Scott Deatherage and Brendan Lowrey of Thompson & Knight LLP will speak at the "Groundwater and Wells in Texas" seminar in Dallas, Texas on October 10, 2007. For more details, click the Lorman Website.
In a case demonstrating the critical value of appropriate environmental due diligence into not only the potential for liability for releases of contaminants, pollutants, and hazardous substances into soil and groundwater, but the environmental management systems and environmental compliance of target companies in mergers and acquisitions, Valero agreed to a settlement by which it would pay a multi-million dollar penalty and over two hundred million dollars to install air pollution control equipment. Valero purchased the refineries in question from another company in 2005. In mergers and acquisitions, particularly those involving refineries, the potential costs to address air emissions issues are enormous. Thus, extreme care should be taken in evaluating the compliance status of the refineries with New Source Review, Prevention of Significant Deterioration, Title V Permitting, the Clean Air Act and the regulations promulgated under the Act, and similar state statutes and regulations. Care should also be taken to ensure that any emission offsets that are or may be required are available for purchase and that the cost of the emission reduction credits is understood.
The value of environmental disclosure due diligence can be demonstrated by this case. Reviewing the prior company's disclosures and the internal controls used to identify and value environmental capital cost expenditures, predicted future potential expenditures, and environmental liabilities, coupled with the environmental compliance assessment, would allow the acquiring company, and if analyzed and reported properly to them, management and the board of directors, to adequately evaluate the acquisition and its impact on the disclosures that may be required under securities laws to shareholders at the time of acquisition or subsequent to acquisition, if the impact of the environmental liabilities or capital costs of the target company would be material to the acquiring company.
In the context of today's voluntary reporting on environmental and sustainability issues, public companies should take care in terms of the statements that are made regarding environmental compliance or management systems and efforts to protect the environment. The acquisition of new companies or facilities could affect how the accuracy of those statements are perceived.
WASHINGTON, Aug. 17 /PRNewswire-USNewswire/ -- The Department of Justice and the U.S. Environmental Protection Agency have reached an agreement with Valero Energy Corp. that provides for a $4.25 million penalty and $232 million in new and upgraded pollution controls at refineries in Tennessee, Ohio and Texas that were formerly owned by Premcor Inc. The state of Ohio and Memphis-Shelby County, Tenn. have also joined in today's consent decree and will receive a portion of the civil penalty.
The agreement requires new pollution controls to be installed at refineries in Port Arthur, Texas; Memphis, Tenn.; and Lima, Ohio, that, when fully implemented, will reduce annual emissions of nitrogen oxide by more than 1,870 tons per year and sulfur dioxide by more than 1,810 tons per year. The new controls will also result in additional reductions of carbon monoxide, volatile organic compounds and particulate matter from each of the refineries. These pollutants can cause serious respiratory problems and exacerbate cases of childhood asthma.
"This Consent Decrees continues the commitment of the Department of Justice to assure that all refineries in the United States are in compliance with the Clean Air Act, said John C. Cruden, Deputy Assistant Attorney General for the Justice Department's Environment and Natural Resources Division. "This settlement, which was done in conjunction with state and local governments, requires new pollution abatement equipment, reduces air pollutants by a significant amount, obtains a meaningful penalty, and secures important environmental projects for the impacted communities."
"Valero committed to spend more than $200 million in upgrades, which will reduce emissions of harmful air pollutants by several thousand tons per year," said Granta Nakayama, assistant administrator for EPA's Office of Enforcement and Compliance Assurance. "Today's settlement is good news for people living near these refineries; local residents will be able to breathe easier knowing that the air in their communities will be cleaner."
The settlement requires an additional $1.6 million to be spent on the following projects serving the Port Arthur, Texas community:
$1 million to support a local health center serving under and un-insured residents of the Port Arthur area, for the diagnosis and treatment of asthma and other respiratory illnesses that may be caused or exacerbated by air pollution. A mobile air monitoring van for the Local Emergency Response Commission. "Shelter-in-place" air control systems at the Booker T. Washington Elementary and Memorial 9th Grade Center schools to detect, isolate And filter air pollution that may result from emissions in the Port Arthur area. A project to replace existing high-emitting water heaters with new low-emission water heaters in low-income residences in the Port Arthur area.
