American Ecology Corporation

American Ecology Corporation

300 E. Mallard Drive, Suite 300
Boise, Idaho 83706
U.S.A.
Telephone: (208) 331-8400
Toll Free: (800) 590-5220
Fax: (208) 331-7900
Web site: http://www.americanecology.com

Public Company
Incorporated: 1984
Employees: 178
Sales: $54.2 million (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: ECOL
NAIC: 562211 Hazardous Waste Treatment and Disposal; 562112 Hazardous Waste Collection

American Ecology Corporation delivers waste treatment and disposal services to producers and handlers of hazardous, toxic, and low-level radioactive wastes (LLRW). Its subsidiary, US Ecology, provides nuclear waste services and hazardous waste services to industrial, medical, academic, and government customers across the nation. The U.S. Army Corps accounts for about 30 percent of the company's sales; other customers include nuclear plants, steel mills, petrochemical facilities, and academic and medical institutions. The company handles non-hazardous, hazardous, and radioactive waste at facilities in Idaho, Nevada, Texas, and Washington state.

1984–2000: A KEY PLAYER IN THE LOW-LEVEL RADIOACTIVE WASTE MARKET

In 1984, Teledyne Inc. spun off two of its subsidiaries, US Ecology Inc. and Teledyne National Corp., both of which were engaged in the disposal of waste materials. W. E. Prachar became president and chief executive of the newly created American Ecology Corp., which, by 1985, consisted of three subsidiaries: US Ecology, the nation's oldest commercial low-level radioactive waste disposal company, providing site clean-up and transportation and packaging services for low-level radioactive and hazardous waste, and seminars in waste management nationwide; National Ecology, a resource recovery firm operating a refuse-derived fuel plant for the county of Baltimore, and offering design and engineering services in the resource recovery area to industry and municipalities; and Detox Inc., specializing in the treatment of contaminated groundwater.

The following year, California's Department of Health Services accepted US Ecology's bid to design, build, and operate the state's first site for the disposal of low-level radioactive waste from Arizona, California, and the Dakotas. Five years earlier, in 1980, the federal government had passed the Low-Level Radioactive Waste Policy Act, which required that each state in the nation develop a facility to handle its LLRW waste before 1993. This waste typically consisted of contaminated clothing, laboratory waste, filter materials, equipment, and plumbing and cleaning material from power plants, hospitals, research institutions, and industries that used radioisotopes. California was one of the nation's largest generators of low-level radioactive waste, and the California site was the first of its kind to be built in the United States in fulfillment of both federal and state requirements.

In fact, US Ecology's history stretched further back than its history with Teledyne. It began providing nuclear waste services since 1953 and hazardous waste services in 1968. From 1963 to 1978, when the company was still Nuclear Engineering Co. Inc., it operated Maxey Flats dump site in Fleming County, Kentucky, for the Commonwealth of Kentucky. In the mid-1980s, an EPA investigation found reason to believe that these facilities were threatening to cause or were causing the discharge of contaminants into the environment, resulting in groundwater pollution, and the EPA informed American Ecology in 1986 that US Ecology was potentially responsible for investigative and remedial actions involving the dump site. American Ecology, in turn, sued its insurers when it learned that Superfund cleanup costs did not fall within the insurance policy's definition of property damage. Later, in 1988, it filed suit for the Eastern District of Kentucky against the Commonwealth of Kentucky, seeking recovery for costs incurred and to be incurred by US Ecology in connection with remedial action at Maxey Flats.

Despite the bad press and costs associated with Maxey Flats, American Ecology continued to grow; by 1987, it was well established in its market. The company operated two of three existing LLRW treatment and disposal sites in the United States, in Nevada and Washington, for treatment and disposal of low-level radioactive waste and two hazardous waste disposal facilities in Nevada and Texas. Its application for a license to operate a low-level radioactive waste site in California was pending. The Central States Low-Level Radioactive Waste Compact, one of several regional companies, or compacts, established as a result of the Federal Low-level Radioactive Waste Policy Act of 1980, selected US Ecology to develop and operate a regional low-level radioactive waste disposal facility to serve Arkansas, Kansas, Louisiana, Nebraska, and Oklahoma. The company began working closely with state officials and eventually selected a site in Nebraska to begin operating in 1993.

However, American Ecology suffered uneven cash flow, and, as a result, the company made several internal changes. In 1989, it sold National Ecology to a subsidiary of Babcock and Wilcox. Two years later, it moved its corporate headquarters from Louisville, Kentucky, to Houston, Texas, and Harry Phillips, Jr., owner of Phillips Investments Inc. and former director of Browning-Ferris Industries Inc., one of the nation's largest waste collection and disposal companies, replaced Prachar as chief executive after Philips increased his ownership to approximately 36 percent of the company's stock. The company also moved US Ecology's headquarters to Sacramento, California, to facilitate construction and operation of California's planned Ward Valley waste disposal facility in the Mojave Desert.

