State nears a deal to keep Exide open; cleanup assurances sought

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A state regulator says California is close to cutting a deal with Exide Technologies that would permit the company to keep recycling batteries in Vernon. In April the state had ordered Exide to close the plant because of health threats posed by toxic materials.  A judge allowed Exide to stay open while it fought the closure order. Now the prospect of the plant permanently reopening worries neighbors and a watchdog group.

State regulators were supposed to face off against Exide Tuesday before an administrative judge. But Rizgar Ghazi, head of permitting at the Department of Toxic Substances Control, said the state asked to postpone the hearing, "because we’re close to finalizing a plan that will address all of our concerns."

TIMELINE: Exide's troubles at its Vernon plant.

That news makes Doelores Mejia angry. Mejia sits outside the public library in Boyle Heights, watching kids come to check out books. Regulators have warned her L.A. neighborhood, and the cities of Bell and Maywood, that Exide’s airborne pollution raises their risk of cancer.

"They’ve told us what arsenic does to us, and lead," she said, noting the threat to children, the elderly, and the disabled. "It’s like we’re a laboratory here."

Mejia wants more action. She points out that the South Coast Air Quality Management District found another violation at Exide this summer, when an apparent fire damaged pollution controls. 

The state's move to close Exide stemmed in part from a March finding  by the South Coast Air Quality management District said that airborne arsenic raised cancer risks for workers in Vernon and people living in Boyle Heights, Maywood and Bell. When the DTSC ordered Exide’s Vernon plant shuttered in April, it relied in part on that decision, and in part on the company’s own discovery of degraded stormwater pipes.

Meanwhile, toxic regulators have launched a new investigation for lead and arsenic in Vernon, in the area around the Exide plant. On a recent day on 26th Street, a man wearing rubber gloves ran a Eureka hand-held vacuum cleaner along the sidewalk, gathering dust samples. The dust will be tested for toxic materials; the results are due in November. 

RELATED: Frequently-asked questions about Exide Technologies

Exide’s supposed to pay for the testing. But the company’s overall finances are in disarray. Exide filed to reorganize under Chapter 11 in June, and creditors have been lining up in a Delaware court.

In court documents, Exide Chief Financial Officer Philip Damaska pointed to  the dispute with California regulators over the Vernon plant and Wal-Mart’s decision to source automotive batteries from Exide’s rival as key setbacks necessitating reorganization under Chapter 11.

Liza Tucker of Consumer Watchdog says Exide has indicated to the bankruptcy court "that it wants permission to walk away from its toxic assets, essentially abandoning them."

The federal Environmental Protection Agency and 10 states  -- including California --  have moved to block Exide’s request. The government is arguing in the public’s interest, said Bob Rasmussen, dean of USC’s Law School and a bankruptcy law expert. 

"If you sell some of these things you’ve got to tell us about it. And it doesn’t relieve you of liability," he said. "Moreover, the person who buys the property is also going to be liable for the cleanup costs."

The state is determined not only to clean up existing contamination in Vernon but also to make Exide pay for it, insists the DTSC's Rizgar Ghazi. 

"We don’t want California to hold the bag," he said.

So that taxpayers aren’t left holding the bag, state law gives regulators the power to require companies like Exide to set aside money to clean up any contaminated property. But Ghazi admits that the state rarely uses that power; he acknowledged that the state did not ask Exide to put up money to pay for previous corrective actions.

"The DTSC should have done it all along," said Consumer Watchdog's Tucker, adding that regulators should also make companies handling toxic materials set aside money in case they shut down – that’s state law, too. Exide has guaranteed around $10 million for cleanup if its Vernon plant closes. That figure’s based on a 23-year old plan. Tucker says upgrades since then mean a real cleanup would take tens of millions more. 

atchdog’s Liza Tucker show that Exide has provided a form of surety called a payment bond. Those records are incomplete, however; the state was unable to provide specifics about the mechanisms by which more than 100 other properties guarantee cleanup costs.

DTSC’s Ghazi says Exide’s guarantee has grown to accommodate inflation-adjusted costs. But the cleanup plan the state has on file is 23 years old. That’s one reason Liza Tucker says the state’s cleanup guarantees are inadequate. 

" There is a slag pit filled with really really toxic lead," she said. "It’s never been properly sealed off. There are a number of features at that location that are not included in what that money is supposed to cover."

Tucker recalls one instance when an insolvent company failed to pay for cleaning up a West Covina landfill. Nearly a decade after the landfill closed, the state’s on the hook for $15 million in cleanup costs – and the bill keeps rising.

Rizgar Ghazi says the state is seeking more money from Exide as part of any deal. Tucker says that’s a good step. But she says her group will be watching to make sure the state follows through.

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