A dispute over a lead smelter in a small Peruvian town has prompted members of Congress and the Obama administration to intervene on behalf of an American billionaire who environmentalists say became one of the richest men in the world while his metal mining companies polluted the environment.
The intervention follows a major lobbying effort by the Renco Group, a U.S.-based private holding company owned by Ira Rennert, to enlist the help of the U.S. government in the company's negotiations with Peru in a dispute over its operations at a lead extraction site in the Andean town of La Oroya.
Rennert, known for building what may be the biggest house in America, a 66,00-square-foot mansion in the Hamptons, amassed a $5.4 billion fortune using junk bonds to finance acquisitions in metal mining companies and other industries in the U.S. and overseas.
His companies have gone up against the U.S. Environmental Protection Agency and state environmental agencies for more than a decade, shelling out tens of millions in fines and clean-up costs for pollution at their U.S.-based facilities. And for years, one of Renco group's plants in Utah was listed as the EPA's number one toxic polluter in America.
Today, Rennert controls one of America's largest privately held industrial empires with interests in mining and metals production, defense equipment and automotive supplies. Rennert is also a major financial backer of Republican candidates, including John McCain and Rudy Giuliani. He and his wife, Ingeborg, have donated more than $500,000 to various political committees over the past five years, mostly to Republicans, according to data available on OpenSecrets.org.
The Renco Group has been flexing its political muscle on Capitol Hill in recent months, spending at least $245,000 since November to hire five Washington firms to lobby members of Congress on its behalf to advocate their point of view in the Peru dispute, according to an analysis by the Sunlight Foundation's Reporting Group, a Washington-based non-profit that tracks political spending.
The push appears to have paid off, with at least two members of Congress writing letters to the Obama Administration on behalf of the company in recent months.
"It really does show that the lobbyist system works. This is why these guys make all this money, and they really do have an impact on policy," said Bill Allison of the Sunlight Foundation.
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The fight over La Oroya is the latest in a series of environmental battles for Renco. In 2001, the EPA sued Renco's Utah-based MagCorp over the company's handling of hazardous wastes at a magnesium chloride plant, proposing over $900 million in fines. That year, MagCorp filed for bankruptcy, even as Rennert was in the process of building his $100 million Hamptons mansion. Renco eventually bought back the company under the name U.S. Magnesium. The dispute with the EPA over the Utah plant has been winding its way through federal court for nearly a decade, and remains unresolved.
Renco Group's Doe Run Peru took over the lead smelter in La Oroya in 1997. First built by an American company in 1922, the smelter was seized by the Peruvian government in 1974 before it was turned over to Doe Run Peru, under an agreement that required the company to take specific steps to significantly reduce the harmful contaminants emitted by the facility.
"You're basically eating and breathing contaminated air. You're walking around in a poisoned atmosphere, that's what's happening when the fumes are coming out of the smelter," said Dr. Anna Cederstav, a scientist with the environmental law group EarthJustice who has tracked the clean-up of La Oroya over the last decade.
Decades of smeltering activities have also lead to high levels of heavy metal contamination throughout the town. A 2005 study conducted by scientists at Saint Louis University in Missouri found that virtually all children in the town under the age of six had levels greater than 10 micrograms of lead per deciliter of blood, a level at which the CDC recommends public health actions be initiated. Lead is known to cause neurodevelopmental disorders in young children.
Now, the government of Peru is threatening to seize Renco Group's stake in the smelter over debts to creditors and claims the company has failed to meet its environmental obligations. At least two members of Congress have recently written to the State and Treasury Departments expressing "serious concern" over the Peruvian government's treatment of the company.
In a letter to Treasury Secretary Tim Geithner and Secretary of State Hillary Clinton dated February 8, Rep. Donald Payne, a New Jersey Democrat who sits on the House Foreign Affairs Committee, said he was concerned over the "disparate treatment" Renco had received from the government of Peru, despite the steps the company has made to clean up a site it has only operated since 1997. The letter was sent eight days after his former chief of staff, Kerry McKenney, became an officially registered lobbyist for Renco. McKenney left Payne's office last year and went work for the Monument Strategies lobbying firm.
"We understand that by 2009 [Doe Run Peru] had invested $315 million in meeting the terms of the agreement, and during that same period of time, and up until this date, the Government of Peru has spent nothing to fulfill its obligations," wrote Payne in the February 8 letter, which he later entered into the Congressional record. Payne also wrote to Geithner three weeks earlier.
