OFFICE OF ENFORCEMENT
CERGLA
COST RECOVERY
NOTEBOOK
VOLUME III
Printed on Recycled Paper
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TABLE OF CONTENTS
I. CASE DEVELOPMENT AND REFERRALS
TAB
A Guidance on Pursuing Cost Recovery Actions Under CERCLA,
August 26, 1983 (Price/OECM, Thomas/OSWER), OSWER #9832.1
i „
B Cost .Recovery-Referrals, * September 6;'"1983 '- (Sniff/OEC),
OSWER #9832.0 -* ' --•-,.•
C Guidance -Regarding-CERCLA Enforcement Against Bankrupt
Parties,-, May 24, 1984, (Price/OECM), OSWER # 9832.7
D Small Cost Recovery*-Referrals, July 12, 1985 (Stiehl/OECM,
Lucero/OWPE) '-
E Revised Hazardous-Waste Bankruptcy Guidance, May 23, 1986
(Mays/OECM), OSWER #9832.7-la
F The Superfund Cost Recovery-Strategy, July 29, 1988,
(Porter/OSWER),-OSWER-#9832.13 - -
G Model Litigation-Report for CERCLA Sections 106 and 107 and
RCRA Section 7003, June 21, 1989, (Reich/OECM),
OSWER #9835.11-1
H Guidance on Documenting Decisions Not to Take Cost Recovery
Actions, June 7, 1988 (Cannon/OSWER),OSWER #9832.11
I Introduction-to Cost Recovery: What Do You Need To-Know
To Prepare a Cost Recovery-Case, March 28, 1990
(Marchetta/DOJ)
* -
J Tactics for Removal Cost Recovery Actions, March 19, 1990
(Unterberger/OECM, 'Diamond/OWPE)
*
II. COST DOCUMENTATION
f ^1 ~- • ' "
A Superfund Time Accounting-Procedures, December 16, 1982
(Perry/OLC)
i - * , i *
B Evidence Needed -to Support'CERCLA Cost Recovery Actions, -
April 8, 1983 (Bielefeld/OEC)
, TV
C Superfund Cost"Recovery Actions, April 21, 1983 (Sniff/OEC)
D Providing Cost Documentation to Support EPA Hazardous Waste
Clean-up Cost Recovery Claims, October 19, 1984 (Buente/DOJ)
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VI. STATE COST DOCUMENTATION
TAB
A Treatment of State Recoveries from Responsible Parties,
December 15, 1982 (Hedeman/OERR)
B Coordination of EPA and State Actions in Cost Recovery,
August 29, 1983, (Price/OCEM), OSWER #9832.2
C Draft Appendix u-Cost Documentation, October 15, 1985
(Wine/OSWER) , '
D State Superfund Financial Management and Recordkeeping
Guidance, November 1987 (FMD)
E Interim Final Guidance Package on Funding CERCLA state
Enforcement Actions at NPL Sites, April 7, 1988
(Porter/OSWER), OSWER #9831.6
VII. MISCELLANEOUS DOCUMENTS (alpabetical order)
A - Arbitration Procedures for Small Superfund Cost Recovery
Claims, May 22, 1989, (Linett/OECM), OSWER # 9832.17,
Federal Register Vol. 54, No. 102, May-30', 1989
B Contractor Cost Allocation Methodology," August 21, 1984 (Var
Slyke/OECM)
C Contracts: Historic Site-Specific Cost Reports for Superfunc
Contracts Active Prior to October 1, 1985, June 26, 1989
(Katz/FMD)
D Leaking Underground Storage Tanks (LUST): Allocation of
Agency FTEs and PC&B Costs Among the Salaries-and Expenses,
Superfund and LUST Appropriations, November 6, 1987, No. 88-
01
E LUST Trust Fund Cost Recovery Policy and Special Conditions,
October 7, 1988 (Porter/OSWER), OSWER # 9610.10
F OSC Reporting Requirements under the NCP — Definition of
"Resources Committed," June 1, 1989, (Dunroire/Region V)
G Statute of Limitations: Cost Recovery Actions, June 12,
"1987, (Lucero/OWPE), OSWER #9832.3-la
H Superfund Cost Recovery and Debt Collection Alternatives,
September 3, 1991, (Harper/FMD)
I Timing of CERCLA Cost Recovery Actions, October 7, 1985
(Price/OECM)
iv
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VIII.COST RECOVERY DECISIONS WITH ATTACHED MOTIONS AND BRIEFS
TAB
A United States v. Northeastern Pharmaceutical and Chemical
Co. Inc.. 579 F.Supp 823 (W.D. Mo. 1984), rev'd in part. 810
F.2d 726 (8th Cir. 1986}
UnitedStates v. Northeastern Pharmaceutical and Chemical
Co. Inc., 810 F.2d 726 (8th Cir. 1986} (reversing district
court on denial of pre-enactment CERCLA costs and affirming
the district court's holding that governmental response
costs are presumed reasonable and recoverable unless
defendants prove those costs are inconsistent with the NCP)
B United States v. Itorthernaire Plating Co.. 685 F. Supp. 1410
(W.D. Mich. 1988) aff'd sub nom. United States v. Mever. 889
F.2d 1497 (6th Cir. 1989) (cost documentation need only be
sufficient to provide accurate accounting of Federal costs
incurred, including documentation detailing source and
computation of each cost item requested)
1. United States' Motion for Summary Judgment on
Costs (with attached Documentation and
Declarations)
2. R.W. Meyer Inc.'s Brief in Opposition to United
States Motion for Summary Judgment on Costs
United States v. Mever. 889 F.2d 1497 (6th Cir. 1989) (EPA
can recover indirect costs because costs represented that
portion of EPA's overhead expenses that supported the
government's response action at the Meyer property)
1. Brief of Defendant-Appellant, R.W. Meyer
2. Brief of Amici Curiae. Chemical Manufacturers
Association, et al
3. Brief for the Plaintiff-Appellee, United States of
America
4, Reply Brief of Defendant Appellant, R.W. Meyer
C O'Neil v. Picillo. 682 F.Supp. 706, (D. R.I. 1988)
(defendants have burden of demonstrating that clean-up,
because of some variance from the plan, resulted in
demonstrably excess costs for which they should not be
responsible}
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COST RECOVERY DECISIONS (continued)
TAB
D United States v. Ottati & Goss. 694 F.Supp. 977 (D.N.H.
