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In the end, Anne Sholtz’s punishment for defrauding the visionary smog-credit market she helped design played out much like her entire federal prosecution: with the belief that there was far more to her case than a simple white-collar swindle.

U.S. District Judge Audrey Collins sentenced Sholtz on April 14 to one year of home detention and five years of probation. Collins said the fact that federal prosecutors only charged Sholtz with a single felony count, combined with a recent US Supreme Court ruling, prevented her from socking Sholtz with jail time. Under previous sentencing guidelines, she could have received a maximum five-year term.

In a brief interview, Assistant US Attorney Joseph Johns expressed unhappiness with the ruling and said his office was mulling an appeal. The Justice Deptartment had focused on what it believed was its best evidence against Sholtz — a fraudulent deal involving one of the world’s biggest oil companies. She had pled guilty to that charge in April 2005.

“I’ve been prosecuting environmental crimes for 18 years and this stands out as the single exception to pleading a defendant out to your most significant count,” Johns said. “I’ve never had a case like this when the obvious strategy wasn’t the winning one. Had we known the court wouldn’t agree with our theory, we would’ve handled this differently. We see this as a prison case.”

Sholtz’s attorney, Richard Callahan, did not respond to calls seeking comments.

Overall, the US Attorney’s Office has divulged little about their case against Sholtz, now roughly 43, or her defunct companies, EonXchange and Automated Credit Exchange. Despite a raft of delays with her sentencing, the Justice Department did not issue a press release about it or provide details about what related schemes they uncovered.

Prosecutors had received evidence of 82 potential counts of wire fraud, mail fraud and false statements, one person knowledgeable about the investigation confirmed. Dorothy Kim, the other federal prosecutor assigned to the case, had no comment.

Computer businessman Seth Brandes was one of several former Sholtz clients who attended the sentencing in downtown Los Angeles to look her in the face. The money he lost to her, he said, was “a good chunk of my retirement nest egg.”

Brandes said Sholtz sobbed as she read a statement to the judge in what he characterized as a “heartfelt, wonderful performance.” She talked about a car accident that killed one of her relatives, and an ill mother who’d face hardship if she went to prison, several sources said.

“When somebody comes and steals your money, you want either your money back or them prosecuted for their crime,” Brandes said. “There were 60-odd names in the bankruptcy, and few of them were interviewed by the US Attorney’s Office.”

During the 1990s, Sholtz had been a young virtuoso in the budding world of pollution credit trading. She was one of the few women involved, and a breed apart from other so-called smog brokers. She had ties to Caltech and large financial institutions, claimed to hold a PhD and impressed with her expertise in Web-driven trading. When the South Coast Air Quality Management District established its trailblazing Regional Clean Air Incentives Market, or RECLAIM, Sholtz won plaudits for her input.

Okayed in 1993, RECLAIM helped pave the way for today’s carbon markets. Instead of traditional “command-and-control” regulations, the program allots to refiners, power plants and other large manufacturers a yearly distribution of credits for their emissions of pollution-forming nitrogen- and sulfur-oxides. Local companies that reduce their discharges, typically by installing cutting-edge equipment, can sell unused credits to firms that need them. Last year there were $74 million in trades; typically, brokers pair buyers and sellers.

Before federal agents busted her, the engaging Sholtz lived well in an 8,000-square-foot estate along the San Gabriel Mountain foothills. It was a short freeway drive from the hip Pasadena office lined with flattering media stories about her.

It all began unraveling in July 2002, when the AQMD notified the federal Environmental Protection Agency about complaints from nine companies alleging that Sholtz’s companies had defrauded them of millions of dollars, documents show. When federal agents arrested her at her gym, and word spread that she didn’t have a PhD, among other surprises, shock waves radiated. Environmental regulators once cozy with her felt betrayed or embarrassed, and the AQMD enacted new trade-oversight rules.

Investigators soon zeroed in on her transactions with AG Clean Air, a New York-based investment firm, and what is now ExxonMobil Corp. In 1999, she convinced AG that Mobil needed $17.5 million in credits to comply with RECLAIM. In truth, there was no deal with ExxonMobil, and Sholtz admitted fabricating faxes and email from the oil giant to persuade AG the transaction was valid.

In her deceptions against AG, Sholtz claimed she had an ExxonMobil contract signed by a man named Jason Hebert. Investigators, however, found ExxonMobil had never employed him. Rather, he worked for Intergen North America, another one of her clients.

A week after the Sept. 11 terrorist attacks, Intergen itself was so nervous about the $4.5 million it had paid Sholtz for credits it needed for a proposed Palm Springs-area power plant that it took action. Hebert’s boss flew his private plane, with Hebert along, from Texas to Pasadena to confront Sholtz, Hebert said. Once there, she told them about a hitch with the deal, reassuring them she’d iron out things if they were patient.

Hebert said Sholtz exuded a calm, professional air, but felt her explanation was a “runaround” that might well cost him his job. “You lose $4.5 million to an individual and you think you are going down the tubes,” Hebert said. “We told her give us our credits or give us our fucking money. It was that simple.”

Herbert’s sinking feeling deepened when Sholtz offered one reason why she couldn’t do either immediately. “She said she was working with another broker to clear the deal and they sustained great losses when the World Trade Towers went down,” Hebert recalled. “Someone using 9/11 as an excuse a week after it happened sounded completely plausible. Now you look back and say, ‘How could you do that?’ She was fabricating everything.”

Eventually, Intergen sued Sholtz and EonXchange. At the time, chaos gripped the energy markets because of the al Qaeda strikes and the rolling California power crisis that fueled the recall of Gov. Gray Davis. When federal agents notified Hebert in 2003 that Sholtz had represented he worked at ExxonMobil, he described feeling “speechless.”

“She should spend time in prison,” he said.

Collins, several people at the sentencing said, praised Sholtz’s attorney while criticizing federal prosecutors for only filing one charge. A US Supreme Court ruling handed down after Sholtz’s plea but before the sentencing now prevents lower judges from using evidence of uncharged criminal activity in meting out punishment. That Sholtz had repaid AG also influenced the judge, though it’s not clear the claim was settled at sentencing time.

Lawyer and businessman William Greenberg made some money with Sholtz, but now has a judgment against her in excess of $1.5 million. In a letter to the judge, Greenberg said the losses hit him so hard he and his wife worried about losing their home and declaring personal bankruptcy.

“Before meeting Sholtz, I had never met a person without a conscience,” Greenberg wrote. “I hope that the sentence you impose will reflect some measure of justice, taking into account the mental pain and anguish experienced by the victims she has injured with astonishing and callous indifference …”

With the prosecution seemingly over, there are unanswered questions galore. Why didn’t the government bring charges against her for the “Ponzi” and international financial schemes uncovered in the investigations? Why also were the accusations of so many other ex-clients excluded?

AQMD spokesman Sam Atwood said the agency was disappointed in the sentence because of the need “to maintain the credibility of” RECLAIM. Atwood called Sholtz’s misdeeds “a significant bump in the road.”

Johns, the prosecutor, countered that the other evidence was “difficult” to prove and wouldn’t have added much to a prison term.

“At the end of the day she lost everything — her friends, respect of the businessmen in this rapidly growing field …” he said. “She will always be a convicted felon and narrowly missed going to prison.”

Paralleling her criminal prosecution has been a complicated bankruptcy filing, where claims by ex-clients and debtors may exceed $80 million. Recently, the lawyer for the court-appointed trustee said that there’s only about $6 million left to pay off remaining creditors.

The post Up in Smoke appeared first on Chip Jacobs .

When word broke three years ago that the poison Erin Brockovich had fought in tiny Hinkley, California had also contaminated groundwater supplies in the dense San Fernando Valley, the countermeasures rippled through California officialdom with a panicky speed.

Wells were closed. Hearings were convened. Laws were passed. Sales of water-filtration kits boomed. Everybody, it seemed, was talking about the perils – or the unwarranted hysteria – created by hexavalent chromium, a versatile industrial compound used by Valley manufacturers, particularly those in the former Cold War aircraft production business.

The yellow-green stuff made infamous in Brockovich’s biographical movie, popularly known as chromium 6, exudes no odor or taste. Health officials long ago listed it as a powerful carcinogen when inhaled as dust. Whether it causes serious illness when consumed in water is officially unknown, despite years of concern.

With federal eyes fixed these days on homeland security and the state focused on other toxins such as perchlorate – a rocket-fuel booster that has permeated sensitive areas from Azusa to Pasadena to the Santa Susana Pass on the border of Ventura and Los Angeles counties – hand-wringing over what to do about chromium 6 has receded from the mainstream agenda. Yet the situation – both underground and in Sacramento’s policymaking world – remains anything but static or calming, a CityBeat investigation has found.

While tap water tainted with significant concentrations of chromium 6 hasn’t yet materialized, previously skeptical local officials now acknowledge that groundwater deep under Burbank, Glendale, and the northeastern portion of Los Angeles will eventually be flooded with so much affected water that officials will be forced to seal off wells and import costlier water from the Metropolitan Water District.

Doing that countywide could add hundreds of millions of dollars to ratepayers’ and government bills, to say nothing of the public health debate – and neighborhood-level fright – it would rekindle.

“It means costs will go up dramatically,” perhaps fourfold,” said Tim Brick, an MWD board member and longtime Pasadena environmentalist. “Then they have to deal with the hassles of developing cleanup programs.”

That hassle is a matter of when, not if.

A sobering, yet surprisingly little-noticed report by the longtime custodian of the Upper Los Angeles River, combined with the results of a four-year investigation by regional water quality officials, depict a menace that won’t wait for long-term fixes. In blunt language that sounds more like a wartime call for action than a plea for more number crunching, the Water District’s January 2003 study titled “Watermaster Special Report Concerning the History and Occurence of Hexavalent Chromium Contamination in the San Fernando Basin” warned that a series of chromium 6-laced “plumes” are surrounding wells in the Valley faster than expected. As a result, there is a “clear and present danger” to area water supplies that hundreds of thousands of people and businesses rely on daily.

“Unless immediate regulatory action, on both state and federal levels, is taken to remediate the hexavalent chromium contamination in the eastern portion of the basin … wells … may have to be shut down …” says the report. “The contaminant plume, identified in historic test results, poses a clear and present danger to our drinking water supply.” New treatment facilities will cost millions, if not much more.

If local water engineers are unsure what to do, state executives in charge of the hard science are lagging badly behind in their efforts to guide them. A definitive standard for chromium 6 in all California drinking water was legally required to be on the state books by January, but now appears to still be several years away. Meanwhile, a report assessing the severity of the Valley’s groundwater problem with chromium 6 remains unfinished, more than two-and-a-half years behind schedule.

“It really is quite amazing to me that the Department of Health Services (DHS) had a legislative mandate to determine the level of chromium 6 in water and report back to the Legislature and the governor in 2002 and never did so,” said that law’s author, Rep. Adam Schiff (D-Pasadena). Schiff was a state senator representing Glendale and Burbank when he wrote the bill. “Even the straightforward matter of reporting the concentrations in the San Fernando Valley hasn’t been done,” he said.

