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January 12, 2006
GE Comes Clean, Disclosing Costs Related to PCB Cleanup on the Hudson
    by William Baue

The move prompts the Tri-State Coalition for Responsible Investment, which characterized some of these expenditures as delay tactics, to withdraw its shareowner resolution requesting this information.


How much does it cost to address the cleanup of the 1.3 million pounds of polychlorinated biphenyl (PCB) that GE (ticker: GE) discharged into New York State's Hudson River--200 miles of which has been deemed the largest Superfund site in the US? A reasonable question for shareowners to ask of their company, it would seem. However, GE has opposed a shareowner resolution requesting "disclosure of costs of delay of cleanup of toxic sites" since the Tri-State Coalition for Responsible Investment (Tri-CRI) started filing it in 2001.

"We disagreed with them that this disclosure was a productive exercise--how would it at all improve the situation on the Hudson?" said Gary Sheffer, GE's executive director of communications and public affairs.

However, GE recently changed its tune. This week, Tri-CRI announced that GE finally broke its silence and disclosed all expenditures from 1990 to 2005 related to PCBs--a known animal carcinogen according to the Mayes Rat Study by GE Corporate Research & Development, and a probable human carcinogen.

"We're releasing this information now at their request because we want to put this behind us and focus on the cleanup, which is the phase of the project that we're in," Mr. Sheffer told SocialFunds.com.

The report was included in GE's "no-action" letter to the Securities and Exchange Commission (SEC) requesting permission to exclude the resolution from its proxy since it is fulfilling the terms. GE's revelation that it spent over $799 million to address PCB cleanup prompted Tri-CRI to withdraw the resolution, which received 27.5 percent support from voting shareowners last proxy season.

"While not all of that money was spent on foot-dragging by General Electric, much of it clearly was," said Sister Pat Daly, executive director of Tri-CRI, a coalition of Catholic institutional investors from New York, Connecticut, and New Jersey. Co-filing the resolution with Tri-CRI were many other members of the Interfaith Center on Corporate Responsibility (ICCR), a coalition of 275 faith-based institutional investors with over $110 billion in assets.

GE reports that it allocated $122 million to what Tri-CRI characterizes as "delay tactics" such as public relations and lobbying ($33.4 million), legal "maneuvering" ($86.6 million), and governmental relations ($2.1 million).

"Most of the spending we disclosed was on investigation and cleanup--in fact more than 80 percent," said Mr. Sheffer.

The report shows that GE spent $510 million on site investigation and remediation on the Hudson and two of the other major polluted sites (the Housatonic River in Pittsfield, Massachusetts and a former transformer facility in Rome, Georgia).

"Whether the delay-specific 'tab' for GE shareholders is $122 million--or even more of the $800 million of PCB-related costs--the bottom line is clear: this is a staggering amount of money and an astounding use of corporate funds to postpone the inevitable," said Sr. Pat. "The fact is that GE will have to clean up its toxic PCB pollution."

Mr. Sheffer does not contest the fact that the Environmental Protection Agency (EPA) is indeed requiring the company to clean up its PCB contamination, but he does advance a different interpretation of the timeline and the reason for GE's opposition to the proposed cleanup.

"We don't control the schedule--the schedule is controlled by the EPA," said Mr. Sheffer. "EPA has said we are not the cause of that delay."

"There's scientific disagreement about what's best for the Hudson River--we felt that dredging up the bottom of the river was a bad idea and we made our feelings known about that," said Mr. Sheffer. "The river is being sedimented--in other words, the PCBs are buried on the bottom of the river, and PCB levels in fish and in water have dropped 90 percent over the last decade or more, so we thought it was better to leave the sediment and the PCBs buried at the bottom of the river rather than risk re-suspending them during a dredging project."

While a 90 percent drop in PCB levels is welcome, it may not be sufficient. The shareowner resolution notes that "PCB concentrations in Upper Hudson fish, sediment, and water continue to exceed federal and state guidelines, creating unacceptable health and environmental risks."

Sr. Pat also counters GE's argument against dredging.

"EPA is not suggesting we use Tonka Toys for dredging," she said. "There are ways of doing this from the bottom of the river--almost like a vacuum--so that that re-contamination is limited or non-existent."

"There are concerns that a number of groups that live along the river have with the proposed next steps to initiate the cleanup, namely that the GE plan does not utilize the sophisticated technology that is available," added Sr. Pat. "We're hoping that GE and the EPA will decide to use the most sophisticated technology, which would then assure us that additional contamination would not happen."

GE is certainly renowned for its mastery of sophisticated technology, and is applying its expertise to environmentally friendly, energy-efficient products through its Ecomagination initiative. Ecomagination relates to the disclosure of PCB costs in that both exhibit corporate responsibility. Oddly, though, Mr. Sheffer denies any connection between the two.

 

 
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