EPA seeks $10 million in fines
against Willamette Industries

by Paul Koberstein and John Paul Williams
/Cascadia Times

Part 1

Meet Willamette Industries. WI, as it is sometimes called, is a national forest products manufacturing giant based in Portland that employs thousands of workers. But WI is sometimes called other names. The citizens who live near the WI plant in Gifford, Arkansas (pop. 300) call WI "criminals." And the Federal Environmental Protection Agency, in their stilted bureaucratese, calls WI, "...in violation of the Clean Air Act" at a baker's dozen or more of their plants across the country.

WI makes everything from cardboard to plywood to toilet paper. WI's 96 facilities dot the maps near the fir forests in the Pacific Northwest, along the pine woods of the South, and adjacent to the urban markets for timber products in the Northeast.

The towering smokestacks at WI's mills dominate the skyline, just as its large payrolls dominate the economies in towns with names like Millersburg, Oregon, (pop. 2729) Chester, South Carolina, (pop. 7158) and Malvern, Arkansas (pop. 9256)

But WI's smokestacks have also illegally spewed an often invisible cloud of airborne chemicals, some of which may cause cancer and birth defects, in these same communities, according to documents obtained from the EPA by Cascadia Times through the Freedom of Information Act.

Many of the folks who were exposed to WI's toxins were painfully aware of the excessive pollution. Their lungs ached. Their children coughed and wheezed. If they parked outside, their cars would become covered with soot from WI's stacks within a few minutes.

Scores of these folks complained to their state environmental protection agencies. In Oregon, they told the Department of Environmental Quality, or the DEQ. But for the most part, for decades, the agencies, and in particular the DEQ, ignored the vocal protests of residents, labor and protest groups.

Some groups reviewed thousands of pages of paperwork that revealed WI's excessive discharges of air toxins. These groups, including grassroots environmental organizations like the Northwest Environmental Defense Council and the Plumbers and Steamfitters Local 290, brought large volumes of evidence against WI to the environmental agencies. In response, the agencies, if they even bothered to issue a violation notice against WI, often would not even assess a fine. Mark Fisher, a permit writer for the DEQ, said his agency was aware that Willamette Industries "went many years without a renewal of their air permit." Nevertheless, he said the DEQ did not see any significant increase in air emissions. "We did the permitting according to our rules," he said.

But the Environmental Protection Agency and the Department of Justice have an altogether different impression. In their investigation of Willamette Industries, they allege that 15 WI building materials plants have violated several air pollution laws and regulations in Oregon, South Carolina, Arkansas and Louisiana. A separate case is being prosecuted against a WI pulp and paper mill in Pennsylvania. At some facilities, WI's violations began in 1980 and continued at least through 1998.

In recent weeks, the EPA and Justice Department have been quietly negotiating in Portland on a backroom deal with WI. After the fact, according to the EPA, the public may have an opportunity to comment on the appropriate penalty for WI's staggering record of violations.

Willamette Industries expects its penalty to be in the neighborhood of $10 million, according to documents it filed with the Securities and Exchange Commission. If so, it would rank among the largest penalties ever assessed for violations of the Clean Air Act.

Willamette Industries said it is not commenting on the EPA case.But Duane McDougall, the company's CEO, said in a recent speech, "I want to emphasize that we at Willamette feel very proud of our environmental record across the board. But at the same time we feel very frustrated at the approach the EPA is taking concerning enforcement actions on the Clean Air Act." He said it "appears to us (the EPA) lost sight of protecting the environment in favor of burdening companies with onerous capital expenditures and operating costs that will make domestic mills completely non-competitive, with negligible improvement to the environment."

But David Paul, a Portland lawyer who has battled Willamette Industries over its air pollution problems for years, sees the EPA's case altogether differently. "We're talking about 19 years of disrespect, not just for the law, but for the citizens who live around there, and the environment of the state of Oregon."

So far, the public has not been granted access to information spelling out the amounts and types of chemicals. Neither has it been informed about the severity of potential exposures, or the possible health damages suffered by the unknowing residents of the towns where WI operates.

Kory Tonouchi, an EPA official who has been involved with the negotiations, said Willamette Industries' illegal emissions are in the range of those seen at Louisiana-Pacific mills. In 1993, L-P, another wood products giant based in Portland, was fined $11.1 million in what then was the largest Clean Air Act fine in history. After L-P installed pollution controls under a consent decree, its emissions were reduced by more than 22,500 tons per year of carbon monoxide, volatile organic compounds and particulates.

WI's schemes were almost embarrassingly simple, yet strikingly lucrative. The company would simply give the environmental protection agencies inaccurate information about how much pollution would be produced by their new and expanded factories. The company would lowball the projected emissions, then never bother to correct the record later on. The public, which has a right to know about contamination in the air they breathe, was never told about the pollution.

