The infamous New York state neighborhood called Love Canal is a nightmare that just won’t go away for Occidental Petroleum Corp.

Two decades after the Westwood oil giant paid more than $200 million to settle one of the nation’s most notorious hazardous waste debacles, the company is now battling new claims of tens of millions of dollars in damages for alleged health impacts.

The fight will likely drag on for years and Occidental could ring up millions of dollars just in legal costs, possibly topping $1-0 million. It could also face another majo-r settlement payout – a preliminary damage figure put forward in one plaintiff’s case last year was $113 million – and have to pay millions more in new cleanup costs.

“It’s a long and costly process to go through, not to mention the costs if further remediation is needed,” said Gary Meyer, founder and chair of the environmental practice at downtown L.A. law firm Parker Milliken Clark O’Hara & Samuelian, who is not involved in the case but reviewed a broad outline of it for the Business Journal.

The infamous Love Canal site is in the city of Niagara Falls in western New York state. Thirty-five years ago, reports of contamination from decades of dumping of hazardous waste sparked a panicked evacuation of the neighborhood and led to national headlines, an emergency declaration from President Carter and ultimately to the creation of the national Superfund cleanup program.

Although it never dumped any chemical waste at Love Canal, Occidental inherited the contamination on the site when it purchased Hooker Chemicals & Plastics Corp. in 1968. After nearly 15 years of litigation lasting into the mid-1990s, Occidental ultimately agreed to pay $129 million in restitution and an additional $98 million in cleanup costs.

At that time, the cleanup was thought to be complete. While the actual dumping ground remained vacant – except for monitoring equipment and a containment system – hundreds of nearby homes abandoned in the evacuation were refurbished and sold. Nearly everybody – including Occidental – thought the case was closed.

But last year, six plaintiffs representing 11 individuals filed a lawsuit alleging that the cleanup was incomplete and that hazardous chemicals left behind were still causing cancer and other illnesses among adjacent residents. The lawsuit targets Occidental Petroleum, its onsite monitoring unit Glenn Springs Holdings Inc., the city of Niagara Falls and the Niagara Falls Water Board.

“Defendants are individually and collectively responsible for callously, wrongfully and dishonestly exposing plaintiffs to a host of deadly chemicals,” the lawsuit alleges.

Among the chemicals left behind by the original dumping in the mid-20th century: byproducts of the manufacture of now-banned pesticide DDT and dioxin. The lawsuit alleges these and other chemicals turned up in recent excavations for a nearby sewer project and have caused cancer, birth defects and other illnesses contracted by nearby residents. They also accuse the defendants of misrepresenting the condition of the site by saying it was cleaned up to levels safe enough to allow people to move back to the area.

Lawyers for the plaintiffs say they have since notified officials in Niagara Falls that they are evaluating an additional 1,100 illness and injury claims and say hundreds more cases could be filed in coming months and years.

Occidental responseIn a statement from Glenn Springs, spokesman Eric Moses said: “We believe the plaintiffs’ allegations are totally without merit, and we will vigorously defend the case.”

The statement said sampling data have found that the containment system is operating as designed, protecting the health and safety of nearby residents and also protecting the environment. It also said the sampling results have been confirmed by state and federal environmental agencies.

Regarding the sewer project excavations that turned up hazardous chemicals, the statement cited a New York state environmental document that states the chemicals found in the excavations did not originate from current activities on the Love Canal site.

News of the new round of lawsuits came as a surprise to two Wall Street analysts who track Occidental.

“I thought Occidental put the case behind it and reached a final settlement years ago. Apparently not,” said Fadel Gheit, oil sector analyst with Oppenheimer & Co. in New York.

Gheit said he did not believe this new round of Love Canal cases poses a major concern for investors – at least not at this stage.

“Occidental is a company with more than $70 billion (in market capitalization) and more than $20 billion in annual revenues, so unless the cost is in the billions of dollars, the downside risk is minimal,” he said.

Another analyst, Pavel Molchanov in the Houston office of Raymond James & Associates of St. Petersburg, Fla., said he hadn’t heard anything about the new lawsuits and that the original case was so old that he knew little about it.

Occidental stock rose Nov. 4, the first trading day after an Associated Press story about the new Love Canal lawsuits, closing at a two-week high of $97.73. But the movement was more likely due to a report from Barclays Research upgrading Occidental stock to a “buy.” The stock fell back a bit to close at $97.01 on Nov. 6.

What Occidental facesStill, the new round of claims comes at an inopportune time for Occidental. The company is in the midst of a major restructuring that could result in the sale or spinoff of its international operations and portions of its U.S. operations. Analysts have indicated Occidental could sell off its chemicals division, which includes the Love Canal monitoring operation; however, the company has not announced any such plans to date.

What’s more, for the last 18 months, the company has been trying to cut its U.S. operating costs in a bid to boost its earnings per share and be more attractive to investors. Litigation costs alone associated with Love Canal could make that task more difficult.

Pinning down the costs at this stage is difficult. One key reason is the strategy plaintiffs lawyers are using: bringing forward a few individual cases at a time to see how they fare in court or whether they result in substantial out-of-court settlements.

“Additional complaints will be filed on a rolling basis as merited,” said William Mack, attorney of counsel to New York’s Phillips and Paolicelli, which took over the case involving the six plaintiffs a year ago. The case is now pending in New York state court, where Occidental has filed a motion to dismiss. That motion will be heard next month.

For plaintiffs, the challenge will be to prove three things:

First, harmful levels of chemicals exist in and around the Love Canal site. Second, there’s a plausible way for those chemicals to reach the homes and yards of nearby residents. Third, the chemicals actually caused the illnesses and symptoms that residents report suffering.

“If this actually reaches trial, it will be a battle of the experts,” local environmental attorney Meyer said.

He said many, if not most, toxic tort cases settle before reaching trial and that it’s usually the defending company that pushes hardest for a settlement.

“Juries can be very unpredictable in these types of cases,” he said.

Love Canal HistoryA timeline tracking the chemical contamination at Niagara Falls, N.Y.:

1894: William Love begins digging a canal; the project is abandoned, but the leftover ditch keeps his name.

1942-53: Hooker Chemicals & Plastics Corp. dumps 22,000 tons of chemical waste there.

1968: Occidental Chemical Corp., a subsidiary of L.A.’s Occidental Petroleum Corp., buys Hooker.

Mid-1970s: Residents complain of chemicals seeping into yards and homes.

1978: Hundreds of homes are evacuated.

1979-80: The company is sued for cleanup costs by the federal and state governments.

1988: U.S. district court rules that Occidental Chemical must help pay cleanup.

1991: The first new owners of 230 refurbished homes move in.

1994: Occidental Chemical agrees to pay $98 million in cleanup costs.

2012: Plaintiffs file state lawsuits seeking damages from Occidental Chemical, environmental contractors and local agencies over alleged contamination.

2013: Occidental Chemical’s motion to dismiss the latest lawsuits is scheduled for December.

Source: Business Journal research