I UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
ff
           ' -7
                     WASHINGTON, DC. 20460

                          JAN 3 0 1990
                                                THE INSPECTOR GENERAL
 SUBJECT*
 TO:
    Special Review of EPA Handling of the Bunker Hill
    Superfund Site, Report Number E6PGGO-13-2005-0400t)06

    P. Henry Habicht II
    Deputy Administrator
      Enclosed  is  a  copy of  the  Special Review conducted on the
Bunker  Hill  Superfund Site.   Our work in Region 10 developed
additional information about  the enforcement and permitting
activities in  this  Region's water  and air programs.  Therefore,
we are  expanding  our initial  effort  to cover these additional
areas.  A second  report will  be provided to you when this work is
completed.

      Of primary concern to  us is the fact that nearly every
Region  10 employee  who we interviewed about the Bunker Hill site
expressed fear of retaliation from the Region 10 Administrator
because of their  cooperation  with  this office.  Such retaliation,
should  it occur,  would be an  extremely serious violation of
several federal statutes which  provide protection to employees
who furnish  information in  matters of this kind.  It is therefore
vital that you take whatever  action  is necessary to ensure that
no retaliatory action is taken  against EPA employees because of
their cooperation during this inquiry.  We intend to monitor this
situation closely as we continue our work in this Region.

     As discussed in the attached  report, we found that the
Regional  Administrator took extraordinary steps to prevent  formal
enforcement  actions from being  initiated against the owners of
the Bunker Kill Superfund site. As  a result, the  smelter complex
was allows*  to deteriorate  to the  point that it was declared a
public  hewth  hasard by the Agency for Toxic Substances  and
Disease s*sJMtry; prompt action was  not taken to  protect the
public  frosl  contamination resulting  from  salvage  operations;  and
partner*  in  the Bunker Limited  Partnership moved  company assets
to other  corporations through stock  and property transfers which
is expected  to complicate attempts to recover  cleanup costs.

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      In view of the serious nature of  these ongoing problems at
 Bunker Hill, we recommend you ask senior EPA management at
 Headquarters to provide oversight to ensure the site is being
 cleaned up with all due speed and that all necessary safeguards
 are employed to protect BPA's and the  public's interest at the
 Bunker Hill site.

      During our review, we were approached by numerous regional
 employees  who expressed high levels of mistrust and frustration
 about the  handling of issues in the air and water programs
 similar to those we saw in the handling of the Bunker Hill site.
 Since our  work in  this area is not complete, we are in no
 position to make overall recommendations regarding what further
 actions might be needed in Region 10.   However, we will provide
 you with such recommendations when our followup work is
 completed.

      If members of your staff have questions or wish to discuss
 the report or our  conclusions further, please have them contact
 Kenneth A.  Ronz, Acting Assistant Inspector General for Audit, on
 382-4106.
                       (Vohn C.
Martin
Attachment

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             UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                         WASHINGTON. D.C. 204*0


                              JAN  3 0 1990
                                                              Of
                                                      THE INSPECTOR QCNEMAL
    SUBJECT:  Special Review of EPA'a Handling of the Bunker Hill
              Superfund Site, Report Number E6FGGO-13-2005-0400006

    FROM:    /Kenneth A. Konz
          ^X^Acting Assistant/Inspector General for Audit
          7)
    TO:   (s   F. Henry Habicht/IX
              Deputy Administrator


    PURPOSE AND SCOPE

     -"  we performed this review in response to a confidential
    /complaint against the Regional Administrator, Region 10.  The
    complainant alleged that the Regional Administrator (RA) blocked
    or delayed the normally routine actions of the Hazardous Waste
    Division (HWD) to enforce the Superfund requirements against the
    Bunker Limited Partnership (BLP), the owners of the Bunker Hill
    Superfund Site.  The specific allegations were the following:
         — The RA would not allow HWD staff to order BLP to respond
            to various concerns of EPA regarding the company's
            salvage activities, site maintenance, site security, and
            the containment of hazardous materials.

         — The RA refused to allow HMD to notify BLP that they were
            a Potentially Responsible Party (PRP) for financing the
            eventual cleanup of the site.  He refused to notify the
            company  even after mounting evidence that its action, or
            lack of action, was contributing to the further pollution
            of the site.
\         — flsa RA discussed the negative impact that EPA enforcement
\            action would have on the value of the company's  stock
            offaring.  This meeting was held in Region  10 in January
            1988.  Both HWD staff and BLP officials ware present.

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      We performed this review in EPA Headquarters; Region 10,
 Seattle, Washington; Idaho Operations Office, Boise, Idaho; and
 the BunJcer Hill Superfund Site,  Kellogg  Idaho.  We met with and
 discussed the events relating to the allegations with the CERCLA
 Enforcement Division Director in Headquarters, the Region 10
 Administrator, and officials in  the Office of Regional Counsel
 and the Hazardous Waste Division in Region 10.  These individuals
 were responsible for managing the cleanup process and had
 knowledge of the history and the sequence of events at the Bunker
 Hill Superfund Site.

