Relating to a compliance agreement for the suspension of an enforcement action against a regional water supply, sewer, wastewater treatment, or solid waste disposal service for certain violations.

Contracts

Asset Purchase Agreements (APAs):

• Condition Precedent: You must amend standard APAs to include a closing condition requiring the successful execution of a TCEQ Compliance Agreement under Texas Water Code § 7.0026.
• Representations & Warranties: Sellers must be contractually obligated to disclose all "existing and anticipated" violations to ensure they are listed in the Compliance Agreement.
• Indemnification: Update indemnification clauses. While TCEQ penalties may be suspended, third-party civil liability is not; ensure the seller indemnifies you for claims arising from pre-closing violations.

Hiring/Training

• Due Diligence Teams: Engineering and Compliance staff must be trained to identify not just current failures, but "anticipated" violations (e.g., aging infrastructure likely to fail post-close) during the due diligence phase. These must be documented to be included in the protection agreement.

Reporting & Record-Keeping

• The Compliance Agreement: This is a binding regulatory contract. You must maintain a strict audit trail of all remedial actions taken to satisfy the agreement's terms. Failure to document remediation can void the suspension and trigger retroactive penalties.

Fees & Costs

• Cost Impact: Positive/Savings. This legislation reduces the financial risk of acquisitions by eliminating potential administrative penalties for inherited non-compliance.
• Legal/Engineering Costs: Expect a slight increase in upfront due diligence costs to properly scope the Compliance Agreement before closing.