Upcoming Congressional Debate Concerning Oil Excise Tax

Everyone has heard the recent television commercial concerning the upcoming gas tax. The commercial states that this new tax will increase the price of gas resulting in further layoffs; and is bad for the economy especially at this critical time of stagnant economic expansion. This tax is not new and was in existence at the time of Presidents Regan’s and George Bush’s administrations. This so called “Superfund Tax” expired in 1996 and the fund ran out of funds in 2003. The funds were used to clean up the orphan sites when no viable responsible party could be found. Orphan share sites currently account for 606 of the 1,279 sites on the national priority list. This “New Tax” would, if passed, increase excise tax on oil and gas, as well as some chemicals, realizing that a proportion of these products will end up in a superfund site requiring remedial action. If the tax is not passed into law, then we tax payers will have to continue to foot the bill. I don’t think it’s right for taxpayers to always be paying for corporate compliance, and in this case, environmental regulations. Polluters should pay as the Superfund law was intended.

U.S. appellate Court Unanimously Rules Against GE Regarding EPA’s Use of Unilateral Orders

EPA has not as yet issued an unilateral order against General Electric to perform a particular cleanup action for the 40 mile stretch of the Hudson River north of Albany to reduce the risk of environmental degradation and/or human health. GE sued stating that the unilateral order provision of Superfund violated General Electric’s due process rights under the constitution (possibly as a reaction to the many sites they have across the county). The appellate court unanimously disagreed, stating that Superfund upholds the due process requirements since a responsible party’s action can force the EPA to sue in court. There are two commonly used venues to cleanup a site. One, EPA can issue unilateral orders stating you will do this. Two, do the necessary cleanup and sue the responsible Party(s) for reimbursement of the cleanup costs. This ruling lets all responsible parties around the country know that EPA has the ultimate authority on superfund cleanups.

New Jersey to Add 15-25 new NPL Superfund Sites Within 5 Years

It has been reported that the state of New Jersey is anticipating adding 15-25 new Superfund Sites within the next five years to the National Priorities List (NPL). For a site to be added to the NPL, a mitre model is used, proportionately weighting the amounts of waste, types of waste, types of waste leaking from the site via groundwater, surface water and air; and the number of residents living within three miles of the site, etc. When all the quotients are added and exceed a threshold, then the site is converted from a proposed site to a final designation. Many of the final sites are older than 100 years of contamination. From old title deeds, some of the responsible parties can be tracked using EFIS’s guide editor; particularly large, public companies being in business for close to a century.

Residents of Gainesville Florida suing owner of Kopper Cabot Superfund site for $500 million

It has been reported that the neighborhood surrounding the Koppers Cabot Superfund site in Gainesville, Florida is suing the responsible party for $500 million to monitor the drinking water and residents of Gainesville area for acute diseases. The site was owned by Koppers Co., which was sold and the name changed to Beazer East. According to EPA records, the remedial action chosen at this site has an estimated price tag of $4.1 million. Of this amount, $2.45 million has been reimbursed to the government; leaving an approximate balance owing of $1.65 million. According to online sources, Beazer East is a privately owned company with approximately 50 employees. Since the company is private there is no reported stockholder equity. One can only surmise that if the plaintiffs win, this would most likely have a detrimental affect financially on the small, privately owned company.

Deepwater Horizon Gulf of Mexico Oil Spill

When the Deepwater Horizon Oil Well exploded last month, initially there was confusion as to which corporate entity would be held financially liable for this terrible accident. BP, Cameron, Halliburton and Transocean all were connected with this ongoing oil spill. By using EFIS’s on-line Corporate Guide editor practically all of a particular company’s corporate relations are laid out on a computer screen. Virtually all name changes, acquisitions since the 1800’s, as well current corporate entity relationships are at the users’ fingertips. A researcher can link the historical name changes and acquisitions simply by clicking them. The Guide is truly “Your Passport to the Corporate World/ Interconnecting business and the environment”. This powerful, but user friendly, system can be a useful research tool in establishing all the corporate interconnections to identify the PRP’s (potentially responsible parties) involved in tragic environmental events such as the Deepwater Horizon Gulf of Mexico Oil spill.

GE’s Hudson River PCB Site is Leaking Toxic Chemicals

It has been reported that General Electric’s (GE) Phase I cleanup of the Hudson River PCB site is leaking toxic material. As I recall, GE always wanted to cap the site since it would cost less and be more effective than EPA’s chosen remedy to dredge the site. According to EPA’s website, at the commencement of 2009, GE has reimbursed the government in the neighborhood of $37 million. If GE negotiates with EPA not to commence the phase II dredging plan, GE would be required to pay an estimated $43 million. Granted GE at the end of 2009 had a high stockholder equity ($117,291 million), therefore, a material impact would be 4% of that figure or $4,692 million. However, no one knows for certain if a material impact has occurred since most likely no one has added all the percentages of wastes that GE disposed of over the years at all superfund sites around the country in relationship to the estimated EPA balance owing for the selected cleanup costs. While GE’s annual report mentions that the company is allocating $.4 billion for remedial clean ups for the next two years, in many cases these liabilities extend over 30 years. Extended liabilities to balance sheets should be done for all companies (not just GE) to create transparency and permit stockholders to be aware of these long term off balance sheet liabilities.

