COVID 19 Commercial Building Liability

With all 50 states now in some stage of reopening from coronavirus pandemic closures, many commercial real estate owners are questioning if they can be liable for damages when someone, whether an employee of the business tenant or someone else, claims to have contracted COVID-19 at their building.

Obviously courts have never addressed a situation like the coronavirus pandemic (.. there was not a mature plaintiff’s bar during the 1918 Spanish flu pandemic), and this evolving and rapidly growing experience will be governed by state, and sometimes local law that varies from jurisdiction. Over time coronavirus pandemic exposure claims may result in a new emergent subset of premises liability law, but in most instances it is presumed that body of existing law will control.

In premises liability cases in Maryland, the state’s highest court has adopted the general rule, also applied in a majority of states with some variations, contained in Restatement (Second) of Torts § 343 (1965) that provides:

“A possessor of land is subject to liability for physical harm caused to his invitees by a condition on the land if, but only if, he

(a) knows or by the exercise of reasonable care would discover the condition, and should realize that it involves an unreasonable risk of harm to such invitees, and

(b) should expect that they will not discover or realize the danger, or will fail to protect themselves against it, and

(c) fails to exercise reasonable care to protect them against the danger.”

It is widely accepted that while a property owner owes a duty to exercise ordinary care to keep the premises in a reasonably safe condition, it is not the insurer of the invitee’s safety. Moreover, an invitee cannot maintain a negligence suit merely from a showing that an injury was sustained in the defendant’s building.

A tort case has not yet provided an answer to the obligation to enforce social distancing or to bar a person from the premises who has a fever until they have a negative test result, or the like.

By early March lawsuits had already been filed in courts in San Francisco and Miami against Princess Cruise Lines Ltd. alleging that passengers on cruise ships became ill with COVID-19 because the ships did not employ proper screening protocols and more.

Historically, state courts have awarded damages for negligent transmission of diseases imposing liability on individuals who have harmed others (from occupational diseases like silicosis inhaled while grinding steel, to cotenants in a two apartment house infected with tuberculosis, and having unprotected sex and transmitting AIDS).

There are likely intervening issues, including significantly that legal action by employees is almost all barred and claims limited to the workers’ compensation system where the employer has insurance. And customers, as business invitees and even trespassers might be able to articulate some claim, but proof during a pandemic that exposure was in a particular building will likely face unsurmountable causation problems not to mention an inability to prove some breach was the proximate cause of the harm?

All of this begs the question if a business owner’s premises liability insurance covers such claims? And while reviewing insurance policies, it is also likely prudent to review liability provisions in tenant leases.

Anticipating coronavirus claims, on March 24, New York Governor Andrew Cuomo signed an executive order limiting the malpractice exposure for health care workers treating COVID-19 patients. The order directs that an action against health care professionals providing medical services in response to the outbreak can only be maintained if gross negligence is established, a higher standard than negligence. There has been discussion in Congress about limiting liability for everything from grocery stores and pharmacies to others that have provided essential services, and some lawmakers have discussed eventually making similar protections universal.

These are uncharted waters, but exercising reasonable care may be adapting conduct by following available government guidance, including from the CDC and states about buildings. California offers widely quoted guidance on reopening.

And while there is some very good information about reopening in the real estate marketplace including from CBRE and the green building industrial complex has belatedly begun to roll out “special pilot credits” and the like, none of that will likely mitigate a building owner’s risk in litigation. Caution should also be observed, when following third party advice; for example some of the green building trade group required cleaning products and disinfectants necessary to achieve a rating system credit are not on the EPA List N of disinfectant products that have qualified for use against COVID-19 and may expose a building owner to legal jeopardy.

There is a great deal of uncertainty, at this time when we are still learning about this coronavirus. I wrote in an earlier blog post, COVID-19 and the Risk from Recirculated Air in Building that California recommends building owners consider stop recirculating air and now that the CDC is saying “touching a surface” is not the main way the coronavirus spreads, all building owners should consider stop recycling air so long as the outbreak lasts (i.e., until there is a COVID-19 vaccine).

There are some things a building should likely do. Most state law provides a duty of a property owner to warn a business invitee of an unsafe condition and while it might sound silly in this instance, posting warning signs is prudent. The CDC has provided some printable signs at the link above that also may serve to allay the concerns of those entering a premises, another key issue.

The coronavirus pandemic is obviously unprecedented, and as such it is not possible to predict with any degree of certainty how courts might rule on exposure claims, however, businesses are reopening now, and the principles described above may provide guidance on understanding and possibly even mitigating the risk to commercial building owners.

If we can assist you in mitigating the risk in the coronavirus pandemic operation of your buildings or otherwise with an environmental matter, we are ready to help you.

New BREEAM In Use Version in a Changing World

Last week BRE Global announced that the “BREEAM USA In-Use Version 6 for Commercial and Residential” green building rating system has launched. In addition to improvements to the prior commercial building rating system BREEAM In-Use now includes residential for the first time (accepting that existing multi-family building is a very much underserved sector).

An update to the BREEAM In-Use online platform, which is used to facilitate the benchmarking and certification process, has also been rolled out with an improved user interface.

During a global pandemic might seem an odd time to announce a new green building rating system, but appreciate that this was at the end of a global 18 month long pilot process.  Moreover, BREEAM USA In-Use supports existing buildings in the United States to measure their sustainability performance and gather information to drive improvements in a cost effective manner and receive market recognition for the achievement, so those buildings exist today (i.e., this is not a new construction rating system).

BREEAM was not only the first third party certified green building rating system, but today many real estate industry insiders consider it the most technically proficient if not also the most efficacious of the green building rating systems. Created in Great Britain in 1990, based upon the work of British engineer and architect John Doggart, an early version of BREEAM was the genesis of LEED. But despite several attempts at a North American invasion, including a 2008 joint venture with ICSC, BREEAM has never been widely accepted nor utilized in the U.S., which has surprised some because it appears aimed at a sweet spot, class B and C existing buildings? See my 2017 post on the First BREEAM USA In-Use Certification.

