The Phase I Environmental Site Assessment: Unexpected COVID-19 Victim?

Written by David Quigley and Bryan Williamson, Akin Gump Strauss Hauer & Feld LLP and Summer Gell, Partner Engineering and
Science, Inc.

A number of commentators note the impacts of the COVID-19 crisis on the commercial and residential real estate markets. Some are obvious: falling interest rates, bargain hunting by investors (and some lenders) and a very different foreclosure environment.1 Recently, a less obvious impact emerged, as these lenders/servicers, investors and purchasers struggle with how to assess the environmental condition of the underlying assets. This brief alert provides answers to some frequently asked questions about phase I ESAs in the COVID-19 era.

Can I still do an ESA?

A number of states and some localities promulgated stay-at-home orders prohibiting all but “essential activities” for the next few weeks, if not months (and perhaps longer). Though each state is different, and must be analyzed as such, a number of the restrictions provide lists of industries or activities that are “essential” and therefore exempt from shelter-in-place mandates. For example, an initial Virginia executive order allows professional services firms to remain open, provided that they adhere to social distancing recommendations, enhance sanitizing practices on common services and apply relevant workplace guidance from state and federal authorities.2 Other states, like Illinois, delineate essential categories, including real estate and legal services, as “essential.”3 These approaches at least implicitly seem to allow for the conduct of ESAs (and ESAs are still taking place). Many states allow consultants to apply for an explicit authorization if squeamish about moving forward. (Note that while some states allow for environmental investigation as part of remediation activities, this may not encompass the typical phase I ESA).4

Beyond these states permitting consulting or related services directly, other states may allow for a phase I ESA where it “supports” a different service deemed “essential,” such as financing, particularly for a transaction that supports the agriculture, energy, manufacturing, hazardous materials and waste sectors.5 Still other states omit ESAs from stay-at-home orders entirely, raising complicated questions of interpretation.

If I can do an ESA, what will it look like?

If your state or locality allows for an ESA, that does not mean it is business-as-usual. As with other services in the COVID-19 era, commonsense efforts should be taken to minimize personal contact before, during and after site assessments. These measures may include adherence to social distancing guidelines; driving (not flying) to sites when possible; proper use of personal protective equipment; and wireless or pre-arranged access to tenant suites or interior building areas. Interviews should be conducted remotely, where feasible. To the extent possible, spaces to be viewed by the consultant should be “cleared” of people for three or more days prior to arrival. If, as will often be the case, this is not possible, then the consultant may seek to restrict her “walk-through” to vacant or limited areas of the facility.6

With all these restrictions, is the ESA “legal”?

While they likely did not have a pandemic in mind, the existing federal regulations and the industry standard governing ESAs already provide for deviations to normal operating procedures. Specifically, the phase I standards include a mechanism through which consultants identify “data gaps” encountered during environmental investigations.7 Historically, data gaps include inadequate records detailing adjacent sites, unreturned interview questionnaires and missing information about physical objects identified at the site (e.g., pipes, vents, tanks). Given the COVID-19 disruption, we expect to see a number of additions to these traditional data gaps, such as: limited or no access to interior areas; inability to locate and interview key personnel; and inability to access regulatory records or obtain Freedom of Information Act responses from government agencies due to staffing reductions and office closures. Much like the interruptions caused by governmental delays and flight cancellations experienced in aftermath of the September 11, 2001, terror attacks and office closures seen during the Great Recession, external forces are likely to hamper even the most diligent and experienced consultants.

The fact that these data gaps exist does not render the phase I invalid (necessarily). As always, it is up to the environmental professional to determine whether any identified data gaps are “significant,” such that they affect “the ability of the environmental professional to identify conditions indicative of releases or threatened releases of hazardous substances, and as applicable, pollutants and contaminants, petroleum or petroleum products, or controlled substances, on, at, in, or to the subject property.”8 Often, experienced consultants can identify other sources of information to resolve any data gaps, such as owner/user interviews or government and third-party environmental databases. Regardless of the significance of identified data gaps, however, consultants must be sure to document and evaluate any data gaps within the text of the ESA report.

OK, it’s “legal.” But is it useful?

Assuming you get an ESA with a number of data gaps, questions will arise as to its utility in evaluating environmental risk. Your counsel and consultants can identify site-specific approaches to find alternative sources of information to “fill” data gaps or at least “put a box around” the potential liability resulting therefrom. Beyond that, the usefulness of the assessment will depend on the use for which it is intended.

If you are trying to determine or allocate risk to close a deal, the above strategies may suffice (or at least may allow for the procurement of insurance to close the deal). If you are looking for financing, it likely will depend on the specific bank. Some may require complete or even more fulsome information than usual as they struggle to measure and manage risk in a pandemic-impacted world. Others may feel comfortable moving forward given the “cost” of money currently, even if they may include more detailed “update” provisions or requirements allowing them to get a clearer picture down the road. If you are looking for protection from Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) liability, that path is still developing. While EPA announced in March that it may exercise discretion in enforcing specific instances of noncompliance with some environmental laws, this policy explicitly does not apply to “activities that are carried out under Superfund and RCRA Corrective Action enforcement instruments.”9 At this time, it is not yet clear what, if any, relief will be provided through CERCLA’s innocent landowner and lender liability requirements.