1988), affd in part. 900 F.2d 429 (1st Cir. 1990)
United States v. Ottati & Goss. 900 F.2d 429 (1st Cir. 1990)
(remanded to- the district court for further explanation of
its denial of EPA's indirect costs)
E United States v. Hardage. et al.. 733 F. Supp. 1424 (W.D.
Okla. 1989) (EPA awarded "all" direct and indirect costs and
pre^udgment interest)
1. United States' Motion for Partial Summary Judgment
on Response Cost Issues (with attached
declarations)
2. United States' Supplemental Report on Revised
Prejudgment Interest Calculation on Response Costs
3. United States' Second Supplemental Report on
Revised Prejudgment Interest Calculation on
Response Costs
F United States v. Bell Petroleum Services. Inc.. et al.,
734 F. Supp. 771 (W.D.Tex. 1990) (the court held EPA
response costs were consistent with NCP, including indirect
costs, and that the Government was entitled to
prejudgment interest)
G United Statesv.Thomas Solvent Co.. 21 Chem. Waste Lit.
Rep. 185 (December 1990) (the court held the government does
not have to prove reasonableness of its response action nor
does the fact that the selected action was not effective
imply that its selection was arbitrary and capricious)
1. United States' Memorandum in Support of its Motion
in Limine to Exclude Evidence
2. Thomas' Supplemental Brief in Opposition to
the United States Motion in Limine
VI
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CLASS DETERMINATION 2-79
CONFIDENTIALITY OP BUSINESS INFORMATION SUBMITTED
IN CONTRACT PROPOSALS AND RELATED DOCUMENTS
<
On May 3, 1973, I issued Class Determination 2-78 concerning
the confidentiality of business information in proposals
submitted to the Environmental Protection Agency (EPA) by persons
competing for EPA contracts. Since that time, I have made nearly
100 confidentiality determinations applying that Class Determination
EPA has been receiving ever-increasing numbers of requests
under the Freedom of Information Act (FOIA) for copies of con-
tract proposals, proposal modifications, best and final offers,
and related documents submitted by offerers seeking to obtain
contracts from EPA. Well over 90% of these FOIA requests come
from competing offerers who are seeking information concerning
their competitors. In almost all cases the business that
originally submitted the proposal or related document claims
that all or part of the submission consists of trade secrets
or confidential commercial or financial information that should
be kept confidential.
I have found that:
1. EPA possesses many proposals and related documents
from offerers seeking to perform EPA contracts and will con-
tinue to acquire such documents in the future.
2. Although the subject matter may vary, the information
contained in the proposals and related documents is of the same
character. Therefore, it is proper to treat all of the proposals
and related documents in the same class for the purpose of this
determination.
3. A class determination would serve a useful purpose in
that it would simplify the responses of EPA to FOIA requests
for proposals and related documents and reduce the burden of
making individual determinations.
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Proposals are usually submitted in two parts: the technical
proposal and the business proposal. The technical proposal sets
out the offerer's understanding of the requirements of the pro-
curement, the way in which the offerer would do the work required,
the resources that the offeror would devote to the work, and
information concerning the offerer's experience and expertise
in the field. The business proposal specifies the price for
which the offeror is willing to do the work in a fixed price
contract or the estimated cost and fixed fee for doing the work
in a cost reimbursement contract. It includes information about
the offerer's financial record, past performance on other con-
tracts, cost information, fee information, and other general
financial information about the offeror. In addition, in the
course of a procurement action the offeror may submit a revised
proposal, answers to specific written questions, a best and final
offer, and negotiating documents. All of these documents contain
information similar to that in the proposal.
This Class Determination applies to the information in
proposals, revised proposals, best and final offers, negotiating
documents, and documents of a similar character submitted by an
offeror prior to award of a contract. This Class Determination
also applies to information submitted by offerers which is in-
corporated into documents written by EPA personnel.
