I
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        OFFICE OF INSPECTOR GENERAL
 Special Report
         Congressional Request on
         Funding Needs for
         Non-Federal Superfund Sites
         Report 2004-P-00001


         January 7, 2004
6? A

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Abbreviations

AOA

CERCLIS


EPA

FY

LTRA

NPL

NTCRA

OIG

OU

OSRTI

PRP

RA

RPM
Advice of Allowance

Comprehensive Environmental Response, Compensation, and
Liability Information System

U.S. Environmental Protection Agency

Fiscal Year

Long-Term Response Action

National Priorities List

Non-time Critical Removal Action

Office of Inspector General

Operable Unit

Office of Site Remediation and Technology Innovation

Potentially Responsible Party

Remedial Action

Remedial Project Manager

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                     UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                                   WASHINGTON, D.C. 20460
                                                                        INSPECTOR GENERAL
The Honorable Barbara Boxer
Ranking Member
Subcommittee on Superfund and Waste Management
U.S. Senate
Washington, D.C. 20510

Dear Senator Boxer:

This report responds to your May 23, 2003, request of the Environmental Protection Agency
(EPA) Office of Inspector General (OIG) to provide information concerning funding needs for
non-Federal Superfund sites.  We are sending identical reports to the cosigners of the letter:
Senator Jeffords, Representative Dingell, and Representative Solis.  Your letter requested that we
address the sufficiency of funding for non-Federal sites at all stages of the site cleanup process,.
including a more detailed review of a limited number of sites to determine if cleanup actions are
being stretched out over a greater number of years because of inadequate funding.

The body of this report and enclosures 1 through 5  address funding for Fiscal Year (FY) 2003.
The attachment to your letter posed a series of questions relating to our October 25,2002, letter
on FY 2002 funding needs for non-Federal Superfund sites. Our responses to those questions are
in enclosures 6 through 11. Please note that given the volume of data requested, we are
providing certain requested financial information via the enclosed disk.

In summary, during FY 2003, limited funding prevented EPA from beginning construction at all
sites or providing additional funds needed to address sites in a manner believed necessary by
regional officials, and caused projects to be segmented into phases and/or scaled back to
accommodate available funding. Within this context, regional officials told us that they
considered FY 2003 funding sufficient to address most sites. However, as discussed in the body
of this report and in the enclosures, sufficient funds were not available to address a limited
number of removal, pipeline, and remedial action sites.  We estimate that the FY 2003 site-
specific funding shortfallwas $174.9 million. Our estimate of shortfall only considers the
regions' use of extramural resources (those resources that are used to fund work by the Army
Corps of Engineers or contractors) applied to site-specific work. This report does not address
intramural resources, or those obligations involving the labor and travel of EPA personnel that
are obligated to specific Superfund sites.

Our October 25,2002, letter on FY 2002 funding needs was limited to two phases of the cleanup
process for Superfund sites - those sites requiring remedial action and those requiring long-term

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response actions (LTRA). Your May 23,2003, request letter asked us to inquire about all stages
of the process.  Accordingly, in addition to discussing funding for remedial action and LTRA
sites, the enclosed information for FY 2003 addresses sites requiring (1) time critical removal
actions, and (2) preconstruction activities (referred to as pipeline activities), such as remedial
investigation/feasibility studies and remedial design work.

The Superfund Funding  Process for FY 2003

The Office of Site Remediation and Technology Innovation (OSRTI) within the Office of Solid
Waste and Emergency Response provides funds for EPA regions to conduct site cleanup
activities using three Advices of Allowance (AOA):

Removal Funding

The Removal AOA funds emergency and time-critical removal actions at those sites where it is
determined that the contaminants present an immediate threat to human health and the
environment. The regions do not request funds from Headquarters on a site-by-site basis prior to
the start of a fiscal year because the nature of this work requires an immediate response to
unanticipated conditions. Instead, OSRTI provides funds to the regions based on historical
allocations for the emergency removal program.

Pipeline Funding

The Pipeline AOA provides the regions funds for pre-constraction activities, such as conducting
remedial investigation/feasibility  studies that characterize the nature of the contaminants at a site;
selection of the remedy, which is  documented in the Record of Decision; the design of the
construction work to address the contaminants; and non-site-specific work, such as community
involvement activities, records management, and State program development. The regions do
not request funds on a site-specific basis from Headquarters for pipeline activities.

Prior to receiving funds, the regions input information on pipeline activities accomplished in the
prior year and those planned for the current year into the Comprehensive Environmental
Response, Compensation, and Liability Information System CERCLIS), the Superfund
information system.  During this process, the regions identify or "target" activities in certain
categories they believe can be initiated with funding amounts from OSRTI, OSRTI then
allocates funds to each region using a formula that considers historical allocations and pipeline
activities accomplished in the prior year and work planned for the current year (i.e., the targeted
activities). The regions then apply pipeline funds to targeted activities for sites or allocate an
amount of money to contracts that will later be used to conduct pipeline activities. The latter
process is known as "bulk funding." Under bulk funding, site-specific obligations are not
recorded in the Agency's financial management system until the  contractor is instructed to
perform a pipeline activity for a particular site.

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Remedial Funding

The Remedial AOA funds remedial construction, LTRA activities, non-time critical removals,
and five-year reviews, LTRAs involve continuing treatment activities after construction is
complete.  Groundwater monitoring is an example of an LTRA. The regions annually request
funds from Headquarters for remedial, non-time critical removal, and LTRAs on a site-specific
basis. Regions input cost estimates into CERCLIS, and complete Project Evaluation forms for
ongoing and new start projects with estimated costs of $600,000 or more. The Project
Evaluation forms enable the regions to provide a desired amount of funding, a minimum amount,
and a description of the known hazards present at the site and the impacts of not providing
funding. New construction starts are evaluated by the National Risk Based Priority Panel, a
group of senior Headquarters and regional officials whose analysis is used by management to
make funding decisions

Once the regional information is available, OSRTI and the regions begin discussions about
regional requests and eventually arrive at an initial allocation of funds for each site. Following a
methodology from FY 2002, projects with estimated costs of less than $5 million were generally
funded at the amount requested by  the regions, while the amounts allocated for higher cost sites
represent the amounts mutually agreed to by Headquarters and the region.  OSRTI issued its
initial funding memorandum for FY 2003 on October 30, 2002. OSRTI officials indicated to us
that the allocation of funds is a dynamic process that continues throughout the year. (We found
this to be the case. For example, as shown on enclosures 3 and 4, regions reported not needing
funds they initially requested from OSRTI based on various factors such as delays and being able
to use funds from prior year appropriations.  On the other hand, some sites required and received
additional funds beyond the amounts estimated for FY 2003.)

In addition to funds provided by OSRTI, the regions obligate funds from two other sources.
Funds are obligated from monies provided by States as matching funds for construction activities
and from "Special Account" monies provided by Potentially Responsible Parties (PRPs) in
accordance with Consent Decrees.

FY 2003 Emphasis on Ongoing Remedial Actions

For FY 2003, OSRTI transferred $10 million of pipeline funds to remedial construction.  In its
October 30,2002, memorandum discussing initial FY 2003 funding decisions, OSRTI stated that
"Because of the limited resources available for construction, regions have the discretion to
minimize new Fund-financed remedial investigation/feasibility study (RI/FS) and remedial
design  (RD) work."  OSRTI also revised its deobligation policy to direct that 75 percent of
deobligations become part of the national pool for reobligation.

As with FY 2002, OSRTI emphasized funding ongoing construction over new construction
starts.  For FY 2003,  the National Risk Based Priority Panel considered 35 new start projects and
determined that 9 should receive remedial funds. Of the remaining 26,15 did not receive
remedial funds, and 11 were, according to an OSRTI official, determined not ready for various
reasons, including enforcement issues, changed site conditions, or design complications. Two of

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the sites not receiving remedial funds - Elizabeth Mine in Region 1 and the Washington
Recreation portion of Operable Unit #3 of the Bunker Hill site in Region 10 - did receive
removal and pipeline funds, respectively.

Results of OIG Review

Regional officials told us that they had sufficient funding for the majority of sites for FY 2003.
However, a limited number of removal, pipeline, and remedial action sites did not.  When
funding is not sufficient, construction at National Priority List (NPL) sites cannot begin; cleanups
are performed in less than an optimal manner; and/or activities are stretched over longer periods
of time. As a result, total project costs may increase and actions needed to fully address the
human health and environmental risk posed by the contaminants are delayed.  We estimate that
the FY 2003 funding shortfall was $174.9 million as summarized in the following table.
 : -'/ ];-'' ' y^afegofy'- - - ' .-/'' ',
FY 2003 new start construction projects not funded
FY 2003 remedial projects not sufficiently funded
FY 2003 removal projects not sufficiently funded
FY 2003 pipeline projects not sufficiently funded
Total {difference due to rounding)
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$118.5
$40.8
$9.4
$6.1
$174.9
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- Enclosure-,
3
3
1
2

In analyzing whether funding was sufficient for a given site, we began by asking regional
Superfund officials/Remedial Project Managers (RPMs) whether they developed their estimate
for FY 2003 without consideration of budget limitations (i.e., whether their estimate was based
on the work that needed to be done from an engineering standpoint to address the site in an
optimal way in FY 2003). In response to our questions about how site cleanup estimates are
developed, some regional officials told us that expected budget limitations were a factor in
developing their estimates for FY 2003. Some regional officials informed us that cleanup work
is conducted differently than it was conducted when full funding was available.  Limited funding
forces work at certain sites to be phased and/or scaled back to accommodate available funding.
We then asked regional officials whether the amount obligated was sufficient to proceed  in an
optimal way. Their responses are noted in enclosures 1 through 4 under the Sufficient Funding
column.