1 Christopher Rugaber, Federal Reserve Cuts Interest Rate to Near Zero in Response to COVID-19 Outbreak, TIME, Mar. 15, 2020, https://time.com/5803563/federal-reserve-interest-rate-cut-zero/; Katy O’Donnell, HUD, Fannie, Freddie suspend foreclosures, evictions during outbreak, POLITICO, Mar. 18, 2020, https://www.politico.com/news/2020/03/18/hud-suspends-foreclosures-evictions-coronavirus-135783.

2 Virg. Exec. Order No. 53 (March 23, 2020), https://www.governor.virginia.gov/media/governorvirginiagov/executive-actions/EO-53-Temporary-Restrictions-Due-To-Novel-Coronavirus-(COVID-19).pdf. Similarly, Washington state published lists of “critical” sectors and examples of essential personnel permitted to work during the crisis. Wash. Proclamation 20-25 (March 23, 2020), https://www.governor.wa.gov/sites/default/files/WA%20Essential%20Critical%20Infrastructure%20Workers%20%28Final%29.pdf.

3 See, e.g., Ill. Exec. Order No. 2020-10 (March 20, 2020), https://www2.illinois.gov/Documents/ExecOrders/2020/ExecutiveOrder-2020-10.pdf (deeming “professional services” essential, including legal and real estate services).

4 See, e.g., “COVID-19: Essential Services,” Office of Governor Charlie Baker and Lt. Governor Karyn Polito, https://www.mass.gov/info-details/covid-19-essential-services#health-care/-public-health-/-human-services- (deeming essential “[l]icensed site clean-up professionals and other workers addressing hazardous spills, waste sites, and remediation”).

5 Wash. Proclamation 20-25, supra note 3.

6 Still, many components of the phase I ESA report, such as historical use and satellite reviews, environmental database searches, lien and title searches, phone interviews, and electronic questionnaires, should remain unaffected.

7 According to the U.S. Environmental Protection Agency’s (EPA) “all appropriate inquiries” (AAI) rule and ASTM Practice E-1527-13, a data gap is “a lack of or inability” to obtain required information “despite good faith efforts.” 40 C.F.R. § 312.10; ASTM E-1527-13 § 12.7.

8 U.S. ENVTL. PROTECTION AGENCY, ALL APPROPRIATE INQUIRIES RULE: REPORTING REQUIREMENTS CHECKLIST FOR ASSESSMENT GRANT RECIPIENTS (2014), https://www.epa.gov/sites/production/files/2014-08/documents/aai-reporting-fact-sheet-and-checklist-062111-final.pdf.

9 Memorandum from Susan Parker Bodine, U.S. Envtl. Protection Agency, to All Governmental and Private Sector Partners (Mar. 26, 2020), https://www.epa.gov/sites/production/files/2020-03/documents/oecamemooncovid19implications.pdf, at 2. Similarly, some states, such as Texas, also announced their intention to provide limited enforcement relief during this crisis. See “TCEQ Reporting Requirements for Regulated Entities,” Texas Commission on Environmental Quality (last visited Apr. 9, 2020), https://www.tceq.texas.gov/response/covid-19/regulated-entities-reporting-requirements (announcing the Commission’s exercise of “administrative relief and enforcement discretion for various reporting requirements by regulated entities” during the COVID-19 pandemic).


About the Authors

David Quigley advises lenders, sellers and buyers on evaluating the environmental liabilities associated with commercial, multifamily and industrial transactions. He develops solutions that are cost-effective and realistic in terms of the role of client as lender and the value of the property or portfolio.

Bryan C. Williamson is an environmental and natural resources lawyer, advising and representing clients on a range of environmental regulatory, transactional and litigation matters. His experience extends to issues involving federal and state environmental protection laws.

Summer Gell is a principal at Partner Engineering and Science, Inc. who leverages her 25+ years of experience and background as an environmental scientist to provide valuable solutions to her clients’ environmental and engineering due diligence needs. Summer is an expert on all things Freddie and Fannie, having worked on hundreds of agency and multifamily deals in recent years. She also serves as the national account manager for several CMBS lenders and life companies.

EHS software market to reach $2 billion in 2025

According to a market research report prepared by Verdantix, the global market for Environmental, Health & Safety Software is expected to grow from $1.35 billion in 2020 to $2.2 billion in 2025.  Verdantix forecasts that the 10% compound annual growth rate (CAGR) over the next five years will be driven by private equity and consumer demand for innovation.  North America will contribute over half (51%) of overall global spend on EHS software at $691 million in 2020.​​​​​​

The report states that there are twelve vendors that lead the EHS software market as follows: Enablon, Intelex, Cority, Velocity EHS, Sphera, UL, Gensuite, SAI Global, ETQ, Enviance, IsoMetrix and Quentic.  Verdantix assessed the capabilities of the 23 most prominent vendors in the market on their ability to meet customer demands to manage risks and improve business performance across EHS impact areas.

“Industry-leading firms are looking to the EHS function to guide digital transformation within their operations, and this benchmark illustrates how digital solutions in the market differ in terms of capabilities and momentum,” commented Yaowen Jean Ma, Senior Analyst, Verdantix. “As a result, we are seeing a surge in mergers, acquisitions and investments in the EHS software market, as vendors look to create advantage in this market, which is set to be worth $1.9bn in 2024.”

The Verdantix 2019 Green Quadrant EHS Software is the only independent benchmark of EHS software vendors available. The study findings are based on a 383-point questionnaire, live product demonstrations and a survey of 411 customers.