1990S: ACQUISITIONS AND ONGOING DIFFICULTIES

The early 1990s were good years at American Ecology. Under Phillips leadership, the company's sales rose from $56 million in 1991 to $72 million in 1994. The company's income increased 70 percent in 1992, with revenues up by 27 percent from 1991's $71 million total. In 1993, American Ecology embarked on a strategy of enhanced service capabilities and expansion throughout the United States and Mexico through acquisition. Its first purchase was Waste Processor Inc., a publicly held, Texas-based environmental services company that provided hazardous and industrial waste transportation and onsite remediation. Waste Processor's assets included transportation terminals in Texas, a fleet of trucks, and a hazardous waste transport permit from the Texas Railroad Commission. Also in 1993, US Ecology's disposal facility in Washington became slated to operate as a regional disposal facility.

Acquisitions continued throughout 1994 when American Ecology acquired Gibralter Chemical Resources, Inc., a hazardous waste disposal, fuels blending, solvent recycling, and transportation company located in Winona, Texas. It also purchased Quadrex Recycle Center, a radioactive waste processing facility in Oak Ridge, Texas.

COMPANY PERSPECTIVES

Our growth is straightforward. We aggressively price commodity services while seeking to expand higher value niche services and increase waste volume throughout. We also strive to deliver customer service second to none. This strategy, which takes advantage of the largely fixed cost nature of the disposal business while responding to customer needs, has been a proven recipe for success.

A year later, American Ecology reorganized itself into two operating units. It consolidated its nuclear waste business under US Ecology, headquartered in Oak Ridge, Tennessee, and its chemically related business under American Ecology Chemical Services, headquartered in Houston. Corporate headquarters for the entire company moved to Boise, Idaho. Also in 1995, Jack Lemley succeeded Phillips as chief executive officer and president. Lemley had been a director of American Ecology since 1992, having served before that as chief executive of Transmarche-Link JV, which designed and built the Channel Tunnel providing train service between England and France.

However, problems also began to mount in the early 1990s. Neither development of the Ward Valley site or the site in Nebraska proceeded smoothly. Five years after the state of California contracted with US Ecology to develop its LLRW site, Interior Secretary Babbitt finally approved the transfer of federal lands for the site in Ward Valley. In 1998, a year after negotiations began for the Central Interstate Low-Level Radioactive Waste facility in Nebraska, that state denied American Ecology the license to construct the five-state waste facility. Lemley, then the company's chief executive, testified before the Senate Armed Services Strategic Forces Subcommittee in 1998 that the 1980 Low-level Radioactive Waste Act was a "political failure." In 1999, American Ecology sued the state of Nebraska for rejecting its license application and sought reimbursement for the $94 million it paid out in development costs for the proposed multi-state dump site. It also sued the state of California for the $80 million it spent on development costs on the Ward Valley dump after the federal government denied the state's request to buy land for the proposed facility at the end of the decade.

The company experienced losses of $49.8 million on revenues of $67.9 million in 1995, the same year that U.S. Geological Survey data showed radioactive waste had long been leaking from its site in Beatty, Nevada. The company insisted that the leakage occurred when workers whom it later dismissed improperly dumped liquid wastes in the facility, but "American Ecology's record is horrible," was the opinion of Senator Barbara Boxer in Business Week in 1996, referring to Maxey Flats' place on the Superfund list in 1986 and the 1978 lawsuit by the state of Illinois seeking $97 million in damages after radioactivity polluted a lake near the Sheffield dump. In 1992, US Ecology began to implement the EPA-approved plan of constructing a clay cap on the 20-acre Sheffield landfill and cleaning up contaminated groundwater.

Critics, including environmentalists as well as Native Americans, who considered the land at Ward Valley sacred, pointed to the company's finances and to American Ecology's history of problems at its sites. They worried that plans to dig unlined trenches at Ward Valley could result in contamination of the Colorado River. After Deputy Interior Secretary Garamendi accused the company of using 1950s technology for a facility that would operate well into the 21st century in a 1996 Business Week article, American Ecology insisted its operations would be safe because the waste would be placed in sealed containers before burial. Others thought the company's financial woes too great for it to survive.

KEY DATES

1984:

Teledyne spins off two subsidiaries, US Ecology Inc. and Teledyne National Corp., which become American Ecology Corporation.

1985:

US Ecology contracts to develop and operate California's first disposal site for low-level radioactive wastes.

1987:

Central States Low-Level Waste Treatment Contract selects US Ecology to develop its low-level radioactive waste facility.

1989:

The company sells its subsidiary, National Ecology Inc.

1991:

Harry Phillips, Jr., replaces W. E. Prachar as chief executive; American Ecology moves to Louisville, Kentucky; US Ecology moves to Sacramento, California.

