WASHINGTON, D.C. - In the largest judgment after trial in the history of the federal Superfund law, the Justice Department and the Environmental Protection Agency (EPA) announced that the U.S. District Court of Montana has ordered W.R. Grace & Co. to pay over $54.5 million to reimburse the federal government for the costs of investigation and cleanup of asbestos contamination in Libby, Montana.

In the ruling issued by District Court Judge Donald W. Molloy of the District Court of Montana, the federal government was awarded a declaratory judgment on W.R. Grace's liability for future costs related to the investigation and cleanup of asbestos contamination in Libby at the properties addressed in the decision. In addition, he ruled that the EPA's revised methodology for calculating indirect, or overhead, costs is appropriate and that those costs may be recovered from W.R. Grace. This is the first time a federal district court has ruled on EPA's revised methodology for calculating indirect costs.

"Today's ruling is a victory for the taxpayers, and for the environment," said Thomas L. Sansonetti, Assistant Attorney General of the Department of Justice Environment and Natural Resources Division. "From very the beginning of this case, W.R. Grace has refused to accept responsibility for contaminating this small town in northwest Montana with asbestos. Today's ruling rejects every argument made by W.R. Grace, and requires the company to pay for the cleanup of the contamination that it caused."

"The millions of dollars in litigation fees that W.R. Grace has spent in this misguided effort to escape responsibility for the Libby cleanup would have been much better spent on cleanup efforts or on health care for Libby residents," said said Carol Rushin, EPA assistant regional administrator for enforcement.

W.R. Grace owned and operated a vermiculite mine and vermiculite processing facilities in Libby from 1963 to 1992. The vermiculite ore found in Libby is contaminated with asbestos fibers. Mining and processing activities resulted in the spread of vermiculite - and the associated asbestos fibers - to numerous homes, businesses, and schools throughout the town. Additionally, the Libby vermiculite ore was also shipped around the country for further processing and packaging.

Asbestos, a recognized human carcinogen, is known to cause lung cancer and mesothelioma, a lethal tumor of the lining of the chest and abdominal cavities. Exposure to asbestos can also cause asbestosis, a disease which causes scarring of the lung, making it difficult to breathe.

Hundreds of people in Libby, including former mine workers, their families, and other residents, have exhibited signs and symptoms of asbestos-related disease. The federal Agency for Toxic Substances and Disease Registry conducted medical testing of Libby residents in the summer of 2000, and observed lung abnormalities in 18% of the people tested. ATSDR also found in a mortality review in the Libby area (from 1979-1988), 92 percent of those who died from asbestosis and 17 percent of those who died of lung cancer were former employees of the W.R. Grace facility in Libby.

"Libby is distinctive among Superfund sites because of the high toll that the exposure to asbestos has taken on the people in this community," says Dr. Henry Falk, Assistant Administrator of ATSDR. "This judgment underscores the importance of our work with the Libby community and the efforts that our agency has devoted to address health concerns there."

The EPA has been removing asbestos-contaminated soils and other materials in and near Libby since May 2000. The federal government filed suit against W.R. Grace in March 2001 to recover its investigation and cleanup costs under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), commonly known as the "Superfund" law. The lawsuit also named Kootenai Development Corporation, a W.R. Grace subsidiary, as a defendant due to its ownership of three contaminated properties in Libby.

In a December 19, 2002 legal opinion, Judge Molloy rejected W.R. Grace's challenges to EPA's actions in Libby, ruling that EPA's cleanup decisions were reasonable. A three-day trial on the remaining issues in the case - including the adequacy of documentation of ATSDR's Libby-related costs and the validity of EPA's methodology for calculating indirect costs - was conducted in January 2003.

The Court's current ruling means that W.R. Grace must pay all of the $54.5 million in costs that the EPA and ATSDR have incurred through December 31, 2001. Costs incurred after that date will be resolved in future proceedings if disputed by W.R. Grace.

In addition, the Court approved EPA's revised methodology for calculating indirect, or overhead, costs. In 2000, the EPA switched from using a labor hours allocation base to a total cost allocation base for purposes of calculating its indirect, or overhead, costs related to Superfund cleanups. The Court ruled that this new formula is appropriate, and ordered W.R. Grace to pay the indirect costs associated with EPA's investigation and cleanup activities in Libby.

This ruling is the largest judgment in a disputed case in the 23-year history of the federal Superfund law. It is exceeded only by a handful of Superfund cases in which the federal government and the responsible parties agreed to a settlement prior to trial.

The Libby cleanup also was the subject of an earlier lawsuit between the federal government and W.R. Grace as a result of the company's refusal in July 2000 to provide EPA with access to property that it owned or controlled near Libby, which EPA needed to conduct cleanup activities. In October of 2000 the government filed suit, alleging that W.R. Grace's refusal to provide access was unlawful and requesting the imposition of civil penalties. In March 2001, Judge Molloy ordered W.R. Grace to provide EPA with access to its properties in Libby. In a settlement of the penalty claims subsequently approved by the Court, W.R. Grace agreed to a civil penalty claim of $71,000 and to spend $2.75 million to create a fund to provide additional health care for Libby residents with asbestos-related diseases.

In April 2001, W.R. Grace filed for bankruptcy in federal court in Delaware. Any payments on today's judgment must be approved by the bankruptcy court.

EPA and ATSDR are continuing to evaluate locations across the United States where the asbestos-contaminated Libby ore was shipped for packaging and processing. This fall, ATSDR will release health consultations on 28 of the sites that received most of the ore shipped from Libby.

Earlier this year, EPA , ATSDR, and NIOSH launched a national consumer information campaign providing cautionary information to homeowners who have asbestos-contaminated vermiculite insulation, fabricated using the Libby ore.