Environmental Valuation & Cost-Benefit News

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A week after Asarco filed for bankruptcy, congressional investigators are warning that other companies might take similar action to shed environmental responsibilities and leave taxpayers liable for billions in cleanup costs.

In a report highly critical of the federal Environmental Protection Agency, Congress’ Government Accountability Office said the agency has failed to ensure that financially ailing companies meet their obligations under the Superfund program.

The report, due for release today, also said some companies have transferred their most lucrative assets to parent corporations or subsidiaries to limit their exposure in bankruptcy proceedings.

While such transfers are generally legal, it is unlawful to transfer assets with the intent to hinder or defraud creditors. Such cases, however, are difficult to prove, especially when foreign ownership is involved, according to a draft copy of the report obtained by The News Tribune.

Sen. Maria Cantwell (D-Edmonds) plans to discuss the GAO report during a news conference today in a Ruston yard that was abandoned by an Asarco contractor after last week’s bankruptcy filing.

“This report confirmed what I feared ? corporate polluters are using bankruptcy and other corporate gimmicks to get out of their environmental cleanup obligations,” Cantwell, one of three senators who requested the study, said in a statement issued Tuesday. “Corporate polluters are contaminating our backyards and water, and then sticking us with the mess and the cleanup bill. I’m tired of this abuse.

EPA officials had no immediate comment.

Asarco could be liable for more than $1 billion in cleanup costs at more than 30 sites nationwide, including the former copper smelter on the border between Ruston and Tacoma. Grupo Mexico bought Asarco in 1999. Four years later, Grupo Mexico took control of Asarco’s most lucrative assets ? two Peruvian mines in the foothills of the Andes and a smelter along the Peruvian coast.

The EPA initially sought to block the deal, but after weeks of negotiations allowed it to proceed. Asarco received an infusion of $765 million at a time it was teetering on the edge of bankruptcy.

The company also agreed to set up a $100 million trust fund that would be used to pay some environmental cleanup costs over three years.

The GAO report does not mention Asarco or Grupo Mexico by name. But the report said the complicated financial relationships between a parent company and a subsidiary can be difficult to unravel.

“Those who seek to pierce the corporate veil, such as the Department of Justice on behalf of EPA, face a task that has been likened to peeling back the layers of an onion,” the report said.

In addition, parent companies are often stockholders in their subsidiaries, and stockholders can’t be held accountable for environmental liabilities, the report said. Grupo Mexico owns Asarco’s stock.

“Federal bankruptcy law, like corporate law, presents a number of significant challenges to EPA’s efforts to hold bankrupt and other financially distressed businesses responsible for their cleanup obligations,” the report said.

Asarco filed a petition for Chapter 11 reorganization in a Texas bankruptcy court. Asarco officials said the company was overwhelmed with financial problems, including cleanup and asbestos liabilities, pension and health costs, downgraded credit ratings and a strike by production workers in Arizona and Texas.

EPA officials have said privately that they were not surprised by Asarco’s decision to file for bankruptcy, but they thought the company would hold on until next year before taking the step.

The agency’s lawyers are trying to determine the company’s liabilities site by site and are expected to pursue EPA’s claims in federal bankruptcy court.

Cantwell said it shouldn’t stop there.

“Corporate polluters who try to pull this kind of disappearing act after they’ve contaminated our neighborhoods and put our health at risk need to be held accountable. There’s more this administration could be doing to hold Asarco and other companies like it responsible for the harm they’ve done,” she said.

The Superfund, created in 1980, is the nation’s top federal program to clean up dangerously polluted sites. When a “responsible party” for a cleanup could not be found, money from the Superfund was used. The cash came from a special tax on oil and chemical producers and an environmental tax on corporations.

But the tax was allowed to lapse in 1995 and the trust fund used to pay for the cleanup is almost empty. Every year, Congress has provided about $1 billion in general tax funds to continue the work.

There are now more than 1,230 sites listed for cleanup under the Superfund program. It is estimated that the 142 largest toxic sites could cost $20 billion to clean. The EPA is already wholly or partially funding cleanup of 60 of these large sites, the GAO report said.

By Les Blumenthal: 202-383-0008, lblumenthal@mcclatchydc.com
The News Tribune via www.thenewstribune.com
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