Please ensure Javascript is enabled for purposes of website accessibility

Bay foundation sues over Sparrows Point steel mill sale

The Chesapeake Bay Foundation and the Maryland Department of the Environment are calling for the potential sale of the Sparrows Point steel mill to be rejected if the deal does not contain clear language about what the new owner needs to do to clean up the site.

The Chesapeake Bay Foundation and Blue Water Baltimore Inc. filed a motion in the U.S. District Court for Delaware on Tuesday objecting to the order the court approved regarding sale of the mill. Sparrows Point’s parent company, RG Steel, is in Chapter 11 bankruptcy and in the process of liquidating its assets after being unable to overcome low steel prices and high raw material costs.

Auctions for Sparrows Point and RG Steel’s Warren, Ohio, plant were scheduled to take place Tuesday. Assuming buyers offered acceptable prices, there will be an Aug. 15 hearing to approve the sales.

No details about either of the sales were released on Tuesday. Published reports have said details would be revealed by midweek.

In its motion, the foundation claims that the sale order is “largely silent” on how RG Steel and any potential buyer would meet environmental obligations put in place after 15 years of litigation over cleanup at the nation’s fourth-largest flat-rolled steel manufacturer.

“This silence is likely to lead to at best uncertainty, and at worst no assurance that the Debtors and the purchaser will perform their obligations under applicable environmental law at the Sparrows Point Facility,” the foundation wrote in the objection.

The Maryland Department of the Environment also entered an objection, which gives it the opportunity to be heard when the sale is approved.

After a lengthy dispute over monitoring for toxic contaminants at the Sparrows Point site, RG Steel reached an agreement with the U.S. Environmental Protection Agency and Maryland environmental regulators late last year requiring the company to sample sediments no more than 50 feet offshore.

Environmentalists contend that contaminants have been found much farther offshore and that the scope of the monitoring agreement, which stems from a 1997 consent decree between environmental regulators and the mill’s former owner, Bethlehem Steel Corp., should be expanded.

As the result of auctions last week at other RG properties, purchasers will pay, pending court approval, $9 million for plants in Wheeling, W.Va., and Martins Ferry, Ohio. There will be a hearing Wednesday in U.S. Bankruptcy Court in Delaware for approval of the sales.

Majority owned by the Renco Group Inc., RG could produce 8.2 million tons a year; making it the fourth-largest flat- rolled steel producer in the U.S. Renco acquired the business from U.S. subsidiaries of OAO Severstal in March 2011.

The petition said assets and debt both exceed $1 billion. Liabilities include $440 million on a senior revolving credit with Wells Fargo Capital Finance LLC as agent. There is $218.7 million outstanding on a second-lien revolving credit with Cerberus Finance LLC as agent. A Cerberus affiliate is a minority shareholder. Parent Renco is owed $130.5 million on subordinated notes.

Severstal is owed $100 million on a note dating from the acquisition. RG claims Severstal owes $82 million for a working capital shortfall when the business was sold.

The Associated Press and Bloomberg contributed to this article.