EPA may withhold information from disclosure under the POIA
if the information falls within one of the exemptions of the
Act. One of these exemptions is for "trade secrets and com-
mercial or financial information obtained from a person and
privileged or confidential" (5 U.S.C. 552(b)(4)). The infor-
mation contained in contract proposals and the related documents
set forth above is clearly commercial or financial information.
The documents are written as commercial documents designed to sell
the offerer's services to EPA. They contain detailed information
about the financial structure, personnel, and management of the
offeror. The real issue is whether the information is exempt from
disclosure as • .trade secrets" or is otherwise "confidential" with-
in the meaning of 5 U.S.C. S52(b){4).
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The threshold decision which EPA must make before it
may conclude that the information is exempt from disclosure
as a trade secret or confidential data is that the information •
is in fact maintained in confidence by the business and, there-
fore, is not publicly available from a source other than the
document in question. .If EPA. finds that the information is publicly
available elsewhere/ the information is not entitled to confidently
treatment and must be disclosed under FOIA.' The following are ex-
amples of information of this type which must be disclosed;
1. Information concerning the identity and scope of work
of other Government contracts or grants performed by the
offeror. This information is available to the public through
the Commerce Business Daily and from the specific Government
agencies.
2. Information of a general nature about the offerer
that the offeror routinely publishes or discloses to the public
as part of its regular business activities.
3. Information reproduced from documents that are already
public such as the request for proposals, other EPA documents,
or published materials.
Once EPA has determined that information in a proposal has
been kept confidential and has not been made public elsewhere,
the information may be entitled to confidential treatment under
S U.S.C. 552(b)(4) if it meets one of the tests set out in
National Parks & Conservation Association v. Morton, 498 F.2d 765
(D.C. Cir. 1974).Under Morton commercial or financial infor-
mation may only be withheld from disclosure if disclosure by
SPA would be likely: {1} to impair the ability of the Government
to obtain necessary information in the future or (2} to cause
substantial harm to the competitive position of the person who
submitted it to the Government.
I have determined that the following types of information
that appear in these proposal documents, if claimed as confidential
and maintained in confidence, are entitled to confidential treat-
sent under the Morton tests:
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1. Information concerning the technical approach to be
taken in performing the work.
2. Information concerning the offeror's understanding of
the work required,
3. Information concerning the offerer's management of
the work.
4. Information concerning the offerer's relevant experience
and expertise, except for general discussions of the offeror's
Government sponsored contracts or grants which is public information
(see above).
'5. Information concerning the offeror's facilities and
equipment.
6. Information concerning the offeror's employees and
matching of personnel to the work required.
7. Information concerning processes, devices, computer
programs, reports, analyses, etc.
8. Information concerning the offeror's financial structure.
9. Information concerning the offeror's price, cost, or fe „.
10. Information concerning the offeror's accounting metho or
specific labor rates, salaries, overhead, and other items of cost.
11. The same types of information listed in items 1 through
10 with respect to any proposed subcontractor.
With respect to the first Morton test, I have determined
that release of the above types of information, if claimed as
confidential, would be likely to impair EPA's ability to obtain
necessary procurement information in the future. EPA uses con-
tracts to perform an important part of its mission and has
a responsibility to perform its work creatively, with a high
degree of quality, and at the lowest cost to the taxpayer.
When EPA makes a decision to enter into a contract, EPA seeks
to obtain a contractor capable of doing the best job for the
lowest price. EPA solicits proposals from as many potential
offerers as possible. Proposals are voluntarily submitted;
EPA cannot demand them. EPA depends upon getting detailed pro-
posals so that the Agency may fairly and completely evaluate the
relative value of each proposal. If prospective offerers were
to submit less detailed or Less candid proposals or were to
choose not to submit proposals, EPA would have less information
on which to base its contracting decisions and fewer offerors
from which to choose. Less detailed proposals or fewer pro-
posals rfould also tend to reduce innovation. This night impair ,
SPA's ability to get the best work for the lowest price.
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Since promulgation of its confidentiality regulations in
September 1976, EPA has written to several hundred offerers con-
cerning the confidentiality of their proposals and related documents
These offerers represent a broad cross-section of the offerers
submitting proposals to EPA. Over 90 percent of these offerers
have indicated that if EPA disclosed information in their pro-
posals which they have claimed as confidential, they would be very
reluctant to submit detailed technical and financial information
to EPA in the future or they would seriously reconsider submitting
proposals to EPA at all. There is clear evidence that disclosure
of proposals and related documents over the objections of the
offerers would result in those offerers submitting less detailed
and leas informative proposals or ceasing to submit proposals.
t
The same finding was made by the United States District
Court for the District of Massachusetts in a recent decision con-
cerning a request under FOIA for a copy of a proposal submitted
to EPA, In Orion Research Incorporated v. Environmental Protection
Agency, Civil Action No. 75-5071-F, June 15, 1979, the Court found
tnat the proposal was exempt from disclosure under S 0.S.C. "552(b)
(4) because "[i^f EPA were ordered to disclose this plan or others
like it, its 'ability to obtain necessary information in the future1
would be impaired."
Furthermore, the Office of Federal Procurement Policy has
stated in its Policy Letter 78-3 that:
commercial and financial information submitted in
connection with a procurement frequently is sub-
mitted more or less voluntarily and public disclosure
against the wishes of the submitter may result in
less complete information in future procurements.