This new update appears to be philosophically based on the changing climate on real estate where there has been a shift from “green” as a marketing tool to ESG performance reporting to stakeholders and risk management. It is not clear how that will play in the U.S. in this post pandemic era. The shift toward ESG may be too much of a European bent where ESG is not an investment tool widely appreciated in the U.S. and the COVID-19 influenced shift from green may be toward building occupant health.

All of that observed, at a time when “What Is Cinema?” is out and “what is television?” is in, the new BREEAM USA In-Use will be an ideal green building rating system for many existing buildings.

v2016 will remain open for registrations for one final year, giving building owners and assessors time to plan before they have to upgrade. Buildings that are due to expire after this one year window will need to recertify in Version 6.

BRE will be hosting a series of four free webinars to introduce the new version. Click on the topic to register:

Commercial buildings are able to register now and benchmark through the updated online platform. Online registration and benchmarking for Residential assets will come online by late summer, with offline Scoring and Reporting Tools are available for the interim.

It can be expected that BREEAM credits will be amended and adjusted, just as new LEED pilot credits are anticipated in coming days, as the green building industrial complex, in an effort to remain relevant, urgently responds to concerns about reoccupying commercial buildings and preventing the spread of coronavirus.

If we can assist you in navigating the realm of green building standards, rating systems and codes or otherwise with an environmental matter, we are ready to help you.

The New and Improved 2020 ICC 700 National Green Building Standard

The 2020 version of the ICC 700 National Green Building Standard (NGBS) is now available for free download and public use.

You care about this because the NGBS is the most used green building standard in the United States. As of April 1, 2020, more than 216,000 residential dwellings have been certified to the NGBS through NGBS Green, the third-party certification program administered by Home Innovation Research Labs. And yes, that is more domestic certifications than LEED and Green Globes combined.

Moreover, the NGBS is a uniquely drafted “standard” in that it can be used by any builder for their individual project as a rating system (including obtaining third party certification), or may be adopted by a local government as a residential green building code. And appreciate that the International Green Construction Code incorporates the NGBS as an option for each jurisdiction that single family dwellings or multifamily family dwellings of 4 stories or less comply with the NGBS.

The NGBS applies to the design, construction, alteration, enlargement, and renovation of all residential buildings, residential portions of mixed-use buildings, and mixed-use buildings where the residential portion is greater than 50% of the gross floor area. This NGBS also applies to subdivisions, building sites, building lots, and accessory structures.

The NGBS includes high performance building practices in six areas: Lot Design and Development, Resource Efficiency, Water Efficiency, Energy Efficiency, Indoor Environmental Quality, and Building Operation & Maintenance. There are 4 certification levels, Bronze, Silver, Gold and Emerald, providing options to integrate sustainability and high performance into a project at a level most appropriate for the regulatory environment as well as the customer base in the local housing market.

Replacing the 2015 edition (.. yes, the development process dragged on), this latest NGBS version keeps abreast of new technologies and advances the standard’s role as the industry benchmark for residential green building.

This fourth edition of NGBS continues the collaboration of the International Code Council and the National Association of Home Builders, who took on a leadership role to commission an independent consensus committee of stakeholders charged with the development of this next generation of the NGBS. Home Innovation Research Labs served as secretariat, or administrator, of an ANSI approved standard development process, as it has done in previous iterations. The 2020 NGBS was ANSI approved earlier this year.

First published in 2009, the NGBS provides a pathway by which builders and developers may seek third-party certification of new homes. In addition, builders and consumers whose projects are NGBS compliant satisfy a large number of green building mandates across the country and may be eligible for federal, state or local incentives.

The 2020 edition builds upon years of experience of building and certifying to the NGBS. Significant changes include:

  • An expanded scope that now includes compliance for the non-residential portion of mixed-use buildings as long as the residential portion of the building is greater than 50% of gross floor area (previous editions defined criteria only for the residential portion of the project);
  • An expanded scope that also includes assisted living facilities, residential board and care facilities, and group homes;
  • A new Chapter 12: Certified Compliance Path for Single-Family Homes, Townhomes and Duplexes, that provides a new compliance path customized for single-family dwellings;
  • A new water efficiency performance path that demonstrates compliance using an index that generates a score relative to a standard baseline home;
  • An option to utilize a phased approach for multifamily remodeling projects;
  • A range of updated performance baselines and references;
  • And, a substantially revised remodeling chapter that offers a choice of prescriptive or performance compliance paths for energy and water efficiency.

“NGBS continues in its tradition of providing builders with the flexibility and choices in meeting market preferences for green building and staying relevant to our customers,” said NAHB Chairman Dean Mon, a home builder and developer from Shrewsbury, N.J.

“The updated NGBS ICC-700 provides designers, contractors, developers and policy makers with the tools and blueprint for green construction strategies and practices. These tools also aid occupant comfort and health, save money and preserve resources during the design, construction and operation of buildings,” said Code Council Chief Executive Officer Dominic Sims, CBO.

At a time when sequels every few years are “out” and sequels every 30 years are “in” the few year development process of the 2020 NGBS predated the coronavirus pandemic and there is already pressure for an update as consumer priorities are shifting away from tradition energy and resource efficient green matters toward health concerns.

All of that observed, there is no way of getting around that the NGBS has been and remains the most used green building standard in the United States. You should read the new document.

A free download of the ICC 700-2020 National Green Building Standard is available here.

COVID-19 and the Risk from Recirculated Air in Buildings

The Federation of European Heating, Ventilation and Air Conditioning Associations (REHVA) has in recent days issued guidance on how to occupy commercial and public buildings, from offices to schools, “in order to prevent the spread of the coronavirus.”

As Americans begin to end coronavirus lockdowns, which were of course intended to keep hospitals from being overwhelmed but not reducing the number of people who will ultimately get infected, with no vaccine yet available, much of the instruction is now for people to six feet of social distance and wear a face mask, but there is apparently no U.S. government guidance on how to operate and use a commercial building. Most would expect more frequent cleaning of buildings, but not anticipate much more. Antimicrobial materials and ultraviolet lights for cleaning may be the future, but will not yet be in place as most people go back to school and work. And as people return to their commercial buildings, codes and standards for heating, ventilation and air conditioning in the U.S., and even the green building movement, are driven principally by energy efficiency not preventing the spread of viruses.

