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OxyChem Expands Cleanup Offer in Superfund Site Liability Fight

July 13, 2022, 9:30 AM

A dispute over cleanup of New Jersey’s polluted Passaic River could be nearing a breakthrough after a chemical giant proposed to sweeten its $441 million cleanup offer, which comes with some strings attached.

The latest offer by Occidental Chemical Corp., outlined in a June 27 letter to the Environmental Protection Agency, would keep its original January 2021 offer on the table to pay nearly a half a billion dollars, which is the entire tab for the design and remedial action along the upper nine miles of the Passaic River.

But the new offer for a “staged process” to coordinate the cleanup in tandem with another section of the river comes with the same demand OxyChem made with its initial pitch: that it retain the right to pursue contributions from other companies that it contends also polluted the river.

In recent months, several companies—including Sherwin-Williams Co. and the Givaudan Fragrances Corp., a Swiss-based fragrance and cosmetic company—have worked toward a settlement with the EPA that would also shield them from having to contribute to OxyChem’s cleanup costs along the upper nine mile stretch of the Passaic River, one of the nation’s most expensive and complicated Superfund sites. The new offer includes that section, and a different 8.3 mile stretch of the river.

The companies regard OxyChem’s cleanup offer and related litigation as a last-ditch effort to prevent EPA from properly wielding the authorities it has under the nation’s Superfund law to determine which polluters should or shouldn’t be held accountable.

OxyChem has responded with warnings that its $441 million dollar offer could be jeopardized if it can’t seek to recoup some of its costs from other polluters. OxyChem continues to push back against the negotiations between EPA and other polluters, including through ongoing litigation it launched in 2018.

The standoff illustrates the challenge of using the Superfund law to clean up waste sites such as the Passaic River that were polluted so long ago. It also raises questions about whether EPA should be using its authority under the Comprehensive Environmental Response, Compensation, and Liability Act to negotiate settlements that essentially offer liability protection, leaving companies like OxyChem stuck with the tab and barred from going after other companies to pay up.

Challenges Assigning Blame

That law gives companies pursuing cleanups the right to sue other responsible parties, with costs allocated by a federal court, not the EPA, the company said in its offer letter to EPA Administrator Michael Regan.

“EPA is an agency of limited jurisdiction and Congress did not grant EPA authority to adjudicate responsibility among responsible parties by barring contribution claims or otherwise,” according to their letter.

OxyChem’s offer includes taking the lead in sequencing work on both sites to minimize the risk that the upriver cleanup would “impair” work on the downstream cleanup.

Many companies have argued there is thin evidence showing they’re liable for cleanup, or that they, like Sherwin-Williams Co., have already spent money toward cleaning up their pollution.

The global paint company “has spent millions of dollars” in early remedial investigation efforts and feasibility studies, working cooperatively with the EPA, said Julie Young, Sherwin Williams’ vice president of global corporate communications. OxyChem has continued “baseless” attempts to blame other parties “instead of focusing its efforts on working with EPA and other parties to clean up the Passaic River.”

‘Hail Mary Attempt’

On the overall cleanup plan, OxyChem shares key objectives with the agency, according to an OxyChem spokesperson, “that the cleanup of the Passaic River move forward in an effective, efficient and timely way and that all responsible parties be required to pay their fair share of the cleanup costs.”

But other companies view it differently. Companies agreeing to one settlement with EPA outlining their cleanup responsibilities shouldn’t then be vulnerable to being sued for contributions by other companies polluting the site, they argue.

“OxyChem has not been able to escape the fact that it alone is responsible for the cleanup costs to address the dioxin (and other pollution related to the Diamond Alkali site operations) in the river,” William Hatfield, an attorney with Gibbons PC law firm representing Givaudan, wrote in a Feb. 15 letter to Thomas Scrivo, the court’s special master overseeing the litigation.

OxyChem disagrees.

The U.S. government isn’t free to “insulate” some companies “from their responsibility to OxyChem for costs OxyChem has incurred and will continue to incur to clean up” pollution the company didn’t cause, according to Kathy Patrick, an attorney with Gibbs Bruns LLP representing OxyChem in the litigation.

The companies battling OxyChem have dangled the possibility that they are nearing a settlement with EPA limiting their liability in part to distract the court’s attention from evidence they polluted the river, according to OxyChem.

The EPA declined to discuss specifics as negotiations are ongoing, including “the inclusion or exclusion of potential settlement provisions or the basis” for settlements, according to Stephen McBay, a spokesman with EPA’s Region 2 office.

The EPA and the Justice Department are “engaged in confidential settlement negotiations with several parties” related to the Lower Passaic River Study Area portion of the Diamond Alkali site, and any settlements between parties will be publicly released “if and when” they are reached, he said.

Dumping Ground

The Passaic River has been a dumping ground for companies since the late 1940s. One such company was Diamond Alkali, which operated there in the 1950s and 1960s manufacturing herbicides—including Agent Orange used in the Vietnam War. The Diamond Alkali site was later purchased by OxyChem and merged into the company.

EPA has made some progress in cleaning up the Passaic River but it and surrounding waterways haven’t improved much since the agency declared it a Superfund site in 1984.

In October 2021, the agency announced it had finalized an interim plan to clean up contaminated sediment in the upper nine miles of the Passaic River, roughly half of the larger contaminated waterway running along a 17-mile stretch. OxyChem has offered $441 million to clean up that portion.

Cleanups along the river accelerated in 2016 when EPA announced a settlement with OxyChem to jump-start the remediation of a different stretch of the river—the lower 8.3 miles—at an estimated cost of $165 million covering engineering and design work needed before the actual cleanup began. OxyChem also agreed to pay for EPA’s oversight costs for that lower river cleanup.

Work Parties Identified

Under the CERCLA Superfund law, EPA can require “potentially responsible parties” to do cleanup operations, or in some cases reimburse EPA for the cleanup costs it incurs.

In a March 2 letter sent to parties it considers potentially responsible for the cleanup—including four deemed as primary “work parties” for having significant enough liability to require them to share in either preforming or funding the cleanups—the agency said it is ready “to begin negotiations” toward a consent decree outlining the site cleanup including how it would be funded.

OxyChem along with Pharmacia LLC, Nokia of America Corp, the Public Service Electric & Gas Co., and PMC Inc. were all deemed to be on the hook for having sufficient liability. The agency offered PMC a “cashout settlement” to release it from any further liability, but PMC declined the offer, according to the EPA.

EPA’s letter is calling on OxyChem, Pharmacia LLC, and other other “work parties” to fully fund and perform interim cleanup efforts—which OxyChem had previously offered to perform under its $441 million offer—as well as contribute to efforts for the lower 8.3 miles of the Passaic River.

If the parties can’t come to an agreement, EPA could instead begin “a federally-funded remedial action” at the site, according to the letter to the work parties, “the costs for which you may be held liable under CERLCA.”

—With assistance from Stephen Lee.

To contact the reporter on this story: Dean Scott in Washington at dscott@bloombergindustry.com

To contact the editors responsible for this story: Zachary Sherwood at zsherwood@bloombergindustry.com; Chuck McCutcheon at cmccutcheon@bloombergindustry.com