Preparing for Environmental Issues that May Arise After Construction Begins Preparing for Environmental Issues that May Arise After Construction Begins

Preparing for Environmental Issues that May Arise After Construction Begins

Construction projects are often subject to environmental requirements or approvals derived from various sources, including federal, state and local regulations. Some applicable environmental requirements come from laws and regulations that apply to all construction activities, whereas other requirements arise from commitments made by the customer (e.g., permit applications, project correspondence to agencies or environmental impact analysis). A contractor should be familiar with the environmental requirements and potential permitting programs that may apply to a project and participate in the permitting process as much as necessary to help ensure permit conditions, project budgets and timelines can be met. In this regard, it is worth noting that in the past year the standard used for complying with regulations pertaining to All Appropriate Inquiry, or environmental investigation of a site aimed at limiting liability for any contamination present, changed as did what may be considered waters of the United States relevant to permit considerations. 
 
Assuming relevant permits are obtained for a project based on known facts, unexpected events may still occur that trigger environmental laws during construction. Construction does not have to occur on contaminated land for potential environmental claims or issues to arise during construction. A surprisingly large number of environmental issues arise from ordinary construction activities that may not be noticed, or visible, until the issue becomes a costly problem. 
 
Contractors have a responsibility to prepare for any environmental concerns that could affect any employees, other contractors, the public and the environment. Indeed, contractors are often brought into claims, lawsuits or regulatory actions related to activities at a jobsite. As such, contractors have to be aware of the environmental problems that might arise from jobsite activities. Below are a few potential environmental hazards of which contractors should be aware:
 
  • Buried drums, stained soils or strong odors are encountered during site clearing, grading or excavation activities.
  • Underground storage tanks, pipes or drums containing pollutants could be broken open resulting in pollution spills.
  • Stormwater may be discharged, which often contains pollutants such as sediment, debris, or chemicals and transported to local storm sewers, surface waters or drinking wells.
  • Mishaps occur in the transportation of waste or materials to or from a jobsite or during the disposal of wastes. Spills may occur while chemicals, waste, debris or equipment is being transported to or from the jobsite or during loading/unloading. 
  • The mixing of debris with hazardous waste occurs. Construction debris may be inadvertently mixed with hazardous waste and then disposed of improperly, causing contamination at the landfill or disposal facility where the wastes were taken. This may result in claims against the landfill or disposal facility that could come back to the original generator (construction entity or construction site owners/operators) of the waste.
  • The release of contaminants occurs at the jobsite. Releases can occur from fumes from chemicals or construction activities (welding, cutting, engines), spills from fuels or lubricants associated with construction equipment, release of asbestos particles from asbestos containing materials (ACM), release of mold or mold spores from areas where water intrusion has occurred or moving soil that contains hazardous chemicals from one part of the construction site to another or off-site.
 
Various federal and state laws and regulations require the reporting of discovered releases or suspected releases of hazardous substances, including past releases that have not already been reported. For instance, the emergency notification requirements of the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and the Emergency Planning and Community Right to Know Act (“EPCRA”) apply to releases of most hazardous substances into the environment—including air, water, land regulations in an amount equal to or greater than the a “reportable quantity” (“RQ”). Furthermore, all “extremely hazardous substances” listed under EPCRA must be reported. 

Whether a release must be reported, and by and to whom, is dependent on the type of substance involved; the amount released; whether the release is into the air, water or land; the state where the release occurs; whether it is a one-time or continuous discharge; the SIC or NAIC code of the industry involved and other factors. In addition, the timing required to report a release might vary from minutes, hours or days depending on the circumstances. Accordingly, you should consult legal counsel in the event of a release or improper handling of materials to determine the reporting, corrective action and other legal requirements applicable to the situation. 

Please keep in mind that the mere reporting of a suspected release does not necessarily make one liable for cleanup of the release under federal or state law. Nonetheless, if you discover a suspected release some recommended actions are:
  • Discontinue operations.
  • Notify the customer and any appropriate supervisor or contractor immediately. 
  • Determine who is responsible for reporting obligations, whether by contract or otherwise.  Please note, however, that even where the customer has reporting responsibility by contractual agreement, your company may still have an obligation to report if the customer fails to do so.
  • Determine any other contractual responsibilities.
  • Document all actions and delays or other effects of the discovery.
  • Consult legal counsel.
  • Report any release, or suspected release, of a hazardous substance greater than a reportable quantity or otherwise required by applicable laws or regulations to the appropriate governmental entities. Depending on the substance involved, the amount and whether it was in transit at the time, reporting may be required to: 1) National Response Center, 2) the United States Department of Transportation, 3) State Emergency Response Commission, 4) local EPCRA Emergency Coordinator, and 5) other state-required officials. Prompt written follow-up reporting is also required. State and local governments may require information in addition to that required by EPA.
As indicated above, even when a contractor has instituted steps or programs relevant to environmental issues, unforeseen environmental issues can still occur. In addition to raising questions as to legal obligations, there is also the question of how to mitigate risk relevant to out-of-pocket expense via insurance. You can obtain some protection from potential environmental liability by shifting such liabilities to any subcontractors by having the relevant subcontractors add you to their insurance policies as an additional insured. However, being an additional insured will not eliminate all potential liability, as some subcontractor General Liability policies may not include any pollution coverage. In addition, subcontractor policies may have specific limits relevant to environmental claims or have time restrictions related to such incidents. For instance, a policy may require an environmental event (i.e. a release, spill, exposure) at the construction site be found within a certain time, like ten days, and reported to the insurance carrier within a certain time, like 30 days. Such time restrictions can be problematic when applied to specific projects, because incidents like the presence and exposure to mold or accidents underground (i.e. punctured line or tank or a release) may not be found immediately. Such delayed knowledge may interfere with your ability to access coverage for pollution events. As such, it is important to review specific contracts for actual coverage provided and needed actions.
 
Another way to mitigate monetary risks via insurance is to have your own policy that specifically addresses pollution incidents. Many environmental insurance policies aimed at contractors can be enhanced with endorsements that provide coverage for pollution events during transportation of waste or materials to or from a jobsite, mold or even asbestos. Some environmental policies also provide coverage for fines and penalties related to jobsites.
 
We encourage you to contact Freedom Smith at Freedom.Smith@icemiller.com, Terri Czajka at Terri.Czajka@icemiller.com or any of the Ice Miller LLP Environmental attorneys to discuss handling of liability risks that may arise during construction activities or if you have questions about mitigating risks related to construction activities. 

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.
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