DHS officials refused to offer specific explanations about the delay or allow their drinking-water chief to be interviewed. They note they have posted chromium 6 samplings statewide on their website (www.dhs.co.la.ca.us).

‘Lots of heat, little substance’

Clustered between North Hollywood and the Glendale-Los Angeles border, and more or less along the flange of the Golden State (5) Freeway, the chromium 6 plumes could turn a huge part of an aquifer into a mothballed toxic swamp. Until now, local cities have addressed the problem by blending tainted water with purer sources.

Filtration plants that are operated under the federal Superfund program can’t cleanse the water of chromium 6, largely because they were built to purge other dangerous materials called volatile organic compounds. There is no current off-the-shelf technology to filter chromium 6 to trace levels without causing difficult waste issues, though research is barreling forward.

“Without timely remediation efforts, the contaminant plume will continue to migrate, causing detections of hexavalent chromium in groundwater wells at such high levels that blending water with other sources may no longer provide a feasible solution that enables the continued delivery of water meeting state and federal standards,” watermaster Mel Blevins wrote in his 2003 report. “Given the hydrology of the basin and the hexavalent chromium concentrations up to 156,000 parts per million in soil and one million in groundwater, the imminent threat is … clear,” the report adds.

Among the major points in his study:

*Water technicians suspect defense contractors such as Lockheed-Martin Corp. and Menasco Aerosystems, and others such as Drilube and Excello Plating, created the “hot spots.” (Some of those manufacturers no longer operate in the area.)

*The waste was discharged into storm drains leading into the Los Angeles River, or dumped elsewhere from World War II to the 1960s, an era predating strict environmental rules. Once in the aquifer, the chemical seeped easily through the stratum partly because of the chemical’s solubility, and partly because the alluvial soil lets it pass through swiftly. The plume is moving on a general northwest-to-southeast bearing.

*Blevins himself testified that he had “personal knowledge” that Lockheed, Andrew Jergens Co., Knickerbocker Plastic Co., and Sears, Roebuck and Co. extracted groundwater for use in their cooling towers and then returned the wastewater into the ground.

To display his seriousness about the issue, Blevins had engineers with long histories with water-contamination issues give their statements about chromium 6 as sworn declarations, meaning they would face perjury charges if it were proven they lied.

“During my visits to Lockheed and Menasco, and during my employment at North American Air, I observed that all of these companies used chromium 6 within ´´ the [Upper L.A. River area] for anodizing aluminum,” testified William Garber, a veteran city and county chemist with more than 40 years experience. “The waste water regularly spilled onto the ground, enabling chromium 6 to enter storm drains or percolate into the soil.”

William Ree, a longtime DWP engineer, testified he saw chromium 6 in the Burbank Wash close to Lockheed’s operations. Generally, chromium 6 is not visible in water unless it exceeds 1,500 parts per billion (ppb), Ree said.

“Because of the high concentrations of chromium 6 in the Wash, I suspected that the Wash was being utilized by industrial organizations as an open source for the dumping of constituent chemicals … Indeed, I observed that the same green/yellow coloring in the waste stream flowing from Lockheed’s facilities flowed directly into the Wash.”

Like the residents of Hinkley, people in Burbank know that chromium 6 is not an abstract issue paraded by extreme environmentalists.

In 1996, Lockheed forged a secret, out-of-court settlement for $60 million with more than 1,300 Burbank residents who claimed they developed cancer and other illnesses, plus suffered property damage, from the company’s industrial waste disposal practices. The retired judge who mediated the case, which bred follow-up lawsuits when word leaked out, said chromium 6 was the catalyst. But it had been assumed that chromium 6 got into the neighborhoods through air emissions.

Pressed about the issue, Lockheed executives later said that wastewater laced with the chemical was discharged into the Valley’s aquifer from the company wells at its former “B-1” plant. Lockheed used chromium 6 as an anti-corrosive in its air conditioning system and in wind tunnels until the mid-1960s. Lockheed has spent close to $275 million on solvent cleanups in Burbank and paid out roughly $100 million in health claims to workers and residents. The company moved its Burbank operations, which developed famed aircraft from the SR-71 Blackbird to the Stealth F-117 fighter over the decades, to Georgia in the early 1990s.

In an interview, Blevins said because the three area cities have been able to blend the chromium 6 water to well below existing state standards, there wasn’t much hue and cry about the tardy Department of Health Services report. The Los Angeles Department of Water and Power, he said, has shuttered about five to 10 wells out of precaution.

“If the cities aren’t fussing about it, I don’t know how DHS would feel any concern,” Blevins added. “I don’t know if they are sweeping it under the carpet, but you can get blindsided by [this issue]. I have studied the groundwater problem in the San Fernando basin for many years and I don’t believe it’ll be a long time before we have to deal with high concentrations of hexavalent chromium. We’re talking five to10 years before the plume is right there at these wells.”

Worries about the health impacts of chromium 6 led Glendale to dump 4,000 gallons of polluted water per minute into the L.A. River for much of 2001 – a cautionary move that put the city at loggerheads with federal authorities and others.

Next door in Burbank, despite some disbelief about the dangers of the chemical, two wells were closed, and blending has since kept chromium 6 at trace levels.

Fred Lance, Burbank’s assistant general manager, said there was “lot of heat and very little substance” following an August 2000 Los Angeles Times exposé about state delays regulating chromium 6. The story triggered meetings, legislation, pleas for investigative funding, and public demands for action, all of which seem to have fallen off the public’s radar.

“Our numbers are below state standards,” Lance said. “This is not Hinkley.” In that remote San Bernardino desert town, Brockovich found dumping practices by Pacific Gas & Electric had poisoned hundreds of people. Even so, Lance conceded, “both Glendale and Burbank are sitting in the middle of the plumes and we are concerned about losing our production facilities.”

Just last month, the MWD’s efforts to get the state’s toxic-control department to attack chromium 6 pollution at a Pacific Gas & Electric compressor site at the lip of the Colorado River went public. A plume with concentrations as high as 13,000 ppb was detected at a sentry well within several hundred feet of the river near the California-Arizona border. MWD officials, who termed it an “emergency situation” in their correspondence, were able to get the utility to start pumping out the tainted water before it leached into the groundwater table that feeds millions of Californians. PG&E discharged the chromium 6 after using it as a rust-inhibitor, said Bart Koch, MWD’s water quality lab manager. More than 108 million gallons of untreated wastewater containing chromium 6 were discharged into percolation beds between 1951 and 1969.

Dropping the ball

Chromium 6 is an established carcinogen linked to lung cancer and other respiratory-tract ailments when inhaled. Whether it causes stomach, throat, and other forms of cancer when ingested through drinking water remains the subject of fierce debate at the state and national levels. A federally run toxicology study on this question is expected to wrap up in 2005. Schiff and U.S. Senator Barbara Boxer pushed for the study.

Some scientists argue chromium 6 shouldn’t be in the water at all. Others argue that stomach acids render it into a benign form of chromium, which is a natural substance.

Adding to the confusion, some say merely breathing shower mist exposes people to potentially deadly effects. Others contend chromium 6 contamination is an over-hyped fear stirred by the media and Hollywood.

State law limits total chromium in drinking water, as a way to contain chromium 6, at 50 parts per billion. The federal cap for chromium exposure is 100 ppb. In 1999, California environmental officials ignited controversy when they proposed slashing the limit to 2.5 ppb. They later withdrew that initiative, admitting they dramatically underestimated how much chromium 6 made up total chromium in California water.

Today, the Office of Environmental Health Hazard Assessment is still working on a threshold for chromium 6, a heavy metal that has turned up in manufacturing-rich states from New Jersey to Texas to California.

Its prevalence in groundwater stems largely from its “do-it-all” capabilities. Among other uses, chromium 6 has a long history in industrial chrome plating and welding, as a paint pigment, and in leather tanning. It is also used as an anti-corrosive.

Blevins, who is now a consultant after 23 years as watermaster, expressed some surprise at the “hot spot” readings that his research uncovered during sample testing from the late 1990s to a few years ago. At Lockheed-Martin’s former aircraft manufacturing complex near the Bob Hope Airport in Burbank, it was 440 ppb. At Drilube in southern Glendale, samples registered 72,380 ppb. A test well operated by the U.S. Environmental Protection Agency in that city clicked in at 1,200 ppb.

Current readings are well below those alarming samples, with “hot spot” numbers ranging from 15 to 780 ppb. Seven of the hottest sites are under a cleanup and abatement order by Los Angeles Regional Water Quality Control Board, which investigated 225 suspected sites and has winnowed that number down to 105 requiring further assessment.

Under Schiff’s bill, SB2721, the state Health Department should have been conducting similar sampling, but has yet to file a report for public consumption. “It’s disappointing the state Department of Health Services has dropped the ball on this,” Schiff said.

For reasons state officials have declined to specify, the completed report that Schiff ordered remains “under review.” Sources told this newspaper the report went to Governor Gray Davis while he was still in office, but that it was “bottled up.” ´´

“Since it’s not complete, [the report] is nota public document,” said DHS spokeswoman Lea Brooks. “It’d be inappropriate to comment until then.”

The Missing Report

Alise Cappel, research director at the Environmental Law Foundation in Oakland, said she was “floored” when she read Blevins’ report. (Interestingly, the Times, which has written extensively about chromium 6, only did a brief piece on the report when it was released.)

“What caught my eye was the proximity to the wells and the tone in which it was written,” said Cappel, who has bird-dogged the state’s effort to regulate chromium 6. “I’ve talked to Mel Blevins. He’s old school. He’s not one to be an alarmist.”

Still, not everyone agrees the region is teetering on the brink of disaster.

Gerald Gewe, head of water systems for the powerful Los Angeles Department of Water and Power, said Blevins’ report was intended to galvanize federal officials in getting a cleanup started. The U.S. Environmental Protection Agency does not formally consider chromium 6 to be a cancer-causing agent after it is ingested as drinking water.

“Unfortunately, government doesn’t react well in terms of a crisis, so sometimes you have to over-paint something to get attention. Our water is within standards. I drink it,” Gewe said.

The state’s lengthy process to develop a drinking water standard for chromium 6 probably won’t be supplying authoritative answers soon. One of the main reasons for that is a study by a blue ribbon panel convened by the University of California concluded that the chemical was not a carcinogen when ingested orally. However, that study was later discarded because of revelations that PG&E-paid consultants staffed the panel and manipulated the results.

Under state law, the first step in establishing a limit for drinking-water agents is to develop one that would pose no health risk. This is called a Public Health Goal, and is established by the state’s Office of Environmental Health Hazard Assessment.

Dr. Joan Denton, head of that office, said that goal probably wouldn’t be set until sometime next year, after scientists are finished poring through years’ worth of studies. From there, the Department of Health Services gets involved, using the health goal, cost-benefit analysis, and feasibility to calculate the eventual numerical limit of how much chromium 6 can be allowed into drinking water.

