YEARS AND MILLIONS LATER, STILL NO DUMP

Efforts to build a radioactive waste disposal site in North Carolina have gone -- by a long and lavish route -- nowhere. This week, lawmakers will discuss the project.

By JAMES ELI SHIFFER, Staff Writer

     After spending $111 million trying to build a radioactive waste landfill, North Carolina has no dump, no guarantee that the chosen site is safe and no consensus that a dump is needed.
     The main beneficiaries of the state's decadelong project are a number of contractors -- most notably Chem-Nuclear Systems Inc, the company hired to develop and run the landfill.
     What the state has to show for its investment is a warehouse full of dirt and rocks, boxes upon boxes of paperwork and two beat-up Chevrolet Suburbans.
     Work on the landfill in Wake County has been suspended in a squabble over funding between Gov. Jim Hunt and a coalition of states called the Southeast Compact Commission, which has paid close to $80 million of the total cost so far.
     Tuesday, a key state legislative committee will meet to discuss the project's future. North Carolina taxpayers already have spent $31 million, and lawmakers have begun to question where the money went.
     The answer is that the N.C. Low-Level Radioactive Waste Management Authority has paid $92 million to Chem-Nuclear and other contractors -- nearly five times the original estimate -- and there's no indication how much more might be spent.
     A News & Observer review of the authority's documents as well as numerous interviews with those involved found that a pay-as-you-go contract and insufficient oversight spawned a system where the solution to problems was to spend more money. None of the politicians or state agencies involved has stopped the money train, even as longtime supporters began to doubt that the waste dump was necessary.
     A decade of invoices tell the story of what authority spokesman Andy James said has been an "open-ended, money-spending animal":

Chem-Nuclear of Columbia, S.C., was paid $77 million, including the cost of moving employees to Raleigh, setting up its office, taking state officials to lunch, even running its coffee makers. It distributed more than $50 million to subcontractors. In 1994, the company won a $2 million bonus from the authority for submitting a license application on time. Two years later, the authority replaced Chem-Nuclear out of frustration with the lack of progress.

The company's principal subcontractor, Law Engineering & Environmental Services of Raleigh, collected $32 million, much of it for detailed studies of the site that another consultant later asserted were "untested" and "inadequate."

Lobbyists earned up to $125 an hour to pressure politicians on behalf of Chem-Nuclear in Congress and the General Assembly. The arrangement put taxpayers in the unusual position of paying to persuade themselves to spend more money on the project.

A Charlotte public relations firm, Epley Associates, earned nearly $1.2 million. Among other work, Epley customized a Winnebago with exhibits about radioactivity, kept an eye on project opponents and clipped news articles, charging up to $35 an hour for each employee wielding the scissors. Epley's fees made up part of the $4.3 million spent on public relations.
     Gov. Jim Hunt, who still supports the process he helped start in the early 1980s, said he tried to bring some discipline to it in 1996.
     "All I know is there was a lot of back-and-forth and blaming folks," he said in a recent interview. "I got tired of hearing it from both sides. That's why I sat down and said, 'listen, give me a step-by-step-by-step process.' I wish that could have been done a long time ago. It might have saved a lot of money and a lot of time and effort."
     With the troubled project at another cash crisis, critics say now is the time to put it to rest. But no one, not even the governor, thinks it's his place to stop it.
     "The legislature passed a law that the authority shall build one," said Bob Heater, a member of the authority since 1993. "It doesn't say we can stop if we don't think we need it."
    

Contract without boundaries

In 1986, the Southeast Compact Commission -- the regional coalition set up by Congress to handle low-level waste -- chose North Carolina to dispose of its low-level radioactive refuse from nuclear reactors, laboratories, factories and hospitals. The project would be financed through fees paid by electric companies to the compact, as well as state tax dollars.
     The compact was looking for a new site because a national landfill in Barnwell, S.C., was scheduled to close in the early 1990s. And Chem-Nuclear, which operated the Barnwell facility, wanted to run the new one as well.
     Chem-Nuclear is a division of Waste Management Inc. of Oak Brook, Ill., the world's largest waste-disposal company with $9.2 billion in annual revenue. In 1989, Chem-Nuclear landed the contract. Under the agreement with the authority, Chem-Nuclear would obtain a license to build a facility and run it for 20 years.
     The company estimated it would cost $20 million to get the license, but the contract set no penalty for cost overruns -- $57 million so far. The authority also agreed to pay for the company's entire Raleigh operation down to each electric cord.
     David Ebenhack, the Chem-Nuclear vice president who ran the Raleigh office from 1989 to 1996, said the contract was appropriate for such a risky undertaking.
     "The task was much bigger than anyone envisioned when they set up the authority," he said, so the company told the authority it could not set a lump sum for the project.
     "We got the best contract we could at the time, under those circumstances," said John Mac Millan, who helped negotiate the contract for the state. He later served as the authority's executive director from 1990 to 1996.
     But the authority's current chairman, Greensboro businessman Warren Corgan, said the agreement lacked terms to guarantee that the proper work was done within spending and time limits.
     "I would never have signed that contract," he said. "I would have insisted on a work plan. I would have insisted on incentives."
     Ebenhack said Chem-Nuclear never made a profit from the $20 million funneled its way from 1989 to 1996.
     Beyond the contract, the authority and its staff allowed Chem-Nuclear and its contractors wide latitude in spending. Aside from paying the salaries of Chem-Nuclear's 14 Raleigh employees, the authority covered their dues in professional societies and sent them to conferences around the country. In the first three years of the contract, a $16 million appropriation from the General Assembly was the main funding, so these and other costs were picked up principally by North Carolina taxpayers:

More than $147,000 to relocate Chem-Nuclear employees from around the country to Raleigh and help them pay for new houses.

