Cleaning Up on Cleanups : Environment: Industry is making huge profits by ridding factories, dumps and military installations of toxics. Much of the mess was made by the firms now cashing in.

The peace dividend is becoming a green dividend as America’s largest corporations discover enormous profits to be made cleaning up the environmental mess that their own technologies spawned.

Companies that once fought environmental regulation now battle pollution for profit. The fast-growing industry generated revenue of $132 billion last year--nearly the cost of the nation’s savings and loan bailout if the entire bill were paid today.

Defense contractors are especially avid converts, as the post-Cold War military begins spending less on building weapons and more on environmental cleanup.

The Energy and Defense departments will spend $7.1 billion in fiscal 1992 alone to begin cleaning up lethal radiation, toxic waste and a plethora of other pollutants at nuclear weapons plants and military bases.

The staggering decontamination project spans more than 11,000 sites from Cape Cod to Guam, is expected to take 30 years and could cost $100 billion to $150 billion, according to Energy Department projections. Other estimates place the cost as high as $400 billion.

“It probably ranks up there with SDI,” the Strategic Defense Initiative or “Star Wars” program, DOE spokesman Fred Lash said.

Eager to cash in, engineering and construction firms including Fluor Corp. in Irvine, Parsons Corp. in Pasadena and Bechtel Group Inc. in San Francisco, as well as defense contractors including Hughes Aircraft Corp., Martin Marietta Corp., Lockheed Corp. and Westinghouse Electric Corp., have formed divisions to apply industrial and military technology to environmental problems. All are angling for the lucrative government contracts.

“With the easing of tensions between East and West, we have begun to beat our swords into environmental plowshares,” said Richard Golob, publisher of the Hazardous Waste Intelligence Report.

The military contracts have created something of a green fever. This month, the Energy Department announced that it was looking for its first “environmental restoration management contractor” to supervise cleanup of a closed uranium fuel plant in Fernald, Ohio. Inquiries came from 200 firms--20 times the usual number, Lash said.

Still, the federal government last year accounted for only a fraction of the national outlay for environmental products and services. Two other trends are driving the environment business into fast forward.

The first is the ongoing cleanup of Superfund sites. Most of the money spent to date has paid for engineering and feasibility studies, and work has been completed at only 64 of the 1,211 “priority sites” deemed dangerous enough to qualify for federal funds, according to the Environmental Protection Agency.

After up to a decade of work, many Superfund sites are finally ready for the real cleanup work to begin. Up to 30,000 more industrial areas are believed to be contaminated. The true cost of the industrial cleanups are unknown, but estimates range up to $100 billion.

The second factor is the need for industry to retool to comply with tougher environmental regulations, especially the Clean Air Act of 1990 and California’s strict emissions controls. Oil refineries are under particular pressure to reduce their own emissions and to produce cleaner-burning gasolines.

Consumer products companies may buff their images by introducing biodegradable diapers, non-polluting barbecue lighter fluid and other “green” products.

But the industrial market is vastly bigger, spanning everything from air pollution scrubbers to landfill liners, waste water treatment plants to analytical laboratories, robots to handle nuclear waste and bacteria to digest solvents.

Despite the recession, the industry grew 11% last year to $132 billion, according to Grant Ferrier, publisher of the Environmental Business Journal in San Diego.

Though thousands of new environmental services companies sprang up and flourished in the 1980s, it is the Fortune 500 corporations that are best positioned to profit from the environmental business boom of the 1990s, industry analysts say.

That is because they have longtime relationships with the military and with industries that need environmental help and experience in managing multimillion-dollar engineering projects that Pentagon and Superfund cleanups will require. Perhaps most important, these companies are rich enough to assume the legal risks associated with hazardous waste cleanups.

“DOE and DOD and many of the large industrial companies want a contractor that can help them with the full range of environmental problems, so they have one-stop shopping,” Golob said.

Some companies are making money cleaning up toxic substances they themselves once manufactured. Others are disposing of nuclear waste for weapons systems they engineered. Still others are retrofitting factories--designed when environmental standards were more lax--to cut down on pollutants.

“It’s ironic, because they caused the problem and now they’re cleaning it up,” Ferrier said. “But that’s really how it should be.”

The companies note that they are cleaning up environmental problems created by practices that were acceptable or even desirable at the time. And in few cases are the companies performing the cleanup legally responsible for the pollution.

But often companies are cleaning up the messes of their competitors. And some companies have come full circle.