Leading vendors are demonstrating various competitive advantages within specific modular categories, such as, ETQ for quality and document management, Enviance for air emissions management, IsoMetrix and SAI Global for contractor safety management, Sphera and VelocityEHS for chemicals compliance management, and UL for GHG emissions and sustainability management.

The need to align Operational Risk and EHS functions is a key success factor for new entrants from an Operational Risk management software background, such as INX Software, TenForce and VisiumKMS.

“The EHS software market is entering a new phase of growth where cloud-hosted deployment, configurability and vendors offering mobile applications are becoming the new normal,” added Yaowen. “Vendors will face increasing pressure to rapidly expand market share and strengthen profitability, which will lead to an increase in vendors investment in technology integrations that expand their capabilities beyond their core competencies.”

Verdantix Senior Analyst Bill Pennington provided insight on the drivers for the growth in EHS software sales: “With EHS functions increasingly focusing on innovation, such as the continued shift from on-premise to SaaS deployment and an increased presence of dedicated IoT safety platforms, this is driving the appetite for spending on EHS technologies.”

 

How simulations and simulator training have amplified CBRNe capability

Written by Steven Pike, Argon Electronics

The use of simulations or ‘war games’ to exercise military strategic planning and to enhance operational readiness is a practice that has been in existence for many hundreds, if not thousands, of years.

The earliest documented records of war gaming can be traced back as far as the ancient Greeks in the 5th century BC, who are known to have played a skill-based board game called petteia or ‘pebbles’.

By the 2nd Century BC petteia was being played widely throughout the Roman Empire, under the name of ludus latrunculorum or ‘the game of little soldiers’.

Chess, which has its origins in Northern India in the 6th century AD, is an example of an early war game that combined both strategy and tactical skill.

By the mid 1700s, the fundamentals of chess would also stimulate the development of an increasingly elaborate range of new battlefield strategy games.

Perhaps the most notable of these is the genre known as kriegspielwhich was formulated in Prussia in the early 1800s and which is now widely regarded as being the ‘grandfather’ of modern military gaming.

The role of simulation in CBRNe training scenarios

As the use of modern weaponry has became more widespread and more destructive in its capability, military strategists have been forced to look for more ‘abstract’ ways to safely imitate and prepare for the realities of conflict conditions.

Today, the tools, technologies and scenarios that are used to train real-life CBRNe incidents have become increasingly sophisticated and life-like in their design.

The use of simulations and simulator detector equipment has become an invaluable addition to many military and civilian CBRNe training programmes.

One example of the way in which simulation is being used to enhance CBRNe capability is through the use of wide-area instrumented training systems such as Argon Electronics’ PlumeSIM.

The PlumeSIM wide-area training system

Using PlumeSIM technology, trainees are able to safely and effectively hone their skills in the operation of chemical and radiological equipment in a diverse variety of true-to-life threat scenarios.

For those tasked with CBRNe instruction, balancing realism with safety is a crucial consideration.

Using PlumeSIM’s innovative simulator technology, the parameters of each training scenario can be rigorously selected and controlled.

Instructors are able to recreate a specific threat, to simulate plumes, deposition or hotspots, to mimic the release of single or multiple CWA, HazMat or radiological sources and to replicate  environmental conditions such as changes in wind direction.

Portability, speed of set-up and ease of use are also key factors. PlumeSIM’s planning mode provides CBRNe instructors with the ability to prepare exercises in advance on a laptop or PC and without the need for any type of system hardware.

Its innovative system design allows the use of common file format map images or even ‘homemade’ sketches of a proposed training area.

The addition of a tabletop classroom mode also enables trainees to familiarise themselves with every aspect of the exercise before hands-on training commences.

Using simple gamepad controllers, students are able to ‘move’ icons of themselves around an on-screen display of the training area.

Once the virtual plume scenario has been activated, all student movement can also be recorded during the session and played back for later analysis.

In field exercise mode, trainees are provided with GPS enabled Player Units before being deployed to the external training area.

Their instructor can then monitor their location on the control base map in real-time via the use of a long-range radio communications link.

The ability to be able to record, document and review trainees’ decisions and actions is a vital element in the effectiveness of a simulator training system.

PlumeSIM’s After Action Review capability means trainee movement and instrument usage can be monitored in real time and can then be analysed and discussed once the exercise has been completed.

Enhanced CBRNe training capability

Simulator training is widely regarded for the role it plays in enhancing the effectiveness of 21st century military and civilian CBRNe capability.

With the help of simulator technology, students can train against actual threats in a realistic, safe and controlled environment.

In addition, expensive detector equipment is protected from needless wear and tear and instructors are able to monitor, assess and review every aspect of their trainees’ movements and decision-making.


About the Author

Steven Pike is the Founder and Managing Director of Argon Electronics, a leader in the development and manufacture of Chemical, Biological, Radiological and Nuclear (CBRN) and hazardous material (HazMat) detector simulators. He is interested in liaising with CBRN professionals and detector manufacturers to develop training simulators as well as CBRN trainers and exercise planners to enhance their capability and improve the quality of CBRN and Hazmat training.

Perfluorinated Compounds: No Longer an Emerging Contaminant

Written by Sarah Peterman Bell and John Ugai, Farella Braun + Martel LLP

Lawsuits present major liability risks to PFAS manufacturers and industries that historically used PFAS in their operations.

