Paying A Price For Polluters

By Donald L. Barlett and James B. Steele

It was about 5 o'clock on Thursday afternoon in August 1996, when a dense gray cloud descended over Route 73, a two-lane road near Geismar, La., cutting visibility to zero and triggering a rear-end collision. As State Trooper Ross Johnson, a fresh-faced, 25-year-old Marine Corps veteran, drove toward the accident, he noted that every car headed his way had headlights on and windshield wipers flapping. When Johnson got out of his patrol car, he suddenly got hit by the heavy smell of ammonia. He ushered the drivers of the two cars out of the cloud and into a guard shack at an entrance to the Borden Chemicals and Plastics plant. "The fog was so dense I couldn't see the road," one driver told him. A plant safety officer had notified authorities about the chemical release, but had assured them "there was no off-site impact." By then, Johnson recalled, "there was a fog as far as the eye could [see]."

After Johnson left the scene, his "throat was really starting to clench, my eyes were starting to burn, and my skin was really starting to itch." Johnson later learned that the cloud was a witches' brew of toxic chemicals: ethylene dichloride, vinyl-chloride monomer and hydrogen chloride.

It had been just another day at the Borden Chemicals and Plastics plant. A month later, half a dozen similarly hazardous chemicals were released but remained on plant grounds. The following year, in July 1997, vinyl-chloride monomer and ammonia escaped from the plant and forced the closing of Route 73. In July 1998, a cloud of hydrochloric acid spewed out, shutting down roads in the area for about 20 minutes.

Back in 1994, at the request of the U.S. Environmental Protection Agency (EPA), the Justice Department filed a lawsuit against Borden Chemicals, accusing the company of a series of environmental-law violations. Among the charges: the company stored hazardous waste, sludges and solid wastes illegally; failed to install containment systems; burned hazardous waste without a permit; neglected to report the release of hazardous chemicals into the air; contaminated groundwater beneath the plant site (thereby threatening an aquifer that provides drinking water for residents of Louisiana and Texas); and shipped toxic waste laced with mercury to South Africa without notifying the EPA, as required by law. Last March, on the third day of what was expected to be a three-week trial, the company signed a consent agreement to settle the case. Without admitting any wrongdoing, Borden Chemicals agreed to pay a fine of $3.6 million--the largest in Louisiana history. The company also consented to spend $3 million to clean up groundwater contamination and stop injecting waste into underground storage wells, and to donate $400,000 for equipment for local emergency response units.

Don't weep for Borden Chemicals. It was able to pay the fine with just a couple of years' savings from abated taxes. For over the past decade, while the plant has been fouling the land, water and air in Louisiana, the state has excused the company from paying $15 million in property taxes as part of just one of its corporate-welfare programs. A Borden spokesman said even with the exemption, the tax the company pays in Louisiana is "about average" for Southern states. Without the exemption, he says, Louisiana would no longer be "competitive as far as trying to attract and retain" jobs.

And who are the real beneficiaries of this welfare? One is the Wall Street buyout firm of Kohlberg Kravis Roberts & Co., one of whose affiliates "manages and controls the activities of the company," according to filings with the U.S. Securities and Exchange Commission.

Borden Chemicals, which years ago was part of Borden Inc., the milk-and-dairy-products company, is typical of scores of companies in Louisiana that receive tax abatements at the same time they contribute to the state's polluted environment. That pollution, in Louisiana and across the country, represents corporate welfare's greatest hidden cost. Chemicals, mining wastes and a broad range of other hazardous materials have fouled water, land and air across America. Billions have already been spent undoing environmental damage. Many more billions will be spent in coming years. Industry itself is footing part of the bill. But the largest chunk will come from taxpayers--a massive corporate-welfare program.

