Liability Assessment Related to a Natural Gas Pipeline Acquisition

Liability Assessment Related to a Natural Gas Pipeline Acquisition

Challenge:

Antea Group was contracted to identify and quantify potential environmental liability associated with the acquisition of an upstream pipeline gathering system. Following initial due diligence efforts by others but prior to the transaction being final, a release of production water comingled with condensate escaped from an underground pipeline in a natural gas field. The production water had surfaced and flowed approximately one mile, impacting range land and a seasonal creek that was considered a sensitive area based on ecological criteria. The client requested that Antea Group prepare an estimate of the potential liability created by the release.

Solution:

Antea Group worked with the client to develop a scope of work that would fulfil their internal requirements with regard to risk management, and would also satisfy financial disclosure and accounting requirements. Antea Group reviewed the spill response report, and documents detailing environmental assessment and remediation work that had already taken place. These documents were obtained following an interview with the acquisition targets Environmental Manager. A site reconnaissance visit was impractical due to snow cover during the time of analysis. Antea Group used its working knowledge of state requirements along with the applicable laws and guidance documents to develop the risk factors and cost scenarios to complete the existing environmental liability estimations/projections. Lifecycle costs were conservatively estimated and assumed that a reasonable effort would be maintained by the acquisition target company to drive the remediation and restoration activities to regulatory closure.  

Result:

The client benefits of performing this analysis were the quantification of potential costs of a pre-existing environmental and/or compliance liability to include in their acquisition negotiation, and adherence to internal objectives and financial disclosure/accounting requirements.