Lockheed Bills Area Firms for Toxics Cleanup : Burbank: The defense giant seeks millions from smaller companies it says share responsibility for ground-water pollution.
Lockheed Corp., on the hook for a massive Superfund cleanup in Burbank, has demanded financial contributions from dozens of firms it says also polluted the ground water, and is threatening to file a lawsuit next month against those who won’t pay up.
Angry and fearful of Lockheed’s legal firepower, many of these small to mid-size businesses are undecided whether to settle or fight, and are scrambling to determine if they have insurance coverage to meet Lockheed’s demands--which range from $50,000 to $15 million per company and total almost $70 million.
“Do I go get a lawyer and spend money I don’t have?” asked Ed Davis, owner of Davis Machining Co., who said Lockheed’s bill for $320,000 is nearly half his annual sales. “It’s tough enough to make machine payments. . . . I’ve never really been in this kind of predicament before.”
The defense giant’s demand for $480,000 from B.J. Grinding Inc., exceeds the annual sales of the machine shop, said Glenda Hoiseth, who runs the firm with her husband. “Essentially this would put us out of business.”
“I don’t believe the David versus Goliath story that they’re spinning for you,” retorted Lockheed lawyer Pierce O’Donnell, who said the firms together created as much pollution as Lockheed.
“Lockheed has a genuine desire to be fair,” said O’Donnell, adding that it would be unfair for Lockheed and federal taxpayers to bear 100% of the costs.
O’Donnell said so many of the firms have asked to meet with Lockheed to discuss cost-sharing that today’s lawsuit deadline established by the firm has been extended to April 25. “We actually are negotiating some settlements as we speak with some smaller players and some mid-size players,” O’Donnell said.
At issue is financial responsibility for purging ground-water supplies of chemical solvents that leaked and spilled over many years, and that have seeped into the vast reservoir that underlies the San Fernando Valley--idling Burbank’s municipal water supply wells.
Lockheed is finishing construction of a ground-water treatment system that will continuously cleanse some 12,000 gallons of water per minute for up to 20 years--at a cost the company says will exceed $172 million.
In moving against its smaller neighbors, the defense giant is standing in the shoes of the U.S. Environmental Protection Agency, in what resembles a high-stakes game of tag.
Lockheed became “it” in 1991, when it entered into an agreement with the EPA to design, build and run the Burbank treatment system until the year 2000. The consent decree came under provisions of the federal Superfund program--which requires polluters to fund cleanup of toxic waste sites.
EPA originally had targeted dozens of Burbank-area firms in addition to Lockheed--but most refused to settle, or offered only a token amount. Once Lockheed opened its deep pockets, assuring completion of the work, the EPA lost interest in the other firms--leaving Lockheed to decide whether to pursue them on its own.
Lockheed came under sharp attack from some environmentalists and members of Congress when news reports revealed that the firm stood to recover most of its cleanup expenses from the government by charging the costs as overhead in Pentagon contracts.
But Lockheed’s tentative agreement with the Defense Department also required the firm to seek cleanup contributions from its insurance carriers and other polluters.
In letters mailed in December, Lockheed lawyers broke the news to about 40 Burbank-area businesses, some of which had been on the EPA’s list of suspects.
The letters invited company representatives to a January meeting “to discuss cost-sharing for the cleanup of Burbank’s ground water, which at present is proceeding virtually at Lockheed’s sole expense,” according to a copy obtained by The Times.
Although the Jan. 26 meeting at the Burbank Hilton had the trappings of civility--”Coffee, Greeting & Introductions” was the first item on the printed agenda--the atmosphere was described as frosty. Lockheed gave the companies until March 25 to open their wallets or be sued. To underscore the message, Lockheed lawyers followed up by mailing a draft copy of the 21 page complaint to each attendee.
This “blazing guns” approach was needless and insulting, complained David Goodreau, chairman of the California Industrial Leadership Council, who attended the meeting on behalf of several members of the trade group, which represents small manufacturers.
But in remarks to the gathering, and in a written report outlining evidence it amassed, Lockheed said it was merely asking for each firm’s fair share.
Lockheed said its research had shown it was responsible for 59% of the pollution, whereas “other parties are responsible for 41% of those costs.” Lockheed said this meant it should bear $102 million of the $172 million, and that the others should split the balance based on the pollution each created.
Lockheed said its cost allocations drew on a variety of sources--including soil and ground-water data obtained from the EPA and California Regional Water Quality Control Board, and “private investigator interviews of employees.”
While acknowledging that some companies are liable, Goodreau said, “Lockheed’s allocation of costs has got more holes in it than Swiss cheese.”
Under orders from the regional water board, some of the firms previously spent thousands of dollars to test and clean up areas of stained soil, and believed their involvement had ended.
Others say they didn’t spill--and in some cases, never even used--trichloroethylene(TCE) and perchloroethylene(PCE), degreasing solvents that are the most prevalent pollutants.
This alone, however, would not get them off the hook. Under the exceptionally broad provisions of the Superfund law, the owner of a contaminated site can be held responsible for pollution that occurred under a prior owner.
EPA officials said the Lockheed strategy is not unique. “It’s not unusual at all that a company that’s settled with EPA would . . . turn around and seek . . . contributions from other parties they believe are responsible, or that private-party litigation would occur without the government being involved,” said Thomas P. Mintz, assistant regional counsel for the EPA in San Francisco.
In fact, this is not even the first use of the tactic by Lockheed and its lawyers. Since reaching an agreement with EPA on cleanup of the Operating Industries landfill Superfund site in Monterey Park, Lockheed and a group of other large companies have extracted settlements of about $47 million from cities and waste haulers who also used the site.
O’Donnell, a lawyer for the big firms, described that case as the “largest private cost recovery settlement” in the history of Superfund--a distinction that could belong to the Burbank case if Lockheed is successful.
Goodreau said the Burbank dispute has prompted his group to seek congressional support for federal low-interest loans to help small businesses pay costs of environmental compliance.
