Agencies Face Specter of Landfill Takeover

Regulatory officials monitoring the controversial Operating Industries landfill say they are gearing up for the possibility that the dump’s owners will declare bankruptcy, a move that would leave their agencies responsible for cleaning up the contaminated site.

But Operating Industries Inc. has no intention of filing for bankruptcy, said Dan Spradlin, an attorney for the corporation. “The only way it could happen is that it will be a self-fulfilling prophecy on the part of the agencies,” Spradlin said.

The dump quietly closed in October after years of public controversy and complaints from nearby residents. Its owners are under several court orders to control dangerous gases and contaminated water seeping from the site into adjacent neighborhoods.

Since the dump’s closure--and its subsequent loss of revenue from dumping fees--the myriad regulatory agencies monitoring the clean-up have become increasingly concerned that OII will not be financially able to comply with the court orders. That concern was recently intensified when Lockman & Associates, a private contractor retained by OII, stopped work on some clean-up projects because OII owes the contractor $300,000.

In response to those developments, the regulatory agencies have held several joint meetings to “map out legal strategy should OII declare bankruptcy,” said Henry Torres, a deputy attorney general representing the state Department of Health Services in a lawsuit against OII.

That strategy includes a contingency plan by the Los Angeles County Department of Health Services, the lead agency of the clean-up, to step in and pay the private contractor on an interim basis until a permanent source of funding could be found to complete the work.

That funding would most likely come from state and federal Superfund reserves, agency officials said.

Lockman & Associates have stopped work on two projects vital to cleaning up the landfill. One is a leachate treatment plant that state health officials have ordered OII to install at the dump site to treat and dispose of the contaminated liquid produced by water runoff and decomposing waste. The second is expansion of the gas retrieval system, which pumps out methane and other harmful gases produced by decaying garbage.

According to Spradlin, the regulatory agencies are partly to blame for Lockman & Associates stopping work on the projects.

“The agencies have tied up all our assets,” Spradlin said. “We’re not asking them to give us the money so we can run off to Venezuela,” he said. “We want them to authorize the payment so we can have a contractor do the work.”

Although OII does not have the cash on hand to pay the contractor, it does have two parcels of land up for sale, the proceeds from which could be used to pay Lockman & Associates, Spradlin said. Under a state order, however, OII cannot spend any money received from the sale of those parcels without governmental approval. Spradlin said the necessary written approval for the sale has not been forthcoming.

“The whole thing is incredibly frustrating,” Spradlin said. “It gets to the point where you think ‘so what if we go bankrupt? They’ve got all the assets anyway.’ I’m sure there are people out there convinced that Operating Industries is trying to weasel out of something, but if they were, they wouldn’t have hung around this long. It makes no sense.”

But Torres, the deputy attorney general, had strong words of his own for OII and its financial problems. “They’ve dragged their feet now for years. The primary reason for that is that they’re trying to expend as little money as possible to (clean up) the landfill.”