America's Most Toxic Business

by David Levine Oct 15 2008

The Army's plan to destroy the nation's Cold War nerve gas stocks has grown into a $36 billion headache. And some companies are getting burned.

How could a project once budgeted at about $2 billion and slated for completion in 1994 now cost a projected $36 billion and be forecast to drag on for another decade? And why have some of the nation's largest chemical and engineering companies, including E. I. du Pont de Nemours and Co. and Parsons Corp., walked away from lucrative project contracts?

The short answer: The project, called the Chemical Stockpile Disposal Program, involves destruction of America's estimated 31,500 tons of Cold War chemical weapons stocks—among them VX and sarin nerve agents, among the deadliest substances on earth.

The more complicated answer: When you mix miscalculation and public relations missteps by the project's operator, the Army, with an outsized public wariness over nerve-agent disposal methods, bad things are bound to happen.

Indeed, with the program, now entering its third decade, bogged down in delays and now mushroomed into the largest non-weapons outlay in the Pentagon budget, taxpayers, and some companies, are getting burned.

Insight into how this happened can be gleaned by heading off to Port Arthur, Texas, to talk to Dan Duncan, a stocky, loquacious man whose crew cut, mustache, and wraparound sunglasses lend him the bearing of an Army drill sergeant.

Beneath an imposing smokestack that he assures me is venting only harmless water vapor, Duncan, the plant's environmental, health, and safety manager, begins to tell the story of how the company he works for, Veolia North America, got a $49 million piece of the Chemical Stockpile Disposal pie when it landed a Department of Defense contract in 2007.

The mission: To incinerate, at long last, a 1,269-ton stockpile of neutralized VX nerve agent that has been stored for decades in heavily guarded Cold War chemical-weapons silos in Newport, Indiana, about 900 miles away.

The Port Arthur project has had its share of problems and controversies, but overall it has proceeded on time and within budget; the last of the nerve gas residue is being incinerated now. The problem: Incineration is only the last—and cheapest—part of what has morphed into a complicated and extravagantly costly process. And Veolia only got into the act after two previous contracts awarded by the Pentagon over a five-year period ended in costly, time-sucking failures amid citizens' uprisings and a slew of lawsuits.

In fact, the Chemical Stockpile Disposal Program has been so dogged by such problems that Craig Williams, of the non-profit Chemical Weapons Working Group, says "the representations made to Congress and the American people by the Army on their projected technical capabilities, cost, and schedule ... were off by orders of magnitude and to a degree almost unheard-of even in government."

Williams, whose organization from the beginning has been involved in the two-decade-long fight over how and where to dispose of these agents, might seem like a spokesman for another alarmist watchdog group. But his sentiments were echoed in a 2005 letter signed by several congressmen, including Senate Republican leader Mitch McConnell, whose state, Kentucky, holds one of the storage depots.

The letter, flaying the Defense Department's stewardship of the disposal scheme, notes that it is one of only 22 programs in the entire federal government to be judged "'ineffective' by the Office of Management and Budget."

So what went wrong?

Following the checkered history of efforts to dispose of the Newport, Indiana, VX nerve gas proves instructive. The Veolia's Port Arthur hazardous-waste remediation plant is the tail end of a process that was originally supposed to take a year or two, but will end up taking almost a decade.

Duncan is with Mitch Osborne, the plant's general manager, on a balmy windswept east Texas morning. Veolia's plant sits in an industrial park on the outskirts of Port Arthur, a gritty industrial town of about 60,000 perched just above the Gulf of Mexico near the Louisiana border.

The plant is incinerating a batch of neutralized VX as we speak. Though this isn't a sentiment generally shared by the public—and certainly not the activists who chronically shadow such disposal efforts—Duncan says, "We feel like we're providing a service to the country."

Duncan is an engineer by training, and from his scientific vantage point, there isn't much to worry about in the process: The VX, dosed onsite in Indiana with lye and neutralized into a caustic liquid called sodium hydrolysate, is shipped to Texas in unguarded tanker trucks. The liquid is then fed into incinerators and kilns at 1,500 to 2,050 degrees Fahrenheit and turned, according to all credible science, into a harmless trickle of steam.

