W.R. Grace & Co. said yesterday that it expects to take a pretax charge of at least $20 million after the U.S. District Court of Montana granted a government motion for partial summary judgment in a lawsuit seeking recovery of cleanup costs for the company's old vermiculite mining and processing sites near Libby, Mont.
The Columbia-based chemical maker said the Environmental Protection Agency claimed to have costs of about $57 million for cleanup efforts in Libby as of Dec. 31 last year. The court found that Grace was liable for $30.5 million. Grace warned that the EPA's total cost-recovery claims could exceed $100 million.
For Grace, the court's decision adds one more burden to the list of current and potential liabilities stemming from discontinued businesses. The company filed for bankruptcy protection in April last year because of asbestos-related claims against it.
As of Sept. 30, Grace's asbestos-related liability totaled $978.2 million, with an additional $156.4 million in environmental cleanup obligations.
Since Grace is operating in bankruptcy, the judgment "becomes another claim that we'll have to deal with as we reorganize," William Corcoran, a Grace spokesman, said yesterday. The federal government becomes a general unsecured creditor, he said.
In the court decision, filed Thursday, U.S. District Judge Donald Molloy found that Grace was liable for cleanup costs at a range of Libby properties, from the mining site to several schools and homes. Under the order, Grace is also responsible for future costs incurred for cleaning these sites.
Corcoran said the company had not expected a ruling on the company's liability in the Libby case until after a trial scheduled to begin Jan. 6. But he added that more than $20 million in cleanup costs is in dispute and expects that to be the basis for the trial.
Paul Peronard, the EPA's on-site coordinator for the Libby cleanup project, said the remaining disputed costs involve $10 million for the medical evaluations of 7,500 area residents and former mine workers and another $10 million in EPA overhead costs, he said.
Grace and the mine's previous owners had conducted vermiculite mining and processing operations near Libby for nearly 70 years before the mine was closed in 1990. Grace owned the property from 1963 until the early 1990s, when it sold the mine and two processing plants to other companies.
Vermiculite, used in insulation, releases trace amounts of asbestos, but the Libby mine has been found to contain a higher asbestos concentration than other vermiculite mines, Peronard said. The mine has been linked to workers' and town residents' lung cancers and asbestosis.
The federal government filed the lawsuit in March last year after a 1 1/2 -year investigation. The EPA also undertook cleaning and demolition of contaminated buildings, and conducted health screenings of Libby residents and mine workers.
The town of 2,600, along with the surrounding area, is on the federal government's list of Superfund sites, making it eligible for extensive, long-term federal assistance in its asbestos cleanup efforts.
Grace "never thought the EPA would win [partial] summary judgment," said Jay R. Harris, president of Goldsmith & Harris Inc., a financial services firm in New York. "They thought they would go [to a full trial]. We now have $20 million more excess obligations, which might run as much as $100 million more in excess obligations."
Despite filing for bankruptcy protection, Grace managed to post a profit of $78.6 million last year. For the quarter that ended Sept. 30, Grace reported a $14 million profit, off 30 percent from the similar year-earlier period because of environmental lawsuit expenses and bankruptcy costs.
Shares of Grace closed yesterday at $2.13, down 7 cents from Friday's closing price.