On the basis of EPA'a experience, the Orion case, and Policy
Letter 73-3, I have determined that when the offerer has claimed
such information confidential and the information is not already
available to the public from sources other than the document in
question, disclosure would be likely to impair EPA* s ability to
obtain necessary procurement information in the fature. According 1.
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-6.
I have determined that, such information is exempt from man-
datory disclosure under S U.S.C. 552(b)(4) because the
information meets the first test of Morton.
With respect to the second Morton test, I have also deter-
mined that release of the information listed above in items
1 through 11, if claimed as confidential, would be likely to
cause substantial harm to the offerer's competitive position.
The kinds of competitive harm that would be likely to result
are as follows:
1. Release of information concerning how the offeror
would undertake the specific work required might allow a
competitor to improve its performance by taking advantage of
the skills, experience, and techniques developed by the offeror.
If the competitor could improve its skills, experience, and
techniques, it would be in a position to compete more effectively
with the offeror in future procurement actions. Also, a competitor
could discover weaknesses in an offerer's work and take advantage
of them in subsequent procurements. This would put the offeror
at a competitive disadvantage in a future procurement action
because the offeror would not necessarily have access to the
same information about the competitor.
2. The information concerning the offerer's understanding
of the work involved relates to the offerer's skill and experie ~ .
Release of this information would have the same result as relea
of data concerning skills and experience.
3. Release of information concerning the offerer's manage—
ment structure and techniques supplements the information in the
technical approach by showing a competitor how the offeror would
organize for performance, allocate resources, assign personnel,
and control costs and time.^ This might enable the competitor
to improve or change its own management techniques to the detriment
of the offeror.
4. Release of information concerning the offerer's employees
might allow a competitor to raid the offeror's personnel and hire
away key employees. This could enhance the competitor's position
and might hurt the offerer's position, especially where the
quality of technical or management personnel is important in
'performing the work.
S. Information concerning the offerer's experience and
non-Government contracts would show a competitor the market in
which the offeror competes. Disclosure might cause a com-
petitor to move into those same markets and take business
away from the offeror.
6. Release of information concerning the offeror's
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facilitxes and equipment might help a competitor to improve
it own facilities and equipment. This could place the com-
petitor in a better position to bid on. subsequent contracts
for similar work and take business from the offerer.
«
7. Release of information concerning processes, devices,
computer programs, reports, analyses, etc. might give a competitor
access to information developed by the offerer at some expense
and allow the competitor to use the information without the
same expenditure of time and resources in its development. This
might allow a competitor to propose a lower contract price in a
subsequent procurement because the competitor would not have
to include the development costs for such items in determining
the price for its work while the offeror might still be re-
covering its development costs. All of these factors would
enable a competitor to compete more effectively with the offeror
in future Government and private procurement actions. IS the
offeror lost future contract work, the loss would constitute
substantial harm.
8. Disclosure of information concerning the offerer's
financial structure, cost, structure, specific costs, and
internal accounting would give potential competitors detailed
information about the offerer's finances. This information
could be used by the competitor to anticipate the offerer's
costs in future procurement actions and allow the competitor
to underbid the offeror. Since price is an important factor
in deciding who will be awarded a contract, the ability of a
competitor to underbid the offeror could mean loss of future
contracts. The loss of future contracts would constitute
substantial competitive harm.
As indicated above, since promulgation of its confidentiality
regulations in September 1976, EPA has written to several hundred
offerers concerning the confidentiality of their proposals and
related documents. These offerers represent a broad cross-section
of the offerers submitting proposals to EPA. Almost all of
these offerers have indicated that disclosure of information
from their proposals and related documents which they have claimed
as confidential would cause substantial harm to their competitive
positions. I have found in almost all cases that the disclosure
of this information, with the exception of clearly public in for-
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mation, would be likely to cause substantial harm to the
competitive position of the offeror.
«»*
The Office of Federal Procurement Policy has also stated
in its Policy Letter 18*3 that:
the context in which such commercial and financial
information is submitted—that of the highly com-
petitive area of Government procurement and free
market enterprise—makes it more likely that release
of the information would in many instances cause
substantial competitive harm.
On the basis of the above discussion, I have determined
that when the offeror has claimed proposal information con-
fidential and the information is not already available to the
public from sources other than the document in question, disclosure
would be likely to cause substantial harm to the offeror's com-
petitive position. Accordingly, X have determined that such infor-
mation is exempt from mandatory disclosure under 5 U.S.C. 552(b) (4)
because the information meets the second test of Morton.
^^^^™"^^^ *•'""'„
EPA policy requires that information which is exempt from
mandatory disclosure under 5 U.S.C. 552(b){4) must be maintaine
in confidence by the Agency subject to any modification that
might arise under 40 CPU 2.205(h) or any other requirement in
40 CFR Part 2. Accordingly, such information will not be
disclosed.
To implement this Class Determination, the appropriate
procurement office in EPA must, upon receipt of a request for
proposals or related documents, review the requested documents.
If the office determines that the documents have been claimed
confidential and that the information in the documents is
not publicly available from sources other than the documents
in question, the office must deny the request in whole or in
part, as appropriate, in reliance upon this Class Determination.