The REHVA guidance is based on WHO documents and the best evidence and knowledge from 27 countries in Europe focusing on HVAC systems in buildings to articulate a set of measures that help to control the airborne transmission of COVID-19 in buildings (apart from frequent surface cleaning).

Important for every pandemic are the transmission routes of the infectious agent. In relation to COVID-19 the standard assumption widely discussed in the U.S. is that there are two dominant transmission routes, droplets emitted when sneezing or coughing or talking and via fomite surface and hand-hand, hand-surface contact.

But Europeans and some Asian countries have also identified another key transmission route of concern, airborne transmission through small particles (< 5 microns), which may stay airborne for hours and can be transported long distances. REHVA describes,

The size of a coronavirus particle is 80-160 nanometers, and it remains active for many hours or couple of days (unless there is specific cleaning). COVID-19 remains active up to 3 hours in indoor air and 2-3 days on room surfaces at common indoor conditions. Such small virus particles stay airborne and can travel long distances carried by airflows in the rooms or in the extract air ducts of ventilation systems. Airborne transmission has caused infections of SARS (an earlier coronavirus outbreak).”

While it has received little if any public discussion in the U.S., the NIH reached the same conclusion about airborne transmission on March 17, 2020, “scientists found that severe acute respiratory syndrome coronavirus 2 was detectable in aerosols for up to three hours.”

The latest studies cited in the REHVA guidance concluded that aerosol transmission is plausible, as the virus can remain viable in aerosols for multiple hours. Another recent study that analyzed superspreading events showed that closed environments with minimal ventilation strongly contributed to a characteristically high number of secondary infections. The manuscript draft discussing airborne transmission concludes that evidence is emerging indicating that COVID-19 is transmitted via airborne particles.

In response to that clear and convincing evidence, albeit preliminary, REHVA provides practical recommendations for building operations:

– The most significant REHVA recommendations is “no use of recirculation” in any building with a mechanical ventilation system. “Virus particles in return ducts can also re-enter a building when centralized air handling units are equipped with recirculation sectors.” It is recommended to avoid recirculation of air during COVID-19 episodes by closing the recirculation dampers (via the Building Management System or manually). Sometimes air handling units and recirculation sections are equipped with return air filters, but most of these filters, even HEPA filters may not filter out virus size particles effectively. Ultraviolet light can be used to disinfect indoor spaces and could be installed to destroy viruses, but has not yet been proven effective against COVD-19.

–  Increase air supply and exhaust ventilation by extending operation times, changing the clock times of system timers to start ventilation at nominal speed at least 2 hours before the building usage.

–  There is a general recommendation to stay away from crowded and poorly ventilated spaces, so in buildings without mechanical ventilation systems it is recommended to actively use operable windows (much more than normally, even when this causes some thermal discomfort).

Humidification and air-conditioning have no practical effect as coronaviruses are quite resistant to environmental changes and are susceptible only for a very high relative humidity above 80% and a temperature above 30 ˚C.

Note, duct cleaning has no practical effect and changing of outdoor air filters is not efficacious.

Arguably retro commissioning or otherwise tuning up HVAC systems could be advantageous. And if the system is beyond its useful life this may be an ideal time for replacing it with a modern system with a MERV-13 filter, ultraviolet light treatment or the like.

Certainly a lower population in a building can affect the spread of the coronavirus.

Owners of existing buildings in Europe are doing this today and American building owners should implement these practices now and for as long as the COVID-19 outbreak lasts (i.e., until there is a vaccine).

Green building programs, that have at their core energy efficiency (e.g., LEED is an acronym for Leadership in Energy ..) will have to promptly change and evolve if they are to remain relevant as ‘stay at home’ orders are lifted and people return to their places of school and work, concerned about the spread of COVID-19 within the buildings. The environmental community elevated reduced energy use to an environmental issue while relegating indoor air quality, including recirculated air necessary to achieve those energy goals, to an unimportant externality. Such may have been well and good when the associated cost savings of reduced energy use could drive green building for many owners. But on April 20 when oil in America went for negative $37 a barrel, reduced building energy costs were no longer a current priority for owners and certainly not a matter that will trump concern for building occupant exposure to coronavirus.

ASHRAE 62.1, the standard specifying minimum ventilation rates “to provide indoor air quality that is acceptable to human occupants and that minimizes adverse health effects” is perceived to not be enough in a post coronavirus building. And the use of no recirculated air, at all, is considered extreme by some, but possibly is necessary for a period of time (i.e., until there is a vaccine?) in order to prevent the spread of coronavirus. ASHRAE’s Executive Committee has issued two statements in response to COVID-19, including, “changes to building operations, including the operation of heating, ventilating, and air-conditioning systems, can reduce airborne exposures.” But many believe ASHRAE should consider and promptly provide direction on suspension of its standards, in particular those related to recirculated air and/ or provide greater guidance on filtering viruses.

The just released California COVID-19 Industry Guidance: Office Spaces, is significant when it raises the issue but makes it a consideration and not mandatory when it provides,

“Consider installing portable high-efficiency air cleaners, upgrading the building’s air filters to the highest efficiency possible, and making other modifications to increase the quantity of outside air and ventilation in offices and other spaces.”

There is a growing call for local code officials to immediately evaluate the efficacy of new executive orders or otherwise suspend code (BOCA, IECC, IgCC, etc.) requirements mandating use of recirculated air. Related to code requirements, demand controlled ventilation should be disabled.

If you think this is not a real issue, a front page story today in The Washington Post describes, several of the studies linked above, and a new one published this week in the journal Nature, that found evidence that the coronavirus can remain suspended in inside building air in aerosol particles.

The current pandemic should be a wake up call to operate and use commercial buildings, from schools to offices and more, to truly provide shelter, on a philosophical and existential basis, including not letting the tail of energy efficiency wag the dog of better and healthier buildings. Maybe the Europeans, who are already beginning to end lockdowns, know something about not using recirculated air at this time in commercial buildings in order to prevent the spread of coronavirus. And across America we should open minimum outdoor air dampers, as high as 100%, eliminating the use of recirculated air.

