Environmental Transactions

Identifying environmental risks and making an informed and realistic risk allocation are key concerns in business transactions across all industry sectors and deal structures. Whether the client needs to develop a pragmatic diligence strategy or complete due diligence within a limited time frame, Sidley has the experience and resources to assemble a skilled team and present our findings in an understandable format.

Our Environmental lawyers have extensive experience in both domestic and international deals ranging from straightforward transfers of real property to complex business acquisitions or divestitures and related financings, capital markets and project finance transactions. Our experience extends to climate change-related transactions as well. We are intimately familiar with required environmental disclosures under the securities laws and state property transfer laws, and with parent and successor corporation liability theories and their effects on risk allocation.

In the bankruptcy area, our lawyers frequently advise clients on structuring workouts to minimize the risk of environmental liability and on the risks of foreclosure on contaminated property. We have assisted both brownfield sellers and brownfield redevelopers in structuring projects, securing available financial incentives and developing effective land use controls to minimize future risks. We also assist clients in obtaining manuscripted environmental insurance policies.

Sidley’s national coverage and cross-office teamwork ensure overall quality and consistency, as well as access to substantial local experience in key jurisdictions such as California, Illinois, New York, Texas and Washington, D.C. Our team approach also enables the firm to remain abreast of the latest legal developments in multiple jurisdictions.

Our recent representations in transactions involving environmental issues include:

• Energy, utility and transportation clients in acquisitions of intra-state and interstate gas and liquid pipelines, gas gathering systems and processing plants, cross-border pipeline construction, utility mergers, refinery divestitures, acquisitions of marine ports and related transit support facilities, and the purchase of a railcar leasing and service shop business.
• Investors in a variety of both traditional and alternative energy projects, including a potential investment by an Asian investor in a U.S. fuel storage and distribution business, wind farm and solar projects throughout the United States and its territories, and numerous ethanol and bio-fuel ventures.
• Issuers and underwriters in the sale of securities or issuance of debt by public and private companies, including natural gas processors, alternative energy companies, mining companies, branded consumer products, beef processors and REITS.
• Multinational, domestic and non-U.S. businesses in acquisitions and divestitures in industries such as aerospace, appliances, automotive, bio-engineering, chemicals, diversified manufacturing, food processing, fuel production and distribution, grain milling, printing, pharmaceuticals, radio/TV, software and telecommunications.
• Transportation companies in the siting and development of new facilities and the redevelopment and expansion of existing ones.
• Clients involved in cross-border transactions, including working with environmental counsel and consultants in other countries to identify and address cross-border environmental risks.

Sidley also has assisted clients in specific climate change-related transactions and has addressed climate change concerns in due diligence efforts and contract terms. For example, our lawyers have:

• Advised numerous purchasers and investors in wind and solar energy projects with respect to environmental and regulatory permitting risks.
• Advised an international environmental trading exchange on U.S. legal issues presented by a proposal to establish a market for trading greenhouse gas allowances available to electric utilities under the Regional Greenhouse Gas Initiative in the Northeast.
• Advised clients on the creation of hedge funds and other financial instruments in which certified and tradable greenhouse gas emissions credits would be among the assets.
• Assisted a large utility in acquiring title to a rainforest in Brazil. The title was then transferred to a local not-for-profit in an effort to obtain offset credits in the future. The client registered the transaction under the voluntary reporting and registration program of the U.S. Department of Energy.

Details on other key aspects of Sidley’s environmental transactions practice follow.

Our lawyers routinely address environmental issues in workouts and bankruptcy. We assist debtors in developing and implementing strategies to best manage environmental issues in bankruptcy, advise companies about the environmental risks of buying assets out of restructuring, and assist PRPs in pursuing claims against parties in bankruptcy.

For example, we represented a natural resources company in an unprecedented renegotiation of environmental settlement obligations with the federal government to reduce financial burdens that could push the company into bankruptcy. The settlement established a trust funded with proceeds from the sale of a subsidiary to be used to clean up multiple sites around the country. This was a landmark settlement. The government had never before agreed to this form of environmental liability restructuring outside of the bankruptcy context.

We regularly advise corporations on how to comply with Securities and Exchange Commission (SEC) requirements governing disclosure of environmental liabilities, including Description of Business, Legal Proceedings, and Management’s Discussion & Analysis of Financial Condition and Results of Operations regulations. Our services include:

• Counseling clients on developing procedures to gather the environmental information needed to prepare registration statements, 10-Ks, 10-Qs and financial statements.
• Monitoring ongoing developments with respect to climate change and corporate social responsibility disclosures.
• Assisting registrants to draft appropriate environmental disclosures.
• Advising clients on responding to environmental inquiries in SEC comment letters.
• Representing underwriters in offerings.

We also monitor developments in financial accounting standards as they relate to environmental matters, including those relating to accounting treatment of contingent environmental liabilities, fair value accounting and international financial reporting standard (IFRS) conversion issues.

Sidley works on a wide range of projects involving re-development and reuse of impaired properties, or “brownfields.” Our lawyers have negotiated with governmental authorities to create protective ownership structures and have advocated for cost-effective cleanup programs that encourage appropriate reuse. Matters representative of our work in the brownfields area include:

• Representing a client in the decommissioning and residential re-development of a former steel mill.
• Working with non-profits such as the YMCA to re-develop industrial sites into youth recreation centers in urban areas such as Chicago.
• Assisting a major U.S. urban redevelopment fund in connection with the re-development of core properties in dozens of cities for mixed residential and commercial reuse for tax-advantaged low income housing.

Another aspect of Sidley’s transactions practice involves assisting clients in obtaining manuscript environmental insurance policies. We have broad experience with the many different options available in this area, including personal injury and property damage environmental coverage, policies to protect against later-discovered contamination and lender policies designed to protect collateral value. Our extensive experience with large-scale remedial projects enables us to effectively negotiate the appropriate policy language and scope of coverage, as well as to ensure that the resulting policy addresses the precise issues of concern. We also carefully track the availability of new and customized insurance products, and we can assist in reviewing novel coverage or enhancing coverage under traditional environmental insurance policies.