Design Flaw Leads to Environmental Incident - Is Owner or Contractor Responsible?

A dispute between a refinery operator and a construction contractor followed the discovery of oil outside of a diked tank area. Our work included determination of whether each party followed applicable design and construction industry standards and best practices.

An expansion project at a large fuels refinery required modifications to the oily water and wastewater treatment systems. The refinery owner (Owner) prepared the basic design modifications and engaged a construction contractor (Contractor), under an existing master services agreement, to prepare the "issued for construction" (IFC) drawings and fabricate and install the modifications.

Sometime after the installation, and after heavy rainfall at the refinery, oil was found in the wastewater discharge, which resulted in an environmental incident. Investigators determined that the heavy rain had caused the storage tanks to overflow into a diked area, which was intended to contain any oil that may have been released. However, oily residue in one of the outlet culverts confirmed that oil had made its way from the diked area into the modified wastewater treatment system. An inspection revealed that the modified system was not functioning as intended.

Baker & O'Brien was retained to determine whether the installation met the functional requirements contained in the work order. Our consultants visited the site to inspect the installation and reviewed the design documents and IFC drawings. We provided a report that presented our findings and opined regarding Owner and Contractor duties and responsibilities under the terms of the master services agreement. A key issue in the matter was project management practices surrounding the use and relevance of IFC drawings.