Province to handle contaminated land at Stelco
Proposed sale sees Bedrock Industries put in $80 million toward cleanup; province will backstop rest of costs
The provincial government says it will assume the environmental legacy of hundreds of hectares of contaminated Stelco land in the north end of Hamilton, a historic promise that is setting the stage for a new owner to take over the company.
A source close to negotiations between the American investment fund Bedrock Industries, U.S. Steel Canada (Stelco) and the provincial Ministry of Finance says Bedrock was not interested in a deal that could leave the company with astronomical cleanup costs at a future date.
Bedrock was willing to put forward $80 million in a one-time payment to help out with the cleanup of a portion of the land but did not want to subject itself to the great unknown of environmental responsibility from more than a century of steelmaking.
Contaminated land has always been a major obstacle to potential Stelco suitors or redevelopment of the property. With the province agreeing to backstop the costs — something that has never been done before in Ontario — it formed the foundation of a memorandum of understanding that could see a new owner at Stelco and redevelopment of unused lands.
As one observer to the negotiations said, “it makes lands that were worthless into potentially very valuable lands.”
The land deal would work like this:
All 325 hectares of Stelco property off Wilcox Street would be turned into a land trust administered by the province, union representatives and probably other parties such as the city and the Hamilton Port Authority.
The land trust then would lease 120 hectares back to Stelco. The company would then be able to operate without fear of costs associated with the contaminated ground it is operating on.
The remaining 200 hectares or so would then be remediated to an industrial use standard with the contribution from Bedrock and potentially other funds. That land would then be sold or leased.
Profits from the sale or lease would then be used to assist in shoring up pension funds for Stelco workers as well as to help finance benefits to pensioners.
The land proposal is part of a larger deal — released Friday — that will be laid out in a Toronto courtroom on Thursday as part of U.S. Steel’s Companies’ Creditors Arrangement Act proceedings, which have been continuing for two years. If approved by the judge overseeing the process, Stelco (which recently reverted back to its historic name from being known as U.S. Steel Canada) will emerge from creditor protection under Bedrock ownership with a new lease on life.
That could happen sometime in the early months of the new year.
But one person who is unhappy with the deal so far is Gary Howe, the president of United Steelworkers Local 1005. He says far more money is needed from Bedrock for the underfunded pension plan for 1005 retirees as well as pensioners from local 8782 and 8782 (B) and non-union retirees in both Hamilton and Lake Erie.
Those four funds have more than $1 billion in solvency deficiency (with more than $800 million to 1005 pensioners alone). Solvency deficiency is the shortfall that would happen if the company goes out of business and all the workers collect their entitlement at once.
It’s a problem in the hundreds of millions that would only be addressed with tens of millions in payments from Bedrock. The new owner would pay $30 million up front and $10 million a year after that for five years, with $15 million in annual payments in the years following. In addition, there could be money from the land trust, but no one is sure how much that would generate.
Howe claimed the province was using “smoke and mirrors” to try to pass on the pension funding issue to a future company and for a future government to deal with.
But McMaster University business professor Marvin Ryder notes it’s a work in progress and if the company stays in business, the funds on hand will be adequate to handle payments to pensioners.
“Is this a perfect deal? No. But it does do an awful lot and there are no guarantees that we will not be back down this road in the future.”
A spokesperson for Bedrock was not available for comment. But Ryder said it is clear Bedrock will inevitably flip Stelco a few years down the line, hoping to make a good profit on an operation it had pulled from the brink.
Mayor Fred Eisenberger said he was concerned about the deal being negotiated without the involvement of the City of Hamilton.
“Planning about us, without us, is never a good thing,” Eisenberger said. “Our concerns are that we get our tax dollars ... Is this going to lead to the best benefit for pensioners and is it going to lead to land value and land uses that will fit with our future economic development initiatives?”