The broader politics of disposal, on the other hand, are a nightmare, intensified, the Army's critics say, by the propensity of the military to try to push through disposal schemes with little, or evasive, public disclosure. Duncan, however, has some sympathy for the Army's predicament.

"It doesn't take much for someone to come out and say: 'A pin-head drop of VX will kill you in minutes—and they're sending 4,000-gallon lots of this material to Port Arthur,'" says Duncan.

Never mind that the VX arriving in Texas is neutralized residue and that Duncan says his facility handles far more harmful material from other clients. The bottom line, he says, is that those other wastes "don't have that nerve-agent connotation."

No doubt that in an America anxious about the environment, rattled by the specter of terrorists, and abloom with tort lawyers, environmental activists, and citizen watchdogs, "nerve agent connotation" is no small matter. It's also true, where a nerve agent is involved, that perception and public relations trump industrial process. But to many observers, the Army has proved awful at managing both.

The U.S. first got serious about destroying its Cold War chemical weapons stockpile in 1982; three years later, Congress adopted a mandate ordering the Pentagon to begin drawing up disposal plans. By 1993, when the U.S. signed on to the International Chemical Weapons Convention, the Army was supposed to already be well along with disposal efforts. It wasn't.

It's hard to know whether the Department of Defense was being optimistic or naïve when, under Congress' initial mandate, it decided it could most easily dispose of thousands of tons of VX, sarin, and mustard gas by simply burning the raw chemicals on-site at nine domestic storage facilities, some of them relatively close to major population centers.

In any case, the Army's initial cost estimate for the project was just under $2 billion; it projected the job would be done by 1994.

As the plan leaked out, however, communities near these sites, one by one, rose in protest. This sparked a reluctant rethinking by the Pentagon, and over time a plan that had seemed relatively simple became mind-bendingly complicated.

Years of study ensued—years that gave increasingly organized watchdogs time to do their own studies and to ratchet up political pressure. As a result, disposal became captive to local and regional politics, and the Army found itself often having to tailor its plans on a site-by-site basis in response to local protests.

Under pressure from McConnell, two facilities—one in the senator's home state of Kentucky and the other in Colorado—were put under the direct supervision of the Defense Department in 2003. The idea was to try alternative disposal methods. The Pentagon expects the Colorado site to finish its work in 2020; Kentucky in 2023.

Meanwhile, the Army program continues, though it too is slow. This is in part because most of the storage sites that the Army oversees in its program had little or no disposal capability and had to be retrofitted with what became enormously expensive facilities—neutralization chambers and, in some cases, incinerators. Thus, the original $2 billion estimate had swollen to $10.2 billion by 1994.

By last year, the Army had raised the estimate to $36 billion. One example why: By the time it is done, the disposal of the 1,269 tons of VX at Newport, Indiana, is estimated to cost $1.9 billion alone. That now includes the costs of delays, litigation, and the construction of on-site facilities to neutralize the gas. None of that had been included in the original estimate.

"I think the original estimates were probably made by somebody sitting around with the proverbial napkin and writing a figure and a timeframe on it," says Greg Mahall, an Army spokesman, "but we are held to that."

Understandably, safety underpinned most of the political dust-ups over disposal. An accident involving leaked nerve agent could precipitate a major civilian catastrophe, causing full-body convulsions and asphyxiation after exposure to even minute doses.

It's worth noting that there have been no major accidents, though equally worth noting that the Pentagon's safety record at its storage sites is far from pristine. Whistleblowers over the years have complained of shoddy safety practices at some of the chemical weapons depots and Army officials have confirmed recent spills of raw agent at two storage sites, including a gallon drum of highly lethal sarin that leaked onto the floor of its storage igloo at its Richmond, Kentucky, storage facility this past August. (None of the incidents caused injuries.)

