IN THE UNITED STATES BANKRUPTCY COURT FOR THE ... - astswmo

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ------------------------------------------------------------x : In re : : CARIBBEAN PETROLEUM CORP., et al.,1 : Debtors. : : : : ------------------------------------------------------------x

Chapter 11 Case No. 10-12553 (KG) Jointly Administered Hearing Date: April 21, 2011 at 4:00 p.m. Objection Deadline: April 14, 2011 at 4:00 p.m.

MOTION OF THE DEBTORS FOR ENTRY OF AN ORDER PURSUANT TO SECTION 554(a) OF THE BANKRUPTCY CODE AUTHORIZING THE DEBTORS TO ABANDON CERTAIN STORAGE TANKS AND RELATED EQUIPMENT Caribbean Petroleum Corporation (“CPC”), Caribbean Petroleum Refining L.P., and Gulf Petroleum Refining (Puerto Rico) Corporation, as debtors and debtors in possession in the above-captioned chapter 11 cases (collectively, the “Debtors”), submit this motion (the “Motion”), pursuant to section 554(a) of title 11 of the United States Code (the “Bankruptcy Code”), 11 U.S.C. § 554(a), and rule 6007 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), seeking entry of an order authorizing the Debtors to abandon certain underground storage tanks (“USTs”) and aboveground storage tanks (“ASTs”) identified on Exhibit A hereto and other ancillary equipment, including but not limited to, pumps, nozzles, hoses, lifts, valve controls, and air tanks (collectively, the “Tank Assets”). In support of this Motion, the Debtors respectfully represent as follows:

1

The Debtors in these chapter 11 cases (along with the last four digits of each Debtor’s federal tax identification number) are: Caribbean Petroleum Corporation (7836), Caribbean Petroleum Refining L.P. (1421), and Gulf Petroleum Refining (Puerto Rico) Corporation (1417). The service address for all Debtors is: PO Box 361988, San Juan, Puerto Rico 00936.

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PRELIMINARY STATEMENT 1.

Since the commencement of these chapter 11 cases, the Debtors have been

working diligently and efficiently to complete an expedited sale of substantially all of their assets and confirm a plan of liquidation to wind down their businesses. The Debtors have completed an auction for the sale of their assets and have chosen a successful bidder, Puma Energy International, B.V. (“Puma”), to purchase their assets. The parties are currently in the process of finalizing the sale to Puma, and the Debtors anticipate that the sale will close in the coming weeks. The Debtors also recently received Court approval of the disclosure statement with respect to their plan of liquidation and are in the process of soliciting votes to accept or reject the plan. The hearing to confirm the plan is scheduled for April 28, 2011, and the Debtors anticipate the plan going effective by mid-May. Accordingly, the Debtors are on the fast track to closing the sale of their assets, confirming their plan of liquidation and winding down their businesses. 2.

Although Puma is acquiring substantially all of the Debtors’ assets, the

Debtors recently learned that Puma would not be purchasing certain Debtor-owned USTs and ASTs located in, or on, real property that is not owned by the Debtors. These tanks are being, or have in the past been, used to store gasoline, diesel and other petroleum products in connection with the operation of service stations that Puma has elected not to acquire or where Debtors’ lease expired prepetition. Because the Debtors are winding down their businesses and in the process of liquidating, they have no use for the Tank Assets. To the contrary, the Tank Assets are burdensome to the Debtors because they are not needed for any ongoing business of the Debtors, and the Debtors do not have the necessary funds in their postpetition financing budget to remove the tanks from the non-owned properties. 3.

By contrast, the Debtors believe that most of the Tank Assets constitute

valuable assets for the landowners on, and under, whose property the Tank Assets currently -2RLF1 3964477v. 1

reside. Many of these landowners use the Tank Assets in connection with the operation of service stations on their properties and would be compelled to replace the tanks at significant cost if the Debtors were to replevy them. Accordingly, the Debtors are meeting with the owners of the land in which the USTs are located to negotiate a transfer of title of the relevant Tank Assets to the landowner. In the event that the Debtors are not successful in negotiating title transfers to the landowner, the Debtors are seeking to abandon the Tank Assets. Abandoning such assets on the same timetable as plan confirmation and the sale closing will allow the Debtors to have an efficient, smooth wind down of their businesses upon confirmation. BACKGROUND A.

