US Magnesium’s bankruptcy leaves a looming question: What happens to the Great Salt Lake cleanup?

Note to readers • This story is made possible through a partnership between The Salt Lake Tribune and Grist, a nonprofit environmental media organization.

Bill Johnson has witnessed the extent of US Magnesium’s pollution up close.

He’s seen the wastewater pond that was so acidic it bubbled like a cauldron. He noted where the corrosive liquid had eaten through the soil beneath, and where it burned through earthen barriers and spilled into the neighboring public lands near the Great Salt Lake.

When the facility staff gave him a safety lecture, he said he was told to remove any corrective lenses.

“The chlorine emissions” from the nearby plant, Johnson explained in an interview, “if the wind direction changes and brings that down to ground level, it could melt your contacts.”

Johnson, a geology professor at the University of Utah who has done extensive work studying the Great Salt Lake, was brought on as a technical advisor in 2013 to help oversee US Magnesium’s Superfund cleanup process. That work began in 2009 but it hasn’t progressed much beyond collecting samples and drafting plans to address the pollution.

In the five years since Johnson’s last visit to the site, however, US Magnesium’s equipment failed. It stopped producing magnesium metal in late 2021, although it still makes road ice and dust suppression salts.

The Environmental Protection Agency and Utah Department of Environmental Quality cited the plant with additional violations of air quality, water monitoring, environmental cleanup and wildlife safety nearly every year that followed its mothballing. The company declared bankruptcy in September after pressure from years of insolvency and decades’ worth of regulatory actions came to a head.

Now officials in Utah want to evict US Magnesium for good. Utah sued the company last December, attempting to compel it to clean up its mess. At the same time, the state moved to revoke US Magnesium’s mineral lease and end its operations on the state-owned bed of the Great Salt Lake.

In an email, US Magnesium president Ron Thayer called discussing legal matters with the press “inappropriate.”

He disputed little work has been done to cleanup the site, asserting “significant remediation” was conducted in areas around the plant.

In court documents, the company contends that because it is no longer producing magnesium, it cannot afford to pay for further environmental cleanup it is responsible for nor should it have to until operations resume. The EPA argues the plant’s obligations are not optional.

US Magnesium “has not been a good steward of the land on which it formerly operated,” the Division of Forestry, Fire and State Lands wrote in its own court filings.

The division pointed to the unpermitted toxic waste lagoon that pollutes the state-owned lakebed and lies a “stone’s throw” from the water of the Great Salt Lake. Regulators particularly took issue with a berm meant to prevent acidic waste from oozing into the Great Salt Lake that sits unfinished.

The EPA told The Salt Lake Tribune that it will take “well over” $100 million to clean up the plant’s decades of environmental problems. And a long list of creditors — from contractors and customers, to local, state and federal governments — claim they have stacks of unpaid bills.

And while the mothballed facility’s smokestacks no longer emit chlorine gas, and its unlined canals and ponds no longer flow with acidic waste, Johnson said environmental concerns remain.

Based on factors such as the volume of past wastewater releases and what he considers a low number of monitoring wells, he suspects a dangerous, acidic groundwater plume may be inching its way toward the Great Salt Lake — if it’s not impacting the saline ecosystem already — while bankruptcy proceedings drag on through court.

In an emailed statement, the EPA said it is working to fully characterize the extent of the site’s groundwater pollution, but “components” of that work are “impacted” by the company’s current bankruptcy status.

The EPA declined to say who would be obligated to pay cleanup costs if US Magnesium ultimately doesn’t have the cash. State regulators also didn’t have a direct answer.

“The state will take all measures to hold US Magnesium,” a spokesperson for the Division of Forestry, Fire and State Lands wrote in an email, “and any other liable party responsible.”

Under Superfund law, the federal government aggressively pursues parties responsible for pollution, including current and past operators, and potentially their parent companies. Owners of the land where the contamination occurred can also be held liable before the federal government shells out taxpayer funds.

But in the US Magnesium case, Superfund law and bankruptcy law are in conflict, said Brigham Daniels, an environmental law professor at the University of Utah. Whether the company’s remaining resources will pay off its many creditors, or whether the court prioritize the environment remains unknown.

“It ends up being a little messy,” Daniels said.

For state regulators and environmental watchdogs, the bankruptcy and pause on cleanup hit like a frustrating case of deja-vu.

“It’s a contaminated blot on the landscape,” said Lynn DeFreitas, executive director of FRIENDS of Great Salt Lake, “and it’s on a landscape that belongs to all Utahns.”

Millions in debt collide with fears of spreading contamination

US Magnesium’s Rowley plant, which covers an area roughly the same size as South Salt Lake, produced magnesium metal by concentrating water from the Great Salt Lake in evaporation ponds in a process that created chlorine and other hazardous byproducts.

