Mitigating Environmental Liability From Construction...

Mitigating Environmental Liability From

Construction Debris and Contaminated Soil

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TUESDAY, FEBRUARY 12, 2019

Presenting a live 90-minute webinar with interactive Q&A

John-Patrick Curran, Principal, Sive Paget & Riesel, New York

Polly B. Jessen, Partner, Kaplan Kirsch & Rockwell, Denver

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MITIGATING RISK AND LIABILITY FROM CONSTRUCTION DEBRIS AND

CONTAMINATED SOIL

MITIGATING RISK AND LIABILITY FROM CONSTRUCTION DEBRIS AND

CONTAMINATED SOIL

John-Patrick Curran, Esq.Sive, Paget & Riesel P.C.

560 Lexington AvenueNew York, New York

[email protected]

RISKS AND LIABILITY RESULTING FROM CONSTRUCTION DEBRIS AND CONTAMINATED MEDIA

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1. LEGAL RISK – “Responsibility” for conditions at and emanating from the property, irrespective of development plans

2. PRACTICAL RISK – Added cost and delay

Two Main Categories of RiskTwo Main Categories of Risk

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LEGAL RISKLEGAL RISK

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• Owner/operator liability – PRP status

• Third-party liability – Offsite migration

• Public or private nuisance

• Natural resources damage

• “Stigma” damages

LEGAL RISKLEGAL RISK

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Statutory Liability CERCLA: Comprehensive Environmental Response, Compensation,

and Liability Act, aka “Superfund”• Joint and several liability regardless of fault• Responsible parties include:

- current and past owners and operators of any facility where a hazardous waste was disposed of (does not include petroleum)

- May include anyone (e.g. corporate officers) who had substantial control over the activities that lead to the release of hazardous substances. US v. Bestfoods, 524 U.S. 51 (1998).

Legal Risk Legal Risk

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CERCLA (cont.)

- generators and those who arrange for disposal or

treatment of hazardous waste

- transporters of hazardous waste who are responsible for

selecting site of disposal Tippins, Inc v. USX Corp., 37 F.3d

87 (3d. Cir. 1994)

• Responsible parties can be made to investigate and to clean up a

site, or to pay for investigation and remediation after that work

has been done by others


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State and Local Laws

• Different laws from state to state, county to county,

etc.

• NY Navigation Law Article 12 (Oil Spill Law)

- Prohibits unauthorized discharge of petroleum

- Strict liability

- Private right of action


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Reporting requirements

• Federal – RCRA

- Hazardous waste

• State reporting requirements

- NY petroleum spill reporting requirements


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Third Party Liability

Offsite migration – obligation to investigate and remediate

• Continuing source

Personal injury

Property damage

• Stigma

Natural resources damage


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PRACTICAL RISKPRACTICAL RISK

Time is MoneyTime is Money

Determining legal responsibility becomes less important when the clock is running

and you need to get something built

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• Added cost has to be carried in development budget,

regardless of whether recovery may be available later

• Impact to schedule has to be accounted for

Practical Risk Practical Risk

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C&D and CONTAMINATED MEDIAC&D and CONTAMINATED MEDIA

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Construction and Demolition Debris (C&D)

• Concrete, brick, clay• Drywall, plaster• Asphalt• Wood• Asphalt shingles• Uncontaminated soil, rock, gravel, sand

Non-Hazardous Contaminated Soil

• Historical fill

Media of ConcernMedia of Concern

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Non-Hazardous Petroleum Contaminated Soil

Hazardous Waste

Contaminated groundwater

Soil vapor

• Not a handling and disposal issue

• Vapor mitigation

Media of Concern Media of Concern

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Legal obligation to remediate vs. practical need to

remove contaminated media

Generation

Handling

Disposal and/or re-use

Topics of ConcernTopics of Concern

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Construction and Demolition Debris (C&D) Construction and Demolition Debris (C&D)

Construction & Demolition Debris

Always a concern (every project generates C&D)

548 million tons of C&D generated in the United States in 2015 (EPA); more than twice the amount of generated municipal solid waste (EPA)

Federal and State Laws typically treat construction debris and soil differently than industrial wastes and other types of media

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Highly variable, both in terms of composition and how it is defined

• US EPA - Waste material that is produced in the process of construction, renovation, or demolition of structures

• New York – recognizable, uncontaminated waste resulting from construction, remodeling, repair and demolition of structures, buildings and roads.

