Deal clears way for red mud cleanup Alumina and a lawsuit The settlement

ST. CROIX - More than six years after the V.I. Department of Planning and Natural Resources filed suit against eight industrial companies operating on the southern shore, a portion of the toxic red mud resulting from decades of alumina production will be cleaned up, officials said.

The cost of the clean-up is unknown, and the exact timeline is still unclear, subject to permitting and plan approvals. A recently lodged consent decree, however, mandates that the bill will be picked up by two of the defendants, while a third was designated as responsible for maintaining the site once work has been completed.

The clean-up will come at no cost to the V.I. government.

Instead, the government will have $3 million set aside in an escrow account to enforce and regulate the three defendants, which are the three most recent owners of the property: St. Croix Renaissance Group; Alcoa World Alumina; and St. Croix Alumina, which is a subsidiary of Alcoa.

Two other alumina defendants, V.I. Alumina Corp. and Lockheed Martin Corp., have not agreed to any settlement.

The two oil refinery defendants, HOVENSA and Hess Oil, also have not reached a settlement. The plaintiffs claim the refineries contaminated the groundwater separately from the red mud contamination.

The final alumina defendant, Century Aluminum, was released from the lawsuit last month after Bartle issued a judgement in its favor. Century Aluminum only owned the alumina plant for one day "through various maneuverings" and did not process any alumina during that day and did not contribute to the red mud, said attorney John Dema, who has been one of five attorneys listed as representing the V.I. government and DPNR.

The settlement agreement between DPNR and the V.I. government and the three alumina defendants in the "Red Mud" case, which has been in U.S. District Court since May 2005, has not yet gone into effect. District Judge Harvey Bartle III will have to sign off on the agreement, Dema said.

During a press conference Friday, V.I. Attorney General Vincent Frazer said the agreement is a significant milestone.

"We are pleased to report today that we have a partial settlement with some of the parties in the case," Frazer said. "While not complete, it represents substantial progress."

During the press conference with Dema, Frazer and DPNR Commissioner Alicia Barnes, the officials stressed that the agreement came about through local initiative. They expressed hope that the agreement might provide an outline for subsequent agreements with other defendants.

The agreement also was in the best interest of St. Croix Renaissance Group, said one of the company's attorneys, Joel Holt. As a brownfield developer, the company purchased the land from St. Croix Alumina in 2002 with the intent of rehabilitating the land after decades of alumina production. St. Croix Renaissance Group dismantled the processing units to use the site for industrial purposes; Diageo currently is situated on their property.

"St. Croix Renaissance Group was pleased to reach a global settlement with St. Croix Alumina and DPNR to get the large, visible red mud hill covered, and we look forward to work starting," Holt said.

A federal jury recently awarded St. Croix Renaissance Group more than $28.7 million in damages, finding that St. Croix Alumina failed to disclose information about the red mud, which is a by-product of producing alumina from bauxite. St. Croix Renaissance Group claimed that St. Croix Alumina fraudulently covered up the releases of red mud and tried to avoid oversight by DPNR from 1992 through 2002.

That finding helped the three defendants agree to the settlement, Holt said.

Frazer said it was in St. Croix Renaissance Group's best interest, as well.

According to the consent decree, all of the remediation work will be funded and performed by St. Croix Alumina and Alcoa. While no dollar figure has been placed on the scope of work, it is likely to be costly, said Dema.

"We negotiated a settlement geared to producing an environmentally sound result," Dema said. "There is no ceiling. The entities have, essentially, agreed to do whatever it will cost along with DPNR and its engineers to get the job done."

St. Croix Renaissance now benefits from the consent decree, which forces St. Croix Alumina and Alcoa to do all the work until it is deemed sufficient by DPNR.

According to the settlement, St. Croix Renaissance Group will not become financially responsible for "all subsequent obligations of maintenance, monitoring and inspection" until the DPNR is satisfied that the work has been completed.

