Environmental Issues in the Dry-Cleaning Industry and How to Address Them

In recent years, as the number of dry-cleaning businesses declines and traditional perchloroethylene (“perc”) machines are replaced with alternative systems, awareness of environmental issues has gradually decreased. With the widespread adoption of alternative machines such as hydrocarbon systems, concern has diminished even further.

However, state environmental agencies still require that separated water from hydrocarbon machines be either disposed of through licensed waste handlers or filtered and then evaporated into the air using approved evaporators. There have been cases where violations resulted in fines, indicating that regulatory oversight and monitoring remain active.

Just as environmental problems associated with perc solvents only became evident decades later, alternative equipment must also be carefully managed in advance to prevent future issues.

Liability and Historical Contamination

Dry-cleaning businesses that have operated for decades often pass through multiple owners. When contamination is discovered, disputes frequently arise over responsibility among past and present stakeholders.

Even if a business currently uses hydrocarbon equipment, prior use of perc machines can still lead to contamination concerns.

Environmental Due Diligence in Transactions

When buying or selling a dry-cleaning business, environmental inspections are rarely required by banks or other parties. However, in real estate transactions or loan applications, lenders typically require environmental assessments before proceeding.

Environmental standards for air, soil, and groundwater are regulated by federal and state agencies:

• Soil contamination: measured in parts per million (ppm)
• Groundwater contamination: measured in parts per billion (ppb)

If contamination exceeds regulatory limits, environmental firms are legally required to report the site to government authorities. This can trigger lengthy and costly remediation processes.

Environmental Site Assessments (ESA)

Environmental evaluations typically begin with Phase I ESA:

• Review of historical records (title search, prior contamination reports)
• Site inspection
• Identification of potential risk areas (Areas of Environmental Concern, AOCs)

If AOCs are identified, a Phase II ESA is conducted:

• Soil and groundwater sampling in suspected areas

Because Phase II involves direct testing and potential liability, many business owners and property owners are reluctant to proceed.

Separated Water: A Key Risk Factor

In the past, when environmental awareness was low, separated water containing perc was often discharged onto the ground, into septic systems, or into drains—becoming a major source of contamination in the industry.

Today, alternative machine wastewater is regulated in the same way as perc wastewater, requiring careful handling. While disposal through environmental service companies can be costly, using an evaporator system can:

• Prevent potential contamination risks at the source
• Reduce disposal costs
• Protect the business from future environmental liabilities

Remediation and Compliance

If contamination is confirmed:

• The property owner or business must submit a remediation plan to environmental authorities
• Approval must be obtained before cleanup begins

If responsible parties fail to act within the required timeframe, government agencies may carry out remediation directly and charge all associated costs—often at a significantly higher amount.

Cost Considerations

Environmental issues can involve three major cost categories:

1. Inspection costs
2. Cleanup and remediation costs
3. Legal expenses

Although the responsible party is generally required to bear these costs, disputes between past and present owners often arise, increasing legal fees.

Typical costs include:

• Phase I ESA: approximately $2,000
• Phase II ESA (for dry cleaners): $5,000–$10,000

If contamination is found, additional costs for investigation, planning, and remediation can escalate significantly depending on severity, location, and site size.

Environmental Insurance

Some landlords now require environmental insurance as part of lease agreements, even for hydrocarbon-based operations. This helps:

• Meet lease requirements
• Protect against unexpected cleanup costs and legal disputes
• Support stable business operations

However, policy limitations must be carefully reviewed:

• Retroactive date: contamination occurring before the policy start date is typically not covered
• Most policies are claims-made, meaning coverage applies only if the claim is filed while the policy is active (unlike occurrence-based policies)

Conclusion

Environmental risks in the dry-cleaning industry have not disappeared—they have simply evolved. Reduced awareness does not eliminate liability.

Proactive management—especially proper handling of separated water, regular compliance with regulations, and consideration of environmental insurance—is essential to prevent long-term financial and legal consequences.