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World War II and Superfund

Court says government agreed to pay for company's future liabilities in 1940 contract

by Cheryl Hogue
May 24, 2004 | A version of this story appeared in Volume 82, Issue 21

DuPont hopes to get the military to reimburse it for its costs at this Superfund site in Morgantown, W.Va.
DuPont hopes to get the military to reimburse it for its costs at this Superfund site in Morgantown, W.Va.

During World War II, many companies, including chemical giant DuPont, made goods for the military under contract at government-owned facilities. Now, six decades later, these companies may get the government to pay for their Superfund cleanup liability from those war efforts.

A federal appeals court recently found that the military agreed to indemnify--to pay for any loss or damage--DuPont for costs associated with an ordnance plant the company operated during World War II. This includes costs that the company incurred because the facility, in Morgantown, W.Va., eventually became a Superfund site, the U.S. Court of Appeals for the Federal Circuit ruled. DuPont was among the companies that formerly operated the facility and helped pay to clean up chemical contamination at the site.

Under a November 1940 contract with the government, DuPont built the facility, initially to produce anhydrous ammonia for use in ordnance. The plant was expanded between 1941 and 1945 to make methanol, formaldehyde, hexamine, and benzol, according to information DuPont provided to the Environmental Protection Agency about the Superfund site. DuPont's manufacturing at the site ceased in 1945, at the end of World War II. DuPont was released from accountability for the property and equipment by the government in 1946.

In the postwar period, the federal government leased the Morgantown facility to various chemical and coke manufacturers until the late 1950s, according to John McGahren, partner in the Newark, N.J., office of Latham & Watkins, who represents DuPont. The facility was shuttered around 1958 because industrial technology shifted from using coal to natural gas as a raw material to make ammonia, McGahren tells C&EN.

The closed facility included contaminated land, but cleanup there did not begin until after Congress in 1980 passed the federal Superfund law, which is aimed at cleaning up polluted, abandoned industrial sites. In 1984, EPA began the process of listing the Morgantown facility as a Superfund site. EPA eventually sought funding for the cleanup from the companies that ran the facility in the 1940s and '50s--including DuPont.

The cleanup work at the facility moved forward and was completed in late 2003, according to EPA. McGahren says DuPont has spent about $2 million thus far in connection with the Morgantown site Superfund cleanup.

DuPont did not lodge its lengthy--and expensive--legal effort through the federal court system merely to get the Pentagon to reimburse it for that $2 million, McGahren points out. The appeals court's decision applies specifically to DuPont's liabilities at the Morgantown site. However, the ruling likely will have broader ramifications for other companies that operated government-owned plants under contract during World War II and that have Superfund liability for those sites, say attorneys who are tracking the case.

"A lot of companies did work for the government" during that war and received indemnification similar to DuPont's, says Michael W. Steinberg, special counsel at the Washington, D.C., office of Morgan Lewis. And a lot of polluted industrial sites around the U.S. have contamination that dates back to World War II, he notes.

DuPont ran about 20 government-owned, contractor-operated plants during World War II, McGahren says. Other chemical companies ran these types of facilities too, churning out synthetic rubber or compounds used in munitions, he says. They could seek reimbursement from the military for Superfund costs associated with operations at those plants. And the court's ruling may apply to businesses outside of the chemical industry, as well--General Motors and Ford are asking the military to cover their Superfund cleanup liabilities for World War II-related pollution, he adds.

THE APPEALS COURT essentially rejected the government's arguments against covering World War II contractors for Superfund liability. The Justice Department had contended that a law called the Anti-Deficiency Act barred the government from reimbursing DuPont for costs incurred decades after it ran the Morgantown plant.

The Anti-Deficiency Act prohibits the government from making commitments to pay indeterminate sums of money in the future, explains Leslie A. Hulse, counsel to the American Chemistry Council. This law bars the government from including open-ended indemnity clauses to cover future costs that don't carry a specific dollar figure--such as possible Superfund liability--in contracts.

However, the appeals court determined that the indemnity the government gave DuPont in the Morgantown contract is exempt from the Anti-Deficiency Act. The court found that the indemnity provided to many contractors of the era by what was then the War Department and by the U.S. Navy continues without a time limit, says Richard P. Bress, partner in the Washington, D.C., office of Latham & Watkins. Bress, who argued DuPont's case before the appeals court, says the court also found that even if the basis for a contractor's liability--such as the Superfund law--did not exist for decades after the contract ended, the government's broad indemnity still covers the company.

How this decision will play out with the Pentagon, DuPont and other World War II contractors, and EPA remains to be seen. But the federal appeals court seems to have given these companies strong legal backing to cover their Superfund liabilities.



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