legacy issues associated with oil and gas development
DESCRIPTION
Presentation for 2013 MPA Annual Meeting in Billings, MT August 27, 2013. George Mathes, P.E., Vice President - Trihydro CorporationTRANSCRIPT
Legacy Issues Associated with Oil and Gas Development
George Mathes, P.E.Vice President – Trihydro CorporationAugust 27, 2013
Presentation Outline
Types of Legacy Issues
Associated with Oil & Gas Development
Best Practices to Address
Legacy Environmental
Issues
Emerging Issues
Affecting Legacy Liability
Case Studies – The Good, The Bad, and The
Ugly
Questions and Discussion
WHAT IS LEGACY LIABILITY?
WHY DO WE CARE?RISKS AND
LIABILITY
PROFITS AND
GROWTH
Typical Sources of Legacy Impacts Historic drilling pits Historic releases and spills Improper materials management Waste disposal (NOD) Leaking tank batteries Junkyards / boneyard / landfills Abandoned pipelines Legacy compressor stations and gas plants Damaged well casing Non-compliant operations
Air permits and reporting NPDES discharges Out of date SPCC plans OSHA
Typical Legacy Issues and Costs Soil and groundwater
impacts NORM Landfills/Boneyards Compliance Safety/OSHA
Best Management Practices (BMPs) to Reduce Risk
Know what you are buying, selling, shipping, or developing
Negotiation of liability with buyer, seller, NOD, etc.
Use of environmental pollution liability insurance
BMPs for Legacy Issues– Due DiligenceDEFINE
OBJECTIVES
DATA ROOM SEARCH
REGULATORY & RECORDS REVIEW
SITE ASSESSMENTS
AND INTERVIEWS
INTRUSIVE ASSESSMENTS
AND SAMPLING
QUANTIFICATION OF LIABILITIES
CONCLUSION AND PATH FORWARD
BMPs for Legacy Issues – Liability Transfer
Liability Transfer and Management
Mechanisms
Baseline Water Quality
Monitoring
Reductions in Purchase Price
Escrow of Environmental
Liability
Insurance – PPL, 3rd Party, Pre-Existing,
NOD
Institutional Controls &
Legal Agreements
Exclusions
Advantages of Knowing Legacy Risk Conditions
Reduces risk by managing financial and business exposures
Eliminates or reduces unknown legacy conditions
Allows risk to be managed proactively
Negotiated with seller as environment defect
Environmental liability insurance bridges gap between buyer-seller
Exclusions manage “high-risk” elements
Manage liability reserves (Sarbanes-Oxley / Financial Accounting Standards)
Emerging Issues Affecting Legacy Liability
Key Emerging Issues Affecting Environmental Liability & Risk
Regulatory Changes / Uncertainty
Increasing Acquisition / Divestiture
Development of Legacy Sites
USEPA Enforcement Initiatives
2014
- 20
16
Reducing Air Pollution from the Largest Sources
Cutting Hazardous Air Pollutants
Keeping Raw Sewage and Contaminated Storm Water out of Our Nations Waters
Preventing Animal Waste from Contaminating Surface
and Ground Water
Reducing Pollution from Mineral Processing
Operations
Assuring Energy Extraction Activities Comply with Environmental Laws
Department of Energy (DOE)
Continuation of “all of the
above”
Supportive of Nuclear, including
small reactors
Shale gas the preferred “bridge”
Anticipated fight over
LNG exports
Department of Interior (DOI)
Hydraulic Fracturing Rule
• August 23, 2013• Main provisions include disclosure of chemicals, well
integrity, and management of drilling/flowback fluids• Includes provision to defer to states if regulations are
more/equally restrictive
Regional Framework for Water Resources Monitoring• 7 Step Process• Very, very extensive• Being adopted/incorporated by more offices
Acquisitions and Divestiture Trends 2011
Projections were high for 2011 698 transactions $300.6B
2012 Projections for steady growth 576 transactions $321.5B
2013 Projected to moderate to 2011 levels
Sources: Deloitte Oil and Gas Mergers and Acquisitions Report, 2011 & 2012 and RR Donnelley, 2013 M&A Outlook.
Development of Historic Fields
EOR
Dismissed Zones
Source Rock
CASE STUDIES – The Good, The Bad, and the Ugly
Case Study – The Good
Acquisition details Specific scope of work Project
completion/solutions
Case Study – The Bad
Non-Owned Wastewater Treatment / Disposal Facility
CERCLA Action
Case Study – The Ugly Legacy Field –
Impacts to domestic wells noted in 2008
USEPA commenced investigation in 2009
USEPA deferred to WY for evaluation and assessment in June 2013
Contact Information:George Mathes, P.E.Vice President – Trihydro [email protected]/745-7474