Willamette Industries also allegedly violated Clean Air Act requirements which ensure that air quality is not degraded in areas where national air quality standards are being met. These are known as "prevention of significant deterioration" requirements. The EPA says violations also occurred at two mills in Lane County, Oregon, where air quality standards were not being met. The case also alleges that WI violated state permitting regulations in the four states.

By lowballing the emissions, WI benefited in at least four ways. It:

• escaped state taxes based on the tonnage of pollution it emits;
  
  
• escaped requirements to install expensive air pollution equipment;
  
  
• saved vast amounts of time in the process for obtaining air permits and constructing the factory; and
  
  
• was able to use money it didn't spend on correcting air pollution in ways that could be more profitable to the company.
  

In short, ignoring the Clean Air Act made good business sense at Willamette Industries, so long as the DEQ kept its mouth shut.

Bad Air in Bend

These days, Bend, Oregon is a trendy ski and golf Mecca on the high desert plateau, three hours east of Portland. Its 300+ days of sun, even when it is snowing, means its foothills are rapidly filling up with condo-confined Californians and fine restaurants.

But before 1970, when the beauties of Bend was know only to Oregon insiders, WI first fired up its "KorPine" particle board plant on the edge of town. Particleboard is made of wood chips glued and pressed together. Production at WI's KorPine mill grew fast, fed by pine logs from the federal forests nearby.

In 1998 alone, KorPine increased its particleboard production by 20 million square feet per year. This new production yields a correspondingly large increase in air emissions of the toxic "volatile organic compounds," like methyl ethyl ketone and formaldehyde, that are needed to manufacture its products. Like formaldehyde, many of these compounds are recognized carcinogens.

The EPA claims that WI modified the KorPine plant at least three times without first obtaining the required air permits. The KorPine plant had been illegally producing excessive pollution since at least 1986.

At KorPine, Willamette Industries claimed that its air emissions totaled only about 400 tons per year. That was true once, but not after WI repeatedly expanded production and added new equipment at KorPine. By the late 1990s, air pollution at KorPine totaled 1600 tons per year.

In a perfect world, a law-abiding company that wanted to increase its air pollution would go to an air pollution agency, and apply for a permit. The agency would respond by telling the company which air pollution-control technology it should install. Then the agency would hold public hearings. The whole process could take a year or more.

Over the last two decades, Oregon has not been such a perfect world. At KorPine and elsewhere, WI simply did not tell the state agency about the increased production. They instantly cranked up their assembly lines without the proper permits, and their smokestacks churned additional toxins into the air breathed by their unsuspecting neighbors. The EPA is now saying they vastly underestimated the amount of new air pollution from the new equipment.

Again, in our perfect world, the agencies would require honest companies to study and test the plant's air quality impacts for several months, by conducting a panorama of expensive and time consuming analyses. After two or more years, the honest company would have its permit.

The DEQ required no such tests. In failing to do so, it gave WI a huge competitive advantage. WI would not be required to operate expensive scrubbers on its plant to reduce air pollution.

This narrative assumes there are actually some honest competitors of WI. That is not certain. Tonouchi said the EPA investigated Willamette Industries, Weyerhaeuser and Georgia-Pacific in the aftermath of the Louisiana-Pacific settlement. The EPA found that a major segment of the wood products industry was operating outside the law.

"This is a continuing EPA initiative, where L-P started it all," Tonouchi said. "There was the discovery of a pattern of violations at L-P facilities, so EPA looked at other companies, including G-P (Georgia-Pacific), Weyerhaeuser, and now Willamette Industries. What triggered this was that EPA was noticing that the facilities under reporting, or improperly characterizing emissions. They weren't counting up their emissions correctly."

In its settlement, G-P agreed to pay a $6 million fine and install $25 million in pollution control equipment at 11 mills. In addition to its $11.1 million fine, L-P was forced to make $70 million in pollution control improvements.

In contrast, when Weyerhaeuser first discovered its facilities were violating the Clean Air Act, it began a self-review. Because it voluntarily approached the states and the EPA and took immediate action to comply, EPA chose not to pursue a federal action.

But not Willamette Industries, and now it may be WI's turn to pay a large fine. But if the amount is in the $10 million range, that's not anywhere near enough to cause any significant harm to its bottom line. In October, WI announced its profits during the third quarter of 1999 more than doubled. In three months, it made more than $81 million.

The EPA's prosecution of WI raises questions about Oregon's Department of Environmental Quality. Although not cited in the EPA's notices of violations, the DEQ has acted like an unindicted co-conspirator. Matt Walters, business manager of the Plumbers and Steamfitters Local 290, said stunning inattention is the most flattering explanation for why the DEQ failed to notice, on its own, that KorPine was emitting 16 times the amount of its admitted pollutants.

