Asarco's Bankruptcy
Leaves Environmentalists Wondering about Cleanups
August 16, 2005 — By Thomas Stauffer, The Arizona Daily Star
Tucson-based Asarco LLC's recent
filing for bankruptcy protection has environmentalists ruing a
2-year-old court settlement that created what now appears to be a paltry
environmental trust fund.
The $100 million fund created as part of a settlement with the U.S.
Justice Department allowed Asarco's parent company, Grupo Mexico, to
spin off Asarco's most profitable arm.
Last week, Asarco CEO Daniel Tellechea said environmental liabilities of
$1 billion are a major factor in the company's bankruptcy filing.
"Certainly, the trust fund is nowhere near enough to cover the extent of
Asarco's environmental obligations, and in the end, Grupo Mexico has
successfully stripped this company of its assets and left enormous
financial and environmental liabilities for state and federal
governments to deal with," said Bonnie Gestring, northwest circuit rider
for Earthworks, a Washington, D.C.-based mining watchdog group.
By the Justice Department's own accounts, the trust fund was never
intended to cover all of Asarco's potential liabilities, Tellechea said.
"It's important to recognize that if the department hadn't allowed
Asarco to sell (subsidiary) Southern Peru, Asarco would have filed
Chapter 11 several years ago, without any trust fund," Tellechea said.
The deal that created the trust fund and allowed Asarco to pay off $550
million in short-term debt by selling its Southern Peru subsidiary to
another subsidiary of Grupo Mexico was brokered in January 2003. The
federal government had earlier blocked the sale, fearing that without
Southern Peru, Asarco would be fiscally unable to meet its U.S.
environmental obligations.
A 5-year-old law that requires mining companies to set up reclamation
bonds -- money held by the state to cover environmental cleanup if a
company defaults -- could help offset some of the bill for cleanup, were
it not for the fact that Arizona's version of the law is one of the most
toothless of the 50 states, said Roger Featherstone, the Tucson-based
southwest circuit rider for Earthworks.
"Alaska and Arizona are basically in a dead heat as far as the least
effective reclamation bonding," Featherstone said. "The Asarco example
just points out the fact that the U.S. taxpayer is going to end up
holding the bag on some of these cleanups because they're so
under-bonded."
Asarco, for example, has about $7 million in reclamation set aside for
sites in Arizona that could potentially cost anywhere from $73 million
to more than $1 billion to clean up, said Arizona State Mine Inspector
Doug Martin.
In addition, Arizona is one of the few states that allows corporations
to avoid actually seeking surety bonds by allowing corporate guarantees,
which are effectively meaningless "IOUs," and smelters are exempt from
reclamation bonding.
Martin said reclamation bonds cover only environmental cleanups for
mining that has occurred since the law's passage, but the state can
still seek compensation for previous environmental obligations through
the EPA's Superfund program.
"If we do find hazardous material for a site like that, it can be deemed
a Superfund site that requires the company to be responsible for
cleanup," Martin said. "There are also a lot of situations where a
company can cooperate with us on cleaning a site up, and there have been
some good examples of that."
But Superfund status has yet to hold Asarco's feet to the fire for the
cleanup of a 100-year-old smelter near Tacoma, Wash. Removal of
contaminated dirt at the site to make way for a townhouse development
was stalled last week week after Asarco's bankruptcy filing.
About 1,500 union workers at Asarco operations in Arizona and Texas have
been on strike since July 2.
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Source: Knight Ridder/Tribune Business News |