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Andres Diamond-‐Ortiz Texas Water Policy Fall 2014
Local Damages, Local Control: The Case of the San Jacinto Waste Pits
Introduction
Texas likes to boast that it is fairly successful in attracting companies to the state because of
low taxes and little regulation. Companies are economically rational actors, and when
presented with the myriad of options that states have to offer, they naturally choose states that
accommodate their business needs. This narrative suggests that things are working efficiently.
However, as hackneyed as the phrase seems, it is true that “there is no such thing as a free
lunch.” The benefit that Texas realizes by attracting companies through low regulation comes
at the expense of protecting its natural resources and the citizens who rely on them. This is
particularly evident in how Texas handles water quality issues. The state, in its aim to
accommodate and attract business, has constructed a lax water quality regulatory and
enforcement environment through the Texas Commission on Environmental Quality (TCEQ), the
state agency charged with monitoring water quality and assessing penalties for violations
through the Texas Water Code. Fortunately, both the federal and local government can play a
role in protecting rivers in Texas through federal regulation and the Texas Water Code itself. As
evidence, this paper presents the case of the San Jacinto River Waste Pits, a pollution case that
highlights the dangers posed by lax regulation of surface water quality.
The San Jacinto Waste Pits (hereinafter referred to as the “Waste Pits”) are located to
the east of Houston, close to the mouth of river that flows into Galveston Bay. The waste pits,
covering an area approximately 3 acres, were built in the 1960’s as impoundments for the
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disposal of paper mill waste produced by Champion Paper Inc. in Pasadena (later purchased by
the International Paper Company in 2000).1 The Harris County Health Unit Air and Water
Pollution Control Section approved of the San Jacinto site for the disposal of paper mill waste.2
1 (Environmental Protection Agency, 2014) 2 (Keith, 2014)
Fig. 1: Location of the waste pits
3
McGinnes Industrial Maintenance Corporation (McGinnes)3, the owner of the pits,
barged waste from the Champion plant in Pasadena to unlined pits.4 The waste products
included by-‐products of the paper bleaching process, including dioxin, which the World Health
Organization has identified as a carcinogen5 and is “widely regarded as the most toxic chemical
ever made by man.”6 At the time, however, “no one knew [that] this waste material contained
dioxin.” 7 The area was found to be so hazardous that the federal government has deemed the
abandoned waste pits as a Superfund site under the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA).
3 McGinnes was bought by a company that would later merge with Waste Management in 4 (Wolf, 2012) 5 (Harris Co. and TCEQ vs. International Paper Company, McGinnis Industrial Maintenance Corporation, Waste Management, 2014) 6 (Dao Van Pho, et al vs. International Paper Company, McGinnes Industrial Maintenance Corporation and Waste Management, 2011) 7 (Keith, 2014)
Fig. 2: Industrial waste being deposited into the pits.
4
Various levels of government have legal authority over surface water quality. The State
of Texas, through the Texas Commission on Environmental Quality – the statewide
environmental agency – sets standards for water quality and penalties for violations “under the
Authority of the Clean Water Act and the Texas Water Code.”8 The TCEQ administers the
federal National Pollutant Discharge Elimination System (NPDES), which regulates the discharge
of pollutants by municipalities and industry into or adjacent to the waters of the state. The
program issues permits for industrial wastewater discharges, outlining the amount of effluent
that can be discharged and its treatment prior to discharge in compliance with the standards
set forth in the Clean Water Act, the federal law that, in conjunction with the State
government, regulates water quality standards. The permits must adhere to the Texas Surface
Water Quality Standards which imposes limits on discharges based on the appropriate use and
the needs of the aquatic life in the body of water receiving the discharge.
Local governments such as Harris County are entitled to bring suit for civil penalties
under the Texas Water Code and the Texas Health and Safety Code.9 This provision was
instrumental in the suit brought against the three companies held responsible for the San
Jacinto River Waste Pit contamination -‐ International Paper, McGinnes Industrial Maintenance
Corporation, and Waste Management. Typically, one would expect TCEQ to be the agency to
undertake the prolonged and expensive matter of filling a lawsuit for environmental violations.
Instead, in the absence of State action, that task was devolved to the County Attorney’s “four-‐
8 (The Texas Commission on Environmental Quality, 2014) 9 (Harris Co. and TCEQ vs. International Paper Company, McGinnis Industrial Maintenance Corporation, Waste Management, 2014)
5
lawyer environmental division.”10 TCEQ was named in the lawsuit, but only as a matter
procedure as a necessary and indispensable party to suits brought under the Texas Water Code.
