Environmental Liability – Regulatory Compliance – Insurance Coverage (or Not)

Dentons US, LLP
Jessica L. Duggan, Kevin P. Kamraczewski and Stephen M. Fields

February 20, 2014

After looking at numerous investment opportunities, you bite the bullet, assemble a syndicate of lenders and close on a leveraged buyout transaction resulting in control of the operating company target through the use of a holding company. You were careful in your diligence, having conducted a Phase I environmental investigation, with nothing significantly adverse to report despite the regular use in its business by the target of certain contaminants. Now fast forward, and, five years later, you have received an attractive offer to buy your interest from a strategic buyer. The buyer and its lenders proceed to conduct their own due diligence and, lo and behold, the contamination levels that were previously below reportable levels have, according to the buyer, exceeded permissible levels and have now reached groundwater. What is the consequence of this? How did it happen? Who caused it? What are the issues?

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The Fracking Flip: U.S. Domestic Oil Production’s Radical Transformation of the North American Tanker Trade

Blank Rome LLP
Keith B. Letourneau and Matthew J. Thomas

March 5, 2014

A flurry of recent economic data and activity suggests that  U.S. tanker markets, both Jones Act and international, are riding swift new market currents that were unforeseen just three years ago. On November 14, 2013, the White House announced  that the U.S., for the first time in nearly two decades, is importing less foreign oil than we are producing domestically. By the  end of FY2014, imported crude oil shipments are expected to fall below 7.0 million barrels per day (bbl/d). As recently as the summer of 2010, imports reached nearly 10.0 million bbl/d. Domestic production is up 39 percent since 2011 and now exceeds 8.0 million bbl/d. The U.S. Energy Information Agency estimates that in 2013, the U.S. became the world’s top oil and natural gas producer, exceeding the production of both Russia and Saudi Arabia, and is poised to become the leading crude producer next year. The increase is largely due to the rapid development of advanced drilling techniques, including horizontal drilling and hydraulic fracturing (fracking) in Texas, North Dakota, and Pennsylvania.

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EPA Requiring Best Practices at Construction Sites to Control Erosion

Dorsey & Whitney LLP
Mark R. Kaster and Jocelyn Knoll

March 11, 2014

The EPA published a final rule on March 6th that clarifies the requirements for the construction industry to use best management practices (BMPs) to control stormwater and minimize soil erosion and pollutant discharges. The EPA decided to apply BMPs rather than set numeric turbidity effluent limits, but the agency reserved the right to revisit discharge limits in the future.

The rule applies to construction activities such as clearing, excavating and grading that disturbs the soil. If not managed properly, these activities can result in discharges off the construction site that cause physical, chemical and biological impacts on receiving waters.

The final rule requires the use of erosion control practices to reduce the volume and velocity of stormwater flows from construction sites, this includes both peak flow rates and total storm volume. The BMPs include providing and maintaining buffers, keeping the length of slopes short, using low gradients, preserving top soil, and preserving natural vegetative cover.

The rule includes a definition of “infeasible” in an effort to clarify that there may be times when protective actions are not technologically possible, or not economically practicable and achievable in light of best industry practices.

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Leak Prompts Chemical Safety Board Call for New Rules

Jackson Lewis P.C.

March 3, 2014

Citing “a gap in the regulatory framework that fails to cover aboveground storage tanks,” the chairman of the  U.S. Chemical Safety Board (CSB) has urged lawmakers at a  congressional field hearing in Charleston, West Virginia, to  approve legislation to prevent major chemical spills.

CSB Chairperson Rafael Maure-Eraso’s remarks came on  February 10, a month after some 10,000 gallons of 4- Methylcyclohexane methanol leaked into the Elk River from a  storage tank situated upstream from the capital city’s water  treatment plant. The river is a tributary of the Kanawha River,  which supplies water for 300,000 people.  Residents were told  not to drink the water or use it for cooking or bathing.  The  directive was lifted after about two weeks.

“While there are laws prohibiting polluting to waterways  with a spill, there are not really any clear, mandatory  standards for how you site, design, maintain and inspect  non-petroleum tanks at a storage facility,” Maure-Eraso said. Tanks at the leak site were not covered by either  state or federal regulations.  He called for “urgent steps” to  address the regulatory gap.

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