Freedom bankruptcy unlikely to delay cleanup

In this Jan. 13, 2014, photo, workers inspect an area outside a retaining wall around storage tanks where a chemical leaked into the Elk River at Freedom Industries storage facility in Charleston, W.Va. The chemical spill that contaminated water for hundreds of thousands of West Virginians is just the latest and most high-profile case of coal polluting the nation's waters. An Associated Press analysis of federal environmental data found chemicals and waste from the coal industry have tainted hundreds of waterways and groundwater supplies for decades, spoiling private wells, shutting down fishing and rendering streams virtually lifeless.

CHARLESTON, W.Va. -- Government officials will likely be able to ensure that Freedom Industries continues to fund cleanup efforts along the Elk River, but now that the company has filed for bankruptcy, it may be more difficult for them to levy any fines or punishment against the company, a bankruptcy expert said Sunday.

A bankruptcy filing puts a temporary hold, or stay, on all claims for a company to pay its debts.

But there is an exception in bankruptcy code so that government agencies can exercise "police powers," which would likely include environmental cleanup.

"The automatic stay does not stop agencies such as the EPA from enforcing cleanup orders," said Bob Simons, a prominent bankruptcy lawyer with the Pittsburgh firm Reed Smith. "Police powers to protect the health and safety of the public are not stayed by the bankruptcy."

But those police powers would likely not apply to any punishment that the agencies might levy.

"If there were a pecuniary claim, like a fine, arguably the fine is like a debt," Simons, who stressed he was not familiar with Freedom's specific filing, said. "That fine may be treated in the bankruptcy case as any other debt would be."

Shortly after Freedom filed for bankruptcy on Friday, state and federal environmental agencies released statements saying they expected the company to continue its environmental cleanup along the Elk River, where the company's spill of a coal-processing chemical left hundreds of thousands of West Virginia without usable water for days.

"Freedom Industries continues to perform cleanup activities at its tank facility and has indicated that the company intends to continue the cleanup, despite having filed for Chapter 11 bankruptcy," the federal Environmental Protection Agency wrote on Saturday. "If circumstances change, EPA will work with West Virginia officials on the most appropriate path forward."

On Friday evening, a spokesman for the state Department of Environmental Protection released a statement in all capital letters that said, "A company's bankruptcy status does not absolve it of its environmental remediation obligations."

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Freedom bankruptcy unlikely to delay cleanup