CHARLESTON, W.Va. — West Virginia regulators on Monday harshly criticized a new liquidation plan submitted by Freedom Industries, saying the proposal wrongly seeks to funnel more than $2.5 million to bankruptcy lawyers and other professionals instead of spending it to adequately clean up the site of the January 2014 chemical leak.
In filing a formal objection to the plan, lawyers for the state Department of Environmental Protection asked U.S. Bankruptcy Judge Ronald Pearson to order $1 million to be spent to “immediately remediate” the Freedom Etowah Terminal along the Elk River, just upstream from a West Virginia American Water drinking water intake that serves 300,000 people in Charleston and the surrounding region.
“As the sun sets on Freedom and its disastrous chemical spill, Freedom’s resulting bankruptcy case now boils down to this: Freedom’s retained professionals seek to abuse their position as the representatives of [the company] to extract eleventh-hour, wholly irresponsible and unwarranted concessions from DEP concerning the extent of Freedom’s remediation obligations solely to further their own economic self-interest by enhancing the recovery on account of their outlandish fees,” wrote Kevin Barrett, a lawyer from the Bailey & Glasser firm, which represents the DEP in the Freedom bankruptcy.
The DEP also revealed in its court filing that agency officials, during a visit to the Freedom site last week, found “that MCHM-contaminated water remains on the premises and that the soil and fill material in the area around the former leaking tank still contain unacceptable levels of MCHM contaminants.”
DEP communications director Kelley Gillenwater said that while no samples were taken during the agency’s inspection, “the presence of MCHM was obvious due to the smell.” Gillenwater said that there was “also a visible sheen” in some water puddles on the site.
“It is thus crystal clear that Freedom must continue to remove additional amounts of soil and fill from the site to prevent contaminated water from entering the Elk River and potentially affecting the region’s water supply again,” the DEP said in its court filing.
Last week, Freedom lawyer Mark Freedlander and court-appointed chief restructuring officer Mark Welch filed a new, $6.7 million plan aimed at settling a variety of legal disputes over the chemical spill and the Elk River site and resolving the company’s bankruptcy case.
The proposal would distribute about $2.7 million to spill victims and $500,000 to other Freedom creditors and pay off the company’s tax debts, but also set aside $2.2 million for payments — subject to court approval — for lawyers, consultants and other professionals for work through February 2015 processing the case. Another $400,000 is estimated for payments to professionals for work since March 1. Those payments, though, would need to be approved by Pearson, who has repeatedly complained about what the judge said were excessive billings from professionals.
Funds for the plan would come from Freedom’s previously reached $3.2 million settlement with its insurance company, and from a $2.8 million payment from former Freedom owners and officers, along with an additional $300,000 payment from former Freedom President Gary Southern.
The new bankruptcy plan argues that site cleanup is essentially done, and Freedom officials had hoped for months that entry into the DEP’s “voluntary” remediation program would ease the requirements for what level of contamination could be left buried at the facility, compared to previous DEP enforcement actions mandating that all MCHM be removed from the site.
In its new court filing, though, the DEP says Freedom misunderstands its obligations under the Voluntary Remediation Program.
“Whether Freedom proceeds with remediation under the VRP or in accordance with the enforcement orders, the standard to which remediation must be completed is set by [DEP Secretary Randy Huffman], and that standard is zero risk of contamination reaching [West Virginia American Water Co.’s] water intake,” the DEP filing said in a footnote.
Freedom has tried to press the DEP for quick approval of its plans, arguing that the company is going to soon run out of money to pay for the state’s mandated collection and treatment of any potentially contaminated water runoff at the site. Freedom has also been searching for a less expensive alternative for disposing of contaminated soil, but has yet to receive final approval for its hoped-for agreement to dump the material at the Charleston city landfill.
Under the proposed bankruptcy plan, Freedom would set aside $150,000 for any remaining remediation that the DEP determines is needed.
But the DEP said Monday that Freedom’s environmental consultant, ARCADIS, “has previously indicated that excavating the soil necessary to remove the contaminant alone will cost at least $500,000.”
Reach Ken Ward Jr. at firstname.lastname@example.org, 304-348-1702 or follow @kenwardjr on Twitter.