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Recovering Costs from Parties in Bankruptcy
An essential part of EPA’s cost recovery practice includes seeking costs for past and future cleanup from parties who have declared bankruptcy. While bankruptcy law entitles a party to obtain a fresh start through the bankruptcy process, bankruptcy law also permits creditors, such as EPA, to assert and recover on claims that they may have against the bankrupt party.
To carry out its mission to protect human health and the environment, EPA vigorously pursues claims for its past and future cleanup costs at Superfund sites from responsible parties who have filed for bankruptcy. EPA collects to the fullest extent it can on its claims in bankruptcy, while still adhering to the rules and goals of bankruptcy law.
As a result of EPA’s enforcement efforts, EPA can get a company to meet its environmental obligations and pay the environmental claims approved by the bankruptcy court. Bankruptcy estates may pay out less than full value on their environmental claims. Environmental creditors and other unsecured creditors recover from the assets available. Companies who emerge from bankruptcy retain their environmental liability for sites that they own.
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EPA’s bankruptcy practice reflects EPA's commitment to use its enforcement authority to pursue all sources of funds to ensure that responsible parties, and not tax payers, pay for clean up of hazardous waste. Recent recoveries illustrate EPA’s commitment to this principle.
When a known potentially responsible party (PRP) files for bankruptcy protection, EPA receives the notice and files its proof of claim along with other creditors. Companies who file for bankruptcy must make environmental disclosures in their Statement of Financial Affairs filed with the bankruptcy court. EPA reads all of these disclosures for potential environmental liability and investigates accordingly.
If a PRP, who is performing environmental work under a settlement agreement, stops the cleanup work after filing for bankruptcy, EPA may enforce the settlement agreement or take over the work.
EPA’s bankruptcy practice reflects EPA's commitment to ensure that responsible parties, and not taxpayers, pay for clean up of hazardous waste. Recent recoveries illustrate EPA's commitment to this principle.
EPA has pursued some sizable claims and achieved excellent recoveries in recent years through settlement of bankruptcy. These funds will enable the Agency to achieve cleanup of contamination at numerous Superfund sites throughout the country. Additional information on the cases listed below and other cases is available from the Cases and Settlements Database.
- In February 2011, Tronox Incorporated (Tronox) agreed to resolve its environmental liabilities with EPA, other federal, state, and local agencies, and the Navajo Nation (collectively, the “Governments”) relating to numerous contaminated sites around the country. The Governments and certain bankruptcy-created trusts receive, among other consideration as part of the settlement, $270 million and 88 percent of Tronox’s interest in a pending fraudulent conveyance litigation.
- In October 2010, EPA announced the bankruptcy settlement with Motors Liquidation Corporation (MLC, also known as "Old GM", and formerly known as General Motors Corporation) to set up a $773 million Environmental Response Trust to conduct, manage, and fund cleanup at 89 owned sites across 14 states where MLC has liabilities. The bankruptcy settlement also aids the redevelopment of the appropriate sites in the Trust. In March 2011, an additional seven settlement agreements associated with the MLC bankruptcy were approved to resolved claims at owned and non-owned sites. Under the terms of the settlements, EPA will receive cash, as well as allowed general unsecured claims and work performance collectively exceeding $51 million to settle environmental claims at various sites contaminated with hazardous waste and resolve civil penalties at other facilities.
- In 2009 EPA's increased efforts resulted in record recoveries in several multi-regional, multi-site bankruptcy cases, totaling over $1 billion from the American Smelting and Refining Company (ASARCO) and G-I Holdings bankruptcies alone.
- In 2008, EPA lodged settlements in the W.R. Grace bankruptcy and in the American International Specialty Lines Insurance Co. (AISLIC) bankruptcy-related insurance litigation, where the potential cost recovery is, respectively, $34 million and $42.5 million.