USA – TEXAS Law and Practice Contributed by: Gerald J. Pels, Elizabeth E. Mack, Gerald D. Higdon, Susan Rainey, Elizabeth Corey and Brett A. Miller, Troutman Pepper Locke LLP
11. Contractual Agreements 11.1 Transferring or Apportioning Liability In Texas, liability for environmental matters may gen- erally be allocated between the parties to a transac- tion. Allocation mechanisms may include indemnities, assumptions of liability and/or releases or covenants not to sue. The parties’ allocation framework is not binding upon the regulatory authorities. Regarding indemnities for strict liability and similar provisions, it is good practice for the language to be conspicuous and expressly state the scope of the risk allocated. Oil and gas transactions often include reference to a relatively unique concept called an “environmental defect,” for which a seller may retain responsibility, provide indem- nity, or a price adjustment. “Environmental defects” in oil and gas transactions commonly include matters related to soil and groundwater contamination and regulatory non-compliance relating to contamination, in addition to unique historical concepts related to orphan wells and liabilities associated with the pres- ence of improperly plugged or abandoned wells. It is important, however, to review this language carefully to determine whether it would include air permitting and emissions regulation, as well as other regulatory programs that can impose significant liabilities on oil and gas assets. Further attention should be paid to monetary caps and aggregation of costs associated with similar environmental defects. 12. Contaminated Land 12.1 Key Laws Governing Contaminated Land The SWDA and its implementing regulations serve as the starting point in Texas for addressing site clean- up and responsibility. The Texas Natural Resources Code and its regulations govern contamination result- ing from oil and gas operations. Texas rules allow risk- based closures based on site-specific factors and consider the actual risks caused by contaminants. 12.2 Clearing Contaminated Land The persons responsible for clean-up generally mirror federal law: • current owners and operators;
• prior owners and operators during periods where a release occurred; • generators of waste; and • persons transporting waste to the site in question. Parties can contractually delegate these responsibili- ties, but contractual arrangements are not binding on regulatory authorities. 12.3 Determining Liability Statutory clean-up liability is generally strict and joint and several, but the Texas SWDA allows for appor- tionment. Liability apportionment is fact-specific and the party seeking apportionment bears the burden of proof. 12.4 Proceedings Against Polluters Regarding contaminated properties, the state is authorised under statutory authority to assert claims for clean-up liability against the four general classes of responsible parties under federal law. Texas law also gives responsible parties the right of contribu- tion. Other Texas statutes authorise causes of action to address clean-up and are programme and/or fact- specific. 12.5 Investigating Environmental Accidents Releases of regulated materials are subject to detailed release reporting and response obligations. The TCEQ-RRC MOU outlines notification and clean-up requirements for certain oil and gas activities. Under certain circumstances, Texas rules permit self-imple- mentation of clean-ups. The state has a vibrant Vol- untary Clean-up Programme (VCP) that allows parties to obtain a release upon site closure. The VCP may also serve as a tool to protect property buyers of a contaminated site, depending on the situation. Texas also has a state Superfund Program. 13. Climate Change and Emissions Trading 13.1 Key Policies, Principles and Laws Currently, there are no specific laws addressing the issue of climate change. Local initiatives do exist, however, and many of Texas’ major cities have estab- lished initiatives that should be considered in legal and
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