      We also met with officials  from the Agency for Toxic
 Substance and Disease Registry (ATSDR) to discuss the events
 leading up to its inspection of  Bunker Hill and the subsequent
 report, Idaho State officials to get their views of the progress
 at  the site, and an Idaho Public Health  official located in
 Kellogg to tour the facility. We also contacted or met with the
 past Assistant Administrator, OSWER and  a former member of the
 Regional Counsel for Region 10.

      We obtained copies of supporting documents, including
 official EPA reports and letters, draft  documents that were
 prepared by the HWD staff in anticipation of taking enforcement
 action,  and personal notes recording the subject and content of
 various meetings and telephone conversations.
BACKGROUND

     The Bunker Hill  Superfund Site was  listed on the National
Priorities List in September 1983,  and is  one of the most complex
sites in the nation.   The site consists  of about 21 square miles
along 1-90 in  the Silver Valley of  Northern Idaho.  It includes
the towns  of Kellogg, Page,  Pinehurst, Smeltervllle and Wardner
with a total population today of about 5,000 people; the Bunker
Hill lead  and  zinc mine; the smelter complex; and the central
impoundment area.   Lead and  other heavy  metals were identified as
the primary contaminants.

     Mining operation* began about  1885, and the first smelter
opened in  1917.   The  smelters produced lead, cine, cadmium,
silver, gold,  and alloy* of  these heavy  metals.  Other plants in
the comple^produced  sulfurlc acid, sine oxide, and phosphate
fertilisecmv   In 1928, a dike was constructed to contain the mine
tailings (istsjfl hnj the central impoundment  area, which now covers
160 acres  and  contains waste materials up  to 70 feet deep.
Mining continues today, but  the smelter  operations ceased in late
1981.

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      Almost 75  years  of  smelter operations have resulted in
 substantial environmental  damage in the valley.  During our visit
 to  the valley,  we  observed the valley downwind of the smelter to
 be  generally defoliated.   We were told by the local health
 department  official that the defoliation was due to the high
 acidic level of the soil caused by smelter emissions.  According
 to  this  same official, the more critical problem is the extremely
 high  content of lead  and other heavy metals in the soil.  For
 example, soil samples taken in Smelterville averaged 3,710 ppm
 (parts per  million) of lead with a range of 110 to 18,500 ppm.
 We  were  told that  the standard for determining lead contamination
 in  soil  is  1,000 ppm.  As  our objective was not a review of the
 Bunker Hill Superfund Site, we did not evaluate these numbers.
 Anecdotally, we were  told  that in some areas the lead level in
 the soil is so  high that it could be mined.

      One of the primary  concerns of the public health officials
 in  the area is  the ingest ion of lead by small children who, along
 with  pregnant women,  are the group most at risk.  High levels of
 lead  in  the body can  cause brain and nervous system damage in
 children, birth defects  and developmental impairment in fetuses,
 and chronic kidney and cardiovascular system damage in adults.
 However, even low  levels of lead in the body may cause more
 subtle health problems.

      The Idaho  Department  of Health and Welfare has routinely
 monitored air emissions  from the smelter since the 1950's.-  with
 the passage of  the Clean Air Act, the emissions standard for the
 smelter  was established  at a maximum of 1.5 micrograms of lead
 per cubic meter of air based on a 3-month average.  During the
 first 3  months  of  1974,  tests were recorded that exceeded 100
micrograms  with a  3-month  average of 30 to 40 micrograms per
 cubic meter of  air.   These emissions were the result of a
decision by the Bunker Hill Company to bypass the emissions
control  equipment  after  a  September 1973 fire destroyed about a
 third of the equipment's capacity.  During the first 3 months of
 1974, the smelter  discharged approximately 20 years worth of  lead
emissions into  the valley.

      In  1974, the  local  health department tested the blood-lead
 levels of^Xl the  children living in the area.  According to  the
project  dttftotor,  the blood-lead levels were the highest ever
recorded * jfcOi the  179 children living within one mile of the
smelter, 99 percent had  a  blood-level over 40 ug/dl  (micrograms
of  lead  per deciliter of blood).  At the tine, anything over  40
ug/dl was considered  hasardoua.  The highest level recorded was

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 164 ug/dl; 41 children had a  blood-lead level over 80, the level
 established for lead poisoning.  These tests resulted in a series
 of reactions by the State, the Community, and the Company.  The
 blood-lead levels were so high that chelation, the clinical
 protocol for lead poisoning,  was performed on about 15 children;
 and most,  if not all, of  the  families living in a one-mile radius
 were relocated.

      Annual tests for blood-lead levels have been performed
 since 1974.  These tests  have continued to identify a large
 number of  children with high  blood-lead levels,  in August 1989,
 8  years after the smelter closed, eight children out of 275
 tested had a blood-lead level over 25 ug/dl, the current
 standard.   The standard for blood-lead levels has been repeatedly
 lowered as scientists and public health officials learn more
 about the  dangers of lead. The director of the blood-lead
 testing project  told us that  in the next year it may be lowered
 to 15 ug/dl.