Denton and other sources said it’s unlikely that limit would be in place for a couple of years. “To be quite honest, [the controversy over the blue ribbon report] delayed work on the Public Health Goal,” Denton said in an interview last week. “When we received the blue ribbon report, we took it quite seriously. We were going to use the same group to peer review. Hexavalent chromium is a huge issue. Now it has this past history.”

State budget cuts that eliminated staff positions and outside experts, Denton added, have also slowed progress on the health department’s goal.

Denton said her office furnished data to DHS’s report about Valley chromium 6 contamination. Local water officials did as well, and it mystified them when no finished report was ever passed around. All they saw was a draft copy that they weren’t allowed to keep.

“I’m not aware of anything controversial in the report,” Denton said. “We provided our piece to the Department of Health Services and it was up to them to follow up.”

Whatever the reason, snafus codifying a threshold for chromium 6 in water have left local cities in limbo.

Do they continue funding a pilot research program to purge low levels of chromium 6? Do they pursue corporate polluters, as Glendale and Burbank intend to do? Do they map out contingency water supplies? Under legislation by state Sen. Deborah Ortiz (D-Sacramento), that standard was to have been in place by January.

“It would have been a greater comfort level if we had a standard,” said Don Froelich, the recently retired chief of Glendale’s water system. “We would have preferred the state would’ve met their schedule, but we understand their situation.”

Six of Glendale’s eight wells, he said, register for chromium 6 at 5 to 6 ppb. The other two wells, he said, register at around 50 ppb each, a problem city water officials hope to mitigate even further by thinning existing resources with water purchased by the Metropolitan Water District. Those two wells now produce low levels of water for community use, and there are as yet not additional costs to ratepayers.

“Our biggest concern is if these chromium 6 levels increase, because we know we have high levels in our groundwater,” Froelich said, adding he did not believe the somewhat dramatic language in watermaster Blevins’ report was exaggerated. In fact, the city, along with Los Angeles and Burbank, are waiting for a U.S. Environmental Protection Agency engineering report on the extent of chromium 6 contamination in the San Fernando Valley.

The watermaster’s report, Froelich added, “Is all part of trying to document who is responsible for creating the problem … and who is going to pay for the cleanup. We agree with it,” he said of the report’s findings. “It’s real. It’s just a matter of how long it’s going to take for [chromium 6] to get to the production wells.”

‘A clearly biased panel’

The blue ribbon panel’s August 2001 report, which asserts chromium 6 is not a carcinogen through water, still haunts state scientists.

Formally called the Chromate Toxicity Review Committee, the group was primarily composed of University of California professors and scientists. Their conclusions appealed to chromium 6 skeptics, primarily because they cited the inadequacy of a 1968 German study that the state banked on in proposing the now-withdrawn public health goal for total chromium.

In that German study, mice that were fed large doses of water contaminated with chromium 6 developed stomach tumors. After reviewing that study, the chromate committee said a virus that hit the mice might have caused lesions that German researchers mistook for chromium-induced tumors.

But last spring, those who were behind those conclusions became a news story themselves.

Gary Praglin, a Century City attorney who worked with Ed Masry, his legal aide Brockovich, and prominent Los Angeles tort lawyer Thomas Girardi on the Hinkley case, found PG&E had manipulated the panel by stacking it with two paid consultants. The two consultants had earned millions from the utility for their chromium 6 expertise then wrote two chapters of the blue ribbon report verbatim from previous work, e-mails retrieved during that case’s discovery process proved. A supposedly neutral association of concerned parties turned out to be a “front” for industry, Praglin found.

Most shocking, though, was that one of the committee members never disclosed that his former consulting company had been paid by PG&E to write a follow-up report of a 1987 chromium study by a Chinese scientist. That scientist, Jiandong Zhang, reported elevated cancer risks and various stomach disorders after 300,000 tons of chromium waste was dumped in areas of the eastern city of Jinzhou.

Yet in the follow-up study that California officials believed Zhang authored, those findings were reversed. Zhang, who Praglin believes is now dead, did not speak or write English, and his name had been misspelled in his supposed follow-up work. It turned out he’d been paid by PG&E’s consultants, too.

Smelling industry infiltration, Ortiz denounced the panel’s report, which was later thrown out. John Froines, a UCLA professor and head of the school’s center of occupational and environmental health, quit the committee, largely over his concerns about alleged conflicts of interest.

“We threw questions into what was clearly a biased panel,” Ortiz said in an interview last week. “The antics and contrivances [were] even more appalling because the public is relying on the state of California to protect its health. They are entitled to having deadlines met.”

PG&E, which did not return calls for this article, at the time called the influence peddling charges “totally baseless” and a ploy by plaintiff’s attorneys.

“The worst thing was the denial in the face of obvious evidence of undue influence,” Praglin added. “The caution I’d give anybody involved in public health is that when you look at science, you have to ask who wrote and funded the studies being used. If it’s all being written by industry hired guns, they are out to save a buck for the companies.”

In the meantime, one of the nation’s premier cancer research labs, the National Toxicology Program, has been studying the effects of chromium 6, but won’t have results for at least another year, possibly two.

Even so, there remains no firm number to indicate at what level chromium 6 poses a health risk to humans, if at all, a reality that Schiff calls “disappointing.”

“Time is not our friend with this,” concluded Schiff. He has acquired $1.5 million in federal funds for a chromium 6 filtration system; the cities must contribute some matching costs. “The plume is moving and threatens the water supply. If this turns out to a be a cancer-causing chemical, it poses a significant threat.”

Copyright Chip Jacobs

The post Troubled Waters appeared first on Chip Jacobs .

The unprecedented $60 million out-of-court settlement by Lockheed Martin with about 1,300 Burbank residents over operations at the company’s old aircraft manufacturing plant seemed to many to spring from nowhere.

But to those who carefully monitor California’s environmental laws, it was only a matter of time before the state’s trailblazing right-to-know toxic hot spots law provided ammunition for such a case.

“The Lockheed case was just waiting to happen thanks to the hot spots law,” said Chris Mathis, an organizer for the Labor Community Strategy Center, an environmental watchdog group. “These companies know what the data is, and they know it shows significantly high emissions of dangerous stuff. They know lots of people are being exposed.”

The Air Toxics Hot Spots Information and Assessment Act of 1987 – the first in the country – requires polluters to assess the health risks to their neighbors. Above a certain risk level, the companies are required to inform each affected neighbor with a letter and to conduct meetings to discuss the risks.

Lockheed had closed its plant, known as B-1, by the time the residents brought their claims against the company. But their attorneys had access to the health risk assessment required of Lockheed for air emissions from the plant in 1989.

Those assessments showed Lockheed’s three plants, when operating, were emitting a combined total of 1,015 pound of toxins daily. Company documents showed a 10-in-1 million cancer risk to more than 44,000 residents as recently as 1991.

In particular, the assessment disclosed that the B-1 plant was emitting at least 2.28 pounds of hexavalent chromium, a known carcinogen, into the air in 1989. The health assessment concluded the compound was primarily responsible for the risk, estimated at 180 additional cancers per 1 million people among residents receiving a maximum exposure over a lifetime.

The private judge who mediated the settlement, John Trotter, said the toxics law was pivotal to the residents’ claims, which he said hinged largely on the hexavalent chromium emissions chronicled in the health risk assessment, as well as other data submitted to the South Coast Air Quality Management District.

“Had these filing requirements not existed, the plaintiffs would not have had access to this information,” Trotter said during a Friday news conference in Orange. “They were vital to the plaintiff’s case in showing what Lockheed had done.”

Trotter said there may be implications for other companies that emitted hexavalent chromium in the past as well.

“Anyone who has used it in the past is sitting with their fingers crossed,” he said.

Lockheed officials and the attorney for the residents, David Casselman of Tarzana, declined to discuss the role the toxic hot spots disclosures played in the settlement.

The settlement has renewed debate about the toxic hot spots law, which environmental groups hail as a milestone in public disclosure. But many businesses say it is overly harsh in requiring expensive inventory reports for minimal risks.

At the heart of the debate is the lag in reporting among companies.

Seven years after the AQMD enacted local standards for the hot spots rules, only seven of the region’s 325 biggest polluters have held the neighborhood meetings, according to state records. AQMD officials had predicted up to 100 would hold the meetings this year.

Not a single company has been required to develop an emission reduction plan as envisioned under the hot spots law.

In 1994, a total of 1.3 million people in Los Angeles, Orange, Riverside and San Bernardino counties had been exposed to cancer risks above the level requiring public notification, according to air district officials.

The seven companies that held meetings were responsible for exposing an estimated 37,000 workers and residents to elevated risks, generating a combined 96,507 pounds of toxic air emissions in 1989, records show.

Assembly Minority Leader Richard Katz, D-Panorama City, said he believes the AQMD held back on aggressively implementing the hot spots rule, noting the state political pressure to scale back the requirements.

“The AQMD has been backsliding for years,” Katz said.

The Senate next week will vote on AB 564 by Assemblyman Sal Cannella, D-Turlock. The measure would exempt all but the state’s biggest toxic emitters from the fees and regulatory oversight they now face.

Cannella said in an interview the hot spots law exceeded its original scope by including small companies that emitted minute amounts of toxins.

“The (hot spots bill) was needed to identify toxics and get a handle on what was going on,” Cannella said. “But once the state and air districts knew who the large polluters were, they made no attempt to reform it. It got out of hand.”

Environmental groups, however, are worried the bill will set back public disclosure of toxic emissions.

Bonnie Holmes, the Sierra Club California’s legislative director, said, “It should be about improving the information. Instead they are cutting off information that neighborhoods need and far beyond what we believe is reasonable.”

AQMD officials say they’ve been slowed down by the complexity of the reporting requirements, but say the law has done what it was intended to do in many instances – to dramatically reduce toxic emissions.

“Toxics have been cut in this area more than anywhere in the world, period,” said Benjamin Shaw, the AQMD’s senior manager for toxics.

“The beating we’ve taken is because the program is much bigger than we realized, and it’s taken too long.”

A log of 15 key toxins spewed by Southland companies show emissions dropped 41 percent – from 43.9 million pounds to 26.4 million pounds – between 1990 and 1993, the last year the information was available, according to district records.

Lockheed would have been required to hold community hearings, but the company decided to dismantle its 103-acre aircraft-manufacturing plant six years ago, Shaw said.

Residents learned about hot spot emissions after they were notified by the air quality district two years ago of a plan to clean up toxic vapors in the soil at the site. The notification was required because the plan to emit 40 pounds of trichloroethylene and perchloroethylene daily into the air carried an increased cancer risk estimated at a maximum of 3.03 people per million for a lifetime of exposure. The emissions have since been reduced to 9.8 pounds per day.

