If the property is connected to public water and so are all surrounding properties, then sampling the groundwater in the absence of any soil exceedances probably would not be needed.

If, however, the property is not connected to public water, or there are adjacent properties with public or private wells, due diligence would probably involve sampling the groundwater for PFAS, since there still could be liability if PFAS is present and migrating off site. The extent of any necessary groundwater characterization is really the concern as it relates to PFAS at a farm property.

Beyond the Fenceline

The reason is that if you find an exceedance for a PFAS compound in groundwater that has an Act 2 MSC, then you need to determine the vertical and horizontal extent of the contamination. For PFAS, PADEP has yet to identify a fate and transport model that can be used to determine exactly how far a PFAS compound would be expected to migrate in the groundwater before it reaches the MSC (i.e., the drinking water standard). For most volatile organic compounds and petroleum, a fate and transport model usually allows the remediator to avoid having to sample off-site if there is migration and no downgradient receptors (like private or public wells or surface water).

With PFAS compounds, the likelihood of having to install off-site downgradient monitoring wells is real, because there are no useful fate and transport models at this point, although PADEP and its Cleanup Standards Scientific Advisory Board (on which I am a member) are actively researching this topic. If groundwater sampling is done, let’s say during due diligence, and PFAS compounds are identified above the MSC, the developer would need to discuss with their environmental counsel and consultant the likelihood that getting through the Act 2 process would require off-site wells and the costs and timing of having to perform that work.

At one PFAS only site I am working on that is in the Act 2 process, PADEP required sampling of a drinking water well on an adjacent property and an off-site creek, because fate and transport modeling could not be used to show that the contamination wouldn’t migrate that far. In both instances, however, sampling was done and neither off-site receptor was found to be impacted.

Cleanup Options

Beyond the issues relating to site characterization, there are questions regarding how one would remediate PFAS found on a farm property. If it is only in the soil, Act 2 would allow the remediator to either remove the PFAS from the soil and demonstrate attainment of the Act 2 statewide health standard or simply cap the site with concrete, asphalt and/or two feet of fill material and demonstrate attainment of the Act 2 Site Specific Standard using pathway elimination, as is done at many Act 2 sites involving soil contamination.

The bigger issue really relates to farm properties found to have contamination in the groundwater and which Act 2 standards are available. One of the Act 2 standards is the background standard. That can be used when there is evidence of an upgradient source of contamination that is migrating onto the property and levels higher than anything found on the property or in the case of areawide contamination. I could foresee instances where the groundwater at a farm property identifies PFAS above Act 2 standards but that contamination is migrating onto the farm property from somewhere else, since PFAS contamination can arise from many possible sources. The attainment demonstrations are different for the two kinds of background, with migration from an upgradient source only requiring samples taken on the subject property being developed (at the most upgradient locations not impacted by a release on the property) and areawide contamination requiring samples being collected on-site and off-site. The areawide background demonstration would be appropriate, for example, if the farm was surrounded by other farms all of which had biosolids land applied (sometimes by the same local municipal authority, especially in rural areas of the Commonwealth).

The migration from an upgradient source would be appropriate when an upgradient industrial or commercial enterprise likely used PFAS. I have reached out to PADEP about whether the background standard could be used at a farm property that had historic land application of biosolids, and I was told that the background standard would be available. If you could use the background standard, that would result in a release of liability and no need for any activity and use limitations or environmental covenants.

If the farm property was found to have PFAS in the groundwater, another option would be to use the Act 2 Site Specific Standard, which is a risk based standard that allows contamination to remain in place as long as there are no complete exposure pathways. That likely means there are no public or private water wells or surface water that would be impacted above the applicable drinking water standards or in-stream water quality standards for PFAS. If there are complete exposure pathways, those would need to be addressed, just as you would for any hazardous substances at a site where remediation would be necessary to attain an Act 2 standard.

Takeaways

There are risks associated with developing a farm property that has a history of the land application of biosolids. If that history comes up during a Phase I site assessment, the developer needs to be informed of the risks of proceeding. Those risks, as set forth above, arise both in terms of what is necessary to characterize the vertical and horizontal extent of the contamination in soil and groundwater, and in figuring out what options may be available to remediate the PFAS identified in the soil and groundwater in order to complete the Act 2 process and obtain a release of liability from the Commonwealth.

PFAS continues to be something of a moving target in Pennsylvania and developers need to stay informed as it relates to the changing regulatory environment, applicable standards and guidance from PADEP. Finding PFAS at a farm property doesn’t mean that site has to be off limits. But it does mean proceed with caution, be mindful of the risks, and act accordingly.

If you have questions about this alert, please contact Joel Bolstein in our Warrington Office at 215-918-3555 or jbolstein@foxrothschild.com.

This information is intended to inform firm clients and friends about legal developments, including the decisions of courts and administrative bodies. Nothing in this alert should be construed as legal advice or a legal opinion. Readers should not act upon the information contained in this alert without seeking the advice of legal counsel. Views expressed are those of the author and not necessarily this law firm or its clients.