Law and the Environment

Asarco Asks Bankruptcy Court to Dismiss $68 Million Claim Filed by State of Texas

From EnergyLaw360

By Christine Caulfield , christine.caulfield@portfoliomedia.com

Wednesday, Sep 19, 2007 --- Bankrupt copper mining company Asarco LLC has urged a bankruptcy court to quash a $68 million claim by Texas officials for environmental damage to the state's coast, a claim it argues was filed too late.

In an objection lodged with the court on Friday, Asarco said the damage claim filed in July 2006 by the Texas attorney general on behalf of the state's natural resource trustees was barred by the statute of limitations.  The claim, just one of scores against the bankrupt copper producer for environmental damage, relates to the company's Corpus Christi facility, which processed mineral ore in the production if zinc.

The Tucson, Ariz.-based company, which no longer operates the facility, argues the state was aware of the release of toxins from the site more than three years before making a claim to the court.  Claims under the Comprehensive Environmental Response, Compensation and Liability Act, otherwise known as Superfund, have a three-year statute of limitations, and that statute begins to run on discovery of a possible claim, Asarco told Judge Richard Schmidt.

“The Trustees had knowledge of the alleged release and losses well before July 14, 2003, three years prior to filing a claim,” the company said.  The state's knowledge was outlined in the attorney general's own proof of claim and expert report, Asarco told the court, both of which contained surveys, notices, memoranda and orders from the state warning the site was releasing dangerous metals into the Corpus Christi harbor and bay.

“It is undisputed that the state possessed knowledge of the alleged loss and its connection the alleged releases of hazardous substances at the site long before 2003,” said Asarco.

Even assuming the court were to rule that the claim was not time-barred, all portions of the state's claim relating to damage that occurred before the December 1980 effected date of Superfund were barred, the company added.  Last month, Judge Schmidt approved a $31 million settlement between Asarco and the federal government over cleanup at its hazardous California Gulch smelter site in Leadville, Colorado.

The settlement resolved a $200 million lawsuit brought by U.S. environment officials and the state of Colorado more than 20 years ago. The site, which encompasses the entire town of Leadville and an 11-mile stretch of the Arkansas River, was added to the U.S. Environmental Protection Agency's national priority list as a hazardous wasteland in 1983.  In approving the settlement, Judge Schmidt ignored the protests of Asarco's parent company, Asarco Inc., which earlier this month asked the court for an order forcing the company to seek its consent before entering into settlements “over the parent's strong protest.”

The company had slammed Asarco's haste in settling the California Gulch claims, saying the debtors had entered into an agreement despite expert analysis showing the claims were highly inflated.

“Alarmingly, the California Gulch settlement may be just the first of many settlement seeking to resolve the environmental claims that are the subject of the ongoing estimation proceeding and that are asserted in the aggregate amount of over $6.77 billion,” said the company, which lost power over Asarco in December 2005, when the court approved a corporate governance stipulation which shook up the board of directors and effectively excluded it from participation in governance matters.

Asarco, which has been active in mining, smelting and refining for over a century, still faces environmental claims at nearly 100 other sites. Those claims have been asserted by the federal government, state governments, Indian tribes and private parties.  The company also faces more than 95,000 asbestos-related personal injury claims, court documents have revealed, with the total value of all claims estimated to be potentially as high as $25 billion.  Asarco filed for Chapter 11 protection on Aug. 9, 2005, listing assets and liabilities in excess of $100 million.

Supreme Court Decision Expands Cost Recovery Actions under CERCLA

On June 11th, the U.S. Supreme Court decided a closely watched environmental case that may have significant financial implications for both the federal government and private industry. The case, United States v. Atl. Research Corp., is the second of two cases that have considered whether private parties can recover costs incurred to cleanup contaminated sites under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) when the cleanup effort was voluntarily carried out, rather than compelled by a lawsuit or government order. These two cases are extremely important for parties who pay more than their fair share to cleanup contaminated sites, as they set forth how parties can recover from others who are also liable, but have not taken action to address environmental contamination of the relevant site. The ability of parties to recover costs from other potentially responsible parties or “PRPs" is a critical public policy issue in terms of encouraging parties to take action to remediate contaminated sites.

 

In the first of the two cases, Cooper Indus., Inc. v. Aviall Serv., Inc., the Court held that private parties who voluntarily clean up sites could seek contribution under § 113 of CERCLA only after having been sued under CERCLA or entering into a settlement agreement with the government resolving CERCLA liability. The upshot of the Aviall case is that a party thatconducts a purely voluntary cleanup will typically not be able to recover under § 113 against other PRPs.

 

In Atlantic Research, however, the Supreme Court reviewed the general cost recovery provision in § 107 of CERCLA. Prior to Aviall, § 107 was typically used only by a governmental body or a private party to sue for cleanup costs when the plaintiff was not otherwise liable for the cleanup, i.e. when the plaintiff was “innocent.” Before Aviall, the weight of authority held that no private cost recovery or contribution action was available under § 107 for parties who themselves were PRPs. After Aviall, the lower courts were divided on the issue.

 

The Supreme Court’s decision in Atlantic Research allows parties that engage in voluntary cleanup actions to recover their costs from other liable parties under CERCLA § 107 even if they have not been sued by other parties and even if they themselves are liable for cleanup costs. This outcome is a welcome one because private parties will no longer be deterred from cleaning up contaminated sites.

 

A more in depth analysis of the Atlantic Research case will be forthcoming.

US Supreme Court Agrees to Hear Second Case on Cost Recovery under CERCLA

The U.S. Supreme Court has decided to hear a closely watched environmental case that may have significant financial implications for both the federal government and private industry. The case, U.S. v. Atlantic Research Corp., is Part II of a duo of cases that consider whether companies can recover costs incurred to cleanup contaminated sites under the Comprehensive Environmental Response, Compensation and Liability Act, when the cleanup effort was voluntarily carried out, rather than compelled by a lawsuit or government order.

In Part I of the two cases, Cooper Industires, Inc. v. Aviall Industries, Inc., the court ruled that parties who voluntarily cleaned up a hazardous waste site could not recover from other parties, including the government, under Section 113 of CERCLA--the contribution section of the federal Superfund cleanup statute, which allows one private party to sue another liable party, including governmental bodies.

In Part II, the Atlantic Research case,  the court will review Section 107, the general cost recovery provision of the statute, which is typically used by a government body or private party to sue for cleanup costs when the plaintiff is not otherwise liable for the cleanup.  The federal appeals courts are divided as to whether a private party liable under CERCLA can recover the share of costs other are responsible for under the Act.  Thus, the Supreme court may rule as to the ability of parties to bring cases at all when they voluntarily perform cleanup without first being sued or being the subject of a governmental enforcement order.

While voluntary cleanup has been growing, promoted by industry and government alike, the federal government has argued in its briefs to restrict the ability of such volunteers to recover their costs from other liable parties, primarily because the government itself is often a liable party. This is simply bad public policy, exercised by a Justice Department more motivated by winning cases than helping responsible companies recover their costs when they step up and cleanup up a hazardous waste site while other entities and governmental bodies stand by and do nothing. 

We will have to await the Supreme Court's ruling as to whether private cost recovery actions are permissible under Section 107 of CERCLA.  If the court rules that plaintiffs cannot recover under Section 107 for voluntary actions or otherwise, then calls for a fix from Congress will grow to amend the statute to allow such contribution or direct actions in order to encourage private parties to conduct cleanup of hazardous waste sites without being subject to litigation or government order.