(CN) — The D.C. Circuit ruled the government will have to foot most of the bill for cleaning up three California rocket-building sites because a contract allows Lockheed Martin to recover costs for environmental rehabilitation.
Friday’s decision concerns three California facilities where Lockheed Propulsion Co. researched and built “state-of-the-art solid propellant rocket technologies” from 1954 to 1975 to support several of the country’s Cold War space programs, including the Vanguard satellite and the Apollo lunar missions.
A 500-acre facility in Redlands was one such site, as were the 9,100-acre Potrero Canyon facility and the 2,500 acre facility at LaBorde Canyon.
Lockheed initially disposed of waste propellant, waste solvents and scrapped motors by piping them to concrete-lined pits where the liquids evaporated, leaving behind large piles of sludge.
Later, the company burned wastes in burn pits or disposed of them in the Mojave Desert at Camp Irwin, now known as Fort Irwin, according to court records.
Several chemicals percolated through the soil, however, and contaminated the groundwater near the facilities. Trichloroethylene, a possible human carcinogen, and perchlorate, which inhibits iodide uptake in humans when ingested and decreases thyroid hormone production, are two such chemicals.
Lockheed has already spent around $287 million to clean up the sites and estimates future response costs at an additional $124 million, court records show.
A September 2000 agreement with the Defense Contract Management Agency allowed Lockheed to collect indirect costs for environmental response at discontinued sites, including the three facilities at issue.
This agreement has allowed Lockheed to recover around $208 million of response costs through indirect charges for goods and services to its defense contracts.
In July 2008, the company sued the government to directly recover those damages under the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA.
The government filed its own CERCLA claim in response, seeking equitable allocation of response costs between the parties for the sites. It also argued that the 2000 deal bars Lockheed from recovering response costs it had already indirectly recovered.
A federal judge ruled in 2014 that Lockheed must bear 100 percent liability for past response costs, but that the U.S. government must pay between 19 and 29 percent of future cleanup costs at the three California facilities.
The government did not dispute the allocation of costs on appeal, but argued that the parties’ agreed-upon CERCLA reimbursement method required the government to pay double.
The government has already paid out $208 million via contract overhead — well over its 29 percent share of $124 million in estimated future costs. If past costs are added in, the estimated total cost of the cleanup is $411 million. The government says it has already paid over half this figure.
But the D.C. Circuit said in an opinion filed Friday that it is “powerless to shift Lockheed’s share of the removal costs from the taxpayer back onto the company,”
“The reason the government will end up paying far more than its own 19 to 29 percent share of future costs is that it voluntarily agreed to let Lockheed pass through its share,” Judge Nina Pillard wrote for a three-judge panel. “Given the government’s decision to enter the billing agreement to reimburse Lockheed’s share of cleanup costs together with its CERCLA liability setting its own share, the only portion of the cleanup bill the government will not foot is the relatively small portion paid by Lockheed’s other customers.” (Emphasis in original).
The panel said it could not “save the government from the natural and probable consequences of its own conduct.”
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