Company Linked to West Virginia Chemical Spill to Shut Down Operations

By Peg Brickley

The company at the center of January's chemical spill and subsequent water contamination in West Virginia says it will wind up its business as it completes the process of cleaning up the spill site.

Freedom Industries Inc. is working to revise plans for bankruptcy financing with a view toward abandoning the effort to keep going as an operating business, the chemical-supply company's lawyer, Mark Freedlander of McGuireWoods LLP, told Judge Ronald Pearson at a bankruptcy court hearing Friday.

The announcement marks the beginning of the end for the small company at the center of last month's environmental accident, in which some 10,000 gallons of a coal-treatment chemical called crude MCMH spilled from a Freedom-owned site into the Elk River, triggering a water ban from state environmental authorities that affected some 300,000 people.

Freedom filed for Chapter 11 bankruptcy protection after being hit with about 20 lawsuits from people and businesses claiming damages from the spill. Claims include everything from health issues to lost business, as restaurants and other companies were forced to shut down until the water was declared safe.

Initially, the supplier of chemicals and services to the coal industry thought it could continue operations while figuring out a way to address the spill-damage claims. Now, Freedom has thrown in the towel and plans to continue as long as it can using cash generated as the business is wound down, according to discussions Friday at a hearing in the U.S. Bankruptcy Court in Charleston, W.Va

Judge Pearson Friday approved the hiring of environmental lawyers and other experts, noting that Freedom's cleanup obligations are a high priority. "That's obviously the most important thing that has to happen, " the judge said.

After Freedom filed for bankruptcy, West Virginia authorities ordered the company to empty and dismantle the tanks at the site where the spill occurred. They cited allegedly inadequate secondary containment structures that should have kept chemicals from finding their way into the water supply.

Clifford Forrest, the Pennsylvania mine operator who bought Freedom in December, originally had offered, through a subsidiary, a bankruptcy loan of as much as $5 million to keep Freedom going, with conditions.

Creditors protested the conditions attached to the loan and questioned whether Freedom really needed to borrow the money.

Charles J. Kaiser Jr., lawyer for the subsidiary Mr. Forrest set up to provide the financing, said Friday that Mr. Forrest would be willing to make a loan of up to $1 million to ensure Freedom can meet its environmental remediation obligations.

"It's clear that the debtor is not going to continue as a going concern, " said Mr. Kaiser, who is with Phillips, Gardill, Kaiser & Altmeyer PLLC.

Freedom, its creditors and the lending company set up by Mr. Forrest to finance the bankruptcy will be discussing a budget and a revised arrangement to manage assets remaining at the company, attorneys said at Friday's hearing.

"It does not make sense to continue the financing arrangement that was agreed to at the beginning of the case," Mr. Kaiser said.

Write to Peg Brickley at peg.brickley@wsj.com

(END) Dow Jones Newswires

February 21, 2014 16:13 ET (21:13 GMT)

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