A common result of corporate bankruptcies is the creation of environmental response trusts or “ERTs”. ERTs are created in order to address environmental issues that the bankrupt company is responsible for. ERTs are typically independent entities without any previous connection to the bankrupt firm or activities that led the environmental problems. It is responsible for correcting those issues within the guidelines of its charter. There is no way to add money to the finite amount that was allocated for environmental cleanup. An underlying, if unspoken, theme of ERTs is the realization that removing the entity that “caused” the issues from the equation should eliminate the standard conflict and adversarial relationship that often exists between environmental regulators and the parties they oversee.
One such ERT, RACER (for Revitalizing Auto Communities Environmental Response) was born out of the General Motors Corp. (“GMC”) bankruptcy. It was the largest ever ERT and was given a double mandate: To perform safe and effective cleanups at GMC properties and to sell them for redevelopment, jobs, and the attendant community benefits.
Trust and Settlement agreements were signed by the United States and 15 states and Tribes that had previously received GM property. These agreements resolved GMC’s environmental obligations and set forth a process for RACER to begin environmental activities.
RACER understood that it was important to cooperate with regulators in order to accomplish its mission. The Trust has pledged to work transparently with regulators as well as the public. This includes sharing data, processes, priorities and engaging in dialogue to maximize limited funding. Trust has developed strong relationships with regulatory personnel who are willing and able to work within the limitations of the agreements. This has allowed for efficient and expeditious environmental action.
Most ERTs face two major challenges: money and time. Funds run dry. An ERT can run out of money if it is not prepared for emerging contaminants, unknown conditions, and changing standards. The longer it takes to complete the ERT’s work, the greater the risk some of those conditions will manifest themselves. The enemy of good relationships with regulators is time. As employees of state agencies and EPA retire, institutional knowledge about how the ERT was created, its goals, and the expected outcomes begins to blur. Project managers and supervisors view the ERT in the same way they see any other regulated entity. The senses of partnership and collaboration begin to fade. This results in a more typical, adversarial relationship which delays action and increases costs — costs which an ERT has limited funds to meet.
As with many ERTs the state or EPA will assume responsibility for environmental conditions at sites if RACER runs out. The Trust’s role in addressing environmental issues is therefore to be of assistance. Before This responsibility shifts to public. ERTs are there to support responsible entities and regulator-led responses. They should be seen as partners, responsible for protecting the environment and correcting existing conditions. To ensure that the recognition of the ERT continues throughout its life, regulators must make a greater and more effective effort.