The cleanup is part of a federal Superfund site in the east San Fernando Valley. Lockheed is expected to pay the bulk of the $300 million groundwater cleanup. Officials have identified dozens of smaller responsible parties.

AQMD officials said attorneys for the residents obtained copies of the health risk assessment required under the toxics law.

Bob Wyman, a Los Angeles attorney who has represented large defense companies, refiners and others before the air district, said there have been few hearings, because corporations voluntarily slashed their toxic use in response to federal Superfund clean-up rules.

“They’ve implemented pretty aggressive phase-out programs,” Wyman said. “They know if they use highly toxic chemicals they’ll be regulated. It’s embarrassing to report that you are on the top of the (toxic) list.”

Terry McGuire, technical support chief for the California Resources Board, which has the overall responsibility for setting emission standards, said that while the law has shown total toxic inventories lower than originally thought, he’s surprised the South Coast Basin, which accounts for roughly half of all the toxics emitted in the state, hasn’t triggered more public meetings.

“Seven is a small number,” McGuire said. “Other air districts have held more.” McGuire said he didn’t have a count of Northern California public hearings.

Based on an initial list of 1,200 major polluters, AQMD officials required 325 submit inventory and health risk assessments. So far, only 40 have been approved, with 150 in the final stages of review. Hundreds of smaller facilities, most of them dry cleaners, are also being studied.

When the health risks assessments conclude the cancer risk would cause more than 10 cancers among 1 million exposed residents, it triggers the meeting notification. When the risk exceeds 100 cancers among 1 million people exposed, the facility must develop a strategy to reduce the risk.

Some of the executives who have held the meetings complain they were unfairly forced to do so under the toxics law, saying in some cases they already had changed their operations to be below the reporting threshold and were still forced to hold community meetings.

That was the case for Prudential Overall Supply, which stopped using the toxic solvent PCE at its industrial dry cleaning operations in Commerce and Irvine by the time of the meetings.

“In our view, instead of being used as a human health tool, they’re using it to help those who might want to pursue toxic tort claims,” said Lee Terry, the company’s environmental manager.

Continental Airlines’ aircraft maintenance hub near Los Angeles International Airport posed the highest cancer risk – 764 in 1 million additional cancers at maximum exposure over a lifetime – of the seven companies that have so far held the meetings, records show.

Company officials refused to talk about the meeting.

BP Chemicals, a Gardena aircraft and aerospace-components manufacturer, and McWhorter Technologies, a Lynwood casting and resin maker, also provided notice to residents and staged meetings. Officials did not return phone calls.

Los Angeles-based Modern Plating, a metal plating company that serves the aerospace and automobile industries, also was required to put on a community forum. Company President Chuck Manzetti said his firm was being assessed based on emission information that was obsolete.

“I grew up on the East Coast, where companies would dump millions of dollars of chlorinated solvents in Lake Erie and it would wipe out the wildlife,” he said. “The planet can’t withstand that, but what I’m concerned about is how a small company like Modern Plating can be classified at the same level as large companies. There is a dichotomy that doesn’t make sense.”

Shaw said it was unfair to judge the hot spots law based on the hearings so far. Another 75 companies may have to hold them once officials review their health assessments, he said.

The only Valley candidates are in Van Nuys: the Anheuser-Busch brewery, Prudential Overall Supply and radar maker ITT Gilfillan.

Officials at those companies said they don’t believe they’ll have to stage hearings because of their programs to reduce emissions.

Officials at Rockwell International Corp.’s Rocketdyne division in Canoga Park say they’ve moved away from toxin use since the law went on the books – so much so they don’t believe they’ll have to stage a community hearing. Two years ago, they were listed just below the reporting limit, at 9 additional cancers per million for a lifetime of maximum exposure.

The company, for instance, nearly eliminated its hexavalent chromium emissions by adding better filters at paint booths and using low-evaporative oils on NASA projects.

“We’ve made substantial progress,” said Kim O’Rourke, a Rocketdyne environmental engineer. The law “definitely made us rethink our priorities.”

copyright Los Angeles Daily News

The post Toxics Law May Have Swayed Lockheed Case appeared first on Chip Jacobs .

Anne Sholtz, as many acquaintances will say, had a Svengali-like talent for persuading big companies and small investors to buy into her vision of a Wall Street-style smog-credit market. Salesmanship aside, her most beguiling magic might’ve been avoiding jail time well after authorities were onto her.

It’s now been five years since investigators targeted Sholtz and her now-defunct Pasadena-based company, EonXchange, and almost three years since she pled guilty to wire fraud for deception and impersonation involving an energy company and ExxonMobil Corp.

Since then, the once hard-charging businesswoman has been free on bond, spending part of her time in her lavish Bradbury estate until lawyers liquidated it for the multimillion-dollar bankruptcy case shadowing her criminal proceedings, officials said. She later moved to Redlands.

Meanwhile, her sentencing date has been postponed so many times – including three dates just this year – that even some agencies have lost count. Her attorney, Richard M. Callahan, sought the most recent postponement so he could respond to the government’s pre-sentencing recommendations, records show.

The lag between her indictment and possible incarceration has fanned speculation that Sholtz, now in her mid-40s, turned over to federal authorities information about other fraudulent schemes she was aware of in order to cut a better deal for herself. Neither Sholtz nor her lawyer would comment for this story. Whatever the true reason, some of the firms and people the petite dynamo allegedly bamboozled are anxious to see her put away.

“She was bold enough, took enough, messed up enough people, and only copped to one count of wire fraud, and may have a ton of money stashed away,” said an attorney for one of the companies seeking its money back. “Clearly, there’s something wrong here with the justice system.”

It’s not easily apparent how many of the postponements were initiated by the US Attorney’s Office. Thom Mrozek, spokesman for the Justice Department’s Los Angeles office, said the government’s rationale is confidential and under seal. Mrozek added that sentencing delays “happen all the time.”

“We believe we negotiated a proper outcome to the case so that the interests of justice are being served,” Mrozek said.

Sholtz may learn her fate on March 31, when US District Judge Audrey B. Collins is scheduled to sentence her. Based on now three-year-old guidelines, she could face a five-year prison term.

“Normally, when somebody commits a crime and the facts point to the perpetrator, the perpetrator is removed from society and put behind bars,” said one industry observer. “We don’t have that situation with her. Who knows what she is doing?”

Ironically, Sholtz kept her freedom longer than the regulator who helped catch her kept his job. Peter Mieras, district prosecutor for the South Coast Air Quality Management District, was fired recently. Mieras, an 18-year district employee, refused direct comment about Sholtz and the reason for his dismissal, but issued a statement.

“My departure from the AQMD involved a matter unrelated to my work performance or the policy direction of the AQMD,” Mieras wrote. “I am looking forward to pursuing new opportunities in the air pollution field, particularly the emerging practice areas associated with greenhouse-gas regulation. I have nothing but good feelings for the people at the AQMD, and I have every reason to expect that the protection of public health will continue to drive the agency’s agenda.”

Sholtz’s case dates back to July 2002, when the AQMD began investigating her for allegedly defrauding nine different clients, records show. The US Environmental Protection Agency joined the inquiry, and officials arrested her. It became the biggest scandal ever to wrack the district’s trailblazing pollution exchange.

For years before then, the woman known for her slick presentations, revealing outfits and outsized ambition, as well as her ties to academia and financial institutions, had been one of the chief industry architects of the smog-trading bazaar known as the Regional Clean Air Incentives Market, or RECLAIM.

Approved in 1993, it was an environmental first, laying some of the groundwork for today’s carbon markets. Instead of traditional “command-and-control” anti-pollution rules, RECLAIM allotted to roughly 350 refiners, power plants and other large manufacturers a yearly distribution of credits for their emissions of smog-forming nitrogen- and sulfur-oxides.

Local companies that reduced their discharges, typically by installing cutting-edge equipment, could sell unused credits to firms that needed them. Brokers paired buyers and sellers. Last year there were $74 million in RECLAIM trades.

While numerous clients accused EonXchange of swindling them out of credits or money owed them, it was Sholtz’s behavior with one client that led to her undoing, a federal affidavit shows. Beginning in April 2000, Sholtz represented to New York-based energy trader A.G. Clean Air that Mobil Corp. needed a large batch of credits to operate in Southern California.

She convinced A.G. that it could turn a handsome windfall selling approximately $17.5 million in credits to the oil giant through her brokerage. Relying on that, A.G. bought from Sholtz $12.5 million in credits that she promised to re-sell to Mobil. In truth, there was no deal and Sholtz’s supposed contract with Mobil was a “fraudulent document,” federal officials concluded.

Sholtz paid A.G. $9 million. When the remaining proceeds went unpaid, A.G. in late 2000 started asking questions. At first, Sholtz blamed it on Mobil. As A.G.’s questions mounted, Sholtz sent phony emails and faxes purporting to confirm there was an agreement in place.

Apparently cornered in spring 2002, Sholtz flew to New York, where she admitted she’d fabricated the documents and blamed the mess on a mysterious co-worker named Jimmy Keller. She also asserted that Keller impersonated an attorney at newly merged ExxonMobil. Keller was never charged.

Concurrent with Sholtz’s criminal prosecution has been a Chapter 7 bankruptcy case, which court-appointed trustee Howard Grobstein and a law firm has overseen. In 2003, creditors registered between $54 million to $80 million in claims, records and interviews indicate. Besides A.G. Sholtz’s creditors included California Federal Bank, Bank of America, American Airlines, Chevron, Disney, energy interests, the cities of Brea, Anaheim and Burbank, the Netherlands and Northrop Grumman Corp.

Kathy Bazoian Phelps, one of the lawyers working with Grobstein, knows plenty about Sholtz’s activities. Like others, she is astonished that Sholtz has remained free for the past five years.

“The criminal matters getting continued and continued and continued appear to have been excessive,” Phelps said. “But the depth of what she was involved in was extensive. It took us time to get our arms around it.”

Her case at the US Bankruptcy Court Central District in downtown Los Angeles has spun off 60 side lawsuits. Called “adversary proceedings,” they seek recovery of credit transfers that shouldn’t have occurred, a December 2007 document indicates. Grobstein reported he had about $5.8 million in cash free and clear of liens, ostensibly to pay off remaining legitimate creditors.

From the start of the bankruptcy through October, Grobstein and his associates have sought about $3.7 million in fees and costs.

Most shockingly, investigators believe that RECLAIM was just a cover for Sholtz’s even grander schemes. The affidavit said Sholtz was plying “several deals that involved Federal Reserve notes, currency, global cell phones, gold, bank guarantees, high-yield investment programs, and medium-term notes. These deals involved large amounts of money.”

Even after she filed for bankruptcy, Sholtz “continued to defraud investors,” Grobstein wrote in a recent court filing. He concluded that “many of the financial transactions taking place were not tied to particular emission credit trades, but rather, appear to be a Ponzi-type scheme where Ms. Sholtz was soliciting new investors in order to pay large returns to existing investors.”