$13,000 to furnish Chem-Nuclear's Raleigh office, including $4,572 for pictures to decorate the walls.

$46,227 for two new Chevrolet Suburbans.
     Mac Millan defended the authority's oversight of Chem-Nuclear's expenses, saying covering such overhead costs was "standard industrial practice." But the authority tightened up some of its practices after a critical 1992 report by the state auditor. The auditor found that in one month, the authority paid its contractors $1,092 more than the contract allowed.
     The auditor also noted that the authority's habit of paying Chem-Nuclear's entertainment expenses was ethically questionable. Company executives would dine with authority board members and staff, pick up the tab, then send the bill to the authority for reimbursement. Some of the meals, such as a $388 salmon dinner in 1989 with two authority members, featured liquor and beer.
     "The practices described here allows authority board and staff members to benefit from meals and entertainment that costs more than, or is not allowed at all by, state travel reimbursement policy," the auditor's report said. State personnel policy forbids reimbursing employees for alcoholic drinks.
     In an effort to speed up the project, Corgan helped renegotiate the contract to include a $2 million bonus for Chem-Nuclear if it completed a license application by the end of 1993. The company would pay a $2 million penalty if it failed.
     Chem-Nuclear turned in a 7,000-page application on time. It won the bonus, although state radiation protection regulators later found so many holes in the data that they drew up a binder of 594 questions, some of which remain unanswered today. Authority officials still defend the bonus.
     "It's not a matter of adequacy. It's a matter of completeness," Mac Millan said about the application. "We never said it had to be adequate."
     The project's mounting expenses eventually caught the eye of state legislators.
     "We all knew it was a major activity, but we had no way to assess whether or not the cost of that activity was within reason," said state Rep. George Miller Jr., a Durham Democrat and one of the project's main backers. The best policy, Miller said, was to keep the process moving.
    

Public relations blitz

In 1992, Chem-Nuclear's shiniest weapon in the battle of public opinion rolled into action. Thirty-four feet long and brimming with exhibits touting the benefits of radiation, the $100,000 "Mobile Information Resource Center" had a mission to "bring North Carolina's Radioactive Waste Disposal Project to YOU."
     The Winnebago rumbled its way to schools, the State Fair, festivals and shopping malls, the four-wheeled vanguard of a giant publicity effort that considered the project as much a public relations challenge as a technical feat.
     The law forming the authority mandated public participation in the choice of a site. On that basis, the authority paid Chem-Nuclear $4.3 million to tell the state its proposed landfill was safe and to quash political and popular opposition. But the publicity campaign sometimes backfired and the company's effort to build local support failed.
     Chem-Nuclear hired a team of political insiders: two veteran lobbyists, Roger Bone and Sam Johnson; Gary Pearce, a longtime adviser to Hunt; and Don Fowler, a Democratic activist and public relations consultant for Chem-Nuclear since 1980.
     "Everybody understands the waste business, very broadly defined, is a sensitive issue for the public," said Fowler, chairman of the Democratic National Committee from 1995 to 1996. "My role was to keep people informed about what was going on, and not persuade them to vote for this bill or that bill."
     Fowler, who was paid at least $237,000 by the authority for his Chem-Nuclear work, said he also kept in touch with North Carolina's congressional delegation to try to head off potential opposition.
     The main public relations subcontractor, Epley Associates, ran a statewide campaign driven by polls, advertising and media contacts, while the authority and Chem-Nuclear employed six people whose sole job was public relations.
     Among the public relations expenses:

$107,090 for one month's work at Epley. The November 1989 bill included salaries grouped in categories such as "briefing," "materials," "assessment" and "tracking," as well as expenses -- $1,300 to monitor and tape television news, $8,855 worth of printing and $2,000 for a single display with spotlights.

$70,000 for a school curriculum supplement about the benefits of radiation for X-rays and electricity and descriptions of the disposal site. It was rejected as propaganda by school officials in Richmond and Chatham counties, which were under consideration for the site.

