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Going for Broke
How a copper giant plans to make the public pay for its toxic mess
By Marilyn Berlin Snell

(page 3 of 3)

Sidebar: Arsenic in the Attic
Sidebar: Picking up Asarco's Tab
Sidebar: Sierra Club's CSI: El Paso
(Sidebars will appear to the left of the article.)

In addition to being lax on demanding financial assurances, the EPA often settles environmental claims for less than the total cleanup costs, the GAO says, "if the agency believes making the business pay the full cost would be inequitable." One might fairly ask: Inequitable to whom?

"We try to work with companies that are financially struggling," says the EPA's Madigan. "We try to find this very precarious balance with those that want to work with us to do a cleanup or pay for their environmental liabilities. We don't want to be the ones to put them over the edge."

Asarco was a beneficiary of this type of governmental largesse in 2003, when it shifted its most valuable asset, the Southern Peru Copper Corporation, to a subsidiary set up by Asarco's parent. The sale was initially blocked by the Department of Justice. The agency was concerned that Asarco was shielding its moneymakers from the environmental cops at the EPA. But when Asarco agreed to set up a $100 million trust fund for the cleanup of its U.S. operations--for which, even then, estimates ran as high as $1 billion--the EPA and Justice Department signed off, essentially accepting ten cents on the dollar from a company that had poisoned huge swaths of air, water, and land. At the time the deal was signed, Asarco owed in excess of $100 million in fines alone, for noncompliance with state and federal cleanup orders. Sweeter still, the deal capped Asarco's cleanup responsibilities for three years.

Agency representatives called it an "exceptional settlement" and "fair to all concerned." Though the trust is guaranteed by Grupo México, it is unclear how bankruptcy affects the fund: There's no $100 million sitting in a bank account somewhere. The promise was to pay out the money at $12.5 million per year, plus interest, over eight years. With Asarco in bankruptcy court, a debate has begun about whether the environmental-trust-fund money is secure from other creditors. Additionally, a battle over who gets which piece of the contested pie is looming. According to Kevin Rochlin, the EPA's Region 10 project manager for Asarco cases, trust-fund dollars will be assigned based on "human health risks, status of cleanup, and extent of cleanup that can be accomplished for a certain amount, pressing needs, eco risk, etc." The situation pits homeowners in Ruston, Washington, whose Superfund-sited yards contain toxic amounts of lead, against families in El Paso whose yards are every bit as contaminated. EPA lawyers say they were talking about going after Asarco for additional funds when the three-year agreement ended in February. The company's bankruptcy basically throws a brick wall in front of those good intentions.

CHANGE IS POSSIBLE. In her work and writing, Baltimore environmental lawyer Karyn Bergmann has focused on the inherent tension between bankruptcy and environmental laws--what she calls "the clash of titans." In Bergmann's view, it's critical to redefine the key players: "Congress needs to revise and clarify the definitions of 'owner' and 'operator' in environmental statutes to include parent companies." If this occurred, it wouldn't have mattered that Asarco was stripped of its assets, since all roads (and profits) lead to Grupo México. Solvent parent corporations would no longer be able to reap the profits of polluting subsidiaries while avoiding environmental liabilities.

Additionally, says Bergmann, environmental statutes must be harmonized with the Bankruptcy Code so that responsible parties aren't so painlessly released from their environmental debts. As it stands, the code allows a company to abandon property when it "is burdensome ... or ... is of inconsequential value and benefit." This pretty much sums up the thousands of acres corporations have contaminated.

It's not just the environment that suffers when a polluting company gets a second chance. In theory, Chapter 11 and the eventual rehabilitation of a business are preferable to people losing jobs, plants being shuttered, and contents of value being sold for scrap. Companies are far more useful to employees and shareholders if they are going concerns, after all. But in the eight years since the last bankruptcy-reform act was adopted by Congress, according to House members who opposed the bankruptcy bill passed in 2005, "workers have sustained unprecedented job loss, endured the termination of pension plans, and faced wage cuts and the elimination of health care and other benefits"--all under the guise of Chapter 11. The 2005 act did little to change this.

Solidifying financial assurances, going after parent companies for cleanup costs, and getting tougher with environmental enforcement before a company's finances crumble would make corporate misbehavior less likely and bankruptcy less attractive as an out. It's really a question of priorities. Senator Cantwell is currently working on legislation that would close bankruptcy loopholes for polluters. "I think everyone agrees that there's a problem," says Amit Ronen, her deputy legislative director. "Asarco is just the microcosm of what's going on all over the country."

AFTER YEARS OF SETBACKS, El Paso activists recently enjoyed one satisfying, though possibly temporary, victory. Prior to its 2005 bankruptcy filing, Asarco applied to renew its permit, perhaps to make the smelter's sale more attractive to potential buyers. Unlike in 1992, at this hearing the opposition's bench was deep and well organized and included the Sierra Club and the city of El Paso. Pinon's daughter, Yvonne, who has become the unofficial historian of Asarco's environmental misdeeds in El Paso, attended every day of the two-week hearing, since her father was needed at the pharmacy. "I had to take notes and rush home and report to Dad, let him know exactly what happened," says Yvonne, 46.

Years of effort paid off when Texas administrative judges recommended that the permit be denied. A final decision by the Texas Commission on Environmental Quality is not expected before August. But none of the El Paso folks are fooling themselves. After decades of work, they still don't have the cleanup they are after, and bankruptcy only makes matters worse.

The Piñóns and their neighbors have been paying pollution's price for decades. Now taxpayers' wallets will be tapped. When will corporations like Asarco be made to pay their fair share? Says Piñón, "My wife says I'm too old now. 'Just let someone else handle it,' she tells me. But you've got to take a stand."

Marilyn Berlin Snell is Sierra's senior writer and directs the Sierra Investigative Journalism Project.

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