On May 5, 2005, then DPNR Commissioner Dean Plaskett filed a multi-count environmental lawsuit against all eight defendants claiming violations of the federal Comprehensive Environmental Response, Compensation and Liability Act; the V.I. Water Pollution Control Act; and the V.I. Oil Spill Prevention and Pollution Control Act. The suit claimed that the defendants released hazardous substances into the land and water - including the groundwater in the Kingshill Aquifer - and into the sea.

DPNR sought to recover "past and future response costs, including oversight costs," according to court documents.

The pollution of what is known as the St. Croix Southern Industrial Complex began in the 1960s, when Hess Oil and Harvey Aluminum arrived and built industrial facilities, replacing what had once been land used for sugar cane production with an oil refinery and an alumina plant. Harvey Aluminum's plans to build on the 1,400-acre property were approved by the V.I. Legislature in 1962. By the end of the decade, Martin Marietta Alumina had purchased a controlling interest in Harvey. Martin Marietta's successor, Lockheed Martin, owned the plant outright by 1972, according to a memorandum in support of the consent decree filed by the settling parties' attorneys.

Up until 1972, the red mud byproduct was being disposed of in a containment lagoon, now called "Area B" in court filings. Lockheed Martin said it closed down Area B in 1972 and began to move the red mud to a different site, called "Area A" in court documents.

V.I. Aluminum bought the site in 1989 and operated the plant until 1994, when it suspended operations. It moved red mud to Area A.

In 1995, St. Croix Alumina bought the site, though it did not resume operations until 1998. St. Croix Alumina also moved red mud only to Area A until it ceased operations in 2000.

Red mud is a chemical compound with a rusty pigmentation from a high concentration of iron oxide which results from producing alumina from bauxite. It can be radioactive and maintains a high pH balance, making it highly caustic, with the potential to leave severe burns. DPNR's lawsuit arose from concerns that red mud had leeched into the aquifer, contaminating the sea and the mangrove swamps to the south and getting picked up by the wind and swept over communities to the northwest.

Some residents in the area claim to continually be cleaning up a red dust they believe comes from the site and to which they attribute some of their health problems.

"We are very glad to be able to bring some relief to the surrounding residents," Barnes said Friday.

The settlement with St. Croix Renaissance Group, St. Croix Alumina and Alcoa outlines the scope of work that must be performed to restore the site and contain the red mud to prevent erosion and its spread through the air or from leeching into the ground and the aquifer, Barnes said.

The defendants must "stabilize, close, cover, provide drainage for and vegetate Area A," where the red mud was disposed of, according to the supporting memorandum. The work also will address red mud located in areas known as the Upper Cooling Pond and Settling Basin.

"All of this will be done despite the fact that non-settling alumina defendants Lockheed Martin and VIALCO generated the vast majority of the bauxite residue disposed of in Area A," the memorandum said.

Studies about how to execute the project already have begun, Dema said. Those studies will have to be approved by DPNR.

"This is under way," he said. "The parties have engaged with the government and the government's engineering firm to already start studies."

They hope to get the process moving "as rapidly as possible," with designs completed and approved by the fall of 2012 and construction to begin immediately after that, Dema said.

According to the settlement, the stormwater basin at the base of Area A will be restored and the Upper Cooling Pond will be closed.

DPNR maintains authority to review and inspect all documentation on the work, it said.

The work, however, does not address the deposit site Area B, because that area was produced solely by Lockheed Martin and its predecessors.

The settlement does not negotiate civil penalties, but requires Alcoa to pay $3 million into an escrow account to help assist DPNR in the enforcement and regulation of the clean-up.

"There aren't any damages or penalties per se," Frazer said. "All the money that is spent is for remediation activities. There's no money coming in to the government."

The consent decree is available for review at District Court on St. Croix. The public comment period will end Dec. 27. Bartle will make a decision on the settlement at a hearing Jan. 12.

- Contact Daniel Shea at 714-9127 or email dshea@dailynews.vi.

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