In fairness to the Army, though, the program has also run into a fair amount of the "not-in-my-backyard" syndrome. "People will agree on A and Z, A being that we have these weapons and Z that they need to be destroyed," says the Army's Mahall. It's the how and the where that end up sparking the controversies, he adds.

Such politics help to explain why today there is no unified disposal regimen. The Veolia project represents one method, while nerve agents at the Kentucky site are processed and neutralized onsite without incineration. At yet another storage facility in Anniston, Alabama, military contractors employ the Army's original idea—incinerating raw sarin and VX on site.

As a result, progress on the larger goal of ridding America of all of its chemical agents has been woefully uneven and costly. By the Army's own estimates, about 97 percent of the nation's sarin nerve gas has been destroyed, while only about 85 percent of its VX agent has been disposed of.

The remaining sarin is housed at a single compound known as Blue Grass near Richmond, Kentucky, while Blue Grass and three other sites, Newport, Pine Bluff, Arkansas, and Umatilla, Oregon, hold the remaining VX. Meanwhile, only about 24 percent of the nation's 17,380 tons of mustard gas, scattered among seven chemical weapons bunkers, has been done away with to date.

The U.S. isn't the only laggard. While 183 nations signed on to the 1993 Chemical Weapons Convention, they collectively have disposed of only about 40 percent of the estimated 70,000 metric tons of chemical agents that existed, according to a convention report released in May.

The U.S. and Russia between them account for about 90 percent of the world's "category 1" chemical agent stockpile—meaning the most lethal agents, including VX and sarin. So far, Russia has destroyed only about 27 percent of its category 1 agents and isn't expected to be done until 2012.

Of other nations with sizeable chemical weapons stocks—Albania, India, and Libya among them—only Albania has completed the task. India is about 97 percent complete while Libya is scheduled to finish by 2010.

In the U.S., the September 2001 terrorist attacks prodded the Army into trying to accelerate its disposal plans out of fears that terrorists might try to seize chemical weapons stored in military depots.

For the 1,269 tons of VX at Newport, on-site incineration would have been by far the quickest and cheapest way to go. But in response to intense lobbying—in part from Craig Williams' Chemical Weapons Working Group and politicians like McConnell—the Army abandoned that idea in favor of the two-step plan.

By 2002, the Pentagon thought it had found a solution when it awarded a $9 million contract to Perma-Fix Environmental Services, a unit of Parsons, a Pasadena, California, engineering and environmental services concern with more than $3 billion in annual revenues.

Perma-Fix, based in Atlanta, operated its flagship chemical treatment facility just outside of Dayton, Ohio, about 200 miles east of Newport. The contract called for Perma-Fix to neutralize the caustic sodium hydrolysate and dispose of the waste by pumping it into the local sewer system.

The Army didn't think it needed to hold public hearings on the matter, or to file an environmental impact statement on the plan. Perma-Fix officials said they went about briefing a number of local elected officials before they signed on.

But when neighbors of the Dayton facility got wind of the Army plan toward the end of 2002, alarm bells rang. The shared opinion was that the Army was trying to pull a fast one.

Soon, the Army found itself not just tangled in a public relations disaster but in a federal lawsuit filed by a group called Citizens for the Responsible Destruction of Chemical Weapons of the Miami Valley. The suit said, among other things, that the Army violated federal law by not having undertaken a formal environmental statement as required under the National Environmental Policy Act.

Perma-Fix C.E.O. Lou Centofanti has a different take. "The community didn't want it, period," he said. "And no mater what we said or how we said it…they just didn't want to hear it."

The battle over VX waste was so damaging that Perma-Fix—after trying in vain to convince the Army to let it build an on-site disposal plant at Newport—chose to sell its Dayton plant and shift its focus from chemical treatment to nuclear waste. "We made a major strategic error in doing that project," Centofanti conceded.

By October 2003, not a single gallon of sodium hydrolysate had been shipped to Dayton from Newport, and Parsons, the main contractor, decided to throw in the towel, ordering Perma-Fix to back out of the deal. The Army was back to square one.

