A major energy company was negotiating the purchase of 18 natural gas processing plants and 365 ancillary facilities across several states.

The acquisition marked an important milestone in the buyer’s strategic plan and was critical to its future growth. As the deal—worth $1.35 billion—neared closing, it was complicated by differing valuations of the environmental liability. The parties were far apart in their understanding of site conditions and the necessary costs to remedy them. There were also concerns about how the environmental restoration would be managed. With the transaction moving on a fast track toward closing, these issues needed to be resolved quickly in order for the buyer to achieve its short- and long-term business objectives.

At the request of the parties, TRC structured an environmental liability transfer that assigned all of the environmental restoration obligations, including the long-term operations and maintenance requirements, to TRC for a fixed price. TRC satisfied the cost and future liability expectations of the buyer through a thorough environmental restoration cost assessment. In addition, TRC reassured the buyer that the restoration would be achieved without disrupting site operations. This assessment was completed in a timeframe that kept the transaction on schedule.

TRC Exit Strategy Solutions
Exit Strategy liberates transactions stymied by the uncertainty resulting from unknown and unquantifiable environmental liabilities by assigning a fixed value to the environmental risk and by TRC accepting full liability.

• Facilitated the closing of a strategic business acquisition by eliminating environmental risk and uncertainty
  The two parties’ estimates of environmental cost impacts varied by almost $100 million. TRC offered a fixed price remedy, acceptable and affordable by the buyer, in a short timeframe.

• Offered cost savings by pooling operating assets into a single environmental risk pool
  Some of the locations had no environmental data at all and most had minimal information. This gave rise to the uncertainty that separated the parties. TRC used its experience on similar sites to fill in the data deficiencies and develop sophisticated modeling to create a risk pool among the sites to quantify and manage the uncertainties.

• Assumed regulatory risk for environmental compliance across five states
  Each state–Colorado, New Mexico, Texas, Utah, and Wyoming–required varying, and in some cases, unknown, levels of regulatory standards for cleanup approval. TRC took on the responsibility to negotiate cleanup standards and the risk associated with final regulatory signoff.

• Eliminated the need for either party to allocate resources to past compliance issues
  TRC assumed all of the seller’s responsibility so the seller could move on with its other business activities. With TRC handling all aspects of the environmental compliance process, including management, legal, and administrative functions, the buyer could concentrate on operational matters critical to achieving its strategic goals.

• Structured a comprehensive financial assurance and insurance package to protect the parties from future unknown conditions
  TRC developed a risk management program that included over $150 million in financial assurance, cost cap insurance, and third party liability protection. The program provided broad coverage for both known and unknown environmental liabilities.