1993:

American Ecology purchases Waste Processor, Inc.

1994:

American Ecology purchases Gibraltar Chemical Resources, Inc. and Quadrex Recycling Center.

1995:

The company reorganizes into two operating units: US Ecology and American Ecology Chemical Services; Jack Lemley becomes chief executive officer.

1999:

American Ecology sues the states of Nebraska and California.

2002:

Steve Romano becomes the chief executive officer and moves the corporate headquarters to Boise, Idaho.

2004:

American Ecology sells its Oak Ridge facility.

It was not until 1998, American Ecology's first profitable year since 1994, that the company began to experience a turnaround. In 1996, the company had losses of $11.9 million; the following year, it earned $1.43 million on revenues of $41.5 million. In 1998, with revenues of $39 million, American Ecology turned over its former low-level waste site at Beatty, Nevada, to the State of Nevada Health Division for permanent custody. This marked the first time a commercial low-level waste disposal company had closed such a facility and returned it to the state's nuclear licensing agency for long-term care and control. The company also took on a contract with Virginia Electric Power Company to decontaminate, refurbish, rewind, and upgrade seven large electrical motors used to circulate cooling water inside nuclear power reactors.

Having made the decision to focus on its core business of low-level radioactive waste services and disposal facilities, in 1999 American Ecology sold all the assets of its two waste transportation related businesses: American Ecology Transportation, a hazardous and non-hazardous waste transportation service provider, and Surecycle, a business division that operated a scheduled, containerized hazardous waste collection service in the Gulf Coast market. In 2000, it sold its Nuclear Equipment Service Center in Oak Ridge, Tennessee, to Alaron.

In an effort to recoup costs for the development of potential sites in California and Nebraska, in 2000 American Ecology became embroiled in a legal fight over whether Nebraska was justified in rejecting its license application, seeking reimbursement for some $94 million in development costs. It also sued the state of California for the $80 million it spent on development costs on the Ward Valley dump after the federal government denied the state's request to buy land for the proposed facility. The case against California was remanded for trial in 2001, while the court ruled in favor of the company and against Nebraska in 2002.

More acquisitions and sales following during the next five years. In 2000, American Ecology opened the El Centro landfill municipal solid waste recycling and disposal facility outside Corpus Christi, Texas. In 2001, it acquired Envirosafe Services of Idaho, Inc., which it renamed US Ecology of Idaho and whose principal operation was hazardous waste treatment and disposal. Also in 2001, the Illinois Department of Nuclear Safety accepted permanent custody of the low-level environmental waste disposal site that US Ecology had operated from 1968 to 1978.

Steve Romano became chief executive of American Ecology, replacing Jack Lemley, who retired in 2002. Romano had 22 years of experience in waste management, including positions with the U.S. Nuclear Regulatory Commission, the Idaho National Environmental and Engineering Laboratory, and the Wisconsin Department of Natural Resources. During Romano's first year, the company moved its headquarters to Boise and added to its 18-person staff. It also sold subsidiary American Ecology Recycle Center, which provided low-level radioactive waste processing and environmental remediation services.

Also in 2002, American Ecology closed its Oak Ridge, Tennessee plant, purchased in 1994, which had since lost more than $45 million, laying off about 20 percent of its workforce. It sold the plant in 2004, marking its exit from all non-core businesses in order to concentrate on the treatment and disposal of hazardous waste at its Nevada, Idaho, and Texas sites and low-level radioactive waste at its Washington, Idaho, and Texas sites. The company was again ready for new beginnings in 2005 when it received a contract from Honeywell International to treat contaminated groundwater. Also in 2005, the company resumed full treatment services in a new hazardous waste treatment building at its Texas facilities.

PRINCIPAL SUBSIDIARIES

US Ecology of Idaho Inc.

PRINCIPAL COMPETITORS

Clean Harbors; Envirocare; Waste Management.

FURTHER READING

Antosh, Nelson, "American Ecology Clears Hurdle for Waste Dump," Houston Chronicle, May 13, 1995, p. 2.

Bowles, Jennifer, "California Examines Ways to Store Nuclear Waste," Press-Enterprise, November 5, 1999.

Harrison, Tom, "American Ecology Says Signs Point to Resolution of Financial Woes," Nucleonics Week, December 5, 1996, p. 5.

Hord, Bill, "American Ecology Stock Sinks on Woes," Omaha World Herald, October 21, 1999, p. 20.

Schine, Eric, "Nuclear Waste with Nowhere to Go," Business Week, June 10, 1996, p. 44.

Wald, Matthew L., "Marketplace: Some Say 'Not in My Backyard' While Others See Opportunity," New York Times, February 2, 1993, p. D8.

Zuercher, Richard R., "Ward Valley Compromise May Put LLW Project Back on Track," Nucleonics Week, March 31, 1994, p. 4.