PG&E’s “Jailbreak”

A little-noticed federal court ruling could mean that companies declaring bankruptcy can waive all state laws governing water quality, safety, or land use.
According to the August 30 ruling in Pacific Gas & Electric (PG&E)’s case, bankrupt companies can sell off publicly important assets like forest lands and nuclear power plants with essentially only one interest in mind — the company’s creditors.
“It would make bankruptcy court a haven for environmental scofflaws,” said attorney Karl Fingerhood, who represents the US Environmental Protection Agency.
PG&E’s bankruptcy plans include spinning off the Diablo Canyon nuclear power plant, along with its vast network of hydroelectric dams and adjacent forest lands, to a limited liability company. If a federal court approves the plans — a decision is expected as early as 2003 — those assets would be regulated only by the Nuclear Regulatory Commission and the Federal Energy Regulatory Commission, which traditionally do not hold utilities to high environmental standards.
The California Public Utilities Commission (PUC), which calls the ruling “a regulatory jailbreak” and has submitted its own proposals to keep a reorganized PG&E under state control, has appealed the US District Court decision.

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