(FORTUNE Magazine) – WHO WOULD have thought that scraping tiny white asbestos fibers off the steel skeletons of aging schools, office buildings, and shopping malls would rise to the top rank in America's long list of problems? Well, it has, thanks to a fit of collective hypochondria bolstered by an abiding national passion to sue the nearest deep-pocket. In a typical assessment of the costs, Stephen L. Schweich, an environmental industry analyst with the Baltimore investment bank Alex. Brown & Sons, estimates that government and commercial property owners could spend a breathtaking $100 billion over the next 25 years to attack asbestos. The purge will likely continue until every offending particle is buried in waste sites, despite mounting evidence that removing the stuff may put more people's health at risk than leaving it in place. Says Barbara P. Billauer, an environmental lawyer and partner with the New York firm Stroock & Stroock & Lavan: ''This is an issue that emotion created and hysteria keeps alive.'' The hysteria is a boon to buyers, who get a powerful new negotiating tool when they bid on asbestos-laden buildings, and to an army of new firms specializing in clearing the material out. For everyone else, asbestos removal is a costly pain. Why all the sudden fuss? After all, this common mineral is found everywhere from suburban Washington, D.C., to the West Coast. Serpentine, the official state rock of California, is laced with it. Known for most of the 20th century as the ''wonder fiber'' for its properties as a cheap insulating and fire- resisting material, asbestos found scores of commercial uses, from lining car brakes to fireproofing ship hulls. The construction industry was besotted with the miracle mineral, which cost just 25 cents a square foot when it became popular in the early 1960s. Asbestos was used for fireproofing and to insulate heat pipes, ducts, and boilers. Workers, often with cigarettes poking out from holes punched through thin protective paper masks, sprayed or troweled 1.4 billion square feet of asbestos onto structural beams and roof decks. Like a genie turned against its master, asbestos is now recognized as an especially sinister carcinogen. It has been implicated in the deaths and disabilities of thousands of shipyard workers, miners, and industrial laborers. Fibers that lodged in their lungs from massive exposure to airborne asbestos in the 1930s and 1940s led, decades later, to asbestosis, lung cancer, and mesothelioma -- a rare killer that attacks the lining of the lungs and intestinal tract. As the deaths mounted, the U.S. Environmental Protection Agency (EPA) and state environmental agencies added asbestos to their long lists of hazardous substances and restricted its use as a building material in the early 1970s. Over the past decade, roughly 90,000 exposed asbestos workers have sued makers of asbestos-containing products, forcing Manville Corp. and some half-dozen other manufacturers to seek refuge in bankruptcy court. COMMERCIAL property owners, lenders, and tenants are worried about becoming targets in the next round of suing. With age, normal maintenance, and continued building renovation, ''friable'' asbestos -- so called because it crumbles easily when disturbed -- will flake off the surface on which it was applied. As building workers snake telephone and computer cables along ceiling beams and tenants move in and out, asbestos fibers are released. The fibers are just half a micron long (a human hair is 80 microns in diameter) and can stay airborne for weeks. In recent years, insurance companies have made it increasingly difficult for building owners to protect themselves from lawsuits by occupants who claim exposure to asbestos has damaged their health. One suit has already held a building owner accountable. Last year a jury in Cleveland awarded $400,000 to a 47-year-old woman who said she contracted mesothelioma from breathing asbestos fibers in her job as a clerk in a federal office building. Some 20 other personal-damages suits against landlords are pending. How deadly is the asbestos that may be in your office building? The answer: The risk is barely detectable. In his pioneering research on U.S. shipyard and asbestos industry workers, published in the mid-1960s and 1970s, Dr. Irving Selikoff, an epidemiologist at New York's Mount Sinai Hospital, observed that asbestos fibers are impervious to the body's natural defenses. He concluded that no level of exposure could be considered safe. But no solid evidence has since turned up to support that thesis. The latency period for the deadly diseases that afflicted the World War II shipyard workers averages from 20 to 30 years. Office workers and custodians, too, have been exposed through decades of building renovation and dusty