When you have an existing ENV variable and then have a build with a parameter of the same name(even if different case) it will overwrite the ENV variable.

Reproduction case:

Create a global ENV variable called "FOO" and set it to "BAR"

Create a test job "TestJob"

Add a string parameter called "foo" to the job

create a shell step to echo out the value of $FOO

Run the job with TEST as the value of foo

Observe that the output of the shell step is "TEST" instead of "BAR"

Resolution:

Personally I think freestyle jobs should call out if you want an ENV or parameter much like pipeline scripts do with the $param.VARIABLE. This will avoid the confusion entirely.