built environment insight 25 Jun 2020 PFAS and Property: Valuation, Litigation, Remediation

Introduction

PFAS are a group of chemicals used from the 1970s to the early 2000s for their heat and grease resistant properties in products ranging from furniture protectant to aviation hydraulic fluid.¹  Due to their effectiveness in extinguishing liquid fuel fires, PFAS chemicals were also used as an ingredient in aqueous film forming foam ("AFFF"), used extensively by civilian and military authorities as a fire retardant from the 1970s onwards. However, PFAS does not readily decompose in the environment and can migrate long distances through soil and water.

Over the past two decades, concerns have emerged about the effects associated with accumulation of PFAS in the human body. While the extent of the effects of PFAS in humans remains uncertain, current research indicates that PFAS exposure may be linked to increased cholesterol, impaired kidney function, changes to thyroid hormones and sex hormones, and low birth rates in babies.²  The Government's official position is that there is insufficient evidence that PFAS substantially impacts an individual's health, but that exposure should be minimised as a precautionary measure.³  Concerns have also been expressed about the effect of PFAS on the environment, particularly given evidence that PFAS can accumulate in water, soil, and in the bodies of animals.⁴

PFAS in Australia

Fire-fighting foams containing PFAS compounds known as PFOS and PFOA have been widely used in Australia due to their effectiveness in fighting liquid fuel fires.⁵  PFAS use was particularly common at, and in areas surrounding, airports and Department of Defence (the "Department") bases. Although the use of certain PFAS chemicals was phased out ten years ago, high concentrations of PFAS remain in those areas traditionally subject to PFAS use. As PFAS compounds are highly soluble and can rapidly disperse via waterways, increased environmental levels of PFAS have also been found in the areas surrounding sites at which at PFAS had been used.⁶

Property Impacts

Owners of properties contaminated with PFAS, or near areas of PFAS contamination, may be unable to use those properties for their intended purposes. For example, a Report produced by the Joint Standing Committee on Foreign Affairs, Defence and Trade (the Report), cited a number of examples of commercial properties that have been forced to cease operations following findings of PFAS contamination. These properties cited include an oyster farm that, as a result of PFAS being found in the area surrounding the farm, became unable to harvest its oysters due to concerns about contamination of the oysters themselves, and a newly-built waterpark that is now unable to open due to concerns about contamination in the immediate area.⁷ 

The economic impact of these limits on land use has been compounded by the indirect effects of PFAS contamination. Many of the regions hit hardest by PFAS contamination rely heavily on nature tourism and the revenue that comes with it. For example, in late 2018 picturesque Jervis Bay, a New South Wales tourist hotspot known for its sandy beaches, was found to be affected by PFAS contamination as a result of the historical use of fire-fighting foams at the Department's Jervis Bay Range Facility and HMAS Creswell.⁸ PFAS was detected at a number of locations around Jervis Bay, including popular swimming and fishing spots such as Mary's Creek. As a result, locals were warned not to fish or consume seafood from the area, with tourists warned to be cautious in higher-risk areas.⁹  

Instances such as this mean that owners and investors of properties not directly impacted by PFAS contamination are nevertheless at risk of reduced revenue if tourists and tenants are deterred by PFAS contamination. In a similar vein, business owners in contaminated regions may face additional challenges in recruiting and retaining staff.

Class actions filed on behalf of residents of PFAS contaminated areas have claimed that limits on use, combined with the negative perceptions associated with PFAS contamination, have also contributed to a decline in property values.¹⁰

These claims have been echoed in a paper produced by the Report, which cited claims by residents that property prices in areas contaminated with PFAS, or close to areas contaminated with PFAS had "plummeted". The Wetland Environmental Taskforce Public Fund's Heart Morass property, a property with a Capital Improved Value of $2.278 million, was, for instance, reported to have "zero commercial value" due to PFAS contamination.

Meanwhile, property prices in Williamtown were found to have decreased by an average of 15%, with claims by residents that real decreases are actually much higher due to an overall slowdown in market activity in the area. Landlords have also suffered losses, with many unable to find tenants for their properties without offering substantial rent reductions.¹¹

PFAS Litigation

In 2016, residents of Katherine in the Northern Territory, Williamtown in New South Wales and Oakey in Queensland brought a class action suit against the Department, claiming that it negligently allowed PFAS to escape from its bases, and contaminate local environments.¹² In particular, Shine Lawyers, on behalf of Oakey residents, sought compensation for economic loss suffered from a decline in value of residential, agricultural and/or business land due to the contamination.¹³

On 26 February 2020, this class action culminated in a landmark $213 million settlement between the Department and residents of Oakey, Katherine and Williamtown – a positive outcome for residents, but one that makes it difficult to speculate what the outcome of the case might have been at trial.

