Abstract

Environmental legislation enacted over the last several decades has produced a complex matrix of regulations. Environmental compliance now represents a significant cost of doing business, both in terms of the cost of compliance and in terms of the possible penalties and fines which could be incurred as a result of non-compliance

When making informed corporate decisions involving the acquisition and divestiture of oil and gas properties environmental audits can be used to evaluate the compliance status of a facility.

Introduction

Due to potential environmental liabilities it is important that an owner or operator of an oil or gas facility document the condition of any property it plans on divesting. Likewise, any properties proposed for acquisition should also be reviewed for environmental concerns.

The environmental audit, conducted properly, is a tool that can be used by both the purchaser and seller to discover, identify, and correct potential environmental problems

REASONS TO AUDIT

The environmental audit can be a valuable tool for both the purchaser and seller in the oil and gas purchase and sale transaction.

The environmental audit can be utilized by the purchaser during property acquisition so that:

  1. the purchaser can utilize the "innocent purchaser" defense to avoid Superfund liability,

  2. the purchaser can adjust the acquisition value of the property to reflect environmental concerns,

  3. the purchaser can insure that any environmental problems are addressed

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