demolition. Epidemiologists have yet to record a rise in asbestos-related deaths among these populations. The victims Selikoff studied inhaled levels of airborne asbestos at least 10,000 times higher than those found in normal indoor room air. Research by British epidemiologists Richard Doll and Julian Peto puts the lifetime danger of exposure to room-air asbestos so low that it has been likened roughly to the risk of inhaling one drag of cigarette smoke per day. In the U.S., comparably low risks to workers in asbestos-laden office buildings emerge from studies by Dr. Robert Sawyer, a member of the University of Pennsylvania medical school's oncology department. Sawyer, a leading researcher on asbestos health effects and an occupational health adviser to the EPA and a list of corporate clients including Bechtel and Perkin-Elmer, concludes that maintenance workers who are exposed to asbestos and also smoke cigarettes may be especially susceptible to lung cancer. For all other office workers, he says, ''There is no epidemiological evidence that shows a health hazard. Period.'' THE EPA'S ATTEMPTS to quantify the risk of low-level exposure paint a reassuring picture. In a study it presented to Congress in February, the agency reported that the worst airborne asbestos levels in a sampling of 43 federal buildings were no higher than the levels found in outdoor air. EPA analysts tried to compute the total asbestos-related deaths from lung cancer and mesothelioma that commercial building occupants and maintenance workers will suffer over the coming 130 years. The numbers are ludicrously low. The study estimated that asbestos-containing buildings accommodate some 22.5 million office workers and 369,200 custodial staff, and that the buildings have an average useful life of 60 years. Among the tens of millions of people who will revolve through these buildings, the EPA predicts that 3,300 asbestos-related fatalities will show up by the year 2118 -- an average of 25 deaths per year. Driving a car to work is over 150 times more dangerous. In a rational society, this limp indictment of ''killer'' dust motes would end most of the agonizing. Unfortunately, the issue is not whether the risk is tolerably low. By a peculiar political mind-set that future anthropologists may one day explain, Congress, the EPA, and other environmental agencies set their sights on achieving zero risk. Says Charles Elkins, the agency's office director for toxic substances: ''We can't say categorically that inhaling a single asbestos fiber causes cancer, but we can't find a level of exposure, however small, where the possibility can be ruled out.'' So the asbestos-control frenzy rolls ever onward. For the past decade, the EPA and state environmental protection agencies have required only that asbestos be removed from commercial buildings before they are demolished. But ancillary regulations, and the expectation of more controls to come, are persuading building owners to go well beyond the letter of the law to protect themselves from future trouble. Some 39 states now certify and regulate asbestos abatement work, up from six in 1985, and city governments are toughening asbestos ordinances. New York City requires asbestos inspections as a precondition for issuing permits for building renovations or demolitions. NOT SURPRISINGLY, Congress is also doing its part. In October the EPA will start enforcing the ominously named Asbestos Hazard Emergency Response Act, which requires the nation's 31,000 school districts to draw up asbestos abatement plans. The cleanup of some 45,000 affected schools could saddle taxpayers with an estimated $3.1 billion bill -- an amount equal to the average annual salaries of 110,000 teachers -- for asbestos control over the next three years. Some members of Congress are talking about extending the school standards to commercial buildings. The real estate market is responding as rationally as it can to the uncertainty about what regulators -- to say nothing of the tort system's entrepreneurs -- are apt to do next. Insurance giants Prudential, Aetna, and Metropolitan, along with most pension funds, syndicators, and real estate investment trusts, will no longer finance asbestos-ridden properties. In a survey of 140 institutional lenders last year, Richard D. Jones, a senior partner at Pepe & Hazard, a Hartford, Connecticut, law firm, found that 37% refuse to write mortgages on buildings containing asbestos. Those that do usually set tough conditions. GE Capital Corp. requires that borrowers establish an approved asbestos-control program and put funds into an escrow account sufficient to cover the cost of removal. Jones found that the escrow requirements of some lenders can run as much as three times estimated removal costs. Corporate tenants such as