General Background 4.

On August 12, 2010 (the “Petition Date”), each of the Debtors filed with

the Court a voluntary petition for relief under chapter 11 of the Bankruptcy Code. The Debtors are authorized to continue to operate their businesses and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 5.

On August 27, 2010, the Office of the United States Trustee for the

District of Delaware (the “U.S. Trustee”) appointed a five-member statutory committee of unsecured creditors (the “Committee”). See D.I. 69. Subsequently, two members resigned from the Committee. B.

Underground Storage Tanks 6.

Prior to the explosions that occurred at the Debtors’ facilities in Bayamón,

Puerto Rico on and about October 23, 2009, the Debtors operated integrated and interdependent businesses consisting of the import, offloading, storage, and distribution of petroleum products in Puerto Rico. In this regard, CPC was a leading distributor of gasoline and other petroleum products through a network of Gulf-branded retail service stations (the “Service Stations”). -3RLF1 3964477v. 1

7.

As of the Petition Date, CPC was party to franchise agreements with the

independent operators (collectively, the “Dealers”) of approximately 172 Service Stations located throughout Puerto Rico. Of the 172 Service Stations, approximately 116 are located on real property owned by CPC (collectively, the “Owned Stations”), and approximately 56 are located on property that CPC leases from a third party landowner, and then subleases to the respective Dealer (collectively, the “Leased Stations”). 8.

The Debtors have purchased and installed USTs (and, in some cases,

ASTs) at (i) the Owned Stations, (ii) the Leased Stations, and (iii) certain formerly leased service stations involving leases that terminated prior to the Petition Date (collectively, the “Formerly Leased Stations”).

Pursuant to the underlying leases for the Leased and Formerly Leased

Stations, the Debtors were permitted to install USTs on the real property. Generally, the leases provide that the Debtors have the right (though not the obligation) to remove the USTs upon termination of the lease. 9.

In December 2008, based on an inspection of 60 Service Stations owned

or leased by the Debtors, the United States Environmental Protection Agency (the “EPA”) issued a Notice of Violation (the “NOV”) and information request to the Debtors regarding alleged violations of the Resource Conservation and Recovery Act (“RCRA”) related to the management of the USTs at several Service Stations. The Debtors complied with the information request by submitting information about the Service Stations to the EPA on March 13, 2009. In December 2009, the EPA issued another information request to CPC pursuant to RCRA related to 64 Service Stations, many of which were inspected and subject to the NOV and the first information request. In addition, certain station properties containing USTs owned by the Debtors appear on

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the Leaking Underground Storage Tank List (“LUST List”) maintained by the Puerto Rico Environmental Quality Board (“EQB”).2 10.

Since the Petition Date, the Debtor-owned USTs have remained at the

Owned Stations, the Leased Stations, and the Formerly Leased Stations. The Debtors believe that many of these USTs are currently being used by the respective Dealers to store gasoline for service station operations, and that the balance of these USTs are no longer in operation. C.

363 Sale and Plan Confirmation 11.

On August 13, 2010, the Debtors filed a motion (the “Sale Motion”, see

D.I. 9) with the Court seeking (i) authority to sell substantially all of their assets pursuant to section 363 of the Bankruptcy Code, and (ii) approval of procedures for submitting bids for the purchase of the Debtors’ assets and conducting an auction for such assets (the “Bidding Procedures”).

On September 10, 2010, the Court entered an order approving the Bidding

Procedures. See D.I. 149. 12.

Pursuant to the Bidding Procedures, on December 16 and 17, 2010, the

Debtors conducted an auction for the Debtors’ assets at the offices of their bankruptcy counsel, Cadwalader, Wickersham & Taft LLP, in New York and their local counsel, McConnell Valdés LLC, in Puerto Rico. Upon the conclusion of the auction, the Debtors, in consultation with their senior secured lender, Banco Popular de Puerto Rico (“BPPR”), and the Committee, selected Puma as the successful bidder for the Debtors’ assets. See D.I. 472. 13.