"We've been complaining for 10 years now and nothing has happened," Walters said. "(The DEQ) kept rejecting our complaints, telling us we have no business being involved. Now the EPA is telling them they were wrong."

That's not to say Willamette Industries did not expend considerable effort in disguising those emissions from the DEQ. Records show that sometimes when WI would install new, pollution emitting equipment, it would tell the state agency all about it. Then WI would conduct a "source test," to determine if the equipment, in truth, emitted only the stated amount of air pollution. But these source tests, even if witnessed by agency personnel, are sometimes suspicious. Company mechanics can fine-tuning the equipment for days in advance, to make sure it will burn clean.

In 1984, the WI KorPine facility failed an "source test" on the newly installed "green dryer." That should have alerted the DEQ that the green dryer was churning out excessive pollution. In 1993, the DEQ discovered that the scrubber on the green dryer had been broken and not operating for over one month. In 1994 the DEQ discovered that KorPine's boilers were exceeding their air pollution limits. In 1995 the Plumber's Union complained to DEQ in writing that KorPine's air pollution was 1000 tons a year over its previously declared limits. But DEQ did not take action to bring KorPine into compliance with the Clean Air Act. The EPA has cited the green dryer's pollution as one element in its Clean Air Act case against Willamette Industries.

Nor was KorPine the only Oregon facility where the DEQ failed to notice, despite obvious evidence, that WI was flaunting the law, according to the EPA's allegations.

For example, both the Northwest Environmental Defense Center (NEDC) and the Plumber's Union had told Oregon DEQ in writing in 1992 that another WI plant, Custom Products near Albany, Oregon, had tripled its production (and its air pollution) without obtaining the required permits. Custom Products had been claiming to DEQ that its emissions were 58.4 tons per year. In truth, its emissions exceeded several hundreds of tons per year. David Paul, Vice President for NEDC at the time of the Custom Products violations, complained to DEQ, "Such pollution increases by Custom Products are violations of the facility's permit and of Oregon Rules. You condone a terrible precedent when you repeatedly allow industries to break the law and then release their permit."

Oregon DEQ did not fine Custom Products for this violation, nor did EPA cite WI for any violations at the Custom Products plant. The EPA's Tonouchi said the agency did not take a close look at that facility's records during its investigation.

At the time the Custom Products violations first came to light, the Plumbers Union was incensed by DEQ's inaction. "Our researchers established beyond any doubt that Custom Products and other Willamette Industries plants in Oregon were grossly violating their air permits. In our opinion, they were making the air so dirty that no other industry could move to Oregon. WI was producing so much pollution that it was actually costing us jobs, in our analysis," Walters said.

The union also discovered air pollution violations at other WI facilities, including KorPine, and the WI "Duraflake" plant, across the street from Custom Products. But the Union's written complaints to DEQ were often ignored. Finally the union sued on behalf of one of its members, Royce Clouse, who lived in Albany, about 400 yards from the Custom Products plant.
In her deposition, Clouse testified, "My son just went to the hospital for lack of oxygen -- he couldn't breathe. He had to have some kind of asthma."

WI's attorneys asked Clouse if he could smell the Custom Products plant.

Clouse replied, "There's so many different smells in the air, I don't know which ones I'm smelling."

"That's Albany, isn't it," replied the WI attorney. What the WI lawyer acknowledged was that the area near Albany includes not only WI's Custom Products furniture plant, but WI's pulp and paper mill, a WI-owned natural-gas fired power plant, and WI's "Duraflake" particle board plant, along with other smokestack industries. Former Oregon Governor Tom McCall called the paper mill that WI now owns in Albany "A stinking cancer in the heart of the Willamette Valley." As you drive on Interstate 5 through Albany, it's hard to pinpoint just what smokestack is dumping which odors and fumes into one's lungs.

In some cases, WI's air pollution actually included visible particles. A reporter visited the WI Duraflake particle board plant in Albany to scrutinize its waste water discharges to nearby Murder Creek. After searching in vain for any fish in the creek, the reporter returned to his car. In just a few minutes, the car had become covered with a black, oily soot from the Duraflake plant. That's a too-common experience for neighbors of WI plants.

In Gifford, Arkansas, (Pop. 300, so small it is not even on a Rand-McNally Atlas) Thelma Ray has complained to her Arkansas Department of Pollution Control about a snowy residue falling from the sky around WI's plant, coating any items that are left outside. The "snow," which contains cancer-causing formaldehyde, produced headaches and sinus problems among Ray and her neighbors. One of her neighbors, Carolyn Freeman, said in a 1996 published account, "I'm sitting here with fiber pulp on my car right now, You could write in it with your finger."

