Lockheed to Pay Small Share of Cleanup Costs : Burbank: Federal officials are surprised by a Defense Department agreement to reimburse the company for the expense of eliminating ground-water pollution.

U.S. Justice Department and Environmental Protection Agency officials expressed surprise Tuesday at disclosures that the U.S. military--not Lockheed Corp.--will pay most of Lockheed’s $60 million to $80 million costs of cleaning up polluted ground water in Burbank.

The two federal agencies last month praised an agreement under which Lockheed was to pay most of the costs. But spokesmen for Lockheed and the Defense Department Tuesday confirmed the existence of an 11-month-old side agreement under which much of Lockheed’s cleanup costs will be paid by the Defense Department with taxpayer funds.

“I can confirm that a large portion of those costs are recoverable” from the government, said Gay Maund, a public information officer with the Defense Department’s Defense Contracts Management agency in El Segundo. “It was a cost of producing the aircraft that they produced for the government,” she said.

Although the Lockheed-Defense Department agreement, or “memorandum of understanding,” was signed last October, its existence remained unknown to officials of the EPA, Justice Department and the city of Burbank, who simultaneously were negotiating with Lockheed over cleanup costs.

“The agency was not aware of an agreement between Lockheed and the Department of Defense,” said Terry Wilson, an EPA spokesman in San Francisco. Wilson added that EPA officials were still trying Tuesday afternoon to confirm the existence of the pact. “We’re very interested to find out what this agreement is,” he said.

“That’s wonderful to hear,” a Justice Department official said sarcastically when told about the agreement. “I think Lockheed should have paid for the whole thing. They made the mess,” said the official, who would not speak if identified.

Burbank and other areas of the San Fernando Valley have been designated for ground water cleanup under the federal Superfund program, which designates the nation’s worst toxic sites and requires those responsible to pay cleanup costs.

Lockheed’s huge Burbank complex has been identified as the main source of chemical solvents that polluted ground water in Burbank. The problem has forced the city to shut down municipal wells and rely entirely on more expensive supplies of purchased water.

Under a consent agreement approved by the Justice Department last month, Lockheed is to build a treatment system to purify 12,000 gallons per minute of chemically tainted ground water, and is to operate the system for two years--at a total estimated cost of $60 million to $80 million.

Two other signers of the agreement--Weber Aircraft Inc. and Burbank--are to contribute about $7.5 million between them to build components of the treatment system, which will enable the city to resume ground water use.

In an Aug. 23 news release, top EPA officials, including agency Administrator William K. Reilly and Regional Administrator Daniel W. McGovern, singled out the agreement as “an excellent example of Superfund’s strong enforcement authority.”

And U.S. Atty. Lourdes G. Baird--citing the “value of the cleanup work to be performed” by Lockheed--called the agreement “one of the largest settlements obtained by the EPA and U.S. Department of Justice in a Los Angeles environmental enforcement action in the last five years.”

Baird wasn’t aware that Lockheed will be reimbursed by public funds, said Carol Levitsky, public affairs officer for the U.S. attorney’s office. “Obviously, if we were aware of it I would never allow a quote like that in one of our news releases,” she said.

Lockheed is in the process of shifting production from Burbank to plants in Palmdale and Georgia. For nearly 50 years following the start of World War II, the Burbank complex was a major producer of fighter planes and a center for top-secret military research.

During the mid1980s, an investigation ordered by state water quality officials revealed a number of leaking chemical tanks and piping and serious ground water contamination beneath the Lockheed complex.

The EPA has estimated Lockheed’s costs under the cleanup agreement at about $62 million. Lockheed has pegged these costs at $80 million.

Although Defense Department and Lockheed officials declined to provide a copy of the memorandum of understanding, Lockheed spokesman Scott Hallman said it requires the government to reimburse all “costs associated with the ground water remediation.”

The company may be able to recoup some of these costs from insurance or from legal action against other firms that may also have polluted the water. With the amount of such recoveries unknown, there was no firm estimate of what taxpayers will spend to reimburse Lockheed.

“This is a cost of doing business . . . as far as the government is concerned,” Maund said. “No one intended to pollute the ground water, but it occurred and the government has to do the responsible thing.”

Hallman also defended the arrangement, saying the pollution “was a result of normal contract activity.” He stated repeatedly that at the time Lockheed leaked the pollutants, there were no laws or regulations to bar that.

State water quality officials, however, said Tuesday that under state law it has been illegal to pollute ground water since at least the late 1940s.

Told about those remarks later, Hallman said Lockheed’s pollution was not intentional. “We didn’t intentionally violate any laws is what I guess I should say,” he said.

Lockheed had been negotiating with the EPA for nearly three years, while some other firms had refused to discuss the possibility of contributing cleanup funds. As a result, Lockheed won a measure of sympathy and respect for its apparent willingness to admit its mistakes.

“We recognize our share of responsibility, and we are ready to step up to it,” the company said in a news release in March that made no mention of the side agreement.

A hint of the firm’s intentions appeared in Lockheed’s 1990 annual report, which stated that the company hoped to recoup certain cleanup costs “under the terms of existing government procurement regulations.”