Risk Management Roadmap: Navigating Environmental Due Diligence in Multi-Jurisdictional Transactions

Hunton Andrews Kurth LLP
P. Scott Burton

October 1, 2018

This article was originally posted in the Nickel Report, The Hunton Energy & Environmental Law Blog

Depending upon the assets being acquired or project being developed, a well-designed due diligence plan can be a critical component in managing transaction risk both before and after closing or commercial operation. Adeptly managing the due diligence process requires careful thought to appropriate timing and scope at both the front and back ends.

Among the most critical items in ensuring a successful outcome are consulting decision-makers who are driving the transaction and engaging professionals to provide appropriate support well in advance. Too often, key risks are overlooked or not adequately allocated or managed as a result of a rushed or improperly focused due diligence effort. Particularly for assets or projects with an inherently higher environmental, health and safety, or social (EHSS) impact potential, attempting to manage risk through the purchase and sale or development agreements alone also may not suffice. For example, avoiding a risk by carving out particular assets, employing third-party risk management strategies such as insurance policies, and post-acquisition integration or stakeholder engagement plans can be among the more effective means of managing EHSS risk—but these each require careful strategic planning by a team of professionals with the skills and experience to navigate a transaction’s complexities, particularly in a cross-border context.

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Environmental liability in the USA

Beveridge & Diamond PC
James M. Auslander, Ryan J. Carra, Virginie R. Casey, Andrew C. Silton, Shengzhi Wang and Nicole B. Weinstein

October 1, 2018


 Types of liability

 What types of liability can arise for environmental damage (eg, administrative, civil, criminal)?

There is no US generalised regime for environmental damages. Statutes, regulations and common law can impose various types of liability, including administrative, civil and criminal. Courts in turn establish precedent for liability in cases arising under various environmental laws. Alleged violators may face government administrative actions, civil suits or citizen suits. Only the government can prosecute criminal liability in court.

The government generally follows proportional enforcement. Minor offences may trigger administrative or civil sanctions; more serious and intentional violations trigger more severe sanctions or even criminal charges. The government’s burden of proof is highest in criminal cases.

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Third Circuit Holds Current Owners May Be Liable for Past Remediation Costs Under CERCLA

Manko Gold Katcher & Fox
Shelby Hancock

October 10, 2018

Last week the Third Circuit held that the owner of a remediated site could be liable under CERCLA § 107(a) for environmental response costs incurred before it acquired the property. Pa. Dep’t of Envtl. Prot. v. Trainer Custom Chem., LLC., __ F.3d __, No. 17-2607, 2018 WL 4844077 (3d Cir. 2018). In its opinion reversing the district court’s grant of partial summary judgment in advance of trial, the court concluded that “all costs” in § 107(a)(4)(A) means an owner is “indeed liable for all response costs, whether incurred before or after acquiring the property.” Id. at *5. Our blog post discussing the district court’s decision, 204 F. Supp. 3d 814 (E.D. Pa. 2016), can be found here.

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Clean Water Act Groundwater Pollution Liability in Limbo

Ryley Carlock & Applewhite
Stacy L. Brownhill and Julie A. Rosen

October 4, 2018

The Clean Water Act (CWA) is facing an identity crisis. In the past year, conflicting federal court decisions have created a circuit split as to whether the CWA regulates pollutant releases into groundwater that is hydrologically connected to navigable waters. The Ninth and Fourth Circuits interpreted CWA liability broadly, applying to indirect releases of pollutants into federally protected surface waters via groundwater. The Sixth Circuit interpreted CWA liability narrowly, applying to only direct releases of pollutants into federally protected surface waters.

The uncertainty leaves regulators and the regulated community in limbo and awaiting a possible U.S. Supreme Court decision and clarifying action by the U.S. Environmental Protection Agency (EPA). While in limbo, operators in various industries – e.g., oil and gas, wastewater utilities, electric utilities, water providers, mining – are at risk of possible agency requests for groundwater quality data, enforcement action or possible citizen suits for illegal discharges based on pollution releases into groundwater that is hydrologically connected to a navigable water covered by the CWA.

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