With significant funding in 2010 under the American Reinvestment and Recovery Act (“ARRA”), a major financial stimulus was afforded the water and wastewater industry to “go green.”  Although many large urban areas decided to address their combined sewer overflow (“CSO”) problems by replacing their existing sewage systems with separate systems, many others opted to construct “green infrastructure” to detain and/or retain the surcharge from rainstorms that could overwhelm operation of wastewater treatment plants and result in the discharge of sewage and other pollutants from CSOs.  In Pennsylvania, a $30 million loan was extended to the City of Philadelphia by the Pennsylvania Infrastructure Investment Authority’s Clean Water State Revolving Fund. This loan enabled the City, which had signed a Consent Order and Agreement with the Pennsylvania Department of Environmental Protection, to implement a green infrastructure program over a 20 year period. 

With the economic recession and major changes in the composition (and philosophies) of the members in both Houses of Congress from the 2010 elections, not only did the prospect of future similar economic stimuli programs go to the “back of the bus”, but the desire of these new members of Congress to reduce spending put increased pressure on the federal government to reduce the funding of any infrastructure improvements. 

A good example of this can be seen in the President’s proposed budget issued on February 13, calling for a proposed EPA budget of $8.3 billion. This reflects a decrease of 1.2 percent below the fiscal 2012 enacted level.  More pertinent to the water and wastewater industry, the proposed cuts included a 19.8 percent reduction (from $1.47 billion to $1.18 billion) in EPA’s budget for the Clean Water State Revolving Funds, and a 7.4% reduction (from $918 million to $850 million) in the Drinking Water State Revolving Fund.  Similar budget cuts occurred in most, if not all, of the states’ share of infrastructure funding.  With dire predictions associated with the Nation’s failure to maintain all of its infrastructure, one may recall the plot in “Atlas Shrugged” where the nation’s infrastructure failed and those who were its leaders “disappeared”.  Recall the query “Who is John Galt?”

As a result, we environmental attorneys find ourselves on the horns of a dilemma.  On the one hand, we are trying to adapt our infrastructure to climate change, foster the use of cleaner and more efficient energy in operating treatment plants, and conserve water. On the other hand, we face the reality of having to represent an industry with an infrastructure that is largely old and outdated and appears, at least in some cases, ready to fail. These failures will no doubt result in more and more violations of the Clean Water Act (and state water laws) in the future. 

Although funding cutbacks are not yet “carved in stone”, it would be wise for us to keep an eye on the budget debates. They may affect our practices in the near term and our environment as well.  

The Federal Trade Commission (FTC) Act prohibits “unfair and deceptive acts or practices.” 15 U.S.C. § 45. In 16 CFR § 260.2, unfair and deceptive acts or practices are defined as being a representation, omission or practice that (1) is likely to mislead consumers acting reasonably under the circumstances and (2) is material to a consumer’s decision. In essence, the FTC evaluates marketing from the consumers’ perspective and in the words of its Chairman Jon Leibowitz: “What companies think green claims mean and what consumers really understand are sometimes two different things.”

In the environmental area such claims can attach to a product, package or service in its labeling, advertising, promotional materials or other forms of marketing or sales paraphernalia, in any medium, expressed or implied, and including words, symbols, logos, depictions, brand names, etc. To avoid being deceptive, there has to be a reasonable basis to substantiate a claim which often requires competent, reliable scientific evidence, often based on tests, analyses, research or studies.

The original Green Guides were issued in 1992, and were amended in 1996 and 1998. The FTC began its current review of the Guides in 2007, proposed revisions in October 2010 and closed the public comment period on December 10, 2010.

Although the proposed Green Guides are voluminous and people should refer to the proposal in the October 15 Federal Register, suffice to say that they now intend to cover not only the products and services within a building, but the proposed Guides, if adopted in their current form, would be interpreted to apply to buildings themselves, which was contrary to the former belief that product liability did not attach to buildings. According, in addition to concern for environmental disclosures, regulated by the Securities Exchange Commission, the FTC would now constitute a second regulatory review agency.
 

As with “green washing” of products, which are subject to existing product liability law, there is an emerging area of law regarding liability for claims that a building marketed as “green” or alleged to achieve the desired platinum, gold, silver or standard Leadership in Energy and Environmental Design (LEED) certification has failed to do so.

