Hazardous Sites Changing Hands Pose Risks for Companies, OECD Says

Environmental due diligence is a critical component of any property transaction where potential environmental risks are a concern—minimize risks and protect yourself from...

By Rick Mitchell

Companies buying or selling hazardous waste sites face risks, so planning ahead is vital, the Organization for Economic Cooperation and Development says in its latest guidance.

Ownership changes at the hazardous facilities are increasingly common, the Paris-based organization said in the guidance aimed sellers and buyers as well as due diligence companies, insurers, regulators, and others with a stake in such transactions.

The guidance provides a new tool for discovering, identifying, and then managing risks from acquisitions and divestitures of hazardous facilities, Bill Gulledge, a senior director at the American Chemistry Council, said during a June 11 webinar on the new guidance.

The 45-page document lists risks companies should consider before, during, and after an ownership change.

For example, a facility being sold may be outdated, in poor condition, or may be losing money. The current or prospective owner may not be aware of the site’s risks or may not have taken appropriate action to address them. Self-assessment checklists are available for the original and prospective owners to evaluate their management of the ownership change.

Venture Capitalists Snap Up Properties

“If you look at most of the recent ownership changes where we have had safety issues or had incidents in plants that have resulted in releases or other consequences, most of them are related to process safety,” said Gulledge, who participated in discussions to develop the new guidance as a representative on the Business and Industry Advisory Committee to the OECD.

One pivotal insight, he said, is that corporations have wide ranges of commercial and industrial expertise. For example, “there are venture capital groups that are buying industrial facilities that they have very little experience in actually managing.”

Well-informed changes of ownership are essential, said Ragnhild Larsen, senior principal engineer for the Norwegian Directorate for Civil Protection, “because bad oversight of hazardous facilities can have disastrous consequences.”

Critical Role of Regulators

Rachel McCann, a senior policy adviser for the U.K. Health and Safety Executive, said the current and new owners of a facility have the primary responsibility for managing risks in an ownership change, but regulators play a critical role.

For example, a change of ownership may trigger new regulatory requirements of revisions or revisions of old ones, she said. To help, the guidance provides a list of factors for regulators to consider before, during, and after the change of ownership, she said.

To contact the reporter on this story: Rick Mitchell in Paris at correspondents@bloomberglaw.com

To contact the editor responsible for this story: Rachael Daigle at rdaigle@bloombergenvironment.com

For More Information

The OECD's new Guidance on Change of Ownership in Hazardous Facilities is available at http://src.bna.com/zvJ.

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