      In 1968,  Gulf Resources  and Chemical Corporation (Gulf)
 purchased  the mine,  the smelter complex and the central
 impoundment area.   The HWD staff told us that, throughout the
 1970's,  the Bunker Hill Company, wholly owned by Gulf, had a
 history of noncompliance  and  obstructionism toward HMD's efforts
 to enforce air emissions  regulations.  The company's typical
 response was  to  ask for more  specifics, agree to comply and fail
 to execute action,  or simply  refuse.  With regard to compliance
 orders,  they would require advance notice of inspections and
 would then ensure that the individuals involved were absent and
 that  the equipment would  be shut down at the tine of inspection.

      Gulf  continued operations until late 1981, at which time  its
 smelter and mining operations were terminated.  On November 1,
 1982,  the  Bunker Limited  Partnership (BLP) purchased the smelter
 complex, the  Bunker Hill  Mine, and the related real property.

      The HMD  staff devoted most of their efforts during 1983 and
 1984  to  defining the problems at the site.  Early on the  staff
 saw a  need to divide the  project into two parts—the populated
area  and the  unpopulated  area.  Dividing the project into two
parts  allowed the cleanup to  progress faster in the populated
areas, wheve more was known about the contamination problems.
Therefor»v~l«»«  investigation was required before cleanup could
begin.   In 1986,  six inches of lead-contaminated soil were

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 removed and replaced with clean  soil and sod or gravel on 16
 public properties.   In 1989,  lead-contaminated soils were removed
 from approximately  80 residential properties with children under
 three years old.

      The lack of  information  about the unpopulated area,
 including the smelter complex, resulted in considerable
 uncertainty regarding the pollution problems and their solution.
 A detailed study  of the area  had to be completed before any
 cleanup could commence.   HWD  staff had the difficult task of
 defining the study  and identifying PRPs.

      Any study performed in the  area was dependent on the
 cooperation of the  community.  However, during their early visits
 to the area,  HWD  staff encountered an extremely hostile attitude
 from the community.   This attitude was the result of about 50
 percent unemployment caused by the smelter closure.  The
 community believed  that Gulf  closed the smelter because of the
 high cost of  compliance with  EPA regulations.  The community also
 believed that BLP wanted to reopen the smelter, and these sane
 regulations were  preventing them from doing so.  The community
 thought EPA was the cause of  their unemployment, and therefore,
 wanted EPA to stay  out of their  affairs.  In the community's
 view,  jobs were more important than lead contamination.

      Primarily in reaction to the attitudes and beliefs of the
 community,  HWD staff determined  that Gulf, as the major
 contributor of the  pollution  in  the area, would be identified as
 the  sole PRP.   BLP  had purchased the facility after the smelter
 had  closed, and had not  contributed to the pollution.  Therefore,
 BLP  was  not identified as a PRP.  The staff believed that any
 additional PRPs could be named later as conditions at the site
 changed  and/or other companies were identified.  The HWD staff
 discussed this case with the  previous Regional Administrator, and
 they all agreed that this was a  reasonable way to proceed.  In
October  1984,  EPA notified Gulf  that it was a PRP and entered
 into negotiations for Gulf to perform the remedial investigation
of the unpopulated  areas.  It was not until May 1987, that Gulf
and  EPA Region 10 finally reached agreement for the study.

      In  July  1985,  HWD staff  learned through a newspaper
advertisemmnt that  BLP was in the process of disposing of various
material amd  equipment located in and around the smelter.  HWD
officials were concerned that the lack of proper decontamination
procedures  could  result  in a  serious health hazard to the
recipients  of  the material.   They requested a meeting to

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           determine the extent of the salvage operations.   In  an
           August 1985, letter, BLP officials did not agree  to  a meeting,
           but assured HWD that they were not engaged in an  extensive
           salvage operation.  They were only trying to sell sone  excess
           equipment, primarily rolling stock.  Continued effort by HHD
           staff finally resulted in a meeting on January 9, 1986.  in this
           meeting, EPA raised several issues in addition to the salvage
           activities—public access, to the> site, fire prevention, and the
           identification and containment of various hazardous  materials on
           the site.  According to HWD staff, BLP officials  were cooperative
           and agreed to address each of the various issues  discussed.  BLP
           officials again assured HWD staff that the salvage operation was
           very limited, and that they would notify EPA if it continued or
           expanded.

