Property owners looking at legal options

While it's difficult enough to understand large complex remedial investigation reports, silence on the part of BNSF Railway has made Railroad District property owners nervous about their real estate investments — especially as BNSF recently began to acquire properties.

And some property owners have decided to act now rather than wait for the state. A recent court case could help those who want to sue the railroad.

Denise Martin, the Montana Department of Environmental Quality section manager who is temporarily serving as project manager for the Superfund site, noted neighborhood concerns in a February letter to BNSF.

"One landowner reported that the BNSF representative told the landowner his property 'might be contaminated with petroleum and solvents,'" she said.

Martin's request for a list of properties that BNSF had identified for purchase was turned down by BNSF representative Michael Hart, who cited "confidential economic options." Hart also noted that "discussions between BNSF and the landowners are not 'remedial actions' as BNSF reads the Montana Code."

DEQ director Richard Opper told Whitefish city councilor John Muhlfeld in an April 27 letter there was no evidence of groundwater contamination exceeding standards south of Railway St. or east of Miles Ave. He also said BNSF had never submitted an "impact model" demonstrating the likelihood of contamination migrating from BNSF property into the Railroad District.

Investments threatened

Several neighborhood landowners and businessmen met with Muhlfeld, mayor Mike Jenson and councilor Frank Sweeney on April 29. Muhlfeld said no attorneys were present, and the consensus on how to proceed was "to be decisive but not in a hurry."

"The cat's out of the bag," Muhlfeld said. "People are already being affected financially and emotionally."

Millions of dollars has already been invested in the area, he said.

"People were following the city's vision of the future there," Muhlfeld said, "and they need to see a return on their investments."

He also pointed out that the city is not interfering with people who want to sell and leave the area.

One investor with a lot at stake is Bill Kahle, whose Conductors Row project borders BNSF property. Several properties across O'Brien Ave. from the project have already been bought by BNSF, but Kahle says he hasn't received an offer from the railroad.

"We had a preliminary meeting with BNSF, and they said they wanted to get an appraisal for the property," he said.

Kahle said it's a tough issue, and so far he and his fellow investors are just gathering information.

"We can't get inside BNSF's head and figure out their motives," he said.

Kahle said he loves his project, and he's anxious to get on with building Phase 2, but he and his partners were at a standstill now. They are still marketing units in the completed Phase 1 building, but liability for health hazards were now a concern.

The April 29 meeting was productive, he noted.

"I was impressed with the willingness of Jenson, Muhlfeld and Sweeney to help, but until we know what the problem is, we don't know what action to take."

The legal road

A question on many people's minds is why BNSF suddenly started buying up property in the Railroad District.

"I've received a zillion calls on this," Whitefish city attorney John Phelps said.

What the city can actually do is not clear, he said. City representatives could talk with BNSF and DEQ and advocate a position, but there are contradictory feelings in the public about the city's role, Phelps noted.

One real estate investment group has already threatened to sue the city if it interferes with their ability to sell their Railroad District property to BNSF.

Phelps said BNSF's interest in acquiring Railroad District properties seems rational in light of the 2007 Montana Supreme Court ruling in Sunburst School District v. Texaco. The oil company operated a refinery in Sunburst from 1924 to 1961, and spills from their operation contaminated the aquifer below the small town.

Fumes from the spilled gasoline created a surface-level health hazard, and Texaco started a clean-up after a home exploded in 1955. In 2003, Texaco's consultants recommended "natural attenuation" rather than active remediation to deal with the contaminated aquifer.

The difference in cost was $1 million to let the gasoline biodegrade over 20 to 100 years or $30 million for an active clean-up plan. DEQ proposed the "natural attenuation" for public comment in 2003, but the school district and 90 property owners had already filed suit in 2001.

The Montana Supreme Court ruling generally in favor of the plaintiffs set two important precedents — it approved $15 million in restoration damages, which exceeded the market value of the properties, and it opened the door for individual property owners to sue for remediation before DEQ took action in a Superfund case.

In light of the Sunburst case, according to Phelps, it makes sense that BNSF acquires Railroad District properties before landowners sue for restorative damages that could add up to millions of dollars.

And in light of BNSF spills elsewhere, the railroad probably doesn't want to set a precedent here that would apply to other places with contamination, such as Havre and Livingston, Rathdrum, Idaho, and Mandan, N.D.

Some landowners have already hired lawyers out of Great Falls and Billings who are experienced with litigation against BNSF. At least two landowners have signed on with Clifford Edwards, a Billings attorney who owns property in Whitefish — several years ago, after he sold the Edwards Jet Center to Bill Foley, Edwards offered to buy City Hall from the city of Whitefish.

Now Edwards wants to educate the city council on the threat posed by BNSF, and his firm will begin testing for contaminants on their clients property.

"Their actions only mean one thing — BNSF knows their toxic plumes have migrated or are migrating off of BNSF's property onto residential and business properties in the city of Whitefish," he said in an April 27 letter to city manager Chuck Stearns.

Edwards cited a successful 1999 verdict his firm was awarded against BNSF by a Park County jury and other clients they've represented in Livingston.

"With well over a decade of experience with BNSF's toxic pollution practices, our firm understands BNSF's modus operandi — delay," he said. "The citizens of Whitefish need to take immediate action in order to force BNSF to contain, control and remove its pollution from the community."

Edwards' aggressive stance against the railroad company and his claim that "BNSF's plumes are quietly taking over Whitefish," however, has some property owners worried that lawyers will seize control of the situation instead of scientists and earth-moving companies that might actually deal with the pollution.

In the meantime, reports are emerging that BNSF has begun inquiries about acquiring and homes at the north end of Kalispell Ave., east of Whitefish Middle School, and property around a former tie plant in Somers, where creosote got into the ground.