• Other states have different definitions of C&D

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Areas of Risk:

• Pre-demolition abatement activities

- Asbestos

- PCBs

- Mercury

• Segregation and characterization

- May be required for disposal

• Re-use and/or Disposal

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Contaminated MediaContaminated Media

Contaminated Media

Site Contamination In General

• Cleanup responsibilities

• Use restrictions

• Engineering and institutional controls

• Liability to third-parties

• Generator liability

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Contaminated Media Contaminated Media

Soil

• Non-Hazardous Contaminated Soil

• Non-Hazardous Petroleum Contaminated Soil

Hazardous Waste

• Costs of disposal

• Additional regulatory fees and surcharges

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• Soil becomes hazardous if:

- Contains a listed waste

- Exhibits one or more hazardous characteristics:Ignitability

Corrosivity

Reactivity, or

Toxicity

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RCRA Haz Waste Decision Tree

Is the material a solid waste?

Is the material excluded from the definition of solid waste or hazardous waste?

Is the material a listed or characteristic

hazardous waste?

Is the material delisted?

The material is not subject to RCRA

Subtitle C regulation

The waste is subject to RCRA

Subtitle C regulation

No

Yes

No

Yes

No

Yes

No

Yes

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• Obligations both regulatory and contractual

• EPA – Generator can be any “Person”:

- Who owns the site from which material was generated

- Who excavated material

- Who caused material to become regulated

• Can be owner, developer, contractor

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• Contaminated groundwater• Dewatering• Treatment and discharge• State and local requirements

• Residual contamination/soil vapor• SVE/vapor barrier• Vapor mitigation• Engineered cap and/or other controls• Periodic monitoring and reporting

• Remedial programs

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DisposalDisposal

Disposal of C&D and Contaminated Media

Know what you are disposing of and where it can go, and then make sure that it goes there

• Permitted C&D Landfills (non-contaminated)

• Recycling facilities

• Permitted treatment, storage and disposal facilities

• Re-use onsite or offsite - On-site processing

- Beneficial use determination

- Pre-determined beneficial use (fill material)

Requires compliance with both Federal and State law

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DisposalDisposal

Federal RCRA: Resource Conservation and Recovery Act - 40

CFR Parts 240-282

• Regulates generation, transportation, treatment,

storage, and disposal of hazardous waste

• Imposes reporting requirements

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DisposalDisposal

State Varies significantly from state to state

New York – 6 NYCRR Parts 360 – 377

• Significantly revised as of November 4, 2017

- Requires tracking of C&D (similar to manifest system)

- Now requires sampling of all fill material

- Predetermined beneficial use

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MITIGATING ENVIRONMENTAL RISKMITIGATING ENVIRONMENTAL RISK

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Mitigating Environmental RiskMitigating Environmental Risk

Pre-Acquisition Due Diligence“All Appropriate inquiries”

• CERCLA may protect innocent purchasers of previously- contaminated property, IF they

- carry out “all appropriate inquiries” into the previous ownership and uses of the facility , AND

- take “reasonable steps” to stop any continuing release of a hazardous substance, prevent a future release, and prevent or limit harm to humans or the environment.

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“All Appropriate inquiries” (cont.)

• ASTM International Standard E1527-13

(“Standard Practice for Environmental Site

Assessments: Phase I Environmental Site

Assessment Process”)

- Identifies “Recognized Environmental

Conditions”

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Recognized Environmental Condition

- the presence or likely presence of any hazardous

substances or petroleum products in, on, or at a

property: (1) due to any release to the environment;

(2) under conditions indicative of a release to the

environment; or (3) under conditions that pose a

material threat of a future release to the environment

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State Standards

ASTM satisfies most, but not all, state due diligence requirements

New Jersey - “Appropriate Inquiry” under the NJ Spill Act, which requires the performance of a “preliminary assessment” N.J.S.A. 58:10-23.11g(d)

• In addition to, not in lieu of, ASTM Phase I/Phase II

• Conducted by a Licensed Site Remediation Professional

• Identifies Areas of Concern (AOCs), which are defined more broadly than REC

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Contractual Allocation of Responsibility and RiskBuyer/seller allocation of responsibility