Per- and polyfluoroalkyl chemicals (PFAS) are synthetic, human-made compounds that were manufactured in the United States beginning in the 1940s and have been used in a wide range of industries. Because they repel oil and water, PFAS chemicals were used in numerous consumer products, including nonstick pans, outdoor gear, raincoats, and food packaging.

PFAS were also widely used in industrial processes, including in operations involving chrome plating, electronics manufacturing, and in firefighting foams. Indeed, the use of firefighting foam at airports, military bases, and firefighting training sites is a major source of PFAS in groundwater in such areas.

PFAS were used in fire-fighting foam

PFAS chemicals tend to persist in the environment. Two of the most prevalent PFAS, perfluorooctanoic acid (PFOA) and perfluorooctane sulfonate (PFOS), have been detected in groundwater in many areas throughout the United States, particularly where these chemicals were manufactured, used in manufacturing or industrial operations, or in areas associated with firefighting work and training.

Federal Regulation of PFAS

For now, the federal Superfund law – the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) – does not identify PFOA, PFOS, or any other PFAS as “hazardous substances.” Nor has the federal government issued maximum contaminant levels (MCLs) or other legally enforceable limits for PFAS in drinking water. Nonetheless, the U.S. Environmental Protection Agency (EPA) has added PFAS sites to its Superfund list. And some states have developed enforceable cleanup standards or issued MCLs for certain PFAS in drinking water.

EPA is apparently moving forward with regulating PFAS. Last month, EPA released an update to its 2019 PFAS Action Plan. As explained in 2019, EPA is evaluating regulation of PFAS, including designating certain compounds as “hazardous substances” under CERCLA, setting enforceable MCLs for drinking water, and/or developing regulatory standards for PFOA or PFOS at cleanup sites. EPA is also considering release reporting for PFAS.

In its February 2020 update, EPA reported that it has developed interim groundwater cleanup recommendations for CERCLA cleanup sites and Resource Conservation and Recovery Act (“RCRA”) corrective action sites. EPA has also begun the process to regulate PFOA and PFOS in drinking water and to add PFAS to the Toxics Release Inventory.

For industry, the regulations contemplated by the PFAS Action Plan would have significant implications. For example, adding PFAS chemicals to the CERCLA hazardous substances list could dramatically impact CERCLA cleanups by expanding the number of cleanup sites, increasing the number of responsible parties, and increasing cleanup costs – not to mention the possibility that closed sites might be reopened to address PFAS.

PFAS Litigation: States & Private Parties Step In

As of now, a growing number of states, nonprofits, and individuals are suing regarding PFAS contamination and exposure. These suits present major liability risks to PFAS manufacturers and industries that historically used PFAS in their operations. In one of the earliest PFAS lawsuits, Minnesota pursued 3M for liability associated with PFAS in groundwater near a 3M industrial facility. That case settled in 2018 for $850 million.

In January, Michigan sued 3M, DuPont, and 15 other chemical manufacturers, alleging that they concealed the dangers of PFASs, withheld scientific evidence, and contaminated the environment. New Mexico, Vermont, and Washington have also filed PFAS-related litigation, while New Hampshire, New Jersey, and New York have filed suits against firefighting foam producers and distributors as well as PFAS chemical manufacturers. And just last month, a group representing more than 31,000 rural utility systems sued more than 20 companies, including 3M and DuPont, to recover the costs to clean up PFAS in groundwater resulting from the use of firefighting foam products.

Nonprofits have also sought to address PFAS contamination through litigation. In February, Earthjustice filed a lawsuit on behalf of nonprofits representing communities in Ohio, Texas, Illinois, and California, alleging deficiencies in the U.S. Department of Defense’s (“DOD”) environmental review of plans to burn millions of gallons of firefighting foam (allegedly an expansion of ongoing efforts to incinerate unused stockpiles of firefighting foam).

Personal injury cases also present a significant potential source of liability. For instance, residents of Parkersburg, West Virginia, sued DuPont in 2001, for injuries from PFOA contamination in the waterways surrounding DuPont’s manufacturing facility. In 2017, DuPont and Chemours Co. settled roughly 3,550 of these pending cases for over $670 million.

Industry should be aware that while EPA’s progress towards regulating PFAS has been slow, states, nonprofit groups, and individual plaintiffs have been taking action regarding these “forever chemicals.” Litigation regarding PFAS is increasing, states are stepping into the regulatory void and setting MCLs and cleanup standards, and EPA has begun adding PFAS sites to the Superfund list.


About the Authors

Sarah Bell is a partner at Farella Braun + Martel.  She focuses her practice on environmental and natural resources litigation, administrative proceedings, and counseling, and advises clients in a broad range of disputes, including environmental enforcement actions, cost recovery, citizen suits, water quality, complex toxic tort, and product liability matters.

John Ugai is an associate in Farella Braun + Martel’s Environmental Law Department.

Tritium Spill at Nuclear Power Plant in Ontario

As acknowledged by Bruce Power, there was a spill of 20-litres of heavy water containing radioactive tritium at the Bruce Nuclear Power plant near Kincardine, Ontario on March 28th.

Staff at Bruce Power Unit B responded to a release of approximately 20 litres of heavy water in Unit 6 which has been shut down since Jan. 17 for Major Component Replacement. The spill occurred when crews were flushing a system as part of layup activities for the unit.