David O. BiCKart Date
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I UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, O C 20460
>
EEC I 4 I98T
MEMORANDUM
OFFICE OF
ENfOfirEMFNT AND
COMPUANfk MONITORING
SUBJECT: Contractor Consent to the Disclosure of Confidential
Business Information in CERCLA Cost Recovery Actions
FROM: Edward E. Reich _ _^
Associate Enforcement Counsel' for Waste
TO: David O'Connor, Director
Procurements and contracts Management Division
As you know, during the course of litigating CERCLA
Section 107 cost recovery actions, the Agency must use (and
defendants may request EPA to produce) certain contractor
documents to substantiate the Agency's costs of cleaning up a
site. These documents often contain confidential business
information (CBI), or information "claimed" as CBI, which EPA
is obligated to protect from disclosure pursuant to 40 C F.R.
Part 2, Subpart B (1986). In these circumstances, EPA is
forced to: (1) obtain the consent of each contractor for
release of each document that may contain CBI, (2) redact the
information claimed as CBI and produce the remainder, (3) seek
a protective order to prevent the improper disclosure of the
information, or (4) decline to produce the documents
altogether.
Notwithstanding the Agency's desire to protect the
contractors' interests, EPA must disclose the documents if
ordered to do so by a court OECM would like to avoid unduly
liberal court orders to produce contractor documents which
may contain CBI while simultaneously producing sufficient
information to support its cost recovery actions One
mechanism for doing this is to join with the defendants in
stipulating to a mutually acceptable protective order to be
issued by the court Therefore, my office is developing a
"model" Stipulation and Protective Order ("Protective Order")
which outlines procedures for handling contractor documents and
which includes a "confidentiality agreement" to be signed prior
to distribution of the information by all nongovernmental
parties seeking access to the information.
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OECM also believes that it should obtain "upfront"
contractual consent from Superfund contractors to the limited
disclosure of documents which may contain CBI. By doing so, the
Agency will be able to inform the contractors at the outset of
the manner in which EPA will handle the documents, thus
streamlining the discovery process. In addition to providing
this "upfront" consent, contractors will receive advance notice
of disclosures made under the Protective Order as required by 40
C.F.R. §2.209(d) and will receive copies of all confident-
iality agreements entered into pursuant to the court order.
In order to obtain such consent, we ask that you include the
following provision in all future Superfund contracts:
Business information submitted to the
Environmental Protection Agency by [the
contractor] under this contract may be
claimed as confidential. [The contractor]
shall assert any such confidentiality claims
at the time the information is submitted to
the Agency by clearly marking the claimed
information as company confidential or
proprietary. If no claim accompanies the
information when it is submitted to EPA,
the Agency may make the information available
to the public without further notice to [the
contractor].
Information covered by a confidentiality
claim will be disclosed by EPA only in
accordance with the procedures set forth in
the Agency's confidentiality of business
information regulations at 40 C.F.R. Part 2,
Subpart B (1986). However, notwithstanding
any such claims, [the contractor] agrees to
the limited disclosure, under a protective
order issued by an appropriate court, of any
information submitted to EPA pursuant to CERCLA
which may be used as evidence by the United
States or sought by potential defendants in
a CERCLA Section 107 cost recovery action.
Please contact Carolyn Tillman of my staff to discuss this
matter further. She may be reached at FTS 475-8205.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D C 20460
NOV 4 1991
OFFICE OF ENFORCEMENT
MEMORANDUM
SUBJECT: Confidentiality of Superfund Cost Information:
Potential Staleness of Overhead, Labor, and Profit
Rates Older than 3 Years
FROM: William A. White, Enforcement Counsel ,
Superfund Division
Office of Enforcement
Richard D. Feldraan, Acting Associate General Counsel
Grants, Contracts, and Geneal Law Division
Office of General Counsel J
TO: Regional Counsels, Regions I - X
The Agency's cumulative experience in negotiations and
litigation with PRPs under Superfund has demonstrated that the
inability to expeditiously release cost documents to PRPs and
litigation support contractors seriously disrupts EPA's
enforcement efforts. The Office of General Counsel (OGC) and the
Office of Enforcement (OE) , in consultation with the Office of
Waste Programs Enforcement (OWPE) , have been working to develop
new approaches to enable the Agency to release Superfund cost
documents, including information claimed as confidential, in an
expeditious manner when necessary. This memorandum discusses
three approaches to address this problem and requests your
assistance in implementing one approach as discussed below.
BACKGROUND
Under EPA regulations set out at 40 C.F.R. Part 2, EPA must
give Superfund contractors the opportunity to claim as
confidential information which, if released to the public, would
harm the contractor's competitive position. See 40 C.F.R.
§ 2.204. Superfund contractors generally have claimed that their
labor rates, overhead rates, and the profit or fee rates are
entitled to be treated as CBI. This information is important in
cost recovery cases • for proving the moneys expended by the
government at a Superfund site. Such information must be
accorded treatment as confidential business information (CBI) and
be protected from disclosure unless and until the Agency
NOT FOR PUBLIC RELEASE
Printed on Rtcytled Paper
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determines that the information is not entitled to confidential
treatment or the claim is withdrawn. See 40 C.F.R. § 2.205.