As the LEED requirements and techniques for sustainable development become better understood and more widely adapted, more and more developers are seeking to build “green.” To the extent that the construction costs permit a manageable return on investment (ROI) and the specifications and requirements for such development are clearly spelled out in the various contractual documents, including especially the agreement with architects, we will likely see more and more claims that the resultant buildings are “green.”

Although some theories of liability will track areas in construction law, e.g., deficiencies in design, construction or installation, green buildings claims will face an additional layer of risk. Without such statutory coverage, cf strict product liability, today’s bases for liability may include breach of contract, tort, fraud and false advertising claims.

For example, in the Maryland case of Shaw Development v. Southern Builders, which was settled without an opinion, the loss of a tax credit based upon compliance with a LEED Silver certification level led to a claim of liability.

The best way to mitigate these risks is to ensure that all contractual documents are clear and consistent, project management is assured, information disclosures are accurate, and finally that insurance coverage, where available, is provided. With regard to documents, AIA form contract B214-2007 has been developed to provide some model contractual language; more than forty insurance carriers are now underwriting green building liability; and in many law firms, some of their attorneys and other technical people have become LEED accredited.

This is an area that will continue to develop as more and more green buildings are constructed. For more in-depth information on potential liability and tips to mitigate claims, see the Harvard Law School Environmental Law & Policy Clinic White Paper, “The Green Building Revolution: Addressing and Managing Legal Risks and Liabilities”.

As with “green washing” of products, which are subject to existing product liability law, there is an emerging area of law regarding liability for claims that a building marketed as “green” or alleged to achieve the desired platinum, gold, silver or standard Leadership in Energy and Environmental Design (LEED) certification has failed to do so.

As the LEED requirements and techniques for sustainable development become better understood and more widely adapted, more and more developers are seeking to build “green.” To the extent that the construction costs permit a manageable return on investment (ROI) and the specifications and requirements for such development are clearly spelled out in the various contractual documents, including especially the agreement with architects, we will likely see more and more claims that the resultant buildings are “green.”

Although some theories of liability will track areas in construction law, e.g., deficiencies in design, construction or installation, green buildings claims will face an additional layer of risk. Without such statutory coverage, cf strict product liability, today’s bases for liability may include breach of contract, tort, fraud and false advertising claims.

For example, in the Maryland case of Shaw Development v. Southern Builders, which was settled without an opinion, the loss of a tax credit based upon compliance with a LEED Silver certification level led to a claim of liability.

The best way to mitigate these risks is to ensure that all contractual documents are clear and consistent, project management is assured, information disclosures are accurate, and finally that insurance coverage, where available, is provided. With regard to documents, AIA form contract B214-2007 has been developed to provide some model contractual language; more than forty insurance carriers are now underwriting green building liability; and in many law firms, some of their attorneys and other technical people have become LEED accredited.

This is an area that will continue to develop as more and more green buildings are constructed. For more in-depth information on potential liability and tips to mitigate claims, see the Harvard Law School Environmental Law & Policy Clinic White Paper, “The Green Building Revolution: Addressing and Managing Legal Risks and Liabilities”.

originally posted for the Association of Corporate Counsel's Green-House Counsel ©2009

The construction and rehabilitation of our nation’s infrastructure has come to the fore with the advent of both climate change and the transformation of our energy production.  As water shortages continue to move eastward from the western states and new water quality standards are promulgated to address previously unregulated pollutants, the handling of water will ultimately require as much, if not more, attention from corporate counsel than the current focus on fossil fuel.  To anticipate this potential sea change, counsel should be aware of the evolution of governmental regulation of the use and handling of water, as well as monetary incentives to achieve compliance with the emerging laws.

To provide a brief history, in 1972, the Clean Water Act was amended to regulate direct discharges from industrial facilities and publicly owned treatment works (POTW), and later expanded to cover indirect discharges (e.g., runoff of stormwater) from agriculture and land development.  Although the 1972 laws created a discharge permit system (NPDES) and initial funding for POTW construction, it wasn’t until the enactment of the Water Quality Act of 1987 that EPA received annual funding to award to states who set up revolving grant and loan funds to address problems with wastewater, drinking water and stormwater systems within each of their states. 

Although the amounts varied with the changes in the executive office and congressional makeup, these funds were normally matched by the states through general obligation and/or revenue bonds and derived from the loan repayments and interest earnings to ensure that the funds would continue to be available to achieve their mission year after year.  One such example is the Pennsylvania Infrastructure Investment Authority (PENNVEST), which awards grants and loans for wastewater, drinking water and stormwater projects, including brownfields, acid mine drainage and nutrient trading.  Similar programs exist in each of the 50 states.

