Mining company faces $1.3 billion in environmental cleanup claims

By Les Blumenthal
McClatchy Newspapers

Aug. 2006

WASHINGTON - The federal government has filed up to $1.3 billion in environmental cleanup claims against Asarco, a century-old mining and smelting company that sought bankruptcy protection last year amid allegations its Mexican owners had sold off its most lucrative assets.

The federal claims represent only a portion of what Asarco may owe its creditors, including at least $500 million in asbestos exposure-related claims and hundreds of millions of dollars more to such states as Washington for their environmental cleanup costs.

Tuesday was the deadline for filing the claims with a Connecticut-based claims administrator appointed by the federal bankruptcy judge in Corpus Christi, Texas, who is handling the Asarco case.

The federal claims involve 31 Superfund and other sites in 14 states, including Washington, Idaho, Missouri, Kansas, California, Texas and Illinois.

"We were expecting a big number," said Jack Kinzie, a Dallas lawyer who represents Asarco.

In its 55-page filing called a supplemental proof of claim, the U.S. Justice Department made clear that Asarco may not ultimately be liable for all the cleanup costs. At some of the sites, other companies may be responsible for a portion of the costs, and some of the cleanups are entangled in litigation.

But the Justice Department also said Asarco's bill for the cleanups could grow.

"This supplemental proof of claim reflects certain known liabilities of Asarco to the United States," federal lawyers said. "The United States reserves the right to amend this supplemental proof of claim to assert subsequently discovered liabilities."

Earlier estimates had pegged Asarco cleanup costs at roughly $1 billion at 94 sites in 21 states, including the company's former copper smelter on the border of Tacoma and Ruston in Washington state. But the new estimates, which took months to assemble, were much more detailed.

The environmental claims were among the largest ever filed by the Justice Department in a bankruptcy case, said Cynthia Magnuson, a department spokeswoman.

The federal government claims are unsecured. With the Superfund essentially depleted, federal taxpayers may end up paying for the Asarco cleanups.

Asarco as well as other creditors can challenge the claims; a final ruling by the judge is not expected until well into 2007 at the earliest.

Asarco filed for Chapter 11 bankruptcy protection last August, six years after it was bought by Grupo Mexico S.A. de C.V., owned by one of Mexico's richest families.

Since the bankruptcy, lawyers representing asbestos claimants have alleged in court documents that Grupo Mexico "systematically cannibalized" Asarco of its most valuable assets, particularly two of the world's best copper mines high in the Andes in Peru.

The Justice Department initially sought to block the transfer of the Peruvian mines to a Grupo Mexico subsidiary. But after Grupo Mexico agreed to create a $100 million environmental trust fund, federal lawyers acquiesced. About half of the trust fund has been spent cleaning up various Asarco sites; Justice Department lawyers say the remaining money in the trust fund should not become part of the bankruptcy proceedings.

The lawyers representing the asbestos claimants have asked the Texas bankruptcy judge and a New York judge in a separate case for permission to drag Grupo Mexico and its deep pockets into the Asarco proceedings. Grupo Mexico is also named in the New York case and has been served with a summons and complaint.

The Department of Justice has yet to decide whether it will also go after Grupo Mexico.

Asbestos lawyers have another month to file claims for their clients, though earlier court documents estimated there were 85,000 such claims worth about $500 million.

Sander Esserman, a Dallas lawyer representing the asbestos claimants, declined to estimate how many claims eventually would be filed and how much they might be worth.

On Friday, Washington state filed claims worth up to $600 million. Fifteen or sixteen or states were also considering claims, though Washington's was expected to be among the three or four largest.

Among the federal claims, the largest, up to $505 million, involved a mining district in northern Idaho. The second largest claim, up to $261 million, involved Asarco's operations in Omaha, Neb.

The claim involving Asarco's former Tacoma area smelter was $54 million, though with the sale of some of the property to a developer the cost could be closer to $45 million.

But the Tacoma area smelter site was also among those listed as having additional "potential" environmental liabilities. Others included Asarco's four mines in Arizona as well as sites in Idaho, Colorado, Montana and Texas.


Federal government environmental claims against Asarco:

Site; Location; Claim amount

Bunker Hill (Superfund site); Coeur d'Alene Basin, northern Idaho; $505.5 million

California Gulch (Superfund site); Leadville, Colo.; $60 million

Commencement Bay (Superfund site); Tacoma and Ruston, Wash.; $54 million

East Helena (Superfund site); East Helena, Mont.; $9.6 million

El Paso County; El Paso County, Texas; $26.4 million

Omaha Lead Smelter (Superfund site); Omaha, Neb.; $261.4 million

Murray Smelter; Utah; $125,000 per year

Federal Mine; St. Francois County, Mo.; $8 million

Big River Mine; St. Francois County, Mo.; $20 million

Cherokee County (Superfund site); Kansas; $8 million

Circle Smelting; Beckemeyer, Ill.; $8 million

Federated Metals; Houston; Undetermined

Globe; Colorado; $14.1 million

Hayden; Winkelman, Ariz.; $3.4 million

Jack Waite Mine; Prichard, Idaho; $8.4 million

Jasper County (Superfund site; Jasper County, Mo.; $32.6 million

Madison County ; Madison County, Mo.; $35.9 million

Newton County (Superfund site); Newton County, Mo.; $3.5 million

Richardson Flat; Summit County, Utah; $607,000

Stephenson Bennett Mine; Dona Ana County, N.M.; $791,000

Tar Creek; Ottawa County, Okla., near Missouri and Kansas borders; $154.5 million

Taylor Springs; Montgomery County, Ill.; $38.2 million

Vasquez Blvd. (Superfund site); Denver; $3.4 million

Azurite Mine; Whatcom County, Wash.; $15.2 million

Black Pine Mine; Phillipsburg, Mont.; $188,000

Combination Mine; Phillipsburg, Mont.; $542,000

Flux Mine; Patagonia, Ariz.; $261,000

Golinsky Mine; Redding, Calif.; $8.8 million

Iron Mountain Mine; Superior, Mont.; $1.6 million

Upper Blackfoot/Mike Horse Mine; Helena, Mont.; $35 million

Source: U.S. Justice Department


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