Company behind W.Va. spill files for bankruptcy

Chapter 11 petition temporarily halts some lawsuits

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CHARLESTON, W.Va. -- The company blamed for a chemical spill that left 300,000 West Virginians without safe drinking water filed for bankruptcy Friday, temporarily shielding them from dozens of lawsuits, most by businesses that were forced to shut down for days.

Freedom Industries Inc. also used its bankruptcy papers as a forum to speculate on how the spill might have happened. The company filed a Chapter 11 petition with the U.S. Bankruptcy Court in the Southern District of West Virginia, eight days after the spill began.

Company president Gary Southern signed the paperwork, which lists both the company's assets and liabilities as being between $1 million and $10 million. It says the company has at least 200 creditors and owes its top 20 creditors $3.66 million.

The bankruptcy proceedings temporarily halt the lawsuits against Freedom Industries, said Charleston attorney Anthony Majestro, who is representing several small businesses that sued the company. Mr. Majestro said his clients are weighing an option to petition the court to proceed in hopes of collecting on Freedom's insurance policy. It depends on the company's level of coverage, Mr. Majestro said.

The bankruptcy filing doesn't stall lawsuits against other parties targeted in the spill, said Washington D.C. attorney H. Jason Gold. Nor does it strip Freedom Industries' responsibility to rectify environmental damage caused by the spill, Department of Environmental Protection spokesman Tom Aluise said.

Some lawsuits against Freedom Industries in Kanawha County Circuit Court also name West Virginia American Water Company and Eastman Chemical, producer of the coal-cleaning chemical that spilled. Freedom Industries also owes the Tennessee-based firm $127,475, bankruptcy documents show.

Attorney Mark E. Freedlander, with the law firm representing Freedom Industries, said in a statement Friday that "the petition and related pleadings speak for themselves."

According to bankruptcy documents, Freedom Industries is wholly owned by Chemstream Holdings Inc., a company located at the Kittanning, Pa., headquarters of Rosebud Mining Co.

In the documents, the company also gives a possible explanation for what caused the spill: Freedom Industries says a water line burst during last week's frigid temperatures, the ground beneath a storage tank froze, and some kind of object punctured a hole in its side, causing it to leak.

The water was tainted after a chemical used to clean coal leaked from a storage tank and then a containment area at a facility owned by Freedom Industries. The water ran into the Elk River, contaminating the state's largest water system.

After the spill, residents in a nine-county area around the state capital of Charleston were told not to use the water for anything other than flushing toilets. Some businesses and schools were forced to close for several days. The water restrictions have since been lifted for most residents.

The spill has become the focal point of the state's 60-day lawmaking session, which started the day before last Thursday's spill. Gov. Earl Ray Tomblin announced plans Friday to push for regulation of above-ground storage tanks. He also wants to require contingency plans for water companies. State Sen. John Unger, D-Berkeley, has spelled out specifics to regulate and inspect storage facilities in SB 373.

In Washington, a bill drafted by Sens. Jay Rockefeller and Joe Manchin, both D-W.Va., aimed at protecting drinking water after the Jan. 9 spill, is making progress in the Senate Environment and Public Works Committee.

The Safety and Drinking Water Protection Act would require states to inspect above-ground chemical storage facilities regularly, require the industry to develop emergency response plans, let states recoup costs of responding to chemical spills that affect drinking water and provide emergency-response tools.

Entities ranging from the U.S. Attorney's Office to a West Virginia legislative water resources panel are investigating the spill. State officials had not inspected the terminal that leaked since 2001, when it was owned by a different company operating under more stringent rules.

State officials said Freedom Industries bought the terminal last month, though the firm has long been tied to the property. Freedom bought the terminal from Etowah River Terminal LLC, a company Freedom formed for the purpose of buying the terminal site, according to a 2005 court filing. State records show that Freedom Industries' former president was listed as Etowah's manager.

Post-Gazette Washington Bureau chief Tracie Mauriello contributed.

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