The Abandonment of the Waste Pits
According to minutes of a MgGinnes special board meeting in August 19, 1968, “the property
was completely filled with waste materials and could no longer serve as a dump site [and] due
to its physical condition [the] land was worthless.”11 For those reasons, the McGinnes board
voted to abandon the dump site and eliminate it as an asset from the corporation’s books and
records. It would soon disappear from view as well. Significant subsidence caused by
groundwater pumping resulted in the “regional subsidence of land in the vicinity of the [waste
pit] Site.”12 Dredging and sand mining in the 1990’s and early 2002’s “resulted in exposure of
the contents of the Northern Impoundments to surface waters”13 though the unstable
characteristics of the waste pits and potential exposure to the river were evident to McGinnins
-‐-‐ when the pit site was inundated by river water, McGinnes erected earthen enbankments,
“which leaked and deteriorated rapidly, permitting wastewater and wastes to discharge into
the river.”14
10 (Collier, 2014) 11 Harris Co. and TCEQ vs. IPC, MIMC, & WM 12 (Anchor QEA, LLC, 2013) 13 (Anchor QEA, LLC, 2013) 14 Harris Co. and TCEQ vs. IPC, MMC, & WM
6
According to the complaint, decades after the abandonment of the pits, Texas state
agencies began to collect “startling data” that 97% of fish samples and 95% of crab samples
exhibited “unusually high dioxin concentrations [that] exceeded the health-‐based standard.”15
In September 1990, in response to these dioxin levels, the Texas Department of Health issued
warnings advising women of childbearing age and children “not to eat a single bite of catfish or
15 (Harris Co. and TCEQ vs. International Paper Company, McGinnis Industrial Maintenance Corporation, Waste Management, 2014)
Fig. 3: Subsidence causes submersion of the waste pits
7
blue crab from the affected waters.”16 During this period, McGinnes did not inform state
agencies or the local health district of the possible source of dioxin, although they did disclose
the potential liability to the firm that was purchasing MIMC, noting that “due to the expansive
nature of the Environmental Laws, [the firm] may at some point incur a liability” for the waste
pits.
For years, the State and local government continued to search for the source of the
elevated levels of dioxin. Finally, in 2005, the Texas Park and Wildlife Department discovered
the waste pits, in a series of events that now seem almost accidental, as the following account
shows:
16 Ibid.
Fig. 4: Health Advisory
8
“[Larry] Koenig, who is a scientist as well as an engineer, and colleagues were puzzled and intrigued by the dioxin mystery. “We were scratching our heads, then one fellow who worked for Texas Parks and Wildlife remembered a conversation he had had with someone about sand dredging near the San Jacinto River when someone had mentioned waste pits.” Aerial photos clearly showed submerged waste pits – several holes dug in the sand and soil bermed up into levees around them. Koenig and scientists working with TCEQ sampled soil in the area to find “astonishing levels of dioxin” near where the pit was submerged.17
In 2007, after the source of the dioxin was discovered, Harris County and TCEQ officials
appealed to the public via radio to see if anyone had any information regarding MIMC. The
Harris County lawsuit alleged that during this public appeal, Waste Management, the company
that became the eventual owner of MIMC, remained silent.
In March 2007, U.S. Representatives Gene Green (D-‐TX) and Ted Poe (R-‐TX) petitioned
the United States Environmental Protection Agency (EPA) to place the site on its National
Priorities List (NPL) of Superfund sites, which are hazardous waste sites that pose a danger to
public health.18 The State of Texas added its name to the petition four months later. The EPA
designated the area as a Superfund site in March of 2008, which initiated a process that
addresses the options for long-‐term cleanup.19 The EPA named McGinnes and International
Paper Company as Potentially Responsible Parties for the contamination, a designation that
requires those companies to pay for cleanup costs pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA).20
In 2011, a temporary armored cap was installed to prevent dioxin releases into the river.
The armored cap consisted of “three layers of protective geotextile and geo membrane covered 17 (Wolf, 2012) 18 (Taylor, 2010) 19 (United States Environmental Protection Agency, 2012) 20 (McGinnes Industrial Maintenance Corporation vs. The Phoenix Insurance Company; The Travelers Indemnity Company, 2014)
9
by rock, and was designed and constructed in accordance with [EPA] and US Army Corps of
Engineers (USACE) design guidance to withstand major storms, including those that would
occur once every 100 years.”21 The armored cap has since been upgraded after a minor storm
in 2012 dislodged armored material in some areas.