                HWD staff told us that they knew in January  1986,  that the
           president of BLF was the same person as the president of the old
           Bunker Hill Company and they were familiar with the  obstructive
           and delaying tactics used in the past.  However,  at  that time,
           HWD staff did not anticipate a continuation of these tactics,   it
           had been over 4 years since the smelter was closed,  and it would
           be prohibitively expensive to reopen it.  HMD staff  thought the
           cleanup of the site was the common goal.  Subsequent events
           clearly revealed their expectations to be in error.
           THE REGIONAL ADMINISTRATOR'S INVOLVEMENT

                We were told by both Headquarters and Region 10 officials
           that the review and approval of PRP notice letters and
           administrative orders issued to companies related to a Superfund
           site are routine procedures that are delegated to the Division
           Director level in the Regions.  The HWD Director stated that it
           was routine to inform the RA of the status of each Superfund
           site, but it was not normal for the RA to require that he approve
           these documents.  According to HWD officials, the RA took an
           unusual interest in the activities at the Bunker Hill Superfund
           Site, and gave verbal orders that no document could be issued or
           action taken relative to this site without his prior approval.
                Zn omr discussions with the RA, he stated that he believes
           more effective and efficient resolution of problems can be
           achieved tfcrough Informal negotiations.  He, therefore, does not
           support EPA'* penchant for formal orders.  As a result, he always
           attempts to achieve the regulatory objectives of EPA through
           informal negotiations and agreements.
L	

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     The RA told us that he was very interested in the Bunker
Hill Site.  He said that before taking office he met with the
Governor of Idaho, who requested EPA emphasize the cleanup of
Kellogg.  He, therefore, established the Bunker Hill Site as a
top priority in the Region.  He used the emergency removal of
lead-contaminated soil from private yards and public areas of the
towns in the Superfund site as an example of progress at the
site.  He claimed that he was unaware of the conditions at the
smelter complex.  Upon learning of the conditions—through the
ATSDR report—he sent BLP and its affiliates a unilateral order
to  perform specific acts to preclude the release of hazardous
material.  He also sent notices to BLP and its affiliates stating
that they were designated PRPs.

     The RA did not think he intervened in the routine activities
of the staff.  He stated that he got Involved only when he was
called upon to make a decision.  He also denied giving any orders
that would prevent the HND staff from performing their duties.
The RA stated that the HWD staff failed to keep him adequately
informed; and, until the ATSDR report was issued, he was unaware
of the deteriorating conditions at the site.  Re thought the HND
officials who blame him for preventing enforcement actions
against BLP are trying to avoid their own responsibility for
consensus decisions that subsequent events have shown to be
wrong.
     ,_«•
     Based on the events that axe described In the following
sections, we have concluded that, since his arrival In August
1986, the RA delayed or prevented the HMD staff from taking
timely enforcement action against HUP.  It the enforcement action
had bran taken when It was first considered necessary, some of
the ^Pvironmental and physical ha sards that exist today at the
smelter complex would have been avoided.
   delayed issuance of Administrative orders

     In October 1986, a fire occurred in the lead  smelter
facility.  The cause was never determined, but HHD staff suspect
it may have been started by an employee using a  cutting torch to
disconnec^tfquipment identified  for salvage.  Luckily, no  serious
damage ocottared, but considerable concern was raised over  the
potential sŁaards if the fire had not been controlled.  The
potential release of toxic substances present in the smelter
could have required an evacuation of the area.

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      In November  1986, HWD staff drafted an administrative  order
 that  would have required BLP to take action to minimize the
 potential for a fire and to ensure adequate fire fighting
 capability at the facility.  The RA, consistent with his stated
 desire to resolve conflicts informally, suggested that the HWD
 staff call BLP officials and negotiate an agreement.  We were
 told  that there was general agreement among the HWD staff for
 this  approach.  At this time, their contact with BLP officials
 had been limited,  and they did not anticipate any difficulty in
 negotiating an agreement to minimize the risk of fire.

      On December  2, 1986, the HWD Director formally requested a
 meeting with BLF  to discuss various fire prevention measures at
 the smelter complex.  At a December 11, 1986, meeting, BLP agreed
 to implement several of EPA's suggestions.  However, BLP would
 not agree to allow an inspection of the smelter complex until
 July  1987.  During the inspection, the HWD staff observed that
 BLP had taken various fire prevention measures.  There were
 differing opinions between BLP and HWD on the effectiveness of
 the fire-fighting equipment and the availability of sufficient
 water, the details of which are beyond the scope of this report.
 However, HWD staff told us that during subsequent visits to the
 area  they observed that most of the equipment had been
 dismantled.

      During the same time that HWD staff were discussing the  fire
 prevention issues, they were also trying to meet with BLP
 officials to discuss the continuing salvage activities and other
 issues of concern—such as access to the property,  future  use of
 the smelter complex, fugitive dust control, and the containment
 of various hazardous materials.  In a series of telephone  calls,
 letters and meetings, BLP officials continually stated jtnat they
wanted to cooperate, and that they were not trying  to tjpbeive
 EPA.  BLP officials also assured HWD staff that they did not  plan
 an extensive salvage operation.  With the exception of  fugitive
dust  control, little progress was made on any of these  issues.

      Toward the end of 1987, an HWD staff member observed  a
 salvage company removing large quantities of railroad  ties and
 rails from the smelter complex.  At EPA's request,  a  local lab
 performed •wipe tests  (passing a filter paper across  a specified
area) on three railroad ties.  Analysis of the results revealed
 extremely hloh levels of lead.  We were told that no  standard
directly applies  in this case; however, as stated before the
 standard set for  determining lead contamination of  soil is 1,000
ppm.  The swipe tests, listed below, showed the amount of lead on
 the surface of the ties.