We also inquired about 15 sites in greater detail. These sites are summarized in enclosure 5.
For these sites, hi addition to discussing them with regional Superfund officials, we obtained
information such as the nature and extent of contamination and the status of cleanup from
CERCLIS. OIG engineers assisted in our review of these sites and provided their opinion of
whether EPA's funding decisions were appropriate given the unique nature of each site.  We
considered four of the 15 sites to be insufficiently funded for FY 2003.

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Removal Funding

Financial information provided by OSRTI indicated that the regions obligated $128.1million
from the FY 2003 and prior-year appropriations and an additional $32.2 million from State
Superfund contracts and amounts provided by PRPs in response to Consent Decrees for a total of
$160.3 million.  Enclosure 1 lists those removal actions that were not fully funded in FY 2003.

Regions generally reported having sufficient funds to address emergency removals. However,
several regions said that because of the amount of removal funds available to them, they made
decisions to modify the type and extent of the removal, or partially fund sites.  Examples follow:

       *   Region 1 officials said that friable asbestos in buildings on trie Inter Royal site was
          not completely dismantled.  Further work may be needed in the future as the
          buildings degenerate.

          Region 3 reported having sufficient funds for removal actions but stated that it had
          changed its approach for the removal program because of limited funding over time.
          Region 3 now focuses on stabilization of sites (for example, erecting a fence and/or
          enclosing leaking drums to control spread of the contaminant) rather than on complete
          cleanups.

          Region 5 officials reported that three sites requiring removal actions were not
          sufficiently funded - Kip Nelson Properties, Hog Hollow, and the Circle Smelting
          Site. The Circle Smelting site needs a time critical removal action to mitigate the
          threat to public health and the environment from lead contamination at an estimated
          cost of $8.3 million.  However, the Region was only able to obligate a total of
          $1.6 million from appropriated funds and Special Accounts during FY 2003.
          Regional officials also told us that they reduced the extent of cleanup in some time-
          critical removal cases.  For example, a site might be fenced and leaking drums placed
          in sealed containers instead of removing the contaminated soil.

          Regions 6 and Region 7 reported that they were involved with the Columbia Shuttle
          disaster for'approximately three months during FY 2003.  Interviews with Regions 6
          and 7 Removal Team staff indicated that if this had not been the case, they would
          have investigated other sites that probably would have needed removal actions.
          Region 6 officials told us that addressing other removal actions "...  would have
          overwhelmed our removal Advice of Allowance."

Pipeline Funding

Financial information provided by OSRTI indicated that the regions obligated a total of $107.6
million from current year appropriations, prior-year appropriations, State Superfund contracts,
and amounts provided by PRPs in response to Consent Decrees to site-specific pipeline activities
in FY 2003.  As discussed below, the amounts obligated for a limited number of sites were not
sufficient to conduct pipeline activities in the manner considered necessary by regional officials.

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When Regions responded to our questions about the sufficiency of pipeline funding, they
generally said the amounts obligated to specific sites were sufficient for targeted sites for
FY 2003. However, some appeared to base their answers on whether they were able to make
some progress with the funding received. For example, Region 2 considered funding sufficient if
the funding allowed the Region to address the site in a manner the Region described as
"minimally sufficient."  Region 4 officials considered funding sufficient because the work can be
phased (divided into segments) to accommodate available funds spread over as many projects as
possible. Region 7 officials told us that they instructed their RPMs to reduce the scope, phase, or
delay planned activities where possible. As a result, for some sites the Region reduced the
number of samples collected, limited the number of contaminants analyzed, and reduced the
number of monitoring wells installed.  Region 8 officials indicated that the Region cut all
pipeline activities by 10 percent and incrementally funded cooperative agreements at 50 percent
to free up funds for remedial investigation/feasibility studies and remedial design work for NPL
sites. Thus, some regional officials considered funding sufficient within the constraints imposed
by limited funding.

However, some pipeline activities were not sufficiently funded. Enclosure 2 is a list of non-
Federal Superfund sites with funding shortfalls for pipeline activities during FY 2003 totaling
$6.1  million. Examples of funding concerns for pipeline sites follow:

         Region 7 estimated $2.5 million for the Omaha Mining site for FY 2003 but only
          obligated $1  million.  As a result, fewer residences were sampled for lead
          contamination.

         The remedial investigation/feasibility study for the Annapolis Mine site in Region 7,
          estimated to cost $400,000, was not started.

         The RPM for the Libby, Montana site in Region 8 indicated that an additional
          $740,000 was needed to take additional samples, analyze the samples taken, and
          conduct a study to determine a cost-effective method for quantifying the amount of
          asbestos in the soil.

         Region 10 officials told us that pipeline operations were significantly cut for the
          remedial design for the Bunker Hill site and for various community involvement
          projects. For 1he Bunker Hill site, the Region obligated $3.9 million versus its
          estimate of $7.05 million for pipeline activities.

Remedial Funding

Enclosures 3 and 4 list non-Federal Superfund NPL sites for which FY 2003 remedial funding
was requested or obligated.  For FY 2003, OSRTI allocated $224.4 million for site-specific
remedial work.  Considering amounts obligated from the FY 2003 appropriation, prior-years
appropriations, State Superfund contracts, and amounts provided by PRPs in response to Consent
Decrees. Financial information supplied by OSRTI indicated that the regions obligated a total of
$369.3 million during FY 2003.

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To obtain the views of regional officials on the sufficiency of FY 2003 funding, we asked
regional Superfund officials, including RPMs, whether the amount allocated to a site was
sufficient to address that site in an optimal way without consideration of budget limitations.
Generally speaking, the regions reported that there was sufficient funding in FY 2003 for
ongoing remedial construction and LTRA projects.  However, some Regions reported their
decision about sufficiency of funds rested on whether funding was sufficient for site work to
continue as planned, even if phased, without additional delays or work stoppage. Regional
officials consider every LTRA site listed in enclosure 4 to be sufficiently funded for FY 2003.

Specific planned site work and funding was the result of a series of discussions between
Headquarters and the regions.  During these work planning discussions, a number of factors are
considered, such as what sites are the highest priority for funding, what specific site work could
be achieved wilh available funds in the fiscal year, and when the funding is needed. Regions
also told us that because of limited funding, they sometimes "phase" and "scale back" work, do
not start new remedial actions, and experience delays. Phasing is the division of a project into
smaller work elements, which, according to OSRTI, allows more projects to get funded.
However, several RPMs told us that phasing work is not as efficient as up-front funding for
remedial actions. For example, as discussed below, at Region 1's Atlas Tack site, remedial
action work was partitioned into three phases because there was not enough money to fully fund
the site:

          Phase I was the planned work for FY 2002 - if funding was available, the building on
          the site would have been demolished. The cost estimate was $1.8 million, but
          funding was not available.

          Phase II would have occurred during FY 2003, if Phase I was completed in FY 2002.
          Phase II involves cleaning up the site and preparing it for future use. The estimated
       .  cost for this phase is $11.3 million (Region 1 's estimate for FY 2003 was $13.1
          million for Phases I and II). However, the site received no funding in FY 2003.

          Phase III is being designed at this time and will not be ready for funding until
          FY2005. The current cost estimate is $4.3 million.

A Region 1 official indicated that had sufficient funds been available in FY 2002 the work for
Phases I and II could have been completed in 6 to 9 months.

Scaling back site work is the reduction of the amount and extent of the work.  For example, the
RPM for Region 2's Welsbach site stated that this site received the requested funding to excavate
three study areas during FY 2003. However, when digging began at the primary study area, the
contamination was determined to be substantially greater than anticipated.  Since additional
funding could not be obtained, work was scaled back at the primary work site and postponed at
the two other areas. The RPM said that construction delays at this site could increase
construction costs, increase the number of days required for road closures, lengthen the time
required before eight displaced families can move back into their homes, and negatively affect
the ability of a private swim club to stay in business. The Region reported that the delayed
cleanup cannot be associated with an increased health risk at this time.

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We asked regional officials how site estimates were developed.  We were told that RPMs'
requests are generally based on Independent Government Cost Estimates for contractor services
and developed in collaboration with supervisors. Some regional officials told us that they did
consider the limited budget when preparing site estimates. Region 10 told us that estimates were
based on the Headquarters' predicted allocation of the money that would be available during FY
2003. Region 10 officials said that OSRTI informed them in advance that OSRTI would cut
back any requested amounts over $5 million for a particular site due to limited funds. Without
that direction, Region 10 staff we interviewed stated that they would have requested more funds
for the Bunker Hill site.