Westinghouse Electric Corp., for example, once a leading manufacturer of transformers containing PCBs, won a $1.1-million contract in June to rid two former steel mills in Pennsylvania of the now-banned stuff. The company can’t say whether the transformers removed were its own.

“It would be logical to assume that some were,” said spokesman Vaughn Gilbert, adding that Westinghouse and General Electric Co. were the nation’s leading suppliers of PCB transformers.

The non-flammable PCBs were once considered more humane because they reduced the possibility that workers would be burned, Gilbert said. Now, Westinghouse plans to truck the PCB-laden transformer fluid to a special hazardous waste incinerator, one of three environmental companies it has acquired in the last five years, company officials said.

But the PCB business pales beside Westinghouse’s other environmental ventures, which had sales of $1.35 billion last year. In January, it consolidated its work into a new division, the Westinghouse Environmental Group, which “deals with every type of waste there is,” spokesman Roy L. Morrow said.

In part, Westinghouse is applying to the commercial market some of the lessons it has learned since the 1970s, when it began taming its own pollution-related problems, including the removal of PCBs, dealing with nuclear waste, tangling with regulators and explaining its decisions to the public, said Samuel R. Pitts, vice president for environmental affairs.

“The corporation, just like every other corporation, had difficulty at the outset adjusting to the changing need,” Pitts said. But by 1981, Westinghouse had realized that “the environment was going to be a concern for at least the foreseeable future--if not forever,” he said.

Westinghouse has long been a government contractor and has contracts to manage seven DOE facilities, including the Hanford Nuclear Reservation in Richland, Wash., and the Savannah River nuclear weapons plant in South Carolina, both considered among the most contaminated in America.

Though military work still represents less than a quarter of its environmental business, the company now views the Pentagon cleanups as “a significant opportunity,” Pitts said.

Fluor is typical of the large engineering firms that have recently plunged into the environmental market. The company formed an environmental services division in late 1989 and has snagged $800 million in new contracts this year, including $300 million in contracts announced in August alone, said Deborah Land, a company spokeswoman.

The dirty work is both military and civilian.

Among the contracts, according to Fluor and federal officials: Building a new $177-million plant for Valero Energy Co. in Texas to produce methyl tert-butyl ether (MTBE), an octane additive that makes gasoline burn cleaner; helping the Navy clean up contaminated bases in Hawaii, Guam and elsewhere in the Pacific; engineering work for a DOE project to reduce waste and radiation exposure at nuclear weapons sites, a job worth an estimated $45 million over three years, and a Superfund cleanup in Gary, Ind.

The companies are also putting old technologies to new uses.

Fluor, for example, once built uranium mines and mills. Now, its engineers have modified a computer program designed for mining to make three-dimensional models of toxic waste sites. Among other things, it can show how to excavate underground contaminants while moving as little earth as possible, and calculate how long it would take to pump out and treat poisoned ground water.

To handle its growing workload, Fluor has doubled to 200 its staff of environmental engineers, toxicologists, hydrologists and other environmental specialists, and will hire another 200 people next year, company officials said.

“It’s by far the fastest-growing business,” said Thomas Merrick, Fluor’s marketing vice president, noting that the company’s business jumped 30% last year and would have grown even more if not for the recession. “This is the decade of the environment.”

The winner of the green sweepstakes this year, however, is probably Bechtel. In 1990, it logged sales of $974 million from environmental jobs, ranking first among engineering firms in two recent industry surveys.

Bechtel cut its environmental teeth in the 1970s handling radioactive waste, including the decontamination of the Three Mile Island nuclear plant. Best known for building oil refineries around the world, it now helps clean them up.

“The oil industry is having to substantially rebuild its fuel production facilities to make cleaner gas because of stricter emission laws,” said Roger Strelow, vice president of Bechtel Environmental Inc., a subsidiary formed in 1987. “That’s actually environmentally driven, but not inherently environmental work.”

Bechtel’s greener image gelled this year when it was hired both by Saudi Arabia to manage the Persian Gulf oil spill cleanup and by Kuwait to help restore production from the oil fields torched by the Iraqi military.

Privately held Bechtel won’t disclose the value of the Saudi and Kuwaiti contracts. But it expects its environmental business to increase 25% or more in 1991, spokesman Larry Miller said.

Not all environmental companies are faring as well. In the 1980s, it was not uncommon for new environmental engineering and hazardous waste companies to grow 35% a year. The industry was considered “recession proof.” Yet this year some companies suffered painful drops in earnings.

