EPA Conducting National Review of Dupont Chemours Spinoff

Activists at Dupont Pompton Lakes RCRA Site Demand EPA Review of RCRA Financial Assurance

RCRA Financial Assurance Requirements Ignored by Press Accounts

[Update: We told you so, see:

• Inspector General Launches Probe Into EPA Financial Assurance Programs – Does EPA Enforce Superfund and RCRA Requirements?  ~~~ end update]

Our sources revealed that EPA Headquarters – and possibly the Justice Department – are reviewing the Dupont corporate spinoff of Chemours. That move could have significant implications. Here’s the story.

On December 18, 2014, Dupont announced the spinoff of a new corporate entity called “Chemours”.

The move was widely reported in the press as an attempt to shave off liability at scores of contaminated Dupont sites. First media reports came from a critical piece in the News Journal in Delaware:  (December 24, 2014)

DuPont’s Chemours spinoff also cuts away cleanup bills

 

DuPont Co. will shed nearly $300 million worth of environmental remediation baggage along with some of its most volatile and competitive-industry business units when it spins three major business segments off as Chemours Co., a financial disclosure shows.

The cleanup bill, including some involving local sites, could push much higher, a Securities and Exchange Commission information statement on the breakup added, with “adverse” circumstances possibly sending the environmental burden above $1 billion.

Upon reading that story, we immediately tried to get the NJ story out, with a specific focus on RCRA sites, with links and a map of all Dupont sites in NJ, see:

But it took Jim O’Neill of the Bergen Record over 2 weeks to pick up the story.

His January 11, 2015 piece painted a very different picture and provided opportunities for Dupont to portray the story in a favorable light:

DuPont said in recent filings with the Securities and Exchange Commission that the new company would be financially sound. It said the environmental liabilities for the 190 sites is estimated at nearly $300 million, including $87 million in expected cleanup costs for Pompton Lakes. Those costs are not expected to have much impact on the new company’s financial position, liquidity or ability to operate, DuPont said. …

“Chemours and DuPont remain committed to fulfilling all remedial and redevelopment activities that have been ongoing at Pompton Lakes,” DuPont spokesman Terry Gooding said.

O’Neill even quoted environmental experts to downplay the significance:

But, thankfully, EPA did caution that there were concerns about potential bankruptcy:

But Walter Mugdan, the federal Environmental Protection Agency’s Superfund director for the region, said the issue would be more complex if Chemours ever filed for bankruptcy. Whenever the EPA finalizes a cleanup plan, the company responsible must provide financial assurance that it can pay for the cleanup. Most of the time these are sufficient, but, Mugdan said, “there’s no guarantee the money will actually be there when needed.”

We then learned that in fact the problem was real, and that similar corporate  abuses had been attempted and prosecuted:

Similar situations have prompted the EPA to launch an investigation into whether a spinoff was fraudulent – and force the parent company to pay up. In 2006, Kerr-McGee Corp. spun off a subsidiary called Tronox, which included the parent’s chemicals business and its former environmental liabilities. Tronox went bankrupt in 2009. The U.S. Justice Department intervened, and a bankruptcy judge ruled that Kerr-McGee had fraudulently tried to evade its environmental debts.

In a settlement agreement approved by the court last fall, Kerr-McGee and its parent agreed to pay $5.15 billion, the largest environmental enforcement recovery ever by the Justice Department. The money will pay for cleanups across the country, including $217 million for work at the Federal Creosote Superfund site in Manville. The EPA had removed more than 450,000 tons of contaminated soil and cleaned up nearly 100 properties in the Somerset County borough.

Hello! Of course one possibility of the Dupont spinoff could be a bankruptcy strategy!

But, despite all this failure to critically consider the potential motives of Dupont in NJ (something that was obvious to the original Delaware reporter), for some reasons, despite the fact that Dupont’s Pompton Lakes site is a RCRA cleanup, no one mentioned that RCRA  has Financial Assurance requirements designed to prevent these kinds of abuses and assure that adequate cleanup funds are available for complete cleanup, including post cleanup monitoring.