Heavy water from the reactor contains levels of tritium, and station staff followed their procedures to promptly stop the spill and safely clean it up, including assembling Bruce B employees away from the affected area while the cleanup occurred. Barriers were established to restrict personnel and tritium levels monitored by station monitoring equipment and staff.

Representation of a Tritium atom

There have been no adverse impacts to our employees, the environment or the public. An investigation to determine the cause of the event is underway and once complete, steps will be taken to implement any lessons learned.

Heavy water is essential to the operation of Canada’s CANDU nuclear power reactors; used as both a moderator and a heat transfer agent. Heavy water is chemically the same as regular (light) water, but with the two hydrogen atoms (as in H2O) replaced with deuterium atoms (hence the symbol D2O). Deuterium is an isotope of hydrogen; it has one extra neutron.

Tritium is a radioactive form, or “isotope”, of hydrogen. It has two neutrons where regular hydrogen does not have any, which makes tritium unstable and therefore radioactive.  It is produced as a by-product of nuclear reactors.

Bruce Power is Canada’s only private sector nuclear generator, annually producing 30 per cent of Ontario’s power.  The power plant in Kincardine, along the eastern shores of Lake Huron, also produces medical isotopes that are used to keep medical equipment sterilized.

 

U.S. EPA awards EPA Awards $2.3 Million in Funding for Businesses to Develop Innovative Environmental Technologies

The U.S. Environmental Protection Agency (U.S. EPA) recently announced that it had awarded $2.3 million in funding for 23 contracts with small businesses through its Small Business Innovation Research (SBIR) program to develop technologies that will help protect human health and the environment. This year’s funded technologies are focused on clean and safe water, air quality monitoring, land revitalization, homeland security, sustainable materials management, and safer chemicals.

“EPA’s Small Business funding supports our economy and opens doors to further environmental protection by fostering and encouraging small businesses to bring groundbreaking technologies to market,” said EPA Administrator Andrew Wheeler. “With EPA funding, these entrepreneurs will be able to develop their ideas to address priority EPA issues ranging from cleaning up PFAS contamination to reducing food waste.”

These small businesses are receiving Phase I funding of up to $100,000 from EPA’s SBIR program, which awards contracts annually through a two-phase competition. After receiving a Phase I award, companies are eligible to compete for a Phase II award of up to $400,000 to further develop and commercialize the technology.

SBIR Phase I recipients include:

  • Aerodyne Research, Inc., Billerica, Mass., to develop an ethylene oxide monitor with an ultra-low limit of detection.
  • AirLift Environmental LLC, Lincoln, Neb., to develop a remedial treatment to remove PFAS and associated co-contaminants from soil and groundwater.
  • Creare LLC, Hanover, N.H., to develop a hydrodynamic cavitation technology to destroy PFAS in drinking water.
  • CTI and Associates, Inc., Novi, Mich., to test and evaluate a novel technology for the concentration and destruction of PFAS in landfill leachate.
  • Hedin Environmental, Pittsburgh, Pa., to create a treatment process for contaminated waters at coal and metal mines.
  • Mesa Photonics, LLC, Santa Fe, N.M., to create a compact, fast, sensitive and selective optical sulfur dioxide monitor.
  • Onvector LLC, King of Prussia, Pa., to develop a technology that destroys PFAS in water and wastewater utilizing a plasma arc reactor.
  • Physical Optics Corporation, Torrance, Calif., to create a 3D mapping and visual system to detect radiation contamination for homeland security applications.
  • RemWell, LLC, Potsdam, N.Y., to design a remediation technology using sonolysis for PFAS contaminated groundwater.

The U.S. EPA is one of 11 federal agencies that participate in the SBIR program, enacted in 1982 to strengthen the role of small businesses in federal research and development, create jobs, and promote U.S. technical innovation. To be eligible, a company must be an organized, for-profit U.S. business and have fewer than 500 employees.

Texas Oil Company to pay $115,000 Civil Penalty to resolve violations of Oil Pollution Prevention Regulations

Agreement with Texas-based company resolves findings of non-compliance

The U.S. Environmental Protection Agency (EPA) recently announced a proposed settlement with Citation Oil & Gas Corp. (Citation) of Houston, Texas, to resolve alleged violations of federal regulations intended to prevent oil pollution. The Clean Water Act violations pertain to oil spill prevention requirements and Spill Prevention, Control, and Countermeasure (SPCC) regulations at Citation’s Park County, Wyoming, oil production facilities. Citation will pay a civil penalty of $115,000 to resolve the alleged violations.

This proposed settlement resulted from EPA’s investigation of two spills at Citation facilities. The first spill occurred on February 9, 2016, when Citation released approximately 300 barrels of crude oil from its Embar 3 Facility into Buffalo Creek, a tributary of the Big Horn River. The second spill occurred on August 21, 2019, when Citation released approximately 1000 barrels of produced water from its North Waterflood Station into the same tributary.

“Companies that store oil have a responsibility to follow laws that protect the public and the environment,” said Suzanne Bohan, director of EPA Region 8’s Enforcement and Compliance Assurance Division. “Due to the harm oil can cause when released to water resources and the environment, every effort must be made to prevent spills and to clean them up promptly once they occur.”

In investigating Citation’s spills, EPA discovered deficiencies in Citation’s SPCC plans for the North Waterflood Station and Middle Waterflood Station. The company corrected these deficiencies and submitted corrected plans to EPA, helping ensure that water resources and communities where Citation operates are better protected from damaging oil spills.

