Over the years, certain environmental conditions, like asbestos, radon, underground storage tanks and PCBs, have cast a pall over transactions as they came to be understood. The newest environmental condition that lenders need to learn about is "PFAS," which is the acronym for Per- and Polyfluoroalkyl substances. This article provides an introduction to PFAS, important background on why lenders should focus on this new issue, and practical suggestions for lending best management strategies to address PFAS. 

What is PFAS and Why Is It Considered Harmful?

The term PFAS refers to a group of chemicals that have been used in many industrial applications and consumer products such as stain-proof or waterproof carpeting (e.g. Stainmaster), clothing (e.g. Goretex), clothing/leather/upholstery treatment (e.g. ScotchGard), food paper wrappings, firefighting foams (commonly used at military bases, airports, fire stations and refineries), dental floss, and non-stick metal plating or cookware (e.g. Teflon). Some research has suggested probable links between exposure to PFASs and diagnosed high cholesterol, ulcerative colitis, thyroid disease, testicular and kidney cancers, and pregnancy-induced hypertension. 

PFASs are resistant to degradation, which means they do not break down in the environment. PFASs are also resistant to heat, water, and oil. They are water-soluble and bioaccumulative, meaning the amount builds up over time in the blood and organs. PFASs have been found at low levels both in the environment and in blood samples of the general U.S. population. The primary exposure pathways for PFASs are through the ingestion of drinking water, fish-rich diets, and dust. 

PFAS Regulatory Developments and Significant Settlements

Regulatory standards are just evolving, but the United States Environmental Protection Agency ("EPA") has set a lifetime health advisory for the PFASs perfluorooctanoic acid ("PFOA") and perfluorooctane sulfonate ("PFOS") of 70 parts per trillion (ppt)—for context, seventy parts per trillion is like waiting 32,000 years for one minute.

EPA only just unveiled its "PFAS Action Plan" on Feb. 14, 2019. The PFAS Action Plan includes objectives such as identifying a federal groundwater standard for PFAS, known as a maximum contaminant level, or MCL, and listing PFAS as a regulated "hazardous substance." 

In Wisconsin, the WDNR is working to develop enforceable groundwater standards for PFASs. However, it is likely that it will take more than two years to develop such standards. In the interim, in a direct response to the growing impact of PFASs, WDNR implemented a significant policy change in how it administers the Voluntary Party Liability Exemption, or VPLE program (Wis. Stats. §292.15). In late October 2018, WDNR shifted to a position that, unlike prior practice, it will no longer issue a "Certificate of Completion," or COC, whereby WDNR would release the VPLE responsible party and assume responsibility for all hazardous substances that existed on the VPLE subject property. Instead, the COC will be effective only for the hazardous substances that were investigated and, as necessary, addressed. For most sites that are in the VPLE process, and for all pre-2019 VPLE sites, this means that PFASs will not be within the scope of the VPLE COC.

There have been several noteworthy cases regarding PFAS in the last several years:

  • 3M Company agreed in February 2018 to pay the State of Minnesota $850 million in regarding to groundwater contamination from PFAS in the 3M product ScotchGard.
  • DuPont agreed to pay $670 million in 2017 to settle 3,000 personal injury claims from exposure to PFAS in its Teflon product.
  • A DuPont Subsidiary, Chemours, agreed in late 2018 to pay $13 million in penalties to reduce air emissions of PFAS related products from a nonstick compound called GenX.

In Wisconsin, the WDNR is tracking PFAS at approximately 10 sites around the state, including in Marinette, where firefighting foams have been tested and managed, in Manitowoc, where nonstick cookware was manufactured, as well as at numerous former military bases and airfields where firefighting foams have been utilized. 

PFAS Best Practices for Lenders

Because PFAS is an entirely new consideration for environmental due diligence and loan underwriting, and there are presently no federal or state standards, there is great uncertainty for lenders—and their borrowers—as they address the possibility of PFAS in lending transactions. Lenders need to update certain environmental best management practices. 

Lenders should be closely attuned to properties where: (1) fire-training/suppression was conducted or a firefighting facility was on or near the property; (2) there was an industrial fire or major accident near the property; (3) a manufacturer was/is located on or near the property or treated a product to make it water or oil resistant (or used products such as ScotchGard or similar materials in large volumes); (4) the property is located near a landfill, airport, or military base; (5) fill or composting material containing PFAS was used at the site; and (6) there is known PFAS contamination onsite and located near municipal or private drinking water sources or surface water. 

Lenders should require enhanced due diligence practices as part of their loan underwriting and should ensure that their environmental consultants, or their borrower's environmental consultants, are familiar with PFAS and PFAS risk-prone activities and properties. Lenders who have used the Wisconsin VPLE program as the gold standard must also adapt to the new and practical limitations WDNR has imposed on this program. Lenders should communicate with the WDNR frequently and early to be certain to address PFAS. Finally, lenders should be supported by PFAS-experienced consultants and legal counsel to cost-effectively address this new challenge. 


Because PFASs are persistent, pervasive, come from a narrow but widely used manufacturing base, may have been included in a multitude of products, and are subject to evolving state sampling and cleanup standards, all parties to a financing project where PFAS-related activities may be present need to proceed with diligent attention to address the risks PFASs create.

Witte is an attorney with Godfrey & Kahn, s.c., a WBA Bronze Associate Member.