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In re In re Stevens

Citation: 17 ELR 20491
No. No. 85-0418-B, 68 Bankr. 774/(D. Me., 01/06/1987)

The court holds that a trustee in a Chapter 7 bankruptcy may not abandon hazardous waste in contravention of state environmental laws, and that costs incurred by the state in cleaning up the site after bankruptcy was declared are entitled to first priority as an administrative expense under the Bankruptcy Code. Reversing the bankruptcy court and relying on the Supreme Court's decision in Midlantic National Bank v. New Jersey Department of Environmental Protection, 16 ELR 20278, the district court first holds that the trustee may not abandon 29 drums of oil contaminated by polychlorinated biphenyls under 11 U.S.C. § 554(a). The Midlantic Court stated that a bankruptcy court does not have the authority to allow an abandonment without formulating conditions to adequately protect the public health and safety; in the case at bar, the trustee had refused to agree to conditions requested by state authorities concerning the appropriate storage of the drums. The court holds that the estate is liable for the costs incurred by the state in removing the waste oil. The trustee was obligated to comply with state law regulating the storage and disposal of hazardous waste, and did not arrange for the waste's removal and disposal. In a note, the court holds that conditions that will adequately protect the public's health and safety are those conditions that will provide for compliance with state and local laws. The court rejects the trustee's contention that roping off the area and posting warning signs prior to the auction at which the debtor's assets were sold sufficiently protected public health and safety and that therefore compliance with state law was not necessary. The court then holds that the postpetition claim of the state for cleanup costs is a first priority administrative expense under 11 U.S.C. § 503(b)(1)(A). The trustee's reliance on Ohio v. Kovacs, 15 ELR 20121, is misplaced, since that case involved a situation in which the debtor had been displaced from the site by the state and therefore could not comply with state environmental laws. The improper storage of waste oil in this case constituted an imminent danger; since the cleanup of the oil conferred value on the estate, the costs incurred are properly allowable as an administrative expense.

Counsel for Debtors
Thomas O. Bither
60 Pleasant St., Houlton ME 04730
(207) 532-6525

Counsel for Appellant
James T. Kilbreth, Phyllis Gardiner, Ass't Attorneys General
State House Station #6, Augusta ME 04333
(207) 289-3661