The enactment of the American Recovery and Reinvestment Act of 2009 (ARRA) provided additional stimulus funds, designed to create jobs, and required that 20 percent of the funds be disbursed for “green infrastructure” projects.  EPA received $4 billion of stimulus money, to encourage the full recycling of wastewater and stormwater to reduce energy costs, augment future water supplies and minimize adverse impacts on water quality.  Since there are financial federal incentives from both the U.S. Environmental Protection Agency (“EPA”) and the Department of Housing and Urban Development (“HUD”), you should proceed with due diligence to determine if funding opportunities are available for your organization.  If an appropriate match is identified, assist in the requisite applications for these funds.

·               Water Quality Standards;

·               Clean Water Act;

·               Publicly Owned Treatment Works;

·               POTW;

·               Wastewater;

·               Drinking water;

·               Stormwater;

·               American Recovery and Reinvestment Act of 2009;

·               ARRA;

·               “Green infrastructure”;

·               Stimulus money;

·               Financial federal incentives; and

·               Funding opportunities.

Among the priorities under the $787.5 billion American Recovery and Reinvestment Act of 2009 is repairing, rebuilding, and constructing the nation’s water infrastructure. Approximately $6 billion will augment the EPA’s clean water and drinking water state revolving funds, of which approximately $221 million will be disbursed to the Commonwealth of Pennsylvania’s Infrastructure Investment Authority (PennVest). The governing board of PennVest is appointed by Governor Rendell, and I have been serving as its chair for the past six years.

PennVest administers the approximately $300 million annual allotment of Clean Water and Drinking Water funds previously supplied by EPA on a matching basis with Pennsylvania. These funds will now be augmented by the $212 million in stimulus funds. The Clean Water Fund addresses waste water infrastructure. The fund also addresses brownfields (with its protection of water quality) and storm water, whereas the Drinking Water Fund is strictly for water supply and distribution. At least 50 percent of the funding must be in the form of grants.

With the current emphasis on sustainability, alternative energy, greenhouse gas emission reduction and the need for more stringent control over stormwater run-off, the allocation of stimulus funds by PennVest will focus on innovative green technology, including particularly, controlling stormwater and remediating brownfields (at least 20 percent of the stimulus funding must be used for “green infrastructure”.)

Although the final disbursement of the economic stimulus funding will be affected by various regulations, the awarding of grants and loans will likely be on the same timetable as in the past with an emphasis on “shovel ready” projects. Funding agreements must be entered into and contracts for the full amount signed within a year.  The ultimate goal is to immediately increase the amount of jobs needed to construct the infrastructural repair, rebuilding and construction. 

Among the priorities under the $787.5 billion American Recovery and Reinvestment Act of 2009 is repairing, rebuilding, and constructing the nation’s water infrastructure. Approximately $6 billion will augment the EPA’s clean water and drinking water state revolving funds, of which approximately $221 million will be disbursed to the Commonwealth of Pennsylvania’s Infrastructure Investment Authority (PennVest). The governing board of PennVest is appointed by Governor Rendell, and I have been serving as its chair for the past six years.

PennVest administers the approximately $300 million annual allotment of Clean Water and Drinking Water funds previously supplied by EPA on a matching basis with Pennsylvania. These funds will now be augmented by the $212 million in stimulus funds. The Clean Water Fund addresses waste water infrastructure. The fund also addresses brownfields (with its protection of water quality) and storm water, whereas the Drinking Water Fund is strictly for water supply and distribution. At least 50 percent of the funding must be in the form of grants.

With the current emphasis on sustainability, alternative energy, greenhouse gas emission reduction and the need for more stringent control over stormwater run-off, the allocation of stimulus funds by PennVest will focus on innovative green technology, including particularly, controlling stormwater and remediating brownfields (at least 20 percent of the stimulus funding must be used for “green infrastructure”.)

Although the final disbursement of the economic stimulus funding will be affected by various regulations, the awarding of grants and loans will likely be on the same timetable as in the past with an emphasis on “shovel ready” projects. Funding agreements must be entered into and contracts for the full amount signed within a year.  The ultimate goal is to immediately increase the amount of jobs needed to construct the infrastructural repair, rebuilding and construction.