1. Audits, Investigations, and Enforcement in Oil & Gas
Professor Tracy Hester
Environmental Law in Oil & Gas
Nov. 13, 2017

2. Something new – Residual Oil Zones
Potential new source of secondary recovery
May contain 30.7 billion bbls of petroleum in 56 fields of Permian Basin alone, of which 11.9 billion may be technically recoverable
The catch – produced water, entrained gases (including methane)
So what laws apply? Liabilities?

3. Looking back – Climate Change and Oil & Gas
Upstream activities and midstream infrastructure can emit large amounts of greenhouse gases
No federal climate statute: must stitch together
multiple federal environmental laws
Clean Air Act:
Prevention of Significant Deterioration
permit for “PSD-anyway” sources via
choice of Best Available Control Technology
New Source Performance Standards – fate of methane limits in upstream NSPS for oil and gas operations
Clean Water (heat, acidity), NEPA, Endangered Species Act, Safe Drinking Water Act (and underground injection), CERCLA/RCRA

5. How do you know?
Legal consequences of incurring knowledge of noncompliance
Civil penalties
Criminal liability for knowing violations
Debarment
Whistleblower responsibilities
So how do you investigate once you think you know, but need to be sure?

6. The Dangers of Knowing (or the Gateway to Environmental Criminal Law)
Availability of criminal liability under environmental statutes
Mens rea not constitutionally required
Public health offenses
Responsible corporate officer doctrine
Result: need to closely parse the statutory language that defines federal and state environmental crimes
Clean Water Act: simple negligence
Migratory Bird Treaty Act: strict liability
State law – varies, but can impose strict criminal liability

7. The traditional tools Attorney-client privilege
Applies to communications between attorney and client designed to aid in the provision of legal advice
Can extend to persons who assist the attorney, including staff and retained consultants
But…

8. The traditional tools Attorney-client privilege
Who gets shielded? (Upjohn tests, control group, corp. v employees)
What gets protected? (communications
vs facts)
The dangers of waiver (how do you use a
secret? Subject matter waivers?)
What law controls? (federal v state)

9. The traditional tools Work product protection
Applies to materials prepared by attorney in anticipation of litigation or adversarial proceedings
But…

10. The traditional tools Work product protection
Controlled by state laws, which vary
How far does “in anticipation” go?
Who owns the protection?
Like privilege, how do you use it? Can you waive it?

11. Self-reporting policies and audit privileges
EPA Self-Disclosure Policy
Texas Environmental Health & Safety Audit Privilege Act
TCEQ Policy
Railroad Commission Policy
Majority of states provide some type of protection for self-investigation and disclosure
Special case - transactions

12. Strategies and Tactics
Prepare before it happens
Once you have knowledge, be proactive
Investigate under privilege or protections whenever possible
Outside vs Inside Counsel

13. Questions? Professor Tracy Hester University of Houston Law Center
(office)