• “As-is” clauses- Not the same thing as a release- Statutory rights must be specifically waived- Release v. indemnity- First party rights v. rights of contribution

Remediation funding sources/escrow• Seller may retain responsibility for increased costs of

development due to the presence of contamination

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Construction contract allocation of responsibility and risk

• Specific provisions concerning management of

contaminated media

• Disclosure of known conditions

• Determining who will be generator

• Responsibility for determining disposal facilities

• Health and safety plans

• Waste characterization and classification

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Construction contract allocation of responsibility and risk(cont.)• Unit costs• Record keeping• Indemnification

- Compliance with laws- State anti-indemnification laws- Attorneys’ fees - Injury to persons employed in the work- Insurance

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Waste Management Plans (Site Management Plans; Soil

Management Plans)

• Best practice

• Saves time and money and reduces risk

• Handling of construction debris - Hazardous or regulated materials (e.g. ACM)

- Disposal or recycling options/locations

- Re-use

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Waste Management Plans (cont.)

• Soil management (cont.)

- Pre-excavation characterization

- Quantities and locations

- Avoidance of cross-contamination

- In-situ treatment options

- Re-use

- Disposal options/locations

- Record keeping – manifests (required for haz waste)

- Need to be able to track fate of material removed from site

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“Contained-in” Determination - Soil and other media may become hazardous when they “contain” hazardous waste

• Increased cost of hazardous waste disposal (e.g. T&D @ $63/yd3 v. $190/yd3)

• Additional surcharges and regulatory fees may also apply

• EPA “contained in” policy allows media containing minimal amounts of a hazardous waste to be treated as non-hazardous if:


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Mitigating Environmental Risk Mitigating Environmental Risk

“Contained-in” Determination (cont.)

- Soil does not exhibit characteristics of a hazardous waste, and

- Disposal as non-hazardous will not pose a threat to human health and environment

• Determination must be made by EPA or “authorized state agency”

• State may have different/additional requirements

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Mitigating Environmental Risk Mitigating Environmental Risk Case Study

Brownfield Cleanup Site In Brooklyn

• Excavation for foundations requires removal of 10,000 tons of soil

• Soil sampling found elevated tetrachloroethylene (TCE), a listed wasted

• Transportation and disposal cost if non-hazardous = $600,000

• Transportation and disposal cost if hazardous = $1.9M

• Soil did not exhibit characteristics of a hazardous waste, and TCE levels did not exceed NY contained in criteria

• NYSDEC issued “contained in” determination to permit disposal as non-hazardous following “hot spot” removal

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Environmental Insurance• Owner’s PLL policy

- The devil is in the endorsements- Claims made- If not carefully scrutinized, policies can be worthless- Capital improvement exclusion- Historical fill exclusion- “Claim” requirement or governmental trigger- Pre-existing conditions – disclosure- Reopeners - Non-owned disposal sites

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• Contractor’s policy- Any work that involves abatement or any subsurface

work (excavation, utilities, etc.)- Can be occurrence based- Contractor’s actions/not pre-existing conditions

• Environmental consultants’ policies- Errors and omissions- Contractual liability limitations

Remedial programs• Liability protections

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MITIGATING ENVIRONMENTAL LIABILITY FROM CONSTRUCTION DEBRIS AND CONTAMINATED SOIL

POLLY B. JESSEN

KAPLAN KIRSCH & ROCKWELL LLP

STRAFFORD PUBLISHING

FEBRUARY 12, 2019

DETERMINING LIABILITY

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WHO IS LIABLE UNDER STATUTORY AND COMMON LAW?

PRE-EXISTING CONTAMINATION

• Current owner or operator • Past owner or operator • Past generator or arranger• Past transporter• Surrounding site owner/operator • Consultants

• CERCLA • RCRA• Clean Water Act• State claims

• e.g. mini-CERCLA• Common law

• Negligence• Trespass• Nuisance• Misrepresentation

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NEWLY INTRODUCED CONTAMINATION/ EXACERBATION/VIOLATIONS OF LAW

• Contractors - negligent exacerbation/disposal

• Party responsible for compliance

Owner/operator of facility

Contractors

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IDENTIFYING RESPONSIBLE PARTIES

• New conditions vs. pre-existing Phase I/Phase II ESA establishes baseline conditions

• Responsibility for pre-existing contamination Phase I ESA historical uses

Chemical “fingerprinting”

Chain of title

Other historical research

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PRE-EXISTING CONTAMINATION

Prior owners/sellers

Are there indemnities in place?