On December 22, 2010, the Court held a hearing to consider approval of

the Sale Motion, and that same day, the Court entered an order authorizing the sale of the 2

Pursuant to regulations governing the operation of USTs, owners and operators of USTs are generally required to report releases of petroleum upon discovery of the release. See 40 C.F.R. §§ 280.50 and 280.61. In Puerto Rico, these reports are made to the EQB, which compiles and publishes information related to the release reports on the LUST List.

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Debtors’ assets to Puma for $82 million in cash. See D.I. 511. The Debtors anticipate closing the sale of substantially all of their assets to Puma in the coming weeks.3 During negotiations with respect to the sale closing, the Debtors learned that Puma would not be assuming the leases at twenty-three of the Leased Stations (the “Rejected Leased Stations”). Accordingly, Puma recently informed the Debtors that it would not be acquiring the USTs located at the Rejected Leased Stations. Additionally, Puma has indicated that it will also not acquire the USTs located at the Formerly Leased Stations. 14.

On February 4, 2011, the Debtors filed the Joint Plan of Liquidation

Under Chapter 11 of the Bankruptcy Code Proposed by the Debtors, the Statutory Committee of Unsecured Creditors, and Banco Popular de Puerto Rico (as subsequently amended and as may be further amended or modified, the “Plan”, see D.I. 629, 670, 764, 790) and the Disclosure Statement With Respect to the Joint Plan of Liquidation Under Chapter 11 of the Bankruptcy Code Proposed by the Debtors, the Statutory Committee of Unsecured Creditors, and Banco Popular de Puerto Rico (as subsequently amended and as may be further amended or modified, the “Disclosure Statement”, see D.I. 630, 672, 765, 792). 15.

On March 21, 2011, the Court held a hearing to consider approval of the

Disclosure Statement, and on March 22, 2011, the Court entered an order approving the Disclosure Statement. See D.I. 795. The Debtors commenced solicitation of votes to accept or reject the Plan on March 25, 2011. A hearing to consider confirmation of the Plan is scheduled for April 28, 2011.

3

One of the service stations owned by the Debtors, designated as Service Station # 56 and located at Carr. 119 Int. 362 Ave. A. Castro, will be sold to San Germán, Inc. The Debtors anticipate that this sale will close in the coming weeks as well.

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D.

The Tank Assets To Be Abandoned 16.

As noted above, the Debtors are seeking authority to abandon USTs at the

Service Stations and other properties not being conveyed to Puma or another buyer – i.e., the Rejected Leased Stations, and the Formerly Leased Stations – a total of 40 properties. There are 103 USTs located at these sites: (i) 56 USTs located at 21 Rejected Leased Stations; and (ii) 47 USTs located at 19 Formerly Leased Stations. 17.

The Debtors are in active negotiations with the landowners at these sites

and are attempting to consensually convey the Tank Assets to them without the need for formal abandonment. These negotiations are generally progressing very well, and the Debtors anticipate that they will be able to remove a significant number of the USTs and other Tank Assets from the list of assets to be abandoned, at or prior to the Court’s hearing on this Motion (currently scheduled for April 21, 2011). 18.

The Debtors also do not believe that any of the USTs (or other Tank

Assets) at issue pose any material risk of environmental harm, and certainly not any risk of imminent harm. The Debtors have retained an environmental consultant, Altol Environmental Services (“Altol”), to perform routine monitoring of groundwater monitoring wells at 33 of the 40 Service Station properties that are the subject of this Motion. The most recent monitoring report (dated May 2010) did not reveal any petroleum product contamination in any of the monitored wells. Further, of the 40 properties where Debtors seek authority to abandon USTs, only 6 appear on the most recent LUST List maintained by the EQB.4

4

That LUST List,

http://www.gobierno.pr/NR/rdonlyres/FF15729E-CD84-42C5-BC0AA62FA977E9A6/0/LUST_LIST_ActiveInactive_End_of_FY_200920101.pdf (last visited: March 31, 2011). The proof of claim (Claim No. 1565) filed by the EQB in these case purports to identify 88 service stations (owned or leased by the Debtors) that appear on the LUST List. A total of 10 of the service stations are among the category of properties for which the Debtors may seek to abandon USTs.

