Dirty Dealings at the Dock

San Francisco is planning to take title to the decommissioned Hunters Point Naval Shipyard before the military completes an environmental cleanup. The move could cost the city hundreds of millions of dollars -- or more.

Last fall, International Technologies Corp., a U.S. Navy contractor, was pounding metal sheets straight down into the lip of a landfill on the southwestern corner of the Hunters Point Naval Shipyard. The metal walls were meant to be a temporary barrier; for a time, at least, they would prevent toxic chemicals in the ground and water there from leaching into the bay.

But that purpose receded in significance shortly after the pounding began.
During their descent into the earth, the walls collided with a mysterious object. A green cloud of chlorine gas shot out of the landfill and into the air -- and chlorine gas is no laughing matter. If you breathe enough you can pass out, and, if you breathe much more, you can die.

Work stopped, and the Navy contacted the U.S. Environmental Protection Agency. But neither the EPA nor anyone else really knows everything that lurks in the landfill. No records document all the muck that was tossed, spilled, or otherwise disposed of in what the Navy has taken to calling Installation Restoration Site 1/21. What is known, though, is not pretty: Triple A Machine Shops Inc., a Navy tenant from 1976 until 1987, allegedly dumped all manner of cancer-causing substances -- mostly heavy metals and polychlorinated biphenyls (PCBs) -- on the marshy wetlands. The company settled out of court with San Francisco prosecutors in 1996, paying $1.1 million for the privilege of not having to admit guilt. One of the prosecutors' allegations had the company dumping metal shavings on the ground until the pile reached six feet high and covered the area of a football field.

At the shipyard landfill, the EPA and the Navy decided that studied ignorance was the best course. Rather than conduct thorough soil and ground water tests throughout the 46-acre landfill, the Navy merely tested around the edges, to determine the extent, rather than the contents, of the landfill.

The reasoning behind this cautious approach is simple to understand: If the EPA required the Navy to poke too many holes in the heart of the landfill, more chlorine gas incidents -- or worse -- could result. Detailing the landfill's contents seemed more dangerous than assuming the god-knows-what in the ground was extremely toxic, and sealing it in with metal walls and a clay cap.

This mystery landfill is but one small example of the toxic risks lying beneath the surface at the 500-acre shipyard. Almost every hazardous waste mentioned in state and federal law is found at exceedingly high levels in the soil and ground water at the base. Veritable lakes of cancer risk lurk in some places in the aquifer beneath the shipyard.

As hard as it may be to fathom, this land -- the city's only Superfund site -- is much coveted by Mayor Willie Brown. The mayor and the city's Redevelopment Agency have big, big plans for the shipyard: They want biotech businesses, research and development space, housing, arts centers, parks, maritime facilities, and more to locate there.

And atop the mystery landfill, Brown and the agency would like to build parks or athletic fields.

In the very near future, it seems, Willie Brown and the San Francisco Redevelopment Agency will seek to cut the most ambitious, audacious, and risky real estate deal of this real estate mayor's administration. It is a deal that could bring the underprivileged Bayview-Hunters Point area desperately needed economic development. It's also a deal that could cost the city $300 million in potential revenue and put municipal government on the hook for a toxic cleanup of enormous scope.

Since 1991, when the Hunters Point Naval Shipyard was placed on a congressional list of former military sites to be turned over to local authorities, the city has been trying to take possession of the land, so it can spark some economic development in Bayview-Hunters Point, an area of the city where crime and unemployment are pernicious problems even during boom times. When Redevelopment Agency officials, from Executive Director James Morales on down, look at the shipyard, they don't see crumbling buildings, rusting anchors, chewed-up streets, spiny weed clusters, and detritus. They see the future. The future and insanely breathtaking views of the bay -- views that any developer in his right mind would give a limb or two to take possession of.

"It's an incredibly valuable asset," says Morales.
The Navy owns the shipyard and is required by law to clean up the toxic mess it and its errant tenant made before ownership is transferred to the city. For the last 10 years, at a cost of $150 million, the Navy has been studying the nature and extent of pollution in the soil and ground water at the former base. It has also removed some of the more threatening toxic sources, underground storage tanks among them.

Under the rosiest, and most likely unrealistic, Navy projections, the base will be cleaned to EPA standards and the city will take title to the land, for free, parcel by parcel, over the next decade. The Navy says the city will take title to different portions of the base this year, in 2000, 2002, and 2007. But Redevelopment Agency officials counsel skepticism about this time line; one official says that judging from performance so far, it would be wise to add five years to any schedule the Navy asserts.

Assuming title to the land is the crucial first step in any real estate deal. No bank will talk to a developer about a loan until the developer owns land, or possesses a long-term lease on it. And no developer will talk seriously to the city about executing a redevelopment scheme at the shipyard until he is confident he can assemble the necessary financing for the project.