$25,000 for a confidential Epley report assessing the political prospects of each proposed site, along with demographic information and critiques of individual newspaper reporters. The authority was embarrassed when a lawsuit brought it to light and demanded repayment for the "political assessments." The state got a refund of $937.50.
     Mac Millan said he urged Chem-Nuclear to rein in its use of Epley Associates after the secret report became public, but he continued to support the publicity campaign.
     Ebenhack said the campaign improved the image of the waste site with the "vast, vast majority of people." He dismissed those who questioned its pro-nuclear message as "emotional."
     The campaign, however, never succeeded in rallying much local support. Politicians in Wake and Chatham counties almost unanimously opposed the site as a potential threat to human health.
     In Richmond County, the choice of a now-discarded site in a poor rural neighborhood aroused so much opposition that Gov. Jim Martin called out the state Highway Patrol in 1991 to serve as "peace officers." Chem-Nuclear constructed a compound around its site headquarters with a $16,000 fence, floodlights and as many as 16 security guards each day. Security costs topped $1.6 million.
     Fighting opponents' lawsuits with some of the state's best-known lawyers cost $2.7 million.
     "I can't convince everybody in the world no matter how many dollars I spend," Ebenhack said.
    

Safety never determined

The biggest hurdle of the process has not been politics or public opinion. Despite conducting the most intense investigation of a tract of land in North Carolina history, Chem-Nuclear never convinced state environmental regulators that it knew enough about the site to guarantee its safety.
     The General Assembly designed the unique process: the authority, through its contractor, would perform the work required to prove the site was safe. Then regulators with the Division of Radiation Protection, part of the N.C. Department of Environment and Natural Resources, would approve or deny a license.
     In practice, the arrangement caused a bizarre standoff between the two state agencies. Chem-Nuclear would tell the authority it had done enough drilling, digging and monitoring to make its case. The regulators would disagree, but they hesitated to tell the authority exactly what it needed to do to satisfy their concerns, for fear of tainting their impartiality.
     "It's a delicate balance between communicating our concerns and not doing their work for them," said Ed Burt, chief of the low-level waste section for the state radiation protection division.
     The back-and-forth might have been frustrating to state officials, but it kept the contractors busy. Their work filled a warehouse with 14,000 feet of cylindrical rock and dirt samples from the site and stuffed file cabinets with statistics about groundwater, bedrock, vegetation and soil. Workers perforated a tract of pine-studded hills with hundreds of wells, trenches and holes.
     The contractors blame the regulators for sending mixed messages.
     "If you can develop a geologic model with three bore-holes, one group would say that's sufficient," said Al Tice, assistant vice president at Law Engineering. "Another group would say no, we need 20 bore-holes."
     Ebenhack, the Chem-Nuclear executive, said the regulators were unreasonable, demanding the specifications, for example, of the air ducts in one of the site's proposed buildings.
     "That added about $2 million and a fair amount of time," he said.
     But he acknowledged that his company shares some of the blame.
     "It may have collectively been a little bit of everybody's fault," he said. "We clearly thought there was sufficient data. It may not have been in the form or organized the way that some folks would have preferred it to be."
     Dayne Brown, the head of the radiation protection division until his retirement in 1996, said the pressure on the authority and Chem-Nuclear to finish the job impaired their judgment.
     "Everyone has been tremendously concerned about time and money," he said. "That's fine and good, as long as you don't let it interfere with your grasp of reality. You can't make a complex site simple."
     In 1994, frustrated by the lack of progress, the authority hired a consultant, Harding Lawson Associates of Denver, Colo., to critique Chem-Nuclear's work. Harding Lawson's 1995 report confirmed what regulators and opponents had long asserted: Chem-Nuclear and Law Engineering still could not prove whether underground fractures at the site would allow radioactive waste to contaminate groundwater.
     At the time, the authority had invested $70 million and seven years on the project. It stood by Chem-Nuclear for another year.
     Hunt intervened in 1996, summoning the people involved to the Executive Mansion to develop a better working relationship. As a result, the authority replaced Chem-Nuclear with Harding Lawson Associates.
     Two years later, Harding Lawson has been paid $8 million for further studies of the site. It has not yet answered the groundwater question. The authority now estimates getting a license will cost another $20 million, while the recent stoppage of work might boost that number.
     "They can keep throwing money at it and throwing money at it," said David Farren, a Chapel Hill environmental lawyer who has fought the dump. "It can't change the fact that it's a bad site."
    

Will it ever open?

In 1995, South Carolina announced that Chem-Nuclear's Barnwell site would remain open after all. The news made a deep impression on Mac Millan, then the authority's director. The man who had negotiated Chem-Nuclear's contract and earned $85,000 a year to build a radioactive waste landfill decided North Carolina did not need one any more.
     "I came fairly quickly to the view that this doesn't make a whole lot of sense," he said in a recent interview. But Mac Millan never told anyone in an official capacity about his change of heart and kept working for the authority to build the site as recently as spring 1997.
     Such was the unusual nature of the process that neither the authority, the regulators, the General Assembly, the governor nor the Southeast Compact Commission thought it was their responsibility to stop it.
     Ed Burt, the state environmental regulator, said that as long as the authority keeps answering his questions, "I don't know that we have a way to terminate the process."
     If the site ever opens, North Carolina taxpayers are supposed to recover their $31 million investment, along with $10 million interest, from surcharges on waste. Miller, the state representative who pushed the project, said he does not know whether the state will see that money again.
     Meanwhile, Chem-Nuclear has closed its Raleigh office and its employees have moved back home. But under terms of the contract signed with the authority, if the state does license a waste dump somewhere in North Carolina, Chem-Nuclear will be back to run it.