Libby, Montana: asbestos and information asymmetry

Transcription

1 Libby, Montana: asbestos and information asymmetry Scott Morrison November 8, Introduction Asbestos has been recognized as a hazardous material for years. EPA and OSHA regulations have attempted to stop asbestos use in industry and the prolonged deaths that accompany it by limiting exposure to the deadly fibers. In the small town of Libby, Montana, one firm failed to act on its growing knowledge about the dangers of asbestos. Confronted with a choice between protecting a thriving vermiculite market and protecting the lives of its workers, W. R. Grace executives chose to save the company. For years, workers in the Libby mine were not told of the hazards they undertook every day. The workers, in turn, took no precautions. Dust from the processing plant sifted through the air, covering the entire town with layers of white powder. [1] Now, years later, hundreds of cases of asbestosis and mesothilioma have appeared. Mine workers and their families slowly began to suffer. Even people who had never set foot in the mine began to exhibit the symptoms of asbestosis, mesothilioma, and lung cancer. By 1999, 187 suits had been filed against W. R. Grace; 120 were still pending. The local district court, unable to support the volume of new litigation, would allow only one new case every three months. [1] In 2001, W. R. Grace filed for bankruptcy protection, leaving many victims uncompensated. This case demonstrates one failure method of environmental regulation: occasionally it is economically beneficial for a firm to ignore government safety regulations. The information asymmetry in W. R. Grace s safety policies is a direct consequence of lax regulations and poor supervision. Without more stringent health regulations and enough government oversight to catch transgressors firms cannot be expected to behave. 1

2 2 Background Vermiculite, a lustrous mineral that expands like popcorn when heated, is inert, nonflammable, and absorbs three times its own weight in water. Because of these unusual properties, vermiculite quickly found many uses: as absorbent packing material, soil conditioner, and sprayable building insulation. [2] By itself, vermiculite is nonhazardous. Libby s supply, however, is laced with a more insidious mineral. Tremolite, an extremely hazardous form of asbestos, is found in thin veins throughout the vermiculite ore. As the ore is strip mined, vermiculite and tremolite are collected indiscriminately. Later processing removes most of the asbestos fibers from the material and disperses them into the air. One study showed that at least 5,000 pounds of fibers were released every day. [1] The useful properties of vermiculite were discovered by Edward Alley in Alley immediately began marketing the mineral under the trade name Zonolite. As the Zonolite Corporation grew, its operations in Libby grew larger. Finally, in 1963, the mine was bought by W. R. Grace, who operated it until its closure in [3] Over its seventy-year life, the Libby mine produced 70 percent of the vermiculite supply used in the United States. [4] 3 Evidence According to an investigation by Andrew Schneider of the Seattle Post-Inquirer, internal documents demonstrated that company officials were fully aware of the situation but chose to ignore it. For example, a 1956 report by the Montana Health Department mentions the hazards of the fine dust. Two years later, another state report described high and substantial concentrations of asbestos dust [5] at the site. Zonolite, of course, did nothing. When Grace bought the mine in 1963, it inherited all of its predecessor s problems. The Post-Inquirer collected the company s quarterly inspection reports, which had been marked confidential. Grace lawyers required this stamp, according to internal memos, to protect the reports from being used in court. [1] The greatest evidence of risk was a set of diagnostic X ray tests performed by Dr. William Little in 1964, which showed a great deal of lung abnormalities among the miners. Later tests showed that nearly half of the plant s long-term workers had visible respiratory damage. According to internal Grace communications, the only persons aware of the studies are (Grace) officials and Dr. Little. [1] The workers themselves were not told of their own diseases. Despite these clear warnings, mine workers were not told that their environment was hazardous. They 2

3 did have respirators, but as one miner noted, the dust was so heavy most of the time that they clogged up within minutes. You had a choice between wearing them and breathing. Despite the company s claims, workers agree that they were never informed of any danger. [1] The deception was not limited to Grace s own workers. As other fireproofing manufacturers ceased production of their asbestos-based flame retardants, Grace created a new product called Monokote. In comparison to other vermiculite products, Monokote was in fact relatively safe; Grace s own tests showed anywhere from 0.001% to 0.5% asbestos fibers by weight. (Independent studies occasionally showed up to 5% asbestos, but Grace tended to quote the more flattering statistics.) [6] This was, according to the company, a negligible amount so Grace began marketing Monokote as a completely asbestos-free product. 4 Analysis Why did W. R. Grace choose to hide these asbestos risks from its employees and customers? One response is that company executives were unwilling to jeopardize a thriving vermiculite market by injecting uncertainty over the product s safety. A New York Times article tells why Grace officials avoided telling customers who used Monokote, a vermiculite product, that it contained asbestos. While silence increased the danger of being sued, they calculated, disclosure could have meant the end of Monokote. So, they decided, customers who inquired if Monokote contained asbestos were to be told that it did not. [6] In an article for Management Communication Quarterly, Schwarze argues that W. R Grace is not solely at fault. He blames the insufficient tension between the company and government agencies that allowed officials to ignore the mine s problems. Safety inspectors came and went; their reports urged improved housekeeping but failed to follow through with penalties of any kind. [3] As Schwarze reports, these lenient practices allowed the company to apply superficial improvements as public health continued to decline. 5 Conclusion This case is not unique. When W. R. Grace filed for Chapter 11 bankruptcy protection after losing $2 billion in asbestos-related claims, it was the twenty-sixth company to do so. [7] But even as the companies responsible begin to vanish, new cases of asbestosis will continue for decades. Costs for medical care and environmental repair will increasingly be placed on taxpayers, insurers, and volunteers. How can future cases of corporate negligence be prevented? One necessary component of sound regulation is a meaningful way to enforce it. In this case, government 3

4 agencies were especially unresponsive in forcing Grace to conform to safety regulations. The extent to which Grace executives kept safety information secret information that would have led to more extensive investigation of the mine s business practices meant that very few people in regulatory roles had any ability to intervene. One suggestion would be the enforcement of laws that require transparency of certain types of safety records. If firms were expected to divulge all research regarding worker safety and allow independent researchers to conduct their own tests, safety violations would become evident more quickly. In this case, the greatest problem was the information asymmetry between the corporation and its workers. By attacking this asymmetry directly, regulators could ensure that workers are free to protect their own safety. 4

5 References [1] Schneider, Andrew. A town left to die. Seattle Post-Intelligencer. Nov 18, Retrieved Nov 8, < [2] About Vermiculite. The Vermiculite Association. Retrieved Nov 8, < [3] Schwarze, Steve. Corporate-state irresponsibility, critical publicity, and asbestos exposure in Libby, Montana. Management Communication Quarterly. Thousand Oaks: May [4] Asbestos and Vermiculite. U.S. Environmental Protection Agency. Retrieved Nov 8, < [5] Dolnick, David and Charles Morgan. A case study in asbestos disaster. Risk Managment. New York: May [6] Moss, Michael and Adrianne Appel. Company s Silence Countered Safety Fears About Asbestos. New York Times 1857 Current. Jul 9, 2001, p. A1. ProQuest Historical Newspapers. [7] Schneider, Andrew. W. R. Grace files for bankruptcy. Seattle Post-Intelligencer. Apr 03, Retrieved Nov 9, < 5