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Schnitzer Steel Can’t Pay to Make Its California Trouble Go Away
Steel company has no double jeopardy protection as it’s slammed by the same California regulator it settled with three week’s earlier.
June 3, 2021
Schnitzer Steel (SCHN), a recycler and manufacturer of finished steel products, is learning it can’t simply write a check to make its regulatory problems disappear in California. The company recently reached an agreement with California’s Attorney General and several state agencies— including the California State Department of Environmental Services, Toxic Substance Control (DTSC)— to settle alleged environmental violations uncovered during a 2013 investigation.

In its latest 10-Q, Schnitzer detailed the price it agreed to pay:

“The settlement provided for $2.05 million for civil penalties and reimbursement of the agencies’ enforcement costs and $2.05 million to fund Supplemental Environmental Projects in the local community to promote public health and the environment.”

Twenty days later though, Schnitzer says DTSC— one of the California state agencies involved in the investigation and settlement— targeted the company yet again over the same issues Schitzer thought had been settled. Though it just sent a $4 million check, in part, to DTSC, Schnitzer is now questioning whether DTSC has the authority to issue a new enforcement order:

“We dispute DTSC’s alleged jurisdictional basis for the order, as well as the scope of work required by the order, which we believe is unwarranted and duplicative of ongoing assessments being conducted under the oversight of another state agency.”

Schnitzer is challenging the new enforcement order through— you guessed it— DTSC’s administrative process.

In response to Schnitzer’s challenge, DTSC hit the company with another enforcement action three weeks after the first one, or six weeks after Schnitzer paid the $4 million settlement. Once again, Schnitzer says the second enforcement action following the settlement is related to the same 2013 environmental matter that was just settled.

Schnitzer and the DTSC have been at odds for the better part of a decade. The company is being targeted for a third time for an infraction it believes it has already paid to remedy. If Schnitzer is forced to pay up again— even if it is due to an overzealous regulator— investors should demand better of the company’s legal team.
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