A federal district court’s decision to hold a parent company liable for its subsidiary’s Clean Air Act new source review violations is drawing attention from environmental attorneys and regulated companies. The ruling, now on appeal, could have significant implications for how courts evaluate parent-company involvement in compliance, operational oversight and corporate governance.
Bracewell’s Jason Hutt discussed the case on Bracewell’s Environmental Law Monitor podcast, emphasizing the importance of maintaining clear lines of authority between parent and subsidiary entities.
“When capital expenditures and compliance decisions are being made, the authority to do that and the action of doing it should be done at the level of the operator or the entity that you intend to be held responsible as the operator, because that’s where EPA is going to kind of point its attention,” Hutt said, as quoted by Inside EPA.
Bracewell’s Jacob Brandes said companies should carefully structure service agreements and compliance responsibilities in light of the ruling.
“I would say that’s a huge takeaway,” Brandes said, as quoted by Inside EPA, advising companies to “thread the needle” to ensure appropriate oversight without crossing the line into the level of control that could support operator liability.