Perfluorinated chemicals (PFCs) and their most common forms, perfluorooctane sulfonate (PFOS) and perfluorooctanoic acid (PFOA), are a class of synthetic compounds effective in repelling water, oil, and grease. For over 50 years after their introduction in the 1940s, PFCs were used in a variety of industrial and manufacturing applications, including in the production of waterproof fabrics, insulation materials, and non-stick cookware, as well as in fire-fighting foams known as aqueous film forming foams (AFFF) used on military and civilian airports. Since the 1990s, U.S. regulators have worked to eliminate the use of PFCs in industrial and military applications and to end imports of PFC-containing materials.
Dealing with the aftermath of decades of heavy use in industry, defense, manufacturing, and consumer products often leads to property-contamination issues as litigation begins to come into effect to recover costs from potentially responsible parties. PFCs are bioaccumulative and persistent in the environment. Statewide testing has only recently begun across the United States, and enforceable federal and state standards are still being developed. So far, only eight states have numerical PFC standards.
Chemical contamination impacts property values through issues of cost, use, and risk. For example, in some cases, property owners may pay out of pocket for installation of in-home filtration systems. In others, property owners and future buyers may lose the use of an orchard or recreational farm supplied by contaminated well water. Risk impacts may include the market resistance—either as longer marketing times or discounts or both—due to perceived environmental risk. Cost, use, and risk issues change over time, and their relative severity may change as well throughout the remediation lifecycle. Thus, those involved in valuing real property impacted by property contamination must consider where a property stands within the context of the remediation lifecycle as of the effective date of value.
The remediation lifecycle consists of before repair, during repair, and after repair. This simple breakdown of the stages of remediation helps valuation professionals classify the changing allocation of cost, use, and risk impacts throughout the development of a property contamination event and its aftermath.
What does it mean for a contaminant to affect property values? By which mechanisms does a contaminant affect property values? These questions become more important when dealing with an emerging contaminant than they typically are with known or well-established and regulated contaminants. Frequently, contamination serves as a catch-all umbrella term with no reference to the chemical compound itself. In some cases, this is appropriate. Property values are not themselves susceptible to health impacts. There are limited ways in which the characteristics of a contaminant can translate into observable market impacts. Chemical classifications are therefore less meaningful than those based on risk level, legal status, and ubiquity.
Emerging contaminants such as PFCs may essentially alter the allocation and evolution of cost, use, and risk impacts during the remediation lifecycle. For instance, uncertainty about the chemical itself—both in its health impacts and its regulatory status—can lessen impact of site-specific characterization.
PFCs are subjects of an uncertain regulatory regime that may be characterized as a patchwork of state-by-state standards. Lack of action at the federal level combined with an increasing number of detections and increasing public pressure are leading to state-level enforcement. Meanwhile, the U.S. Environmental Protection Agency (EPA) maintains a non-enforceable health advisory of 70 ppt. This has direct consequences for property owners and their participation in markets. For example, funding of in-house filtration systems for a property owner may be linked to the non-enforceable 70 ppt EPA advisory.
It is important for litigators and valuation professionals to keep an eye out for new research, new litigation, and changing state and federal standards. There are nearly daily news articles on the quickly evolving PFAS situation at a state and national—and even international—levels.
Orell Anderson, MAI, is the president of Strategic Property Analytics, Inc., in Orange County, California.