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      Tie  No.  1  -  589,286 ppm  lead

      Tie  No.  2  =  204,321 ppm  lead

      Tie  No.  3  -   14,967 ppm  lead
Upon notification of  the contaminated condition of this material,
a salvage company official told the EPA representative that they
had a contract to salvage about nine miles of track.  The salvage
company had already removed and sold about half the rails and 10
percent of the ties.   The remaining rails and approximately 1,000
ties were stacked and ready for removal from the site.  The
salvage company agreed to wash the remaining rails before
removing them from the site.  However, an adequate cleaning
method did not exist  for the  ties, so the salvage company agreed
to stop removing them.

     HWD staff never  learned  who received the ties that were
removed from the site.  However, they heard rumors that the ties
were sold to a landscape company in the Spokane, Washington area.
They also told us that during the next several months the stack
of 1,000 ties disappeared.  They did not know who took them or
where they went.

     During their visits to the area, Region 10 staff observed
big holes in the sides of the smelter complex where equipment had
literally been ripped from the building apparently to be
salvaged.  This action resulted in the disturbance of large
quantities of asbestos-containing material.  During their
observations, HWD staff could see no indication of any attempt to
contain the material.  They observed loose material hanging from
the building and lying on the ground.  They told us that, even
after repeated requests, BLP  officials did little, if anything,
to contain the material.

     As a result of BLP'a lack of cooperation—and despite the
verbal orders of the  RA—the  HWD Director, with the support of
the staff, decided it was time to take action.  In a November 12,
1987, letter, he informed BLP about EPA's concern over salvaged
material being removed from the Bunker Hill site without
notifying IPA and without proper decontamination procedures.
Therefore, may future activity would be governed by an
administrative) order  to ensure proper handling of contaminated
material,  ffce letter concluded that the terms of the order could

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 be negotiated; however,  a unilateral administrative order would
 be issued if acceptable  agreement could not be reached.  The HWD
 Director took this action without notifying the RA because he did
 not believe the RA would approve.

      HWD management officials  believe that BLP officials called
 the RA and complained about to* letter.  This belief is based on
 the fact, that the RA scheduled a meeting in January 1988, and
 then called the HWD Director to tell him to attend.  The subject
 of the meeting was the HWD Director's November 12, 1987, letter.

      The RA told us that he did not remember anyone from BLP
 calling him to request a meeting.  He said that he hardly knows
 the BLP officials, so it would be unlikely that they would call
 him.   He remembered attending  a meeting with BLP to discuss
 salvage operations at the site.   He told us that he viewed the
 HWD Director's action as another attempt by HWD staff  to take
 formal action when,  in his opinion, informal negotiation would
 suffice.   The RA said that prior to meeting with BLP,  he met with
 the HWD Director and the Superfund Branch Chief to discuss the
 need to issue an administrative order, and they reached a mutual
 agreement that an order  was not necessary.

      In any case,  the meeting  in January 1988, took place.  The
 HWD staff present at the meeting stated that the RA belittled the
 issues identified in the November 12, 1987, letter which he
 indicated were not significant and could easily be resolved.  The
 RA then stated that reasonable people could discuss these issues
 and reach an agreement that would satisfy everyone.  There would
 then be no need to issue an administrative order.  BLP, again,
 promised to ensure that  any salvaged material would be properly
 decontaminated and they  would  notify HWD of any new or revised
 salvage plans.   The administrative order was never completed.

     According to HWD staff, 1988 was spent trying to  negotiate
 with BLP officials.   BLP officials continued to deny they were
 doing  anything wrong, and they continued to deny access to their
 facilities.   The HWD staff told us that the level of frustration
was extremely high during this period because of the RA's refusal
 to  allow then to take enforcement action against BLP.  The HWD
 staff  beliovsjd the situation at the smelter complex was critical
because It WM becoming  a potential health hazard to the
community.   Ifeey said that the RA was repeatedly Informed,
 through informal discussions and formal briefings, about the
hazardous condition* at  the site.  Despite these efforts, the RA
would  not change his decision.
                                10

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      In the middle of  1989,  EPA staff secretly contacted the
 resident staff  of  ATSDR to discuss the possibility of performing
 a  public health review at the  site.  ATSDR staff agreed, and in
 July 1989,  inspected the smelter complex.  They determined that
 the  presence of chemical and physical hazards at the smelter
 complex presented  a significant risk to public health.  On
 October 5,  1989, ATSDR issued  a Public Health Advisory for the
 Bunker  Hill smelter complex.   Public Health Advisories axe issued
 only under  extraordinary conditions where the release or
 threatened  release of  hazardous substances may pose a serious
 threat  to human health and the environment.  ATSDR staff told us
 that fewer  than a  half dozen advisories have been issued
 nationwide  since inception of  the Superfund program.

      The public health advisory was based on (1) the threat to
 human health and life  from the significant concentrations of
 lead, cadmium,  arsenic and asbestos in the smelter complex; and
 (2)  the risk of physical injury due to the unrestricted access to
 the  area and to physical hazards, such as the deteriorated and
 unsound structures, salvage  debris, and open shafts in the
 smelter area.

