current issues in environmental liability

Navigating Environmentaland Climate Change Policies:

What You Need to Know to Protect Business Assets and Minimize Liability

Cindy BishopGardere Wynne Sewell LLP

Dallas, Texaswww.gardere.com

April 21, 2009

What Does Environmental Liability Mean to You?

Basic Exposure Pathways

What’s Different Now?

• Increased Enforcement• Increased Liability• Increased Emphasis on Closure Obligations

= Increased Due Diligence

•Minimizing Liability During Due Diligence•Preparing for Greenhouse Gas Regulation

Increased Due Diligence

All Appropriate Inquiry

• “All appropriate inquiry” is the process of evaluating a property’s environmental conditions and assessing potential contamination liability prior to its acquisition.– Possible Defense under CERCLA– Requirement from Most Lenders before Purchase

• EPA and States regulate what constitutes “all appropriate inquiry.” – e.g., American Society for Testing and Materials (“ASTM”) Phase I

Environmental Site Assessment Standard (E 1527)

Phase I Environmental Site Assessment (ESA) Interviews, Records Searches, Site Visit, Historical

Research– ASTM E-1527

Phase II ESA Collect soil, groundwater, sediment, surface water

samples

Environmental Due Diligence Elements

• Not properly signed by Environmental Professional. – ‘‘[I, We] declare that, to the best of [my, our] professional

knowledge and belief, [I, we] meet the definition of Environmental Professional as defined in §312.10 of this part.’’ ‘‘[I, We] have the specific qualifications based on education, training, and experience to assess a property of the nature, history, and setting of the subject property. [I, We] have developed and performed the all appropriate inquiries in conformance with the standards and practices set forth in 40 CFR Part 312.’’

Acquiring PropertyThe Due Diligence Standard

Problem Area

Due Diligence Issues

Due Diligence Issues

New Due Diligence Considerations

Vapor Intrusion Assessment (ASTM E2600)

Increased Closure Obligations

What Changes Are Triggered?

• Transfer, sale, closure or abandonment of a “facility”• Scaling back operations, consolidations and facility

closures• Changing production lines, raw materials, suppliers• Materials reuse, repurposing, recycling• Reducing air emissions or water usage and changing

waste handling practices• Changing material storage practices

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Increased Closure Obligations

• Identify the effect on operations.

•Gather all permits, regulations, orders, citizen complaints, environmental compliance audits or assessments.

•Evaluate the proposed operational change against the obligations.

•Timely communication to management and regulating authorities where applicable.

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Closure/Slowdown Effect on Permits

• Idle petroleum USTs– update UST registration status or permanently remove and

close USTs• Significantly reduced wastewater volume

– advance notice to permitting authority (e.g., municipal wastewater treatment authority) may be required

• Changes in fuel or hazardous substance storage– update plans, including SPCC (fuel), SWPPP (stormwater)

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Operational changes that impact environmental permits include:

Post Closure• Post Closure Audits:

– Purpose• Required by some regulations• Establish a baseline• Marketing tool • Essential for redevelopment

– How to address concerns?• Audit Privilege• Voluntary disclosure to the government• Disclosure in transactions (reps & warranties)

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Climate Change“Greenhouse Gases”

Carbon DioxideMethaneNitrous OxideHydrofluorocarbonsPerflurorcarbonsSulfur hexafluoride

• New Proposed Reporting Requirements• Regulation of Greenhouse Gases• New Air Permitting Requirements• SEC disclosure obligations• Litigation

Climate Change

Climate ChangeMarch 10, 2009 – EPA proposed rule requiring reporting of GHG for certain sources

April 17, 2009 – EPA submits issued proposed rule declaring that GHG are dangerous to human health and the environment

What does that mean to me?

Climate Change

• Certain industrial facilities• Vehicle manufacturers• Facilities that emit 25,000 tons/yr CO2e•Reporting proposed to begin in 2011 for calendar year 2010• Comments due by May 25, 2009

You may have to report your GHG emissions to EPA:

Climate Change

• GHG Regulation

• Cap & Trade

• SEC Disclosure

• Litigation

Summary• More diligent due diligence

• Be aware of closure requirements

• Consider GHG emission impacts

Gardere Wynne Sewell LLP Cindy Bishop

1601 Elm St., Suite 3000Dallas, Texas 75201

Phone: 214.999.4506 Fax: 214.999.3506cbishop@gardere.com