And that delay threatens to extend the transfer of much of the shipyard beyond Mayor Brown's term in office, which cannot last beyond 2003, even if he wins election to a second term. And the city's chief executive has made it absolutely clear, in a speech before the Redevelopment Commission in mid-December, that the shipyard is one of his two top redevelopment priorities. (The other is Mission Bay, the 250-acre-plus mixed-use development planned for the postindustrial wasteland along China Basin.)

But if the mayor wants to spur any economic development of significance at the shipyard during his term, if Willie Brown wants to choose the developer or developers who build out Hunters Point, he has to get his hands on most if not all the land in the next couple of years.

Somehow.

It just so happens that the Department of Defense -- the very entity that has been frustrating city attempts to take over the shipyard -- has also helped create a method of ending the frustration. That method is not, however, without complications.

Last year, Pentagon officials went to Congress with a modest paragraph of proposed law that would have allowed the DOD to transfer former base sites to local governments "dirty" -- that is, without completing an environmental cleanup -- and walk away. That didn't pass, but in the end, despite the objections of environmental groups, state attorneys general, and state environmental regulators, Congress did pass an amendment to the Superfund law that allows for what's called an early -- or, if you prefer, dirty -- transfer.

An early transfer could alter the time line at Hunters Point dramatically. If given before cleanup, the entire shipyard could fall into the hands of the city as early as this year, bringing job opportunities to a part of town that badly needs them and generating political points for the mayor. But early transfer also threatens to cost the city hundreds of millions of dollars, while placing the responsibility for environmental cleanup in the hands of a private developer.

The early-transfer option has crept past the theoretical state at Hunters Point. The city is actively considering losing millions of dollars on the shipyard deal, if that will spur development there sooner rather than later.

For months now, Redevelopment Agency officials have been talking to developers and the Navy about the possibility of allowing a city-selected builder to pay for and clean up the toxics at the base as a way of moving title into the city's hands much earlier than currently planned. The city would of course discount the price paid for the land to compensate the developer for financing the cleanup. This loss of revenue means, in essence, that the city would fund the cleanup, rather than the Navy, as the Superfund law originally contemplated.

When asked about just such an early transfer and the accompanying loss of city revenue, the Redevelopment Agency's Morales asked several questions back.

"Is it possible? Is it a good idea to perhaps subsidize an early development to create the perception that you can develop on a Superfund site in the southeast of the city? Would it make sense?"

Then he answered them.
"Yes. Absolutely. It would be part of the social cost of making something good happen out there."

The early-transfer amendment to the Superfund law is largely untested. There's really no way of telling right now how smart it is to rely on private developers to clean up toxics of the magnitude found at the Hunters Point Naval Shipyard. Some early transfers have been allowed in California, says Bob Carr, the base closure expert for the EPA's regional office in San Francisco. But they have been small in scope and the military has paid for the option. Never before has a city allowed a private-sector company to pay for and clean up a Superfund site. It would be a first, Carr says.

"I can't imagine a developer wanting to take on the job," he says.
Indeed, cleaning up the shipyard promises to be an arduous undertaking. A task, it might be argued, that requires time, patience, and more money than most people can easily imagine. A task, you might say, that should not be wedded to the urgency of a mayor looking for political benefit, or a developer looking to make hay while a sunny real estate market is still shining.

What is known about the toxic pollution at the Hunters Point shipyard is simply staggering. Taking on the task and responsibility for the cleanup is no trivial matter.

Across the base, toxic materials in the soil and ground water have been determined by the Navy and government regulators to pose an unacceptable cancer risk to future workers and residents. The toxics also pose health risks other than cancer -- everything from hair loss and impotence to reproductive disorders and human intelligence degradation -- in widespread areas. Marine organisms, from worms in the offshore sediment to the California sea lions that ply the waters off the shipyard, are also at risk.

A small taste of the toxics at the shipyard: At a place called Parcel C, a 77-acre area forming the eastern prong of the base, Navy workers discovered ground water deposits, or plumes, of vinyl chloride, one of seven known cancer-causing agents found at the shipyard, and trichloroethylene (TCE), a chemical precursor of vinyl chloride believed to be carcinogenic on its own. In some tests for vinyl chloride, the Navy's environmental consultant found the chemical at 36,000 times EPA warning levels.

Tests measured TCE at more than 55,000 times the regulatory threshold. One vinyl chloride plume is 2.8 acres in size. Both of these chemicals are capable of turning into gas and entering buildings where people could breathe them unknowingly. Both TCE and vinyl chloride deposits are within the area where the bay interacts with the ground water, endangering wildlife.

