The legal implications of not knowing the environmental risks on your bulk liquid terminal

By John Almond, National Account Manager from Adler and Allan and Simon Tilling, Partner at Burges Salmon

When it comes to commercial land, plant, infrastructure and buildings, it is the owner who is liable for even genuinely unknown site contamination. It is therefore paramount for terminal owners and managers to carry out due diligence and robust asset management throughout the duration of their activities. John Almond, National Account Manager from Adler and Allan and Simon Tilling, Partner at Burges Salmon discuss the importance of knowing the environmental risks on your site, and the associated costs of not doing so.

The variety of liquids a terminal might handle is vast. All have the potential to cause considerable environmental damage if accidentally released into the environment.

The issues leading to contamination can sometimes go undetected for many years by operators particularly when an effective asset management strategy has not been put in place.

For this reason, it is very important to realise the legal implications of not knowing your site and who is ultimately liable for polluting it.

Historical pollution

Under the contaminated land regime, if a local authority deems the condition of a site to pose an unacceptable risk of harm to people or the environment, then a remediation notice could be served on an “appropriate person” requiring them to restore the land at their expense.

The question of who is an ‘appropriate person’ can be a complex one, however, the starting point is the person who has caused (or knowingly permitted) contaminating substances to be in the land.

In the absence of specific legal arrangements, a company having polluted a site could be ordered to remediate it even after having sold the site to an entirely different new owner.

Usually, the issues related to contaminated sites are flushed out when ownership changes. Buyers may ask the seller to give certain warranties, including assurances that inspections and precautions to reduce the risk of contamination have been carried out.

A seller who does not know enough about the conditions of its site will have more difficulties selling its business or asset.

Insufficient analysis

If issues do arise, it can be difficult to determine the difference in impact between historical contamination and a current owner’s actions, especially if insufficient analysis is undertaken at the time of exchange.

There are also risks of being fined under environmental law regimes for day to day operational issues if environmental damage occurs.

The level of fines will depend on the level of harm, the culpability of the offender and - in the case of corporates - the size of company’s turnover. While penalties vary, they have been steadily increasing over recent years, with some of the highest reaching seven figure sums including potential custodial sentences for company directors.

Finally, neighbouring landowners can petition for the costs of dealing with migrating contamination under the law of nuisance, while those whose economic activities are disrupted by spills may also have a route to compensation.

Due diligence and asset management

The combination of legal risks under the contaminated land regime, environmental regulations and civil claims make it paramount for terminal owners and managers to carry out due diligence and robust asset management throughout the duration of their activities.

A responsible, efficient organisation always has a robust, ongoing programme in hand. This keeps it abreast of the environmental health of its buildings, land and water conducting intrusive surveys and staying in touch with regulatory and inspection bodies.

Effective due diligence coupled with having the right legal agreements in place will help protect all parties. 

Open lines of communication

Lines of communication should be kept open throughout normal business operations, informing the agencies of key operational changes and showing practical permit compliance. Underpinning this, it is also good to secure the right advice at the right time.

By doing so, a verifiable track record of business transparency, willingness to engage, consideration and care for the environment is created which if required will be easier to persuade both prosecutors and the courts that they weren’t reckless, negligent or deliberately harmful.

A thorough environmental risk audit will give site owners peace of mind in detecting and identifying the environmental risks posed today, offering remediation strategies to reduce future damage to the environment, reputation and finances.

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