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BANKRUPTCY LOOPHOLE ALLOWS POLLUTERS TO PASS CLEANUP COSTS TO TAXPAYERS Senator Cantwell Unveils Legislation to Close Loophole, Ensure Polluters Meet Cleanup Obligations The Sierra Club called on Congress to quickly pass new legislation, proposed today by Senator Maria Cantwell (D-WA), to close a loophole in the nation's bankruptcy laws that allows companies with significant pollution liabilities to evade cleanup costs. The new legislation comes on the heels of a special investigative report by the Sierra Club, which contends that one company, the American Smelting and Refining Company (Asarco), could legally shift $500 million to $1 billion in cleanup responsibilities to taxpayers by reorganizing under the federal Chapter 11 Bankruptcy Code. The investigative report, entitled “Going for Broke: How a Copper Giant Plans to Make the Public Pay for Its Toxic Mess,” is available at http://www.sierraclub.org/sierra/200605/goingforbroke/ "Under the existing law, it's possible for a company like Asarco to declare Chapter 11 and wipe the slate clean of environmental liabilities," explained Marilyn Berlin Snell, who directs Sierra's Investigative Journalism Project. "Not only do taxpayers end up holding the bag, but it takes far longer for the contaminated sites to get cleaned up, and that puts more people at risk." Asarco, a massive copper conglomerate with a presence in more than 20 states, has a toxic legacy that is all too familiar in communities where the company has done business. Its name is attached to 19 Superfund sites around the country, including Colorado, Texas, and Washington. At the time it filed for bankruptcy last summer, Asarco faced more than 100 civil environmental cases. By declaring Chapter 11, however, Asarco puts all of those cases on hold. It also means that creditors – in this case EPA and the states demanding that Asarco clean up its polluted sites – get in line to collect what they are due. They are unlikely to collect much, however, since Asarco had the foresight to sell off its most valuable assets to a shell company, set up by its parent Grupo Mexico, before the bankruptcy filing. The total cost of Asarco's cleanup liabilities is estimated at $500 million to $1 billion. In 2003, the Government Accountability Office (GAO), at the behest of Senator Cantwell, looked into whether the existing bankruptcy laws were sufficient to prevent companies from shirking their cleanup responsibilities. (The GAO report can be found at http://www.gao.gov/new.items/d05658.pdf ) While the GAO was unable to determine the extent of abuse, it confirmed that the law was ripe for exploitation and outlined steps that the Environmental Protection Agency could take with its existing authority to minimize the problem. The legislation proposed by Senator Cantwell today is based largely on the recommendations of that GAO report. Among other things, the Cantwell bill would direct EPA to write regulations making the parent corporation liable for the environmental liabilities of its bankrupt subsidiary. It would also direct EPA to require that businesses handling hazardous waste substances maintain financial assurances, providing evidence of their ability to afford cleanup of spills or other environmental contamination that could result from their operations. Meanwhile, some states have taken matters into their own hands. After a mining company, Pegasus Gold, declared bankruptcy and stuck the state of Montana with a $40 million cleanup bill, state officials went so far as to require mining companies to up the bond amounts they held for clean up purposes from 50 to 10,000 percent. "Even with the bankruptcy loophole, there should be a safety net to protect taxpayers and ensure that sites get cleaned up quickly," stated Ed Hopkins, director of the Sierra Club's Environmental Quality Program. He explained that ever since Congress allowed the "polluter-pays" provision of the Superfund program to lapse in 1995, the trust fund that should be available to pay for orphaned toxic waste sites has dried up. The GAO estimates that it will cost on average $140 million to remediate each of the 142 largest Superfund sites, for a total of almost $20 billion. ###
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