Archive for July, 2010

Emergency Spill Response: Preparation is Important

July 1st, 2010

Question – A number of our clients/borrowers own and/or operate commercial sites at which hazardous substances are stored, used and/or sold.  With the BP oil spill in the Gulf a major news story, the question has been posed as to whether our clients have made adequate preparations for accidental or sudden spills or releases at their respective facilities; what can we do to find out what, if any, preparations have been made, and how could we advise our clients/borrowers regarding this issue?

Response – It is part of best management practices to have in place response mechanisms that can be called up on to address the range of spills/Releases that are possible at a given facility, whether that means containers or absorbent materials available onsite for minor issues, to third party emergency response contractors ready to deploy to a site with a more sizable incident to manage.

A good way to start your inquiry on this matter is to determine which of your clients and/or borrowers have facilities which use or accumulate hazardous substances.  The next step would be to divide the identified facilities into two groups.

The first group (Group A) would consist of facilities where a spill or release of hazardous substances of more than 25 gallons at one time is possible. The second group (Group B) would including facilities or operations which have fewer than 25 gallons of spill likelihood, i.e. they use or store di minimis quantities of hazardous substances as part of their business operations.  For Group B, it is appropriate to as if those facilities have absorbent products stored on hand to properly handle and manage any spill or release.  A spill of 25 gallons or less is usually considered de minimis (unless the substance is acutely hazardous, like mercury or similar materials) and if cleaned up with in a short period of time, does not necessarily become a regulatory reportable event, or otherwise cause potential harm to people, the facility or the environment.  It would be appropriate to periodically obtain from the client/borrower an updated inventory of all hazardous substances used, stored, handled and/or sold at a facility during the course of normal operations, along with a summary statement from the client/ borrower as to whether any of the materials are considered acutely hazardous (such that the 25 gallon threshold would not apply) and what preparations and materials the client/borrower has on hand to address any spill or release.   It would be appropriate to recommend, as part of best business practices, that any Group B clients/borrowers ensure that the facility stores, or otherwise has immediate access to products and materials which are suitable for managing and cleaning up a de minimis spill or release of up to 25 gallons per incident.

Group A types of facilities, such as gas and convenience stores, light or heavy manufacturing facilities, “wet” product warehouses, certain retail facilities (like Pinch A Penny stores or certain dry cleaners), or facilities which have emergency power generators with associated fuel tanks, are examples of facilities and operations which have the capacity for spills or releases in excess of 25 gallons at one time.  For these types of facilities, a more robust inquiry and series of recommended.  This is because the potential impact, and associated costs and liability are much larger, and could affect not only the client/borrower, but also third parties in proximity to the impacted property, as well has having an adverse affect on the lender.

For Group A entities, in addition to meeting the Group B recommendations, it is also appropriate to recommend that they have in place a procedure to contact an emergency response contractor within a specified amount of time, in the event of a larger spill.  For example, certain clients have retainer agreements (usually a couple or few thousand dollars per year, depending on the number and nature of facilities included) with emergency response contractors (like EagleSWS, CliffBerry and CleanHarbors, to name a few) to arrive at the site of a material spill within a couple of hours from the time of notification with sufficient and specific equipment to properly address the incident.  Some clients/borrowers have indicated that they would rely on municipal fire departments and/or hazmat teams for response actions, but the objectives and prerogatives of public safety agencies is public health and safety and may not be in line with the needs of the property owner; therefore, having a dedicated contractor is recommended.