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By Catherine Johnson
Law360 (March 21, 2019, 4:06 PM EDT)
Vapor intrusion — the presence of contaminated vapors inside buildings
— can present actual or perceived health and safety risks to building occupants and significant liabilities for property and business owners. In California, recent and anticipated regulatory developments will increase the number of properties investigated by regulatory agencies, shift the focus of vapor intrusion investigations to indoor air sampling — and possibly affect real estate transactions.
The field of vapor intrusion has taken center stage in agency cleanups for many years, since indoor air impacts were first detected at some contaminated sites previously closed by regulatory agencies. In addition, in 2014, the U.S. Environmental Protection Agency concluded — based on clinical studies involving rats — that short-term exposure to low dose of trichloroethylene, or TCE, may present potential risks to the hearts of developing human fetuses.[1]
Since that time, the field of vapor intrusion has been evolving at a rapid
clip — with a wide variety of regulatory responses to the EPA’s position on TCE. According to a fact sheet distributed by one state agency, “there is no conclusive evidence from epidemiologic studies [that low-dose exposure to TCE] causes development effects in humans.”[2] Nonetheless, EPA Region IX and several states, including California, subsequently adopted guidance, frameworks or policies that identify trigger levels for TCE in indoor air, above which the agency may require the evacuation of building occupants until levels can be abated.
Just two months ago, one of the most influential regulatory agencies in California, the San Francisco Bay Regional Water Quality Control Board, released new environmental screening levels, or ESLs, which dramatically reduce the screening levels for several chemicals, including TCE.[3] Environmental consulting firms have already been posting blogs and circulating news alerts warning that the new ESLs will result in more sites being subject to investigation and cleanup directives — and that new ESLs in soil vapor for TCE are below federal drinking water standards.
Meanwhile, California agencies are expected to release proposed new guidance for vapor intrusion investigations in the next few months, which is expected to also extend the scope of vapor intrusion investigations by focusing on sewer lines as preferential pathways. In addition, the new guidance is reported to favor the collection of indoor air samples as a staple element of vapor intrusion investigations rather than the current step-wise approach (where indoor air is sampled only as a last resort after other media are sampled and screened).[4]
Four agencies in California have been collaborating on the new guidance, meaning California will have a unified approach to vapor intrusion investigations.[5] The new guidance has been widely anticipated for months and is now reported to be almost ready for circulation to the public for comment.
Whatever the ultimate consensus, if any, may be about alleged health risks posed by short- term exposure to TCE, at this point in time and in some states, including California, the presence of TCE in indoor air may create new and significant liabilities for property and business owners — and challenges for all parties to a transaction in a real estate acquisition.
Long-term exposure to TCE has already been the subject of medical monitoring and personal injury claims. Where evacuations are required due to the presence of TCE in indoor air above trigger levels, there is the potential for additional liabilities and losses. For example, property owners may face business interruption claims or claims for breach of the lease. In the case of residential tenants, property owners may need to arrange for relocating tenants, — and face claims under landlord-tenant laws.[6]
Also, where TCE vapor intrusion is present, property owners may need to take immediate mitigation actions so that the property can be occupied — even if other parties are responsible for the release that caused the vapor intrusion. By contrast, when vapor intrusion is not present but underlying groundwater is contaminated from an off-site source, the need to remediate is rarely urgent — and regulatory agencies will direct cleanup orders to the source of the contamination.
Moreover, where TCE or other chemicals are detected on properties, property owners may be required to make statutory disclosures and notifications — both to regulatory agencies and/or private parties. For example, under one California law, where certain releases must be reported to a regulatory agency, penalties for failure to report can be as much as $25,000 a day as long as the chemicals remain on the property.[7] In addition to other disclosure obligations, property owners in California must provide written notice to tenants about releases of hazardous substances at the property before entering into lease agreements.[8] In some cases, the failure to comply with applicable laws can subject parties to per se negligence claims.
Another consideration is the potential for a citizens’ suit claim under Proposition 65 — a California law that under certain circumstances requires businesses to provide warnings about exposures to carcinogens or reproductive toxins.[9] Many chemicals associated with vapor intrusion are found on the Proposition 65 list of carcinogens or reproductive toxins. On Jan. 31, 2014, following the EPA’s study of TCE short-term exposure risks, TCE was listed under Proposition 65 as a reproductive toxin.
Whatever arguments can be made that Proposition 65 does not apply to a vapor intrusion exposure[10] — and however fraught with difficulty it may be to provide Proposition 65 warnings in the context of a vapor intrusion investigation — the Proposition 65 plaintiffs bar is widely known for expansive interpretations of the law. Only last year, the Center for Environmental Health, or CEH, a well-known Proposition 65 plaintiffs group, filed a Proposition 65 lawsuit alleging a failure to make a Proposition 65 warning about TCE in the context of vapor intrusion.[11]
In California, more expansive regulation of vapor intrusion is likely to heighten concerns of potential purchasers in real estate transactions. As regulations continue to evolve, it remains to be seen how these concerns will be reflected in due diligence practices and/or in purchase and sale agreements. California property owners, however, should expect more attention to vapor intrusion risks in real estate transactions — with increased focus on applicable state and local guidance and policies.
In the context of invasive due diligence investigations, the common practice is to sample soil, soil gas and/or groundwater to evaluate a vapor intrusion risk — and avoid indoor air sampling. Notwithstanding California’s anticipated shift away from step-wise vapor intrusion investigations to indoor air sampling, due diligence practices may not move in the same direction. Due diligence rarely, if ever, reaches the level of certainty an agency-directed investigation may demand — and attempting to do so is often impractical (e.g., an agency requirement for iterative sampling events).
Under certain circumstances, however, some potential purchasers may demand indoor air sampling. Other prospective purchasers may elect to forego indoor air sampling but require more extensive indemnity agreements or contingencies that apply in the event the property is the subject of a vapor intrusion investigation — such that they are protected from liability without yielding total control of an invasive investigation to a third party.
[1] TSCA Work Plan Chemical Risk Assessment, EPA, 2014.
[2] Fact Sheet for Health Professionals, Minn. Dept. Of Public Health, Nov. 20, 2018
[3] Environmental Screening Levels, SF Bay RWQCB, January 2019.
[4] California trails the EPA, which issued guidance in 2014, favoring contemporaneous collection of indoor air samples, in 2014. See OSWER Technical Guide for Assessing and Mitigating the Vapor Intrusion Pathway from Subsurface Vapor Sources to Indoor Air, U.S. EPA, June 2014.
[5] The four agencies are the California Department of Toxic Substances Control, State Water Resources Control Board, SF Bay RWQCB, and the Office of Environmental Health Hazard Assessment.
[6] California Civil Code, § 1941.
[7] California Health and Saf. Code § 25359.4.
[8] California Health & Saf. Code § 25359.7.
[9] California Health & Saf. Code § 25249.6.
[10] The application of Proposition 65 to vapor intrusion is beyond the scope of this article. Vapor intrusion exposures, however, are often associated with historical releases to soil (which then migrate laterally and vertically) from businesses that are no longer operating, which presents a different analysis of Proposition 65 than a direct release from existing business operations.
[11] CEH v. Senior Operations, San Diego County Sup. Ct., Case No. 37-2018-00005835- CU-MC-CTL (Feb. 1, 2018).
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The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.