The Federal Government, for example, has spent $130 million so far to clean up the Alamosa River in Colorado, contaminated with cyanide and heavy metals from a gold mine abandoned in 1992. The final tab is expected to reach at least $160 million. The government will eventually spend more than $100 million to clean up a site in Wayne, N.J., contaminated with radioactive waste. The company has agreed to chip in $32 million. The government estimates it will cost as much as $200 million to scrub up a zinc-smelter site in Palmerton, Pa. The tab for cleaning up radioactive waste, at a site in Weldon Spring, Mo., is put at $800 million.

As is so often the case with environmental pollution, practices once deemed safe turn out years later to be hazardous. So it was with the PCBs used by General Electric Co. and other manufacturers of transformers. Now cost estimates for cleaning up GE's PCB contamination in the Hudson River alone range as high as $3 billion.

Add to these cleanup bills yet another cost from pollution: the billions spent on health care to treat conditions ranging from black-lung disease to asbestosis. These costs are yet to be counted; it often takes years, even decades, to document links between chemicals and other products and deadly or debilitating diseases.

A LITTLE START-UP CALLED EXXON

To better understand the link between corporate welfare and pollution, let's take a closer look at Louisiana, a state that hands out tax breaks to companies that have been repeatedly fined or cited for discharging hazardous chemicals or for generating large amounts of toxic waste. Louisiana has been canceling taxes owed by industry ever since the Great Depression. But, as elsewhere, the exemptions have soared over the past decade.

Thus far in the 1990s, a TIME analysis shows, the state has wiped off the books $3.1 billion in property taxes alone. That's 14 times the amount the state excused in the 1960s and doesn't include all the other types of tax breaks granted to corporations. That makes Louisiana No. 1 in terms of subsidies per capita. Some of the big beneficiaries include Lucent Technologies, Uniroyal Chemical, Willamette Industries, PPG Industries and Georgia Gulf Corp. Paul Templet, a professor of environmental studies at Louisiana State University, has measured business subsidies across the country. His sobering conclusion: "The states that offer the least subsidies are doing the best from per capita income, [low] poverty, you name it...as the subsidies rise, the states essentially get poorer." What's more, Templet found, "as these subsidies rise, the income disparity... between the rich and the poor rises."

Plenty of states pass out tax breaks, of course, even to polluters whose mess taxpayers must later clean up. But Louisiana's incentive program has an odd twist: the tax abatements are intended to help start-up businesses. The purpose of the industrial-tax-exemption program, in the state's own words, is to offer "to industry certain tax benefits at the most critical stage of any business endeavor--the beginning."

So what are some of these "beginning" businesses? Over the past 10 years the state canceled $213 million in industrial property taxes owed by Exxon Corp., a company that traces its origins back 116 years. It eliminated $140 million in taxes owed by Shell Oil Co. affiliates, a business whose roots in the U.S. go back 86 years. It erased $103 million in taxes owed by International Paper Co., which opened its doors 100 years ago. And it voided $96 million in taxes owed by Dow Chemical Co., which was established 101 years ago.

While government officials across the country publicly embrace tax-abatement programs like Louisiana's, the employees involved in the actual administration of them are often quietly critical. In Louisiana, as in other states, TIME encountered those outraged by the escalating handouts but fearful of losing their jobs and powerless to stop the process. A Baton Rouge state official, who agreed to talk anonymously, said some companies today practice a form of "extortion" in Louisiana--they demand tax breaks yet give back very little in return. At one time, he said, companies might actually create new jobs in exchange for the abatements. "Today the corporations may add one or two new jobs for every million [dollars in abatements they receive]," he said. "That's not fair." Even when a company does create "100 new jobs, [it] closes a plant somewhere else, and 150 people lose their jobs," he added.

But he is quick to say that Louisiana on its own cannot stop the handouts if other states don't join in. "We'd be killed."