Additional supplemental projects will be performed in the communities near the Lima and Memphis refineries, such as the installation of equipment on municipal diesel trucks and buses to reduce particulate and ozone-forming emissions, and the installation of new equipment to control wastewater treatment plant odors. Projects to further reduce "fugitive" and unregulated emissions from refinery equipment are also being undertaken at each of the three refineries covered by today's agreement.
This settlement is part of the EPA's national effort to reduce air emissions from refineries. Through federal settlements such as the one reached today, approximately 84 percent of domestic refining capacity is now operating under pollution reduction agreements. Including the settlement with Valero, 89 refineries located in 26 states across the nation are now under agreements to address environmental problems and to invest over $4.7 billion in new pollution control technologies.
The three refineries covered by today's settlement produce more than 650,000 barrels of oil per day, representing nearly four percent of domestic refining capacity in the United States.
The refineries were previously owned by Premcor and purchased by Valero in late 2005. In June 2005, before Valero acquired Premcor, a similar settlement was reached with Valero that addressed the refineries it owned at that time. Under that agreement, Valero committed to spend at least $700 million at 14 refineries nationwide.
Today's agreement was lodged in the U.S. District Court for the Western District of Texas and is subject to a 30-day public comment period and final court approval. A copy of the consent decree is available on the Department of Justice Web site at http://www.usdoj.gov/enrd/Consent_Decrees.html.
U.S. Environmental Protection Agency
CONTACT: U.S. Environmental Protection Agency, ENRD +1-202-514-2007, EPA+1-202-564-4355, TDD +1-202-514-1888
The City of Houston passed an ordinance allowing the City to participate in the Texas Municipal Setting Designation ("MSD") program on August 22, 2007. The MSD program permits cities in Texas to approve of designated properties where groundwater cannot be used for potable purposes. Once the local government endorses the MSD application, the applicant can apply to the Texas Commission on Environmental Quality ("TCEQ") for an MSD certificate, which then allows the designated area to be taken out of consideration for potable uses of groundwater. The result is that the area does not have to be investigated or remediated to address potable risks. Thus, a true risk-based remediation plan can be developed.
The legislation enabling the MSD program was passed in but in 2003 by the Texas Legislature, but he City of Houston had previously decided not to participate in this program. As mayors and other leadership changed, and as many other cities, primarily Dallas, Fort Worth, and other north Texas cities have enacted programs and approved many sites, the City of Houston has come around to allowing MSDs in its jurisdiction.
In North Texas, we have found the MSD program to be of significant assistance in moving forward with acquisition, sale, and development of contaminated properties. We would expect similar results in Houston.
For answers to Frequently Asked Questions on MSDs, please see my prior post on the topic by clicking here.
If you are interested in my companion blog the New Carbon Cycle that provides news and analysis of the rapidly evolving law and policy surrounding carbon trading and markets, climate change, and renewable energy, please visit this blog. I've just corrected the email subscription form so that subscribers to the New Carbon Cycle will receive new articles by email.
I recently published an article in Water and Wastewater News that discusses the confusion that has arisen over EPA and the Army Corp of Engineer's jurisdiction over wetlands under the federal Clean Water Act. The article is entitled Are Wetlands Protected Under CWA? Regulators try to make sense of Supreme Court's response to wetlands cases . When the U.S. Supreme Court agreed to hear the consolidated cases of Rapanos v. United States and Carabell v. United States in 2006, observers hoped the Court would supply much-needed clarification to the federal Clean Water Act’s dominion over wetlands. Instead, the Court could not reach a consensus, and regulation and enforcement of the law has been mired in confusion ever since. The EPA and the Corps of Engineers has subsequently issued guidance on the two agencies' interpetation of the Rapanos decision.
I suggest that regulation alone may not be sufficient to preserve wetlands, but that economic incentives through allowing parties who preserve wetlands to obtain greenhouse gas emission reduction credits, or "carbon credits" may help preserve wetlands more than regulation alone.