Our estimate of the remedial funding shortfall for FY 2003 is comprised of sites where
construction could not begin and sites with ongoing construction where the need exceeded
available funds. Following are the sites where construction activities were ready to begin but no
funding was available because the sites were not ranked high enough by the National Priority
Panel.
V- ' ' "1
Region ,
1*
1
1*
1
5*
5
6
6
6
6
10

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Massachusetts
New Hampshire
Vermont
New Hampshire
Indiana
Illinois
Louisiana
New Mexico
Texas
Texas
Oregon
Total
Mafeft NndM In FY '2X*3 = " '':
Atlas Tack
Mohawk Tannery
Elizabeth Mine
New Hampshire Plating
Continental Steel
Jennison Wright
Marion Pressure Treating
North Railroad Ave. Plume
Hart Creosoting
Jasper Creosoting
McCormick and Baxter

- - fo?30$i$$&: "
' estimate (mli&nsji
$13.1
6
8
3.5
39.1
12.5
9
6.5
9.9
6.2
4.7
$118.5
NOTE: site involves multiple operating units

In addition, some sites received less funding than the region requested or, in the view of regional
officials, were not sufficiently funded. Some examples of sites not sufficiently funded are:

          The Bunker Hill site in Region 10 - The Region estimated $37.8 million and
          obligated $15.0 million. The entire shortfall involves Operable Unit #3. The impact
          of reduced funds for the Bunker Hill site is associated with risk to human health,
          particularly for young children and pregnant women, from lead contamination in a
          residential area. The future costs are expected to increase as work is delayed.

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          The Roebling Steel site in Region 2 - The Region requested $5 million from OSRTI
          to demolish a building with asbestos during FY 2003. When OSRTI did not provide
          the funds, the Region looked to other sources and obligated a total of $4.3 million
          from prior year deobligations and State Superfund contracts in September 2003.
          However, because funding was not available earlier, demolition could not begin in
          FY2003. '

          The Welsbach site in Region 2 - Region 2 obligated a total of $20.5 million but the
          RPM told us that the extent of contamination was greater than expected and work was
          scaled back at the primary work site and postponed  at other areas. The RPM
          estimated an additional $7 million were needed for FY 2003.

          The Libby Mine site in Region 8 - Region 8 officials discussed the Libby, Montana
          site, anon-time critical removal, that poses a cancer health threat to residents in the
          towns of Libby and Troy. The region requested funds for operable units involving the
          town of Libby, the town of Troy, and the mine itself (Libby Mine). Funding was
          obtained for the Libby operable unit, but not for Troy or for the Libby Mine. Region
          8 officials indicated that the Region could have used another $3.7 million. The
          additional funds would have enabled the Region to analyze more samples to help
          characterize the site and to conduct a study to determine how clean the site should be.

          The Upper Tenmile Creek site in Region 8 - Region 8 obligated $3.8 million but the
          RPM indicated mat an additional $1.3 million was needed to clean up two additional
          areas and begin installation of an alternate water supply and treatment system.

The request letter also asked that we provide expenditure data by date and the unobligated site
balances at the end of FY 2003.  Enclosure 3 contains this information for the two sites in each
region with the highest total obligations in FY 2003. Because of the volume of data involved, we
are providing this information for other sites on the enclosed disk.

High Cost Sites

Enclosure 5 summarizes the work conducted for a limited number of sites with large estimates of
overall costs. We judgmentally selected these sites based on information included in our
October 25,2002, letter on FY 2002 funding. Our selection was primarily based on sites with
high overall project costs with comparatively low total obligations at the end of FY 2002.  We
focused on these sites to inquire in greater depth about how the region arrived at its estimate for
FY 2003 and whether,  in our opinion, the amount requested appeared appropriate to address
these site in an optimal way in FY 2003. For these sites, in addition to discussing them with
regional Superfund officials, we obtained information such as the nature and extent of
contamination and the  status of cleanup from EPA's Superfund information system, CERCLIS.
OIG engineers assisted in our review of these sites and provided their opinions of whether EPA's
funding decisions were appropriate given the unique nature of each site. In summary, we

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identified funding concerns for 4 of the 15 sites reviewed - the Welsbach site in Region 2,- the
Upper Tenmile Creek and Libby sites in Region 8, and the Bunker Hill site in Region 10. These
sites are discussed above and in enclosure 5.

In analyzing funding for remedial action sites, we noted that the demands of a limited number of
high-cost, complex sites limit OSRTTs ability to fully fund all ongoing sites and new starts. For
example, approximately half of the FY 2003 Remedial AOA funding for remedial action, non-
time critical removals, and LTRAs went to 8 sites out of a total of 94 sites receiving funding. In
addition, the funding demands for some sites will grow.  For example, the RPM for the New
Bedford site in Region 1 indicated that the site will require at least $15 million per year
beginning in FY 2004 but could need as much as $80 million per year for optimal cleanup. The
RPM for the Woolfolk Chemical site in Region 4 indicated that if funding of an estimated
$25 million is not available over the next 2 to 3 years there could  be increased risk to human
health and the environment from the  continued migration of contaminants to the groundwater.
Such high-cost sites, in addition to sites discussed above such as Continental Steel that did not
receive any funding in FY 2003, will continue to pose significant funding challenges for EPA.

Scope and Methodology

We interviewed OSRTI and regional officials, including RPMs, about the FY 2003 process for
funding Superfund sites and reviewed documentation relating to FY 2003 funding. During the
interviews, we asked regional officials if they prepared cost estimates for sites without
considering budget limitations and whether the funding available to them was sufficient to
address sites in an optimal way for FY 2003. To calculate funding shortfalls, we verified with
regional officials and RPMs those sites they had designated as insufficiently funded and
confirmed with them our estimate of shortfall. We also asked regional officials whether not
obligating funds until late in the fiscal year limited the amount of site cleanup activity.

For the financial information in enclosures 1 through 4, we relied on information supplied by
OSRTI and regional Superfund officials.  To obtain the desired financial information by site,
special queries of EPA's Integrated Financial Management System were developed for us by
OSRTI and financial management officials. Prior to giving the information to us, OSRTI
corrected errors and modified certain data to meet our reporting needs. Given time constraints,
we were not able to test whether the queries extracted the data in the manner desired. Further,
because unique queries were developed, we were not able to rely on the transaction testing
conducted during our audit  of EPA's financial statements.  However, prior to finalizing this
letter, we asked regional officials to confirm the accuracy and completeness of the data provided
for the information appearing in enclosures 1 through 4 which they did.

In addition to the above limitation, we did not test the controls governing certain activities, such
as the work of the National  Risk Based Priority Panel, or the process used to deobligate and
reobligate funds.  For theses reasons, our work does not represent an audit conducted in
accordance with Government Auditing Standards.
                                          10

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Because of OSRTTs emphasis on remedial action funding during FY 2003, enclosures 3 and 4
contain obligation information for all sites with FY 2003 extramural obligations. However,
given the volume of data involved, enclosures 1 (removal) and 2 (pipeline) only list those sites
with ah identified funding shortfall for FY 2003.  Information on other sites is included on the
enclosed disk.

To answer the questions in the attachment to your request letter, we obtained information from   >
OSRTI and regional officials in writing and through interviews.  This information is provided in
enclosures 6 through 11.

As I'm sure you are aware, the Conference Committee on the FY 2004 Omnibus Appropriations
Act directed the OIG to conduct an evaluation of how to increase cleanups and reduce
administrative costs within the Superfund program.  This will provide yet another opportunity for
the OIG to provide the Congress with additional information on the Superfund program. We
plan to begin this work early in 2004.    

If you or your staff have any questions, feel free to call me on (202) 566-0847, or Eileen
McMahon, Assistant Inspector General for Congressional and Public Liaison, on
(202) 566-2546.

                                              Sincerely,
                                              Nikki L. Tinsley
Enclosures
                                          11

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                 Listing of Enclosures
 1   Non-Federal Facility Sites with Removal Funding Shortfalls for FY 2003



 2   Non-Federal Facility Sites with Pipeline Funding Shortfalls for FY 2003



 3   Non-Federal Facility Fund-financed Remedial Actions - FY 2003



 4   Non-Federal Facility Fund-financed Long-term Response Actions - FY 2003



 5   Summary of Sites Selected for Focused Review by OIG



 6   OIG Response to Attachment Question 1



 7   OIG Response to Attachment Question 2



 8   OIG Response to Attachment Question 3



 9   OIG Response to Attachment Question 4



10   OIG Response to Attachment Question 5



11   OIG Response to Attachment Question 6

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                                              Enclosure 5
                                              Page 1 of 6
Summary of Sites Selected for Focused Review by OIG
-'*'' '.'' ** , ,-'',''-'' ;V ',/^ew'dft>MMl|"- ^  . "<: v';,: A'^ ,
Location/Region
Description of Site
FY 2003 Funding Information
OIG Comments on
Adequacy of FY 2003 Funding
Vineland, New Jersey / Region 2
Added to the NPL in 1984. This facility manufactured arsenic-based
herbicides. Arsenic contaminated the soils, groundwater, and
nearby river and lake.
Region 2 requested $10 million in remedial action funds for FY
and obligated a total of $8 million.
According to the RPM, actual costs were less than anticipated
funds were deobligated from this site for use at the Federal
Creosote site. Funding was sufficient for FY 2003.
2003
and