Phelps said they hoped to resolve the bankruptcy case this year. One of the larger claims is from Aera Energy, a California oil and gas production company that alleged it lost $10 million in credits that were supposed to be held in an escrow account.

Sholtz allegedly fleeced more than corporations. There were individual investors, too.

“Mixed in are sad stories,” Phelps said. “Some people [who] had saved up money for their kids’ college education invested with her, and now it’s gone.”

Sholtz had come to Southern California from the Midwest as a young, go-getting economist who claimed to hold a Ph.D. from Washington University in St. Louis. With some private seed money, she founded what would become EonXchange and operated a Web site for trades called “Automated Credit Exchange.” During the 1990s, Sholtz claimed connections with Caltech and the Pacific Stock Exchange, hyped her ability to harness computers developed for space missions to analyze trades, won glowing media attention and lived well. Working out of a hip office in Old Pasadena, she helped the AQMD fine-tune RECLAIM in its infancy – one reason why district officials have felt both embarrassed and betrayed by her.

During the Californian electricity crises of 2001 and 2002, Sholtz even offered to stabilize skyrocketing RECLAIM credit prices by managing transactions on her trading system. The district rejected the proposal.

Sholtz, to some who dealt with her, was charming, pretty and impressive. Later her deceitfulness and cunning emerged. As the Pasadena Weekly reported, she held no Ph.D. and was just a part-time Caltech professor. When investigators and lawyers caught her scent, panic set in.

When “we were at her offices, we got on the phone to call one of the people she had told us to call but didn’t think we would,” Phelps recalled. “She bolted out of the room. She grabbed her cell phone, and we believed she called him and told him not to talk to us.”

Copyright Chip Jacobs

A nearly identical version of this story appeared in the Pasadena Weekly.

The post Smoke Screen appeared first on Chip Jacobs .

Energized by Mideast oil shocks and the fledgling “green” revolution 15 years ago, the Los Angeles Department of Water and Power gambled on a rugged, high desert expanse with a natural treasure entombed within – thermal steam energy.

With the right drills and a dose of luck, the DWP foresaw a bountiful underground steam reserve it could convert into electricity – enough to quench the yearly power needs of 400,000 people.

Other benefits were foreseen. These included reduced dependence on volatile foreign oil supplies, while the city invested in local, renewable, smog-free energy sources the state was encouraging utilities to jump into.

By 1985, the bet appeared to be one that would pay off – when test wells drilled by the city produced superheated steam.

“You could feel the power of the fluid coming out of the ground,” said Robert Briffett, a DWP engineer long involved with the project. “We were excited.”

Today, the promise of harnessing the thermal energy beneath the surface of the Earth has faded – and the promising political career of Mayor Richard Riordan’s right-hand man, Deputy Mayor and Chief Operating Officer Michael Keeley, has been imperiled by the fallout from that costly failure.

The geothermal steam plants the DWP once envisioned dotting their leased land 150 miles north of Los Angeles haven’t been built. They may never be, despite the $20 million the city has poured into the Coso Geothermal Reserve.

The energy issues that once dominated the DWP’s Coso project have now taken a back seat to its political and legal impact on the Riordan administration and a tangle of corporate lawyers pointing fingers.

Nine days ago, City Attorney James Hahn accused Keeley of leaking a confidential document – the city’s analysis of its legal situation – to lawyers representing a company lobbying the city over the DWP’s steam-plant deal and threatening to sue if they didn’t prevail.

Keeley, under investigation by the Los Angeles Ethics Commission and the Mayor’s Office, was out of town Friday and unavailable for comment. In explaining his actions, Keeley last week acknowledged he had exercised poor judgment in turning over the document. He said he only wanted to convince the company its legal position wasn’t nearly as strong as the city’s.

How the so-called Coso project evolved from obscurity to front-page news is one part science, one part business speculation and one part politics.

It began in the early 1980s, when the DWP offered $6.4 million in a sealed-bid auction for the leasehold rights on 6,824 acres of land managed by the U.S. Bureau of Land Management.

The DWP won the lease, and with it the rights to explore the rolling, volcanic hills inside the China Lake Naval Weapons Center.

After successful exploratory drilling, DWP officials spent the next few years nailing down permits, completing feasibility studies and waiting out an environmental lawsuit over federal lands.

DWP believed it was worth the wait. During the 1980s, natural gas production was unreliable, and experts feared $40-a-barrel oil prices. Alternative energy sources such as solar power, geothermal and biomass production, still seemed promising.

“The big push was for fuel diversity,” Briffett said.

By spring 1990, the DWP was sending out requests for proposals to companies interested in turning Coso steam into electricity and then selling up to 150 megawatts to the DWP. Among the seven bidders was industry giant California Energy Co. Inc. and a smaller rival, San Jose-based Calpine Corp.

DWP picked Calpine in Jan. 1992, and the vapor-to-power idea marched ahead.

The science worked like this: Drilling rigs similar to those used in oil and natural gas exploration would burrow deep into the earth, from 1,000 to 10,000 feet. The drills then would suck out a mineral-rich fluid, which would be brought up to the surface and then channeled through a separator that would extract water and other impurities.

The steam would emerge at extremely high pressure at temperatures reaching 450 degrees, DWP engineers say. Experts say that’s plenty to drive an electric turbine generator the size of a Winnebago to produce electricity.

By November 1993 Calpine still had no signed contract. It was then, Calpine general counsel Joe Ronan recalled, that company officials got a call from DWP managers.

“They said there were reconsidering . . . so we had a meeting and said, `What are you doing?’ ” Ronan recalled. “We had gone through millions of dollars.”

DWP, now answering to the newly installed Riordan Administration, said there was ample reason for reconsidering the project.

Among other things, consumer demand for electricity had dropped for the first time in years, driven in part by the recession and the Los Angeles riots.

Changes in air quality regulations eliminated cost savings that had been anticipated in the form of smog-emission credits for using alternative energy sources.

Talk of deregulation in the electric power industry also was beginning. DWP officials worried they would be stuck with huge amounts of steam-produced electricity more costly than they could obtain from conventional sources.

“It wasn’t in the best interest of our ratepayers and the Department to develop the project,” said Kellie Peterson Kendall, who managed Coso for DWP during much of its life.

Sean Hagerty, who oversees California geothermal programs for the federal government, said steam power is costly despite the potential to generate vast amounts of electricity from the ground. Statewide, he said, HYPERLINK “http://columbia.thefreedictionary.com/geothermal+energy” geothermal energy produces enough juice to power the entire San Francisco Bay Area.

But, “It’s a tremendous gamble,” said Hagerty. “Just exploration alone to drill to a well costs $2 million. It’s capital-intensive.”

By virtue of geologic happenstance, nonetheless, California is home to the nation’s biggest geothermal operations, which produce 7 percent of all electricity in the state, analysts say. Besides the Coso area, there are steam-energy plants in Imperial County and in Northern California.

The “Geysers” field north of San Francisco is the world’s largest steam-energy producer. The Philippines, Japan, Mexico and New Zealand have invested extensively in the geothermal business.

Analysts say the cost of power generated by alternative energy sources – like geothermal, wind and solar plants – is much higher than for electricity produced by traditional means.

“Basically, geothermal energy is a declining asset,” said Gary Hovis at Argus Research in New York. It doesn’t “make sense for the city fathers of Los Angeles to be dabbling around in geothermal energy. It’s a red herring and a fad.”

Analyst Douglas A. Christopher at Crowell, Weedon in Los Angeles says some of the highest priced energy purchased by Edison International is produced by geothermal plants.

The big Rosemead-based electric company paid 13.3 cents a kilowatt hour for geothermal power last year, whereas the cost from natural gas fired plants was 2.2 cents per kilowatt hour, he said.

Asked Christopher: “Are you willing to pay (more) . . . for your energy if the air is cleaner?”

Scrambling for a compromise that would salvage DWP’s multi-million dollar investment, officials with the utility negotiated with Calpine executives for about a year and came up with what they figured was a workable plan.

Under the deal, DWP would not be obligated to buy a single watt of geothermal energy from Calpine, while the company would be free to sell the energy to third-party buyers.

In return for that, the city would receive royalties estimated between $8 million and $30 million over three decades.

Speed was of the essence in coming to an agreement, since two of the DWP’s three leases were due to expire in December 1997, and there was no guarantee the federal government would quickly renew them.

If energy production hadn’t started by then, the land in theory would revert to the U.S. government, according to documents obtained from the City Attorney’s Office.

To date, the Department has poured roughly $20 million into Coso – money spent on the federal bid, test drilling, lease payments and other costs. Delays in producing energy have cost the city millions more in royalties.

Originally, the plants were supposed to be running by 1996. Today, Calpine officials say 1999 is a more realistic target date.

If DWP and Calpine were satisfied, the Mayor’s Office was not and went to war against the powerful bureaucracy of the DWP despite a City Administrative Office report concluding that the compromise made sense.

Riordan and his aides in late 1994 urged that “the asset be sold,” according to City Attorney’s documents.

At the same time, California Energy, the firm that Calpine beat out for the project, was pressing its case with Riordan’s office and the City Council, arguing that the Calpine deal should be scrapped.

Since 1994, records show, California Energy and its lawyers at Morrison & Foerster lobbied aggressively to convince lawmakers, particularly Riordan, that the reshaped energy plan was really a whole new agreement that should be competitively bid.

“The public interest requires no less,” company president Thomas R. Mason wrote to Keeley on Aug. 16, three weeks before Keeley leaked the City Attorney’s legal analysis – the leak that Hahn made public April 19. “The new contract, and its economic value to the taxpayers, have never been tested through a competitive bidding process as required by the City Charter.”

California Energy had earlier written Riordan, saying DWP had paid $945 per acre, compared with the company’s deal to lease a federal field near DWP’s proposed steam plant for $18 an acre. Their plant, which is on Navy land, fired up in summer 1987.

Keeley, in an Aug. 8 letter to Councilwoman Ruth Galanter, said he still had reservations about the compromise, suggesting that DWP sell the steam to California Energy on a short-term basis.

“Though it is possible that, at some future date, a new power plant at Coso leasehold would be economically viable, it is clear that such as project is not viable at the present time,” he wrote.

Despite those reservations and the questions he raised about the City Attorney’s legal strategy, Keeley faxed to California Energy’s lawyers the now infamous document on Sept. 8, purportedly with the aim of convincing the company to back off its legal threats.

The Council and Riordan signed off on the compromise geothermal deal with Calpine in October, and California Energy filed suit against the DWP in January.

In the course of obtaining California Energy documents through the legal process of discovery, City Attorney Hahn found the company in possession of his legal strategy memo, along with a cover sheet from Keeley asking company officials not to reveal he had given it to them.

The political controversy exploded April 19, and the fate of the Coso project hangs in the balance as the mayor battles to keep his trusted deputy on board.

But Briffett still believes Coso will happen.

“It’s frustrating, but it’s not a failure,” he said. “There is a future.”