Key Issues
The case highlights the need for allowing three levels of government to regulate threats to
surface water quality. In a state that has a history of accommodating powerful but
environmentally destructive industries, the task of holding polluters responsible cannot be
entrusted solely to a politically influenced state environmental agency. The authority for local
governments to bring suit provides a legal avenue for holding polluters accountable when the
state agency is not inclined to do so, as was clear in the San Jacinto River Case.
21 (The United State Environmental Protection Agency, 2014)
Fig. 5: The Armored Cap
10
Harris County has a special interest in maintaining this right as it is home to a huge to a
huge industrial complex. Its ability to regulate environmental polluters is not a direct challenge
to business, but rather a protection of State’s property rights in regard to surface water or the
property rights of those who either live by the waste pits or rely on the river for fish. When
polluters fail to take adequate measures to dispose of their waste and pollute the water, they
impose a cost on others, either through their health or their economic interests. Thus, Harris
County’s actions should not be viewed as those of an environmentally radical actor, but rather
a political body acting in the interest of their citizens.
Recently, there have been several attempts to curtail that right for local governments.
In 2013, two bills were filed (though they did not become law) in the Texas State House by
Cindy Burkett (R-‐ District 113) that would have effectively ended a local government’s ability to
file suit. House Bill 3119 would have prevented local governments bringing suit under the
Texas Water Code from hiring outside counsel on a contingency basis. Supporters of the bill,
such as the Texas Conservative Coalition Research Institute, argue that “contingency fee deals
encourage private firms to enrich themselves at the expense of adequately funding the toxic
cleanup site.”22 Environmental cases are expensive and prolonged endeavors. The use of
contingency lawyers allows an understaffed county to benefit from the expertise of private law
firms specializing in environmental cases while also transferring the economic risk of expending
significant resources to try the case. Furthermore, the county’s use of private law firm levels
22 (Spearman, 2013)
11
the playing field, since the “big corporations fighting the suits often use very experienced,
highly-‐paid attorneys.”23
House Bill 3117 would have allowed the Attorney General to settle lawsuits without the
consent or approval of the local government that brought the suit. That is problematic, as the
state has exhibited an accommodating stance towards polluters in its attempt to remain a
business friendly state. That stance is manifested in four ways: 1) its inaction in initiating
lawsuits or imposing penalties against the responsible parties in the Waste Pit, 2) a history of
small or no penalties for violations to the water code 3) TCEQ’s attempt to degrade water
quality standards to accommodate another paper company charged with polluting another
Texas waterway and 4) its response to Houston when the city attempted to regulate air quality
standards.
TCEQ’s Lack of Action
As previously mentioned, Harris County undertook the task of filing a lawsuit for violations of
state water laws because the state had not.24 Terry O’Rourke, an attorney with Harris County,
argues that TCEQ is a compliance agency that views “polluters as their clients or their
customers” and that the “history of the State of Texas in protecting people, especially people
here on the Gulf Coast from environmental contamination is […] a history of neglect.”25 The
agency delayed its petition to EPA to designate the waste pits as a Superfund site, doing so only
after two U.S. Representatives (from both parties) made the initial request. With an annual
23 (Fehling, Bill Would Stop Private Lawyers Who Help Counties Sue For Pollution, 2013) 24 (Satija, 2014) 25 (Fehling, 2011)
12
budget of close to $400 million and a staff of nearly 3,000 employees26 (making it the second-‐
largest environmental agency in the world27), one would expect TCEQ to be at the forefront of
actions against environmental polluters, particularly as it relates to matters affecting rivers that
travel far and affect public health and the food chain. Instead, TCEQ has continued its history of
neglect, forcing Harris County to initiate action.
How could a state agency be so negligent in addressing toxic waste sites? The answer
lies in the fact that the Governor appoints the three TCEQ commissioners, effectively making
the agency a political entity that hews a Governor’s pro-‐business platform – with that being the
prevailing political posturing for the past two of decades. The adherence to such a platform is
evident in penalties TCEQ assesses against its violators. The table below shows the
administrative and judicial actions taken by TCEQ in 2013.28
26 (Texas Commission on Environmental Quality, 2013) 27 (Wilder, 2010) 28 Compiled using Tables T-‐25: Summary of Administrative Orders Issued FY 2013 and Table T-‐31: Summary of Civil Judicial Orders Issued FY 2013 from the TCEQ’s annual enforcement report for Fiscal Year 2013.
