TAMPA -- A federal bankruptcy judge rubber-stamped a borrowing plan Tuesday by HRK Holdings LLC that will earmark $2.5 million to remedy environmental concerns at Piney Point.
The Regions Bank loan, which also will provide about $900,000 in operating capital for the embattled firm, becomes the first funding source to stabilize gypsum stacks at the former phosphate facility near Port Manatee since a rip in the liner last year spilled 170 million gallons of toxic water into Bishop Harbor.
An attorney for the Florida Department of Environ
mental Protection would not specify exactly how the allocation would be used despite several requests from creditors collectively owed nearly $26 million by HRK.
But the agency sees the funding plan as a step forward, which at the very least would lessen the financial burden that ultimately could still fall on taxpayers for cleanup work. The DEP hopes to finalize a work plan by October.
"This $2.5 million is a compromise because we don't know now what this will cost exactly," DEP Senior Attorney Jonathan Alden said. "We do believe a substantial amount can get done. ... This is not a slush fund. We will have to stretch this money as far as we can, or we will have to pay for it."
Eight deficiencies outlined by the DEP in a June 15 letter to HRK CEO Jordan Levy remain unaddressed including high levels of ammonia on site, a puncture in the storage liner and watershed still contaminated with dredging sediment.
But the most pressing immediate issue is controlling the 13 million cubic yards of tainted water stored in the massive stacks, which reached capacity last month and now are spilling into a 77-acre emergency container to prevent runoff, according to the DEP.
Although the reservoir transfer prevented a toxic overflow into nearby waterways, the volume of tainted water on site is growing rapidly, while HRK's funds to handle repairs continues to dwindle.
Without the loan approved Tuesday, the company was poised to run out of cash by next week.
"We tried to find other funding," said Scott Stichter, an attorney representing HRK. "Other funding was not available, even before we had issues with the spill."
The $2.5 million for environmental account will function similar to a letter of credit, with 9 percent interest and a maturation of June 30, 2013.
The plan also will eliminate an 11th-hour roadblock that had delayed Air Products and Chemicals Inc. from closing on the sale of 32 acres of the massive Piney Point site, where the company plans to build a manufacturing plant and employ 250 workers.
Negotiations on that $5.5 million deal hit a snag last month when Air Products requested the state clear the company of any future financial obligations for spill-related clean up -- a stipulation the DEP only would meet upon immediate repairs there.
If HRK goes belly up during its Chapter 11 bankruptcy process, the $2.5 million would still be guaranteed by Regions.
The money will be made available once the Air Products sale closes Oct. 23. In return for the new loan, all of the proceeds from that sale will benefit Regions, which already was owed $17.2 million by HRK.
"In order to get the logjam unstuck, somebody had to comprise," case judge K. Rodney May said. "This is just a number to get things moving."
Piney Point is a former phosphate facility purchased by HRK in 2006 with the sole purpose of housing material from Port Manatee's Berth 12 dredging project.
The dredging was completed in October. But while the work was in progress in May 2011, liners and pipes that housed the dredged material at Piney Point sprung leaks, gushing 2,700 gallons of water a minute into Bishop Harbor on Tampa Bay.
A series of Bradenton Herald reports revealed the disaster could have been averted had the state stopped the dredging project when a tear was discovered in the liner months before the work began, or applied a commonly used protective dirt cover on the exterior of the gypsum stack.
State officials never notified port staff of any previous problems before the toxic spill.
The DEP has estimated $15.8 million will be needed to ease all of the future environmental threats that remain.
Josh Salman, Herald business writer, can be reached at 9451-745-7095. Follow him on Twitter @JoshSalman