Specifically, EPA explains what “Corrective Action” and “Financial Assurance” are:

Corrective action entails conducting cleanup activities to address all unacceptable risks to human health or the environment from the release of hazardous waste or hazardous constituents at TSDFs. 3 The corrective action process generally includes the following elements: initial site assessment, site characterization, environmental indicators, selection and implementation of the remedy.

EPA explains the purpose of RCRA Financial Assurance:

The primary purpose of the financial responsibility requirements for corrective action is to assure that funds will be available when needed to conduct necessary corrective action measures. 7 The intent of the RCRA financial responsibility requirements is, in part, to reduce the number of TSDFs that are insolvent or abandoned by their owners and operators, leaving the costs of corrective action to be borne by the public. 8 

Congress intended that facility owners and operators ensure that adequate funds would be available to complete the required corrective action so contaminated TSDFs do not become the responsibility of the federal Superfund or State cleanup programs. 9 It is important for regulators to require facility owners and operators to obtain financial assurance when the companies are financially healthy, so that resources are set aside in the event a company hits a financial decline. 

RCRA Financial Assurance regulations require:

If corrective action, when necessary, cannot be completed prior to the issuance of a permit to an owner or operator of a TSDF by the Administrator or an authorized State, the permit must contain a schedule of compliance for completing such corrective action and assurances of financial responsibility. 5 Thus, both EPA and authorized States must include assurance of financial responsibility for corrective action in permits that require corrective action.  EPA is authorized to issue administrative orders or file civil judicial actions that impose corrective action financial responsibility requirements on facilities subject to 3008(h) orders. 6

Additional regulations for closure, post-closure care and third-party liability are found in 40 CFR Part 264, Subpart H for owners and operators of permitted hazardous waste facilities

EPA explicitly anticipates bankruptcy abuse:

So, with that in mind, we reached out to our friends in Pompton Lakes, who immediately understood the significance and they fired off the below letter to EPA Region 2 Administrator Enck.

We understand that this Pompton Lakes letter to Region 2 prompted EPA HQ review.

We will keep you posted when we hear about how this is being resolved.

If EPA decides to enforce RCRA Financial Assurance  requirements as part of some kind of national review of the Dupont Chemours spinoff, the implications could be significant.

January 21, 2015

Ms. Judith Enck

Administrator,Region 2

U.S. Environmental Protection Agency

290 Broadway New York, NY  10007-1866

Re:  DuPont Spin-off (The Chemours Company) – Pompton Lakes DuPont Works Site.  RCRA Financial Assurance

Dear Ms. Enck:

We are writing to you on behalf of the concerned Pompton Lakes residents that are critically worried about our future here in Pompton Lakes.  We have some specific questions in regard to the recent DuPont spin-off request to the US Securities and Exchange Commission which will affect the Pompton Lakes DuPont Works site here in Pompton Lakes under  I.E. DuPont De Nemours and Co.  We are sure you are familiar with the recent news and the various articles that have appeared in a variety of news outlets.  Here is the US Securities and Exchange Commission application for your information. http://investors.dupont.com/files/Chemours/Chemours-Form-10-12-18-2014.pdf.

Our questions are as follows:

1.  What is the dollar amount for the DuPont RCRA financial assurance for the Pompton Lakes DuPont Works site?  Can you provide us with that information?

2.   What specific instrument is DuPont RCRA financial assurance?  Is this instrument guaranteed by DuPont (not The Chemours Company but DuPont specifically)?

3.   Is this instrument liquid?

4.  Will EPA require DuPont (not The Chemours Company) to put money aside in an escrow account for the projected cost of the cleanup?

5. Will EPA ramp up existing DuPont RCRA financial assurance to address risks from The Chemours Company?

6.  Can this spin-off be stopped and if so, who has the authority to take such an action?

Since the above concerns are on the forefront for the residents as they are worried about their future, please respond as soon as possible.

Many thanks.

Respectfully,

Pompton Lakes Community Advisory Group (PLCAG)