Federal oil spill prevention, control, and countermeasure rules specify requirements for businesses that store oil and prevent oil discharges that can affect nearby water resources. For more on the Clean Water Act’s prohibition against discharges of oil into waters of the U.S. and SPCC regulations, visit: https://www.epa.gov/compliance/clean-water-act-cwa-compliance-monitoring#oil.

This proposed Consent Agreement is subject to a 30-day public comment period and final approval by the EPA’s Regional Judicial Officer. To access and comment on the Consent Agreement , visit: https://www.epa.gov/publicnotices/notices-search/location/Wyoming

Source: The U.S. Environmental Protection Agency (EPA)

Environmental Due Diligence Carries on, With Limitations, During the COVID-19 Pandemic

Written by Michael A. NesteroffLane Powell PC

COVID-19 Resource

Banks, borrowers and their supporting professionals, like everyone else, are having to adapt to the rapidly-changing circumstances surrounding COVID-19. With commercial and multi-family real estate, one of the more difficult issues is how to conduct a Phase I Environmental Site Assessment in order to qualify as the “All Appropriate Inquiry” that most lenders require. A full Phase I investigation includes items such as a site visit, interviews with knowledgeable people, and records research, but each of those are constrained during this global pandemic and shelter-in-place or stay-at-home orders. Lenders and environmental professionals, however, are getting creative and flexible in the ways they address this unique situation.

Lender Adaptations

Because banks are considered an essential business service, many lenders are continuing to process loan applications, although they face the same logistical issues that we all are confronting with working from home. Depending on the type of loan involved, banks may be more flexible with the level of environmental due diligence required. For example, a refinance of a loan on a property where there was a recent Phase I, or the property has not changed, may not require any additional environmental review or a desktop review may suffice. Instead of one-size-fits-all approaches to due diligence, banks now are evaluating what’s needed on a property-by-property basis. In some instances, the environmental review may be called a “Limited Site Investigation,” instead of a Phase I, with follow-up site inspections conducted when the crisis abates.

Consultant Approaches

Environmental professionals, while not specifically called out as an essential business service, are considered support for an essential business service, such as a bank. This allows them to conduct the necessary site assessments and fieldwork but, in many cases, they may not be able to do so because the subject property is closed; the people to be interviewed are staying at home, whether because of stay-at-home orders or illness; and the government agencies and offices with relevant property records are not open to the public. Furthermore, the consulting firms are cognizant of the health and safety needs of their employees and don’t want to place them at unnecessary risk.

In some instances, such as hospitals, long-term care facilities, assisted living facilities, nursing homes or senior living communities, environmental consultants simply are not conducting in-person interior inspections. In other cases, multi-family properties for example, the inspections may consist of looking only at vacant units and common areas, but foregoing occupied units. Other workarounds include the site contact walking through the building on FaceTime or having a resident take photographs. One pitfall is that a building occupant or resident may not be as aware of what to look for, or may even want to minimize issues that an environmental consultant would spot. If a site visit is absolutely necessary, some consultants are scheduling visits for weekends or evenings when fewer people are around, having the site contact open all doors, wearing gloves, and maintaining social distancing as much as possible. For larger, open properties, use of a drone may be a helpful substitute.

Communication between the client and the environmental professional is key. If the scope of work may be more limited by current conditions, that should be made clear from the outset and the parties reach consensus on the necessary adjustments. Communication between the consultant and site contact also is important, although privacy issues prevent inquiring about a site contact’s COVID-19 status. Indeed, not everyone is convinced that current measures, such as social distancing, are warranted. In those situations, the consultants are having to communicate in advance their practices and expectations.


About the Author

Mike Nesteroff is a preeminent environmental lawyer with extensive experience representing clients in environmental litigation, agency negotiations, property acquisition and leasing issues, and counseling clients on risk and compliance. During his 31 years at Lane Powell, Mike has represented clients in litigation claims involving hazardous material investigations, cleanups and cost recovery at sites in Washington, Oregon and Alaska. He has obtained a several million-dollar cost recovery judgment on behalf of one client and a defense verdict in another cost recovery case. Mike has also represented clients in litigation involving public records and obtained a favorable court of appeals ruling on a previously-untested exemption in the Washington Public Records Act.

What can the Act of God Defence in Regulatory Offences tell us about Responding to the COVID 19 Crisis

Written by Stanley Berger, Partner, Fogler Rubinoff

In April 2008 water bodies in Alberta were frozen over and as a result, migratory birds were drawn to Syncrude’s open tailings ponds where over 1600 waterfowl died from exposure to bitumen. Syncrude was prosecuted under federal and provincial environmental laws for the adverse impacts of the tailings on migratory birds.

The company defended itself by arguing that that the convergence of record snowfalls and the freezing of the adjacent waters that the waterfowl would naturally use for sustenance during spring migration amounted to an Act of God which could not reasonably be anticipated. The company had a system of deterrents which had worked reasonably well in previous years to prevent the loss of all but a small number of birds drawn to the open tailings, but the record snowfall had interfered with their planned deployment.

