November 01, 2011

Bitter Cold War Legacy Highlighted In "Favorable" Navajo Settlement

Dana J. Stotsky

The United States clearly “won” the Cold War, as evidenced by the 1989 disestablishment of the U.S.S.R. As with any war, to the victor belong loss and pain, too. There is no better illustration of this than the radiologic ordeal continuing to this day on the Navajo Nation. The Navajo, readily answering the call from the United States for uranium ore to support the Manhattan Project during World War II, allowed extensive mining on their lands in the American Southwest. During the Cold War, the Navajo Nation allowed five uranium mills to be built, enabling production of weapons-grade, enriched uranium. The tribe benefitted from these activities with increased employment for its members, who often lived and raised families in close proximity to the mines and mills. In the end, nearly four million tons of uranium ore were extracted from Navajo lands. And yet today, long since the last victory march ended over twenty years ago, the devastating legacy of radiologic contamination from mill wastes and from hundreds of abandoned uranium mines haunts the tribe and threatens existential Navajo ways.

This article describes the extent and nature of the radiologic contamination of Navajo lands. Next, it reviews recent federal government efforts to strengthen and enforce the federal environmental justice policy that might apply to this contamination. Then, the article discusses a troubling trend in corporate and bankruptcy practice, where environmental liabilities are shed from the successor entity and instead burden the American taxpayer. Finally, it outlines a recent bankruptcy settlement that implicates each of the preceding topics.


The Navajo experience with uranium

The lands of the Navajo Nation include some 27,000 square miles spread over Arizona, New Mexico, and Utah in the Four Corners area of the Southwest. This is an area approximately equal in size to West Virginia. Although uranium mine and mill operations are long-closed on Navajo lands, a legacy of radiologic contamination remains, including some 520 abandoned uranium mines located in nearly half of the “Chapters” (or local units of Navajo government). Further, homes and drinking water sources with elevated levels of radiation have been identified. Over thirty percent of all Navajo obtain their drinking water from unregulated sources (the national percentage is less then one percent). Potential adverse health effects from exposure to radionuclides in drinking water include lung cancer from inhalation of radioactive particles, bone cancer, and kidney disease. Reproductive-organ cancers in teenage Navajo girls average seventeen times higher than the average of teenage girls in the United States. J. Raloff, Uranium, the newest "hormone.”  Science News (2004). In 1978 Congress acted to address the very worst sites, the uranium mills, by enacting the Uranium Mill Tailings Radiologic Control Act. But, as a precondition to federal remedial action by the U.S. Department of Energy (DOE) at its five uranium mills, the tribe was required to waive its rights and hold the United States harmless in perpetuity for any damages resulting from implementation of the DOE-selected remedy for groundwater management at the mill sites. Mill wastes have been formed into large piles (at one site combining the waste of two mills) with engineered covers at four mill sites on Navajo land at the cost of hundreds of millions of dollars. Recent analyses of groundwater discharged from or near these piles indicate the presence of contaminants of concern, and the tribe continues to monitor the remedy’s implementation carefully.

The risks presented by groundwater contamination are complicated by the fact that, generally, most tribal members living on or near the reservation rely on or support the traditional livestock subsistence economy. This can be problematic when the animals graze on contaminated vegetation and drink contaminated water. Further, the traditional Navajo way involves consuming all parts of a slaughtered animal. This is significant since some animal parts bioaccumulate contaminants and consequently pose an increased threat to tribal members.

After thirteen years of study, in August 2007, the U.S. Environmental Protection Agency (EPA) compiled a comprehensive database and atlas with the most complete assessment to date of all known uranium mines on Navajo lands. Later in 2007, at the request of the U.S. House Committee on Oversight and Government Reform (then chaired by Congressman Waxman), EPA, along with the Bureau of Indian Affairs, the Nuclear Regulatory Commission, DOE, and the Indian Health Service, developed a coordinated five-year plan to address uranium contamination in consultation with the Navajo Nation Environmental Protection Agency (NNEPA), the environmental arm of the tribe. The Five-Year Plan is the first coordinated approach taken by the five federal agencies to systematically assess these legacy health and environmental issues. The milestones identified in the Five-Year Plan range from assessing the contamination of structures and water sources, to providing alternative water supplies to residents, to cleaning up the mine sites themselves. EPA is the lead federal agency for assessing and requiring cleanup of the 520 known mines. Beginning in 2012, EPA will conduct detailed assessments of the thirty-five highest-priority sites, at a rate of seven per year, with an eye toward identifying Plan nears expiration, the agencies will need to decide how to move forward with remediation, and consider the implications of recent changes in the federal government’s environmental justice policy.


