Congress’s other last-minute fail: Chinese drywall regs

January 23, 2013, 1:12 AM UTC

FORTUNE – For nearly four years, victims of contaminated Chinese-made drywall have sought help from the federal government to solve a problem that’s wreaked havoc in thousands of homes across the country.

The tainted drywall releases sulfur gases that corrode a home’s wires and pipes, cause smoke detectors and electronic devices to fail, and has been linked to a host of respiratory ailments, nosebleeds and sinus problems plaguing affected homeowners, their children – even their pets.

In the waning hours of the 112th Congress, lawmakers finally passed a piece of legislation aimed at tainted drywall – sending the bill to President Obama’s desk during the final stages of the high-stakes wrangling over the fiscal cliff. He signed the Drywall Safety Act last week.

There’s just one problem: the bill does little to prevent the problem from continuing to spread, nor keep it from happening again. And it doesn’t call for standards ensuring that future drywall – imported or domestically produced – does not release similarly problematic levels of sulfur gases. It also doesn’t mandate disclosure of Chinese drywall when an affected home is sold – leaving a whole new generation of buyers currently at risk for inheriting the tainted homes.

What’s more, after lobbying pressure from industry, the watered-down legislation hands off virtually all responsibility for developing a handful of new rules to drywall manufacturers themselves, rather than government regulators.

As a result, little may actually change for those whose finances and health have been severely impacted by the tainted drywall. And what’s actually causing the drywall to release its corrosive gases may remain a mystery.

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Drywall, also known as wallboard, gypsum board or Sheetrock, is used to build the interior walls of most U.S. homes. During the housing boom, demand was incredibly high, but after the devastating 2005 storm season that included Hurricane Katrina, drywall supplies around the U.S. ran short. A number of suppliers and builders turned to imported gypsum board from China.

Unfortunately, large quantities of the Chinese drywall arriving on U.S. shores turned out to be contaminated – releasing noxious and corrosive sulfur gases such as hydrogen sulfide and carbon disulfide into the air of homes built with it.

In January 2009, the Sarasota Herald-Tribune reported that at least 550 million pounds of drywall arrived from China between 2006 and 2008 — enough for 60,000 average-sized houses, according to building experts. Since then, hundreds and then thousands of homes indeed popped up across the country with tainted Chinese drywall and nearly identical corrosion problems and health effects. (Records compiled by the Herald-Tribune and ProPublica in 2010 found about 7,000 affected homes involved in lawsuits or tax abatement programs; the number has grown since then.)

Fixing a tainted home requires essentially gutting the house down to the studs and rebuilding, frequently at a cost upwards of six figures. And that’s assuming a remediation job is done right: builders and investors with less-than-honorable intentions have engaged in dubious and incomplete fixes, then tried to sell off the houses to unsuspecting buyers. No disclosures are currently required to help prevent those practices.

The federal government’s investigation into tainted drywall, headed by the U.S. Consumer Product Safety Commission, never used powers it could have pursued to help victims and crack down on the companies responsible, nor did it answer fundamental questions such as what caused the sulfur emissions in the first place or how extensive the health effects could be. Meanwhile, the CPSC found itself outmatched and without strong statutory authority to pursue companies overseas in China, or attempt to force a recall.

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Indeed, the fact that foreign corporations are involved – particularly Chinese– has complicated any efforts by those harmed by the contaminated drywall to pursue legal action. Thousands of lawsuits have been combined in a New Orleans federal court, but nearly four years after the litigation began, the Chinese manufacturers have shown little interest in cooperating. Even judgments against them have gone uncollected. (The one exception is the Chinese subsidiary of German conglomerate Knauf Group, which has agreed to help fund repairs of its affected homes).

The ability of Chinese companies to skirt the U.S. court system did not go unnoticed by lawmakers who crafted the new Drywall Safety Act. They included that it was the “sense of Congress” that the Secretary of Commerce should insist the Chinese government “direct the companies that manufactured and exported problematic drywall to submit to jurisdiction in United States Federal Courts and comply with any decisions issued by the Courts for homeowners with problematic drywall.”

However, the “sense of Congress” language carries no legal weight, and there is little to indicate the Chinese government will change its stance absent strong diplomatic pressure, which thus far has never been applied regarding the drywall.

The Drywall Safety Act always had more limited intentions. It started out with more teeth when first introduced last year by Rep. Scott Rigell (R-Va.), at the urging of his affected constituents in Virginia Beach. Most tainted homes in the region were built with bad drywall from Taishan Gypsum Co. Ltd. – a manufacturer controlled by the Chinese-government itself.