“You would have lost money in many of the pollution-control issues over the past six months,” said Leone Young, an analyst for Smith Barney, Harris Upham & Co. in New York.

Still, the sheer volume of toxic stuff at U.S. factories, dumps and military installations means there will be ample work to go around. And more work could come from Eastern Europe and the Soviet Union--if and when they generate enough hard currency and resolve to pay for a cleanup of their pollution.

“Supposedly this is a finite problem,” Young said. “But it will be around past our lifetimes.”

Analysts’ estimates for industry growth range from about 10% to 35%. Robbert Osterholt of LEK Partnership, an environmental management consultant in Los Angeles, is skeptical that the military will continue to receive enough funding to fuel a green gold rush.

To keep up with demand, the larger players are hiring away environmental engineers from smaller start-up firms or buying the firms outright. In 1991, about 550 small environmental firms were swallowed up, 214 of them small waste haulers bought by two large hazardous and solid waste disposal firms, Osterholt said.

In California, 30 environmental businesses have been bought by large companies in the past 18 months, said Gail Brice, president of Brice Enviro Ventures in Newport Beach, who specializes in brokering such deals. European companies have been active buyers, she said.

But new companies spring up as fast as old ones are bought, Brice said. She predicted that they will continue to win important subcontracts even if the chemical, engineering and defense giants land the big military and industrial jobs.

Meanwhile, industry watchdogs see an irony in ex-polluters dominating the environmental market.

“There is a kind of interesting syndrome where companies have turned a liability into a profitable business,” said Joel Hirschhorn, a Washington environmental consultant.

Of more serious concern, Hirschhorn said, is that in this explosive growth market, inexperienced companies--both large and small--are landing environmentally sensitive jobs--and some are doing shoddy work.

“Contractors are nailed often for work that has to be redone and redone,” he said. “Everybody is putting out a shingle in the business. . . . People with zero experience are handed a lot of responsibility.”

At the Stringfellow Acid Pit in Riverside, for example, where political problems and lawsuits have snagged cleanup of a Superfund dump that was closed in 1971, much of the environmental work was of “low quality,” said Hirschhorn, a former official at the congressional Office of Technology Assessment.

“A lot of the studies failed,” he said. “A lot of the studies had to be repeated. A lot of engineering and technical work failed. . . . It’s a horrendous story.”

Moreover, some of the touted new environmental technologies--including some Pentagon-funded experiments for handling radioactive waste--are unproven and possibly seriously flawed, Hirschhorn said.

“The money is there,” he said. “No doubt, the demand is there. The laws are pushing it. We have all this stimuli. But I would argue that there are a lot of problems with both technology and people and companies that are not able to deliver the goods.”

Others watchdogs contend that defense contractors--some of whom have poor environmental records--are not being held accountable for their role in polluting military bases. Now, they may bring the inefficiencies that have plagued weapons productions to the military cleanup projects, warns Lenny Siegel, who wrote a report on the Pentagon’s environmental record for the National Toxics Campaign Fund.

“Instead of meeting deadlines, you learn to extend deadlines, and you learn to inflate costs instead of reduce them,” Siegel said. “There’s a concern about the corporate culture.”

But Brice, who was responsible for overseeing the cleanup of a Superfund site at Aerojet General in Sacramento, said the defense contractors often have precisely the advanced technologies and the expertise required to solve the problem.

Aerospace firms, for example, have chemists expert in the properties of jet fuel--just the people to put to work cleaning up soil and water contaminated with jet fuel, she said.

“The entry of the ‘Big Boys’ into the environmental industry is significantly helping the development of new technologies and expanding the resources we need to clean up this planet,” Brice said.

Top 10 Environmental Consultants Below are the industry’s top moneymakers, based on a survey of 1990 revenue from environmental projects.

Revenue Rank Company Location (in millions) 1 Bechtel Group Inc. San Francisco $974 2 Foster Wheeler Corp. Clinton, N.J. $470 3 CH2M Hill Cos. Denver $400 4 Metcalf & Eddy Cos. Wakefield, Mass. $294 5 Morrison Knudsen Corp. Boise, Ida. $274 6 Roy F. Weston Inc. West Chester, Pa. $269 7 Camp Dresser & McKee Inc. Cambridge, Mass. $228 8 Parsons/Main Cos. Pasadena $222 9 Jacobs Engineering Group Inc. Pasadena $220 10 Dames & Moore Los Angeles $210

Source: Environmental Business Journal