Texas Governor Signs Legislation to Encourage Voluntary Disclosure, Correction of Environmental Issues

AUSTIN, Texas, May 29, 2013 /PRNewswire/ -- In its recently concluded session, the Texas Legislature voted to amend state law and expand protections to new property owners who voluntarily report environmental, health or safety compliance issues discovered during the sale of facilities, and Gov. Rick Perry has now signed the bill into law.

The amendment to the state's Environmental, Health and Safety Audit Privilege Act is expected to encourage a thorough review and correction of environmental issues during and after any transaction, and supports the use of the state's audit program to manage the process. The new law also includes criteria that can extend immunity from civil and administrative penalties to new owners who report compliance issues and diligently work with the appropriate regulatory agency to address those issues.

"It is not uncommon for a purchaser's due diligence to uncover some type of violation that will need to be corrected after closing," says Jim Morriss, a Partner in the Austin office of Thompson & Knight LLP. "By broadening eligibility for these protections, there is less risk that regulatory fines will be assessed while a new owner works to correct these issues. This change also creates greater consistency between Texas law and the self-audit and reporting policies of the U.S. Environmental Protection Agency."

Using transactions involving oil and gas properties as an example, Morriss notes that correcting any issues discovered during the purchase of such properties often can be costly and time-consuming, greatly increasing the chance of significant regulatory penalties. While the new law reduces that potential exposure, he says another likely benefit will be an increase in voluntary disclosures and quicker reactions to fix any violations.

The effort to amend the Act was led by Morriss and fellow Thompson & Knight attorneys Ashley T.K. Phillips, Gary D. Compton, and Charlene Heydinger. The initiative also drew the support of numerous organizations, including the Texas Association of Business, Texas Oil & Gas Association, Texas Chemical Council, Texas Association of Manufacturers, Environmental Defense Fund, and the Texas League of Conservation Voters.

Texas Senate Bill 1300 was introduced by Sen. Kevin Eltife and co-authored by Sen. Glenn Hegar. The legislation was sponsored in the House of Representatives by Tryon Lewis, Drew Darby, Marisa Marquez, Chris Turner and Jason Villalba, and was formally passed by the Legislature on May 8 before being signed into law by Gov. Perry on May 24. The new law will become effective Sept. 1, 2013.

"The previous law was an excellent tool that we frequently used in helping clients identify and address issues at their properties and facilities," says Morriss. "But the Act did not work well in a transactional setting. We're very pleased that state lawmakers and a diverse group of organizations came together to support this change that will benefit the regulated community and the environment."

Thompson & Knight has been named "Law Firm of the Year" in Oil & Gas Law in the 2011-2012 and 2013 consecutive editions of Best Law Firms, the preeminent listing of the nation's top legal practices published by U.S. News & World Report and The Best Lawyers in America®.

For additional information: Becky S. Jackson, Thompson & Knight LLP, 214.969.1478.

SOURCE Thompson & Knight LLP