By Jack Kaskey and Sophia Pearson

July 13 (Bloomberg) -- Dow Chemical Co., the largest U.S. chemical maker, agreed to remove contaminated soil along three sections of the Tittabawassee River downstream from factories in Midland, Michigan, where the company is based.

The company will remove 54,000 cubic yards of contaminated sediment and floodplain soil as far as six miles (10 kilometers) downstream from the 1,900-acre site, the U.S. Environmental Protection Agency said today in a statement. The material, contaminated with furans and dioxins, will be buried in a company landfill in Midland, Dow spokesman John Musser said.

Dow still faces a class-action lawsuit by 2,000 homeowners in Saginaw County who live along the river. The company is appealing a Michigan judge's ruling in October granting class action status to the group. The case was argued before the state appeals court in May, Norman Siegel, an attorney for the homeowners, said.

``We're happy to see that Dow has started to own up to the contamination,'' Siegel, from the firm Stueve Siegel Hanson LLP in Kansas City, Missouri, said in a phone interview. ``We certainly call on Dow to compensate affected homeowners.''

The residents sued Dow in 2003 after the state Department of Environmental Quality found that dioxin levels downstream from the plant were up to 700 times higher than upstream. Attorneys for the residents are seeking unspecified damages from Dow for alleged losses in property value plus punitive damages and clean-up costs.

Bleach Production

The contamination is the byproduct of chlorine-bleach production at the 110-year-old site that was discontinued before World War I, Musser said. The work should be completed this year, depending on river conditions, and is part of a larger accord to clean up the entire 22-mile river, Musser said. He declined to estimate the cost of the project.

Remediation at the Midland site cost $20 million last year, Dow said in a Feb. 20 regulatory filing. The company had a $41 million accrual for remediation as of Dec. 31. Dow's global accrued liability for probable environmental remediation and restoration expenses at the end of the year was $347 million.

Dioxins and furans are likely human carcinogens that accumulate in the body's fatty tissue, according to the EPA. They also can cause reproductive problems and weakened immune systems, the agency said on its Web site.

Dow had agreed with Michigan regulators to begin cleaning up two sections of the river, based on "uncharacteristically elevated levels" of dioxins and furans, Musser said. The EPA this year added a third section, he said.

The company is sampling sediment in the next 11 miles of the river this year and plans to complete sampling along the entire river by the end of 2008 as part of a 2003 hazardous-waste- operating license with the state, he said.

Shares of Dow rose 20 cents to $46.33 in New York Stock Exchange composite trading. They have gained 16 percent this year, bringing the company's market value to $44.2 billion.

To contact the reporters on this story: Jack Kaskey in New York at jkaskey@bloomberg.net ; Sophia Pearson in Wilmington, Delaware at spearson3@bloomberg.net

Last Updated: July 13, 2007 16:16 EDT