Exide Wrestling With Environmental Troubles in Bankruptcy

Exide Wrestling With Environmental Troubles in Bankruptcy

Source: Dow Jones News Service, March 7, 2014
Posted on: http://envfpn.advisen.com
By: Peg Brickley

Questions about the safety of its California lead-recycling operation continue to haunt Exide Technologies Inc. (XIDEQ), a battery maker operating under bankruptcy protection.

This week, the company agreed to allow a $40 million lawsuit filed by the South Coast Air Quality Management District to move ahead in spite of the Chapter 11 bankruptcy shield that protects companies from being targeted in litigation.

The shield may be dropped when it comes to threats to public health and safety. The California agency, which regulates air quality in Los Angeles, Orange, Riverside and San Bernardino counties, says Exide’s operation means an elevated risk of cancer for workers and residents in Vernon, Calif.

A deal approved this week allows the regulators to try to make their case against Exide but requires them to get approval from the bankruptcy judge before seeking to collect any money judgment.

Exide has yet to formally answer the suit, which is related to action regulators took last year involving the Vernon plant. An administrative hearing board is weighing evidence now on claims the Vernon plant’s environmental safeguards are inadequate.

The lawsuit filed by the regional air quality regulator alleges Exide’s air pollution controls were deficient, and the plant dumped unacceptable levels of gaseous arsenic into the atmosphere. Filed in state court, it’s been moved to federal court in California.

A toxic contaminant, arsenic is known to cause cancer, according to the lawsuit. Exide’s reports to regulators identified “elevated health risk levels” at the Vernon plant, including a risk that 156 workers out of every million would develop cancer, court papers say.

At a Feb. 20 hearing in the U.S. Bankruptcy Court in Wilmington, Del., Exide lawyer Kenneth Ziman of Skadden Arps Slate Meagher & Flom LLP said a decision is expected by the end of March from the hearing board that is reviewing allegations of problems at the Vernon plant.

Generally, Exide has answered regulatory criticism by saying it is moving to bring its operations into compliance with regulations.

Environmental issues are a major piece of the business plan Exide has put together as it prepares its Chapter 11 exit plan, Mr. Ziman told the court.

“We’re considering options around the treatment of legacy environmental liabilities,” Mr. Ziman said. Besides the environmental obligations for its operating facilities, Exide is spending on maintenance and cleanup of 15 to 16 nonoperating sites, he said.

“We’re thinking of ways to address those, perhaps, in the context of a Chapter 11 plan,” Mr. Ziman said.

In the meantime, the company is contending day-to-day with regulators, particularly in California, where the Vernon plant which supplies cheap lead for Exide’s battery-making operations has become a focal point of criticism from community activists, as well as a concern for regulators. Some 900 personal injury claims stemming from the Vernon operations have been filed in Exide’s Chapter 11 case.

California regulators ordered Exide’s Vernon plant to shut down shortly before the bankruptcy filing, but the company won an order reversing that edict.

Exide filed for Chapter 11 protection in June 2013 intent on reshaping its balance sheet. It is due to file a Chapter 11 plan by the end of May.

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