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Cantwell Plans Legislation to Close Superfund Loopholes, Hold Polluters Accountable

Location: Tacoma, WA

Cantwell Plans Legislation to Close Superfund Loopholes, Hold Polluters Accountable

By manipulating the bankruptcy code, corporations like Asarco evade cleanup responsibilities at polluted sites

Tuesday, U.S. Senator Maria Cantwell (D-WA) announced plans to introduce legislation addressing loopholes and lax enforcement that allow companies with environmental liabilities to manipulate corporate bankruptcy laws, shirk cleanup responsibilities, and force taxpayers to cover cleanup costs. Cantwell's proposal is based on Government Accountability Office (GAO) recommendations.

"Polluters must pay for destroying our backyards," said Cantwell. "We need to make sure it's the polluter who pays, and not the taxpayers. Asarco and its parent company Grupo Mexico are case-studies on how companies exploit our bankruptcy laws to pass cleanup costs on to taxpayers. We need to close these legal loopholes and address the lax enforcement that lets corporate polluters off the hook. My legislation will fix environmental laws and empower federal regulators to hold companies accountable."

After Asarco first threatened to file for bankruptcy in 2002 and leave behind over $100 million in cleanup dept, Cantwell wrote to the Justice Department and also requested a GAO investigation to determine if companies were exploiting existing laws to avoid their cleanup responsibilities. The GAO report, released on August 18, 2005, confirmed that corporate polluters were using bankruptcy laws to evade environmental responsibilities and that the Environmental Protection Agency (EPA) could do more to make sure liable parties meet cleanup obligations. The report also noted several factors pointing to a rise in the number of companies without adequate financial resources to cleanup their own pollution.

+ Based on the GAO report's findings, Cantwell's legislation would close existing loopholes, protect taxpayers from unjust corporate maneuvering, and ensure that polluters, not tax payers, pay for cleanup. Cantwell's legislation proposes five specific solutions to the current system's shortcomings:

+ Current law allows a parent company to avoid responsibility for environmental cleanup by acting through subsidiaries. Cantwell's legislation would direct the Environmental Protection Agency (EPA) to write regulations defining the relationship between parent companies and subsidiaries, making it easier to prove in court if a parent corporation is responsible for the environmental liabilities of its bankrupt subsidiary.

+ Under current law, the individual appointed by the court to supervise the affairs of the bankrupt business may only examine the past year of transactions between a parent company and its subsidiaries when determining if the companies transferred assets to avoid cleanup obligations. Cantwell's legislation would extend this review period to three years in cases where the debtor has cleanup liability exceeding $50 million.

+ Conflicting goals between current bankruptcy code and environmental laws often make it difficult to hold bankrupt companies responsible for their cleanup obligations. Cantwell's proposal would require the National Bankruptcy Review Commission to evaluate these conflicts and recommend legislative or administrative actions.

+ Currently, the EPA requires businesses handling hazardous waste substances to maintain financial assurances and provide evidence of their ability to cleanup any environmental contamination that could result from their operations. Cantwell's legislation would reassert this requirement—which is mandated under the 1980 Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), but which EPA has failed to implement for 26 years—and establish additional guidance on the proper use of financial assurance mechanisms by EPA. The legislation would also direct EPA to adjust for inflation the current threshold a company must meet. The threshold has not been adjusted since 1982. + Currently, EPA learns of bankruptcy filings from the business itself, other agencies, or from a bankruptcy court. Cantwell's legislation would require EPA to identify industries at high risk of (1) having environmental liabilities and of (2) going bankrupt. Within a year, EPA would write a rule requiring companies in high-risk industries to report bankruptcy declaration to EPA headquarters directly. In their reports, companies would have to estimate their cleanup liabilities and explain current and former corporate relationships to the facility in need of cleanup.

In Washington state, Asarco operated a 14-acre site in Everett until 1912, and two sites in Ruston—a 67-acre property and a larger 97-acre Superfund site on Commencement Bay. In addition to massive cleanup needs on the Asarco sites themselves, between 700 and 1100 yards at nearby residences in Ruston and Tacoma may require cleanup. In some cases, after Asarco filed for bankruptcy, contractors abandoned cleanup projects midway through, leaving piles of contaminated soil sitting in residents' yards. On August 19, 2005, Cantwell secured funding from the EPA to restart cleanup. In February, another $2.5 million was released from Asarco's national environmental trust to cover decontamination costs. This amount is out of a total of $17.7 million that will be released in 2006 to continue 21 Asarco cleanup projects in 10 states.

In 1980, Congress established the Superfund Trust Fund to cleanup hazardous sites when the liable party cannot be identified or is unable to pay. The Superfund Trust was funded by excise taxes on crude oil and chemicals and by a corporate environmental income tax until 1995. Since then, taxpayers rather than polluters have funded Superfund cleanup when the responsible party cannot be identified or cannot pay. Currently, many companies are using the Bankruptcy Code's Chapter 11 to clear their plate of all environmental clean-up responsibilities, dropping cleanup costs onto the taxpayers. The legislation announced Tuesday by Cantwell would begin to address this increasingly frequent corporate practice.

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