At the very least, the Navy – which developed the Sidewinder missile and other classified weapons at China Lake – hasn’t been jarred by the flap at City Hall. It has a deal to tap into the steam supply if its normal power lines go down, Hagerty said with a chuckle.

Copyright Los Angeles Daily News

The post Steam Plant Fueled Political Blow-UP appeared first on Chip Jacobs .

The post Smoke And Mirrors appeared first on Chip Jacobs .

Ready or not, Los Angeles is about to confront its inner tree-hugger.

A recently toughened city regulation protecting four species of indigenous trees could, as never before, pit homeowners’ control over their land against preservation of the Southland’s development-thinned urban canopy.

The stricter native tree ordinance, which went into effect April 23, covers all oaks (except the scruboak), the California bay laurel, the Southern California black walnut and the Western sycamore. It is now illegal to remove or fatally harm any of these species if they measure at least 4 inches wide at 54 inches above ground level; the previous width threshold was 8 inches. Even parcels of less than 1 acre must comply, tugging homes of all sizes into the regulatory mix.

“Before this [enhanced] ordinance, Los Angeles had the worst protection of trees,” said Paul Edelman, deputy director of natural resources and planning at the Santa Monica Mountains Conservancy. “People could do whatever they wanted. Now we’re knocking on the door of the more elite, native-tree-protective cities.”

Preservationists insist that the strengthening of this law comes none too soon. For years, they claim, subdividers have killed adolescent trees to avoid the controversy of later removing a grown oak. In some parts of the city, Sundays are sometimes called “chain-saw day” because people have lopped trees, knowing inspectors wouldn’t be around to stop them.

Until now, homeowners were required only to safeguard oaks. Cutting one down without a permit or taking actions that resulted in its death was grounds for up to a $1,000 fine and six months in jail, depending on what the L.A. city attorney’s office recommended. Today, those same penalties apply to all four species, along with an added punitive bite: Officials can withhold building permits for as long as 10 years in egregious cases.

Damaging a native tree by poisoning it, burning it, imperiling its root system or changing its natural grade also is forbidden. As before, L.A. property owners don’t need a permit to prune these trees, though experts caution against trimming an oak by more than 10% of its green foliage at one time.

Homeowners do have wiggle room. They can eliminate a protected tree if, among other criteria, it’s in danger of falling, it’s too sickly to survive or it stymies the property’s “reasonable development.” For a go-ahead, residents must hire an arborist or other tree expert to advise them, request a permit — the review process can take one to two months — and replace the lost tree with two new native ones somewhere on the lot. Also, homeowner-planted trees are exempt.

“This idea is not about bureaucracy, it’s about ecology,” said City Council President Eric Garcetti, who championed the regulation. “We expect to see more stable hillsides, cleaner air and a generally better quality of life. These trees act as great anchors.”

Several pro-business groups view things differently, suspecting the beefed-up ordinance is intended to blunt residential construction in the foothills ridging the Westside, the Hollywood Hills and elsewhere. City officials expect subdividers will be most affected.

Brad Rosenheim, chair of the land use committee for the Valley Industry and Commerce Assn., said he believes average landowners will bear the brunt of the stricter rules.

“The ordinance, good intentions and all, is going to create a ton of surprising headaches for homeowners trying to go about their daily lives,” Rosenheim said. It will create inadvertent violators of the law, he said. “You want a safe environment for your home, or to expand it, and you don’t know you have to go to the city to get a tree permit.”

Los Angeles has mostly been on the sidelines of man-versus-tree skirmishes experienced by more rural suburbs such as Thousand Oaks and Calabasas, which have large numbers of oaks and have gone to lengths to protect them. Activist John Quigley made national headlines in 2002 when he lived in a historic Santa Clarita Valley oak for 71 days to spare it from the bulldozer. Old Glory, as the Stevenson Ranch oak was dubbed, was eventually moved to a site a quarter of a mile away.

Every city and county has rules about indigenous foliage. In unincorporated areas of Los Angeles County, property owners may not remove, trim or encroach on any oak if it’s 8 inches or wider at 54 inches from ground level. County officials are mulling tougher regulations that could be in place by the end of summer.

For the L.A. County Fire Department’s Forestry Division, which enforces the policy, the most common problem is feuding neighbors attempting to get each other in trouble over oak maintenance.

For the ment’s Forestry Division, which enforces the policy, the most common problem is feuding neighbors attempting to get each other in trouble over oak maintenance.

“It’s a daily occurrence, people squabbling about it,” said Frank Vidales, assistant forestry chief. “But for the most part we haven’t seen many cases where people try to destroy the trees, sneakily or not.”

Oaks can be frustrating for homeowners because their prickly leaves fall year round, creating drainage and maintenance issues, and their roots fan out. Oaks’ acorns and walnut trees’ seeds can spawn saplings rapidly after rains.

Partly because of that, the estimated 1 billion oaks in California today are not on the federal endangered species list. Neither are the other species protected by the expanded city ordinance, experts said.

Still, city foresters and environmentalists believe too much green has vanished. As housing tracts, golf courses, brush clearance and development crept deeper into woodlands, the general tree cover started showing bald spots. The thinning was first visible in wildlife habitats, which drove regulations in the 1980s.

“We just don’t have that many native trees in Los Angeles, and we think the oak is the most important,” said Ronald Lorenzen, superintendent of the city’s Urban Forestry Department. “They’re a valuable resource that was here before people, and by that alone they’re worth saving.”

There has been a wave of calls to the city about the ordinance, Lorenzen said, and he hopes education will minimize the prosecutions. The Forestry Department has 12 to 15 inspectors covering the city’s 465-square-mile ecosystem.

“But remember,” Lorenzen added, “we’re tree people, not the tree police.”

Influential groups such as the Santa Monica Mountains Conservancy and the Sherman Oaks Homeowners Assn. embraced the rule change, but some arborists have not. They fear that Los Angeles will go overboard as they claim some small cities have done by exerting their power to use tree fines as a cash cow.

“You can get into so much trouble cutting an oak, it’s not worth it,” said veteran arborist Robert Wallace. “Your whole life can be turned upside down overnight — fines, city hearings, misdemeanor charges. Generally speaking, homeowners absolutely love and treasure their oaks, and go to Herculean efforts to save them….”

Certainly they have protectors in the community. “I don’t see oaks being cut down all over the place,” Wallace said.

Several years ago, about 40 residents from or around Multiview Drive in the Hollywood Hills convened an emergency neighborhood meeting to demand that a property owner who had razed half a dozen mature oak trees to clear land for a home stop the destruction and replace what’d he’d ripped out.

“These were professionals, busy people with jobs, and for them to show up on short notice tells you how strongly most people in the area feel about the environment,” said Patricia Marlatt, a homeowner who attended the gathering.
Under pressure from the city and others, the property owner eventually planted fresh oaks on the sloping, wooded parcel just south of Universal Studios.

Fran Offenhauser, the project’s architect, said the owner removed the trees during escrow after he received a brush clearance order from the fire department that mentioned nothing about oak-tree protections. The project today sits in limbo over design specifications.

Marlatt said she protested the oak destruction because the trees provide a bucolic feel in the big city. Marlatt is also working to protect a huge, 200-year-old-plus oak on her property from a possible street widening. Over the years, the tree gave her solace and shade as she battled a chronic illness.

“These trees remind us where we live,” Marlatt said. “If the city allows them to be destroyed, they’re taking away history.”

Copyright Los Angeles Times

The post Score One For The Trees appeared first on Chip Jacobs .

In the past decade, Rockwell International Corp. has seen the same cycle re-enacted around the country: federal raids for suspected environmental crimes or citations for radioactive and chemical leakage, followed by denials and finally promises to obey the law and clean up.

Given that history, the July 13 raid by FBI agents on the company’s Rocketdyne Division plant in Canoga Park and its rocket test facility in the Simi Hills has raised troubling new questions.

It was the second time in six years that federal agents have raided a Rockwell facility.

This time, the allegations involve accusations that two physicists were killed last summer while conducting sham tests to dispose of hazardous wastes in an effort to avoid packaging and transporting them.

Company officials have declined to talk about the July 26, 1994, death of the physicists in relation to the recent raid.

But John Stocker, Rockwell’s vice president for legal affairs, said the aerospace and industrial conglomerate prides itself on corporate consciousness when it comes to environmental issues.

He points out that Rockwell has received U.S. Environmental Protection Agency awards upon exceeding federal standards for pollutant reduction, received accolades from regulators for other efforts and was taken off one watchdog group’s hit list after it showed signs of progress.

“We believe that as a corporation, we are both committed to be good environmental citizens and that we are, in fact, functioning as good environmental citizens,” Stocker said. “You will find companies out there that are better than we. You will find a lot of companies out there that are worse than we. We don’t pretend to be the best. We aspire to be the best.”

But critics say the company’s records show a clear disregard for the environment, pointing to a long history of infractions, many of them revolving around operation of two of the country’s most contaminated nuclear sites – Rocky Flats in Colorado, and Hanford in Washington state.

“There are few companies in this country that have had as pronounced a record of criminal charges and plea bargains as Rockwell Corporation,” said Jonathan Turley, a professor at George Washington University Law Center and author of environmental legislation now before Congress. “There is clearly a corporate culture at Rockwell that treats environmental responsibilities cavalierly, even environmental matters that are potentially criminal in nature.”

The Rocketdyne raid, for example, is the fifth instance of a major investigation into environmental practices at a Rockwell facility in the past decade, according to local and federal records in four states where the company has operated.

Included in Rockwell’s history:

Low-level radioactive and chemical contamination problems found at Rocketdyne’s Santa Susana Field Laboratory, located in the hills between Chatsworth and Simi Valley. The cleanup work there is continuing.

A federal investigation into the Rocky Flats nuclear weapons plant outside Denver that ended with Rockwell admitting to 10 felony and misdemeanor environmental violations and paying a $18.5 million fine.

The firm’s operation of the Hanford nuclear weapons plant at Hanford, Wash., the nation’s most contaminated nuclear site. Rockwell was one of several contractors cited for contaminating the area around the site with plutonium. In one instance, a company official was fired in 1985 for taking down signs warning of contamination as then-Gov. Booth Gardner’s motorcade drove through.

Extensive soil and ground water contamination with an industrial chemical suspected of causing cancer at the company’s aluminum die casting plant in Russellville, Ky. The plant came under scrutiny after state regulators determined in the late 1980s that a toxic lagoon it created to contain polychlorinated biphenyls (PCBs) had leaked into nearby rivers.

“If one were to round up the usual suspects for environmental crime among the Fortune 500, Rockwell would certainly be in the room,” said Turley, who is representing grand jurors who are under federal investigation for breaking their silence to criticize prosecutors for settling with Rockwell in the Rocky Flats case.

Rockwell’s Stocker responded, “That’s a National Enquirer kind of statement.”

“What happened at Rocky Flats was most unfortunate,” Stocker added. “We’ve accepted responsibility for that. What happened up here at Santa Susana was most unfortunate, and it remains to be seen what’s going to come out of that.”