In addition to the EPA’s $100 million estimate for cleanup costs, US Magnesium noted in court filings that it owes at least $95.4 million in debt to its top 20 creditors. That includes nearly $7 million in unpaid property taxes to Tooele County and nearly $1 million to the EPA for administrative costs.

It does not include $67 million in debt owed to Wells Fargo, or $464,732 the Division of Forestry, Fire and State Lands claims the company owes in unpaid royalties from Great Salt Lake mineral extraction.

In his email, Thayer denied his company owes the state unpaid royalties and disputed EPA’s estimates for cleanup costs.

US Magnesium contracted Colorado-based Forgen to build a barrier wall meant to prevent pollution from seeping underground into the Great Salt Lake. Construction began in May 2023, but the contractor stopped work after six months. A Forgen spokesperson said US Magnesium has not paid a single invoice, and the barrier wall sits half finished.

The berm is required under a 2021 court-ordered agreement with EPA called a consent decree. It will take around $10 million to complete the barrier, court documents show.

“We believe it should be finished,” said Mike Kirchner, executive vice president of Forgen. “We believe finishing the wall provides some degree of protection.”

As part of the state’s lawsuit against US Magnesium, a district judge appointed a receiver last year to oversee the company’s affairs. US Magnesium pushed back, and the court reined in the receiver’s scope, assigning him to monitor the facility’s environmental status instead.

US Magnesium argued in court filings the state’s receiver has only visited its plant once, and questioned whether the additional oversight was necessary. It asserted it has made “good faith efforts” to comply with environmental requirements and objected to the state’s characterization of its operations as “environmentally irresponsible.”

The court recently granted the state’s request to allow the receiver to continue monitoring the plant. Regulators cited the company’s violation of the consent decree, its failure to provide required water monitoring reports, and potential ongoing impacts to the environment from US Magnesium’s current “limited” operations in making their case.

Johnson has echoed the state’s concerns. The four-mile-long boundary along the facility’s waste pond only has a “handful” of wells monitoring groundwater, he said, making any plumes moving toward the Great Salt Lake easy to miss.

And based on the facility’s own reports and plans to retrofit and expand the pond area, he suspects at least two-thirds of the 630 million gallons it discharged every year has seeped underground. The buildup of liquid beneath the facility sometimes caused the ground surface to mound, he said.

“Everything was focused on this containment barrier (wall),” he said, “with no focus on, well, what’s downgradient of that?”

He prepared a monitoring plan for the site’s potential plume, with an estimated cost of $213,000, at FRIENDS of Great Salt Lake’s request this fall. The nonprofit said it plans to pass the proposal along to state regulators and the receiver.

“We can’t allow this sleeping monster,” DeFreitas said, “just continue to be out there.”

Thayer asserted that site sampling has not shown any evidence of a groundwater plume.

Regulators balk at proposal to dig plant out of debt

In its bankruptcy filings, US Magnesium has put forth a proposal to dig itself out of its financial hole.

On Sept. 15, days after it filed for Chapter 11 bankruptcy in Delaware, US Magnesium proposed auctioning off its assets. It offered the court a “stalking horse” bidder, or a party that makes an initial offer and sets a base price for the goods.

The proposed bidder is LiMag Holdings, LLC — a new affiliate of Renco, US Magnesium’s New York-based parent company. LiMag was created the same day US Magnesium filed for bankruptcy, Delaware records show.

State and federal regulators balked at the proposal. They questioned whether LiMag has a valid business proposal that would prevent the plant from winding up in bankruptcy court once again. Federal regulators claimed in court filings that the company is trying to use the bankruptcy as “thinly veiled” leverage to avoid its environmental obligations.

In a deposition as part of the bankruptcy proceedings, Thayer noted the company hasn’t been profitable since at least 2016.

Rebuilding the Rowley plant and restarting magnesium production would cost $40 million, Thayer testified. The company also wants to resume producing lithium from its waste piles, which will take another $30 million to $100 million, he added.

But Utah is actively working to revoke US Magnesium’s minerals lease and evict it from state lands. The company also lost its approval to produce lithium from the Great Salt Lake after negotiations with Forestry, Fire and State Lands broke down this year, the division confirmed.

The U.S. government, meanwhile, told the court it wants to protect the environment by holding the company accountable for its obligations. They noted that US Magnesium has further proposed renegotiating its previous cleanup commitments as a condition of sale to LiMag.

Specifically, the company asked the court to allow the new subsidiary to modify its agreement with the EPA by:

The federal government pushed back against that proposal, saying it “demonstrates that US Magnesium is attempting to use this case … inappropriately,” according to court documents.

The proposal would also get rid of the state’s court-appointed receiver.

Instead, the federal and state governments, along with US Magnesium’s many unsecured creditors, asked the court to convert the bankruptcy case to Chapter 7 so that US Magnesium could be liquidated rather than reorganized under a new subsidiary.

“Creditors and parties in interest must not be forced to accept a sale,” the U.S. government wrote, “... to a new company that is primed to fail in the same way as two other Renco subsidiaries that operated this same facility.”

