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When Water Can Be Bad for Kids

Burt Helm Perchlorate is its name, and it has plenty of people worried. A primary ingredient in rocket fuel and fireworks, the chemical has been found in the water supply of at least 20 states. If ingested in high-enough amounts, perchlorate blocks iodide uptake into the thyroid gland, an essential function that aids the development of fetuses, newborns, and children (see "Perchlorate Facts" below).

Just what constitutes a sufficient risk level is unclear, and this lack of clarity is at the root of a six-year controversy pitching the Pentagon, the Energy Dept., NASA, and defense-industry contractors against the Environmental Protection Agency. The two sides have turned the matter over to the National Academy of Sciences, the "Supreme Court" for science debates, in the words of an EPA spokesperson.

BEYOND GUIDANCE. What's at stake? Potentially hundreds of millions of dollars in cleanup costs, a headache for the Defense Dept. et al., and a bonanza for the water-remediation companies that can handle perchlorate.

Resolution may be on a fast track -- perhaps much faster than the EPA, defense-industry groups, and the American Thyroid Assn. believe. All sides are expecting no more than general guidance from the NAS, such as an opinion on the current research on perchlorate and a recommendation for further scientific studies.

Yet, BusinessWeek Online has learned from two sources close to the study that the NAS, in an uncharacteristic move, will recommend a specific reference dose (the amount judged safe for consumption by even the most at-risk groups) when it releases its findings in the first half of January, 2005. While the NAS won't confirm what number it will release and declined to comment publicly about the results, the fact that it will be tendering specific numbers is significant.

"AWFUL PR." Scientists have known about perchlorate's effects on the human body since the 1950s. But it was only in 1997 they discovered how to detect the chemical at low levels in water. That kicked off a serious evaluation of the pollutant's presence in drinking water, with the EPA finishing its initial risk assessment in 2002. The agency recommended a reference dose of one part per billion - the equivalent of roughly a half a teaspoon of perchlorate dissolved in an Olympic-size swimming pool of water. The Pentagon & Co. complained the level was onerously low and demanded a reevaluation.

So now the NAS is reviewing the EPA's assessment. And although its findings aren't legally binding in any way (and the EPA must still go through the process of actually regulating perchlorate), they'll carry a great deal of weight in the political debate. An unfavorable decision will undercut Defense's already tenuous position against regulation. "The Pentagon is trying to [oppose the EPA] quietly, because [doing so] is awful PR," says Debra Coy, an analyst with Washington Research Group. Defense officials didn't return phone calls seeking comment for this story.

Meanwhile, aerospace and chemical companies are hedging their bets. Lockheed Martin (LMT), Kerr McGee (KMG), GenCorp (GY) unit AeroJet, and perchlorate manufacturer American Pacific are either setting aside reserves or actively conducting cleanups in California and Nevada, even while fighting against the establishment of standards for the contaminant in Washington, D.C.

COSTLY CLEANUPS.A clear recommendation by the NAS for levels of the chemical considered acceptable in water supplies could mean more cleanup funding from individual companies, even as they try to solve the problem well before actual regulation by the EPA. Defense will eventually be forced to pick up the bill as well. "Nobody wants to be liable down the line, when there's a mandate," says Peter Jensen of Basin Water, a privately owned filtration company based in San Bernardino County, Calif. "Ultimately all [the responsible parties] are going to move into treatment - but a lot of of them are delaying because of this NAS study."

So far, Lockheed has listed $180 million as a liability for the future cleanup of a former test site in Redlands, Calif., while Kerr McGee added $32 million to its reserves for a cleanup in Nevada. AeroJet says it has spent between $35 million and $40 million removing perchlorate at its site in Rancho Cordova, Calif., alone. Kerr McGee stopped making the chemical in 1998, and aerospace companies like AeroJet and Lockheed Martin now do their testing at military bases -- firmly on government property where they're farther from populated areas and free from liability if perchlorate or other chemicals seep into the ground.

Cleaning it up isn't cheap. Filtration systems for municipal-level wells can cost several hundred thousand dollars to install. But the real issue is the operating cost. The going rate for cleaning the equivalent of one family's yearly supply of water is roughly $50 to $75, according to Siemens-owned (SI) USFilter and Calgon Carbon (CCC), two filtration companies.

"DOWN THE ROAD." Costs can pile up when you consider the pollutant has turned up in 4% of the nation's water systems so far, according to a recent Food & Drug Administration investigation. Purging the chemical from the San Gabriel basin, a site covering just the eastern portion of Los Angeles County, would cost at least $100 million over the next 15 years, according to Carol Williams, an executive officer of the San Gabriel Basin Watermaster.

And perchlorate could be just the beginning. If the NAS sets a safety standard for traces of the chemical in drinking water, other governmental research groups could use the process to set standards to regulate additional contaminants. "A stringent [ruling] represents what's down the road for emerging contaminants," says Doug Gillen of USFilter.

Because pollutants have different chemical makeups, removing two different substances often means buying two separate filtration systems, thus doubling the cost. Cleanups themselves can often take over 20 years, meaning that water must be constantly filtered for that period before the threat is gone.

READY TO SUE. While the remediation of each individual substance may not create a huge market on its own, the combination of all of them could generate a thriving, new industry in chemical decontamination -- much to the dismay of aerospace and chemical companies, and to the Pentagon, which several of the contractors have said they plan to sue to help cover the costs.

"If you add all those little bits and pieces together, you have a market in the tens of billions of dollars," says Gillen. For the handful of remediation companies already in the business such as USFilter, Calgon Carbon, and Basin Water, there's a lot on tap.

Perchlorate Facts

While some perchlorate occurs naturally, most of the drinking-water contamination has been linked to rocket test sites, military bases, and perchlorate-production plants, where the chemical was improperly disposed of and soaked into the ground.

Perchlorate has turned up in an estimated 4% of U.S. water systems as of 2003. Significant levels of arsenic (above the EPA's protective level) are estimated to be in 5.3% of groundwater systems. Elevated levels of lead are estimated to be in roughly 3% of water systems that serve over 3,300 people each.

Perchlorate isn't regulated on the state or national level right now, but companies are cleaning up because of local agreements.

The presence of the contaminant in drinking water won't harm adults, but it may hinder the development of newborns and fetuses. Toxicological studies have so far looked only at perchlorate consumption in healthy adults, and in animals, so firm conclusions have not been reached. Helm is a reporter for BusinessWeek Online in New York

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