Water Fall 2023 Report

I. Public Water Systems Reach PFAS Settlement with 3M Company

• On August 29, 2023, preliminary approval was granted to a settlement agreement between a class of Public Water Systems and 3M Company (“3M”). The settlement is intended to address the claims of Public Water Systems regarding alleged PFAS-related harm to drinking water and associated financial burdens, including the potential costs of monitoring, treating, or remediating PFAS in drinking water.
• The class action complaint filed by the Public Water Systems alleged that PFAS used in 3M products, including aqueous film-forming foam (“AFFF”), caused the widespread contamination of water intended for distribution to customers. The Public Water Systems further alleged that 3M had knowledge that through the use of products, including AFFF, toxic compounds would be released into the environment, even when the product was used as directed, instructed, and/or intended by 3M.
• The Public Water Systems alleged the following causes of action in the class action complaint: (1) Public Nuisance; (2) Private Nuisance; (3) Strict Liability – Design Defect; (4) Negligence - Design Defect; (5) Strict Liability - Failure to Warn; (6) Negligence – Failure to Warn; (7) Negligence – Failure to Recall; (8) Trespass; and (9) Civil Conspiracy.
• The Settlement Agreement is intended to resolve these claims and requires 3M to pay a total of not less than $10.5 billion and not more than $12.5 billion to Public Water Systems that are part of the settlement. The Settlement Agreement represents the largest water provider settlement in history.
• The class of eligible Public Water Systems is broad and includes every active Public Water System in the United States of America that:
  • (a) has one or more Impacted Water Sources as of the settlement date; or
  • (b) does not have one or more Impacted Water Sources as of the settlement date, and (i) is required to test for certain PFAS under UCMR-5, or (ii) serves more than 3,300 people, according to the U.S. EPA Safe Drinking Water Information System Federal Reporting Services System.
• However, a number of Public Water Systems are excluded. Excluded Public Water Systems include:
  • 1) Systems associated with a specific PFAS-manufacturing facility owned by 3M;
  • 2) Systems owned by the state or federal government;
  • 3) Systems that have previously settled PFAS-related claims against 3M; and
  • 4) Any privately owned well that provides water only to its owner’s individual household and any other system for the provision of water for human consumption that is not a Public Water System.
• In order to become eligible to participate in the settlement, Public Water Systems must test each of its water sources for PFAS. This testing requires the following:
  • 1) PFAS tests must be conducted at a minimum for PFAS analytes for which UCMR-5 requires testing; and
  • 2) The PFAS test results must report any measurable concentration of PFAS, regardless of whether the level of PFAS detected in the water is above or below UCMR-5’s relevant minimum reporting level.
• The payments will be made available to Public Water Systems in two phases: (1) Phase 1 includes class members that had a PFAS detection in one or more water sources as of the date of the settlement; and (2) Phase 2 includes class members that did not have a PFAS detection in one or more water sources as of the date of the settlement. Each Phase includes a number of funds through which payments will be distributed:
  • 1) Phase 1 and Phase 2 Action Fund – this fund is intended to compensate Phase 1 and Phase 2 class members whose testing of water sources results in a measurable concentration of PFAS.
  • 2) Phase 1 and Phase 2 Supplemental Fund – this fund is intended to compensate Phase 1 and Phase 2 class members that did not have measurable PFAS detections at the time claims needed to be filed for the Action Fund but where subsequent testing shows measurable PFAS detection levels. Application to the Supplemental Fund is available through January 31, 2030.
  • 3) Phase 1 and Phase 2 Special Needs Fund – this fund is intended to compensate Phase 1 and Phase 2 class members that have already spent money to address PFAS, including, but not limited to, as a result of pulling water from other sources, purchasing supplemental water, and/or drilling new wells.
  • 4) Phase 2 Testing Compensation Fund – this fund is intended to compensate Phase 2 class members for the cost of testing that is not already required by federal or state law.
• Payments are allocated based on a complex formula that takes into account the level of PFAS in Impacted Water Sources, flow rate, and capital and O&M components. Public Water Systems that have Impacted Water Sources with PFAS levels that exceed federal or state Maximum Contaminant Levels will receive an increased allocation. Similarly, Public Water Systems with pending litigation against 3M will receive an increased allocation.
• Public Water Systems that participate in the Settlement Agreement agree to release 3M from any past, present or future claim that:
  • 1) May have arisen or may arise at any time in the future related to PFAS that has entered or may reasonably be expected to enter drinking water or a Public Water System, including any claim that:
    • i. Was or could have been asserted in litigation and that arises or may arise at any time in the future that relates to drinking water or a Public Water System;
    • ii. Is for any type of relief with respect to the design, engineering, installation, maintenance, or operation of, or costs associated with, any kind of treatment, filtration, remediation, management, investigation, testing or monitoring of PFAS in drinking water or a Public Water System; or
    • iii. Has arisen or may arise at any time in the future that involves any increase in the rates for drinking water that any Public Water System charges its customers.
  • 2) Has arisen or may arise at any time in the future that relates to the development, manufacture, formulation, distribution, sale, transportation, storage, loading, mixing, application, or use of PFAS or any product manufactured with or containing PFAS;
  • 3) Has arisen or may arise at any time in the future that relates to a Public Water System’s transport, disposal, or arrangement for disposal of PFAS-containing waste or PFAS-containing wastewater;
  • 4) Has arisen or may arise at any time in the future that relates to representations about PFAS or any product manufactured with or containing PFAS; and
  • 5) Any claim for punitive or exemplary damages that has arisen or may arise at any time in the future that involves PFAS.
• The release of claims does not include any claim that a Public Water System can demonstrate arises solely out of conduct by 3M that occurs entirely after the Effective Date (5 business days following final approval of the Settlement Agreement).
• Other exceptions include claims related to PFAS contamination of real property that is separate from a Public Water System and where claims are related to a wastewater facility or stormwater system that is not related to a Public Water System.
• A number of states filed a Motion to Intervene on July 26, 2023, arguing that the initial settlement could impact claims that various states have brought against 3M, which the states claim seek much broader relief than the class members. As a result, the Settlement Agreement was revised to carve out claims owned and brought by the state or federal government. Following changes to the Settlement Agreement, the states dropped their opposition.
• In the context of utility rate increases, the Settlement Agreement prohibits Public Water Systems in the class from asserting that any future rate increase request was attributable to 3M Company’s development, manufacture, formulation, distribution, sale, transportation, storage, loading, mixing, application, or use of PFAS or any product (including AFFF) manufactured with or containing PFAS, but may assert generally the need for PFAS treatment.
• This is an interesting clause, and it could potentially complicate a class member’s ability to justify recovery of capital and O&M expenditures related to PFAS treatment.
• Next steps include the following:
  • Eligible class members have until November 11, 2023 to object to the Settlement Agreement.
  • Eligible class members have until December 11, 2023 to opt-out of the Settlement Agreement.
  • A Final Fairness Hearing is scheduled for February 2, 2024. The purpose of this hearing is to make a final determination of whether the class members should be certified and if the Settlement Agreement should be granted final approval.