Administrative Orders Civil Judicial OrdersNumber of Number of
Programs Orders Assessed Average Orders Assessed AverageAGRICULTURE 10 $88,545 $8,855 3 $372,500 $124,167
AIR 226 $3,950,729 $17,481 4 $302,063 $75,516
DRY CLEANERS 2 $6,000 $3,000
INDUSTRIAL AND HAZARDOUS WASTE
23 $943,277 $41,012 5 $1,113,697 $222,739
MUNICIPAL SOLID WASTE
58 $552,389 $9,524 7 $178,009 $25,430
OCCUPATIONAL CERTIFICATION
41 $30,187 $736
PETROLEUM STORAGE TANKS
1,079 $6,004,481 $5,565 9 $2,100,598 $233,400
PUBLIC WATER SUPPLY24
250 $498,503 $1,994 2 $292,414 $146,207
WATER RIGHTS 25 $85,019 $3,401
WATER QUALITY 385 $4,863,443 $12,632 4 $64,846 $16,212
MULTI-‐MEDIA 83 $1,262,232 $15,208 9 $8,197,125 $910,792
13
The table reveals low average penalties assessed for both administrative and judicial
orders. These figures support a common criticism of TCEQ, namely, that it does not assess
penalties in proportion to the environmental damage produced, giving industries the
impression that the low fines are just “the cost of doing business.”29 The penalties are certainly
not in line with a state that ranks as the “second-‐biggest water polluter in the country, in terms
of pounds released” and by far the biggest polluter based on the toxicity of that pollution.30
TCEQ has also demonstrated its willingness to downgrade water quality standards in
order to accommodate business interests. For example, when confronted with evidence that a
paper mill in Lufkin was releasing wastewater into Paper Mill Creek (which eventually flowed
into the Sam Rayburn Reservoir) that exceeded the allowable amounts of “ammonia,
aluminum, and oxygen-‐depleting organic matter […] under current federal standards,”31 the
Texas Natural Resources Conservation Commission (TNRCC -‐ now TCEQ) proposed to lower the
quality standards for the reservoir. The lowering of the designated use standard from “high
aquatic use” to “intermediate aquatic life” would lower the dissolved oxygen standards, which
in turn would enable the Donohue Industries paper mill to continue to discharge wastewater
effluent at its desired level. The TNRCC proposed the change based on studies “done by
consultants hired by the paper mill.”32 Under the federal Clean Water Act, the EPA is obligated
to review changes to the water quality standards submitted by the states.33 The EPA
29 (Fehling, 2013) 30 (Edelman, 2014) 31 (Korosec, 2001) 32 (Sierra Club) 33 (Environmental Protection Agency, 2001)
14
overturned TNRCC’s decision and issued a finding of violation of standards against the paper
mill.34
The TCEQ’s position in regard to standards and fines suggests that it is a weak
environmental advocate. Thus, in order to protect their cities and counties, local officials have
been forced to act where TCEQ has not. The regulation efforts by local governments have often
been challenged by TCEQ itself. For instance, in 2005, in response to TCEQ’s lack of air quality
enforcement, the City of Houston managed to find a legal avenue to independently sue air
emission violators using existing nuisance ordinances. A coalition of petrochemical and energy
service companies filed suit challenging the City’s right to regulate air polluters, claiming that
the ordinances intruded into “exclusive powers granted by the Legislature to a state agency.”35
36 Rather than stepping aside and allowing the City of Houston to regulate an area of vast
importance to the city, TCEQ’s General Counsel wrote a letter to the District Judge in which he
sided with the coalition’s position, “claiming that the Ordinance conflicts with the TCEQ’s
authority.”37
The Outcome of the Harris County Lawsuit
The regulatory environment described above supports Harris County’s decision to file suit
against the Waste Pits polluters. The County’s position was bolstered by the fact that the
Federal government had already indicated fault when it named International Paper and
McGinnes as potentially responsible parties of the Superfund site. With culpability well
34 (Korosec, 2001) 35 (Hackney) 36 See BCCA Appeal Group v. City of Houston 37 (Hackney)
15
established (at least for McGinnes), the defendant’s strategy revolved around challenging the
lawsuit on technical matters. For example, the suit was challenged in the First Court of Appeals
on the ground that the County Attorney’s office had no right to hire outside counsel on a
contingency basis because the prospect of winning money “would remove the neutral status of
the court.”38 Nevertheless, Harris County prevailed by noting that contingency fees are capped
and approved by the State Comptroller.
