Tacoma smelter cleanup in doubt

Associated Press

RUSTON — Asarco has spent about $180 million cleaning up lead, arsenic and other toxins that seeped into the soil, air and water around the copper smelter it ran in this Tacoma suburb for nearly a century.

Company officials say they’re committed to finishing the job, but Asarco’s financial troubles and a shrinking federal Superfund account are raising serious doubts about how the cleanup can be completed on time and who will pay for it.

The Phoenix-based company, which shut down the smelter 17 year ago, has more than $450 million in outstanding loans. And it’s in default, because its assets are $84 million short of the collateral needed to cover them.

It’s negotiating with a consortium of 20 U.S., Canadian and European banks to restructure the loans.

Meanwhile, the global market for copper is plunging.

"It’s a big concern," Federico Mora, an analyst with Standard &Poor’s in Mexico City, told The News Tribune of Tacoma. "The good thing is the banks haven’t accelerated the loans. They are talking. But it has taken a long time and anything can happen at any moment."

Some fear Asarco could go bankrupt, sticking taxpayers with the estimated $1 billion tab for cleaning up the smelter here and about two dozen other heavily polluted sites, mostly in the West.

Asarco managers are not saying much, except that they hope to avoid bankruptcy.

"It certainly is a serious situation," company spokesman Clay Allen said. Citing Asarco’s tight cash flow, high debt and low copper prices, he added, "It’s going to be a challenge for us."

Meanwhile, the Superfund trust account is running out of money.

Established in 1980, the Superfund was initially financed with a special tax on oil, chemical and other businesses that brought in about $1 billion a year.

In 1995, the Republican-controlled Congress let the tax lapse amid complaints that it imposed an unfair burden on corporations.

Six years ago, the fund was worth $3.8 billion.

Next year, it will be worth $28 million and in 2004, there will be nothing left, The News Tribune reported. Congress is footing about half the bill for Superfund cleanup costs, which total more than $1 billion a year.

There are more than 1,500 sites on Superfund’s priority list — about half of them cleaned up. An additional 490 sites may be added to the list, which would leave the U.S. Environmental Protection Agency with outstanding costs of more than $14 billion.

Asarco and W.R. Grace, which also owns several Superfund sites, are among the financially ailing mining companies whose properties are proving the most difficult and costly to clean up.

"With W.R. Grace and Asarco, EPA has some big-time financial questions facing them," said Bob Hersch, who has been studying Superfund as a member of Resources for the Future, an independent research group.

The EPA and the Justice Department have been talking with Asarco’s top financial officers, but have refused to disclose the details of their discussions, the newspaper said.

Citing an unnamed federal official last month, The News Tribune reported the EPA and Justice Department were trying to get a clearer picture of the company’s finances and its relationship with Mexico City-based Grupo Mexico S.A. de C.V., the world’s largest mining company, which bought Asarco in 1999.

Grupo Mexico’s corporate earnings have been declining, too. On Thursday, it reported operating earnings in the fourth quarter of 2001 were down 125 percent compared to the same period a year ago, and down 64 percent for the just-completed fiscal year.

The company also is carrying a debt load of $2.5 billion — in part because of its acquisition of Asarco, Mora said. It has sought to control costs by suspending operations at Asarco smelters in Helena, Mont., and El Paso, Texas.

Any future financial restructuring, financial analysts say, would likely involve Southern Peru Copper, which owns two of the richest copper mines in the world. Asarco holds a 54 percent interest in that company — one of its most valuable remaining assets. The Peruvian mines produce more copper than Asarco’s mines in the United States, and their reserves are larger.

"Asarco was very attractive because of its Peruvian mines," Mora said. "That’s why Grupo offered so much."

Grupo Mexico could sell its interest in Southern Peru Copper, or move to strip it from Asarco and place it elsewhere in the corporate structure.

Asarco is scheduled to spend about $30 million on cleanup at Ruston this year under an agreement with the EPA, and up to $90 million more to finish the job.

Still to be completed are additional soil testing, shoreline work and relocation of contaminated tailings.

Despite Asarco’s money problems, Allen said, "We are committed to fulfilling our environmental obligations and doing it in a most timely way."