(CN) - Though not liable past environmental contamination at three production sites of rocket motors, the United States must cover some future response costs, a federal judge ruled.
The 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 Martin said it has reviewed and will comply with the court's order and "will continue to work cooperatively with the U.S. government in our commitment to restore the environment at these sites."
Government inspections generally focused only on issues of quality control and safety risks during production and testing of propellants, not environmental pollution.
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.
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.
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. The agreement also stipulated, however, that Lockheed would not gain a double recovery for environmental-remediation costs through insurance proceeds or other types of payment.
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, it sued the government to directly recover those damages under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).
The government filed its own CERCLA claim in response, seeking equitable allocation of response between the parties for the sites. It also argued that the 2000 deal bars Lockheed from recovering response costs it had already indirectly recovered.
In 2009, a federal judge in Washington found that the agreement does not settle CERCLA claims, and that the government failed to distinguish between itself as a client and itself as a partially responsible party.
When the government moved for reconsideration, the court again denied summary judgment. It deemed the government's arguments concerning taxpayer burden and equitable considerations relevant, however, and "therefore left open the door" for the government to pursue those arguments in this case.
Both parties admitted to liability under CERCLA at trial and asked the court to determine their responsibility for response costs at the three sites.
Despite several procedural difficulties, including gaps in the record and the fact that few CERCLA cases make it to the allocation stage, U.S. District Judge Ellen Segal Huvelle found last week that the government need not pay for past response costs but is responsible for future costs.
The 108-page ruling looks at the source of contamination, the typical allocation of response costs, and how Lockheed's indirect recovery of costs affects equitable allocation.
Though unable to pinpoint exact sources of perchlorate and trichloroethylene contamination, Huvelle did find that contamination at the three sites likely resulted from rocket-motor testing, the dumping of waste solvents onto the bare ground and the incomplete burning of chemicals percolating into the soil or dissolving in rainwater and thereby infiltrating groundwater supplies.
Lockheed argued that the government should have a higher allocation because it owned the chemicals and the facilities where the disposals and subsequent contamination occurred.
Huvelle deemed it more important, however, to determine who disposed of the chemicals and had primary control over on-site operations.
Since Lockheed exercised much more control over daily waste-disposal practices at the sites, it "should shoulder a large proportion of the liability for response costs at the sites," the ruling states.
Huvelle conceded that it would be inequitable to put the burden for response costs entirely on Lockheed because the government knew about and approved of many of its disposal practices at the facilities. Nevertheless, the fact that Lockheed violated its own rules and government protocols regarding waste disposal at Redlands and Potrero Canyon means that it should receive a higher allocation for these sites, the ruling states.
Turning to the "novel issue" of whether Lockheed's indirect recovery of response costs impacts equitable allocation, Huvelle said Lockheed's bid for direct payment does not amount to a double recovery, allowing it to collect those funds would profit Lockheed at taxpayer expense.
Indeed, Lockheed has collected around $17.2 million in such pre-tax profits, and has already indirectly collected from the government far more than its equitable share of response costs, the court noted.
Thus, it would be "inequitable to allocate any liability for past response costs for the sites to the government," Huvelle wrote.
Allowing Lockheed to recover future response costs will not unfairly burden taxpayers, meanwhile, because direct recovery under CERCLA will actually cause it to lose some profit, she added.
"Having considered the evidence, the controlling law, and all relevant equitable factors, the court has determined that an equitable allocation for the past response costs for all three facilities is 0 percent liability to the United States and 100 percent liability to Lockheed," the opinion states.
"In contrast, the court will equitably allocate future response costs between the parties differently for each facility: 29 percent to the United States and 71 percent to Lockheed for the Redlands facility; 24 percent to the United States and 76 percent to Lockheed for the Potrero Canyon facility; and 19 percent to the United States and 81 percent to Lockheed for the LaBorde Canyon facility," Huvelle added.
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