Indeed, Rockwell has shown signs of improvement on environmental issues in the eyes of two corporate watchdog groups – the Washington, D.C.-based Investor’s Responsibility Research Center and the New York-based Council on Economic Priorities, Stocker said.

In 1992 and 1993, the Council on Economic Priorities featured Rockwell on a list of “America’s Least Wanted” companies because of its poor environmental record. The council called Rocky Flats the nation’s most polluted site and called upon Rockwell to meet with it and disclose company data.

Last year, the council took Rockwell off the list because of the strides it made, citing the company’s voluntary environmental report.

“Rockwell is committed to adopting American environmental laws and regulations at foreign operations where local standards are less stringent,” the council said in a 1994 report.

Investor’s Responsibility said Rockwell has shown signs of improvement, but added that many of those indicators come from data provided by the company itself.

Peter Chines, manager of environmental research for Investor’s, said there is some data showing Rockwell with fewer penalties assessed by regulators, but said the company needs to sustain its performance for a longer period of time in order for it to be meaningful,

“In any given year, one company will do better and one company will do worse,” Chines said.

Stocker said to be fair, a review of Rockwell’s environmental record should include comparisons with other companies made by Chines’ group. But Chines refused to release comparative data, saying that the information was proprietary.

Federal environmental officials said Rockwell has reduced toxic emissions from its plants in recent years. The U.S. Environmental Protection Agency gave the company awards in 1993 and 1994 for emissions reductions.

Rocketdyne Division also made major reductions in toxic air emissions under the South Coast Air Quality Management District’s Toxic Hot Spots program, reducing the risks to surrounding neighborhoods to zero between 1989 and 1991.

And, the company won a clean air award from the Air Quality Management District for pioneering a new, water-based method of cleaning Space Shuttle engines. Previously, they had to use solvents that harmed the ozone layer.

Richard Reisenweber, the company’s vice president of environment and health, said Rockwell is proud of its accomplishment in the EPA’s voluntary program to reduce air emissions 33 percent by 1992 and 50 percent by 1995.

In fact, the company cut emissions by more than 50 percent by 1992 and by 85 percent by the end of last year, Reisenweber said.

EPA spokesman Arnold Robbins verified that Rockwell was one of the first volunteers and did exceed the 50 percent level by 1992. He added that the EPA cannot verify last year’s levels.

But Rockwell critics said despite the company’s records of environmental improvements, the FBI raid and state allegations that Rocketdyne was illegally burning off toxic explosives renews the debate – at least until the company can provide evidence that the incident was an aberration, not a continuation of a corporate culture that engaged in environmental crimes.

“What’s of concern to me is, given the volatile nature and hazardous nature of a lot of the chemicals and hazardous material at Rockwell, is whether this is an isolated case or a pattern,” said Assemblyman Richard Katz, D-Panorama City. “Was this the result of some really stupid decisions by some people who were out of control, or is this a pattern of behavior that is part of the company’s way of doing business?”

For instance, even before federal agents raided Rocketdyne’s offices in the criminal probe, the division had been cited by the state for numerous violations – most of them for the treatment, handling and disposal of hazardous waste, records show.

Between late 1986 and mid-1994, Rocketdyne racked up 31 violations, including minor paperwork problems, but also more serious allegations of environmental breaches.

In one of the largest settlements of its kind with the California Attorney General’s Office, the company agreed in December 1993 to pay $650,000 in connection with an array of citations for problems at its facilities in Santa Susana, Palmdale and El Segundo.

At the Santa Susana laboratory, state Department of Toxic Substances Control identified ground water polluted by an industrial solvent in both its National Aeronautics and Space Administration and Air Force areas.

Rocketdyne paid $280,000 in civil fines after state inspectors discovered that company workers, among other things, had disposed of liquid hazardous waste improperly, did not close down waste “impoundment” ponds and did not have proper plans and inspection records on hand at the Canoga Park manufacturing plant and Santa Susana.

At the company’s four locations where previous problems were cited, Rockwell’s actions repeatedly have come under fire. SANTA SUSANA Santa Susana, located in the Simi Hills three miles west of Chatsworth, caught the eye of regulators when a 1989 U.S. Department of Energy environmental survey found problems with radioactive and chemical contamination at the 2,600-acre mountain site.

The federal EPA stepped in and assumed oversight of the cleanup program at the field laboratory, where the company conducted four decades of nuclear research under DOE contracts. A $55 million cleanup is under way.

The DOE survey, subsequent testing and expanded environmental monitoring has revealed no evidence of a health threat to workers or the public.

Monitoring and testing is continuing, and a health study of past and present Rocketdyne nuclear workers is being conducted. Preliminary results are expected this fall.

Rockwell also is involved in a multimillion-dollar cleanup of toxic solvents from the ground water under Santa Susana in a program ordered by the state Regional Water Quality Control Board.

More than 1 million gallons of ground water are pumped out of the ground and cleaned daily of the solvents that were allowed to seep into the ground during decades of rocket testing at the site.

But the attention of the public and regulators had focused mainly on the area at Santa Susana where research was conducted for the DOE and where nuclear contamination was a problem.

It wasn’t until the fatal explosion last year that killed Otto Heiney and Larry Pugh that state Occupational Safety and Health Administration investigators began looking into the handling of rocket fuel and other explosives in the areas devoted to work for the U.S. Air Force and NASA.

Federal officials said in the wake of the FBI raid that evidence probably will be presented to a grand jury and that it will be weeks or months before it is known whether indictments will be returned.

The Clinton administration has asked for $1 million during fiscal year 1996 for ongoing cleanup in the DOE area of the field laboratory. ROCKY FLATS Rockwell ran the Rocky Flats plant for the Department of Energy from 1975 to 1989. Rocky Flats bears strong similarities to the most recent Rocketdyne difficulties in that it also was raided by federal authorities. After Rocky Flats was raided in June 1989, a grand jury convened to investigate the company’s practices there.

“The government didn’t provide oversight and the company took advantage of it,” said Bob Quillen, director of the Colorado Health Department’s radiation control division.

Rocky Flats has been cited as one of the nation’s most polluted plant sites, with 166 hazardous waste dumps and plutonium waste beyond the plant’s boundaries that may have contaminated workers and nearby residents, federal records show.

After convening for 2-1/2 years in secret, a federal grand jury in Colorado took the unprecedented step of going public with the findings, saying the government was not harsh enough.

Rockwell was charged with operating a plutonium incinerator in secret after it was ordered shut, spraying radioactive wastes onto a nearby field and leaking chemical wastes into nearby creeks.

Rockwell pleaded guilty in March 1992 to five felonies and five misdemeanors and paid an $18.5 million fine, which critics said was only a fraction of what Rockwell was paid for running Rocky Flats. Eight months later, 12 of the 23 grand jury members took the unprecedented step of coming forward to criticize the federal government’s prosecution, saying it wasn’t tough enough.

“We wanted the Justice Department investigated for their handling of the grand jury,” said Wesley McKinley, the panel’s foreman.

Jackie Brever, a former operator in chemical recovery at Rocky Flats, blew the whistle on Rockwell and later claimed harassment in a subsequent lawsuit.

“In my opinion, they did this because I talked to the FBI about my years at Rockwell and problems they had,” Brever said.

Stocker would not comment specifically about the Brever case, but said there were some employees concerned about losing their jobs who may have harassed co-workers.

“I’m not aware of any management-directed or management-condoned harassment at Rocky Flats,” Stocker said.

Stocker said Rockwell’s troubles at Rocky Flats arose primarily because the company operated the site for the Department of Energy. The department put restraints on Rockwell, hampering its ability to run the plants, said Stocker.

Most of the Rocky Flats problems stemmed from Rockwell’s inability to get permits to ship the material out, Stocker said. The spraying was federally approved but proved problematic when water began running off the fields, he said.

“We could not shut down the spray field without shutting down the plant. We were told by the Department of Energy that we could not shut down the plant. Did that result in violations of water laws? Yes it did,” Stocker said.

Rockwell lost the contract to operate Rocky Flats in 1989. President Clinton has requested $640 million in cleanup funds for Rocky Flats for fiscal year 1996. HANFORD Rockwell ran Hanford, the nation’s largest nuclear reservation and weapons plant, from 1977 to 1987. Rockwell relinquished its contract under heavy public criticism after the facility was ordered shut in 1986 due to radioactive waste contamination in and around the site.

At Hanford, 66 underground tanks leaked 1 million gallons of radioactive material, spreading contamination into the soil, records show. Federal records show that radioactive iodine was released from the plant in its early years of operation.

The plant was in the hands of several contractors over its 52 years of operation, including Rockwell. Westinghouse is supervising cleanup at Hanford, which is expected to take several decades.

The contamination was the fault of prior contractors, Rockwell officials said. But state records show that in trying to restart the plant in the early 1980s after it lay dormant for years, Rockwell had several mishaps including a near-chain reaction, exposing several workers to radiation, said Jerry Gilliland, spokesman for the Washington Ecology Department.

“They were operating on the basis of producing plutonium and not dealing with safety issues and environmental issues,” said Gilliland, himself a former Rockwell spokesman when the company operated Hanford.

Rockwell has acknowledged that it contaminated one-third of an acre with plutonium at Hanford due to a broken valve. That led to th incident in which Gardner, the Washington governor, faced potential irradiation in 1985.

Rockwell officials acknowledged that company workers took down signs warning of potential hazards at the contaminated field moments before Gardner’s motorcade passed during a much publicized tour of the Hanford reservation.

The signs were replaced after the governor and his entourage had passed.

Stocker conceded that removing the signs was a mistake. He said the employee who ordered it done was fired.

Stocker said that although dozens of lawsuits have been filed against former Hanford operators, evidence disclosed so far shows no culpability by Rockwell.

“We came to Hanford in 1977, and I understand that virtually no evidence has been produced . . . of meaningful releases during the time we were there or subsequent to that,” Stocker said. “In fact, I understand that there’s a very high likelihood that Rockwell and the other (later) contractors are probably going to be dismissed out of those cases for lack of evidence.”

Clinton has asked for $1.4 billion in Hanford cleanup funds for next year. RUSSELLVILLE, KY. The problems at Rockwell’s aluminum die casting plant at Russellville involved the discharge of massive quantities of PCBs, a suspected carcinogenic compound that was commonly found in lubricating and insulating oil in an impound lagoon near the plant.

In 1985, a study by the state’s Department of Environmental Protection found significant PCB contamination in local streams and high levels of the toxic compound in fish.

The state cited Rockwell, saying the company had discharged PCBs into ditches and a stream that empties into the Mud River. Pollution also has been found along 64 miles of the Mud River.

Rockwell has been involved for the past decade in a $12 million cleanup under an agreement with the state. The company has sold the Russellville plant, but remains responsible for the cleanup.

The post Rockwell’s Flawed Environmental Record Questions Raised Over History of Infractions at Company Sites appeared first on Chip Jacobs .

