DuPont’s Chemours spinoff also cuts away cleanup bills
DuPont Co. will shed nearly $300 million worth of environmental remediation baggage along with some of its most volatile and competitive-industry business units when it spins three major business segments off as Chemours Co., a financial disclosure shows.
The cleanup bill, including some involving local sites, could push much higher, a Securities and Exchange Commission information statement on the breakup added, with “adverse” circumstances possibly sending the environmental burden above $1 billion.
More than 21 percent of Chemours’ $1.28 billion in contractual obligations at the end of 2013 involved environmental remediation, second only to raw material purchase obligations, according to a company filing. Legal settlements accounted for another $89 million in current and future debts.
Company officials stressed other reasons for the breakup, pointing out that the food, energy and protection segments that will remain as DuPont’s core involve “high potential commercial opportunities” and activities “where the company’s innovation, global scale and efficient execution have the potential to create valuable new outcomes.”
“The separation and distribution will allow DuPont to continue its transformation into a higher growth, less cyclical company, resulting in greater value creation for its shareholders,” a 205-page SEC filing on Chemours said.
Chemours – which has yet to announce its headquarters location – will own DuPont’s ventures in the $7 billion annual global titanium technologies arena and in the up-to-$12 billion annual world fluoroproducts market. While DuPont leads globally in both industries, it also has substantial competition and significant environmental burdens.
The Edge Moor titanium dioxide plant east of Wilmington was the first to deploy the company’s current chlorine-based production technology, and is expected to become part of Chemours. DuPont is expanding its titanium output elsewhere and global production capacity has outpaced current demand.
Chemours also will own the large Chambers Works fluoroproducts plant in Deepwater, New Jersey, at the foot of the Delaware Memorial Bridge, and DuPont and Chemours will share two technical and research and development sites in New Castle County.
Also departing DuPont is a large and varied Chemical Solutions area that the company described as more volatile and subject to business cycles, and that lost $6 million on sales before income taxes for the first nine months of this year.
The chemical solutions segment includes a wide range of materials produced for a wide range of industries at a dozen sites around the country, including the Red Lion sulfuric acid regeneration plant inside the boundaries of the Delaware City Refinery.
Jeff Tittel, spokesman for the Sierra Club New Jersey chapter, said that environmental groups have concerns about sites in that state, including the 1,455-acre Chambers Works site. Once the world’s largest chemical plant, Chambers Works now employs hundreds in fluoroproducts, a range of materials used in production of nonstick and nonstain materials. Some of the remaining DuPont activities will stay on site as a tenant.
“When they do these spinoffs, it’s often partly to try to get around their liabilities, so that the parent company can be healthy financially,” Tittel said. “We’re concerned because of the risk that there will be less money to deal with cleanups and the pollution that affects surrounding areas.”
Problems at Chambers Works include groundwater pollution from a range of past activities, with about 1.5 million gallons pumped up and treated to remove an assortment of chemicals under the 1,455-acre plant site.
The company also is tending a more-than 15-acre landfill near the Delaware River east of Wilmington containing byproducts of titanium dioxide production tainted with hazardous materials.
At one point, the Environmental Protection Agency ranked Edge Moor as the nation’s largest producer of unwanted dioxin compounds, after DuPont determined that features of its chlorine-based process had unintended results.
More environmental liabilities could surface in the future. The company is in negotiations with the Justice Department and Environmental Protection agency to settle charges that DuPont violated record-keeping requirements under chemical leak detection and repair programs and that it failed to report emissions of “a compound” from the company’s industrial wastewater treatment plant.
An official with the EPA declined to identify the wastewater plant chemical on Tuesday, saying that agency attorneys have not yet filed their complaint and consider it an “ongoing enforcement matter.” DuPont was obliged to report the releases under the Emergency Planning and Community Right to Know Act, however.
DuPont’s management estimated that Chemours’ overall liability “may range up to 3.5 times” the $298 million accrued debt as of Sept. 30 because of “considerable uncertainty” surrounding the issues. Some 190 sites are currently involved around the country, with active work under way at 65; another 20 are in dispute.
Despite hefty annual spending, the total environmental liability has increased from $269 million in 2011, company tables showed.
Among the company’s largest environmental liabilities is its Pompton Lakes, New Jersey, site, where expenses currently estimated at $78 million could rise to $116 million. DuPont made blasting caps and related materials there until the mid-1990s. Groundwater pollution and vapor intrusions into surrounding homes are among the problems, as is a requirement to dredge mercury-tainted sediments from a 36-acre portion of lake.
Chemours also faces a huge, multiyear expense in areas round its Washington Works, West Virginia, plant, where a chemical used in Teflon production fouled water supplies over a wide area. DuPont paid $70 million for a community health project and $23 million in attorneys fees in 2005, but still faces thousands of lawsuits, millions in claims and has an obligation to fund up to $235 million in medical monitoring for eligible residents.
Contact Jeff Montgomery at 463-3344 or [email protected]