Environmental Provisions in Corporate and Commercial Agreements

Virtually all corporate and commercial transactions implicate environmental compliance considerations or potential environmental liabilities. Indeed, certain commercial transactions can be dominated by environmental issues. For this reason, the environmental provisions of asset purchase agreements (or purchase and sale agreements) take on critical significance. Indeed, in many circumstances, separate agreements are dedicated to addressing complicated environmental issues.

MGKF has extensive experience in drafting and negotiating environmental agreements, and environmental provisions of sales agreements, in the context of corporate and commercial transactions. For example, we have drafted and negotiated numerous environmental agreements covering the purchase or sale of complex industrial facilities, including petroleum refineries, chemical facilities, metals manufacturing facilities, and electric generating units. We have also drafted environmental provisions in numerous agreements documenting real estate transactions involving the purchase or sale of contaminated properties that are destined for remediation and/or redevelopment. With our singular focus on environmental and land use issues, we apply our experience and expertise to ensure that environmental agreements or provisions are drafted to minimize the liabilities associated with the specific transaction.

Of course, the specific nature of the transaction materially influences the appropriate treatment of potential environmental liabilities, and therefore the precise terms for inclusion in environmental agreements. For example, under relevant environmental law, asset transfers implicate distinct liability mechanisms as contrasted with stock transfers. Similarly, the specific corporate entity (parent, subsidiary, related company, or transaction-specific entity) influences the potential scope of liability as well as the availability of assets for indemnity recovery. Therefore, in the context of corporate and commercial transactions, we provide counsel to clients regarding corporate structure issues relevant to environmental liabilities, the recoverability against and value of indemnities, and opportunities for limiting exposure.

Finally, corporate and commercial transactions may implicate environmental "assets" as well as liabilities. We have drafted numerous agreements regarding the purchase and sale of emission reduction credits and emission allowances that may support on-site expansion activity and/or be transferred to independent sources for economic return. We also work with our clients to evaluate the sufficiency of existing authorizations for on-going operations, as well as the need and opportunity for enhancing business activity at the facility through appropriate modifications of environmental permit conditions.


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The firm has experience with drafting and negotiating contractual provisions addressing environmental considerations including, for example:

• allocation of responsibility for any remediation activities, compliance obligations, and permit transfers as between the purchaser and seller;
• due diligence provisions to enable effective evaluation of environmental considerations prior to closing, including the purchaser's rights to investigate the property, review seller's documents, and speak to seller's personnel;
• access provisions or agreements to support environmental evaluations;
• representations and warranties regarding environmental compliance and environmental condition of facilities and real property;
• allocations of liability and indemnifications for both known and unknown environmental liabilities, including responsibility for taking actions to address non-compliance, remediate contamination, or respond to third-party claims;
• permit transfer provisions, as well as detailed commitments regarding communications with regulatory agencies;
• sunset provisions relative to the identification or allocation of liability for potential claims;
• off-site environmental liabilities arising from on-site commercial activities;
• environmental insurance provisions; and
• dispute resolution provisions, including provisions addressing technically complex contamination issues.