Nelco Oil Refining Corp. ducked a blow from state officials that would have shut the doors on the National City oil recycling plant, by closing shop and filing for Chapter 7 bankruptcy in federal court.
The company's move into bankruptcy last week has raised a slew of questions for state officials about where the money will come from to pay for a final inspection and any cleanup of contaminated soil, equipment or materials that might be at the site.
Officials at the State Department of Health Services Toxic Substances Control Program were in the process of denying Nelco an operating permit when the company filed for bankruptcy. One reason cited for the denial was the company's failure to obtain liability coverage and financial assurance that, in the event of an accident or plant closure, would provide the money for a cleanup.
A quick look around the plant Monday by a county hazardous-materials team found no immediate health risk to the community or environment, officials said. The plant is near the Civic Center Drive exit off Interstate 5.
The 54-year-old company, which stopped operations July 13, had been operating under an interim permit since 1985, state officials said. The bankruptcy lawyer handling the Nelco case said it was the high cost of state-required insurance that forced the company to seek protection from its creditors.
"They couldn't afford to pay for it. They just couldn't economically continue operation, because of the expense of the insurance," attorney Dennis Burns said. "It didn't make sense to keep going. Why beat a dead horse?"
Nelco, co-owned by brothers Roger and Steven Humphreys, claimed just more than $197,000 in assets in its bankruptcy filing, while the corporation's total debt is estimated at $700,000, Burns said.
Under Chapter 7 liquidation, the court will appoint a trustee who will take over the corporation's assets, sell them and then distribute the money among creditors, Burns said.
"In this case, it's kind of like we give up; take us," he said.
Nelco has a checkered past of compliance with hazardous-waste laws, according to state officials.
The company was cited in December for 17 alleged violations, including material spilling out of hazardous-waste containers and using an oil treatment method not allowed under the guidelines of their interim operating permit, said Allan Hirsch, spokesman for the state toxics program.
These latest citations and previous ones that included illegally storing 1,500 barrels of acid sludge waste near I-5 in the early 1980s contributed to the state's decision to deny Nelco the operating permit, Hirsch said.
Dan Avera, assistant deputy director of environmental health services for the county, said there are still about 200 55-gallon drums stacked three high on pallets at the plant, some of them bearing contaminated-soil labels. Because of the way the drums are stacked, he said, inspectors cannot tell exactly how many have the labels.
Inspectors also noticed about 10 above-ground tanks that can hold 5,000 to 10,000 gallons of material. Avera said the next step is to find out if there is anything in the tanks.
"We wanted to see what was really going on and to see whether there were any obvious problems," he said. "There were no obvious problems as of yesterday."