IBM, AT&T, Chrysler, Amoco, and Philip Morris, which normally pay top market rents, will no longer lease space in buildings that contain asbestos if asbestos-free alternatives are available. Some almost always are, since office vacancies are running about 15% in most U.S. cities. Alex. Brown & Sons estimates that rents on office space in asbestos-containing buildings in major cities have fallen 10% to 15% below those in comparable clean buildings. The EPA calculates that roughly 733,000 of the 3.2 million privately owned commercial buildings in the U.S. contain some form of friable asbestos and that the material in some 317,000 shows signs of significant damage. Since the market is telling them that buyers won't buy, lenders won't lend, and tenants won't rent, owners of asbestos-plagued buildings see little alternative but to get rid of the stuff. THE COSTS will be staggering. At an average of $25 a square foot, removing asbestos from a single floor of a Manhattan office tower can run $1 million. If the removal contractors have to work near areas where building occupants are present, the price can jump to twice or three times as much. Some major owners are going ahead anyway. Worried about the exposure of employees and visitors in its high-profile public spaces, the Port Authority of New York and New Jersey has launched a ten-year, $650 million cleanup of 30 properties, including the World Trade Center and the metropolitan area's three major airports. Chase Manhattan Bank hopes to recover the $110 million it will shell out to clean its two office towers in New York's financial district by suing the contractors and suppliers who originally put the asbestos in. So what's a landlord to do? First, recognize that the asbestos issue is less a question of health and safety than a market-driven business reality. ''Among owners of property containing asbestos, just 2% may face health and safety risks,'' says Peter MacDowell, a vice president with Kaselaan & D'Angelo, a New Jersey environmental consulting firm. ''But 95% have to deal with the economic consequences.'' PUT TO THE test, most real estate investors probably couldn't spell mesothelioma, but the nimble entrepreneurs among them sure know a bargaining edge when they see one. Says John Allen, a senior vice president with commercial real estate brokers Grubb & Ellis: ''Owners of asbestos-containing buildings face just two choices -- to put up the money to take asbestos out of their properties or to let a buyer take it out of their wallets when they decide to sell.'' In the past two years, Bank of America, Exxon, and Rockefeller Center Group have had their wallets lightened. Canny buyers have extracted a premium for taking over the cleanup job. Mitsui Real Estate, the Japanese developer that bought the Exxon building last year, for example, knocked $90 million off the asking price. Brokers estimate that the bill for cleaning up the 53-story tower will run $50 million. Owners of second-tier commercial properties typically fare worse. One major California-based broker -- he doesn't want to be quoted by name, because just mentioning the ''A'' word makes his clients writhe -- calculates that the asbestos discount for such properties can run as high as 40%, vs. as little as 5% for the choicest buildings. Experienced buyers such as Century Development in Houston and Tishman Speyer Properties in New York are betting that cleaning up will cost them less than the discounts they can extract from sellers. Says Tishman Speyer President Jerry Speyer, whose firm spent $2 billion buying properties in the past three years: ''I'm amazed at some of the irrational worries people have about asbestos. There is no asbestos problem I've seen that can't be managed.'' THAT MAY not be true for less sophisticated operators. Removing asbestos from a tenanted commercial building is somewhat akin to having a bone marrow transplant while running a marathon. Teams of abatement contractors wearing protective space suits and full-face respirators work in a partial vacuum chamber to laboriously scrape away the delicate fibers inch by dusty inch. A dozen removal workers may have to toil for ten weeks to remove what a single worker originally sprayed on in less than a week. The demand for such work over the past few years has created some 2,000 new enterprises calling themselves asbestos abatement firms. According to Rifkin- Wernick Associates, a Philadelphia environmental research firm, these companies will scrape up some $2.5 billion this year; by the early 1990s industry revenues will grow to an annual $7.5 billion. BY SOME ESTIMATES, fewer than a quarter of these firms are competent. Many others are so-called ''rip and skip'' artists who yank the stuff out and disappear, often leaving behind a cloud of dangerous dust. Many experts