Disposal Plan for Napalm in Jeopardy : Munitions: Navy may be stuck with 33,000 canisters if the company hired to recycle Vietnam-era material decides to forfeit its $1-million investment.

TIMES STAFF WRITER

An eight-year effort by the Navy to remove 33,000 canisters of Vietnam-era napalm from its weapons station near Fallbrook--a problem that was thought to be solved three years ago when a company offered to recycle the flammable goo--is in jeopardy.

The company contracted in January, 1987, to remove the napalm may walk off the job because of unresolved citations from the state Department of Health Services and because napalm components will not fetch as much money now as they did a few years ago.

"The politics have become too risky and the economics are too marginal," said Ike Sheinbaum, a petrochemical engineer and project manager of Palm Enterprises, a Monrovia-based joint-venture company.

"We would absolutely not bid on the project" if it were to be offered again today, Sheinbaum said.

But now that his company has invested more than $1 million in the design, acquisition and construction of equipment to recycle the napalm, will he walk off the job?

"I might," he said. "If the Department of Health Service intimidates us sufficiently, we might just take a loss and let someone else enter the picture."

A Navy spokesman in San Diego said that if Palm Enterprises quits, the Navy will pursue other options to remove the napalm.

"Since this was our third contract to get rid of the napalm, we were confident it would work this time--or we wouldn't have let the contract," said Cmdr. Doug Schamp.

"On the other hand, the Navy has not discontinued exploring other avenues, and one of the things we'd consider is the cost of building containers to safely transport the canisters to a hazardous waste disposal site, and pay the price of disposing it there."

Schamp emphasized--and state health officials agreed--that the napalm does not pose a public health risk. While some of the 17-year-old bomb skins have developed leaks, they have plugged themselves. The plastic hardens when exposed to air.

The Air Force-owned napalm was deposited at the Naval Weapons Station in 1973, when it was a staging area for munitions bound for the Vietnam War. When the war came to an end, the 2.7 million gallons of napalm, contained in 33,000 unfused bombs, was left at the Fallbrook station for the Navy to handle.

The contract with Palm Enterprises is the third effort by the Navy to remove the napalm.

In January, 1982, the Navy accepted a $182,000 bid from two trucking firms to transport the napalm off base. But the companies backed out of the deal a year later, claiming that environmental restrictions made the operation too costly.

In November, 1983, a Phoenix oil company said it would pay the Navy $880,000 for the right to salvage the napalm. But that firm defaulted on its contract in 1986 after failing to begin work on time, despite two extensions by the Navy.

Finally, the Navy contracted with Palm Enterprises in January, 1987, to recycle the napalm on site.

The company said it would pay the Navy $10,000 for the right to recycle the napalm's three major components--gasoline, benzene and polystyrene plastic--and sell them on the open market.

And the Navy said it was just glad to just get rid of the stuff.

A host of federal, state and county environmental protection agencies have since monitored Palm Enterprises' progress in the recycling operation, which has yet to go into actual production.

The San Diego County Air Pollution Control District--which is concerned about possible hydrocarbon and benzene emissions during the distilling process--issued the necessary permits to build and test the recycling facility.

Sheinbaum said that he is within about two months of full production--if he decides to stick with the project. The most recent delays have focused on ordering new equipment to replace machines that lacked the power to extrude the sticky material from the bomb casings and into an underground storage tank, where the material then would be fed into a distillery in which the components would be separated.

"We're doing something that's never been done before, so there's an element of research and development built into this project," Sheinbaum said. "We try it one way, and if it's not satisfactory, we change it and try it another way. That's what I do for a living."

Pollution control officials say they will issue an operating permit once Sheinbaum demonstrates that the process works according to design.

But Sheinbaum says he may not get to that point.

"I can very easily walk away from this, and so can the other (investors) involved here," Sheinbaum said. "This is an investment. If it doesn't bear fruits, then one cannot beat a dead horse.

"We are a private business, and the level of risk we are taking is large. We had to invest all our money up front before we'd see a penny in income. But if the rewards are not sufficiently large to reflect the level of risk, the project cannot go ahead. And let's just say that, in today's market, the rewards are not sufficient to cover the level of risk."

Compounding his frustration, Sheinbaum said, is an ongoing dispute with the state Department of Health Services, which in December announced its intent to levy a $20,000 fine against Sheinbaum's firm.

The state cited Palm Enterprises for not having a toxic waste warning sign in Spanish at the site; for not completing a 1988 annual report on its operation, and for not updating the expected duration of the operation.

Sheinbaum balked at the fine, saying that the site is on a military base and persons authorized to be there presumably speak English. Furthermore, he said, he failed to complete a 1988 report because he was not operating then.

Nonetheless, he erected warning signs in Spanish, submitted a 1988 report--stating that he had nothing to report--and updated his recycling time frame.

Allan Hirsch, spokesman for the toxics division of the state Department of Health Services, acknowledged that each of the complaints was rectified within days of notification, "but it's our practice to still go ahead and cite somebody," even if the problem is corrected.

In addition, the state cited the Navy for allowing some of the canisters to leak--even though, health department officials said, there was no evidence of a health risk.

The county Air Pollution Control District monitors the site for benzene and hydrocarbon pollution, and the Navy hired a private firm to measure pollution at the site, with air and ground water monitors. The Navy's Schamp said the pollution level was no greater than what exists in an industrial area or in city traffic, and "certainly was less than what you'd find at a neighborhood gas station."

Schamp said the state action perplexed the Navy because it had continuously monitored the napalm and in 1981 publicly disclosed that some canisters had developed leaks--perhaps after wooden pallets shifted.

Hirsch said part of the proposed fine was for alleged violations by the Navy in connection with the leaks. But because the Navy cannot be sued, the state targeted Palm Enterprises.

Sheinbaum has appealed the fine. He has met once with state officials to negotiate a possible settlement, and a second meeting is scheduled.

But he still bristles at the state's action.

"It gets scary when the (health) department takes a strong position like this over some really unbelievably minor corrections that have been corrected," he said.

If Palm Enterprises withdraws from the project, Rick Forman, a Department of Defense official who oversees the disposal of excess military material, said the firm would forfeit the $2,000 it paid up front for the right to buy the napalm but would not otherwise be penalized.

The company would be required to dismantle and remove the recycling machinery, and if it failed to do so, it would lose its $5,000 performance bond and forfeit the equipment to the Navy.

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