Supreme Court Permits State Law Claims Against Superfund Property

In an instructive environmental law decision last week, the U.S. Supreme Court held that the federal Superfund statute (the Comprehensive Environmental Response, Compensation and Liability Act) does not preclude owners of adjacent contaminated land from pursuing state laws claims for money damages for nuisance, trespass and strict liability, but any cleanup of that land cannot be taken in the absence of EPA approval.

Among the reasons this is a significant decision is the impact on widely utilized state Brownfields programs.

For nearly a century, the Anaconda Copper Smelter in Butte, Montana contaminated an area of over 300 square miles with arsenic and lead. Over the past 35 years, EPA has worked with the current owner of the now-closed smelter, Atlantic Richfield Company, to implement a cleanup plan for a remediation expected to continue through 2025. EPA has managed an extensive cleanup at the site, working with Atlantic Richfield to remediate more than 800 residential and commercial properties; remove 10 million cubic yards of tailings, mine waste, and contaminated soil; cap in place 500 million cubic yards of waste over 5,000 acres; and reclaim 12,500 acres of land. More work remains.

A group of 98 landowners sued Atlantic Richfield in Montana state court for common law nuisance, trespass, and strict liability, seeking restoration damages, which Montana law requires to be spent on property rehabilitation. The landowners estimate that their cleanup would cost Atlantic Richfield $50 to $58 million.

Of note, the landowners’ proposed cleanup exceeds that found necessary to protect human health and the environment by EPA in the CERCLA cleanup agreed to in the settlement with Atlantic Richfield.

The Supreme Court, in a split decision with two opinions concurring in part and dissenting in part, held that CERCLA does not strip the Montana courts of jurisdiction over this lawsuit.

But the Montana Supreme Court erred in holding that the landowners were not potentially responsible parties under CERCLA §122(e)(6) and therefore did not need to seek EPA approval. The high court reasoned, because arsenic and lead are hazardous substances that have “come to be located” on the landowners’ properties, the landowners are PRPs, under the Section 107 definition of a “covered person” as an “owner” of a “facility” despite that the landowners argued they are no longer PRPs including because CERCLA’s six year limitations period for recovery of remedial costs has run, and they were not parties to the EPA action.

Montana law requires that “an award of restoration damages actually . . . be used to repair the damaged property.” But such action cannot be taken in the absence of EPA approval. That approval process, if pursued, could ameliorate the conflict, if any, between the landowners’ restoration plan and EPA’s Superfund cleanup. So, the judgment of the Montana Supreme Court was affirmed in part and vacated in part.

This decision impacts on landowners in widely utilized state Brownfields programs, including those who enter the program in advance to purchasing a contaminated property as a defense to being a PRP. That is, the Small Business Liability Relief and Brownfields Revitalization Act of 2001, amended CERCLA, restricting liability under federal law for the cleanup and redevelopment of a Brownfields property by a person complying with a state voluntary cleanup program. A key lesson to be learned here is that even a landowner determined to be an “inculpable person” under a state voluntary cleanup program is still subject to a state law claim by some other impacted third party property owner.

You can read the Supreme Court decision at Atlantic Richfield Co. v. Christian et al.

Maryland is First State to Legislate Permitted Use of PFAS

Prior to the just concluded session of the Maryland legislature, the State’s laws and regulations were silent with regard to PFAS chemicals including PFOA. At worst, Maryland could have been criticized along with the Federal government and other states, for failing to regulate PFAS as a hazardous substance.

But then, some days ago Maryland did what no other state (nor the Federal government) has done. It passed legislation (.. actually 3 separate bills) expressly permitting PFAS (.. perfluoroalkyl chemicals)?!

To appreciate this legislative act some context is appropriate. I wrote in a blog post last November, PFOA Contamination Found in 49 States, the “New York Attorney commenced a civil suit against the nation’s largest chemical manufacturers and several firefighting foam makers for what the complaint alleges is contamination of water supplies across the state with PFAS.” That lawsuit, among others filed by governments, was among many hundreds of PFAS suits pending across the country, not to mention the more than 120 lawsuits involving fire-fighting foam that have been combined in one multidistrict litigation in Federal Court in South Carolina. In late 2019 hazardous waste incinerators in at least three states were destroying PFAS fire-fighting foam (.. a future blog post will consider the Clean Air Act implications not to mention the wisdom of incinerating PFAS fire-fighting foam?). Then on February 20, 2020, the EPA issued preliminary determinations to regulate PFOA and PFAS in drinking water and also issued a supplemental proposal regulating new uses of PFAS as requiring review under TSCA.

But while other states were suing to stop the use of PFAS and incinerating PFAS fire-fighting foam, while the Federal government was declaring it a hazardous substance, on March 18, 2020, the Maryland legislature, by unanimous vote in the House and Senate passed HB 619, the day before also having unanimously passed SB 420 / HB 581, which were amended to be the same as HB 619, authorizing and allowing PFAS use in Maryland.

HB 619 was also significantly amended from the originally drafted local bill seeking to protect Baltimore County firefighters from fire-fighting foam (.. more precisely, aqueous film-forming foams) containing PFAS.

This much amended legislation as enacted purports to “prohibit” beginning October 1, 2021, the use of “Class B fire-fighting foam” that contains “PFAS chemicals” for testing purposes or training purposes, that is, non PFAS foam is to be used for training, but the bill permits PFAS use in Maryland when in anything other than testing and training with fire-fighting foam. There is an express ‘get out of jail free’ provision for Baltimore-Washington International Airport (but not for other civilian or military airports, because they did not know to ask to be exempted?), presumably to allow Federally mandated fire-fighting training at BWI, but the bill does not restrict the manufacture, sale, distribution, discharge, or use of Class B fire-fighting foam that contains intentionally added PFAS chemicals in fire-fighting or fire prevention operations. Nor does it in any other way prohibit or even regulate PFAS chemicals in other uses.

