1992-08-13_GENERAL DOCUMENTS - C1981017 (2)

Home Browse Search

Having determined that environmental claims generally should be treated as general unsecured claims, the court in Pierce Coal then found "an implied exception" which would appear to authorize an administrative claim in many, if not most, instances: "It is reasonable to expect that under a given set of circumstances, the necessary costs of protecting the public health or safety from imminent and identifiable harm may be elevated to administrative priority and, perhaps, even to a type of secured priority." The suggestion that such costs could be given a ''secured priority" was not discussed further in the opinion. However, the competition between environmental authorities and secured creditors has been considered in other cases which are cited below. Priority of reclamation claims relative to Sanwa If environmental claims are administrative priorities, they will be paid ahead of junior priorities (such as tax claims) and general unsecured claims (such as trade vendors). However, administrative priority claims do not take precedence over secured claims. The remaining question therefore is whether there is any basis for requiring payment of reclamation expenses ahead of Sanwa's secured claim. Several reported cases have considered this issue. In re Paris Industries Corporation, 80 Bankr. 2 (Bankr.D.Me. 1987), like other cases cited above, held that costs of environmental cleanup by a state or federal agency are entitled to an administrative expense priority in bankruptcy. The court then went on to consider what it characterized as the "genuine issue," which was whether the state's environmental claim had priority over a perfected security interest in the proceeds of the sale of the debtor's personal property. The court found no authority under any applicable non - bankruptcy law requiring secured lenders to subordinate to the state's environmental cleanup expenses. The court rejected the state's arguments that public policy favored the recognition of a super - priority lien in favor of entities who incur costs in cleaning up the environment, stating that such a result was unsupported by statute and case law and, moreover, could be bad policy with serious and unforeseen consequences to lenders, investors, and the nation's economy. It should be noted that five states have enacted "superlien" statutes giving the state a lien ahead of secured creditors to secure the repayment of cleanup costs. Such a statute would be given effect in a bankruptcy court and would have changed the result in Paris Industries. Colorado has no such statute. Although the Colorado Mined Land Reclamation Act permits the state to institute proceedings to secure amounts warranted by forfeited financial warranties,. § 34 -32- 119(5). -7-