To the west of that site, on what the Navy calls Parcel B, nickel has been found in the ground water at more than 850 times the federal regulatory threshold for aquatic wildlife safety and more than 1,000 times the same standard set by California water quality officials. Again, the plume is within the area where the bay water interacts with the ground water. TCE in the soil nearby measured 306 times the EPA standard for residential use.

And that type of pollution is just what the Navy knows about and has revealed. At the Hunters Point shipyard, when it comes to toxics, the unknowns outnumber the knowns. Perhaps the biggest unknown at the base is what lurks offshore in the bay mud that serves as the crucible of life for the local ecosystem.

It's called Parcel F, and it measures 443 acres. Tests have just begun on the sediment in the underwater area, which is probably the most serious threat to the aquatic habitat. Already, the EPA says, the results are showing that metals and other compounds in the muddy bottom seem to pose an ecological risk.

Numerous federally protected or endangered species call the shipyard area home, including the California sea lion and harbor seal, both protected under the Marine Mammal Protection Act. Fishing activity in the area is common, including the harvesting of herring, halibut, and anchovy.

On the shipyard land itself there's a veritable field guide of varmints and critters, and the birds that eat them. Plant- and seed-eaters include Botta's pocket gophers, California meadow voles, deer mice, black tailed hares, mourning doves, house finches, and sparrows. Insect fanciers include the mockingbird and meadowlark. Loggerhead shrikes and American kestrels prefer the mice and the lizards. Top predators include the majestic and hardy peregrine falcon, the red-shouldered hawk, and the red fox.

Wetlands dot the base and provide a home for numerous resident and migratory shorebirds. At high tide osprey, great blue heron, great egret, and belted kingfisher forage for food in the wetlands.

This ecosystem could be seriously disrupted by toxics in the sediment. The sediment supports crustaceans, bivalves, and other low-level bay life. Exposed at low tide, they are dinner for shorebirds. At high tide, they're dinner for fish.

If the mud flat and sediment dwellers are contaminated it's no minor matter. Toxics can bioaccumulate in the birds and fish that feed on them, and the mammals that feed on the birds and fish, decimating entire populations of wildlife.

But shipyard pollution also poses a direct threat to human life. Following EPA guidelines, the Navy has calculated that future workers at the base won't face much of a risk. But residents of new housing built on the former base will be endangered without a proper cleanup, according to Navy tests.

The base contains 224,000 square feet of land that poses a significant cancer risk; in 10 different areas, the inhalation of ground water fumes of vinyl chloride and other volatile compounds has been deemed an unacceptable hazard by the Navy and the EPA. And some 1 million square feet are considered a human health risk due to non-carcinogenic chemicals.

Where toxics pose an unacceptable level of health or ecological risk at the base, the Navy has proposed removing the toxics, or isolating them from people or other animals. Any private developer would be expected to meet the same level of cleanup, according to the EPA. Current cost estimates put the job at $300 million. But this cost estimate is based on a study of less than half the shipyard. The total cost will likely be more.

The vinyl chloride and TCE plumes under large portions of the base are the biggest concern for the EPA and the Navy. They are huge and dangerous to both humans and wildlife. To contain the risk they pose will require a high-tech effort. The Navy and federal regulators have yet to settle on a solution. But what the Navy has proposed illustrates the level of responsibility the city is considering turning over to a private company.

To stop the vinyl chloride and TCE from breaking down into gas and entering buildings or from leaking into the bay, the Navy is proposing to do one or more things, all of them expensive. The proposals include:

* Hauling toxic soil to landfills.
* Monitoring ground water movement and toxicity.
* Building underground walls to block the path of polluted ground water.

* Constructing underground funnels and gates to move the plumes into underground water treatment plants.

* Extracting the ground water, treating it, and disposing of it in the bay.
* Implementing a process called air sparging, which involves shooting air into the ground to gasify polluted water, which then would be extracted.

But these are just proposals the Navy has made for cleaning up a small amount of land on a small portion of the base. All across the base thousands of square yards of dirt will have to be removed to landfills. At the landfill, the Navy is proposing to excavate soil and then construct multilayered clay caps on the ground. In addition, the Navy has proposed placing underground liners to prevent rainwater from reaching the underground toxics.

There is, of course, a difference between proposing and acting. And the one formal, legally binding decision issued in connection with the Navy's cleanup program for the Hunters Point shipyard suggests that the Navy is going to be very slow about acting on a cleanup.

In October of last year, the Navy published exact plans for Parcel B, the first dirty lot to be cleaned and turned over to the city, sometime in the year 2000. Among the biggest concerns on Parcel B are nickel and TCE plumes in ground water. And although ground water extraction and other cleanup methods were considered, the Navy settled on a wait-and-see approach.

