Latham & Watkins LLP
Michael Scott Feeley and Aron Potash
March 26, 2015
There is no shortage of environmental matters to navigate when buying a company or facility. Environmental counsel must first lead a diligence effort that delineates the target’s environmental footprint and then suss out the environmental risks and liabilities attendant to the deal. This diligence process often involves Phase I environmental site assessments, environmental, health and safety compliance evaluations, interviews of target personnel, and review of seller-provided permits, reports, and other documentation. The knowledge gained from the diligence process feeds into negotiation of purchase agreement terms, including the purchase price, environmental representations, warranties and covenants, corresponding definitions and indemnification provisions, disclosure schedules, and permit transfer provisions. Myriad environmental matters must be addressed, including compliance with environmental laws, the release of hazardous substances, the presence and validity of environmental permits, ongoing environmental litigation or the possibility of it, and health and safety matters.
One issue that all too frequently gets lost in the shuffle during the diligence and purchase agreement negotiation process is the evaluation of whether air emission credits are necessary to run the business, and if so, how these credits will be treated in the deal documents. Air emission credits take many shapes and forms but, at bottom, are governmentally issued or approved authorizations to emit air contaminants.