Houston Partner Gerry Pels and Houston Associate A.J. Davitt co-authored an article for Energy Law Report examining the Environmental Protection Agency’s recently issued Oil and Gas Exploration and Production Facilities New Owner Audit Program. The program, which is voluntary, is intended to encourage new upstream facility owners to audit, disclose and correct violations promptly after an acquisition. The authors cover the significance of the program, terms of participation and an analysis of the audit process. Pels and Davitt conclude that “the Audit Program is a step forward for EPA. The media-specific and industry-specific focus are interesting and signal EPA priorities.” The authors also note that where available “state programs may allow greater flexibility to achieve compliance.”
Pels and Davitt also warn E&P buyers about the costs of achieving compliance: “Buyers of E&P assets should recognize that even with penalty immunity, significant capital expenditures may be encountered. Further, E&P asset buyers should carefully negotiate acquisition documents to ensure the greatest likelihood of indemnity coverage for air emissions compliance costs. It is not unusual for standard ‘environmental defect’ language to not encompass air emissions compliance as an ‘environmental defect.’”
To read the full article, click here.