CBI claims delay the negotiations process and the resolution
of litigation with PRPs. EPA must either make confidentiality
determinations or request that contractors allow the Agency to
disclose information under a protective order in litigation or a
confidentiality agreement in negotiations before it can be
disclosed to PRPs.
I. Contract Clause
Currently, three projects are under way that will help
remedy this problem. First, OGC-Contracts recently drafted a
contract clause which is being inserted in all new Superfund
contracts awarded after April of 1991. This clause provides EPA
with the contractor's consent up front to the Agency's release of
information claimed as CBI to litigation support contractors and
to PRPs under a protective order in litigation or a
confidentiality agreement in negotiations. A copy of this clause
is attached for your information. Questions concerning the
contract clause may be directed to Tom Doherty in OGC-Contracts
at FTS 260-2794.
II. Cost Recovery Rulemaking
*
%
Second, the OSWER draft, proposed Cost Recovery Rule
contains a section on CBI which explicitly authorizes the Agency
to release contractor information claimed as CBI to PRPs under a
protective order in litigation or a confidentiality agreement in
negotiations. The Rule hopefully will be final long before the
contract language referred to above is inserted into every
Superfund contract. Thus, the Rule will act as an interim
measure allowing the release of CBI to PRPs once it is issued in
final form. Unfortunately, the draft Rule is currently on hold
and we do not know when it will be published.
III. Aaencv Confidentiality Determinations
As the Rule does not provide for release of CBI to
litigation support contractors, a third mechanism is necessary to
fill this gap as an interim measure until the contract clause is
inserted in all Superfund contracts. As discussed above,
information claimed as CBI may be disclosed if the Agency has
determined that the information is not entitled to confidential
treatment and has given the affected business ten days notice
during which the business may sue to enjoin disclosure. Although
each CBI claim must be evaluated on its own merits, rate and fee
information may have a limited shelf life, and, past a certain
age, may no longer be of use to competitors.
NOT FOR PUBLIC RELEASE
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Courts have recognized that cost information can become
stale and thereby lose its entitlement to confidential treatment.
See, e.g. . United States v. International ....Business Machines. 67
F.R.D. 40 (S.D.N.Y. 1975) (antitrust context); cf. Acumenics
Research & Technology v. United States Department of Justice. 843
F.2d 800 {4th Cir. 1988). OE and OGC propose to evaluate CBI
claims for rate and fee information in Superfund remediation
contracts and determine what period of time must pass before such
information becomes stale.1
Challenge of these CBI claims would proceed according to the
procedures set out in 40 C.F.R. Part 2. Briefly, when the Agency
desired to determine whether such information is entitled to
confidentiality, it would send a request for substantiation to
all affected contractors. See 40 C.F.R. §2.204. The request
letter would be drafted by the ORC staff attorney assigned to the
site in question and the OE and OGC staff attorneys who
specialize in CBI. The request letter would require that the
contractor substantiate why information older than, for example,
three years is entitled to protection as CBI, if it believes such
protection is warranted.
After reviewing the responses, the ORC, OE, and OGC
attorneys collectively would draft a response for the signature
of the Regional Counsel. Confidentiality would be denied where
appropriate, based on the specific facts of the case, the nature
of the Superfund industry, and relevant case law. See 40 C.F.R.
§2.208. This final Agency determination would then be sent to
the contractors and they would have an opportunity to challenge
that Agency determination in court. Any such challenge would be
handled by the OGC, OE, and ORC attorneys in conjunction with
DOJ.
The authority to make some confidentiality determinations
has been delegated by the General Counsel to the Regional
Counsels (Memorandum from Jim Barnes, dated June 22, 1983).
However, because this legal theory is one developed by OE and OGC
and because our staff attorneys are most familiar with the legal
and factual background of the issue, coordination with
Headquarters will be needed in the drafting of requests for
substantiation and confidentiality determinations based on this
theory.
1OGC has very recently made determinations with respect to
several ARCS contracts that fees (base fee, award fee pool, award
fees paid) are not entitled to confidentiality, on grounds apart
from staleness. The period specified by 40 CFR §2.205 during
which affected businesses may challenge the determination in
court has not yet run.
NOT FOR PUBLIC RELEASE
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While challenges to CBI claims are not as certain of outcome
as drafting a contract clause or issuing a rule, it is clear that
the Superfund program's problems with CBI warrant immediate
action. Because the concept of staleness of CBI claims in
Superfund remediation contracts is 'of novel application, it is
imperative to develop test cases as quickly as possible.
Thus, we request that, should you have a case in the near
future where you feel it may be necessary for the Agency to
disclose Superfund cost documents containing information claimed
as CBI, please contact the staff attorneys listed below a few
months before the release is necessary. Thus, if you will need
to disclose information claimed as CBI during RD/RA negotiations,
please contact our attorneys when the ROD is issued or shortly
thereafter. If you will need the information for cost recovery
negotiations, please contact the attorneys as soon as possible
before the desired release date.
The attorneys assigned to this matter in our offices are:
Richard Gold in OB, FTS 260-9735; fax, FTS 260-3069; Mail code
LE-134S; and Don Sadowsfcy in OGC, FTS 260-5469; fax, FTS 260-
0020; Mail code LE-132G.