Forestry, Fire and State Lands filed its own motion supporting the liquidation proposal.

“Given the plethora of environmental problems with the land which [US Magnesium] has heavily polluted over the past many years,” the division wrote in its filing, ”it is highly unlikely any potential buyer would purchase its business other than” LiMag and the parent company, Renco.

The state and federal governments also noted that US Magnesium and Renco are trying to repeat history by leaving its many creditors in the red and kicking its environmental obligations further down the road.

“The Debtor has gone through this charade previously,” attorneys for the Division of Forestry, Fire and State Lands wrote in their objection, “when it filed Chapter 11 bankruptcy 24 years ago in the Southern District of New York, and used this same play-book: file bankruptcy as far away as possible from its Utah operations (or now, former operations), cleanse the company’s assets through a Bankruptcy ... [sell] to its owner, and thus escape payment of its debts.”

The first bankruptcy took decades to resolve

The Rowley plant has released toxic materials like highly acidic wastewater, and cancer-causing chemicals like chlorinated dioxins, polychlorinated biphenyls (PCBs) and hexachlorobenzene in the soils and surface water near the Great Salt Lake since at least the 1990s. Back then, it operated under another Renco subsidiary called Magnesium Corporation of America, or MagCorp.

An inspection by EPA in January 2001 found an array of environmental issues at the MagCorp site. The agency sued MagCorp threatening $900 million in penalties after it claimed the company misrepresented the extent of its contamination.

The feds described an unlined, 2,000-foot long and 20-foot deep canal flowing through the site that workers called the “Red River” because of its color. Sampling found its contents highly acidic and corrosive, and the canal flowed into the facility’s equally acidic and corrosive waste lagoon.

MagCorp also dumped unpermitted sludge and solid waste directly onto the ground which contained toxins like lead, arsenic and chromium.

MagCorp declared bankruptcy months after the inspection, in August 2001.

The company sold off its assets to Renco’s new subsidiary – US Magnesium – soon after, despite objections from the U.S. government. That allowed the plant to continue magnesium production even as its multitude of environmental problems sat unresolved.

In 2009, the EPA listed historical pollution under MagCorp’s operation on the National Priorities List and declared it a Superfund site. In 2014, the facility’s reorganized operators spilled 8,000 pounds of hydrochloric acid onto neighboring Bureau of Land Management lands, putting hunters, livestock and wildlife at risk, according to the EPA.

The company finally settled with the EPA in January 2021. It signed the consent decree with the federal agency a few months later. The bankruptcy case closed that June.

But just three years later, US Magnesium was back in hot water.

The EPA notified the company it had violated the consent decree in July 2024. And this fall, the plant operators filed in bankruptcy court once again.

In his email, Thayer asserted the company is not currently generating any waste or emissions regulated by the consent decree.

Who will pay to protect the GSL?

Johnson, the geologist and Superfund advisor, said environmental concerns remain at the US Magnesium site, even though it’s in a remote location.

“There’s no doubt,” Johnson said, “that there is a toxic risk.”

In August, EPA issued another letter to the company, asserting that the waste ponds posed a “significant” hazard to birds. While they’re not currently in use or full of acidic water, they include “now-exposed, highly contaminated sediments,” the agency wrote, and birds are using them as habitat.

“EPA has been working to ensure US Magnesium, regardless of its operating status, complies with its obligations,” a spokesperson wrote in an email.

US Magnesium was required to set aside $16.5 million in financial assurance as part of the cleanup agreement with the EPA, and add funds to those accounts as needed based on updated cost estimates. The agency used money from the first bankruptcy settlement to set up the initial tranche — funds US Magnesium now wants released as part of its proposed sale to LiMag. The company failed to hand over $1.5 million the EPA required in supplemental funds last year, according to court filings by the agency.

While the bankruptcy court decides how to settle US Magnesium’s debts, it’s unclear who will pick up the tab to complete cleanup at the site, especially if it permanently shutters.

“The Division is working with our legal counsel,” a FFSL spokesperson wrote in an email, “to ensure the State’s interests in the bankruptcy proceedings are fully represented and protected.”

Whether Renco and US Magnesium are able to get the same results from their previous bankruptcy — shifting their assets free of liens to a new corporation, discharging their debts and paying creditors just a fraction of what’s owed, as the state asserts — is now in the hands of a judge.

“It depends on whether or not the court will think it’s what’s best for society,” said Brook Gotberg, a law professor at Brigham Young University. “It almost creates an odd tension where we need this plant to continue so that it will remediate these environmental harms.”

Liquidating the company could mean workers’ pensions go unpaid, the nation permanently loses its largest producer of a vital mineral and the state and EPA are stuck figuring out how to pay for the mess.

Still, Gotberg said, there’s a case to be made for the court to shut down US Magnesium’s operations for good.

“Especially if those environmental claims carry over,” she said, “I don’t know how they can make it profitable.”