For 30 years the Navy proposes to monitor the ground water.
If monitoring wells pick up unexpected levels of nickel or TCE, the Navy plans to do -- well, just about everything possible to avoid removing the toxics.

First Navy consultants will conduct monitoring tests more frequently. If levels don't go down, the Navy will average the test results. If that doesn't bring the Navy in line with federal regulations, more monitoring wells will be drilled. If that doesn't work, Navy officials will go back and rethink their assumptions about what constitutes a risk. If that doesn't work, the Navy will rethink its equations about how fast the toxics will degrade and dilute while moving toward and into the bay. If none of these avoidance techniques eliminate the problem, then, and only then, will the Navy remove the toxic threat from the water under Parcel B.

Why all this furious dancing around the problem?
Chris Shirley, a scientist for the environmental group ARC Ecology, says the Navy doesn't really know what size problem it has on its hands at Hunters Point.

"And they don't want to find out," says Shirley, who has read all the naval reports and keeps in contact with EPA regulators dealing with the shipyard.

Without a dirty transfer, everything about the situation at the shipyard points to a long cleanup and a slow, painful transfer of the base to the city. Even if the Navy cared about Willie Brown's political fortunes and the San Francisco economy and wanted to clean the base quickly, it doesn't have the money to do so. Hunters Point must compete with other closed military facilities across the country for a single Pentagon cleanup budget that is dependent, year to year, on congressional appropriations.

This competitive situation already delayed the transfer of Parcel B from 1998 until the year 2000. Further funding delays are all but certain.

These realities -- and the perceived political benefits of the quick redevelopment of Hunters Point -- have led the city to make the dirty-transfer option its preferred route. Of course, the city would prefer that the Navy pay for the job, says Byron Rhett, the Redevelopment Agency official in charge of the shipyard project. But he and others acknowledge that a developer-financed remediation may be necessary and is under discussion.

The city is talking to several developers informally, including Catellus Development Corp. and Texas-based Lincoln Property Co., about taking the land dirty and paying for the cleanup, according to city officials and one of the developers. But a dirty transfer and developer cleanup would, city officials acknowledge, cost San Francisco large amounts of money.

"If the cleanup comes out of the developer's pocket, the developer pays us less for the land," Rhett says.

No appraisals of the value of the shipyard property have been conducted. But it's hard to imagine that the city could discount the cost of the property by the $300 million or more a cleanup would cost and still reap a sizable profit from the land, which the Navy, by law, must turn over to the city free of charge.

It is not surprising that shifting the financial burden of a cleanup to the city suits the military just fine. "Hey, every dollar we don't have to spend cleaning up Hunters Point can be spent at some other base," says Navy spokesman Jeff Young.

There are other pressures -- aside from Navy timing -- impelling the city toward the dirty-transfer option.

This year the city will take possession of the first parcel of the shipyard and enter a legal agreement with the Navy called a lease in furtherance of conveyance. With this agreement come two things: the ability of the city to execute short-term leases at the shipyard, and the city's assumption of responsibility for police and fire services, sewer maintenance, and building safety.

More than 100 artists currently rent studios at the shipyard; a skateboard manufacturer, a ship-dismantling operation, and other leaseholds also require services.

But the city is unlikely to be able to strike large numbers of other short-term leases. Very few of the buildings at the base are inhabitable. Already, one business has turned down the opportunity to locate at the shipyard because it's concerned about the toxic risk associated with the cleanup plans.

An annual shortfall in the millions of dollars -- the difference between the cost of city services and the revenue leases provide -- will, therefore, become embedded in the city budget, and stay there until the Navy is finished with cleaning up the entire base, so it can all be redeveloped.

The city is in a weak bargaining position in regard to the former naval base at Hunters Point. The Navy could take just about as long as it wants to clean up and transfer the site. The city could not greatly shorten the time needed to complete that transfer, without essentially throwing away a quarter of a billion dollars in property value.

But if the city government and those who monitor its activities are not diligent, the costs of an early transfer could escalate to almost unimaginable levels.

The EPA's Carr says that if the city chooses the dirty-transfer route, the EPA will require that a detailed legal agreement be struck among the city, the Navy, the EPA, and the developer proposing to clean and redevelop the base. At the very least, he says the EPA would demand that someone -- the city or the developer -- promise to complete the cleanup, come hell, high water, war, acts of God, changing economic conditions -- or the discovery of unknown toxins at the base. He can't imagine a developer agreeing to such sweeping and open-ended financial risk.

But Carr acknowledges that the early-transfer law has a lot of breathing room, and such an agreement could take many forms. The city could, for instance, put itself on the hook by indemnifying the developer against unforeseen costs.

In short, the possibilities of early transfer are endless.
So, it seems, are the liabilities.

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