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reproduced in part below, demonstrates that all six of the sites appear on the list as a result of a reported release from a UST more than fifteen years ago. The LUST List also indicates that at three of these sites, the release was discovered as a result of the allegedly leaking UST being closed5 or removed.

UST ID 860336 860339 860349 860379 860217 860912

NAME

Gulf # 316

CITY Puerto Nuevo Las Piedras

Carr 31 km 14.8

Gulf # 342

Morovis

Gulf # 395 Gulf # 429 Shell (Gulf # 461)

Gulf # 304

18.

ADDRESS Carr 2 km 50 Ave Kennedy

OWNER

DTRELEASED 28-Mar-95

HOW KNOWN Tank Removal

29-Mar-95

Carr 167 & 565 & 145

Gulf-Chevron Caribbean Petroleum Corp. Caribbean Petroleum Corp.

30-Mar-95

Product in Well

Guaynabo

Carr 20 km 9.2

Gulf-Chevron

3-Apr-95

Closure

Cidra

Carr 172 km 128

5-Mar-95

Cabo Rojo

Carr. 103 Km. 9.1

Gulf-Chevron Caribean (sic) Petroleum

6-Jul-95

Closure Report

Moreover, each of the USTs that are the subject of this Motion reside in

land that is owned by a third party who will accordingly be responsible for fulfilling environmental obligations related to the USTs after abandonment. 19.

Accordingly, there is no indication that any of the USTs that the Debtors

are seeking to abandon pose any imminent and identifiable risk to the environment.

The service stations identified as appearing on the LUST List by the EQB’s proof of claim do not, however, correspond to the service stations that appear on the LUST List that is published on the EQB’s publicly available internet site. The Debtors have contacted the EQB and requested clarification of this inconsistency. 5

Under RCRA regulations, closure is defined as taking a regulated unit (including a UST) out of service either temporarily or permanently. See 40 C.F.R. §§ 280.70 and 280.71.

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JURISDICTION AND VENUE 19.

This Court has jurisdiction to consider this matter pursuant to 28 U.S.C.

§§ 157 and 1334. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b) and venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409. RELIEF REQUESTED 20.

By this motion and for the reasons set forth below, pursuant to section

554(a) of the Bankruptcy Code and Bankruptcy Rule 6007, the Debtors respectfully request entry of an order, substantially in the form attached hereto as Exhibit B, authorizing the Debtors to abandon those USTs and ASTs identified on Exhibit A hereto. ARGUMENT I.

Abandonment of the Tank Assets Under Section 554(a) of the Bankruptcy Code is in the Best Interests of the Estate 21.

Section 554(a) of the Bankruptcy Code provides: After notice and a hearing, the trustee may abandon property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate.

11 U.S.C. § 554(a). Section 554(a) thus requires two showings. First, the property to be abandoned must be property of the estate. 11 U.S.C. §§ 541 and 554. Second, the property to be abandoned must be burdensome or of inconsequential value or benefit to the debtor’s estate. In re Unidigital, Inc., 262 B.R. 283, 286 (Bankr. D. Del. 2001). The debtor in possession is afforded significant discretion in determining the value and benefits of particular property for the purposes of the decision to abandon it. Krantz v. Youngman (In re A&P Diversified Techs. Realty), 2008 U.S. Dist. LEXIS 11893, *8 (D.N.J. 2008) (“[t]he trustee’s power to abandon property is discretionary”); In re Interpictures Inc., 168 B.R. 526, 535 (Bankr. E.D.N.Y. 1994)

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(“abandonment is in the discretion of the trustee, bounded only by that of the court”).6 “Courts defer to the trustee’s judgment and place the burden on the party opposing the abandonment to prove a benefit to the estate and an abuse of the trustee’s discretion.” In re Slack, 290 B.R. 282, 284 (Bankr. D.N.J. 2003). This right to abandon exists so that “burdensome property” can be removed and “the best interests of the estate” will be furthered. In re Trans World Airlines, Inc., 261 B.R. 103, 117 (Bankr. D. Del. 2001) (citing In re Taylor, 103 B.R. 511, 516 (D.N.J. 1989)). A.