      Shortly before the ATSDR  report was issued, HWD management
 scheduled a meeting to inform  the RA of the reports findings.  We
 were told the RA asked who the ATSDR was and why were they doing
 a study.  He went  on to say  that.nobody died out there, so what
 was  the problem.   He then asked if the Region should try to block
 it.   The HWD staff present at  this meeting told us they informed
 the  RA  that ATSDR  is part of the Center for Disease Control and
was  established by the Superfund legislation to do these kinds of
 studies.  It could not be stopped.

      The RA told us that he  was aware of the study.  He did not
elaborate,  however, on when  he became aware of it.  He also
stated  that he  supported the study and did not try to block it.

      In  October 1989,  Region 10 officials conducted an inspection
and  assessment  of  the  smelter  complex and confirmed all of
ATSDR's  findings.   Additional  threats requiring immediate actions
were observed including approximately 250 drums containing
mercury-laden sludge in varying degrees of deterioration and
decay.   BF&. inspectors also  observed eight open tanks containing
various  asjsjuts of sulfuric  acid and mercury sludge and a ninth
tank containing an estimated 56,000 gallons of 80 percent
sulfuric acid and  mercury sludge.  This tank was extensively
corroded.   Tests revealed that the thickness of the tank wall  had
been reduced in places by as much as 68 percent.
                                11

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     As a result of the conditions noted and ATSDR's public
health advisory, EPA, on October 24, 1989, finally issued a
unilateral administrative order to BLP, Gulf, Mineral Corporation
of  Idaho, and Bunker Hill Mining Company (U.S.)/  Inc. for the
performance of necessary response actions at the smelter complex.
This was about 3 years after the HWD staff first attempted
enforcement: action against BLP.
RA delayed notification that BLP is a PRP

     In 1984, the previous RA and the HWD staff decided to name
Gulf as the sole PRP for the Bunker Bill Superfund Site.  As
mentioned earlier this decision was based on the HWD staff's
belief that Gulf was the primary cause of the pollution in the
area and the community's resistance to EPA.  They planned to name
additional PRPs as conditions changed and other companies were
identified.

     Shortly after assuming his position in August 1986, the RA
was briefed on the reasons for the decision to name Gulf as the
sole PRP.  The RA concurred with this decision and referred to it
during our discussions as an established policy.

     Almost immediately after being named a PRP, Gulf began to
lobby EPA to name other PRPs.  In December 1987, Gulf presented a
fairly detailed argument for EPA to name more PRPs.  Gulf claimed
that it was unjust to place all the financial burden on them.
There were many other companies that operated in the area, and
these other companies should be required to pay their fair share.
Gulf also pointed out that the failure to name additional PRPs
could delay site remediation if the cost apportionment issues
were not resolved.  Gulf then provided a listing of over 25
companies that, in their opinion, should have been identified as
PRPs.  At the end of the meeting Gulf asked that Region 10
respond to this request by January 1988, or they would take their
case to Headquarters.

     On January 11, 1988, the HWD Director signed two internal
memos addressed to the RA.  The nemos, a background paper  and an
option papsjr, described the changing conditions at the  site,   in
             of equity considerations, the background paper
               f as the operator of the site was responsible  for
             Ity of the pollution problems at Bunker Hill.
a discuss
stated
a great
However, BLP, through various  action*  or inaction*,  had
contributed to many of  these problem.   The paper also
established a link  between the upstream mining companies and the
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site contamination.  The option paper discussed timing of the PRP
notices and then presented options for notifying additional PRPs.
According to HWD management, the paper recommended that BLP be
immediately named a PRP, and that other companies be named as
they were identified.

     We were told that the RA refused to accept the
recommendation in the paper, and called a meeting to discuss the
options.  The attendees included the HWD Director, the Superfund
Branch Chief, the Site Management Section Chief, and a
representative from Regional Counsel.  According to the
attendees, the RA adamantly opposed sending BLP a PRP notice
letter.  During the meeting, the RA asked each member for
concurrence on his decision not to name BLP.  The HMD staff
present at the meeting told us they believed that BLP should be
named a PRP, and the paper submitted to the RA clearly supported
this belief.  However, they all indicated they were intimidated
by the RA, and, therefore, they concurred with his position.

     At the end of the meeting the RA directed that the
recommendation be dropped from the option paper.  The two memos
were to then be declared confidential and exempt from a Freedom
of Information Act request.  He then ordered that only four
copies be produced and numbered for control purposes.

     The RA stated that he was unaware of the HWD staff's
changing opinion regarding naming BLP a PRP.  He met regularly
with the HWD Director and occasionally the Superfund Branch
Chief, and they would generally agree on a course of action.  He
stated that if the Branch Chief had a change of mind, he never
stated it directly.  He thought that he and the  Director  were in
basic agreement.  Re admitted, however, that sometime before the
fall of 1988, the Director may have changed his mind.  We  showed
him copies of the January 11, 1988, memos addressed to him which
presented background and options for naming other PRPs.  Re
denied ever seeing them.  He claimed that prior to the March
1988, meeting with Gulf officials, the staff and he met  and
mutually agreed that the policy would not change.  If the  HWD
staff had changed their collective minds, he was not  informed.

