70 TEXAS JOURNAL OF OIL , GAS , AND ENERGY LAW [ Vol . 16:1
property to secure the obligations of one of the parties under the agreement in question . Depending on the collateral covered , that lien can serve as an effective substitute for providing a related party guarantee .
In addition to ensuring that sufficient financial resources are there to support each party ’ s obligations , the agreement should define “ events of default ” to include instances where a party files for bankruptcy or otherwise demonstrates that it is in financial distress . These events of default should trigger remedies ( such as indemnity and potentially contract termination ) when they are not timely cured . Additionally , it is important to limit the ability of the parties to assign their interest in the agreement ( and potentially the facilities used to perform that party ’ s obligations under the agreement ) to only assignees who either meet stated minimum credit rating standards or who can provide a guarantee from a party that meets those standards .
A full discussion of each of these topics is beyond the scope of this paper ; however , the above outline of the general framework used for these agreements provides an important background for the discussion of some of the more nuanced considerations noted below . Further , as with any legal agreement , care should be taken to tailor the agreement to address the specific circumstances being encountered by the parties . The parties should also ensure that the terms of the agreement work in concert with other agreements that are binding on the parties or that otherwise impact the operation of the project . Next , this paper will discuss some of the important commercial considerations that are specific to CCUS projects .
C . CCUS Project Specific Considerations
A number of commercial issues that participants in CCUS projects must consider flow from the fact that the success of the project will rely on the integrated performance of each of the participants and their respective processes and facilities . They all have to work together to capture and deliver sufficient volumes of CO 2 and to meet the requirements necessary to generate tax credits , which underlie the project ’ s economics . As a result , recognition of the considerations and risks related to these interdependencies and appropriately addressing them in the participants ’ commercial arrangements is essential to the success of each project .
Further , it is important to note that these risks are shared by all of the project participants even if the issue creating the risk materializes from the interaction of processes between participants that are contractually “ upstream ” or “ downstream ” within the contractual chain . The consequences of delays or inabilities to perform based on these risks should be considered , and a clear allocation of these risks among the project participants should be provided for in these commercial arrangements .