Friday, March 21, 2025
Quick, name an integral sector within the construction industry that:
• generates billions of dollars in annual costs nationally;
• has enormous impacts on environmental and human health as well as greenhouse gas emissions;
• has a checkered history of regulatory compliance;
• is in the nascent stages of revolutionary change to improve business and sustainability outcomes.
If you answered “management of the excess soil generated from construction projects” you would be correct. If your reaction to this answer is “I never thought about this,” you would be in good company.
This is an omnipresent component of construction activities, and those involved in project financing and risk underwriting would benefit from better understanding their intricate connections to this sector, and adopting practices accordingly.
The scope and impact of excess soil generated from construction activities
When we build, we almost inevitably displace soil, mountains of it. Traditionally, this soil has been regarded as an impediment to achieving the final built form and a waste material to be disposed of in the cheapest way possible. The pervasive mindset of “it’s only dirt” has fostered, at least until recently, an industry rife with inefficiencies with little consideration to its impacts. In addition, while most players in this arena are corporately responsible, the temptation to make a quick buck where lax regulatory conditions exist has invited unsavoury guests to the party.
Removing excess soil from construction projects generates billions of dollars in costs annually in Canada. Millions of diesel dump truck trips travel hundreds of millions of kilometres annually to transport tens of millions of cubic metres of soil, with the resulting emissions of hundreds of thousands of metric tonnes of greenhouse gases (GHGs). If displaced soils (which usually contain some degree of contamination) are not properly relocated, the resulting impacts to environmental and human health (especially via groundwater pollution) can be devastating.
The cost of managing these soils can easily amount to five per cent or more of a construction pro forma, yet it is not unusual for this expense to appear as a single line item in a development budget. Despite the costs and potential liabilities, the consideration of good soil management practices is often given no thought by lenders and insurers when financing projects and underwriting risk.
The times they are a “changin”
In recent years, there has been a fundamental shift in attitudes and behaviours in this arena due to regulatory changes. As well, industry stakeholders are awakening to the financial benefits of paying detailed attention to their soil management plans and embracing digital tools to facilitate logistics while maintaining regulatory compliance.
Regulatory authorities in regions across the country have enacted legislation that both mitigates harm caused by improper soil management while promoting beneficial reuse where possible. This requires greater accountability and transparency for soil movements.
Nonetheless, many involved in project financing have not kept abreast of this changing landscape and its impact upon their organizations. Krista Chaytor, a partner and construction law practitioner at Toronto legal firm WeirFoulds LLP stated to the author that “excess soil management is an area of significant liability that is poorly understood by the financial industry”, a sentiment echoed by many involved in transacting business in this domain.
In Ontario, O. Reg 406/19, the On-site and Excess Soil Management Regulationassigns liability for proper soil management to project owners and has coupled this with potential astronomic costs for cleanup of egregious transgressions. This statutory responsibility cannot be offloaded onto others such as contractors, receiving sites or soil haulers.
Barrie Ngeh, Senior Vice-President, Construction, at Marsh Canada Limited, has emphasized this responsibility, writing: “Under the new regulation, project leaders can no longer exclude, limit, or alter their liability through contract or other arrangements with third-party contractors. As a result, project leaders will be solely responsible for regulatory compliance under the new regulation, and failure to comply may result in a variety of penalties under the Environmental Protection Act.”
Project financiers and insurers take note, it is ultimately your capital and reputations that are at risk if your borrowers attempt to eschew soil management rules.
It has been heartening to witness the growth of innovative enterprises to address and assist with sustainable outcomes in earthworks management. I have personal investment in such activity via my involvement with SoilFLO Inc., an earthworks solutions software provider. The company website contains case studies from around the world from the perspectives of project owners, construction managers, receiving site operators and technical consultants that underscore the value of using 21st century technology in an industry entrenched in 20th century practices.
The employment of technologies that track soil relocations has resulted in the safe and successful repurposing of this resource. The transformation of exhausted quarry pits into public parks is but one example of this circular economy activity writ large with the ancillary benefit of diverting reusable soils from the wasteful practice of depositing them into landfills.
Properly classified and tracked soils results in more willing receiving sites which ultimately leads to greater competition among them with the prospect of lower “tip fees” charged by hosts.
Of great importance is the potential reduction in greenhouse gas emissions. A 2016 study conducted by three Ontario industry and professional associations estimated the average one-way distance travelled by dump trucks from generating to receiving sites to be 65 kilometres. If increased availability of receiving sites reduced this distance by as little as 10 per cent, the resulting decrease in GHG dump truck emissions would measure in the thousands of tonnes annually in Ontario alone. This does not count the additional significant reductions in such emissions from other vehicles on the road impacted by these lumbering behemoths.
Sadly, many financial institutions are unaware of such developments and missing the opportunities to invest in and foster the growth of the emerging enterprises dedicated to improved soil management outcomes. My own encounters with representatives from leading banks have drawn blank stares and bewilderment on their part as to how soil management has any relevance to their construction business units or ESG aspirations let alone how they might participate in developing this industry.
What your organization can do
As a litmus test to evaluate your organization’s knowledge and participation in this field, ask yourselves the following:
• Does my organization appreciate and understand the risk exposure from participation in projects that do not subscribe to good soil management practices?
• Has my organization engaged expert legal counsel to review contracts, performance parameters and liability limitations with regards to the excess soil management component of construction projects?
• Does my organization review an applicant’s earthworks management plan for efficiency and regulatory compliance as conditions of approval?
• Does my organization appreciate the sustainability benefits of being invested in good soil management outcomes?
Should the answer to any of the above be “no”, then respectfully, a rethink may be prudent. This issue is a sleeping giant that is about to awaken. It’s time for conversations to commence.
Jeff Goldman is a land developer and a Principal of SoilFLO Inc., a leading provider of earthworks software. For the past 12 years he has been the representative of The Ontario Home Builders’ Association (OHBA) on provincial government working groups involved with shaping and refining Ontario’s excess soil regulation. The comments herein are solely the author’s.
Note: This article has been published with permission from the Institute for Sustainable Finance, as it originally appeared here.
Featured image credit: Getty Images
Excess Soils Symposium accepting abstract submissions: deadline is April 4
