Environmental Regulatory Impacts on the Construction Contract: Storm Water Discharge Legislation Reminder
Construction Practices Newsletter
On July 1, 2010, the California State Water Resources Control Board's (the Water Board) National Pollutant Discharge Elimination System (NPDES) General Permit for Storm Water Runoff (the CA Permit) goes into effect, following on the heels of the EPA's adoption of final effluent limitation rules related to storm water discharges. EPA's final effluent limitation rules became effective on February 1, 2010. Like California, most states issue their own NPDES permit. Thus, the reissued state permits will need to conform to the new EPA Rules. Indeed, the California Water Board specifically reserved the right to reopen the CA Permit in order to incorporate the EPA Rules. The recent adoption of the EPA Rules and the new CA Permit, however, are good reminders to contractors and owners that they need to address these regulatory issues specifically in the construction contract.
First, a few of the key differences between the EPA Rules and the CA Permit include differing effluent limits, storm size, and post-construction requirements.
For the first time, EPA imposed specific numeric effluent limitations (NEL) on storm water discharge in the EPA Rules. The NEL, as measured in turbidity units (which is basically how much sediment is in the water), is 280 Nephelometric Turbidity Units (NTUs) and applies to all construction and development sites of a given size. The CA Permit NEL uses a risk standard analysis of the site with the NEL for high risk sites at 500 NTUs (which is more permissive than the 280 NTUs). Either way, the controversy surrounding the NELs is that, in some instances, they require a lower turbidity (or to be "cleaner" or contain less sediment) than the pre-existing condition of the water.
Another significant difference between the EPA Rules and the CA Permit is the applicable storm size. The CA Permit is stricter, with a five-year storm standard as compared to a two-year storm standard in the EPA Rules.
Finally, the CA Permit imposes a stringent post-construction requirement but the EPA Rules do not (though it is coming). The CA Permit post-construction requirement essentially requires that there be no change in the hydrological condition of the site between pre- and post-construction conditions.
These types of regulations and the fact that they continue to evolve and may conflict are reminders to contractors and owners to pay close attention to what are frequently viewed as boilerplate provisions in the construction contract. It is fairly standard for an owner to impose on a contractor the obligation to comply with all permits and legal requirements applicable to the project. Similarly, an owner may require the contractor to warrant that the contractor is familiar with all federal and local laws applicable to construction of the project. To some contractors, these provisions seem generic and boilerplate. They are not. Using storm water discharge as an example, some pre-contract planning can help eliminate some nasty surprises. For example, currently, fines under the CA Permit can be as high as $37,500 per day.
Contractors and owners would be wise to review the site's Storm Water Prevention Pollution Plan (SWPPP), if it exists, before the bidding process. They might also clarify whether the contract requires the contractor to modify the SWPPP. Under the CA Permit, there is a qualification requirement to prepare or amend a SWPPP. The contract should clearly allocate responsibility on the obligation to comply with the SWPPP, including penalties resulting from errors in the SWPPP (as opposed to failing to perform the work in accordance with the SWPPP). The parties should clearly allocate who bears the risks for permit violations and should also pay attention to the impact regulatory compliance or violations of the permit could have on the timing and delivery requirements under the contract.