We appreciate the problems that release of Superfund cost
documents containing information claimed as CBI have caused for
your offices. We hope that the projects outlined above will help
to alleviate these problems. If you have any questions or
suggestions, please feel free to call either of us or the staff
attorneys listed above. Thank you.
Attachment
cc: Scott C. Fulton, Acting Assistant Administrator for
Enforcement
Raymond B. Ludwiszewski, Acting General Counsel
Regional Counsel Superfund Branch Chiefs, Regions I - X
Lisa K. Friedman, Associate General Counsel, Solid Waste and
Emergency Response Division
Frank Biros, Chief, Cost Recovery Branch, OWPE
David J. O'Connor, Director, Procurement and Contracts
Management Division
Mark Walker, Associate Director for Superfund/RCRA
Procurement
NOT FOR PUBLIC RELEASE
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On C* E1© THE UNITED STATES DISTRICT COURT
U ^ FOR THE DISTRICT OF MONTANA
BUTTE DIVISION
L -
AUG 3D 1391
UNITED STATES OF ,AMERICA
D«pw<7 C'e™ j
VS. )
) Civil Action No.
ATLANTIC RICHFIELD COMPANY, INC., ) CV 89-39-BU
CLEVELAND WRECKING COMPANY, INC. )
Defendants. )
PROTECTIVE ORDER REGARDING CONFIDENTIALITY
Plaintiff United States of America, on behalf of the
United States Environmental Protection Agency, and defendant
Atlantic Richfield Company, Inc., and their respective attorneys,
have stipulated to the terms of this Order. This Order is
entered to maintain the confidentiality of certain confidential
business information contained in documents submitted to the
United States by various of its contractors and to promote the
efficient exchange of documents during this litigation. The
Court finds that good cause exists for issuance of an order
requiring limited disclosure of such information and that entry
of this Order is appropriate pursuant to Federal Rule of Civil
Procedure 26(c) . Consequently, it is hereby ORDERED:Q/\.l I __:) js Q
1. Any party who has stipulated to the terms of this
Order who may produce documents (pursuant to a discovery request,
case management order, administrative order on consent relating
to any operable unit within the geographical scope of the
complaint or other pleadings in this action, or i
SEP
6 199
UNDi OrviSKDN
-------
of documents in this action) or serve interrogatory answers,
admissions, or'other discovery responses that contain, or the
party believes to contain, information of a confidential nature
as described in Paragraph 2 of this Order, may identify
documents, interrogatory answers, admissions, or discovery
responses as "Confidential Information" in accordance with and
for purposes of this Order.
2. Documents, interrogatory answers, admissions, or
discovery responses shall not be identified as Confidential
Information unless they contain information within the scope of
Fed. R. Civ. P. 26(c)(7), 40 C.F.R. Part 2 (1990), 18 U.S.C. §
1905, or other statute or regulation restricting disclosure. No
claim of confidentiality shall be made with respect to any data,
including, but not limited to, all sampling, analytical,
monitoring, hydrogeoligic, scientific, chemical, or engineering
data, or any other documents or information evidencing conditions
at or around Butte, the Clark Fork River Basin, or any area
within the geographic scope of the Complaint filed in this
action. As provided by 40 C.F.R, 2.209(d), the requirements of
40 C.F.R. Part 2 need not be complied with in (1) making a
determination regarding whether documents, interrogatory answers,
admissions, or discovery responses shall be deemed and stamped
Confidential Information for the purposes of this Order and (2)
distributing documents, interrogatory answers, admissions, or
discovery responses in this action pursuant to any discovery
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- 3 -
request, case management order, or informal exchange of
documents.
3. Documents, interrogatory answers, admissions, or
discovery responses deemed Confidential Information pursuant to
paragraph 1 of this Order shall be identified by the stamping of
each page of the document, interrogatory answers, or admissions
with the following prior to disclosure pursuant to paragraph 4 of
this Order:
CONFIDENTIAL INFORMATION TO BE USED ONLY IN ACCORDANCE
WITH PROTECTIVE ORDER ENTERED IN U.S. v. ARCO. CV 89-39-BU.
4. Confidential Information may be disclosed to
counsel of record for another party who has stipulated to the
terms of this Order through any discovery request, case
management order, administrative order on consent relating to any
operable unit within the geographical scope of the complaint or
t ^
other pleadings in this action, or informal exchange of documents
in this action only if counsel of record for the other party
agrees in writing to be bound by the terms of this Order by
executing the notarized confidentiality agreement (set forth in
paragraph 7 of this Order), copies of which must be served on
opposing counsel prior to disclosure.
5. Confidential Information obtained by counsel of
record pursuant to paragraph 4 of this Order may be disclosed
only to the following persons and only where such persons agree
in writing to be bound by the terms of this Order by executing
the notarized confidentiality agreement (set forth in paragraph 7
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- 4 -
of this Order), copies of which must be served on opposing
counsel prior to the disclosure:
a) record counsel's partners, associates, clerks, legal
assistants, secretarial personnel, and co-counsels;
b) persons who are, or who are the employees of,
independent experts, consultants, document managers, and
litigation support contractors retained by counsel or parties to
this action; and
c) employees, officers, or directors of parties in the
action.