PFOA was used for decades to make nonstick surfaces on frying pans and ski wax. PFOS was used to make water repellent clothing, pizza boxes and more.

Perfluoroalkyl and polyfluoroalkyl substances are a group of more than 4,000 man-made chemicals that have been manufactured and used in a variety of industries around the globe, including in the United States since the 1940s and have been the most extensively produced and studied of these chemicals. PFAS are very persistent in the environment and in the human body, meaning they don’t break down, accumulating over time, and as such have been referred to as ‘forever chemicals’ making them an emergent environmental priority.

The EPA reports, “there is evidence that exposure to PFAS can lead to adverse health outcomes .. studies indicate that PFAS can cause reproductive and developmental, liver and kidney, and immunological effects in laboratory animals, .. and have caused tumors in animal studies.”

A peer reviewed study cited approvingly by the EPA describes 99.7% of Americans have a detectable PFOA in their blood!

The Department of Defense has identified 15 bases in Maryland “known to have releases of PFAS.” There is PFAS fire-fighting foam in use at most if not all 38 civilian airports in Maryland. An indeterminate number of Maryland local government and volunteer fire departments have PFAS foam fire suppression systems.  And there are similar PFAS fire-fighting foam systems at marinas and in thousands of boats across the State.

A surprise to some, the Maryland Department of the Environment (which has been considering PFAS measures itself for some time but to date has done nothing), offered a letter of support for the legislation at the hearing.

It has been suggested this legislation will put in jeopardy claims within Maryland in the national fire-fighting foam multidistrict litigation in South Carolina.

There are alternatives to PFAS containing fire-fighting foam and to a host of other products, in use in other states and around the world.

This law firm has been advising and counseling clients in PFAS related matters since 2009. The subject matter is not new to us and we are ready to help you.

Adverse health impacts from PFAS are being policed by the marketplace in the courts, including enforcing existing tort law, and this legislation that began as an earnest and good effort to protect Baltimore County firefighters, is now bad statewide environmental public policy that will also have the effect of costing the Maryland taxpayers Millions of dollars in damages. It has been suggested that the Maryland Governor should veto the 3 bills, but given that they passed unanimously, such would not solve the greater environmental catastrophe.

Maryland Enacts New Environmental Laws in 2020

The 440th session of the Maryland General Assembly commenced on January 8, 2020. The 90 day session was, for the first time since the Civil War cut short, ending three weeks early (.. of note, the predecessor, appointed not elected, General Assembly of Maryland was first called together in 1635 in St. Mary’s for 90 days).

Despite the abridged session, the legislature acted on 1,664 House bills and 12 resolutions and 1,081 Senate bills and 6 resolutions with 667 bills passing both chambers before they adjourned sine die on March 18, 2020. Surprising few of those bills that passed involved environmental matters. The Governor has until the 30th day after presentment to sign or veto bills and given the impact of the coronavirus pandemic any legislation that requires new State spending will no doubt receive heightened scrutiny.

This is a review of key environmental legislation enacted this session.

Maryland has been described as having more pages of environmental statutes and regulations on a per capita basis than any other state. This year of a short legislative session no doubt saved many Marylanders from additional tyranny by the majority (i.e., the overwhelming number of environmental bills that were introduced did not pass), but the new laws compiled below add to the environmental regulatory scheme. Savvy players in the environmental industrial complex will find business opportunities to lead and profit in environmental matters, including opportunities advantaged by these newly enacted laws.

And to keep this compilation of new environmental in context, this April 22nd is the 50th anniversary of Earth Day:

SB 007 alters the membership of the Maryland Green Building Council by removing the Secretary of Housing and Community Development or designee and adding the Secretary of Labor or designee. This bill is a ministerial response to the fact that in 2018 the State’s Building Codes Administration moved to the Department of Labor.

SB 300 was VETOED by the Governor on May 7, 2020. The bill as passed would have made Maryland the first state in the continental U.S. to legislatively prohibit using chlorpyrifos in the State, including insecticides that contain chlorpyrifos and seeds that have been treated with chlorpyrifos, beginning December 31, 2020. The bill also prohibited aerial application of chlorpyrifos beginning October 1, 2020. The bill’s prohibition on the use of chlorpyrifos, the most widely used insecticide on agricultural products in the nation, was expected to have had a meaningful economic impact on Maryland agriculture and related businesses in the State. Maryland was already moving to a somewhat more limited regulatory response that will apparently now move forward.

HB 161  a departmental bill codifies (and expands) the requirement that each place of business that employs a person to apply fertilizer to property (including State property) that is not used for agricultural purposes have a professional fertilizer on staff who has obtained a fertilizer application certification and be licensed annually by the Maryland Department of Agriculture.  In the name of reducing nitrogen, phosphorus, and sediment loading in the Chesapeake Bay, the bill expands licensing of the non English proficient immigrant heavy landscaping industry in fertilizing turf and flower beds across the State.

HB 177  modifies dam safety laws related to the Maryland Department of the Environment’s authority to respond to an emergency situation related to a “water infrastructure asset,” defined as a reservoir, dam, or any other waterway construction. A water infrastructure “asset owner” must reimburse MDE for costs incurred, and a lien must be established for nonpayment under specified circumstances. The bill also establishes liability protections for MDE and the State.

HB 619  Maryland law and regulations are today silent with regard to PFAS including PFOA. This bill purports to prohibit, beginning October 1, 2021, the use of “Class B fire-fighting foam” that contains “PFAS chemicals” for testing purposes or training purposes, that is, non PFAS containing foam is to be used for training, but of import the bill continues to permit PFAS in Maryland when in anything other than fire-fighting foam. There is an express ‘get out of jail free’ provision for Baltimore-Washington International Airport (but not for other civilian or military airports, because they did not know to ask to be exempted?), presumably to allow Federally mandated fire-fighting training at BWI, but the bill does not restrict the manufacture, sale, distribution, discharge, or use of Class B fire-fighting foam that contains PFAS chemicals in fire-fighting or fire prevention operations. Nor does it in any other way prohibit or even regulate PFAS chemicals in other uses. It has been suggested this legislation will put in jeopardy claims within Maryland in the national fire-fighting foam multidistrict litigation in South Carolina. Adverse health impacts from PFAS are being policed by the marketplace in the courts, including enforcing existing tort law, and this legislation that began as an earnest and good effort to protect Baltimore County firefighters, is now bad statewide environmental public policy that will also have the effect of costing the Maryland taxpayers Millions of dollars in damages.