The Tank Assets Are Property of the Debtors’ Estates 22.

All of the USTs that are the subject of this Motion and listed on Exhibit A

are registered with the EQB as the Debtors’ property. Based on the Debtors’ review of their books and records, the Debtors hold proper title to each of these USTs, as well as the other Tank Assets. See Declaration of Eric Guzmán in Support of the Motion (“Guzmán Declaration”), attached as Exhibit C hereto. Accordingly, the Tank Assets are property of the Debtors’ estates for purposes of section 554(a). B.

The Tank Assets are Burdensome to the Debtors’ Estates 23.

As discussed above, the Debtors are in the process of selling substantially

all their assets to Puma and winding down. Due to the explosions that occurred at the Debtors’ facilities in October 2009, the Debtors ceased operations prior to filing their chapter 11 cases. Puma has already chosen which of the Debtors’ assets it will acquire, and which of the leases for the Leased Stations it will assume. To that end, Puma is not assuming the Rejected Leased Stations, and accordingly, will not acquire the USTs and other Tank Assets located at those

6

Although no trustee was appointed in these cases, debtors in possession have the same rights as trustees to abandon property of their estates. 11 U.S.C. § 1107(a).

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stations. Further, Puma is not acquiring the USTs and other Tank Assets located at the Formerly Leased Stations. 24.

The Debtors have no use for this property, and they are of no benefit to the

Debtors’ estate. In fact, the tanks are a burden to the Debtors’ estate because the cost of removing each UST from the underlying property is estimated, on average, at approximately $25,000 per tank. See Guzmán Declaration. The Debtors are already operating on a limited budget and the extra costs associated with tank removal are not available. In the event that the Debtors are left with any of the USTs or other Tank Assets, it is in the best interests of the Debtors’ estates to abandon this property and avoid unnecessary burden and cost.

Thus,

abandonment is appropriate under section 554(a). II.

Abandonment of the Tank Assets is Permitted Under Midlantic and Its Progeny 25.

In the landmark case of Midlantic National Bank v. New Jersey Dept. of

Environmental Protection, 474 U.S. 494 (1986), the Supreme Court established a limited exception to the otherwise unfettered discretion of a trustee or debtor in possession to abandon burdensome property. The Supreme Court recognized that in certain circumstances, courts could restrict the ability to abandon environmentally contaminated property: The Bankruptcy Court does not have the power to authorize an abandonment without formulating conditions that will adequately protect the public’s health and safety. Accordingly, without reaching the question whether certain state laws imposing conditions on abandonment may be so onerous as to interfere with the bankruptcy adjudication itself, we hold that a trustee may not abandon property in contravention of a state statute or regulation that is reasonably designed to protect the public health or safety from identified hazards. Midlantic, 474 U.S. at 506-07. The Court stressed that this exception to the abandonment power must be applied “narrow[ly].”

Id. at 507 n.9.

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Employing language that has become the

touchstone for subsequent cases addressing abandonment of property involving environmental issues, the Supreme Court held that the exception to the abandonment power “does not encompass a speculative or indeterminate future violation of such laws that may stem from abandonment,” and that a trustee’s power to abandon “is not to be fettered by laws or regulations not reasonably calculated to protect the public health or safety from imminent and identifiable harm.” Id. 26.

In the wake of Midlantic, courts have adopted the Supreme Court’s two-

prong test: abandonment is permitted unless (1) the abandoned property poses an “imminent and identifiable harm” at the time of the abandonment, and (2) the abandonment would violate applicable environmental laws or regulations reasonably calculated to protect the public health or safety.7 27.

