A New Twist on Toxic Cleanup

Like a grisly wound in the earth, the crumbled mine shafts carved deep into Iron Mountain have for decades oozed a toxic stream straight from Dante. This eerie underground world drips with neon green runoff packing nearly the punch of industrial acid. Government scientists indelicately dub it the world’s worst water.

But now the troublesome mountain could become more than just a notorious symbol of mining’s tainted legacy.

A landmark agreement hatched to fund cleanup efforts at Iron Mountain for centuries to come is being covetously eyed by corporate America as a possible new way to tackle big industry’s vexing toxic problems.

Traditionally, deep-pocketed corporations have been kept on the hook while tainted Superfund sites are scrubbed clean. But at Iron Mountain, the U.S. Environmental Protection Agency agreed to let a French corporate giant essentially walk away--for a price.

The firm, Aventis Corp., is paying $160 million to pass off the responsibility and risks of cleanup at Iron Mountain to a U.S. insurance company and an environmental engineering firm for the next 30 years.

Those funds will be invested to finance the ongoing cleanup. Even with withdrawals for operations at Iron Mountain, the investments are expected to swell to an estimated $514 million in 30 years. That cash would be counted on to finance operations for generations to come at Iron Mountain, which scientists believe will continue to leak tainted water for at least 2,500 years.

“It’s very unusual that we give somebody a release, that they get to walk,” said Rick Sugarek, EPA project manager at the site.

Indeed, the deal--if not unprecedented--is highly unusual. Other firms have opened the corporate checkbook to escape the hassles of mopping up an environmental mess, but typically with some guarantee that regulators can demand more money if needed.

Not surprisingly, many firms dogged by pollution problems like the look of the Iron Mountain deal.

“We’ve gotten calls from companies that want to use this at their site,” said Tom Bloomfield, an EPA assistant counsel who helped broker the Iron Mountain agreement. “I think there’s going to be pressure on us to use it elsewhere.”

Similar Deals Could Be Struck

That pressure could mount with a new Republican administration in Washington that has made no secret of its zeal to ease the effects of environmental rules on the bottom line for big business.

Insurance firms hope federal and state regulators embrace what they see as a profitable new line of business. Since the mid-1990s, a half-dozen large insurance companies and several big environmental engineering firms have struck agreements with polluters large and small to assume the risk of cleaning up nettlesome environmental problems for a fixed price. Wall Street firms, meanwhile, have offered their services to help broker such deals.

“We think we’re doing a good turn here,” said John W. Arata, business development director for AIG Environmental, a division of American Insurance Group. “We’re trying to make a profit, but anything that facilitates and speeds cleanup has got to be looked at with favor.”

Last year, his firm, which is backing Iron Mountain, struck 15 smaller deals, Arata said; this year it expects to double that business. The growing economy, he said, has generated a new demand for use of polluted sites for construction.

“The demand can no longer be met by clean sites,” Arata said. “So contaminated sites are increasingly coming into play.”

There are plenty out there. By some estimates, the U.S. is blighted by about 1.5 million polluted parcels of all sizes and complexities--from closed oil refineries and former waste dumps to old military bases and aircraft plants.

British Petroleum alone has set aside $2 billion on its books for various environmental cleanup efforts; Chevron has accumulated $814 million in potential cleanup costs, and Dow Chemical $339 million.

Many environmentalists haven’t given much heed to the new approach. Those that have suggest there are advantages along with potential pitfalls.

Lenny Siegel, executive director at the Center for Public Environmental Oversight in San Francisco, said the insurance firms that broker such deals in most cases have deeper pockets than the companies responsible for a polluted site and can help speed cleanup by avoiding protracted litigation that often slows the process.

“There are limitations,” conceded Bloomfield of the EPA. “I’m not so sure it’s such a good thing to allow companies to walk away from these sites most of the time. It’s beneficial to be able to go back to them if new problems come up.”

In the case of Iron Mountain, the risk for EPA regulators who crafted the deal wasn’t so much in anticipating unpredictable environmental problems in the future. They’ve been studying the mountain nearly nonstop since 1983, when it was among the first Superfund sites listed by the U.S. government.

Instead, the danger is that inflation could outpace the interest earned on the invested funds.

No one doubts that Iron Mountain will need money for the foreseeable future. Sugarek, the site’s federal shepherd for more than a dozen years, compares Iron Mountain to Humpty Dumpty. It’s cracked, he said, and cannot be put back together.

For decades, hard-rock prospectors chiseled into the site to reap its trove of gold, copper, silver, iron and zinc before the mines were shut down in 1963.

The honeycombed mountain ultimately caved in on itself, creating a huge heap of debris that has proven the perfect setting for the production of pollution. Rainwater and air seeping through the fissures and cracks in the mountain swirl through natural deposits of pyrite to create acidic runoff laced with toxic heavy metals.

For generations, that foul discharge cascaded down into the headwaters of the Sacramento River, tainting one of the state’s prime sources of drinking water.

More than $200 million has already been spent to tackle the problem. Nine miles of acid-resistant pipe has been laid down the mountain, funneling drainage to a sprawling water treatment plant perched on the slope. There it is treated with lime to neutralize the acid and put into a huge settling pond to cull the toxic metals.

Sugarek figures the current pollution problems are handled for now. His biggest worry is the future--and the vagaries of inflation and investments.

Will there be enough money three decades from now to finance cleanup by future generations at Iron Mountain? Will new toxic problems emerge?

“We’re in effect baby-sitting this mountain,” he said. “And we will be for a long time to come.”