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A Quagmire of Obligations

By Eric R. Wilson and Mark W. Page
April 25, 2008

Pending in bankruptcy court in Corpus Christi, TX, is In re ASARCO, LLC, et al., the largest environmental bankruptcy case ever filed. Founded in 1899, ASARCO had diverse mining, smelting, and refining operations across the country. Unfortunately, ASARCO's 108 years of operation left a legacy of environmental liability spanning roughly 94 sites in 21 states. As a result, the United States, 16 states, and 73 private potentially responsible persons (PRPs) asserted more than $6 billion in environmental claims against ASARCO's bankruptcy estate.

At present, ASARCO is concluding the estimation of such claims for purposes of allowance (not just for plan voting or feasibility) at more than 30 sites. The estimation proceedings involve numerous unsettled issues arising at the intersection of the Bankruptcy Code and environmental law, including the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). The Bankruptcy Code is premised on granting the debtor a discharge of its pre-bankruptcy obligations while CERCLA was enacted to ensure PRPs are held accountable for the cleanup of contaminated property. When a PRP becomes a debtor, courts struggle to reconcile the competing objectives of these comprehensive statutes.

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