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Enclosure 5
Page 2 of 6
>V , - ;'/!-; '',-- V^WsJwq^-^TOralOasWanW -'/''-: ' ''' '-'"'' "V \'
Location/Region
Description of Site
FY 2003 Funding Information
OIG Comments on
Adequacy of FY 2003 Funding
Camden and Gloucester City, New Jersey / Region 2
Added to the NPL in 1996. Facilities at this site manufactured gas
mantles using thorin, a radionuclide that emits gamma radiation
during decay.
Region 2 requested $15.7 million in remedial action funds for
FY 2003 and obligated $20.5 million.
Despite obligating more funds than estimated, the RPM stated that
funding for this site was not sufficient. The extent of contamination
was greater than expected. As a result, work was slowed down
during FY 2003 at the primary work site and postponed at other
areas. The RPM estimated an additional $7 million was needed for
FY 2003. Funding was not sufficient for this site.
/-' ;.,'/'',<', ,;. -'-".,'/'.:' :,. ,..'../ .;,A*er1^ftCiBoaote,', , \. ,' -" / " ''/' * ' '
Location/Region
Description of Site
FY 2003 Funding Information
OIG Comments on
Adequacy of FY 2003 Funding
Pensacola, Florida / Region 4
This wood treating facility was added to the NPL in 1983. Major
contaminants in the soil, sediment, and groundwater included
Volatile Organic Compounds and dioxin.
Region 4 initially requested $3 million in remedial action funds for
FY 2003 and obligated $300,000.
Community disagreement concerning the site's future use
prevented planned remedial actions from occurring. Region 4
expects to implement remedial action activities in 2004/2005
consistent with the future use of the property. The site was not
impacted by funding concerns in FY 2003. According to the RPM,
the site does not present an immediate danger to human health.
FY 2003 funding was sufficient.
                       I

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Enclosure 5
Page 3 of 6
, -"-'-' '"-' ,"' ''V -' ' ' - '^temaf&Evaas '-' ' ',/ : , ' ; ''-:, / ' ''- :l /' J;
Location/Region
Description of Site
FY 2003 Funding Information
N
DIG Comments on
Adequacy of FY 2003 Funding
Whitehouse, Florida / Region 4
This wood preserving facility was added to the NPL in 1983. Soil,
sediment, and shallow groundwater in the residential area adjacent
to the site was found to be contaminated with dioxin.
Region 4 requested $4.9 million in remedial action funds for
FY 2003 and obligated a total of $21 million.
The RPM indicated that more funds were needed than originally
estimated to address a three-fold increase in the volume of
contaminated soil and for the settlement of a contract dispute
involving $13 million. FY 2003 funding was sufficient for this site.
//-',; "'" \ ''.',. -,'''"'. ',-'>' ,',- Tower Chemfcal / ,'>,'- ; , ''*',/,","'' ' "' -
Location/Region
Description of Site
FY 2003 Funding Information
OIG Comments on
Adequacy of FY 2003 Funding
Lake County, Florida / Region 4
This abandoned pesticide manufacturing facility was added to the
NPL in 1983. The site is located in a mixed agricultural, industrial,
and residential area. . High levels of DDT and other contaminants
were found at the main facility. Groundwater plumes of pesticides
and other organic contaminants exist on site.
Region 4 requested and received $400,000 in remedial funds but
the site was not ready for remedial action. Instead, Region 4
obligated $500,800 of pipeline funds during FY 2003.
The RPM indicated that funding was not a concern at this site for
FY 2003. Technical problems and characterization of the
contaminants must be done before the remedial action can
proceed. Work will be funded from State Superfund contract funds.
FY 2003 funding was sufficient.
;-";' '*;:-A',/ '"-XV-: /-'*oQowiiwi-: '''--V -,:/'>'>- ' '\ '.-';/:
Location/Region
Description of Site
FY 2003 Funding Information
OIG Comments on
Adequacy of FY 2003 Funding
Fort Valley, Georgia / Region 4
This facility, which manufactured pesticides, herbicides, and
insecticides, was added to the NPL in 1990.
Region 4 requested and obligated $1.3 million in FY 2003.
According to the RPM, funds were sufficient to resolve problems
with the groundwater treatment facility and for determining the
extent of the plume to be treated. Delays were due to negotiation
and litigation with PRPs and not to lack of funding. FY 2003 funding
was sufficient.

-------
Enclosure 5
 Page 4 of 6
; .,, ' .,/-' .,.'.,.-. :\ > ;s *v;, , -/-- 'vi*ie ,1^0** - - ;:; Y'Y Y \., ' '"\ , ';;< \
Location/Region
Description of Site
FY 2003 Funding Information
OIG Comments on
Adequacy of FY 2003 Funding
Ottowa County, Oklahoma / Region 6
This site, which represents multiple mining facilities, was added to
the NPL in 1983. The primary pollutants are lead, cadmium, and
zinc.
For FY 2003, Region 6 requested $5 million
$7.7 million.
and obligated
FY 2003 funding was sufficient.

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Enclosure 5
Page 5 of 6
"" \; '"'"''- " "*""-; ,;;, : u^i&w&&t&& - ; ,'''-,;' ' V- v'
Location/Region
Description of Site
FY 2003 Funding Information
DIG Comments on
Adequacy of FY 2003 Funding
Helena, Montana / Region 8
A mining area affected by lead and arsenic contamination. The
primary focus of remedial action is the cleanup of waste in close
proximity to the water source.
Region 8 requested $ Smillion and obligated $3.7 million in FY
2003.
The RPM indicated additional funds were needed. The additional
funds could have cleaned up two additional areas, and began the
installation of an alternate water supply and treatment system.
FY 2003 funding was not sufficient. The RPM further indicated that
the Record of Decision, which contains a 10-year time frame for
cleanup, was impacted by limited funding. The RPM stated the
work could be completed sooner if additional funds were available.
^v;v ;: ''/,, '^ /, <:, - ::', -,:- Vuw* ',/', ''',';-: :) .-:-' ' - ,\ :/!
Location/Region
Description of Site
FY 2003 Funding Information
OIG Comments on
Adequacy of FY 2003 Funding
Libby, Montana / Region 8
This is a large removal action being funded with remedial funds.
Primary concern at this site is the cancer risk from exposure to
asbestos.
Region 8 obligated $19.4 million during FY 2003.
According to the RPM, funding is not sufficient to address all
operable units and completely characterize site conditions. Work
was "scaled back" at this site. Instead of analyzing all the samples
collected, EPA analyzed the minimum number to gain an
understanding of site conditions. FY 2003 funding was not
sufficient at this site.
-'- ;,/' ^; ':' ' ''/>'*, <'" - ? - ' \ - -1 , 1j*d)d&Sim* ' "''; -" - '"'-', ' /;, 	 ':' '' : ; ''- =
Location/Region
Description of Site
FY 2003 Funding Information
OIG Comments on
Adequacy of FY 2003 Funding
Maricopa County, Arizona / Region 9
Site was added to the NPL in 1983. Numerous industrial facilities
disposed of industrial solvents directly onto the ground or in dry
wells contaminating the soil and groundwater
Region 9 requested and obligated $135,000 in FY 2003.
Majority of costs will be borne by the PRP. The PRP has signed a
Consent Decree to pay $129 million of the $140 million estimated
costs. FY 2003 funding was sufficient.

-------
Enclosure 5
Page 6 of 6
'/". "'"''',. "' /'-,' , ' JrWlSfotintaie Wise ' --';",' , ','/'<' ' '>:' '
Location/Region
Description of Site
FY 2003 Funding Information
01G Comments on
Adequacy of FY 2003 Funding
Shasta County, California / Region 9
Site was added to the NPL in 1983. Mine runoff has contaminated
nearby water bodies with heavy metals.
Region 9 requested and obligated $5 million in FY 2003.
PRP has signed Consent Decree to pay $862 million of the total
estimated costs of $880 million. Remedial action work is almost
complete. FY 2003 funding was sufficient.
,-'',', T' -% '' ' ;" "-'-"*. /' fitaflfcHiiSr" ''' ':.-;''. """;/' "- -
Location/Region
Description of Site
FY 2003 Funding Information
OIG Comments on
Adequacy of FY 2003 Funding
Northern Idaho / Region 10
This abandoned lead zinc mine and smelter in Kellogg, Idaho was.
added to the NPL in 1983. Major contaminants in the soil,
sediment, and water include lead, mercury, zinc, antimony, and
arsenic cadmium. The site includes a 21 -square-mile area called
"The Box" and the downstream area called "The Basin."
Requested $42,250,000 in remedial action funds and obligated
$15,081,219.
According to the RPM, funding at a reduced level ($15 million)
delays the cleanup significantly. Compared to full funding, the lower
funding level adds one additional year for cleanup of Box properties,
four additional years for cleanup of Basin properties, seven
additional years for cleanup of recreation areas, and a
postponement of ecological projects until 2007. FY 2003 funding
was not sufficient.

