Local group set to buy much of Sparrows Point

An unidentified “local investment group” has agreed to buy a “significant percentage” of the Sparrows Point steel mill property, according to a document filed in federal court in Baltimore.

The information was part of a letter sent by lawyers representing the city and Sparrows Point LLC, asking a judge to extend through early October a temporary restraining order allowing treated wastewater to pass through two of the plant’s pipelines. The order had been scheduled to expire Aug. 1, the day after a hearing is scheduled for the case.

Michael Schatzow, a lawyer for the city, said Wednesday he was “not at liberty” to disclose the identity of the local investment group. Schatzow is a partner with Venable LLP in Baltimore.

Gerard P. Martin, a lawyer for Sparrows Point LLC, said he did not know the identity of the local investment group. Martin, of Rosenberg Martin Greenberg LLP in Baltimore, wrote the letter Tuesday to Judge James K. Bredar in U.S. District Court.

The former site of the Bethlehem Steel plant is owned jointly by St. Louis-based Environmental Liability Transfer Inc., the parent company of Sparrows Point LLC, and Hilco SP LLC, part of Northbrook, Illinois-based Hilco Redevelopment Partners.

The two companies purchased the site for $72 million at auction in August 2012. Under the terms of the joint venture, Sparrows Point owns the 3,400-acre site and certain environmental liabilities associated with the land, while Hilco owns above-grade improvements, machinery and equipment.

According to Martin’s letter Tuesday, Sparrows Point in the last three months agreed to sell the property to Hilco, which in turn “has just agreed to sell a significant percentage” of its new acquisition to the local investment group.

“Together, Hilco and its partner will be negotiating with the City of Baltimore to reach a solution to the problems that led to this action,” Martin wrote.

The extension of the order will give all parties the time needed “to close on property transfers and reach agreement on the solution to the existing water problems,” Martin added.

Local and state officials have said that an expansion of the Port of Baltimore would be a natural project for the steel mill site. Baltimore County officials last year also organized the Sparrows Point Partnership, a work group to find ways to develop land on the surrounding peninsula that is not part of the mill. The group has said it sees potential for activities related to the Port of Baltimore itself.

Gary Epstein, executive vice president and chief marketing officer of Hilco Global, said he could not comment Wednesday about the content of Martin’s letter.

As part of the temporary restraining order, the city will continue to pay Sparrows Point $105,000 a month for use of the two pipelines, which take up to 40 million gallons per day of treated wastewater from the Back River Wastewater Treatment Plant. The wastewater, which was once used in steelmaking, has flowed to Sparrows Point for at least 70 years.

Sparrows Point agreed in September 2012 to let the city keep using the pipelines for a year at cost of $80,000 a month. But the company sought to terminate that agreement in August 2013, arguing the city breached the contract, in part, by not paying on time, to the point that Sparrows Point began sending monthly invoices.

The city filed suit against Sparrows Point last October in Baltimore City Circuit Court, claiming the agreement was never breached and alleging Sparrows Point was “holding hostage residents’ ability to flush their toilets.” Without the Sparrows Point pipelines, the city claimed all effluent from 1.3 million city and county residents would be discharged into the Back River and lead to environmental violations.

A city judge originally granted the temporary restraining order in mid-October. The case was moved to federal court in Baltimore at the end of that month, and Bredar has twice extended the détente.

The case is Mayor and City Council of Baltimore v. Sparrows Point LLC, 1:13-cv-03221-JKB.