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Hearing of the Senate Environment and Public Works Subcommittee on Preventing Corporate Polluters from Evading Toxic Cleanup Responsibilities

Location: Washington, DC

Hearing of the Senate Environment and Public Works Subcommittee on Preventing Corporate Polluters from Evading Toxic Cleanup Responsibilities

Cantwell Introduces Legislation to Prevent Corporate Polluters from Evading Toxic Cleanup Responsibilities

At Superfund hearing, Cantwell highlights her bill to close existing loopholes and prevent bad actors from sticking taxpayers with cleanup costs

Thursday, June 15,2006

WASHINGTON, DC - Thursday, U.S. Senator Maria Cantwell (D-WA) testified before a Senate Environment and Public Works Subcommittee on corporate polluters' use of bankruptcy loopholes and other gaps in Superfund regulations to evade cleanup responsibilities. During her testimony before the Subcommittee on Superfund and Waste Management, Cantwell highlighted lessons learned from Asarco Superfund sites in Washington state and discussed her Cleanup Assurance and Polluter Accountability (CAPA) Act, which she introduced Wednesday night. The CAPA Act, which is based on recommendations made in an August 2005 Government Accountability Office (GAO) report Cantwell requested, would ensure that polluters, not taxpayers, pay to clean up contaminated sites and probably would have prevented Asarco from shirking their billion dollar cleanup obligations at more than 90 polluted sites across the country.

"We need to address the lax enforcement and loopholes that allow polluting corporations to manipulate bankruptcy laws and evade cleanup responsibilities," said Cantwell. "This legislation will help ensure that toxic sites nationwide get cleaned up by the responsible parties, not American taxpayers."

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 Washington, Asarco has polluted sites at two locations, including a $180 million mess on the shores of Commencement Bay adjacent to the cities of Tacoma and Ruston," said Cantwell. "The real world effect of Asarco's corporate maneuvering became strikingly clear last summer when, the day after Asarco declared bankruptcy, contractors abandoned cleanup projects midway through, leaving local residents' yards torn up with piles of contaminated dirt."

After Asarco first threatened to file for bankruptcy in 2002, Cantwell requested a Government Accountability Office (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 clean up their own pollution.

Based on the GAO report's findings, Cantwell's CAPA Act (S. 3515), introduced along with Environment and Public Works Committee Ranking Member James Jeffords (I-VT) and Environment and Public Works Subcommittee on the Superfund and Waste Management Ranking Member Barbara Boxer (D-CA) would change the current system in the following ways:

Requirements for Financial Assurance: When the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) passed in 1980, it directed the EPA to develop regulations requiring businesses that handle hazardous waste substances prove their ability to pay for cleanup of spills or other environmental contamination that could result from their operations. The CAPA Act would reassert this requirement—which the EPA has failed to implement for 21 years—and establish additional guidance on the proper use of financial assurance mechanisms by the EPA. Specifically, the Cantwell legislation would:

o Require the EPA to write financial assurance regulations for high-risk facilities within 18 months, giving the highest priority to facilities with un-reimbursed costs of $12 million or more.

o Direct the EPA to adjust the current threshold a company must meet (currently $10 million in tangible net worth) for inflation since 1982.

o Ensure that compliance with this section is tracked by the EPA. Currently, this information, including the amount and source of financial assurance included in settlements, is not collected.

o Direct companies declaring bankruptcy that are required to provide financial assurance under CERCLA to estimate their cleanup liabilities and explain current and former corporate relationships to the facilities in question. Under current law, the EPA learns of bankruptcy filings from the business itself, other agencies, or from a bankruptcy court, although bankruptcy courts only notify the EPA if the Agency is listed as a creditor.

Illegal Avoidance of Environmental Liabilities: Under current law, the individual appointed by the court to supervise the affairs of the bankrupt business may only examine—and void if appropriate— the previous two years of transactions between a parent company and its subsidiaries when determining if the companies transferred assets to avoid environmental cleanup obligations—as Asarco is suspected to have done. The CAPA Act would extend this period during which fraudulent transaction could be voided from two years to ten years.

Upholding Polluter Responsibilities in Bankruptcy: Under current law, the EPA faces challenges in trying to hold bankrupt companies responsible for their cleanup obligations in part because of the often conflicting goals of bankruptcy laws and CERCLA. Building on the August 2005 GAO report, the National Bankruptcy Review Commission would be required to reconvene and evaluate the inconsistencies between bankruptcy code and CERCLA. Within a year, the Commission would report on findings and conclusions together with recommendations for legislative or administrative action.

CAPA probably would have prevented Asarco from shirking their billion dollar cleanup obligations at more than 90 polluted sites nationwide.

Since Asarco's bankruptcy, Cantwell has worked to guarantee the completion of cleanup at Washington's former Asarco sites. On August 19, 2005, Cantwell secured funding from the EPA to restart cleanup efforts in Ruston and Tacoma.

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 cleanup responsibilities, dropping cleanup costs onto the taxpayers.

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