The Court, conceded that the convergence of adverse weather, open tailings, frozen natural water bodies and bird migration was an unavoidable natural event. (2010) ABPC 229 at par. 136) Nevertheless, the Court reasoned that while the exact circumstances or degree of severity may have been unpredictable, the convergence of these critical factors was not remarkable. The company’s response was deficient whether it had been “the second worst snowfall in 65 years that occurred, coupled with a late breakup and quick thaw or, or some lesser but still significant amount of snow or rain. “(at par. 138) On October 22, 2010

Provincial Court Judge Tjosvold imposed fines and orders totaling three million dollars for violations of Alberta’s Environmental Protection and Enhancement Act and Canada’s Migratory Birds Convention Act. see Berger and Myers, Prosecution and Defence of Environmental Offences, Sentencing Service on Thomson and Reuters Proview at https://nextcanada.westlaw.com/.

Lessons Learned: Regulatory Due Diligence During and After COVID  19

Regardless of whether one is religious or not, COVID 19 would certainly fit within the Act of God defence if faced with a charge of non-compliance with a regulatory offence. But the level of sympathy expected to be extended by a court to this defence will ultimately depend upon the magnitude of the harm environmental, health and safety or otherwise and the steps taken by a defendant to plan for a once in a lifetime event. The nuclear industry offers an excellent example. Licensees of nuclear facilities have always been required to deploy minimum complements of workers at all times to ensure that critical activities such as the operation of the nuclear reactor and its cooling systems are maintained. There are always control room operators on hand even during a pandemic though additional precautions are taken to ensure that their health and safety are optimized. Businesses should review their regulatory licenses and approvals and identify which of their operations need to be maintained at all times in order to protect public health and safety and the environment. Once identified, budgets
and schedules should be set for implementation. Particularly, but not exclusively where costs are prohibitive or actions are not feasible, transparent communication with the relevant regulatory authorities should be initiated without delay to ensure that there is a mutual consensus on the expectations of the parties. Finally, those expectations should be reduced to writing and kept on line so that they are readily accessible. Given the magnitude of the current crisis, regulators may not respond to e-mails in a timely fashion, so businesses should ensure that all requests for reviews of compliance plans are sent and kept electronically.

This republished article is intended for general information purposes only and should not be relied upon as legal advice.


About the Author

Stan Berger has practiced regulatory law for 37 years. He represents nuclear operators and suppliers, waste management operators, renewable energy operators, receivers-in-bankruptcy, municipalities and First Nations. He was an Assistant Crown Attorney in Toronto for 8 years, Senior counsel and Deputy Director for Legal Services/Prosecutions at the Ministry of the Environment for 9 years and Assistant General Counsel at Ontario Power Generation Inc for 14 years.  He is the author of a quarterly loose-leaf service published by Thomson Reuters entitled the Prosecution and Defence of Environmental Offences and the editor of an annual review of environmental law.  Mr. Berger was the President of the International Nuclear Law Association (2008-2009) and the founder, and President of the Canadian Nuclear Law Organization.

Practical Tips for Managing Environmental Issues During the Coronavirus Pandemic

Written by Sheila McCafferty Harvey and Reza Zarghamee, Pillsbury Law

Due diligence and compliance challenges require flexible approaches and creative solutions.

Practical Tips Regarding Due Diligence

The COVID-19 pandemic already has created significant disruptions to daily business and governmental activities, as employees across industries have been encouraged to practice social distancing and work from home. Moreover, an increasing number of states have issued shelter-in-place orders and nonessential business shutdowns, which may last for several months.

Among the challenges facing companies in these circumstances is the practical matter of how they may satisfactorily conduct environmental due diligence under such conditions for corporate and real estate transactions. To explain, in transactions involving the transfer of title to real property or the creation of a leasehold interest (since the 2018 BUILD Act), prospective purchasers and lessees must satisfy the requirements of the All Appropriate Inquiries (AAI) Rule (40 CFR Part 312) to obtain innocent status and, thus, qualify for one or more affirmative defenses to liability under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. 9601, et seq. (CERCLA). The baseline level of environmental due diligence under the AAI Rule is the performance of a Phase I Environmental Site Assessment in accordance with the ASTM E 1527-13 standard. An ASTM-compliant Phase I also has become the industry standard for environmental due diligence required by financial institutions and insurers for purposes of project financing and obtaining insurance coverage, respectively, although such companies tend to allow somewhat greater flexibility in terms of strict adherence to the standard.

A Phase I contains many components, some of which may be performed on a “desk-top” basis. Environmental Data Resources LLC, the provider of the EDR Radius Map Report that accompanies the majority of Phase I reports, is committed to providing its services during the pandemic. As a result, between the services of EDR and the Phase I author, assuming responsive information is available online, the expectation is that environmental consultants should be able to continue to perform these tasks, despite the new paradigm of working at home. However, an essential component of the ASTM standard is a site visit of the subject property. Non-essential business shutdowns and shelter-in-home orders may prevent consultants from performing such visual inspections in certain states. Although the ASTM standard allows for the specification of “data gaps” and “limiting conditions/deviations,” the site visit is such a core requirement of the standard that, in the ordinary course, failure to perform one within 180 days of the closing date of a transaction renders a Phase I inadequate for purposes of qualifying for CERCLA defenses.