Shine Lawyers recently announced that they are representing more than 40,000 Australians in a further class action over alleged property value losses due to PFAS contamination (the 2020 class action). This class action will focus on areas where PFAS contamination has only recently come to light, including Wagga Wagga and Richmond in New South Wales, Wodonga in Victoria, Darwin in the Northern Territory, Townsville in Queensland, and Edinburgh in South Australia.

Heads of Action

The 2016 class action brought by Shine Lawyers alleged liability in tort for nuisance and negligence, as a breach of statutory duty.¹⁴ Nuisance and negligence are common heads of action in cases where there is alleged contamination of land, often referred to as "toxic torts".

For a claim in private nuisance to succeed, the plaintiff needs to establish that:

• they have a right to own or occupy land;
• the defendant has caused an interference with their rights to use or enjoy that land through an act or omission; and
• that interference was substantial and unreasonable.

Private nuisance only applies where there has been an interference with a private property right. Negligence, by comparison, has a broader application but requires the plaintiff to establish that:

• the defendant owed the plaintiff a duty of care;
• the defendant failed to exercise a reasonable standard of care;
• the plaintiff suffered loss or damage as a result; and
• that the loss or damage was reasonably foreseeable.

Although a Statement of Claim is not yet available in respect of the 2020 class action, it can be expected that compensation will be sought based on the above (or similar) heads of action. 

Challenges for Remediation

Due to the extent of PFAS contamination and the solubility of PFAS compounds, there are significant challenges for remediation of PFAS-contaminated properties. PFAS chemicals do not readily decompose in the environment, and therefore intervention is needed in order to decrease PFAS accumulations.¹⁵

Generally, PFAS remediation will involve a combination of:

• isolation and treatment of contaminated water supplies;
• provision of non-contaminated water to affected communities; and
• removal of contaminated soils.

However, remediation methodologies for PFAS continue to evolve, and the volume of soil and water requiring treatment means that remediation is incredibly costly.

In areas near Department facilities where legacy fighting foams were used, the Department has generally been responsible for mitigation or remediation of contamination. It has, for instance, commissioned nine water treatment plants across Department estates and had, as of June 2019, spent $125 million to reduce the mass of PFAS in the environment and prevent migration of the chemicals.¹⁶

PFAS chemicals, however, were not exclusively used by the Department, and may often be present at industrial sites used, or previously used, for chrome-plating, petrochemical storage and textile manufacturing.¹⁷ This complicates remediation in cases where the original user cannot be readily identified or held responsible for investigating and managing potential pollution, as the current owner will generally become responsible for the site.¹⁸

Compensation of Land Owners

In light of the significant losses suffered by landowners and residents of PFAS contaminated properties, the Coalition Against PFAS recently called for the Commonwealth Government to fully compensate affected communities for all losses suffered, including financial losses in relation to property and business losses.¹⁹ At this stage, affected parties can make a claim for compensation for loss or damage suffered as a consequence of Defence activities through the PFAS Investigation & Management Program Financial Claims web page.

Conclusion

While the links between PFAS exposure and negative impacts on human health remain equivocal, lawyers and landowners should take a conservative approach to managing PFAS risk in light of the potential impacts on property values and the significant costs of remediation.

It is likely that new areas of PFAS contamination will continue to be identified in Australia, with further claims being brought as a result. Due to the cost and difficulty of remediation, affected landowners are likely to be reliant on government compensation and/or the proceeds of any settlement reached or court order made to offset economic losses.

Owners or prospective purchasers of land near Department bases or land that is nearby areas of historical PFAS use should ensure that they do proper due diligence to ensure that their land is not contaminated with PFAS.

Authors: Jake Saccardo, Senior Associate and Samantha Ward

^1. Australian Government, "About PFAS"

^2. Ibid

^3. Australian Government Department of Health, "Per- and Poly-Fluoroalkyl Substances (PFAS)"

^4. Environmental Protection, "What is PFAS and why should you care?"

^5. Expert Health Panel for PFAS, n 2.

^6. Australian Government, n 1; Department of Defence, n 2.

^7. Joint Standing Committee on Foreign Affairs, Defence and Trade, "Inquiry into the Management of PFAS Contamination in and Around Defence Bases"

^8. EPA NSW, "Jervis Bay range facility" (October 2019)

^9. Kate Jackson, "Tourists Warned to Stay Away from Contaminated Holiday Haven" (9 December 2018)

^10. ?

^11. Joint Standing Committee on Foreign Affairs, Defence and Trade, n 8.

^12. Shine Lawyers, "Class Actions"

^13. Shine Lawyers, "Oakey Contamination

^14. Shine Lawyers, n 7; Shine Lawyers, "Kirsty Jane Bartlett & Anor v Commonwealth of Australia Further Amended Statement of Claim" (30 August 2019)

^15. Joint Standing Committee on Foreign Affairs, Defence and Trade, n 8.

^16. Australian Department of Defence, "Response provided to journalist" (21 June 2019)

^17. Geo-Logix, "PFOS & PFAS Assessment and Remediation"

^18. ?

^19. Queensland Government, "PFAS Contamination Protocol"