By Chris Pratt
Onshore oil and gas exploration and production, especially unconventional, has seen a major expansion across many US states and around the globe over the last 10 years. Fluctuating oil and gas prices have resulted in numerous sales of assets in various stages of their development, operation and abandonment. Many companies have purchased assets without fully understanding the associated environmental liabilities which can have significant impacts on not just the long-term cost of site management and cleanup, but also potential impacts on its immediate ability to operate and generate revenue. A typical Phase I environmental site assessment (i.e. ASTM 1527-2013) generally focuses on the obvious potential environmental liabilities, such as impacted soils; however, there are less obvious issues which should also be considered when purchasing an existing oil or gas well, saltwater disposal well and associated infrastructure.
At the federal level, an oil well pad site might trigger a variety of environmental laws including the Resource Conservation and Recovery Act (RCRA) the Clean Water Act and Oil Pollution Act, which cover soil and water contamination and impacts from spills. These and other state laws and regulations can cover requirements around well installation, operation and abandonment, and their operation and security, among other things. We have seen that the associated operating license/permit can have onerous, and often overlooked, requirements which need to be understood and acted upon or they can restrict operation and/or result in penalties. Some of these less obvious issues that we have identified for our clients during due diligence have included:
- A recent Phase I enabled us to provide effective liability limitation to our clients when an injection zone issue was noted in one of a number of salt water disposal wells: misalignment of actual injection zone with specified injection depth. A review by our technical team of the bore log, workover report and reported data indicated differences in the depths recorded. After review with the owner’s technical expert, the owner corrected the permit with the agency to align correctly prior to closure.
- In another project, permit conditions required security for a number of well pads, which included a locked gate and fencing to prevent unauthorized access. A site visit by our auditor and review of conditions indicated that the required security measures were not implemented at several locations. A reduction in the sale price was secured allowing the new owner to upgrade the sites to meet the requirement post-close.
These are just two examples where environmental liabilities have been identified during the due diligence, resulting in successful completion of sales of oil and gas assets to our clients, providing them with better value and a more secure asset going forward.
EHS Support has a team of environmental professionals with excellent experience in approvals, regulatory requirements, geological and hydrogeological expertise that can focus on the obvious and less obvious liabilities during due diligence assessments of oil and gas assets and other facilities. When considering acquiring a property or company, a thorough evaluation to identifying environmental liabilities is essential for the long-term profitability of this investment. Please contact EHS Support’s Chris Pratt at 412, 398 7585 (chris.pratt@ehs-support) or Bruce Martin at 703 944 4709 (firstname.lastname@example.org).