-------
                                                                        Enclosure 6
                                                                         Page 1 of 3
               OIG Response to Attachment Question 1
Question I - According to reports in the trade press, &e Ssperfund program director, Nike
Cook, informed ihe NAC-BPT Committee that the shortfall in Stjpeifid funding would exceed
$200: million in PV 2002 and continue 10 grow in ftiura years. Your October 25,2002, report  -
identified seven NH< sites where funding shortfalls totaling $9LS Trillion prevented cleanups
Irorn beginning and an additional shortfall of $17 million for long-term response actions. Th&
report also identified folk sites that received partial funding but had a shortfall from the needed
amount                                                                            *

Can you recbpeiJb 1fce difference between Mr, Cook's projection and yor findings in ihs
October.25,2062, report? Pees Hie factlfeat some sites received only partial funding for
remedial actions, or the fact thai your report did not cover funding for remedial design or remedial
investigation and Feasibility studies>account for soate or all of the differential^

OIG Response - According to Mike Cook, Director of the Office of Site Remediation and
Technology Innovation (OSRTI), the difference was due to the universe of projects being
discussed. He described his reference to a "$200 million shortfall" as a "planning estimate"
which included (1) FY 2002 funding needs for the seven sites cited in the OIG's October 25,
2002, letter; (2) FY 2003 and FY 2004 funding needs for those projects where the FY 2002 need
represented only the initial increment of funding; and (3) construction projects at other NPL sites
that were initially considered for funding during FY 2002 but experienced schedule delays and
subsequently were not ready to proceed by the end of FY 2002.  Neither Mr. Cook's estimate of
the funding shortfall nor the OIG's October 2002 letter discussed funding shortfalls for remedial
design or remedial investigations and feasibility studies.

An OSRTI official indicated that OSRTI did not  prepare detailed support for Mr. Cook's
estimate at the time. In response to our questions, the OSRTI official provided the following
information as a "rough frame of reference" for the estimate.  We added information on the
amount obligated during FY 2003 to provide understanding on the extent to which site needs
were addressed in FY 2003.

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                                                                               Enclosure 6
                                                                               Page 2 of 3
j. '-^,-r, ,4 ,.,,_;- 'sHeNsftte ;' '"' , """ '" :< ':
,--,.. - /, ,,/ - * .r,: fegtori*$&i} :.., ..".. '-; ',' / ' .: ]
GSRTtCost
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ArnoantOtJligated
"', iHF"r20Q3
- i$$r$) / -
Sites Reported by DIG That Did Wot Receive Any FY 2002 Funding
Atlas Tack - Phase 1 (Region 1- Massachusetts)
Elizabeth Mine (Region 1 - Vermont)
Jennison Wright (Region 5 - Illinois)
Continental Steel (Region 5 - Indiana)
Central Wood (Region 6 * Louisiana)
Hart Creosoting (Region 6 - Texas)
Jasper Creosoting (Region 6 - Texas)
$13
15
10
28
9
10
6
$0.0
0.0
0.0
o.o
7.2
0.0
0.0
Sites Needing Additional Funding in FY 2003/2004
Chemical Insecticide (Region 2 - New Jersey)
American Creosote (Region 4 - Florida)
Alaric (Region 4 - Florida)
Solitron (Region 4 - Florida)
Trans Circuits (Region 4 - Florida)
Aircraft Components (Region 5 - Michigan)
Hudson Oil (Region 6 - Oklahoma)
Sprague Road (Region 6 - Texas)
10th Street (Region 7 - Nebraska)
Upper Ten Mile Creek (Region 8 - Montana)
Basin Mining (Region 8 - Montana)
Frontier Hard Chrome (Region 10 - Washington)
$20
3
2
2
1
4
5
4
1
4
3
4
$7.3
0.3
1.7
0.5
1.0
4.3
4.8
4.2
1.2
3.8
2.6
6.5
FY 2002 Sites Not Ready for Construction
Vasquez Boulevard/VB I-70 (Region 8 - Colorado)
Davenport & Flagstaff (Region 8 - Utah)
Roebling Steel (Region 2 - New Jersey)
Eureka Mills (Region 8 - Utah)
Atlas Tack - Phase 2 (Region 1 - Massachusetts)
Totaf Estimated Needs > -
$16
9
12
28
5
$214
$0.0*
0.0*
4.3
7.2
0.0
$56.9
* These sites received pipeline funding in FY 2003

-------
                                                                           Enclosure 6
                                                                           Page 3 of 3
According to an OSRTI official, the second group of sites above - Sites Needing Additional
Funding in FY 2003/2004 - represent remedial construction projects started in FY 2002 that
required additional funding in subsequent years.  The cost estimates reflect the regions' estimate
of need for these projects as reflected in OSRTI's initial FY 2003 funding decision of
October 30,2002. According to OSRTI, additional funding for the Chemical Insecticide Site is
planned for FY 2004.

Concerning the sites listed in the FY 2002 Sites Not Ready for Construction category, the OSRTI
official indicated that these five sites were reviewed by the National Risk Based Priority Panel.
The regions subsequently  determined that these sites were not ready for remedial funds in
FY 2002.  For example, our October 25,2002, letter indicated mat a delay in signing the Record
of Decision for the Vasquez Boulevard site delayed construction.

-------
                                                                        Enclosure 7
              OIG Response to Attachment Question 2

Question 2 - Please identify each site in FY 2002 where funds were obligated* the date and the
amount of obligation, and each site where funds were actually expended in FY 2062 and the date
stid amount of expenditures. Also indicate for each site the amount of obligated fiutds which
were not expended in FY 2003.  Please indicate if each site is o target with, the timeline set forth
iathe Record of Decision:

OIG Response - The charts on the following pages show the date and amount of obligations for
non-Federal Remedial Action and Long-term Response Action sites considered for funding in
FY 2002. The charts show the amount obligated and the date for FY 2002 obligations as well as
the total expenditures for FY 2002 and the corresponding year of obligation. The information
provided is only for those sites identified in our October 25, 2002, letter.  OSRTI records show
expenditures for other remedial action and LTRA sites that did not have obligations during
FY 2002.

The OIG has not independently verified the FY 2002 obligation and expenditure information
supplied by OSRTI officials. Information on obligated funds not expended at the end of
FY 2003 for certain sites are in enclosures 1 through 4. The remaining data is included on the
enclosed disk. Information on the sufficiency of FY 2003 site-specific funding is presented on
pages 4 through 10 of this letter.

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                                                                         Enclosure 8

               OIG Response to Attachment Question 3

Question 3 - In your October 25,2002* report you reported that Hie final need was the same as or
equal to the total amount obligated for FY 2002 at many sites where it was significantly less than
the initial requested amount Please provide any documentation that substantiates the EPA
claims and identify where there were discrepancies between the information you received from
the remedial project ruaaagers and Headquarters,

OIG Response - Our October 25, 2002, letter stated that Office of Emergency and Remedial
Response officials (now OSTRI) indicated to us that managing uncontrolled hazardous waste
sites is inherently uncertain in nature, and site funding needs change frequently based on dynamic
site conditions (see page 2 of our letter). In analyzing the financial information obtained in
preparation for our October 2002 letter, we noted that EPA had obligated funds for certain sites
well above the amount requested at the start of FY 2002. In contrast, some sites, for which funds
were originally requested, received  no funding at all. For example, Region 1 originally requested
$10,000,000 for the New Bedford site for FY 2002, but by the end of the fiscal year had
obligated $22,008,211, the majority of which came from available funds supplied by  PRPs in
accordance with Consent Decrees.  Also, Region 6 initially requested $9,880,000 for the Hart
Creosoting site but did not receive any funding for this site. OSRTI officials told us that amounts
tiie regions request for sites at the beginning of a fiscal year are "planning estimates." Thus, the
question arose for the OIG as to what EPA's "real funding need" was for each of the  remedial
and LIRA sites during FY 2002.

To provide some perspective on this issue, at the end of our field work we asked regional
Superfund officials to provide the final FY 2002 need for each site. We asked regional officials
to indicate an amount for "Final Site Need for FY 2002" on our spreadsheets which became part
of our working papers. Given time  constraints, we did not request any other supporting
documentation. The information provided by regional officials is reflected in the column
"Final Site Need for FY02" in enclosures 1 and 2 of our October 25,2002, letter.

During our review, an OSRTI official indicated that he disagreed with Region 5 on the amount
needed for the Continental Steel Corporation site.  Region 5 indicated that its final FY 2002 need
was $28.5 million. According to a Region 5 official, this estimate reflected the operating
"ground rules" for the Superfund program that a region receives the full Federal share for new
construction starts. The OSRTI official maintained that the Region did not need all $28.5 million
in FY 2002 given the multi-year nature of this proj ect. That official maintained that the site
could be addressed by allocating approximately $10 million per year over a 3-year period. The
Region 5 official agreed that all $28.5 million would not have been spent in the first year of
construction but did not believe that the "ground rules" had been changed to support an
incremental funding approach. The Region 5 official added that the danger with incremental
funding is that future funding may not be available when needed to complete the project.

