Workers in Sacramento's downtown railyard this summer unearthed a disconcerting find: a large container of contaminated soil, likely buried by the Southern Pacific railroad company, which once used the property to build and fix locomotives.
It wasn't the first such surprise. A few months before that, they had dug up an old tank.
The discoveries are adding fuel to a behind-the-scenes disagreement over how much contamination remains in the 240- acre property once known as the biggest industrial complex west of the Mississippi and who will pay to get rid of it.
City officials and railyard owners past and present have said most of the toxic cleanup in the yard was done, and development could begin soon after streets were installed next year.
But recent letters, work plans and other documents filed with the state Department of Toxic Substances Control by the city, the railyard owner and former owner Union Pacific railroad offer a more troublesome picture.
While most of the yard's surface soil has been cleaned, and some remediation done around the clutch of historic shop buildings that remain standing, a substantial amount of potentially costly work is still needed to make the site safe for use.
Groundwater filtration and vapor mitigation systems will be required for decades to come, even as offices, stores and housing are built on the massive downtown site. An undetermined amount of excavation also will be needed.
The disagreement over the scope and responsibility for the cleanup pitting the city and railyard owner Inland American Real Estate Investment Trust against former owner UP also offers a sharper view of the downtown railyard site as both a major development opportunity and a burden.
It is promoted as the largest existing infill development site in the country, and is drawing interest from some of the nation's main urban developers. But it is also one of the nation's biggest "brownfield," or unclean, urban development sites and does not yet have a final remediation plan.
Until that plan and follow-up agreements are in place, city officials say developers will steer clear of the railyard, which could stall its transformation into an urban village that extends downtown Sacramento.
"There has to be certainty," city railyard manager Fran Halbakken said. "They are not going to sign up if there are hidden costs, and those costs could be substantial."
In an effort to referee a resolution, state toxic control officials have been meeting monthly with UP, Inland American and the city.
Inland American and city officials say UP, which bought Southern Pacific and its railyard in 1996, must clean the dusty, dormant property to the levels required for the city to carry out its plan for thousands of housing units, stores, offices and entertainment venues.
City officials argue that UP's legal responsibility includes any as-yet-undiscovered contamination such as the container of soil and the tank the city recently dug up on the land the city owns near the depot and passenger track platforms.
"We removed them, but that doesn't mean we have responsibility for it," the city's Halbakken said.
Owner says UP's on hook
Inland American, which owns most of the railyard, has pushed forcefully for Union Pacific to shoulder responsibility for all current and future cleanup. The Illinois-based real estate investment trust took control of the property in 2010 after the former owner, developer Thomas Enterprises of Atlanta, defaulted on a loan from Inland American. Thomas Enterprises bought the railyard from UP in 2006 after wrangling for years over the terms.
"We didn't pollute this place," said Inland American spokesman Jared Ficker. "UP, the responsible party did, and they should provide the cleanup. UP is attempting to do that, it's just not happening at the pace and level of focus we'd like to see."
Inland American is pursuing the sale of a railyard parcel to the state for a new Sacramento County Courthouse and intends to turn over two of the old shop buildings to the state for a railroad museum expansion, but can't do it until the remediation dispute is sorted out.
UP officials say they agree their company is responsible for cleanup, but said that doesn't mean Inland American, the city and future landowners and developers won't have some role in dealing with contamination. They declined to say what role that could be.
UP officials also disagree with Inland American over how much cleanup is necessary. They note the site is far cleaner than it was when they gained ownership from SP.
"There is work to be done, but a lot of work has been done," said Jim Levy, the rail company's director of site remediation. "The Sacramento yard is the single largest environmental cleanup project UP has (ever) had nationally."
Remediation started in the late 1980s, when Southern Pacific still owned the railyard. The task was massive: removing contaminants from 130 years of trainbuilding and repairs that included upholstery-making, engine-building and plating of the silverware used on trains.
The residue includes oil, fuel, caustic cleaning solutions, paint, gas solvents and thinners, chlorinated solvents, acids and metal alloys.
UP said it has removed 650,000 cubic yards of unclean dirt from the site, enough to half-fill a football stadium. That involved digging anywhere from one foot to 20 feet deep, depending on what type of use is expected at that spot.
The railroad also installed a groundwater extraction and filtering system that cleans a contaminated underground plume. That plume stretches south of the railyard, running under Sacramento City Hall and along the west steps of the state Capitol.
State toxic control officials say tests show the plume's upper level of water is clean and does not represent a health hazard for downtown workers and residents.
UP also has set up venting systems in the shop buildings to capture and dissipate potentially harmful vapors coming up from the ground.
UP officials declined to say how much has been spent on toxic cleanup so far. Those officials on Friday also declined to estimate how much more cleanup is needed.
UP has been trying for more than a year to win state approval for a key document: a remedial action plan for the central shops area, the most polluted portion of the yard and the heart of the planned development.
State officials rejected earlier drafts, and sent UP a letter this spring, telling the rail company it must accept more responsibility for cleanup and ongoing maintenance.
"Alternatives which depend on future development to complete the remedy are not acceptable," toxics officials wrote in March.
State toxics officials, who called that letter a "wake up and smell the coffee" message, said they are pleased with UP's response since then.
Ray Leclerc, deputy director of the toxic substances control department, said UP's latest remedial action plan, submitted in August, is improved but will require another rewrite. The department sent UP a six-page letter Friday, listing changes the company must make in the plan in the next 45 days. The document eventually will be submitted for public review and comment.
In an interview with The Bee, Leclerc emphasized that "UP is the responsible party" for cleaning up railyard contamination. But he said Inland American and future property buyers could shoulder some responsibility, such as maintaining ground caps and other features that protect the public from exposure to pollution.
LeClerc said state officials probably will not referee all disagreements over the contamination, including an ongoing dispute over the use of one of the shop buildings.
UP has turned one of those historic buildings into a groundwater filtration plant. But Inland American officials say that same building is a key piece of the shops' future transformation, as it sits on the main plaza that will someday border a pedestrian tunnel from downtown. They say they are willing to offer UP another site for a new filtration plant.
A UP representative, however, suggested the rail company is not inclined to incur extra expense by moving its plant so that Inland American can make more money selling the building to a developer.
"From a remediation point of view, it is absolutely in the right place," said Peter Weiner of Paul Hastings law firm, which represents UP.