SB 420 / HB 581 was amended to be substantially the same as HB 619.

HB 1442 /SB 840  alters the definition of “expanded polystyrene food service product” to exclude cartons for eggs that are shipped into the State for packaging or cartons of eggs that have been packaged within the State for sale within the State. As a result, these egg cartons are no longer subject to restrictions on the sale of expanded polystyrene food service products that take effect July 1, 2020.

HB 1035 / SB 495  expands the authorized uses of the Bay Restoration Fund’s Septics Account to include specified costs associated with connecting a property using an on-site sewage disposal system (commonly referred to as a septic system) to an existing municipal wastewater facility that has signed a funding agreement with the Maryland Department of the Environment and is under construction to achieve, enhanced nutrient removal or biological nutrient removal level treatment.

HB 1479  updates the Public Local Laws of Calvert County to include requirements for the preparation and recordation of subdivision plats in the County. Among other things, a subdivision plat that is intended to be recorded must require the property owner, or a successor or assign of the owner, to grant a perpetual stormwater management easement to the County.

SB 018  alters the membership of the 1994 Lead Poisoning Prevention Commission and changes and adds topics on which the commission may appoint a subcommittee. The bill also repeals and amends several obsolete provisions that require the commission to develop recommendations and standards and to study and collect information on various topics related to lead, lead poisoning, and remediation and repeals an obsolete provision that requires the Maryland Department of the Environment to consult with the commission on establishing specified standards.

SB 074  a departmental bill explicitly establishes the Marine Contractors Licensing Board as a unit in the Maryland Department of the Environment; amends the definition of “marine contractor services” to exclude specified activities located over State or private tidal wetlands; and authorizes the board to establish, by regulation, separate license categories that specify the marine contractor services that each license authorizes a licensee to perform.

SB 242  repeals current law authorizing the Department of Natural Resources to issue a license to a person or a group to feed waterfowl on land owned or operated by the person or group, or in waters within 300 yards of a shoreline. DNR advises that it has not issued a license to feed waterfowl in more than 20 years.

HB 662  a departmental bill codifies and implements the requirements of the Governor’s Executive Order 01.01.2019.08, which requires that the State reduce energy consumption in State-owned buildings by 10% by 2029 compared with a fiscal 2018 baseline. It also institutes new requirements for State agencies that plan, pursue, and enter into an energy performance contract. Finally, it repeals obsolete provisions related to energy conservation in State buildings.

HB 980 / SB 775  alters the energy storage system tax credit by increasing to $150,000 the maximum tax credit (up from $75,000) that may be claimed for a system installed on commercial property (the $5,000 residential cap remains) and specifying that a person that owns or pays for the installation of a system that supplies electrical energy intended for use on a residential or commercial property may claim the tax credit, funded at $750,000 annually.

HB 1029 / SB 224 alters the allocation of funds for the Clean Energy Account within the Maryland Employment Advancement Right Now program. It reduces funding for pre-apprenticeship and apprenticeship programs to provide funding for the recruitment of individuals to the pre-apprenticeship jobs training programs and the registered apprenticeship jobs training programs. The bill adds energy efficiency and geothermal careers as permissible career fields for youth apprenticeship jobs training programs and the registered apprenticeship jobs training programs under EARN, along with solar and wind sectors as specified under current law.

SB 281 / HB 336  an Administration bill requires the Maryland Department of the Environment to waive application fees for the Voluntary Cleanup Program  for a qualifying applicant who intends to use eligible property to generate clean or renewable energy and expands the definition of “eligible property,” as it applies to VCP to include those listed on the Superfund Enterprise Management System. The bill also exempts specified public-private partnerships (P3s) formed for the generation of clean or renewable energy from the public service company franchise tax.

2019 HB 720 / override of gubernatorial veto. The bill reestablishes the Oyster Advisory Commission and requires the Department of Natural Resources and the commission, in coordination with the University of Maryland Center for Environmental Science, develop a package of consensus recommendations for enhancing and implementing the fishery management plan for oysters. DNR must implement the 2019 Fishery Management Plan for Oysters and must not reduce or alter boundaries of existing oyster sanctuaries until a fisheries management plan has been developed based on the consensus recommendations.

The Maryland General Assembly may convene in special session in late May 2020, but will convene in regular session on Wednesday, January 13, 2021 at 12:00 p.m.

Thank you to the Maryland Department of Legislative Services for the information provided above.

And be assured I would like to be your lawyer in environmental matters. We are ready to help you.

Understand How EPA Does Not Expect to Seek Penalties during COVID-19 Pandemic

The U.S. Environmental Protection Agency announced last Thursday retroactively beginning March 13, 2020, a temporary policy regarding EPA enforcement of environmental legal obligations during the COVID-19 pandemic.

EPA’s admittedly unprecedented temporary “enforcement discretion policy” applies to civil violations during the COVID-19 outbreak as a response to the deleterious effect on a wide variety of businesses. EPA has in the past announced how it intends to exercise enforcement discretion (e.g., the 1974 mobile source tampering policy) but it has maybe never before done so, so broadly and widely across all businesses as in this instance to be reasonably commensurate with the scope of the COVID-19 pandemic.

The policy addresses different categories of noncompliance differently. For example, under the policy EPA does not expect to seek penalties for noncompliance with routine monitoring and reporting obligations that are the result of the COVID-19 pandemic (e.g., even a well managed non-essential business closed by state order may not be able to collect monitoring samples, etc.) but on the other hand does expressly expect operators of public water systems to have heightened responsibility for continuing to ensure the safety of drinking water supplies.