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                                                                        Enclosure 9
                                                                        Page 1 of 5
              OIG Response to Attachment Question 4
Question 4 - Please' describe^he budget fonmifeition and funding process for FY 2003 for :
Superfoncl activities, focusing on remedial investigation, remedial design, remedial construction,
and iong-teira response actions. Please describe the budget formulation and funding process for
FT 2<>92 for these same activiiiesv Please describe any changes to the budget and funding
process fromJFY 2002 to FY 2003, Please provide any background docantentation ancl jnemos>

OIG Response - OSRTI provided the following information:

EPA manages the allocation of Superfund resources using an AOA structure. For the remedial
program, response resources (exclusive of payroll, travel and working capital fund) from the
Superfund appropriation are placed in two AOAs.  The Remedial Action AOA provides
resources for remedial action construction, non-time critical removal construction, LTRAs
(e.g., ground water restoration), and five-year reviews scheduled to be performed during the year.
These actions are taken at sites on the Superfund NPL. The Pipeline Operations AOA provides
resources for a wide variety of program activities including site assessment, remedial
investigation/feasibility study, remedial design, oversight of responsible party cleanups,
community involvement (including technical advisor grants), State involvement, and contracts
management. The budget and funding process varies significantly for each AOA.

FY 2003 Budget and Funding Process

Remedial Action AOA

The resources planning and management process for Superfund cleanup construction projects is
an ongoing effort throughout the fiscal year.  Resources for construction projects are provided
from the Remedial Action AOA and from the deobligation of unexpended funds from prior
years. The highest priority for funding is given to "ongoing" projects with resource needs,
including ongoing construction projects with resource needs to maintain progress or achieve
completion, LTRA, and five-year reviews scheduled to be performed during the year.  After
ongoing construction needs are met, any remaining resources from the Remedial Action AOA
and deobligations are allocated to sites where new cleanup construction projects are ready to
proceed.

EPA began the Remedial Action funding process for FY 2003 during July/August 2002. A work
planning memorandum was issued to the EPA Regional Offices on June 28,2002.  The
memorandum asked the Regions to identify funding needs for ongoing remedial actions and
LTRAs and for five-year reviews.   The memorandum also requested that the regions

-------
                                                                         Enclosure 9
                                                                         Page 2 of 5
complete project evaluation forms for each ongoing remedial action project and each LTRA  .
project (with an estimated annual cost exceeding $600,000) requiring funding during FY 2003.
These forms were intended to provide a brief description of the project and the projected resource
need for the year. Using the project evaluation forms as well as reports pulled from the
Superfund information management system, CERCLIS, initial resource requests for ongoing
construction projects were identified, as well as candidates for new start construction expected to
be ready to begin work during the fiscal year that the Region planned to present to the National
Risk Based Priority Panel (see description below).  A conference call was subsequently
scheduled with each Region to review their funding request for each site/project.  These
discussions confirmed the resource estimates, the timing (fiscal quarter) when resources were
needed, and whether other sources of funding were potentially available for the site/project (e.g.,
reimbursable resources from State cost share payments or responsible party settlement
resources).  A preliminary estimate of potential deobligations also was obtained from each
Region. Most ongoing projects require a relatively small amount of funding and are readily
approved at the amount requested by the Regional Office, while the larger, higher cost projects
undergo a more detailed review. Factors considered in this review include the specific scope,
status, and resource needs of the project, the total resource needs for all cleanup projects, the
available budget for cleanup construction work from the Superfund appropriation, and other
potential sources of funding. The goal of the program is to provide the resources required to
maintain cleanup progress during the year.  This allocation may be less than the amount initially
requested by the Regional Office.

Concurrent with the work planning process, senior managers in EPA Headquarters, in
consultation with the Superfund Directors in the Regions, considered options for increasing Hie
available funding for cleanup construction. After extensive deliberations, a decision was made to
transfer $10 million from the Pipeline Operations AOAto the Remedial Action AOA.  In
addition, the Superfund deobligation policy was revised to direct a larger portion of deobligation
resources to the National Deobligation Pool for construction funding. These adjustments were
required to meet the growing need for resources for cleanup construction.

The FY 2003 Remedial Action AOA funding level, the Superfund deobligation policy, and the
initial funding plan for ongoing remedial action needs were issued in a memorandum to the
Regions on October 30,2002. The Remedial Action AOA was tentatively set at $230 million
(subsequently reduced to $227.8 million based on the final appropriation received from Congress
and the proposed Agency Operating Plan).  The deobligation policy was set with  25 percent of
the resources retained by the Regions for regional priorities and 75 percent returned to
Headquarters for national priorities, including funding for remedial action needs.  Deobligation
resources returned to Headquarters are placed  in a reserve account called the National
Deobligation Pool and remain available through the year until reprogrammed back to a Region
for a specific project. The initial funding plan designated over $220 million from the Remedial
Action AOA for more than 180 projects with ongoing funding needs (including cleanup
construction projects, LTRA's and five-year reviews).

-------
                                                                           Enclosure 9
                                                                           Page 3 of 5
Resources were provided to the Regional Offices as funding became available during Hie
continuing resolution periods and after enactment of the appropriation, largely in accordance
with the funding plan.  During the course of the year, the Regional Offices refined their project
needs as cleanup work progressed in the field, and EPA Headquarters adjusted the initial
allocations as needed.  A comprehensive review was conducted at mid-year and a revised plan
reflecting the updated regional needs was issued on June 5, 2003. Resources were issued in
accordance with the plan over the remainder of the fiscal year.

Concurrent with the work planning process for ongoing projects, EPA Headquarters asked the
Regional Offices to submit new start construction project candidates for consideration by the
National Risk Based Priorities Panel.  EPA established this Panel to review and evaluate
Superfund cleanup construction projects that are expected to be ready to proceed during a fiscal
year.  The Panel is comprised of national program experts from each EPA Regional Office and
Headquarters. The panel uses the following factors to evaluate each project:

          Risk of human exposure;
          Stability of the contaminant;
          Characteristics of the contaminant, including concentration and volume;
          Ecological risk; and
          Program Management considerations, such as whether (1) innovative technologies
          can be  employed, (2) design is complete, (3) the State's share of cleanup costs is
          available; (4) environmental justice concerns are present, and (5) economic
          redevelopment may occur.

Each factor receives a score of from 1 to 5 and the project's overall score is arrived at by adding
the raw scores multiplied by the weight of each factor.  For FY 2003,35 projects were reviewed
by the Panel.

New start construction projects are funded depending on the availability of resources.  Priorities
are set based on the relative risk posed by the site as determined by the Panel, and the potential
for achieving construction completion.  Based on a projection of available resources, largely from
the deobligation of unexpended prior year resources, EPA designated 11 projects to receive
construction funding during FY 2003.  (OIG Note: one of the projects received removal funds
and another project received pipeline funds.)

Pipeline Operations AOA

EPA Headquarters and the Regional Offices engage in a work planning process for
Pipeline AOA resources, but the critical difference is that Pipeline resources are not
allocated to the Regions on a site/project-specific basis. For FY 2003, the Pipeline Operations
AOA funding level was initially set at $190 million (after $10 million was shifted to the
Remedial Action AOA to augment the construction budget).  Similar to the Remedial Action

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                                                                       Enclosure 9
                                                                       Page 4 of 5
AOA, Pipeline funding was subsequently reduced to $187 million following enactment of the
Superfund appropriation.

The Pipeline Operations AOA resources are distributed among the Regions based on the Pipeline
Allocation Model. A portion of the allocation is based on historical allocations and the
remaining portion is based on a work-based scoring system. The work-based scoring system
contains such factors as the number of completed actions, ongoing actions, and planned actions.
Weights are assigned to the categories and differ depending on whether (1) the action will be
funded with Federal funds or by the responsible parties, (2) the site is considered a mega site, or
sites with estimated costs of $50 million or more, and (3) the site is on the NPL. The various
weights are used to calculate a work-based amount for each region. For FY 2003, the work
planning memorandum issued to the Regions on August 12,2002, provided general guidance
regarding OSRTI's projections of the funding mat would be available to the Regions through the
Pipeline Operations AOA. Using this information, each Region planned for the use of its budget,
entering its planned obligations and accomplishments for certain actions (e.g., remedial
investigations/feasibility studies, remedial design, and oversight) into CERCLIS/WasteLAN.
Pursuant to work planning discussions conducted during October/November 2002, EPA
Headquarters refined resource allocation projections based on the Pipeline Allocation Model and
Regions finalized their planned accomplishments in CERCLIS/WasteLAN. As a result of
uncertainties due to the appropriation continuing resolutions, delays in obtaining an Agency
Operating Plan, and concerns regarding the availability of funds for construction, Headquarters
finalized its decision for distributing the Pipeline Operation AOA in April 2003.

FY 2002 Budget and  Funding Process

The Remedial Action AOA planning and resource allocation process for FY 2002 was  largely Ihe
same as described above. The methodology for allocating Pipeline AOA resources in FY 2002
was also substantially  similar to that of FY 2003.

Process Changes from FY 2002 to FY 2003

Process changes from  FY 2002 to FY 2003 include the following:

  The Remedial Action AOA was increased by $10 million for FY 2003 and the Pipeline
   Operations AOA reduced by $10 million to address the increased need for cleanup
   construction funding. This decision, as well as the decision on the deobligation policy, was
   reached after extensive consultation with the regional Superfund Division Directors.