II. Phoenix Explores Desalination as an Option to Address Shortages

• The State of Arizona, and particularly the area surrounding Phoenix, is experiencing resource constraints related to the physical availability of groundwater, due to decades of groundwater overdraft and the continued reliance on groundwater resources.
• As a result, the Arizona Department of Water Resources announced on June 1, 2023, that it will not approve new determinations of Assured Water Supply within the Phoenix Active Management Area (“AMA”) as a result of dwindling groundwater supplies.
• In December 2022, Arizona considered a plan to build a water desalination plant in Mexico, as well as 200 miles of pipeline infrastructure, to address drought-related issues. Desalination, generally, is the process by which sea water is converted to fresh water.
• The proposed project “intends to draw water from the Sea of Cortez, desalinate it, move it, and provide up to 1 million acre feet of water a year, for 100 years and more to the State of Arizona. The entire water system of Arizona…will benefit from the capacity of the [project] and this will solve one of the biggest growth, economic and environmental issues of our generation for the Southwest U.S.”
• The project is anticipated to cost up to $5.5 billion dollars, and the targeted commercial operations date is December 31, 2027.
• The project has received pushback due to concerns about the project’s energy requirements, the effects of brine returned to the sea, and crossing unique and sensitive habitats.

If you would like additional supporting (settlement) documents, please contact either Patricia Honzik at [email protected] or Susan Koz at [email protected]