Despite the hyperbole of activists who have characterized this policy as everything from an abject waiver of environmental laws to a license to pollute, “EPA is committed to protecting human health and the environment, but recognizes challenges resulting from efforts to protect workers and the public from COVID-19 may directly impact the ability of regulated facilities to meet all federal regulatory requirements,” said EPA Administrator Andrew Wheeler. “This temporary policy is designed to provide enforcement discretion under the current, extraordinary conditions, while ensuring facility operations continue to protect human health and the environment.”

Of paramount import “[a]ll enforcement discretion set forth in this temporary policy is conditioned on .. Entities should make every effort to comply with their environmental compliance obligations. If compliance is not reasonably practicable, facilities with environmental compliance obligations should .. [a]ct responsibly under the circumstances in order to minimize the effects and duration of any noncompliance caused by COVID-19.”

As we self-isolate in the final days of the first quarter of 2020, when food delivery is “out” and alcoholic beverage delivery is “in” the policy details the steps that regulated facilities must take now to qualify for enforcement discretion.

The temporary policy makes it clear that EPA expects regulated facilities to comply with regulatory requirements, where reasonably practicable, and to return to compliance as quickly as possible. To be eligible for enforcement discretion, the policy also requires facilities to document decisions made to prevent or mitigate noncompliance and demonstrate how the noncompliance was caused by the COVID-19 pandemic.

Be assured this is not a “get out of jail free” card. This policy does not provide leniency for intentional criminal violations of law.

The policy does not apply to activities that are carried out under Superfund and RCRA Corrective Action enforcement instruments. EPA will address these matters in separate communications.

Additionally, “[n]othing in this temporary policy relieves any entity from the responsibility to prevent, respond to, or report accidental releases of oil, hazardous substances, hazardous chemicals, hazardous waste, and other pollutants, as required by federal law, or should be read as a willingness to exercise enforcement discretion in the wake of such a release.”

The EPA’s policy will have a limited impact in states that have delegated EPA enforcement jurisdiction. That includes Maryland, where Secretary of the Maryland Department Environment Ben Grumbles made clear that the state wouldn’t be following EPA’s lead. “We understand we may need to exercise discretion in enforcement of environmental regulations on a limited, case-by-case basis during a disaster, but Maryland is not issuing a broad upfront policy as EPA is doing,” Grumbles said in a statement.

While you are at home take a few minutes to read the EPA COVID-19 Policy and be aware EPA will post a notification here at least 7 days prior to terminating this temporary policy.

If we can assist you in understanding how to navigate this extraordinary discretionary policy or otherwise with an environmental matter, we are ready to help you.

LEED can Help Mitigate Legal Risks in ESG Disclosures

Public companies in the U.S. find themselves at a dynamic time of emergent environmental, social and governance (“ESG”) disclosures. Vocal socially conscious investors, activist stockholder environmental proxy proposals, and the like are driving companies to make ESG statements.

This blog post highlights the legal risk associated with ESG disclosures and proffers that with green building practices companies can mitigate their legal risk while still being responsive to the trend of investor demands for more disclosure.

Make no mistake, there is no U.S. law requiring businesses to make ESG statements, but I have posted about ongoing attempts to criminalize the matter, ESG Disclosure Simplification Act Passes Committee But Will Fail.

Of course SEC rules generally require public companies to disclose, among other things, known trends, events, and uncertainties that are reasonably likely to have a material effect on the company’s financial condition or operating performance in an annual report and other periodic filings, and there are the SEC’s Conflict Minerals Disclosure Rule, and the California Transparency in Supply Chains Act, but none of that equates to ESG disclosures.

Recent U.S. case law underscores that ESG disclosures may be actionable if found to be materially false or misleading. There has been relatively little judicial redress arising from ESG claims (largely attributable to a robust stock market in recent years) and much of it involving bad facts in extreme instances (i.e., against BP arising from the Deepwater Horizon incident, against Massey Energy arising from a fire in a coal mine, etc.) and the legal adage that bad facts rise to bad law may certainly have been at play in those instances.

But the risks associated with ESG disclosures are real and should not be underestimated.

It was widely reported in the media in December 2019 that the SEC was scrutinizing whether ESG claims “are at odds with reality.” The SEC sent examination letters to managers of funds touting their ESG bonafides, apparently focusing on criteria for claiming a company to be socially responsible and the methodology for applying those criteria.

The problem, of course, is there are no such accepted criteria.

SEC Commissioner Hester Peirce has publicly said, “we are seeing a similar scarlet letter phenomenon in today’s modern, but no less flawed world” but it is not Hester Prynne’s “A” for adultery in Puritan Massachusetts Bay Colony in 1642, but rather ESG in America in 2020. The SEC Commissioner has also questioned “the materiality of ESG” including finding fault with ESG for having no enforceable or common meaning, “while financial reporting benefits from uniform standards developed over centuries, many ESG factors rely on research that is far from settled.”

In what is widely viewed as a flawed rule only further slowing chronically weak European economies, the EU Parliament will require by the end of 2020 that EU member public companies publish their policies on integration of sustainability risks, with a much watered down definition of “sustainability risks .. as an ESG event that could cause an actual or potential negative impact on the value of the investment arising from an adverse sustainability impact.” Such offers no good guidance for U.S. best practices.

Michael Bloomberg funded the Sustainability Accounting Standards Board and more than 100 companies report information according to SASB guidelines, but the disclosures aren’t standardized like corporate financial disclosures including that they sometimes omit proprietary information or damaging data. Critics claim SASB simply provides more data the parent company can sell and such is a widely heard knock on many in the ESG space?

In a year when Billionaires are “out” and 401(k) Millionaires are “in” increasingly progressive in the U.S. are disgruntled when the most popular stocks held in ESG mutual funds are Microsoft and Apple, the same as in non-ESG funds?

Maybe most damning is that ESG mutual funds, on average, underperform the market. An analysis reported last month in The Wall Street Journal of 219 mutual and exchange traded funds classified by Morningstar are integrating ESG into their investment process of focusing on sustainable themes “underperformed the S&P 500 over both one and three years.”  The Morningstar data does not rely on any particular criteria, but rather lets the companies self identify as integrating ESG.

