Bankruptcy looms over Asarco obligations
Asarco LLC’s bankruptcy filing this week raises questions about the future cleanup of 94 contaminated sites across the nation, including mine waste in Idaho’s Silver Valley and toxic outfall from a defunct smelter in Tacoma.
Best known for its copper mines in Arizona, the 106-year-old company had operations in 21 states. Asarco is facing “hundreds of millions of dollars” worth of environmental claims, according to the company’s Chapter 11 filing in Corpus Christi, Texas.
In Idaho’s Silver Valley, Asarco was one of several companies sued by the federal government for cleanup of a century of mining waste. In 2003, U.S. District Court Judge Edward Lodge ruled that Asarco was partially responsible for the damage. The suit is ongoing.
In Tacoma, the company is cleaning up heavy metals from a former copper-lead smelter. Kevin Rochlin, the Environmental Protection Agency’s project manager for the smelter cleanup, said it’s too soon to know how the bankruptcy filing will affect the company’s clean-up obligations.
“While we expect Asarco to keep doing the (smelter) work, I’m not sure what impacts the bankruptcy will have,” Rochlin said Thursday.
About $35 million to $45 million worth of smelter clean-up remains, including replacing contaminated yards in the nearby town of Ruston, Wash., with clean soil, he said.
Some of the work is being paid for out of a $100 million trust fund established by Asarco’s parent company, Grupo Mexico. The Justice Department forced Grupo Mexico to set up the fund two years ago, after accusing the company of stripping Asarco of lucrative Latin American assets and leaving U.S. taxpayers with cleanup bills.
The federal government and the states of Washington, Texas and Arizona are listed among Asarco’s 20 largest creditors. Asarco is one of the nation’s largest copper producers.
Environmental liabilities played into Asarco’s decision to file for bankruptcy, said Daniel Tellechea, president of the Tucson-based company.
“We believe that the Chapter 11 process is the best way for the company to reorganize its liabilities, reduce its operation costs and restructure its balance sheet for the long-term,” he said. “We are determined to complete our reorganization as quickly and smoothly as possible.”
Asarco subsidiaries are facing 95,000 personal-injury claims related to asbestos. In addition, 1,500 workers in Texas and Arizona went on strike since last month, rather than accept Asarco’s proposals for a three-year wage freeze and cuts in benefits. The strike cut the company’s production in half during a period of record copper prices.
Citing Asarco’s shaky financial position, Standard & Poors recently downgraded the company’s corporate credit rating. The lower rating made it difficult to negotiate new loans to cover the impact of the strike, officials said in the bankruptcy filing.
Union members were critical of the bankruptcy filing, accusing Grupo Mexico of ducking its responsibility to workers and communities.
“It’s no secret what’s happening here,” said Terry Bonds, a district director for the United Steelworkers union. “The robber barons running Grupo Mexico set the stage for this by stripping Asarco of its profitable Peruvian assets in 2003. They believe it will be cheaper to bankrupt Asarco than it would be to meet Asarco’s tremendous environmental, asbestos and retiree obligations.”
Miners and smelter workers consider the company’s request for wage freezes and benefits unreasonable, Bonds said. Copper is trading at around $1.68 per pound, more than double its price two years ago.
Tellechea said despite the higher prices, Asarco is still recovering from a long downturn, and is not yet operating in the black. Asarco’s operating costs are some of the highest in the copper industry, he said.
The Associated Press contributed to this report.