Recent federal actions on environmental justice

In an October 2007 Congressional hearing, Congressman Waxman observed “[i]f a fraction of the deadly contamination the Navajos live with every day had been in Beverly Hills or any wealthy community, it would have been cleaned up immediately. But there’s a different standard applied to the Navajo land . . . while time passes, people get sick, people die, people develop kidney disease, children, babies are born with birth defects, bone cancer develops and gets worse, lung cancer, leukemia, while we wait.” Mr. Waxman’s statement tersely captures the vast environmental justice issues involving legacy uranium mining impacts on the Navajo.

In September 2010, the federal Interagency Working Group on Environmental Justice met for the first time in more than a decade. In early August 2011, the seventeen federal agencies that comprise the Working Group signed a “Memorandum of Understanding on Environmental Justice and Executive Order 12898” (MOU), which sets forth goals important to all Americans disproportionately affected by environmental problems: providing all Americans—regardless of their race, ethnicity, or income status—full protection under the nation’s environmental, civil rights, and health laws and to make sure that certain communities are not unfairly burdened with pollution or toxic chemicals. The MOU specifically reaffirms that agency responsibilities under the Executive Order “shall apply equally to Native American programs.” It also notes that those Americans living with these environmental problems face disproportionate health problems and greater obstacles to economic growth when their communities cannot attract businesses and new jobs. The MOU is a critical step in reestablishing federal agency obligations to address environmental justice concerns involving health threats and economic inequities present in some communities. The MOU builds on Executive Order 12898, issued in 1994, and requires each covered agency to “identify and address . . . any disproportionately high and adverse human health or environmental effects of its programs, policies and activities on minority populations and low-income populations.” This would ostensibly include remediation and enforcement efforts, which are obviously relevant for the Navajo. Given that many potentially liable entities may be implicated in multiple sites around the country, EPA may have to consider how the environmental justice issues presented by contaminated sites on Navajo and other Indian lands would affect division of cleanup funds and penalty awards. This consideration is further complicated by the fact that potentially responsible parties have not been idle.


Corporate restructurings, bankruptcy law, Kerr-McGee, Tronox, and the Navajo Nation

Bankruptcy law has often been academically criticized for its sometimes-questionable role in corporate reorganizations designed to limit or avoid environmental liabilities. As one author frames the problem: “the current structures of bankruptcy, corporate, and environmental law allow a firm to protect its assets by creating a subsidiary that carries the firm’s environmental liabilities but has insufficient assets with which to pay those liabilities. The subsidiary then declares bankruptcy, leaving the taxpayers with the environmental cleanup bill and the parent corporation’s assets untouched.” Scary Stories and the Limited Liability Polluter in Chapter 11, 65 Wash. & Lee L. Rev. 451, 454 (2008). The vast scope of cleanup costs associated with legacy uranium mining issues on Navajo makes the prospect of a corporate restructuring by a potentially responsible party truly “scary,” especially if it shifts the cleanup burden onto the increasingly constrained federal government, seriously weakened for the foreseeable future by the expanding national debt.

And yet this scenario has occurred. Specifically, Kerr-McGee Corporation created and spun-off Tronox Incorporated as part of a complete reorganization known by the seemingly innocuous title “Project Focus.” Tronox is a multi-national chemical company that makes and sells titanium dioxide, and other specialty chemicals. As part of Project Focus, Tronox was also given all of Kerr-McGee’s mining interests, including Kerr-McGee’s uranium mining and milling interests and operations it had extensively conducted on Navajo land from 1952 to 1968. Several months after the spin-off, Anadarko Petroleum Corporation purchased Kerr-McGee for $18 billion. Tronox subsequently declared bankruptcy. During the bankruptcy proceedings, Tronox’s creditors (including those affected by its environmental liabilities) asserted that Tronox had been purposely underfunded prior to the spin-off and saddled with the bulk of Kerr-McGee’s legacy environmental liabilities to make Kerr-McGee more appealing to potential buyers. The creditors asserted that Project Focus resulted in a fraudulent conveyance that a court order could remedy.

EPA and the U.S. Department of Justice announced on November 23, 2010, that Tronox agreed to resolve its environmental liabilities with EPA, other governmental agencies, and the Navajo Nation, at numerous contaminated sites around the country. The settlement agreement provides the governments will receive, among other consideration, $270 million up front, and 88 percent of Tronox’s interest in a pending fraudulent conveyance litigation against Anadarko, which is scheduled for trial in March 2012. Tronox Inc. v. Anadarko Petroleum Corp., Case Nos. 09-10156 and 09-1198 (Bankr. S.D.N.Y.). Although we cannot determine what an 88 percent share would be in practical terms, the outcome of this fraudulent conveyance litigation will likely have long-reaching repercussions in the bankruptcy law arena and will certainly have a significant effect on the efforts to remediate the Cold War legacy of uranium mining operations in the Navajo Nation.

Trends, Vol. 43, No. 2, November/December 2011, Section of Environment, Energy, and Resources, American Bar Association.

Dana J. Stotsky

Dana J. Stotsky is a career enforcement attorney with the U.S. Environmental Protection Agency. He is on detail to the Navajo Nation Department of Justice during 2011–2012.