While Rigell included a similarly symbolic “sense of Congress” about pressuring the Chinese government, his bill aimed to clearly make the buying, selling and using of contaminated Chinese drywall illegal. It called for it to be “treated as a banned hazardous substance under the Federal Hazardous Substances Act” and as “an imminent hazard” under the Consumer Product Safety Act.

However, almost immediately the bill found itself being weakened.

By the time it got through the House Energy and Commerce Committee – a panel known on Capitol Hill for opposing new environmental regulations – the legislation had been reduced to only calling for better identifying marks on drywall, and for a standard on “sulfur content.” It further allowed the CPSC to simply defer to an industry-developed voluntary standard, rather than instituting its own rules.

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The bill specifically authorized a drywall working group within ASTM International, a trade association that develops voluntary standards, to write the rules. That group, dominated by drywall manufacturers themselves, has been mired in delay and in-fighting for years – unable to even agree on basic guidelines for repairing homes with bad drywall. (As of this past summer, it essentially went dormant and stopped meeting.)

The bill calls for the CPSC to essentially defer to ASTM’s own standards, even if they later change. If the industry group changes its “sulfur content” standard in future years, the CPSC will have only 90 days to review it and determine if it’s inadequate, according to the bill. Otherwise, those changes will go into effect.

But by focusing on “sulfur content” at all, the new legislation ensures no meaningful standard will be developed to keep drywall safe. That’s because to date, the federal government hasn’t determined what’s actually causing the bad drywall to release corrosive sulfur gases. In other words, the problem with contaminated drywall is it releases high levels of sulfur gases, including hydrogen sulfide. What within the drywall is responsible for those emissions? The federal investigation has never answered that question.

Theories have abounded, including everything from contaminated gypsum mines, to problems with synthetic gypsum made from the byproduct of coal-fired power plants. The root cause could even be with faulty production processes themselves, where the drywall may have been inadequately heated or where bad additives were used by manufacturers looking to stretch a dollar. It could be a combination of such factors.

But four years after the federal government began its investigation, the CPSC and other agencies have not reached an answer. In fact, they never truly instituted the research to find one. Instead, the federal focus has been limited to developing a checklist for identifying affected houses and then guidance for repairing them.

There is only one definitive way to test whether a piece of drywall is contaminated, says Michael Foreman, head of Foreman & Associates, which has been investigating tainted drywall since the crisis first emerged. Measure the levels of gases the drywall releases, and their ability to corrode metals such as copper. If the sulfur gas emissions, also known as out-gassing, can corrode copper, then the drywall is conclusively tainted.

“The out-gassing is the only thing that matters,” Foreman says. “That’s why what you need is a standard for what’s an acceptable level of sulfur gas emissions from drywall. That would keep this from happening. Looking at sulfur content is a joke.”

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Measuring sulfur content inside a piece of drywall is essentially useless at this point, Foreman says, because nobody knows for sure if elemental sulfur causes the gases. Instead, a standard based on the emissions – much like what’s been enacted for formaldehyde levels allowed from composite wood products – would get to the root of the problem. It would both keep builders and consumers safe from bad drywall entering the marketplace, and would compel manufacturers to figure out what materials caused the emissions in order to could control them.

Most lawmakers involved in sponsoring the Drywall Safety Act were unwilling to answer questions about their new legislation, despite issuing glowing press releases after its passage touting it as an important step in the drywall saga.

A spokeswoman for Sen. Marker Warner (D-Va.), who was also involved in drafting the Senate substitute bill, declined to answer questions on the record. She instead only provided the previous news release, where Warner said the bill’s passage means “more Virginians will not have to go through similar nightmares.”

Even Rigell himself, the Virginia Beach congressman who first introduced the legislation, was reluctant to talk. His office did not respond to requests for comment.

A spokesman for Sen. Bill Nelson (D-Fla.) said only that many lawmakers felt passing something was better than no drywall legislation at all. “It’s not a perfect bill, but it’s the best we could do under the circumstances,” said Nelson spokesman Bryan Gulley. “We can’t let these companies off the hook, we’ve got to keep the heat up on the Chinese. So this bill is a way of keeping up that pressure.”

Meanwhile, Foreman, the construction consultant, is not optimistic that the ASTM drywall committee designated by the new law can overcome its in-fighting and conflicts of interest. He would know: he sits on the committee.

Foreman said that early on, ASTM – which develops a range of standards for thousands of building products – could have assigned the contaminated drywall issue to another working group. ASTM has committees that deal with air quality issues, with environmental hazards, with caustic or damaging chemicals, among others.

But the organization decided to let the drywall committee – which includes numerous drywall manufacturers themselves – attempt to identify the flaws in their own product.

“That was a mistake, I feel. It became a political hot potato,” Foreman said. “But we can’t go back and rewrite history, so we are where we are.”

A version of this story previously appeared on 100Reporters.