Senator Frank Lautenberg (NJ) Proposes "Polluter Pay" Initiative

Just recently learned that Senator Frank Lautenberg (NJ) has introduced an initiative to make Superfund “polluter Pay”. I was confused by this statement since I was under the presumption that Superfund was always polluter pay. The federal government under the stimulus plan has given money to remediate old bankrupt facilities like the W.R. Grace’s facility in Vineland New Jersey. Lautenberg’s initiative would transfer the federal government footing the bill to a tax for all chemicals would be reinstated. Republicans will probably cry out that prices for every commodity will increase since product is derived from chemicals and that this measure is inflationary. This is true, but companies always pass on regulatory expenses to their consumers. What the Bush Administration and the republicans do not understand is that Superfund liability follows the principals of free market economy. If both company A and company B have similar balance sheets, but company A has more superfund liabilities than company B; company A will increase their price per unit to offset the superfund expense. Meanwhile, company B will most likely increase their prices to compete with company A, but this incremental increase will be all profit (from prudence where/how to dispose their waste or from pure luck). I thought this is what conservative republicans desire: survival of the fittest, and the strongest and most efficient companies will survive!

EFIS Letter to Elected Officials Concerning Corporations off Balance Sheet Concerns Regarding Superfund Liability

February 18, 2009



The President of the United States of America
The White House
1600 Pennsylvania Ave NW
Washington, D.C. 20500

Dear Mr. President

The ever-escalating federal “bailouts” have resulted in unprecedented public investment and concomitant public financial interests in a plethora of key U.S. companies and industries. In considering such investments, we believe it is imperative that the public and Congress have complete information regarding the true financial condition of these companies. This includes critical off-balance sheet items such as environmental liabilities, which are all too often not quantified or reported in the financial information released by the companies. These liabilities can represent enormous hidden future costs and should be identified and included in the calculations used in deriving and valuing public investments in these firms.

This is especially relevant in the case of the three large U.S. automobile manufacturers. With the taxpayer on the hook for all liabilities, along with Congress’ desire to be paid back in full, the looming question of when GM, Ford and Chrysler will become profitable makes all off-balance sheet items a necessity to be factored into valuations of these concerns.

We have reviewed the most current financial statements from these companies and have found both omissions and contradictory information regarding estimates of future environmental liabilities. My firm, Environmental Financial Information Services (EFIS), specializes in compiling and tracking such environmental liabilities. To do this, we have assembled one of the nation’s largest databases of such information, compiled from federal records over the past 18 years.

Our records show, for example, that General Motors owns a Superfund site called the General Motors Central Foundry Division. EPA estimates the cleanup actions at this site to cost between $109 and $123 million. General Motors has been billed just under $12 million to date associated with this facility, leaving an approximate balance owing of $100 to $111 million. This information, however, is not included in the current balance sheet for GM.

One hundred million dollars may not seem a lot of money to a large company like General Motors, but in its current position, with negative stockholder equity, Congress and the public needs such information to properly assess and value the investments they are making. My firm, EFIS, provides such information to law firms, banks and other investors on a regular basis and we believe the same information may be both material and relevant to government officials involved in the massive public investment actions now underway.

If you or someone on your staff would like to discuss with us how we may be of assistance in providing this information, we would be happy to meet at your convenience. We have great appreciation for the unprecedented responsibilities you have assumed, and hope we may be of service to you and the public in this endeavor.

Sincerely,



Alexander C. Stewart, Jr.
President

ACS/jf

Colorado Contemplating Stricter Environmental Standards

On word that Cotter Corporation, an uranium mills superfund site in Colorado is planning to reopen in 2014 to crush 500,000 tons of uranium per year; state senators, department of public health and environmental groups have teamed up to propose that state environmental standards be tightened. A couple of key points to the proposed initiative are that environmental cleanups should be completed before new waste is accepted; and that mill sites notify residents of contamination within 1 mile radius of the site. If this measure is passed, it may set precedence on nuclear and mill sites under President Obama’s administration energy initiative goals to increase the number of nuclear reactors, therefore most likely more waste to contend with.

EPA request NPL listing for Black Eagle Smelting Area

EPA is proposing the Black Eagle Smelting Area to be included on the Superfund National Priority List. The site will be proposed in March, and after further testing and public comment, it may become final in September. The site is a 250 acre smelter and refining complex with some residential properties in Montana. At this time, EPA hasn’t determined the boundaries of the site. The residential areas contain elevated levels of Cadmium, Lead and Zinc. It is reported that the lead levels are less at this site compared with other smelting sites i.e. East Helena, Butte and Anaconda. The residential area will be a priority for the first phase of the remedial action.

The Black Eagle Smelting operated from the late 1800’s until 1980 under the names Anaconda Copper Mining Company and Anaconda Mineral Company. According to EFIS’s records, Anaconda Company was purchased by Atlantic Richfield Company (ARCO) in 1977. Atlantic Richfield was subsequently purchased by BP Amoco plc in 2000.