Facing Litigation And Years-Long Push For Increased Regulation, Conglomerate Ends Production Of PFAS Chemicals

The Environmental Protection Agency describes PFAS, the acronym referring to Per- and Polyfluoroalkyl chemicals, as “a group of manufactured chemicals that have been used in industry and consumer products since the 1940s because of their useful properties.” As recently as a couple of years ago, few people had heard of PFAS. But that has changed following increased attention from the media, lawmakers, regulators, and the courts.

After years of escalating legislative, regulatory, and judicial attempts to restrict or prohibit the use of PFAS chemicals — which critics contend has occurred amid a lack of clarity and good faith discussions about these substances and the threats they pose to humans and the environment — a major private company recently announced that it will voluntarily stop production of PFAS chemicals. 3M, the Minnesota-based industrial conglomerate, announced on December 20 that it will cease all PFAS production by 2025.

“While PFAS can be safely made and used, we also see an opportunity to lead in a rapidly evolving external regulatory and business landscape to make the greatest impact for those we serve,” 3M CEO Mike Rowan said in a statement. There will be costs associated with the decision.

“3M said its annual sales of manufactured PFAS are about $1.3 billion with estimated earnings before interest, tax, depreciation (EBITDA) margins of about 16%,” Yahoo Finance reported. “The sales figure works out at about 3.7% of 3M’s 2021 group revenues of $35.4 billion. 3M expects related total pre-tax charges of about $1.3 billion to $2.3 billion over the course of its PFAS exit.”

3M, despite its recent announcement, is still being sued by the attorney general of California and others. Will state officials cease action now that the private sector is voluntarily moving in their sought after direction? The answer to that question, which will come in 2023, will have significant financial ramifications for certain industries, companies, shareholders, and employees.

This decision by 3M follows efforts by state lawmakers to enact broad bans or other regulations restricting the use of PFAS in recent years. 11 states have a PFAS ban of some form already on the books. A California law prohibiting the use of some PFAS chemicals in certain food packaging takes effect January 1, 2023. Maine’s new reporting requirements for PFAS use and mitigation, which was enacted by state legislators in 2021, also begins to take effect on the first day of 2023. That new reporting rule has been criticized by the business community for being particularly onerous and invasive.

“Industry groups are criticizing a revised draft of Maine’s PFAS reporting rule as a threat to confidential business information (CBI), particularly sales projections, underscoring the complexities and challenges faced by state regulators as they implement the nation’s first ban on the use of the toxic chemicals in a wide range of products,” Inside EPA reported on November 30, one month before Maine’s rule takes effect.

Companies submitted formal comments criticizing the Maine Department of Environmental Protection’s proposed rule implementing the 2021 PFAS legislation. In particular, 3M and others criticized the DEP’s inclusion of sales projections in the state reporting requirements, contending that exceeds the writ of the PFAS bill enacted by Maine legislators. In official comments submitted to DEP by 3M, the company argued “reporting requirements cannot be implemented without protections in place for confidential and trade secret information,” adding that “DEP’s rulemaking should establish and describe a process” through which confidential and proprietary information will be protected.

Rather than disclose information to the Maine government alone, 3M recently published the list of its products that contain PFAS on the company’s website. This public disclosure details the scope of products that contain PFAS chemicals. Many are now interested to see if other companies make similar public disclosures related to PFAS use.

In addition to the state-level actions against PFAS production, there is talk that the Biden White House is looking to ban PFAS chemicals under the EPA’s superfund authority. There is also legislation pending in Congress, the PFAS Action Act, that would direct the EPA to designate certain PFAS chemicals as hazardous substances.

In addition to all of the proposals pending at the federal and state levels, international action on PFAS is also expected in 2023. The governments of Denmark, Germany, the Netherlands, Norway, and Sweden are expected issue a plan in January that will restrict the use of PFAS in Europe. Though there is much governmental action against PFAS at various levels of jurisdiction, both domestically and abroad, there is not a commensurate amount of discussion about what PFAS chemicals can be replaced with, nor is the comparative efficacy and cost of PFAS substitutes a topic that gets much attention. As the current energy crisis in Europe is now demonstrating, government attempts to regulate or prohibit certain goods, when it is unaccompanied by an appropriate amount of thought and planning related to replacements and substitutes for the regulated and restricted products, is a recipe for future hardship.

According to the EPA there are “thousands of different PFAS, some of which have been more widely used and studied than others.” California lawmakers have already passed legislation banning certain PFAS chemicals in infant carriers, changing pads, booster seats, nursing pillows, crib mattresses, and food packaging. Lawmakers and regulators in other states are planning to to follow suit. Aside from many household products, PFAS chemicals are also key components used in critical products like medical devices, smartphones, firefighting foam, and technologies critical to national security. Which products and materials can be used in the place of restricted PFAS chemicals and will those substitutes drive up consumer costs?

The answer to those questions will have political consequences for those pushing for PFAS regulation and prohibition in 2023 and beyond. Whether this voluntary move by 3M will be copied by other companies, as well as whether or not it will quell the push for state regulatory and legal action against PFAS manufacturers, is another matter that will become clearer in 2023.