Keith Loria Oct. 20, 2010, 3:00pm
WASHINGTON (Legal Newsline) - The United States Justice Department announced on Wednesday that it, 14 states and the Saint Regis Mohawk Tribe have agreed to a $773 million settlement with Chapter 11 debtor Motors Liquidation Company.
The former General Motors Corporation allegedly engaged had environmental liabilities under the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act and state environmental laws.
Acting Deputy Attorney General Gary G. Grindler, along with Preet Bharara, U.S. Attorney for the Southern District of New York; Lisa Jackson, Administrator of the Environmental Protection Agency; and Department of Labor Secretary Hilda Solis, as co-chair of the White House Council on Auto Communities and Workers, made the announcement about the settlement.
"This settlement holds accountable those responsible for contaminating certain properties and ensures they help transform these communities by supporting the necessary cleanup," Grindler said.
"The agreement marks a new beginning by responsibly addressing hazardous waste contamination in impacted communities, and at the same time creates jobs to help clean up and return these sites to beneficial uses. It also shows how the federal government can work successfully in concert with states and tribes to resolve environmental legacy issues in their communities."
The agreement calls for Old GM to pay nearly $641.4 million and contribute additional non-cash assets, estimated at around $120 million, for the cleanup and administration of 89 properties and sites. Of those, 59 are known to have been contaminated with hazardous substances or waste.
During its bankruptcy proceedings, Old GM had already spent about $11.5 million towards the cleanup of the properties with known contamination.
The money, along with the properties that are currently owned by Old GM and certain other non-cash assets, will be placed in an environmental response bankruptcy trust to fund the cleanup and administration of the properties to return them to a use that is beneficial.
The settlement agreement addresses Old GM's environmental liabilities under CERCLA, RCRA and state environmental laws at the 89 properties still owned by Old GM in Delaware, Illinois, Indiana, Kansas, Louisiana, Massachusetts, Michigan, Missouri, New Jersey, New York, Ohio, Pennsylvania, Virginia and Wisconsin.
At least half of the cleanup funds will be used for the environmental remediation of sites in New York and Michigan.
In New York, the General Motors-Central Foundry Division Superfund Site in Saint Lawrence County, also known as Massena, will receive approximately $120.8 million.
Another $160 million will be paid to Michigan, which will have the largest number of properties in the trust, to help clean 36 properties containing hazardous wastes or other hazardous substances.
In June 2009, Old GM and three wholly-owned subsidiaries filed Chapter 11 petitions in the U.S. Bankruptcy Court for the Southern District of New York and filed a motion to sell all of its assets to a newly formed corporation now known as General Motors Company. The 89 properties named in the settlement agreement were excluded from the sale of assets to New GM and continued to be owned and managed by Old GM.
In order to ensure the orderly winding down of Old GM's affairs in the bankruptcy proceeding, the Treasury Department and Export Development Canada collectively lent Old GM $1.175 billion in June and July 2009.
In October 2009, two additional wholly-owned subsidiaries of Old GM filed their own Chapter 11 petitions in the U.S. Bankruptcy Court for the Southern District of New York and are jointly administered with Old GM's previously filed petitions by the bankruptcy court.
The United States filed proofs of claim against Old GM and its affiliated debtors in October 2009 and April, hoping to recover past and future environmental cleanup costs for sites owned or operated by Old GM and its affiliated debtors, or where Old GM and its affiliated debtors had disposed of hazardous wastes. This was followed by several states filing similar proofs of claim against Old GM.
The agreement further calls for an environmental response bankruptcy trust to be established to take ownership and possession of the 89 properties and the funding provided to clean the properties up, administer them and return them to beneficial use.
Overall, Old GM is required to pay nearly $499 million of the funding provided by the Treasury Department and EDC to the environmental response trust for environmental cleanup at the properties.
More than $431 million of this money will be placed in site-specific accounts for each of the 59 properties known to have been contaminated. About $68 million will be placed in a pooled account for environmental cleanup that may arise in the future at any of those properties transferred to the trust on account of unforeseen conditions.
Furthermore, Old GM must contribute at least $142 million of the funding provided by the Treasury Department and EDC and certain non-cash assets in the trust to cover the administrative costs of the trust and the return of the properties to beneficial use.
Before being considered by the bankruptcy court for approval, the settlement agreement will be lodged with the bankruptcy court for a period of 30 days to provide public notice and to afford members of the public the chance to comment on the settlement.