Rep. Spencer Bachus, an Alabama Republican who chairs the House Committee on Financial Services, sent a letter to Geithner dated January 25 citing claims of "inappropriate treatment" at the hands of the Peruvian government by Renco. The letter says the company claims that it had spent $315 million on environmental clean-up while the Peruvian government spent nothing.
"While my office does not have the resources to investigate these claims," wrote Rep. Bachus, "DRP raises series issues, particularly since the U.S. and Peru are parties to a trade promotion agreement."
Renco has made similar claims in recent press releases stating that the company's complaint "stems from the government of Peru's failure to honor its legal obligations under international law… this include the government of Peru's refusal to clean the soil in and around La Oroya as it is legal committed and promised to do."
CLICK HERE to read The Renco Group's press release.
Cederstav agreed that the government of Peru should be doing more to help the people of La Oroya, but she argued that Renco's recent statements omit some crucial facts involved in the dispute.
"Soil remediation costs millions and millions of dollars," said Cederstav. "What they are not mentioning is that the reason [the Peruvian government hasn't] done that is because it makes no economic and environmental sense to do it as long as the smelter keeps contaminating."
In a statement to ABC News, Renco Group Andrew Shea spokesman called such reasoning "meritless and misguided," stating that "Peruvian officials made a commitment to remediate the soils of La Oroya. This remains their obligation; the work should have been completed years ago."
Cederstav says that Renco's recent statements also downplay the company's delay in implementing the key component to reducing the contamination at the La Oroya site -- a sulphuric acid plant that would remove heavy metals from the smelter's exhaust stream.
Shea stated that the company "has not delayed the construction of a sulphuric acid plant; it is the last project to be completed, and Renco has submitted a proposal that would complete its construction within the next twenty months." A company press release from 2007 shows that Doe Run Peru made a similar pronouncement in the past when it announced the work on the plant would be completed by September 2008.
CLICK HERE to read Doe Run Peru's 2007 press release.
In response to the letter from Payne, Treasury Assistant Secretary Marisa Lago assured the congressman on February 15 that "our embassy has been in touch with the Government of Peru with respect to this case, emphasizing that we expect both parties to make a good faith effort to work to resolve the pending financial and environmental issues." In a very similar response to Bachus, Lago said the embassy had emphasized to the Peruvian government that "we expect it to make a good faith effort to work with [Doe Run Peru] to resolve the pending financial and environmental issues."
A Bachus spokesman confirmed that the congressman's office had been contacted by "representatives from Renco" and said that Bachus only asked Geithner to give the company "due consideration." One of Renco's auto supply companies, Inteva Products, operates facilities near Bachus' district in Alabama.
A spokeswoman for Payne did not respond to requests for comment. It is unclear whether either congressman was aware of the complexities of the La Oroya dispute or Renco Group's environmental track record before writing the letters. The Sunlight Foundation's Allison, however, questioned who the lawmakers were serving by going to bat for Renco.
"What kind of constituency is this? It looks like you have members of Congress intervening on an issue that doesn't have a whole lot to do with their districts," said Allison.
Renco Group spokesman Shea said that the company was forced to turn to officials in Washington after Peruvian officials refused to meet with Doe Run Peru representatives.
"Renco has no choice but to explore every communication channel available to enlighten Peruvian officials of their contractual obligations to Doe Run Peru and the people of La Oroya. Further, as Peru's actions toward Doe Run Peru violate Peru's trade treaty with the United States, it is essential the U.S. government be made aware of this situation and engage in appropriate discussions with Peruvian officials on the matter," said Shea in a statement.
Doe Run Peru shutdown the smelter in 2009, citing a drop in commodity prices due to the global economic crisis. It continues to pay the employees in La Oroya and says it is committed to starting up operations again.
A spokesman for the Peruvian embassy in Washington did not respond to a request for comment.
Shea also called criticism of Renco Group's environmental record "ill-informed." The company claims to have spent "an excess of $700 million on environmental improvement projects since 1990."
With regards to the Utah operation, Shea said that Renco "directed in excess of $70 million to capital projects related to improving environmental performance and energy conservation through technology improvements. Chlorine emissions have been reduced 99 percent from 1989 levels andtotal air emissions from the cells have been reduced by 95 percent."
In Peru, the company said its investments "represent more than four times what the company was advised by the government would be needed to complete the environmental work when it purchased the facility in 1997. Doe Run Peru efforts have resulted in a more than 60% reduction in the total particle matter since 1999, and more than 25% reduction in sulfur dioxide during the same period."
CLICK HERE to read the Sunlight Foundation's report.
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