reckon that careless removal can leave airborne asbestos levels three to four times higher than before the work was done. Lingering on week after week, the fibers may raise genuine health and legal issues. Says Charles Hardy, a senior manager of Reservoirs Environmental Services, a Houston testing lab: ''There's nothing worse than a botched removal job.'' Before beginning any removal work, owners should hire an environmental consultant with a specialty in asbestos -- check his references -- to survey the properties. Knowing the scope of the job can help dull the bargaining edge that opportunistic buyers currently enjoy. Owners may also find the problem is not as bad as they feared. When IBM surveyed 1,000 of its buildings, it discovered friable asbestos in just 100 of them. Charging into a major renovation without a rigorous inspection can be a prescription for disaster. RREEF Fund, a nationwide real estate investment management firm, hired a survey team to inspect the 760,000-square-foot Southglenn Mall near Denver before buying the property for $53 million in 1985. The lab that carried out the analysis gave the mall a clean bill of health. But the surveyors didn't look hard enough. When RREEF hired contractors to renovate the mall last year, they discovered asbestos throughout the ceiling. Colorado health officials ordered the mall shut and the contaminated inventory of its 100 stores carted off and buried. Lost rent, payments to storekeepers, and the four-month emergency asbestos removal cost the owners some $17 million. Should building owners consider removing asbestos from their properties even if they are not about to sell? Many reckon that asbestos control will become more expensive as demand for the services of competent abatement contractors outstrips their availability. Says Burton Fried, president of LVI Environmental Services Group, a New York-headquartered abatement firm: ''You can pay now, or you can pay later when the price goes up.'' Better to pay Burt later. The ideal approach is to clean up the material in exposed areas where building maintenance workers come into frequent contact with asbestos, and leave the rest alone until demolition. The cost of cleaning an empty structure about to be razed is less than a third of tearing it out of a tenanted building. Those who plan to sell their buildings intact should still remove asbestos as leases expire or during other major building renovations when the work can be done relatively safely and economically. William D'Angelo, president of the environmental consulting firm Kaselaan & D'Angelo, recommends that until the asbestos is taken out, property managers should train maintenance workers on how to avoid hazards, and should continuously monitor the air where work is done. THE GROUP whose health policymakers should worry about most are the people who remove asbestos. Most abatement workers are recent immigrants or foreigners working illegally on tourist visas, and are easy victims of exploitation. State training and licensing standards are mostly inadequate. Says Jack Cain, founder of a Houston abatement firm called Industrial Commercial Enterprises: ''Either the environmental agencies are taking cavalier risks with workers' health or the agencies know that they don't face much risk in the first place. Whichever the case, I find their attitude shockingly cynical.'' As things stand now, policies are giving the U.S. the worst of both worlds: imposing huge costs to deal with ephemeral risks, and simultaneously making the risks higher for many people. The EPA and local health authorities could better serve the public by cracking down on shady abatement operators, setting standards for safe asbestos removal, and rigorously enforcing the standards. The EPA has just two full-time and half a dozen part-time inspectors to monitor asbestos removal in all New York State, though in New York City alone as many as 40% of office towers contain asbestos. Last January one inspector and 23 asbestos removal contractors were arrested on bribery charges. In February EPA administrator Lee Thomas recommended a three-year moratorium on new regulations that would require building owners to undertake asbestos abatement programs. Thomas thinks the fledgling abatement industry will have its hands full simply dealing with schools. That's a good first step, though it doesn't address the central problem. In a society where asbestos is omnipresent, holding building owners legally responsible for dubious health risks they had no part in creating makes little sense. The EPA and Congress could reduce the confusion they have created by matching their regulatory zeal to a hard-nosed appraisal of the problem and the burden on national treasure required to solve it. There are better ways to spend the money.