TODAY'S LESSON: RATS DO BITE

When government distributes handouts to select companies, someone else pays, either in higher taxes or in reduced services. Among the nation's most innocent victims: children who attend public schools. In some Louisiana parishes (counties), 20% or more of the industrial property taxes goes to education. So every tax break granted to a company translates into less money for schools. Consider the consequences of that policy for the 56,000 students in the East Baton Rouge Parish school system, the state's second largest after New Orleans. Everyday, many of them face some or all of these afflictions: rat bites; roofs with holes in them; buildings whose antiquated wiring will not permit more than a few computers to work at one time; walls so damaged by water leaks that paint will not adhere to the plaster; floors so rotted that children put their feet through them; long lines to use outmoded bathrooms; sewage backups in classrooms; asthma and respiratory illnesses as a result of mildew and fungus in ancient air ducts; falling ceiling tiles; condemned rooms; collapsing partitions; unusable playgrounds; broken stairs; carpets that smell from the repeated leaks and flooding.

Cindy Jones, an assistant principal, says, "It's astonishing... that people actually have to come to work and to learn in this kind of environment." Adds John McCann, principal of the 1,000-student Woodlawn High School, arguably the most dilapidated building in the district: "Teachers, they get run-down. It hurts their morale. They're tired of coming to school and getting wet when it rains." McCann means, of course, that teachers are tired of getting wet inside the school--not outside.

Sometimes the flooding occurs at inopportune moments, like the time students sat down to take a state-required test that determines whether they will graduate. "We went to classrooms vacuuming out with those big wet vacs," McCann recalled. "The kids were supposed to be trying to take an exam to see if they can get out of school. Well, we had to stop [the test]...and we had to move some kids out of [the] classrooms."

McCann's school was built long ago on a geological fault and is now cracking--literally. The auditorium, band room and choir room are off limits because they have been condemned.

None of this is to suggest that corporate welfare alone is responsible for the plight of the state's schools. While it certainly is one of the contributing factors, there are others. For example, at the same time the state passes out tax breaks wholesale, it does not contribute one cent to building construction or other capital needs of schools, as many other states do. All of which helps explain why Louisiana ranks 45th in the nation in spending on elementary and secondary education.

As if conditions inside Baton Rouge schools were not bad enough, students and teachers must also contend with pollution alerts. Listen to assistant superintendent Christine Arab describe life amid the petrochemical plants:

"Certain schools are in wind patterns from chemical plants, and they have as part of their safety drill what's called shelter-in-place, where all the windows in the buildings must be shut, the doors sealed in a special way. No one can go outside. They stay right there until it's cleared.

"Well, we had a barge overturn up on the north end of the river last year that was about a three- or four-day emergency, and we had kids sheltered in place for hours and hours and hours and had to wait for the wind to shift so we would be permitted to take the buses in and get out as many children as we could before the wind pattern changed again. Amazing. I thought to myself, I didn't know when I took this job that I would be issued a hard hat and a gas mask."

VERY BLACKENED REDFISH, ANYONE?

Each year the EPA compiles a catalog of the toxic chemicals discharged into the environment. Congress ordered the accounting after a deadly cloud of chemicals escaped from a Union Carbide plant in Bhopal, India, in 1984, killing thousands of people--and after the company released a smaller quantity of an equally toxic gas from its plant in Institute, W.Va., less than a year later.

Let's look at five companies in Louisiana that have earned spots on the EPA's list of the Top 50 companies measured in volume of chemical releases across the country. The five also happen to be beneficiaries of direct corporate welfare.

--Cytec Industries Inc. ranked No. 1 in the release of toxic chemicals in Louisiana during 1996. The company pumped 24.1 million lbs. of chemicals into wells and the air. The company also ranked No. 5 on the EPA's Top 50 list of companies that spew out the largest volume of toxic materials nationwide. Cytec, based in West Paterson, N.J., is a global chemical company with sales of $1.3 billion. And it has a friend in Louisiana, which has excused it from paying $19 million in local property taxes on machinery and equipment over the past decade. Records of the State Department of Economic Development show that the company created exactly 13 jobs during that period--meaning taxpayers shelled out $1.5 million for each additional person hired by Cytec.

With reporting by Laura Karmatz and Aisha Labi, and research by Joan Levinstein