Recent lawsuits against 3M have intensified concerns that it could face huge legal and cleanup costs over a class of chemicals called polyfluoroalkyl substances, also known as PFAS.
The Maplewood, Minn., industrial giant has already reached a historic $850 million pollution settlement with Minnesota. It settled a $35 million case with an Alabama water authority in April to treat PFAS chemicals that leaked into the Tennessee River.
More are in the pipeline. New York sued last month, after spring and summer filings by New Jersey, New Hampshire and Vermont. A shoe company that used the chemicals to waterproof its products has sued. So has a dairy farm in New Mexico that says it had to dump 15,000 gallons of cow milk each day since October 2018 because of contamination from a nearby military base that used firefighting foams that contained the chemicals.
The 3M company has set aside an additional $235 million to cover legal claims, but some estimates of the ultimate cost exceed $10 billion.
"You can kind of see at its infancy how this could become a very large problem," said Peter Kelso, an analyst at environmental consulting firm Roux Associates. "This [PFAS] is somewhat like asbestos in that it's very ubiquitous, which means it's pretty much everywhere."
The chemicals have been found in streams, rivers, military bases and in the drinking water of 1,361 sites across the U.S., according to information compiled from states and the U.S. Department of Defense by the Environmental Working Group advocacy firm.
While the lawsuits weave through the system, governments at municipal, state and federal levels have introduced new restrictions or elevated the pollution status of polyfluoroalkyls. In one Ohio lawsuit, a judge allowed a request for lifelong health monitoring to proceed. Health claims were not allowed into evidence in the lawsuits that led to the Minnesota settlement.
While 3M isn't the only company that made or used polyfluoroalkyls -- DuPont, Chemours, Tyco, Chemguard and others also are named in lawsuits and government actions -- the concern is the widespread nature of the chemicals. They are used in things ranging from nonstick coatings on pans and carpets to waterproof boots and jackets and fluorinated firefighting foams.
The 3M company is fighting many of the increased liability claims -- and also more stringent regulations and legislation regarding PFAS. Attorneys for 3M told Congress this fall that PFAS compounds do not harm humans at the levels found in the environment. Company representatives also said 3M has never hidden any research and regularly works with cities, states and the Environmental Protection Agency to remediate contamination from the chemical tied to its own sites.
It also "placed thousands of documents in the public domain, including more than 150 published studies conducted by 3M and other researchers on potential environmental and health effects of PFAS," said spokeswoman Fanna Haile-Selassie. "We want to broaden the global knowledge on PFAS."
RISKS WORRY INVESTORS
As the court cases and the advocacy for the government to increase regulations intensifies, Wall Street and groups representing shareholders have taken notice.
Of the 19 analysts tracked by Reuters that cover 3M, only three rated the company a "buy" or "outperform." This month both Citigroup and UBS Securities downgraded their 3M stock recommendations, citing PFAS cost concerns.
Citigroup research analyst Andrew Kaplowitz wrote in a report to investors that litigation risks could be a "lingering overhang" on 3M's stock.
"Our discussions with legal experts indicate that the remediation [and] cleanup costs -- per severe state -- could be [as much as $850 million]," Kaplowitz wrote, citing 10 known states with "severe" problems. But he noted that "3M's ultimate liability remains difficult to qualify [because] the science relative to PFAS' actual impact on human health remains not well understood."
As concerns have mounted, Gordon Haskett Research Advisors, an independent investment research firm, organized two teleconferences last summer with insurance and risk analytics experts regarding PFAS liability.
John Inch, a senior analyst from Gordon Haskett, said some investors looking at mounting lawsuits and 3M's $235 million reserve wonder, "Does that seem like enough?" More lawsuits and PFAS pollution sites seemingly materialize each month, along with claims about health ailments, Inch said.
It has been 70 years since 3M made its first nonstick, waterproof and stain-resistant chemical ingredients for Scotchgard, Teflon and eventually fluorinated firefighting foams. Environmentalists call PFAS the "forever chemicals" because they don't break down and instead linger in soil, water and human blood.
The growing problem worries environmentalists, cities and plaintiffs who point to the results of a published study that monitored the health of 16,000 West Virginians exposed to PFAS-contaminated water between 2005 and 2013. The C8 Science Panel, as the researchers were called, found probable links between certain PFAS compounds and testicular and kidney cancers, thyroid, cholesterol, autoimmune and high blood pressure problems in animals and humans.
While states go to court -- and some like New Hampshire pass more stringent legislation -- critics complain the U.S. government has yet to do more than study growing contamination claims. The EPA set a PFAS "health advisory level" of 70 parts per 1 trillion in water. That advisory is a guideline that is not enforceable.
More than 40 bills have been introduced in Congress that would raise the PFAS class, thus adding some enforcement teeth. The latest of those was just pushed out by a bipartisan conference committee trying to reconcile the House and Senate defense spending bills. The House version had suggested elevating certain PFAS to the Superfund level.
Even so, product liability experts note that most PFAS lawsuits just mention health risks but largely complain about sizable environmental damage. That's because it's easier to prove chemicals are in city drinking water than to prove that PFAS -- and only PFAS -- caused a person's specific disease, attorneys note.
Business on 12/27/2019
Print Headline: Suits raise concerns over liability of 3M for chemical's harm