  The Superfund deobligation policy was revised for FY 2003 to allocate a higher percentage
   of regional deobligations for cleanup construction to the national deobligations pool. This
   allocation was increased from 50 percent for FY 2002 to 75 percent for FY 2003. 

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                                                                         Enclosure 9
                                                                          Page 5 of 5
  For FY 2003, work planning discussions between OSRTI and the regions for cleanup
   construction were done separately from the work planning discussions on all other program
   activities. In prior years, construction resource discussions between OSRTI and the regions
   took place during the first quarter of the fiscal year as part of the work planning sessions.
   Because the construction resource discussions for FY 2003 began in the summer of 2002,
   OSRTI and the regions were able to conduct a more thorough review of regional needs.
   Because these discussions took place sooner than in prior years, OSRTI was able to issue its
   initial funding plan early in the fiscal year - on October 30,2002.

  Although not a change in policy, OSRTI issued a memorandum to the Regions on
   September 20, 2002, reinforcing the need to explore all enforcement options prior to.
   proceeding with a fund-financed cleanup construction project.  The memorandum was
  released during FY 2002, but had its most practical affect during FY 2003.

  The Pipeline Allocation Model was adjusted for FY 2003, including giving greater weight to
   the number of pipeline actions completed in the prior year and giving more money to those
   regions that met or exceeded 80 percent of their planned starts for the previous fiscal year.

  The extended Continuing Resolution periods during FY 2003 resulted in increased control
   over the allocation of funds to the Regions from both the Pipeline operations and Remedial
   Action AOAs to ensure critical needs could be met within the limited cash flow of
   Continuing Resolution funding. Because each Continuing Resolution lasted for a specified
   period of time and only allowed a limited amount of funding to be used, OSRTI and the
   regions held discussions during each Continuing Resolution to discuss funding needs and
   craft a funding plan for that Continuing Resolution.   .

  The FY 2002 Superfund appropriation included a provision that $100  million of the
   appropriated amount was not available until September 1,2002 (referred to as the
   $100 million hold-back). The hold-back was allocated $60 million to the Remedial Action
   AOA and $40 million to the Pipeline Operations AOA. As a result, these resources were not
   provided to the regional offices until after September 1, 2002. Congress did not include this
   provision in the FY 2003 appropriation, allowing the Agency more flexibility in allocating
   resources and funding projects..

Copies of memoranda relating to FY 2002 and FY 2003 processes are attached.

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                                                                        Enclosure 10
                                                                         Page 1 of 3
               OIG Response to Attachment Question 5
Question 5 - In your October 25, 2002, report you stated that Headquarters staff emphasized to
one of fee addttkaial practices that helps conserve Super&ad resources was 'lightening tie
eriferiafor NP1* listing/*1 Please specify these nw criteria and abdicate which, sites may have
been., or win be affected or had[their listing affected by the new criteria,

OIG Response - OSRTI provided the following information:

In considering sites for inclusion in the April 2003 proposed National Priorities List Rule, OSRTI
used a tiering system as an additional component of the internal deliberative process. The tiering
system used risk to human health/environment and urgency for cleanup as the two main factors.
The sites were tiered by OSRTI staff and representatives from EPA's ten Regions.

Generally, the Tiers used were as follows:
     ier A*
     1^1 .tm.
      erB:
    Tier C:
    Tier D:
      ei E
Current actual human exposure (measurable with appropriate
sampling/analytical data) to resident population, or students at schools/daycare,
and Superfund remedial action is needed near term (e.g., within 10 years).

Current actual human exposure to any population residents/students/workers/
trespassers) and Superfund remedial action is needed in the long term (e.g.,
more than 10 years).

Human exposure has occurred in the past, but current risk management practices
are adequate for the interim, or potential human exposure above
screening/cleanup levels is a reasonable scenario in the future.

No current/past human exposure.  Possible future human exposure or
contaminated sensitive environments, or there are known State endangered
species habitats within the target distance limit (TDL).

Contaminated ground water, surface water, soils, or air; no projected potential
human exposure or projected exposures below screening/cleanup levels; no
direct threat to sensitive environments.


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                                                                        Enclosure 10
                                                                         Page 2 of 3
Once the sites potentially eligible for the April 2003 NPL update were identified by EPA regions,
the sites were selected for further evaluation by taking the Tiers into account. In selecting sites
for this rule, EPA considered, in addition to the Tiers:

          the need for a strong enforcement program through cleanups conducted or
          financed by PRPs;
          the level of State, tribal, community, and congressional delegation support;
          estimated cleanup costs;
          the timing of the costs and cleanup;
          environmental justice issues;
          prospects for commercial redevelopment; and
          geographic balance.

An OSRTI official indicated that cleanup costs  and timing were considered in the aggregate (e.g.,
the costs for all Tier A and B sites were presented as an option to management) and were not the
cause for a final decision  on any site. The official indicated that while the regions had considered
the factors above for past rulemakings, this was the first time factors other than legal defensibility
had been considered by Headquarters. These considerations resulted in proposing 14 sites (out of
30 sites identified by the regions) to the NPL on April 30,2003 (68 FR 23094).

The 14 sites proposed were as follows:
Proposed Rule No. 39, General Superfund Section

State   Site name

 CA   AMCO Chemical
 CO   Captain Jack Mill
 MD   68th Street Dump
 MO   Madison County Mines
 MO   Newton County Mine Tailings
 NC   Ram Leather Care
 NH   Troy Mills Landfill
 NJ    Rolling Knolls Landfill
 NJ    Standard Chlorine Chemical Company, Inc.
 NJ    White Swan/Sun Cleaners GW Contamination
 OH   Armco Inc., Hamilton Plant
 OH   Peters Cartridge Factory
 TX   Conroe Creosoting Company
 TX   Jones Road Ground Water Plume
City/county

Oakland
Ward
Baltimore
Fredericktown
Newton County
Charlotte
Troy
Chatham Township
Keamy
Wall Township
Hamilton
Kings Mills
Conroe
Harris County
(EPA considers the 16 sites not proposed to be deliberative and enforcement-sensitive
information. Seven sites were added to the NPL in April 2003, but these sites related to prior

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                                                                          Enclosure 10
                                                                           Page 3 of 3
rulemakings and thus were not evaluated using the tiering process described above. Final listing
decisions concerning the 14 sites will occur after the public comment period closes and all
relevant comments are considered and addressed.)

The tiering process only aided in identifying sites that should be a priority for further
evaluation. Sites initially identified as candidates for proposed listing may not ultimately be
proposed for listing for several reasons. Further technical, legal and policy review may indicate
that certain sites are notready for proposed listing. For example, EPA postponed decisions on
some sites because States requested additional time to negotiate cleanup agreements or,
alternately, EPA plans to negotiate cleanup agreements under the Superfund Alternative Sites
approach, (Under the Superfund Alternative Sites policy, the listing process is suspended while
responsible parties are given an opportunity to enter into an agreement to clean up the site in the
same manner as if the site were listed.) Other EPA policies that may affect the decision to
propose listing a site on the NPL include EPA's  Resource Conservation and Recovery Act
deferral and  State deferral policies.  According to OSRTI officials, the Agency will consider all
sites identified by the regions as eligible for listing for future NPL proposed rules. While OSRTI
will obtain information on the factors indicated above for the next proposed rulemaking, it has
not decided how this information will be used.

(OIG note: The U.S. General Accounting Office discussed the tiering process on page 29 of its
July 2003 report, "Superfund Program: Current Status and Future Fiscal Challenges," GAO-03-
850.)

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                                                                       Enclosure 11
                                                                         Page 1 of 6
               OIG Response to Attachment Question 6
Question <> - The October 25&report indicates thai $95 million was de-obligated from prior year,
Bonding and used in FY 2002, Please identify the sites where the funding came from, identify the
work fee funding was reserved for,, and indicate whether it was replaced or needs to be replaced *
in future years, Also, please indicate to what extent the EPA will be able to find significant
amounts of additional prior year funding to de-obligate and use in FY 2003,                  :

OIG Response - OSRTI reported that a total of $85 million of FY 2003 obligations were from
prior-year funds. The enclosed disk contains information each region provided for all
deobligations during FY 2002.  The information indicates where the funds were taken from and
the region's comments on whether these activities would require funds to address any remaining
needs.  As a general rule, regional officials indicated that they did not have a need to replenish
the funds deobligated from Hie activities indicated Since the regions reported all deobligations,
the total for the deobligations will exceed the $95 million obligated to remedial actions in FY
2002. The OIG did not confirm the accuracy of the information provided by the regions.  As an
example, we are providing the information submitted by Region 6, the Region with the greatest
total deobligations for FY 2002.
Amount
Deobligated
tftFf2Q02
$21,430,712.00
47.550.00
150,805.00
1,018.00
8,233.13
47,593.00
103,763.07
61,495.92
181,023.00
30,602.87
1,991,250.68
330,000.00
301,492.00
50,000.00
75,000.00
21,884.00
500,000.00
27,353.00
26,726.08
92,994.54
83,477.39
491,862.00
450,000.00
13.45
13.93
Site from Which
.. funds Were De-obligated
Popile
Brio
Southern Shipbuilding
Small Purchase Order for GP
North Railroad Plume
Training
General Support
General Support
PA/SI
Core Program
Madisonville
All Indian Pueblo Council Coop Ag
All Indian Pueblo Council Coop Ag
North Railroad Ave Plume
North Railroad Ave Plume
Lockheed Martin ESAT Contract
DOT Interagency Agreement
RSR
Ecology &Environment (START)
Ecology &Environment (START)
Quinton Smelter
Odesa Chromium I
Ice House Drums
Edmond Strees (S Valley)
Dixie Oil Processors
Activity from Which
Funds Were Oe-oblJgated
Remedial Action
Technical Assistance Grant
Remedial Action