Of these two prongs, courts have treated the demonstration of “imminent

and identifiable harm” as the threshold inquiry. As this Court has stated: “[s]ince the Midlantic decision, the majority of courts have read the exception to abandonment narrowly by disallowing abandonment only where there is an imminent and identifiable harm to the public health or safety.” In re Unidigital, Inc., 262 B.R. 283, 286-87 (Bankr. D. Del. 2001); see also In re 7

See, e.g., New Jersey Dept. of Envtl Protection v. Atkinson (In re St. Lawrence Corp.), 248 B.R. 734, 739 (D.N.J. 2000) (identifying four factors for whether abandonment is permissible: “(1) an identified hazard exists that poses a risk of imminent and identifiable harm to the public health and safety; (2) abandonment of the property will violate a state statute or regulation; (3) the statute or regulation being violated is reasonably designed to protect the public health and safety from imminent and identifiable harm caused by identified hazards; [and] (4) compliance with the statute or regulation would not be so onerous as to interfere with the bankruptcy administration itself.”). With respect to the fourth factor, the St. Lawrence court explained that “[a]lthough the Supreme Court did not reach this question, it implied that some state laws may impose conditions too onerous on the bankruptcy proceeding to be enforced. Examples might include the following: (1) when the estate lacks unencumbered assets with which to comply with state law, (2) when compliance would take too long for the proceeding to be expeditious, or (3) when compliance would allow environmental authorities to completely usurp administration of the case. . . . In such cases, the bankruptcy court is free to formulate conditions short of full compliance with state law that will adequately protect the public’s health and safety.” Id. at 739 n.6.

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McCrory, 188 B.R. 763, 768 (Bankr. S.D.N.Y. 1995) (“Where there has been a violation of state environmental laws but there is not any imminent harm or danger to the public, abandonment has been permitted”) (citing Borden, Inc. v. Wells-Fargo Business Credit (In re Smith-Douglass, Inc.), 856 F.2d 12, 16 (4th Cir. 1988)); New Jersey Dept. of Envt'l Protection v. North American Products Acquisition Corp., 137 B.R. 8, 12 (D.N.J. 1992) (“if the bankruptcy court finds that abandonment will not aggravate the threat of harm to the health and safety of the public or create some additional harm abandonment should be permitted.”); South Chicago Disposal, Inc. v. LTV Steel Co., Inc. (In re Chateaugay Corp.), 130 B.R. 162, 167 (S.D.N.Y. 1991) (“Cases following Midlantic have made clear that the only policy concern of the environmental laws that will impinge upon a debtor’s otherwise unfettered right to abandon its property is that an imminent and identifiable hazard may not be created.”); White v. Coon (In re Purco, Inc.), 76 B.R. 523, 532 (Bankr. W.D. Pa. 1987) (same). If the party opposing abandonment cannot demonstrate the existence of “an identified hazard” posing a risk of “imminent and identifiable harm to the public health and safety,” the Court need not consider any of the other factors. In re St. Lawrence Corp., 248 B.R. at 741 n.9; In re Guterl Specialty Steel Corp., 316 B.R. 843, 858-59 (Bankr. W.D. Pa. 2004) (abandonment permitted if it does not present an imminent threat to public health or safety, even though such abandonment would violate state laws or regulations designed to protect public health and safety); In re Heldor Industries, Inc., 131 B.R. 578, 588 (Bankr. D.N.J. 1991). 28.

The burden of proof for demonstrating that abandonment would lead to an

imminent and identifiable harm and, if so, would also violate any applicable environmental laws or regulations reasonably calculated to protect the public health or safety rests with objecting parties. See In re St. Lawrence Corp., 248 B.R. at 741 (burden of proof is on the party seeking to demonstrate the applicability of the Midlantic exception to the abandonment power). -13RLF1 3964477v. 1

A.

The USTs and other Tank Assets Do Not Pose An “Imminent and Identifiable Harm” 29.