Are there escrows or cost reimbursement provisions?

Federal covenants and indemnities

o BRAC § 330

o CERCLA § 120(h)

Insurance

Pollution legal liability policies

Historical CGL policies

Consultant’s policies

WHO MAY BE CONTRACTUALLY LIABLE?

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NEWLY INTRODUCED CONTAMINATION/ EXACERBATION/VIOLATIONS OF LAW

• Contractors/subcontractors

• Consultants

• Insurers Contractor’s pollution legal liability

WHO MAY BE CONTRACTUALLY LIABLE?

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PRACTICALLY SPEAKING

• Time may not allow recovery at the time costs are incurred

• Time may not allow steps to insure maximum recovery

• Liable parties may not be solvent

• Recovery costs may exceed likely cost recovery

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COST RECOVERY

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SOURCES OF RECOVERY

LEGAL Claims Funding Sources

• CERCLA claims• RCRA/CWA claims• Common law claims• Insurance• Contractual claims

• Tax credits • State cleanup funds

• UST fund• Spill fund• Dry cleaner funds

• Other state and local incentives• e.g., TIF or special

district funding

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CERCLA• Current and past owners and operators, arrangers, transporters

• Recoverable costs under 107(a)(4)(B): are “any . . . necessary costs of response incurred by any other person consistent with the national contingency plan”

• 40 CFR 300.700 defines actions “consistent with the national contingency plan” NCP provisions for private actions

Public comment on remedy selection and community relations

Immaterial or insubstantial deviations do not affect claims

• Segregate recoverable costs Site characterization vs. investigation of nature and extent

Development vs. remediation

Fees for attorneys/consultant: cost recovery vs. regulatory compliance

• Statute of limitations is 3 or 6 years

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RCRA/CLEAN WATER ACT

• Citizen suit provisions can be used to enforce federal and state regulations or to address “imminent and substantial endangerment”

• RCRA provides injunctive relief only, 42 U.S.C. 6972; Meghrig v. KFC Western, 516 U.S. 479 (1996)

• CWA provides injunctive relief, penalties and fee shifting, 33 U.S. 1365

• Notice of intent to sue is required: 42 U.S.C. 6972(b)(1)(A) (60 days to enforce regulations)

42 U.S.C. 6972(b)(2)(A) (90 days for “imminent and substantial endangerment”)

6972(b)(2)(A)(iii), (B)(iii) (prior notice only for RCRA suits involving hazardous wastes)

33 U.S.C 1365(a) (60 days for CWA citizen suits)

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STATE COMMON LAW AND OTHER CLAIMS

• Nuisance and trespass Claims against adjacent property owners/operators

Interference with use and enjoyment = nuisance

Unlawful entry (migration of contaminants) = trespass

Diminution in property value/loss of use

• Negligence Claims against contractors and consultants

Cleanup costs

• Misrepresentation (seller)

• Takings (governmental actor)

• Statutory claims (e.g., mini-CERCLA) vary by state

• Statute of limitations may limit claims

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INSURANCE

• Coverage for “additional named” vs. “additional” insureds varies

• Notice and conditions of coverage must be observed—read the policies

• Beware of tricky exclusions e.g., insured vs. insured exclusions

• Historical coverage may require cooperative efforts to be agreed upon in advance

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CONTRACTUAL CLAIMS

• Sellers, lessors, lessees, contractors, consultants, utility providers, and anyone with permits, licenses, easements, or other contractual access to the site

• Mine the files

• Observe contractual formalities

• Watch statute of limitations

• Limitations on liability/caps may apply

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SOURCES OF FUNDING

• Tax credits

• State special funds

Storage task funds

Dry cleaner funds

Spill funds

• Grants

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STATE LAW RESOURCE

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ATTORNEY ADVERTISEMENT. The contents of this document, current at the date of publication, are for reference purposes only and do not constitute legal advice.© 2019 Kaplan Kirsch & Rockwell LLP

QUESTIONS?

POLLY B. JESSEN

KAPLAN KIRSCH & ROCKWELL LLP1675 BROADWAY, SUITE 2300

DENVER, CO 80202(303) 825-7000

[email protected]

www.kaplankirsch.com

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