     In MftXCh 1988, the RA and HWD staff met with Gulf
representatives to present the Region's position  on naming
addition«IS>*Ps.  At the meeting, the RA stated that  the decision
to name only Gulf was made before his appointment in  Region 10,
but he continued to support that decision.  Be then turned the
meeting over to the HWD Director to  explain the rationale.  The
Director told us he was completely surprised by the RA's action.
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 He had not expected to have to publicly defend a position which
 he and his staff  no longer supported.  However, to avoid looking
 foolish,  he repeated the initial rationale for naming only Gulf.
 Gulf was  apparently furious, and subsequently solicited a
 decision  from Headquarters.

     The  RA stated he remembered the meeting with Gulf.  He
 believed  that Gulf was simply trying to avoid the financial
 burden of the cleanup.  He stated that he believed then, and
 still  believes, that Gulf was primarily responsible for the
 pollution and should have to pay.  He agreed with the policy
 established by the previous Regional Administrator and saw no
 reason to change  it.

     In March 1988,  Gulf officials requested a meeting with the
 then Assistant Administrator for Solid Waste and Emergency
 Response  to discuss the PRP situation at the Bunker Hill site.
 Between March and June of 1988, Gulf had various contacts, either
 directly  or through counsel, with EPA Headquarters officials.  On
 June 9, 1988,  the Vice President and General Counsel for Gulf
 summarized Gulf's position in a letter to the Director, Office of
 waste  Programs Enforcement.  In general, Gulf believed that many
 other  companies contributed to the pollution problems at the
 site,  and that Region 10 had sufficient evidence to support
 naming additional PRPs, particularly the current owner of the
 facility.   They also claimed that Bunker Hill was the only
 significant site  where only one PRP was named.

     The  CERCLA Enforcement Division Director told us that the
 former AA supported Gulf's argument and agreed that more PRPs
 should be named.   The former AA asked the Director, CBRCLA
 Enforcement Division to work with the Region 10 officials and
 find some way to  resolve the conflict between the RA and the HWD
 staff.  The CBRCLA Enforcement Division Director told us that his
primary goal was  to develop language to modify the PRP notice
 letter into a fora that the RA would accept.  On July  29,  1988,
the CBRCLA Enforcement Division Director sent the revised
 language  to the Office of Regional Counsel in Region 10.  His
intent was to soften the language so it would not appear as
harsh, but still  transmit the idea that it was a PRP notice
 letter.   He believed this new language provided an implicit
notice ratter than the explicit notice that was normally issued.
He stated ffcet this was not the ideal approach; but, in his
opinion,  an average person would read the letter and conclude
that it was a notice letter.
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e
     The HWD Director told us of a conference call in September
1988, with the former AA, the then Director of the Office of
Waste Programs Enforcement, the RA and himself.  The purpose of
the call was to discuss sending BLP the revised PRP notice
letter.  According to the HWD Director, the discussion between
the RA and the former AA turned confrontational and no conclusion
was reached.  The RA told the HWD Director that he was not going
to discuss this any more, and the HWD Director should continue to
work with Headquarters and resolve the situation.  The HWD
Director and the Headquarters officials agreed to send the
revised PRP notice letter to BLP.

     On October 18, 1988, the HWD Director sent the revised PRP
notice letter and an attached request for information to BLP.
The HWD staff believed that this was a PRP notice letter.  In
fact, they informed Gulf and the local community that BLP had
been notified it was a PRP.  Each staff member we talked to
stated that after the notice letter was issued, the RA took every
opportunity to make the point that the letter was not a notice
letter, and BLP was not a PRP.

     In our meeting with the RA, he stated that he did not know
what a standard PRP notice letter looks like, so he would not be
able to tell us if one had been revised or not.  We specifically
asked him if he believed the letter sent to BLP was a PRP notice
letter.  He stated that since he did not see the letter before it
was sent to BLP, he did not know whether it was or not.  During
our discussion, he expressed doubt that it was a notice letter;
however, he would not commit himself to an opinion one way or the
other.  He also stated that this whole issue is irrelevant.  In
his opinion, Gulf is the only responsible party and should have
to pay for the cleanup.  BLP just bought the property and did not
contribute to the pollution.  They should not have to pay.

     In response to the information request attached to the
notice letter, BLP's attorneys began a year-long exchange of
letters with the Regional Counsel.  BLP'm attorneys stated that
BLP would not provide the information requested unless they were
granted a specific confidentiality agreement.  BLP's attorneys
were concerned that the proprietary information would be  leaked
to Gulf.  A Regional Counsel representative told us that  this  was
totally ridiculous.  BLP, under current law, can protect  its
records by simply declaring that they contain proprietary
information and must be kept confidential.  BPA is then bound  by
law to maintain confidentiality.  Based on past experience  with
this company, a Regional Counsel representative believed  this  was
just another tactic to avoid responding to BPA's information
request.

