What environmental due diligence is needed in an asset purchase?

An asset purchase narrows environmental due diligence rather than removing it. You are not buying the company’s whole history, but you are buying specific things, and land, buildings, tanks and the operation itself can each be the source of a problem. Provincial law decides who is responsible for a contaminated site, so the work starts with a plain list of what you will own, lease or operate after closing.

Match the checks to what you are taking

If the deal includes owned land, the site is the main subject. If you will lease the premises, ask what the seller’s operations did there and what the lease says about the tenant’s responsibility. If you are buying only equipment and inventory, ask where it has been kept and whether any of it holds fuel or chemicals. Saskatchewan’s ministry notes that impacts are typically associated with transportation, manufacturing, industrial, commercial or mining activities, a fair guide to which businesses deserve the closest look.

Start with the public record

Regulators publish part of what they know. Saskatchewan maintains an environmentally impacted sites map. British Columbia’s Site Remediation Program provides guidance on identifying a site that may be contaminated and takes site disclosure statements. Alberta publishes guidelines covering assessment, risk management and regulatory closure for contaminated sites. A clean search does not prove a site is clean, but a listing, an order or an open file changes the questions you ask.

Ask the seller for the paper

Request any environmental assessments, regulator letters, orders, spill reports and closure documents, along with records of tank removals and waste disposal. A gap in the file is an answer too. Where the use or history points to contamination, a qualified consultant can carry out an environmental site assessment before you commit.

Settle who carries the risk

Environmental findings usually end up as a question of who carries the cost. Saskatchewan’s Environmental Code has a chapter on transferring responsibility for an impacted site, a reminder that responsibility is a regulatory matter as well as a contractual one. Your lawyer can explain how your province treats an asset buyer. The wider question of when to check at all is in What environmental checks do I need before buying a business?