Last month in Chamber of Commerce of the United States of America et al. v. United States Environmental Protection Agency, the D.C. Circuit Court of Appeals denied petitions for review of the United States Environmental Protection Agency’s (“EPA’s” or the “Agency’s”) May 2024 designation of two per- and polyfluoroalkyl substances (“PFAS”) chemicals—perfluorooctanoic acid (“PFOA”) and perfluorooctanesulfonic acid (“PFOS”)—as “hazardous substances” (the “Designation”) under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA” or the “Act”).  The petitions were filed by industry interest groups that use, transport, or discharge PFOA and PFOS (the “Petitioners”). 

Prior to the Agency’s May 2024 Designation, EPA studied scientific evidence regarding the harms of PFOA and PFOS and analyzed relative costs and benefits, including publishing an August 2022 Economic Assessment quantitatively addressing direct impacts and qualitatively evaluating indirect impacts.  In September 2022, EPA issued a notice of proposed rulemaking and requested comments on the Agency’s ability to consider costs and benefits, which direct and indirect costs and benefits should be considered, and how costs and benefits should be factored into any ultimate designation of PFOS and PFOA as hazardous substances. 

After receiving and considering comments from the public and from Petitioners, EPA issued the Designation as a final rule in May 2024.  EPA’s scientific analysis was framed by its determinations that the potential harms to humans and the environment and the manner in which PFOA and PFOS persist in the environment supported the Designation.  After coming to those two conclusions, the Agency also undertook a cost-benefit analysis of the Designation—published as the “Regulatory Impact Analysis” with the final rule—which considered direct and indirect impacts. 

Petitioners offered three primary lines of argument as to why the Designation should be vacated: (1) the Agency’s interpretation of “hazardous substances” as applied to PFOA and PFOS was contrary to law; (2) the cost-benefit analysis was arbitrary and capricious and issued without proper notice; and (3) the decision to regulate PFOS and PFOA was arbitrary and capricious given many uncertainties.  The Court rejected each argument.

The Designation Was Not Contrary to Law
Beginning by emphasizing that it must determine the “best” reading of CERCLA’s text using “all relevant interpretative tools” pursuant to Loper Bright, the Court considered the parties’ competing interpretations of the language in Section 9602(a) which requires EPA to designate as hazardous substances those substances which “may present a substantial danger to the public health or welfare or the environment.”   While EPA argued that “may” meant “at a minimum, there is a possibility,” the Petitioners argued that “may” must mean “will be actually existing or real” at the time of release.  In crediting EPA’s interpretation, the Court emphasized the ordinary usage and legal definitions of “may” as well as CERCLA’s construction around scientific knowledge, which generally frames risks in terms of probabilities, not certainties.  It also noted that none of the Petitioners actually challenged the Designation’s finding that PFOA or PFOS may pose a substantial risk to health, welfare, or the environment. 

In finding no legal error in the Agency’s Designation, the Court also rejected arguments by Petitioners that the term “hazardous substances” must be narrower than “pollutants or contaminants” as defined under CERCLA and that Section 9602(a) was void for vagueness.  The Court reasoned that Congress has given EPA an “intelligible principle” by which to regulate—the use of scientific findings based on public health standards—and that regulated parties had fair notice that PFOA and PFOS might be designated hazardous substances, in no small part because they were previously designated “pollutants or contaminants” under the Act.

EPA’s Cost-Benefit Analysis Was Sound
The Court also rejected all of Petitioners’ many arguments that there was any defect in the Agency’s cost-benefit analysis.

First, the Court determined that the Regulatory Impact Analysis issued with the final rule was the “logical outgrowth” of the May 2022 Economic Assessment, and that the Regulatory Impact Analysis did not differ so greatly as to deprive Petitioners of notice of the issues addressed.  In so concluding, it reasoned that EPA had specifically requested comments on cost issues and that the changes the Agency made to its cost-benefit analysis in response to those comments were “proof that notice and comment rulemaking is working as it should.” 

Petitioners also brought arguments that several facets of EPA’s cost benefit analysis were conducted in an arbitrary and capricious manner.  In rejecting these claims, the Court found that EPA’s judgments were consistent with the core of CERCLA and reasonably explained, and where the Agency’s conclusions differed from the proposals of Petitioners, EPA “reasonably rejected them based in part on its factfinding and experienced judgment.” 

Towards the end of its analysis, the Court pointedly rejected Petitioners’ argument that the Agency did not appropriately evaluate all alternatives to regulating PFOA and PFOS, including their proposed alternative of “providing alternative water” to populations whose water sources are contaminated rather than cleaning up those water sources.  The Court found that this proposal both “fails the common-sense test” and entirely fails to address the environmental harms of these two forever chemicals.

EPA Is Appropriately Regulating in the Face of Uncertainties
Finally, the Petitioners argued that the Agency had not carefully assessed or understood the severe consequences of the Designation.  They pointed in particular to uncertainties regarding where PFOS and PFOA are located and in what quantities, unknown costs imposed by the Designation, and particular unintended consequences, emphasizing those on real estate transactions. 

In rejecting these arguments, the Court found that EPA “fully acknowledged” the uncertainties that exist in regulating PFOS and PFOA as hazardous substances.  It explained that CERCLA contains many safeguards for potentially responsible parties before the ultimate imposition of liability, first emphasizing that liability is only imposed after sites go through the extensive regulatory steps associated with the listing process as well as undergoing remedial evaluations and the completion of remediation plans.  And even after those steps occur, the statute still provides “complete defenses” to covered persons, provides that costs are only recoverable when shown to be consistent with the National Contingency Plan, and directs EPA to prioritize settlements over litigation.  The Court acknowledged that these “uncertainties and contingencies” necessarily make “forecasting liability costs exceptionally difficult” but found the Agency discussed them in the Designation and still ultimately made a reasoned decision to regulate PFOA and PFOS as hazardous substances.

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In denying these petitions, the D.C. Circuit applied core principles of administrative law and notice and comment rulemaking to EPA’s determinations.  We anticipate this decision will be appealed, but in the meantime, the rule remains in effect.  Thus, potentially responsible parties at existing CERCLA sites should anticipate they may be required to take actions to evaluate and potentially remediate PFOA and PFOS contamination.

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