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      When the ATSDR report was issued the RA then reversed his
 position to limit liability  to Gulf and issued a second notice
 letter and information request to BLP.  This letter was sent on
 October 4, 1989.   In a meeting to discuss the request for
 information,  one  of BLP's  attorneys told an HWD staff member that
 they were just told that BLP was a PRP, so they needed some time
 to collect the information.  "She staff member thought that this
 was just a continuation of BLP's normally obstructive tactics.

      In an October 13,  1989, memo to Regional Counsel, BLP's
 attorney stated that BLP does not own any part of the Bunker Hill
 complex identified in the  information request.  The attorney
 noted in the  letter that he  consulted with the owners of the
 complex to obtain the information requested so EPA could avoid
 the inconvenience of dealing with three legally distinct
 entities.

      Regional  Counsel provided us a copy of an investigation into
 the corporate  ownership of the Bunker Hill Site.  The report was
 completed in December 1989.  The report makes two important
 points.   The first is that the corporate officers of the original
 Bunker  Hill Company (owned by Gulf), BLP, and all the newly
 formed  corporations (one of  which is chartered in British
 Columbia)  that now own the complex are the same people.  The
 second  point is that the majority of the corporate restructuring
 occurred during 1987 and 1988—the same period that the conflict
 over enforcement  actions and naming additional PRPs was
 occurring.

     Based on  the above report, Regional Counsel expressed
concern  over EPA's ability to collect for the costs of any
cleanup  of the smelter complex.  The report recommended, in parti

      ...the ready and instant organization and reorganization of
     corporate entitle* has  been used to transfer assets and
     responsibilities.  Real property, personal property and
     shareholdings have been traded among different corporate
     entities  for no apparent par value.  The possibility exists
     that once capitalization is realized, the assets will be
     applied to other ventures unassociated with Bunker Hill.
     The delaying tactics, both in answering EPA request letters
     and I* obstructing EPA  investigations, suggest that an asset
     freeew or trust fund  arrangement should be implemented to
     protect BPA's coat recovery interests.
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We were informed by a Regional Counsel representative that they
are reviewing this case in anticipation of a possible referral to
the Environmental Enforcement Section of the Department of
Justice.  They also plan to meet with attorneys from the
Securities and Exchange Commission to review BLP's disclosure of
its environmental liabilities in its application to sell stock in
this country.


Discussion of value of stock issue

     As part of the more general allegations, we received a
specific allegation that the RA discussed the negative impact
that EPA's enforcement action would have on the value of the
company's stock offering underway at the time in Canada.  The
alleged discussion took place in a meeting held in January 1988
with BLP officials, Region 10 officials and an assistant to the
Governor of Idaho.

     We discussed the contents of this meeting with three of the
attendees at the meeting—the RA, the HWD Director, and the
Director of Region 10's Idaho Operations.  The RA told us that he
did not recall the discussion.  He remembers that BLP spoke
generally about getting funding, but he did not remember
specifically how they planned to do it.  In any case, he stated
that a company's financing would not be considered in any
decision he may have to make regarding EPA regulations.         "'

     The HWD Director stated that he recalled the discussion.  He
thought it was a thinly disguised threat that any enforcement
action would reduce the value of their stock offering and, thus,
impact on their ability to reopen the mine.  This would have an
adverse effect on the community's opinion of BPA.  The Director
of Idaho Operations remembered that there was some comment about
the value of stock, but he could not remember exactly what was
said.  Both officials stated that the RA did not respond, nor did
he discuss the incident after the meeting.
CONCLUSION

     We believe the evidence indicates that the RA took
extraordinary measures to prevent the HWD staff from performing
the normal and proper activities required to enforce the
Superfund regulation*.  During the period from August  1986
through October 1989, the RA blocked or delayed any formal
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 enforcement actions  initiated against BLP despite the
 recommendations of the HWD staff.  As a result, EPA failed to
 take timely enforcement action against BLP.  This failure has had
 serious consequences:

      — The smelter  complex within the Superfund site was allowed
         to deteriorate to the point that, in October 1989, it was
         declared a public health hazard by the ATSDR;

      — The partners have transferred all of BLP's assets to
         newly formed corporations through various stock and
         property transfers.   As a result, collections for the
         Superfund cleanup activity is going to be substantially
         more difficult.

      — The company's uncontrolled salvage activities may have
         resulted in highly contaminated equipment and material
         being  sold to,  in some cases, uninformed buyers.   For
         example,  an unknown quantity of lead-contaminated
         railroad ties have disappeared from the site.

It was  not  until  October  1989,  coincident with the issuance of
the ATSDR report,  that the RA finally allowed HWD staff to take
the action  they  considered necessary.

     Within the  limited scope of'our review,  we found no  evidence
to support  the allegation  that  the RA discussed the impact of
EPA's enforcement action on the value of  the  company's stock
offering, although BLP officials  raised the issue at the  meeting.
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