Tainted-Earth Dispute Halts Irvine Project

Construction of the $300-million Mola Centre, one of the largest development projects in city history, has been postponed indefinitely by a legal dispute between two giant landowners over the extent of efforts to clean up soil tainted with a toxic chemical.

Mola Development had planned to begin construction last fall on the project at Jamboree Road and Campus Drive, which includes two office towers, a 16-story condominium building, a Hyatt hotel, a cinema complex, a health club, a day-care center, restaurants and stores.

But the development was delayed because tests showed that perchloroethylene, an industrial solvent, remained in soil and ground water on part of the 40-acre site, despite a cleanup attempt by the previous owner, Prudential Insurance Co. of America, nearly four years ago.

“Our commercial project is dead in the water,” said Peter von Elten, general counsel and executive vice president for Mola Development, based in Newport Beach. “We just want the property to be cleaned up. It’s been over three years since we closed escrow on it and we still have no realistic idea as we sit here today when it will be available for development.”

The toxic waste at the Mola Centre site has created another legal morass for the development company, which for five years has been embroiled in a dispute over a proposal to build a $200-million housing community in Seal Beach. Mola, which says it has spent about $11 million on that site, has sued the city of Seal Beach for discrimination for rescinding its original approval of the Hellman Ranch project.

Contamination at the Irvine site isn’t considered that serious or unusual, since several hundred locations throughout Orange County are tainted with similar industrial spills. But the waste has attracted attention because it has blocked a major development and resulted in a high-profile lawsuit.

Last month, the county health department approved Prudential’s plan to initiate a new cleanup at the Irvine site by excavating and treating 9,700 cubic yards of contaminated soil.

“We’ve given OK to the cleanup,” said Steve Wong, Orange County’s assistant director of environmental health.

But Prudential officials said Friday that it refuses to begin the work until a lawsuit filed by Mola Development is resolved. The suit, filed in January against Prudential, seeks complete cleanup of the site and about $15 million in costs and damages for sale of the property under allegedly fraudulent conditions.

“The cleanup has not begun and the reason is there is still litigation involved and things are not ready to our satisfaction,” said Jim Longo, a spokesman for Prudential at its New Jersey headquarters. “There’s a disagreement between the parties which must still be worked out. We’re in a stage of lawyers talking to lawyers.”

Longo declined to elaborate or predict when the excavation might begin. No court dates or negotiations to settle the case have been scheduled.

In 1987, Prudential removed soil which apparently had been contaminated by leaking underground tanks at the site, which was a former Beckman Instruments plant. It then certified the property was clean and sold it to Newport Beach-based Mola Development for $46 million. But in 1989, more contamination was discovered, county health officials say.

The main point of contention between the developer and Prudential is the new cleanup plan, which Mola Development contends will leave too much toxic waste behind.

The health department is allowing Prudential to leave as much as 1,000 parts per billion of perchloroethylene, or PCE, suspected of being a cancer-causing agent, in the soil.

Mola Development officials said they worry that they may not get loans for financing the construction unless they can prove the site contains no detectable waste. They are also worried about the risk of lawsuits from future residents.

“If they are cleaning it up to a lesser standard than we agreed to, we think we are running a significant risk when constructing the project,” Von Elten said. “We fear down the road having problems with the property.”

Instead of removing 9,700 cubic yards of soil as proposed by Prudential, Mola Development wants as much as 24,000 cubic yards excavated. Von Elten said the difference may amount to a couple more million dollars in cleanup costs for Prudential.

Von Elten said he cannot understand why the county health department approved the cleanup.

“Why in 1987 did Orange County health say clean it up to undetectable levels and then so dramatically turn around three years later?” he said.

Wong said that the remaining PCE is a minor amount and that the health department did not change its standards.

Back in 1987, the health agency told Prudential that waste residue would be allowed in the soil only if the company showed the public risk is low--a potential cancer risk of less than 1 in 100,000 people exposed, a standard rule of thumb in California, he said.

A risk assessment at the site, approved by the health department last month, showed leaving 1,000 parts per billion in the soil would pose a potential risk much lower, 1 in 10 million, so the cleanup plan was endorsed, Wong said. He said the county is satisfied the residue would essentially pose no threat to the public since it is contained deep in the soil.

Mola Development, however, contends that the analysis, performed by an engineering firm hired by Prudential, is inadequate, especially since a day-care center is part of the project. The developer contends that its sales contract with Prudential requires the PCE to be cleaned up to an undetectable level.

“Since we are the landowner and subject to all these other requirements, such as potential suits by residents of the property down the road, we simply feel the county has fallen short of the mark,” Von Elten said. “Orange County health is not the last authority on the subject and I am not confident that the county is totally correct.”

He said the health department should have approved a cleanup plan agreeable to both parties.

Wong, however, said the health department does not want to get involved in the lawsuit and approved the cleanup plan using the same standards it has set for hundreds of other sites.

As far as the health department is concerned, Wong said, if Prudential removes the 9,700 cubic yards of soil, development can begin, even though cleanup of the contaminated ground water must continue for years with pumping of wells.

“In general we have allowed a property owner, once the soil contamination is gone, to develop a site,” Wong said. “If they clean it up as they have proposed to do, then we have no problem with that.”