EPA has yet to give any indication about how it will treat the failure to perform a site visit due to COVID-19-related disruptions in terms of Phase I user’s eligibility for the CERCLA defenses. A distinct possibility thus exists that a Phase I consisting of a desk-top only review will be deemed inadequate, regardless of the exigent circumstances preventing a site visit. Therefore, to the extent possible, companies should schedule Phase I ESAs to occur after the expiration of non-essential business shutdowns or shelter-in-home orders. If a Phase I cannot be delayed, then companies may wish to consider creative means of performing the site inspection, e.g., perhaps using drones to examine interior and exterior site features or using FaceTime to direct any facility personnel onsite to perform the site surveillance.

For a Phase I intended to satisfy a business purpose (e.g., securing a loan, obtaining insurance coverage), failure to satisfy the ASTM standard could have undesirable consequences. However, because agreements between private parties are negotiable, the party commissioning the report has, in theory, greater flexibility in terms of working around the COVID-19-related obstacles. Specifically, the inability to obtain firsthand information regarding a site may be excused or addressed in business agreements. To this end, the party commissioning the report is encouraged to proactively engage the other parties seeking to rely on the report to discuss whether a report without a site visit would suffice and, if not, what possible alternatives would be acceptable for purposes of obtaining the business objective.

Practical Tips Regarding Environmental Compliance Obligations

Proactiveness is also necessary to ensure continued compliance with environmental cleanup obligations, permit conditions, and environmental due diligence standards during the COVID-19 pandemic. In evaluating options and implementing measures to ensure continued compliance with environmental legal requirements, businesses are encouraged to take a systematic approach, which may entail all or some the following steps:

  • Develop an internal team responsible for the COVID-19 response: The establishment of clearly defined roles and a chain of command can be tremendously useful to ensuring that the tasks needed to maintain compliance are expeditiously performed.
  • Consult existing plans and internal policies: Some businesses already may have in place plans and policies that have been triggered by the current crisis or are otherwise useful. For example, environmental management systems, hazardous waste contingency plans and risk management plans may contain specific protocols for exigent circumstances that may prevent compliance with legal obligations (e.g., the inability to remove hazardous waste within the 90-day threshold specified for large quantity generators) or trigger certain preventative measures (e.g., the securing of extremely hazardous substances regulated under Section 112(r) of the Clean Air Act as part of a risk management plan).
  • Identify what tasks and deadlines are required or coming up in the near-term and whether they are at risk of being impacted: Businesses should develop lists of upcoming environmental tasks and deadlines, including scheduled remedial activities, sampling, submittals to agencies, commitments to private-parties under environmental indemnities, etc. For items due in the next few months, an assessment should be made about the degree to which the requisite task may be affected by COVID-19-related disruptions. A broad view of how current conditions may affect the ability to discharge obligations should be taken in this regard. For example, it may be useful to ascertain which tasks require outside vendors or subcontractors and the likelihood that they would be available to assist.
  • Review relevant statutes, regulations, guidance, and other documents for authority that might excuse or delay performance: Applicable laws, regulations, and legal instruments such as permits and orders should be consulted to determine if they contain provisions that afford relief from the obligations discussed in the previous bullet. The EPA has policies and guidelines regarding governmental expectations during emergency situations, and an increasing number of states have issued guidance on how businesses may invoke enforcement discretion during the current crisis. Pillsbury is closely monitoring these developments and tracking them on its website. Where such agency guidance is vague or off-point, businesses are recommended to consult the specific documents establishing their legal obligations, as many consent orders, cleanup agreements, private-party indemnities, and permits contain provisions that bound parties may invoke to obtain relief from requirements that may be difficult or impossible to perform because of COVID-19-related restrictions. “Force majeure” clauses are a good place to start, as these provisions serve to excuse or delay performance under exigent circumstances. Some such clauses explicitly designate pandemics and governmentally declared emergencies and shutdowns as force majeure events. However, they often also have time limits, so they should be reviewed as soon as possible.
  • If legal authority affording relief is identified, follow the specified procedures for invoking the authority and providing notice. This should be done as early as possible, especially if the applicability of specific guidance or provision is questionable, to ensure enough time to react if a third party (e.g., governmental agency) disagrees about the existence of an adequate basis to excuse or delay performance.
  • Document efforts to comply and reasons impeding performance. The legal landscape is extremely fluid right now, giving rise to a heightened potential for legal disputes over failure to perform. For this reason, as well as the fact that many force majeure clauses require it, businesses should document all efforts to comply, as well as information supporting the contention that COVID-19-related disruptions have prevented compliance, as such information may be useful in supporting petitions for enforcement discretion.

Key Takeaways

  • The COVID-19 pandemic is impeding the ability of businesses to perform transactional environmental due diligence and usual compliance activities.
  • How courts and businesses (e.g., lenders, insurers) will value attempts to perform All Appropriate Inquiries that, because of COVID-19-related orders, may not include such activities as physical inspections of the subject property is uncertain. Though we may see various guidance emerge in the coming days, much like the numerous hastily promulgated stay-home orders, we can expect a patchwork with ample ambiguity and unanswered questions.
  • In such a dynamic and unprecedented legal and business climate, proactive and creative compliance strategies, and effective strategies to document parties’ efforts to comply with existing obligations, can help hedge against transactional and compliance risks.

About the Authors

Sheila Harvey, Pillsbury’s Energy Industry Group leader, is an accomplished adviser on environmental and energy policy and regulatory issues and their impact on transactional and litigation matters.

Reza Zarghamee advises U.S. and international clients on a vast array of environmental matters, including the strategies for performing compliance audits, transactional due diligence, remediation, and SEC disclosures.