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ANALYSIS: AK, other steelmakers have differing histories with EPA

By Thomas Gnau, Journal Business Writer

As Bud Smith saw it, the April 2002 meeting with Ohio Environmental Protection Agency Director Christopher Jones was a critical one on the road from bankruptcy.

Wheeling-Pittsburgh Steel Corp., where Smith is director of environmental control, wanted to build an electric arc furnace at its Mingo Junction, Ohio, facility. The furnace was key to the company becoming part-minimill and part-integrated steelmaker, letting it make steel in less expensive ways.

To build the furnace, Wheeling-Pittsburgh — which has four Ohio facilities and about 2,500 Ohio employees — needed an OEPA permit.

Wheeling-Pittsburgh officials laid engineering and financial plans before Jones and made their case, Smith remembered.

Result: “They bent over backwards to help us,” Smith said.

Wheeling-Pittsburgh’s story may put AK Steel Corp.’s travails with the OEPA in some perspective. Ohio has joined a federal lawsuit against Middletown-based AK alleging environmental violations. The lawsuit could go to trial late this year and is one in a series of challenges AK has said could kill some 1,000 high-paying jobs on the hot end of AK’s Middletown Works.

Late last month, Jones wrote AK Chairman and Chief Executive Richard Wardrop, telling him that as long as he refuses to consider a cash penalty, “settlement will remain impossible.”

Today, Wheeling-Pittsburgh has a draft permit for the furnace and a federal bankruptcy court-approved reorganization plan. Earlier this year, the Emergency Steel Loan Guarantee Board approved a $250 million loan to the Wheeling, W.Va.,-based company.

Smith said a public hearing will be scheduled on a final permit, probably in Steubenville, Ohio. Construction of the furnace may begin in November or December, he said.

Though Wheeling-Pittsburgh has had run-ins with the OEPA, Smith said the relationship between company and agency today is “good.”

“If you go in friendly and expecting them to be friendly, nine times out of 10, they are,” Smith said. “Our approach has always been: They have a job to do.”

The relationship between Wheeling-Pittsburgh and the OEPA wasn’t always “friendly.” Agency spokeswoman Heather Lauer said enforcement actions against the company resulted in a $1.25 million settlement in the 1990s, a $350,000 penalty for water violations and another $294,000 settlement last year.

Indeed, two of the creditors with whom the company had to reach agreements on its path from bankruptcy included state and federal environmental protection agencies, Smith said.

“If you pollute, it’s our responsibility to try to make things right,” Lauer said.

She agreed that it isn’t the agency’s responsibility to shut down companies or destroy jobs.

“I can tell you for a fact that’s nobody’s goal,” she said.

The agency will consider a company’s ability to pay civil penalties, said Carol Hester, of OEPA’s public interest section. Economists on staff pore over a company’s financial data to see what that ability is, she said.

“The other economic consideration, of course, is whatever benefit the facility gained by not complying” with environmental laws, Hester added.

International Steel Group bought the Ohio assets of former steelmaker LTV Steel in 2002. Before the new company could win a transfer of LTV’s environmental permits, it had to assure state regulators that LTV’s environmental issues would be addressed, said Mitch Hecht, International Steel Group vice president of external affairs. The OEPA reached a $419,000 settlement that involved LTV in the 1990s, Lauer said.

“They made that demand,” Hecht said. “At the same time, because we’re a new company, they worked with us in a pragmatic way.”

AK presents a far different picture.

“That certainly has not been our experience, and just one example comes to mind immediately,” AK Vice President of Public Affairs Alan McCoy said.

When AK wanted an OEPA permit to build a backup quench station — basically a device with four shower-heads — for its Middletown coke plant, the process took some 15 months in 2000 and 2001, McCoy said.

“I would not classify that as bending over backwards,” he said.

The station was to cool hot coke with water when the primary quench station was down for repairs.

On AK’s Web site, a message implores viewers to “save AK Steel jobs,” saying the company and Ohio’s economy are “under attack by the (Gov. Bob) Taft administration.”

AK’s Web site message says the company offered to install new air pollution controls “long” before they were required by federal law. It says the company last year alone spent $106.4 million for environmental equipment and compliance.

A PARTICULAR SOURCE of frustration for AK has been the furor over Dicks Creek.

AK acknowledges that oil separator ponds on its property are a likely source of PCBs, McCoy said. The ponds were holding areas for waste oil that corporate predecessor Armco “lawfully operated and lawfully closed” under then-prevailing environmental laws, he said.

And though the company has offered to deal with those areas, the agency insists on civil penalties tied to its lawsuit anyway, McCoy said.

“That just defies logic,” he said.

In 2001 AK commissioned a study of the creek by Arcadis G&M Inc. which pointed to dozens of other “potential sources” of chemicals in the creek.

Those “sources” include businesses along Yankee and Oxford State roads and elsewhere, auto body shops, service stations, a car wash, a plastics manufacturer and others.

“Why have the OEPA and the U.S. EPA refused to bring an enforcement action against any other source than AK Steel?” AK asks in a paper it drafted summarizing its positions on the controversy around Dicks Creek. “What is their motive?”

Agency officials have declined to comment directly on the suit.

Rachael Belz, Southwestern Ohio director for Ohio Citizen Action, one of several activist groups persistently critical of AK, agrees.

“If AK is not the only company responsible, I would be in favor of finding all the parties responsible,” Belz said.

Belz takes a position on the agency that she thinks may surprise people.

“The Ohio EPA typically doesn’t do a very good job enforcing just existing laws,” she said. Never mind pushing for newer, more effective laws, she added.

In an “open letter” to Taft, Belz late last month insisted that she and her allies don’t want to shut down any part of AK.

“We documented many ways that AK Steel can control pollution at the Middletown plant, while remaining the most productive steel plant in the country,” Belz wrote.

The state-federal suit alleges that AK is discharging groundwater seeps containing PCBs into a ditch that drains into Dicks Creek south of Oxford State Road. In late 1997, AK built an interceptor trench and carbon-absorption system to deal with the situation.

“AK Steel has tested and verified that there are no detectable PCBs entering Dicks Creek from its outfalls or any other portion of existing operations,” AK’s paper says. “There are no piles of old machinery leaking PCBs as some have suggested.”

And thanks to the interceptor trench, no PCB-laden seeps entering the ditch, AK contends.

McCoy pointed to one of his “favorite” lawsuit claims the government has against his company: The OEPA ordered the company in late 1997 to build the interceptor trench “immediately” — and today is suing the company for not applying for a permit to build it, he said.

“Bizarre,” McCoy said.

This story was published in The Middletown Journal Sunday, July 6.



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