Oil Pollution Jeopardizes Furniture Firm

For almost a decade, Tom Flynn has been up to his neck in black gold, Texas tea--oil, that is, and lots of it.

But he isn’t happy. Instead of getting rich, Flynn, 47, has struck a gusher of financial trouble.

The oil is sinking his furniture factory, Tradewest Hardwood Co. in Wilmington, and Flynn is fighting to keep the 81-year-old firm out of bankruptcy.

“Every day, my life is like the first 20 minutes of ‘Saving Private Ryan,’ ” said Flynn, whose professional and personal lives have been under strain for years. “We are barely holding the company together. We’ve been in and out of foreclosure at least a dozen times.”

Flynn is planning another round of layoffs and Tradewest’s sales have plummeted from almost $11 million in 1991 to $5 million in 1999.

It is a far cry from the days when Tradewest’s corporate predecessor, the successful Robert Osgood Co., supplied wood for the Spruce Goose, the giant seaplane built by industrialist Howard Hughes in the 1940s.

But after Flynn bought the Wilmington site in 1989, its underground history began catching up to it. State officials and soils experts say the ground was so fouled by abandoned oil sumps, well “cellars” and a web of pipelines that the factory floor collapsed in 1993 and the company’s large concrete driveway had to be dug out and replaced in 1996. Flynn said Tradewest has never recovered.

He filed suit against the oil companies linked to the problems but lost. And now, he’s poised to abandon an appeal rather than pour thousands of dollars more down a legal black hole.

“I’m almost broke, I’m exhausted, and I’m rebuilding my business,” said Flynn, whose furniture has been sold by such trendy firms as Restoration Hardware, Pottery Barn and Sundance. “The Irish in me says to keep fighting, but I’ve got the well-being of my family and company to think of.”

Flynn’s predicament may be extreme but is not unique. The remains of old manufacturing plants, gas stations, oil fields and petrochemical facilities have caused a host of difficulties for property owners, particularly in commercial and industrial areas.

Case in point: The controversial Belmont Learning Complex in Los Angeles contains explosive methane and toxic hydrogen sulfide from an oil field that extends four miles in a band that contains 1,200 to 1,500 wells. Millions of dollars have been spent to investigate the hazards on the site and to make the facility safe for children if it is ever completed.

“Environmental problems are a big issue today,” said Flynn’s attorney, William Clark, who specializes in real estate law. “It’s getting to the point where you can’t buy or sell a piece of land in an urban area without some kind of environmental analysis or report.”

Geologists say that Wilmington has the potential for problems as well because it has been one of the largest oil fields in the state for almost a century. Aerial photos taken in the 1930s show that Tradewest’s property and its surroundings were formerly covered with wells, tank farms, pipes and oil sumps.

“In the 1920s, ‘30s and ‘40s, there were no controlling agencies and no regulation,” said David Worthington, a Costa Mesa engineering geologist hired by Flynn to review the problems. “A lot of sites were abandoned without any testing or cleanup. It was a kind of scorched-earth policy.”

In the case of Tradewest, crude oil, refined petroleum products, underground pipelines and buried oil well cellars conspired over time to destroy the stability of the company’s 1 1/2 acres.

Large Amount of Crude Oil

The first problems surfaced shortly after Flynn entered escrow to buy the factory site in 1989. Tests of the property uncovered an old sump and a large concentration of crude oil that had penetrated down to the water table.

Oryx Energy Co., which later became part of Kerr-McGee, excavated the property and removed the contaminated soil, digging a 20-foot-deep pit. Flynn said the company paid him $50,000 for the year’s delay in finalizing the sale.

Although he signed a release in 1990, Flynn said that Bruce Fensterbush, then an Oryx executive, promised that Tradewest was indemnified and if there were any further problems the oil company would take care of them.

Flynn thought it was the last he would see of Oryx. Then, one of his forklifts weighing several tons fell through the concrete floor of the factory in 1993. A huge sinkhole, measuring 100 feet by 100 feet, opened directly below his plant. It was almost 20 feet deep.

Tradewest halted operations for at least a year as workers relocated equipment and inventory from the tilting concrete to a temporary facility in Anaheim.

The entire floor of the Tradewest plant had to be removed and the soil beneath it replaced. Flynn, who signed another release when the job was finished, said that Oryx paid only $38,000 for bulldozing, a fraction of the overall repair cost.

The company’s operations were interrupted again in 1996. While trying to install new electrical conduit beneath the driveway, workers drilled into a void that was filled with crude oil.

Excavation of the ground revealed about 20 abandoned pipelines that crisscrossed the property and contained crude oil and refined petroleum products. To remove the pipes and tainted soil, hundreds of square yards of pavement had to be removed and replaced along 170 feet of the property.

The state Division of Oil, Gas, and Geothermal Resources, which regulates the oil industry, concluded in 1997 that Global Oil Production Co. in Wilmington, which had ties to Kerr-McGee, was responsible for the pipelines and ordered the firm to clean up Tradewest’s property, which it did.

Overall, soils experts who analyzed the factory grounds blamed the floor collapse and contamination of the driveway area on the leaky pipes and concrete basements, or vaults, of abandoned oil wells that had been buried years ago.

“All of this contributed to subsidence on the property,” said Worthington, who tested Flynn’s land. “The vaults should have been removed and the space filled with compacted dirt. This was not done.”

Today, Flynn estimates that Tradewest owes $2.5 million in repair bills for the structure, not to mention the millions of dollars in lost business caused by the long interruptions in production. The company’s attempts to recover those losses have largely failed in court, however.

Late last year, Long Beach Superior Court Judge James L. Wright dismissed Flynn’s lawsuit against Kerr-McGee Corp., saying that Flynn had signed two general releases absolving the company’s oil divisions of any responsibility for problems on his land. Wright also ordered Tradewest to pay Kerr-McGee’s legal fees of $131,000.

“The trial judge clearly ruled that Kerr-McGee was not liable,” said David Ossentjuk, an attorney for the energy conglomerate and the two other oil firms. “It’s a simple contract matter. On two prior occasions, Flynn released my client from all claims.”

Ossentjuk also contends that Flynn knew what he was buying when he purchased the property in 1989 and that he should have known the abandoned oil facilities were there.

Flynn counters that the old infrastructure was never disclosed to him when he bought the property. Oryx officials told him after the 1990 cleanup that his land should be free of oil contamination, he added.

Flynn also cites the sworn statement of Fensterbush, given in response to his lawsuit, who says the documents in question were never intended to be general releases of oil company responsibility.

Discussions, however, are underway to drop the company’s appeal and eliminate the legal fees Flynn has been ordered to pay Kerr-McGee.

Meanwhile, Tradewest has moved away from importing hardwoods and into furniture production because it could make more money to stay in business. The factory, which first turned out chairs for Whoopi Goldberg, is now filled with popular Mission-style chairs, sofas and bookcases bound for upscale outlets.

If monthly sales trends continue, Tradewest could be headed for an $8-million year, company officials said.

Flynn also has turned to a group of Chinese businesspeople in an attempt to make Tradewest into a West Coast distribution center for hardwoods and wood products from Asia. Talks are underway.

“If the Asian prospects work out,” Flynn said, “it could be like the U.S. cavalry coming over the hill to save the settlers.”