The odyssey that led to Rockwell International’s guilty plea and $6.5 million fine last week for hazardous waste violations began in March 1994 with a small chemical fire at the company’s remote test facility near Chatsworth.

“It was a few grams of material that had been just neglected inside of a glove box and started a fire,” said Stephen Lafflam, director of environmental safety for the company’s Rocketdyne Division. “It caused about $5,000 in damage.”

But that small fire focused Lafflam’s attention on a little-known research group at Rocketdyne called the Advanced Chemistry Technology Department – and on roughly 13 tons of toxic materials and high explosives that the group had stored in labs and bunkers at the mountain site.

“And that’s when we knew we had some housekeeping problems and we had an inadequate inventory of the material, and we started to do some housekeeping and cleanup,” Lafflam said.

Late that summer, the company spent more than $1 million to hire a highly specialized hazardous waste hauler to package and cart away the 26,000 pounds of chemicals, nearly two tons of which was old, off color, mislabeled or otherwise unusable, Lafflam said.

But before the waste was properly disposed, some was illegally burned on site, and physicists Otto Heiney and Larry Pugh were killed in the process.

The two scientists died in an accidental explosion July 26, 1994, at the company’s Santa Susana Field Laboratory while they were illegally burning explosive waste from the chemical storehouse.

The deaths sparked an FBI investigation that led to a July 1995 raid by federal agents on Rocketdyne’s Canoga Park headquarters and the Santa Susana laboratory, and to last week’s record corporate fine for an environmental crime in California.

It also led to the unprecedented public admission by Rockwell Chairman and CEO Donald Beall that the scientists were in fact conducting bogus experiments with the real motive of disposing of hazardous wastes simply by burning them up.

Beall conceded that company executives had been wrong in early statements that the scientists were conducting legitimate tests. In fact, he said, they had been been breaking the law.

Standing before reporters and television cameras, Beall wondered how the incident could have happened in the first place. How could the company have wound up with 13 tons of explosive hazardous waste that should have long ago been disposed of properly?

After all the emphasis he had put on environmental safety at the corporation’s 82 facilities worldwide, Beall wondered, what had gone wrong?

“I can’t imagine that there was a financial incentive for keeping these materials,” he told reporters. “It’s inconceivable to me that a financial motive would have been involved here.”

Rocketdyne President Paul Smith said he could think of no reason that the scientists would have been trying to dispose of the hazardous explosives illegally when the company routinely ships hazardous waste from its manufacturing operations.

Legitimate tests

That was why, Smith explained, he initially believed employees who were interviewed after the fatal blast and maintained that legitimate tests were being conducted.

“It just seemed to be a very legitimate activity,” Smith told reporters last week. “Every employee that we did interview told us the same thing: That these were legitimate tests for legitimate purposes.”

But in hindsight, Smith conceded, the internal Rocketdyne investigation raised some disturbing questions about what the scientists had been doing.

“For example,” Smith said, “we could not find any data that had been recorded on the test instruments that were at the site.”

Still, what was the motive? Indeed, the chemistry group had only 160 pounds of the explosive compound, triaminoguanidine nitrate, better known as TAGN, Lafflam said.

The company pleaded guilty to three counts of illegal storage and disposal of TAGN last week, and no other chemicals or explosives were mentioned.

Lafflam said it would have cost $15,000 maximum to legally ship that much waste to a licensed hazardous waste dump.

“We spend nearly $11 million a year on environmental management trying to do the right thing, the right procedures and go beyond compliance,” Lafflam said. “I have to ask myself why they would do this. But I’m not sure what the answer would be.”

Federal prosecutors said last week that they will be looking for the answer as they continue the criminal investigation before a grand jury.

Although the plea agreement precludes further criminal charges against the corporation, it does not prevent new criminal charges against individual employees, said Assistant U.S. Attorney William Carter.

Only the first step

“We’re continuing to investigate, and as a condition Rocketdyne has agreed to give us the information from their investigative materials,” Carter said. “This is just one step in a long process. We are still moving forward.”

Asked how high up the corporate ladder the investigation might reach, Carter said there is “no limit.”

Among the questions that remain are: Who ordered the bogus tests; who knew the real reason they were being conducted; and how high up did the knowledge go?

The answers almost certainly lie with the company’s now-defunct Advanced Chemistry Technology Department. But neither company officials nor government prosecutors would discuss the department or any individuals who ever worked there.

All Rocketdyne officials would say is that some employees were either fired or placed on suspension without pay in the wake of the fatal explosion. Officials would not name any employees.

“We don’t want to point fingers at anybody today,” Smith said last week.

The Advanced Chemistry group was composed of only 17 people in early 1994 and was in the process of winding down operations, company officials said. The department was to be completely gone by the end of 1994.

According to court documents, the group of brainy chemists and physicists had been developing gun propellants and flares for the Department of Defense.

The director of the department was Joseph E. Flanagan, who had been a Rocketdyne employee for more than 32 years, according to Flanagan’s statement to investigators with the California Occupational Health and Safety Administration.

“(O)n July 25 (1994), I met with Otto Heiney to discuss his revised procedures for the testing scheduled the next day,” Flanagan wrote in a statement to Cal-OSHA investigators.

“He took the fall”

Rocketdyne officials refused to discuss Flanagan’s tenure at the company.

But one chemist who had worked in the chemistry department years before the explosion said Flanagan was forced into retirement after the accident.

“He took the fall for this. It was his group,” the chemist said.

Flanagan did not return phone calls, and family members said he refused to comment for this article.

Whatever scientific work Flanagan’s 17-person group was doing, it was not well known within the Rocketdyne Division of 5,200 employees. Lafflam said he had never heard of the group until the March 1994 fire.

But after the fire, Lafflam’s 60-person environmental safety department became intensely interested in the chemistry group’s toxic storehouse.

A critically important question, Lafflam said, was whether any of the arcane chemical compounds and highly explosive materials being stored there were unused and unneeded.

Under federal law, such materials are considered hazardous wastes that can only be stored for 90 days before being shipped to a licensed waste dump.

In August 1994, the month after the fatal explosion, Rocketdyne hired UXB International Inc., a Virginia firm that specializes in disposal of highly explosive wastes, to inventory the chemistry department’s stores and dispose of them.

“I don’t know how they picked UXB, but I do know the handling of this type of material is highly specialized,” said Dave Wilma, head of criminal investigation for the U.S. Environmental Protection Agency in San Francisco.

“I don’t think you can get somebody by looking in the phone book.”

UXB (whose name derives from a term for “unexploded bomb”) was paid more than $1 million to remove 26,000 pounds of chemicals and explosives.

Taken to the dump

About 60 percent of the material was taken to a licensed waste dump and destroyed, Rocketdyne officials said. About 40 percent was shipped to U.S. government facilities for reuse.

“It was a whole variety of stuff, lots of different materials,” Lafflam said. “Some very basic stuff: fuse cord, primer, black gunpowderSome simple things and some more exotic things that they made.

“These were typically scientists who were experts (at making) some special stuff for the government.”

Reviewing the UXB inventory, Lafflam said there were 3,700 pounds of toxic materials and explosives that were unusable and clearly qualified as hazardous waste.

“So we could say that we probably clearly had 3,700 pounds of waste that should have been gotten rid of prior to this accident,” Lafflam said.

“You know, in hindsight you can go in and say, I’m not sure when it changed color or when the label fell off. But at the time of the inventory by UXB, I would have looked at that material and said, you know, let’s get rid of this as waste.”

Last week’s plea agreement expressly states that Rocketdyne will turn over to prosecutors the UXB report and inventory of the chemicals and explosives.

“Thirty-seven hundred pounds is almost two tons. That’s a lot,” said the EPA’s Wilma.

In a written response to Daily News questions in August, Rocketdyne said 80 pounds of TAGN was shipped to Alliat Techsystems, a waste disposal firm in Elk River, Minn. and 70 pounds were shipped as useful product to Air Force Phillips Laboratories at Edwards Air Force Base.

Well before the fire, Rocketdyne policies and procedures were in place requiring the Advanced Chemistry department to notify environmental engineers of the wastes and have it disposed of within 90 days, Lafflam said. Why that didn’t happen is unknown, he said.

Details of fine

Of the $6.5 million fine that the company paid last week, $5.5 million was for illegal storage of TAGN for a period of 55 days. The other $1 million was for two counts of illegal disposal of the waste in the bogus experiments.

“I had not given any orders to anybody to dispose of it,” Lafflam said of the chemical stores in the days after the fire.

“We were asking (the Advanced Chemistry group) the tough questions: Do we still need it? What do we need it for? Which programs is it going to support?” Lafflam said.

“And it’s really these scientists, these world experts who handled the material and who manufactured the stuff, who really know when they are going to need it.”

How Flanagan’s group responded to these questions is unclear. But a chemist who formerly worked with the group told Cal-OSHA investigators that Heiney had expressed grave concerns about the situation.

“Otto and I talked quite frequently and attended the same technical conferences,” Ronald L. Simmons, now a chemist for the Navy in Maryland, said in a written statement to state investigators.

“As a matter of fact, we talked about the need for Rocketdyne to dispose of excess chemicals and explosives only a week or so prior to the incident,” Simmons wrote.

“Otto said that they could not legally store the materials any longer, they could not ship them anywhere and could not obtain a permit to burn them. He said, `What in the hell are we going to do?’”

Did not have permit

One of the problems the company faced was that it no longer had a Ventura County permit to burn explosive chemicals as wastes, as it had done at Santa Susana from 1958 until 1982, according to documents from the state Department of Toxic Substance Control.

The company stopped the practices in 1982 because the new federal Resource Conservation and Recovery Act prohibited such disposal without a federal permit.

In California, those federal permits are issued by state toxics officials. Rocketdyne applied for a new federal permit in 1990, according to state documents.

The company was granted an interim permit to burn no more than five pounds of wastes in May 1990, while its application for a permanent permit was being processed. But the company abruptly withdrew the permit application in November 1990, according to state records.

Company officials said they decided it would be cheaper and easier to ship the waste to a licensed waste dump.

But during a routine inspection, state investigators found company logs indicating that far more than five pounds of wastes was burned while the interim permit was in effect. The company was fined $650,000, which it paid in 1992.

Sources close to the current federal case said investigators will be looking closely at what the company was doing with its solid explosive and chemical waste after it gave up trying to get a federal permit to burn it.

“Where was it going between 1990 and 1994?” the source said. “You have to look at what they were shipping.”

In hindsight, Lafflam said that he should have moved more quickly when he discovered the chemical and explosive stores were going to present a problem, especially since the chemistry group was in the process of being phased out.

“A lot of things were in the works that weren’t being handled as aggressively as they probably should have,” Lafflam said.

Knight was the lead writer on this story, with Jacobs and Van Derbeken contributing.

The post Rockwell Debacle: How Did it Start? appeared first on Chip Jacobs .