The trial began on October 16, 2014. The County sought damages for daily leaks from
1965 to 2008, imposing the maximum fine in accordance with the laws as they existed during
that period. The total sum amounted to about $2.0 -‐ $3.0 billion, though legal experts such as
Jim Blackburn predicted that the likelihood of an award that large was relatively low.39 The trial
ended on November 13, 2014 with a $29.2 million settlement with Waste Management and
McGinnes. The jury voted 10-‐2 in favor of the third company, International Paper. Legal fees
were estimated to be about $10 million.
The outcome of the trial may seem disappointing when compared to the civil penalties
being sought. However, it is important to note that these penalties are in addition to the costs
that the companies must pay the EPA to clean the Superfund site. Furthermore, the settlement
justifies Harris County’s decision to pursue a trial. Although the award is not commensurate to
the economic and environmental damage caused by the leaking waste pits, the outcome
establishes a local government’s right to pursue civil penalties under the Texas Water Code in
the absence of TCEQ enforcement action. Furthermore, it dispels the argument that the
lawsuits were without merit and filed haphazardly by a rogue county attorney. The facts 38 (Wray, 2013) 39 (Tresaugue, With huge damages at stake, trial over waste pits to begin, 2014)
16
uncovered during the trial prove that McGinnes acted in an irresponsible manner. Also, the
lawsuit was not the direct result of an overzealous county lawyer, but rather a collective
decision which Harris County Commissioner’s Court approved unanimously. The decision to
settle also rebuts the argument that the lawsuit was “just some big revenue-‐raising exercise.”40
The County’s share of the award – approximately $10 million – is a small drop for a county with
an “annual operating budget of $2.3 billion.”41 The rest of the award is distributed among the
state and the private environmental law firm that tried the case.
Conclusion and Recommendations
The attacks on a local government’s right to pursue civil penalties continue, as “business groups
and lobbyists now want to limit how much local governments can collect in penalties.”42 This
attempt at environmental tort reform is misguided in light of the settlement reached in a case
involving such egregious environmental violations. First, the settlement amount of $29.2
million is a minimal amount when compared to Waste Management’s nearly $14 billion in
revenue and $4.8 billion in profit for 2013. Second, like medical malpractice reform, a cap on
penalties may severely limit the number of private law firms willing to take on environmental
cases, which are very expensive to take to court.
A local government’s right to bring suit needs to be protected from bills that seek to
curtail it. The two bills mentioned above, HB 3117 and HB 3119, may resurface in the next
legislative session, and their passage would end local vigilance in a state whose environmental
agency is not inclined to challenge business interests.
40 (Collier, 2014) 41 (Tresaugue, Was Harris County's high-‐stakes pollution fight worth it?, 2014) 42 (Collier, 2014)
17
Instead, the legislature should strengthen a local government’s ability to bring suit by
providing funding to local governments for environmental cases, especially in areas like
Houston, which produce much of the state’s wealth, but at a significant cost and risk to its own
environment. The state could achieve this by imposing greater fines for violators and
redistributing the money to local governments based on where the violation took place. Some
might argue that this would ignite a series of environmental lawsuits, many of which would be
frivolous. Such an argument ignores the economic reality of awards in lawsuits and
contingency contracts. Environmental law firms face the inherent risk of receiving an
unfavorable ruling (even in the strongest of cases) after expending significant financial
resources to try a case. As such, most law firms would be unwilling to take on either small or
hard-‐to-‐prove cases, and would reserve their resources for clearest and most egregious cases.
The right for parties (other than the official environmental agency) to bring suit has
been included in both the Texas Water Code and the federal Clean Water Act. In the case of
the Clean Water Act, Legislators recognized that citizen suits, for instance, could become “an
important method for enforcement”43 because citizens could help detect violations and call
them to the court’s attention. The same is true for local governments, which have more
resources and an even greater obligation to protect the public that has directly elected them.
43 (Schwartz & Hackett, 1984)
18
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20
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