People are free to invest in companies as they wish, but they can only do so if the peddlers of ESG are honest about the limitations of the three letter acronym. The broad breadth of issues that get dropped into the ESG bucket are too diverse to be given a number score.

I have for years advised public companies about environmental matters and sustainability including navigating the complexity of the emergent ESG disclosure decision making landscape. Of course, there are steps that companies can take to reduce the potential legal exposure created by these disclosures. While our most frequent advice is simply to use aspirational language in ESG statements, including using words like “should,” “expect,” or “strive,” possibly our most efficacious advice is to obtain third party verification of the accuracy of disclosures.

And there may be no better third party verification in the realm of environmental disclosures (the E of ESG) than a third party certified LEED green building. I posted about the concept in 2018 and today, still with no accepted criteria, the widely recognized LEED seal provides some sustainable panache, but most important mitigates risk from the modern scarlet letters ESG.

179D Tax Deduction Allocated from Government Buildings

On December 20, 2019, the President signed legislation reviving the Section 179D energy efficient commercial building tax deduction and while much has been written about the much needed boost to green building, little has been said about the enormous benefits available from government owned buildings.

The § 179D federal tax deduction was brought back from the dead. This was Congress’ tax extenders bill bringing back to life expired tax provisions. This post will not consider the extended tax breaks for racehorses and auto racetracks nor the reduction in taxes for domestic beer and spirts, and not the § 179D deduction for privately owned buildings, but rather it will focus on the energy efficient commercial building deduction for government owned buildings.

Unremarkable, the Tax Extender and Disaster Relief Act of 2019 amended the Internal Revenue Code of 1986, ..

SEC. 131. ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.

IN GENERAL. – Section 179D(h) is amended by striking ‘‘December 31, 2017’’ and inserting ‘‘December 31, 2020’’.

EFFECTIVE DATES. – The amendment made by subsection (a) shall apply to property placed in service after December 31, 2017.

But the import of those few interlineated words, is in the instance of energy efficient commercial building or property that is installed on or in property owned by a Federal, State, or local government or a political subdivision where the owner of the property may allocate the § 179D deduction to the person primarily responsible for designing the property (the designer). Of course, the government does not pay federal income tax such that it cannot utilize a tax deduction , so that tax deduction may be allocated to a taxpayer.

The deduction will be allowed to the designer for the taxable year that includes the date on which the property is placed in service. The § 179D deduction had been in effect since January 1, 2006, but the systems and buildings must have been placed in service by December 31, 2017, which is when § 179D expired, prior to this revival. And it should not be lost on anyone that this tax deduction was revived back to December 31, 2017 (.. when it last expired) and will remain effective through December 31, 2020.

The IRS has issued guidance, that a designer is a person that creates the technical specifications for installation of energy efficient commercial building property (or partially qualifying commercial building property for which a deduction is allowed under § 179D). A designer may include, for example, an architect, engineer, contractor, environmental consultant or energy services provider who creates the technical specifications for a new building or an addition to an existing building that incorporates energy efficient commercial building property.

A person that merely installs, repairs, or maintains the property is not a designer.

If more than one designer is responsible for creating the technical specifications, the government owner of the building may determine which designer is primarily responsible and allocate the full deduction to that designer, or at the owner’s discretion, allocate the deduction among several designers.

An allocation of the § 179D deduction to the designer of a government owned building must be in writing and will be treated as satisfying the requirements of tax code with respect to energy efficient commercial building property (or partially qualifying commercial building property for which a deduction is allowed under § 179D) if the allocation meets the simple and straightforward requirement of the IRS guidance and contains:

(1) The name, address, and telephone number of an authorized representative of the owner of the government owned building; (2) The name, address, and telephone number of an authorized representative of the designer receiving the allocation of the § 179D deduction; (3) The address of the government owned building on or in which the property is installed; (4) The cost of the property; (5) The date the property is placed in service; (6) The amount of the § 179D deduction allocated to the designer; (7) The signatures of the authorized representatives of both the owner of the government owned building and the designer or the designer’s authorized representative; and (8) A declaration, applicable to the allocation and any accompanying documents, signed by the authorized representative of the owner of the government building and designer.

In most instances that allocation form is no longer than one page.

A tax deduction of $1.80 per square foot (i.e., this tax incentive is based on the area of the building not the dollar amount expended) is available to owners of new or existing buildings who install (1) interior lighting; (2) building envelope, or (3) heating, cooling, ventilation, or hot water systems that reduce the building’s total energy and power cost by 50% or more in comparison to a building meeting minimum requirements set by ASHRAE Standard 90.1-2007 for buildings and systems placed in service after January 1, 2017 (before that date ASHRAE 90.1-2001 was used).

Note the maximum amount of the § 179D deduction to be allocated to the designer is the amount of the costs incurred by the owner of the government owned building to place the energy efficient commercial building property in service. A partial deduction may be allocated.

Be aware the Department of Energy maintains a public list of software that may be used to calculate energy and power consumption and costs for purposes of the comparison against the prototype ASHRAE 90.1-2007 building. Selection of the ideal software for a particular building type can be key.

In 2020 when Big Pharma is “out” and Jagged Little Pill is “in” many if not most new buildings constructed this year in states where the adopted energy code is the 2015 IECC or later, will meet the required level of performance above the ASHRAE standard. And LEED as well as 4.0 projects will in the vast majority of instances qualify.

Deductions of $0.60 per square foot are available in instances in which individual lighting, building envelope, or heating and cooling systems that partially qualify by meeting certain target levels or through an interim lighting rule issued by the IRS.

Bringing back to life the dormant § 179D tax deduction will not bring about the zombie apocalypse (.. I’m fairly confident?) but it will revive the moribund U.S. green building industrial complex, including incentivizing energy efficient government building.

Moreover, given that buildings use more than 40% of energy in the U.S., this tax incentive can benefit not only the designer of a government owned building, but given the concomitant one-third of all greenhouse gas emissions coming from those buildings (more than any other sector in the economy), also repairing the world.

This law firm regularly works with owners, tenants, designers and others in securing green building incentives, including advantaging the § 179D tax deduction.

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