Since the Supreme Court’s Midlantic decision, courts have adopted an

exacting standard for proof of “imminent and identifiable harm.” As the Fourth Circuit aptly observed, the “narrow exception [to the abandonment power] applies where there is a serious health risk, not where the hazards are speculative or may await appropriate action by an environmental agency.” Borden, 856 F.2d at 16; In re Anthony Ferrante & Sons, Inc., 119 B.R. 45, 48 (D.N.J. 1990) (finding that the Midlantic exception does not apply if “the [state law] violation caused by the abandonment would merely be speculative or indeterminate or would not create a risk of imminent and identifiable harm”) (emphasis in original); In re Purco, Inc., 76 B.R. at 532-33. In the majority of cases, findings of “imminent and identifiable harm” have been reserved for extreme cases that pose a palpable and immediate danger to public health or safety at the time of abandonment.8 Absent such showing, courts have permitted abandonment. See, e.g., In re Purco, Inc., 76 B.R. at 533 (permitting abandonment of 200 drums of cutback asphalt containing various chemicals, even if construed as hazardous waste and despite evidence of leakage, because of no finding of imminent harm); In re Vel Rey Properties, 174 B.R. 859, 868 (Bankr. D.D.C. 1994) (approving abandonment of building in violation of housing code with

8

In Midlantic, the debtor had formerly operated two facilities to process waste oil. 474 U.S. at 496-97. At one facility in New Jersey, the debtor “violated a specific prohibition in its operating permit by accepting more than 400,000 gallons of oil contaminated with PCB, a highly toxic carcinogen.” Id. at 497. The New Jersey Department of Environmental Protection ordered the debtor to cease operations at the New Jersey facility and was in the process of negotiating a cleanup of the facility when the debtors filed for bankruptcy protection. Id. At the debtor’s other facility, in Long Island, the debtor “had accepted and stored . . . over 70,000 gallons of toxic, PCB-contaminated oil in deteriorating and leaking containers.” Id. Thus, the Supreme Court found that debtors had stored “470,000 gallons of highly toxic and carcinogenic waste oil in unguarded, deteriorating containers [that] present risks of explosion, fire, contamination of water supplies, destruction of natural resources, and injury, genetic damage, or death through personal contact.” Id. at 499 n.3 (internal quotation and citations omitted).

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respect to the presence of lead paint and distinguishing “the unprotected lagoons of flammable toxic waste in Midlantic”). 30.

As explained above, there is no reason to be believe that abandonment of

any of the Debtor-owned USTs will present any imminent and identifiable harm. Only six properties contained USTs that appear on the LUST List maintained by the EQB, and in each case, the listing relates to a reported release that occurred over fifteen years ago. Moreover, the LUST List itself evidences that most of the tanks that were reported as leaking were either closed or removed from the property. Even assuming that contamination currently exists as a result of these reported releases, the age of the release reports underscores the fact that such contamination does not constitute an “immediate threat to public health or safety.” See New Mexico Environment Dept. v. Foulston (In re L.F. Jennings Oil Co.), 4 F.3d 887, 890 (10th Cir. 1993) (permitting abandonment of former gas station site at which tank and soil samples “evidenced contamination in excess of 100 parts per million” because the site did not present an immediate threat to public health and safety at the time of abandonment), cert. denied, 511 U.S. 1005 (l994). 31.

Moreover, as previously discussed, the available groundwater monitoring

information at the relevant Service Station properties strongly supports the conclusion that, if there is any petroleum contamination, it is certainly not pervasive or widespread. 32.

It is also important to note that, upon abandonment, the USTs will not be

orphaned, but rather will become the responsibility of the owner of the land in which the USTs reside. This is the case both under applicable environmental law, see e.g., Zands v. Nelson, 779 F. Supp. 1254, 1264 (S.D. Cal. 1991) (holding that a party “who owned the land during which time . . . gasoline allegedly leaked” could be held to be liable under RCRA), as well as real estate law. Because underground storage tanks are considered trade fixtures, upon abandonment they -15RLF1 3964477v. 1

