Chapter 13 - § 13.8 • MINIMIZING ENVIRONMENTAL LIABILITIES THROUGH INVESTIGATION

• Jurisdiction: Colorado

§ 13.8 • MINIMIZING ENVIRONMENTAL LIABILITIES THROUGH INVESTIGATION

Minimizing environmental liability on a construction project requires (1) taking all steps possible to evaluate the potential for environmental hazards for a particular project; (2) allocating the risks by suitable contract provisions; (3) ensuring that any activity that will impact the environment is in compliance with all legal requirements, including necessary permits; (4) advance preparation for response to environmental incidents; and (5) timely and appropriate response to an incident. The measures required will, to some extent, depend upon a particular party's role in the project. For example, it is more likely that an owner rather than a contractor or design professional will arrange for an environmental audit of the site. Nevertheless, such measures will inure to everyone's benefit, so it is important that all parties understand what should be done.

§ 13.8.1-Environmental Evaluations³⁰⁹

Liabilities arise from environmental contamination in three primary arenas: (1) the environmental condition of the location of the project before the project begins; (2) contamination caused on-site during construction; and (3) liabilities for the off-site disposal of construction-related debris and waste. The primary way of dealing with these potential liabilities is to perform audits and studies of the environmental conditions and the compliance practices of the project.

Environmental Assessment Report

It is routine for the property owner to have obtained a pre-purchase environmental assessment of the property. These assessments are conducted under American Society for Testing and Materials (ASTM) standards E1527-13 and E2247-16 to meet the requirements of EPA regulations.³¹⁰ It is not routine for this assessment to be part of the bid documents. The contractor should ask to see the document prior to bidding if it is not provided. If the owner or architect refuses to provide the report or it does not exist, the contractor should be very cautious and should consider obtaining its own environmental assessment as a condition of the bid. Liability under the environmental statutes easily extends to entities such as contractors that exercise some degree of control over contaminated properties. Ignorance is no defense.

Another quite obvious concern is potential health and safety issues regarding the contractor's employees should they be working around contamination and possible hazardous conditions. Reviewing the environmental assessment report is really the best avenue available to the contractor to understand and manage these potential risks.

Compliance Audits and Reports

The purpose of an environmental compliance audit is to review the operations, practices, and facilities of an owner of property and/or the contractor to evaluate the potential for environmental liability risk and to ensure compliance with applicable environmental regulations. This audit is a critical proposition for all involved, as the consequences of non-compliance with environmental regulations is an extraordinarily serious matter from both a civil and criminal point of view.

The results of an audit are used to evaluate environmental compliance. In addition, these audits can be used to identify environmental risks, coordinate project performance, make corrections to the project, obtain more favorable insurance rates, provide information for loan transactions, provide information for a permit, or allocate responsibilities for environmental liabilities. Some matters to consider if performing a compliance audit follow.

Attorney-Client Privilege

Always consider the possibility of liability or government enforcement litigation. As one cannot predict the outcome or findings of the compliance audit, the use of counsel may allow for the protection of sensitive materials. Counsel may also be useful in the evaluation of the project objectives, in avoiding problems in the conduct of the audit, and in project completion.

One tricky question that frequently arises is whether discovered conditions require reports to government agencies or third parties. The more serious the problem, the clearer the answer to this question. Conditions that violate regulations and create imminent or substantial endangerment to human health and the environment will require reports. Evidence of spills or releases of pollutants and contaminants, depending on the severity, may require reports. Each condition must be considered on a case-by-case basis.

Elements of the Compliance Audit

There are hundreds of lists of what to look for during an environmental compliance audit. Audits should be focused intelligently in order to maximize efficiency and limit cost. The one thing that is very clear is that the point of a compliance audit is to go beyond the environmental assessment and look at the conditions and operations of the project in detail.

The specific reason for performing a compliance audit must be established. All parties need to establish the objectives up front, rather than simply...