Steam billows from a stack at the U.S. Steel Canada plant in Hamilton in this file photo taken March 4, 2009.MIKE CASSESE/Reuters
The issues of environmental liabilities and pension deficits of U.S. Steel Canada Inc. must be settled during the current bankruptcy protection process, says one of the potential buyers of the steel maker.
Those are key issues that were kicked down the road during the trip that Stelco Inc. made through creditor protection in the 2000s before United States Steel Corp. bought Stelco in 2007, said Tom Clarke, a Virginia health-care executive and environmental activist whose ERP Compliant Fuels has made a bid to buy U.S. Steel Canada.
"If we're going to avoid Stelco 3, we need to deal with the issues right now," Mr. Clarke said in an interview in Toronto on Tuesday, between meetings with stakeholders participating in U.S. Steel Canada's restructuring under the Companies' Creditors Arrangement Act.
At stake as the court-appointed monitor assesses bids by ERP Compliant, some restructuring hedge funds and others, are about 1,000 jobs in Nanticoke, Ont., another 500 in Hamilton and potential costs to taxpayers in the billions of dollars if all of the bids are rejected and the assets are liquidated.
Mr. Clarke and Charles Ebetino, ERP Compliant's senior vice-president of business development, said their bid to buy the company would address the pension deficit and establish a process to begin cleaning up environmental messes in Hamilton and Nanticoke.
"The environment is critical," Mr. Clarke said. "If Hamilton is ever going to reinvent itself, we've got to take care of the harbour."
It would likely take 10 years to clean up Hamilton Harbour, but there are questions concerning whether the province will work with ERP Compliant, how it will be funded, who will finance the cleanup and how it will be managed, he said.
Mr. Ebetino said ERP Compliant, which is owned by Mr. Clarke's Virginia Conservation Legacy Fund, has a "creative" plan to address the pension deficit of more than $800-million, but is unable to provide details because of non-disclosure agreements signed as part of the bidding process.
The costs of cleaning up the environment in Nanticoke and Hamilton – where steel was produced for more than 100 years – could be as much as $1-billion, Mr. Clarke said.
If U.S. Steel Canada were liquidated, the Ontario government would have to battle in court against the steel maker's former parent, U.S. Steel, to force it to pay for some or all of the costs. Ontario would also be on the hook for about $500-million through the Pension Benefit Guarantee Fund if the pension plans for Hamilton and Nanticoke unionized workers and salaried employees were wound up.
U.S. Steel cut ties with its former Canadian unit last fall but holds secured debt of $120-million and unsecured debt of $2.2-billion. Stakeholders that have been battling U.S. Steel in court since September, 2014, dispute the unsecured claim and disagree with the Pittsburgh-based giant on how high the secured debt ranks.
Financial buyers bidding for U.S. Steel will agree to preserve jobs, but they likely want to ensure that the province finances some or all of the pension liability and they won't address the environmental issues, Mr. Clarke said.
ERP Compliant is the second-largest producer of metallurgical coal in the U.S. It offsets its emissions by planting trees that reduce excess atmospheric carbon dioxide. The company owns a 13,500-acre forest in Belize, and an environmental partner has planted 36 million trees along the Mississippi River flood plain.
"We absolutely are capitalists," Mr. Clarke said. "The more money we make, the more we can divert into our purposes."
U.S. Steel can be financially healthy if the costs of iron ore and coal to produce the coke used in steel making are reduced, he said. ERP Compliant can sell coal to U.S. Steel Canada at cost and is bidding to buy the closed Wabush Mines in Labrador so that the steel maker would have its own source of both key natural resources.
"We want to provide them with raw materials at cost so their finished goods can be more price competitive," Mr. Clarke said. "That's where we'll make the profit."
ERP Compliant is also considering bidding on metallurgical coal assets in Alberta and British Columbia.