generally become “part of the realty” and, accordingly, property of the landowner. See Sgro v. Getty Petroleum Corp., 854 F. Supp. 1164, 1181 (D.N.J. 1994) (holding that USTs not removed from formerly leased service station property were either converted by landowner or abandoned by the owner of the USTs and, in either case, became “by operation of law, part of the real estate owned” by the landowner), aff’d, 96 F.3d 1434 (3d Cir. 1996). As such, the landowners are legally and practically responsible for the environmental compliance of the USTs after abandonment. See In re Purco, 76 B.R. at 533 (approving abandonment in part because of finding that “[T]here is no showing that the landlord/landowner . . ., which will be in possession of such inventory upon abandonment, is not capable of any remedy which may be necessary to adequately protect the public.”). 33.

Several other courts have considered whether the abandonment of

underground storage tanks at formerly leased service station properties comports with Midlantic, and in each case, approved the abandonment of the underground storage tanks. See In re Circle K Corp., B-90-5052-PHX-GBN, 1991 WL 349900 at *17 (Bankr. D. Ariz. Apr. 5, 1991), aff’d, No. Civ. 91-1000-PHX-RGS (D. Ariz. Dec. 29, 1992) (approving abandonment of underground petroleum storage tanks on formerly leased service station property and noting that the landowner is in best position to remediate any contamination arising therefrom); In re Sheffield Oil Co., 162 B.R. 339, 341-42 (Bankr. M.D. Ala. 1993) (authorizing debtor’s abandonment of 110 underground storage tanks at forty-five different sites, recognizing that “[t]he fact that some of the sites may be contaminated from ordinary usage is not sufficient to conclude that the contamination . . . poses an imminent threat to the public health and safety”); In re Contemporary Industries, Inc., BK98-80382, slip op. (Bankr. D. Neb. Aug. 13, 1998) (approving abandonment and holding that a landlord of a tenant who rejected a lease and left behind underground storage

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tanks does not have a right to force the former tenant to remove the tanks, but rather has a claim for damages against the former tenant) (attached hereto as Exhibit D). 34.

Therefore, the Court should authorize abandonment of the Tank Assets. RESERVATION OF RIGHTS

35.

The Debtors reserve the right to amend Exhibit A at or prior to the hearing

to consider the Motion to reflect their ongoing discussions with the landowners regarding transfer of title to the Tank Assets. NOTICE 36.

No trustee or examiner has been appointed in these cases. Notice of this

Motion shall be provided on the date hereof via U.S. first class mail to (i) the U.S. Trustee, (ii) each of the Debtors’ prepetition secured lenders, (iii) counsel to BPPR, (iv) counsel to the Committee, (v) the Securities and Exchange Commission, (vi) the Internal Revenue Service, (vii) the United States Department of Justice, (viii) the EQB, (ix) each of the non-Debtor owners of the Rejected Leased Stations and Formerly Leased Stations, and (x) all parties having filed requests for notices in these chapter 11 cases. Due to the nature of the relief requested herein, the Debtors submit that no other or further notice need be given.

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WHEREFORE, the Debtors respectfully request entry of an order, substantially in the form attached hereto as Exhibit B, granting the relief requested herein and such other and further relief as is just. Dated:

March 31, 2011 Wilmington, Delaware /s/ Jason M. Madron Mark D. Collins (No. 2981) Jason M. Madron (No. 4431) RICHARDS, LAYTON & FINGER, P.A. One Rodney Square 920 North King Street Wilmington, Delaware 19801 Telephone: (302) 651-7700 Facsimile: (302) 651-7701 -andJohn J. Rapisardi George A. Davis Peter Friedman Zachary H. Smith CADWALADER, WICKERSHAM & TAFT LLP One World Financial Center New York, New York 10281 Telephone: (212) 504-6000 Facsimile: (212) 504-6666 -andDavid F. Williams Geoffrey E. Gettinger CADWALADER, WICKERSHAM & TAFT LLP 700 Sixth Street, N.W. Washington, DC 20001 Telephone: (202) 862-2200 Facsimile: (202) 862-2400 Co-Attorneys for Debtors and Debtors in Possession

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