Apparently, when WI's pollution is so grossly visible, state environmental agencies can be prodded into limited action. Albany's Duraflake plant was eventually fined $65,040, and the Arkansas regulators have assessed a $60,000 fine against the WI plant in Gifford, among other actions.

The EPA's notices of violations cited both plants. According to the EPA, Duraflake has violated air pollution laws for 15 years now. Duraflake added equipment in 1984 and did not report an emissions increase, and again increased production and pollution in 1995, without reporting an emissions increase.

The EPA also cited the Gifford plant, charging that WI added equipment in 1987-88, and increased production in 1997. As the word smiths at EPA described it:

"On numerous occasions since startup in 1983, Respondent (WI) has failed to properly identify VOC (volatile organic compounds, including air toxins that can cause such things as birth defects and cancer), CO (carbon monoxide) PM (particulates, or very fine dust) and NOx Emissions (oxides of nitrogen), meet permitted emissions limits, and obtain appropriate permits, as required by Arkansas and the federal regulations."

What that dry language meant to Gifford resident Carolyn Wright was that WI' s toxic air pollutants were discovered in her family's air conditioner. They were found in their urine samples. An Arkansas jury ordered Willamette Industries to pay a $226,250 judgment to Carolyn Wright.

But overall the courts have reacted with hostility toward lawsuits against WI, both in Oregon and Arkansas. The appeals court overturned Wright's award. The Oregon Supreme Court also dismissed the Plumber's Union's suit -- remarkably on the grounds that no group of any kind had any right to sue in Oregon on behalf of its members. (In 1999, the Oregon Legislature partially removed that law from the books. Groups can now sue over air violations, but not water violations.)

The EPA says that with this provision, the Oregon DEQ was violating not only EPA rules but the U.S. Constitution. No other state bars its citizens from the courtroom when they are seeking to challenge a state environmental decision. For the last four years, EPA has been wringing its hands over whether this breach is serious enough to cause it to strip Oregon of its authority to enforce federal air and water pollution laws. In the meantime, the Sierra Club, or any other group, could not challenge any DEQ actions in court.

At some point, Willamette Industries' scheme to produce secret plumes of unregulated pollution became a profit-making opportunity. Every year, WI was underpaying its annual assessments to state environmental agencies, figured on a payment for each ton of pollution emitted. Since WI officers have had to "certify" annually that they were paying the correct amount, there may be some potential tax problems ahead for the company. It also may be liable if it lied to government agencies. In any event, violating the Clean Air Act was good for the bottom line at Willamette Industries and at the facilities where it evaded the laws, at KorPine, Duraflake, Gifford, and at 1east 12 other facilities.

Records obtained by Cascadia Times indicate WI appears to have escaped prosecution for its permit violations at the Custom Products plant, and other facilities. Its Lebanon, Ore., plant failed to tell Oregon DEQ about 41.2 tons per year of VOC emissions from its dry kilns until 1996. And records show that WI's Albany pulp and paper mill burned more tires in its boilers than its permits allowed, in 1988. DEQ's files do not show WI was fined one cent in either instance.

It is important to note that the vast majority of pollution monitoring and reporting in the United States takes place solely by the voluntary efforts of the polluters themselves. The state and federal agencies rarely possess either the staff, the equipment, the funding, the expertise, or most importantly, the political will to go out in the field and stick a pollution snuffer in someone's smokestack.

There are several reasons why pollution laws are enforced in this haphazard manner. State legislators are often dominated by business interests who despise environmental laws, and are loathe to fund the agencies that enforce those statutes. In many cases, it is even illegal for a pollution cop to show up and make a surprise inspection at a factory.

EPA's action is a major advance for the long-suffering and long-complaining neighbors of WI's plants. Such EPA action typically takes place only when a state air pollution agency has chronically failed to enforce environmental laws.

And as a practical matter, if a state environmental enforcement officer appeared unannounced at a timber mill -- a surprise, spot check on the plant 's pollution -- the company would probably be calling the state governor on speed-dial within seconds. The vigilant enforcers would likely find themselves reassigned to inspecting septic tanks in the hinterlands soon thereafter, or out of a job. Buddy Slate, a Little Rock lawyer who helped a number of clients win settlements against Willamette Industries for pollution at a plant in Malvern, Ark., said an employee of the Arkansas Department of Environmental Quality "lost his job for raising too much Cain about it."

"It's politics," Slate sighed. "The head of the DEQ was a political appointee of Jim Guy Tucker, our former governor, and now he's a convicted felon."

Part 2

The nuts and bolts of the EPA's case against Willamette Industries