Management Assistance
Non Site Specific
Removal
Remedial
Non Site Specific
Non Site Specific
Remedial Action
PA/S!
Core
Management Assistance
MRS Pilot
Data Validation
Emergency Response Support
Management Assistance
Removal Support Assessment
Removal Support Assessment
Removal
Remedial Action
Removal
RI/FS oversight
RI/FS oversight
Note
1
1
1
1
2
2
2
2
2
2
3
4
4
4
4
4
4
4
4
4
4
4
4
4
4

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Enclosure 11
 Page 2 of 6
Amount
De-obligated
inFYaooa
1.20
2,911.29
722.43
376.19
142.40
. 21.47
31,677.51
23.26
15,000.00
15,000.00
19,991.03
7,506.22
8,174.48
10,594.14
370.04
36,561.26
12,437.80
26,701.28
301.54
39,707.46
19,873.57
13,664.59
19,597.92
18,517.12
10,286.65
38,494.07
50,040.68
3,563.92
235.465.89
17.661.68
3,203.77
15,000.00
23,715.35
19,690.49
23,970.47
25.514.13
4,155.21
4,470.81
280,716.62
63,236.94
1,000.00
39,792.36
3,817.58
8,107.28
10.908.67
SltefromWlticii
Funds Were De-otrftgated
Sheridan (cashout)
PA/SI
Brio
RAB Valley
Arkwood
Ag Street
ARCS Contract Management
Integrated Assessment
Site Assessment
TinkerAFB
South 8th Street
ATSF-Alburquerque
Rinchem
Tinker AFB
Remedial Support
4th Street
Bailey Waste
ARCS Contract
Sol Lynn
South Calvacade
Hardage
Alcoa/Lavaca Bay
Koppers
Mosley Road
Petrochem
ATSF-Clovis
PA/SI
Alcoa/Lavaca Bay
06009 Contract
4th Street
South 8th Street
South 8th Street
Integrated Assessment
PetroChem
Double Eagle
Double Eagle -
Ag Street
Bayou D'lnde
06009 Contract
4th Street
Sol Lynn
Double Eagle
North Calvacade
Texarkana Wood
Texarkana Wood
Activity front Which
Funds Were Oe-obligated
RI/FS oversight
Non-site
Oversight
RI/FS
Oversight
Community Involvement
Non-site
Non-site

RD oversight
Oversight
Remedial Analysis
Remedial Analysis
RA oversight

Remedial Action
PRP RA
Non-site
Oversight
Oversight
Oversight
Oversight
Oversight
Oversight
Oversight
Oversight
Non-site
Remedial Analysis
Bulk Funding
RD
RI/FS
RD
Non-site
RD
RA
RD
FS
RI/FS
Program Management
Ri/FS
RD
RI/FS
RD
RD
RI/FS
Note
4
4
4
4
4
4 .
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4

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Enclosure 11
 Page 3 of 6
Amount
De-obligated
triFY2
-------
Enclosure 11
 Page 4 of 6
Amount
De-obligated
, in FY 2002
129.83
19.546.25
20,000.05
485.65
436.10
80,122.26
57,280.11
316.70
29.40
68,115.46
37,421.59
112.03
20,729.38
9,415.56
39,687.88
3,144.03
787.14
122,707.21
224.18
154.154.10
56,708.55
350.49
88.05
7,030.03
772.70
448.36
448.36
80,050.52
25,434.87
3.342.66
10,410.07
5,031.38
24.000.00
6,110.29
72,750.02
2,950.40
2,095.80
46,207.09
10,516.31
36.504.64
15,613.36
17,284.90
64,604.64
21,944.25
602.00
Site from Which
Funds Were De-obligated
Southern Shipbuilding
Texas Gulf Refining
Sprague Rd GW Plume
Mallard Bay
Delatte Metals
New Orleans Parathion
Stephenson Bennett
Mylar Fire
BPS. Inc.
Hudson Refinery
Rogers Enterprises
Hot Springs Mercury
Dallas Plating
Texarkana Mercury & Neon
Renner Creosoting
Doughty's Treating Plant
Pleasant Hill Pole Plant
Union Creosoting
Piano Mercury
R&H Oil
Tropicana Energy Co
Eri Tire Fire
Limestone Landfill Fire
Malone Service Co
R&P Electroplating
Rockwall Mercury
Arabi Mercury Spill
Gibson Recyling Tire Fire
Little Bit Rad Site
Old Storm Plastics Facility
Southwest Tire Processors
Woods Tank Farm
Red River Aluminum
Coastal Radiation Services
Gulf States Paint
North Louisiana Chemical
Tar Creek E-P Lab Chemicals
Urban Machine
Brownsville Furfural Spill
Dewey Mercury
Sol Lynn Well Plug Removal
Alvin Mercury
ETP
Nonsite Funding for Site Walks
Gulf Coast Vacuum
Activity fromWHteti
Funds Were De-obligated
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Note
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4

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Enclosure 11
 Page 5 of 6
Amount
De-obligated .
ftiFY2Q0a
119.00
1,789.00
334.00
1,110.00
2,228.00
1,610.00
567.00
588.67
1,175.00
2,891.00
11,613.32
1,376.00
3.169.00
2,137.00
6,300.55
859.00
1,033.00
1,023.00
542.00
8,132.93
944.00
1.023.00
252.00
1,980.00
75,461.88
1,605.00
5,296.52
13,490.96
13,50121
1,621.00
1,450.00
3,216.00
1,333.00
967.18
2,670.00
826.00
714.00
13,366.16
185.98
3.573.11
364.17
1,063.00
915.00
12,907.59
1,310.93
Site from Which ,
Funds Were De-oWtgated
Vertac
Kem Week Control
Ella Warehouse Drums
Service Circuits
Poly Cycle
Malter Internation
Dempco Paint & MFC
Shore Refining
Patterson-Edmonson Construction
Okay Trailer Park
Glenmora Creosoting
Card/Blanc/Carter
Hillsdale Drums
Marco of lota
Hi-Chem. Inc.
Macmillan Ring Free
Lithium of Lubbock
Russell Fare Site
Ann T. King Property
Smith Smelter
Oklahoma Furniture
Hardco of Arkansas
Boeck Drums
Rab Valley
RSR OUI-Phase II RV Area
Johnson Lumber
Hart Creosoting
Central Wood
Tri Container Inc.
Good Latimer
Willie Heard Drum
Hearst Mill
Matagorda Round Up
Waco Drum
Terrell Plating
Reliable Coatings
Clearwater Fluids Recycling
Robin Boulevard
G.P. Drums
Ray Quinn Drum
Voda Petroleum
Cimarron Refining
Jacksonville Landfill
JC Pennco Waste Oil
Archem Comoanv
, Activity from Which
Fwnds Were De-obligated
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
, Note
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4.
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
                   \

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Amount
De-obligated
in FY 2002
27,079.20
3,219.46
1,199.00
3,041.91
480.00
499.00
1,381.00
1,639.00
274.00
664.00
17,111.27
1,041.00
1,811.00
$46,347,12*77
* Site from Which
Funds Were De-obligated
Tar Creek OU2
Safe Tire Fire
Rogers Road Landfill
Agricultural Street Landfill
Oklahoma Refining Company
Oklahoma Refining
Tomlinson Drums
King Sales Company
Baldwin Waste Oil
T/B Gail
CG Empire Tank Barge
Hart Creosoting
Red River Treating
Total
Activity from Which
Funds Ware De-obligated
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal
Removal

Mote
4
4
4
4
4
4
4
4
4
4
4
4
4

Notes

1   The funds deobligated from these projects, especially the Popile Remedial Action, were no longer needed as
    the action was complete. The funds were part of the Pipeline Operations AOA to assist the Region with the
    shortfall in that AOA and were not obligated for these same sites for these same activities.

2   The Cooperative Agreement with the All Indian Pueblo Consortium (AIPC) was closed out Funds in the amount
    of $216,355 were obligated to American Creosote for ongoing Remedial Action and Five-Year Review in FY
    2002.

3   The funds deobligated from this project were no longer needed as the action was complete. The funds were
    part of the Removal Advice of Allowance and obligated on some removal actions and in the START contract for
    removal support.

4   Of the total funds recertified to the Region, $6,151,860 was reobligated in FY2002 for the same sites and the
    same activities from which the funds were deobligated. These funds were transferred from one funding vehicle
    to another type.  The remaining $8,170,608 was deobligated from projects that were complete and the funds
    were no longer needed.  These monies were obligated in FY 2002 for the Tar Creek Remedial Action ($5
    million) and three removal actions.

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