Much has already been written regarding the potential of COVID-19 to impact construction or development projects. For example, businesses may experience personnel or material shortages, or stoppages that result from Government-directed actions. These delays jeopardize project timelines and place businesses in vulnerable positions regarding liquidated damages or other contract penalties. These businesses are reviewing their contracts to see whether they may seek relief pursuant to their contract’s force majeure clause.
Businesses performing mandatory remedial actions or other corrective action pursuant to regulatory enforcement documents, including settlement agreements and consent orders with Federal or State regulators, will face similar challenges. These businesses and individuals should review their settlement agreements or consent orders to understand the procedural requirements they must follow to invoke their force majeure clause.
Force majeure clauses in most environmental settlement agreements or consent orders tend to be more rigid than their commercial counterparts, including stringent timelines that must be followed before a regulated entity may invoke the clause. For example, the force majeure clause in EPA’s standard Administrative Settlement Agreement and Order on Consent requires that the regulated entity notify EPA within 24 hours of when the entity first knew that an event may cause delay. The standard force majeure clause also requires the regulated entity, within 10 days, to provide a written explanation to EPA describing the reason for the delay, along with other supporting information, such as the extent of expected delay, and actions taken to mitigate the delay. The clause also places the burden on the regulated entity to continue the environmental work to the best of their ability, including the burden of anticipating delays before they occur. The clause provides that failure to comply strictly with the clause’s requirements prevents the regulated entity from asserting a force majeure claim. Many state settlement agreements or consent orders carry similar requirements. For example, Virginia Consent Orders often carry a 24-hour notice requirement as does EPA, along with similar informational requirements.
Businesses governed by a settlement agreement or consent order should review their documents to ensure they understand the procedural requirements necessary to invoke a force majeure clause lest they inadvertently waive their ability to invoke the clause. In addition, businesses should be speaking with their contractors, vendors, and project managers to assess potential delays to their projects, and they should communicate with their regulator as soon as a potential delay is identified. Businesses and individuals currently negotiating a compliance agreement should raise COVID-19 concerns with the regulator, and they should negotiate terms in their force majeure clause that accounts for the current pandemic.
Businesses and individuals with questions regarding their settlement agreements or consent orders, or businesses currently negotiating a compliance agreement with a regulator, should consult with counsel. Our Environmental Law practice is available to help businesses and individuals understand their compliance requirements.