That same year, the Army restructured its disposal efforts under a new outfit called the Chemical Materials Agency. But new or not, the C.M.A. didn't seem to apply any lessons it may have learned in Dayton to its next move.

About a year later, it concocted yet another plan to get rid of the Newport cache, this time contracting with DuPont, which operates a chemical treatment plant called the Secure Environmental Treatment facility in Deepwater, New Jersey, near the banks of the Delaware River.

The plan and tact were remarkably similar to the Dayton debacle. The Army, without briefing local or state officials, published a small legal ad in a tiny southern New Jersey newspaper announcing the barebones of the project and setting a date for a public hearing. This time, the treated sodium hydrolysate wasn't destined for public sewers—it was going to be dumped into the Delaware River.

The river, which originates in New York and touches Pennsylvania, New Jersey, and Delaware on its way to the Atlantic, has in recent years made a remarkable comeback from the industrial pollutants that once fouled it. And the river has some fierce defenders, including an organization called the Delaware Riverkeeper Network.

When the C.M.A.'s legal notice came to the attention of Tracy Carluccio, the group's deputy director, she immediately asked the Army what it was up to. The answer—using the river to dispose of nerve-agent residue—shocked her. "What the Army was proposing to do," Carluccio says, "was absolutely outrageous."

Carluccio and her group formed a coalition to oppose the plan. But her outrage was nothing compared with the wrath of New Jersey lawmakers, including Representative Robert Andrews, a Democrat whose district straddles a part of the Delaware River watershed.

Andrews sits on the House Armed Services Committee and "though the river runs through my district, no one ever told me or the elected officials who represent our area that this was even under consideration," he says.

The Army had another fight on its hands.

Congress took steps to delay the project while asking the Government Accountability Office to review the plan. The governor of New Jersey pledged to physically block nerve-agent residue shipments on the New Jersey Turnpike. Then, in December 2006, the Delaware Riverkeepers, the New Jersey Audubon Society, and others filed suit in Federal District Court in Washington. They alleged that the Army's plan violated all manner of federal laws, including bans on shipping of chemical agents across state lines.

This was too much for DuPont; in early January 2007, the company backed out, saying "it has become increasingly clear to us that the regulatory process will be lengthy and arduous....Therefore, we believe it is in the best interest of ...DuPont not to proceed." The company declined further comment for this story.

After the Dayton and DuPont debacles, the Army scrambled to find a new home for the processed VX, and settled on Port Arthur. According to Veolia and Army officials, the plant there was already permitted by the state of Texas to dispose of chemicals like sodium hydrolysate.

Although neither Army nor Veolia officials will say it, there's another compelling reason to select Port Arthur: The blue-collar city's economic fortunes are already tied to the chemical plants and oil- and gas-processing facilities there.

Port Arthur has environmental and community activists, but they're not nearly as numerous, well-funded, or politically connected as are the Dayton and New Jersey groups.

And by this time, the Army had finally seemed to learn a lesson: It agreed it was best to do some outreach to first sell the plan. It also decided it would be best if the Army itself stayed out of it. So in February 2007, only a month after the New Jersey fiasco, Veolia's Duncan, Osborne, and others spent five weeks briefing state and local officials about the project.

This was not a tour that included public hearings or press briefings, however. When the story leaked in a local newspaper, another firestorm erupted.

But Veolia had two things that neither DuPont nor Parsons could produce: a permit to dispose of the VX residue, and a claim that it had at least briefed some of the people who needed to know.

That didn't stop the Sierra Club and others from asking a federal court in Indiana to block the Newport shipments. A judge in late September rejected that request, ruling that the plan didn't violate federal or state laws.

Still, bitter feelings remain. "Surely we were hoodwinked," says Port Arthur city councilman Martin Flood, who was not among the officials briefed in advance.

Veolia's general manager, Osborne, says his company did what it could. "Could I sit here and tell you that we could have done more and briefed more people? Sure," he says. "But would that have alleviated some of the concern or stopped the misinformation from various entities? I don't know."

Later, Duncan weighs in. "We thought that if had we handled it any differently, we might have jeopardized the project."