6. Documents identified by the United States pursuant
to paragraph 1 of this Order may be disclosed to persons who are,
or who are the employees of, independent experts, consultants,
document managers, or litigation support contractors retained by
the United States in connection with the litigation of this
action but only where such persons agree in writing to be bound
by the terms of this Order by executing the notarized
confidentiality agreement set forth in paragraph 7 of this Order.
7. The confidentiality agreement referred to in
paragraphs 4, 5, and 6 of this Order will be titled
'CONFIDENTIALITY AGREEMENT* and will contain, above the signature
of the person signing the agreement, date of signature, and the
seal of the notary public who witnessed the signature, the
following terns:
The undersigned hereby acknowledges that he/she
has read the Protective Order entered in the action
presently pending in the United States District Court
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- 5 -
for the District of Montana, entitled United States v.
Atlantic Richfield Company, Inc.. Civil Action No. CV
89-39-BU, understands the terms thereof, and agrees,
upon threat of penalty of contempt of Court, to be
Jaound by such terms. The undersigned shall keep the
material within his/her exclusive possession, place the
material in a secure and segregated location, shall not
disclose the information other than to those
specifically authorized by the Protective Order, and
shall not use or disclose it other than as authorized
by the Protective Order. The undersigned understands
that the pledge of secrecy under this Agreement
continues in perpetuity after the lawsuit is over.
8. Persons who obtain Confidential Information
pursuant to paragraphs 4, 5, or 6 of this Order may use or
disclose such confidential Information only in connection with,
or preparation for, settlement negotiations, trial, and other
proceedings in this action and not for any other purpose and
shall not at any time show, display, reveal or discuss such
Confidential Information or the contents thereof to or with any
person(s) other than those persons listed in paragraphs 4, 5, or
6 of this Order, without leave of Court.
9. Any person who obtains access to information
designated as confidential under this Protective Order may make
copies, duplicates, extracts, summaries, or descriptions of the
information or any portion thereof only for the purpose of
preparation for litigation in this matter. All copies,
duplicates, extracts, summaries, or descriptions shall be subject
to the terms of this Protective Order to the same extent and
manner as original documents.
10. At least fifteen calendar days prior to disclosure
to a person obtaining Confidential Information pursuant to
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- 6 -
paragraphs 4, 5, or 6 of this Order, the person who is planning
to disclose the information to such person must inform the
corporation or entity to which the Confidential Information
pertains by sending a first class letter postage pre-paid to such
corporation or entity describing the Confidential Information to
be disclosed and the corporation or firm (if any) by whom the
person who is to receive the Confidential Information is
employed; except that no such notification is necessary if the
person who is to receive the Confidential Information works for a
corporation or firm that has previously received Confidential
Information concerning that corporation's or entity's business
pursuant to a prior notice pursuant to this Order.
11. Notwithstanding any other provision in this Order
j
and except as otherwise ordered by the Court, if any question
concerning Confidential Information is addressed to any witness
or witnesses in this action at any deposition, such question
shall be posed only in the presence of persons described in
paragraphs 4, 5, or 6 of this Order, the Court, and the Court
Reporter, and the pages of the transcript containing such
questions and answers shall be treated in the same manner as
Confidential Information. This provision shall not apply to
judicial personnel, including a Court Reporter. At the request
of any party, a copy of this Order shall be identified and marked
as an exhibit to any such deposition, and all persons who have
actual notice of this Order shall be bound by its terms.
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- 7 -
12. Any party who believes that testimony elicited
during a deposition may include information of a confidential
nature shall, before such testimony is concluded, state such
belief for the record and, within two (2) weeks of receipt of the
**
deposition transcript, provide all counsel of record with a
written designation of the pages of the deponent's transcript
that such party deems to be Confidential Information. Pages of
the transcript so designated shall be deemed Confidential
*
Information under this Order. Until this two-week period has
expired, the entire transcript shall be considered Confidential
Information for the purpose of this Order and thereafter only
such pages as have been expressly designated shall be deemed
Confidential Information.
13. If any papers filed with the Court reveal
Confidential Information, the filing party shall file those
papers in a sealed envelope with a copy of this Order attached
thereto. At the time of such filing, the filing party'shall mail
a notification of such filing to the corporation or entity to
which the Confidential Information pertains. No seale'd envelope
shall be opened or released from the Clerk's custody except to
the Court or upon notice to the parties and on express order of
the Court.
14. Notwithstanding the preceding paragraph,
Confidential Information may be offered in evidence at trial or
any court hearing, subject to the Federal Rules of Evidence,
provided that the proponent of the evidence gives advance written
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- 8 -
notice of intent to use such evidence to the Court and to all
counsel and to the corporation or entity to which the
Confidential Information pertains at least thirty (30) calendar
/
days prior to the beginning of the trial or hearing during which
such evidence is to be offered. Any party may move the Court for
an order that such evidence be received under conditions that
will prevent unnecessary disclosure. The Court will then
determine whether the proffered evidence should continue to be
treated as Confidential Information and, if so, what protection,
if any, may be afforded to such information at trial or hearing.
15. Nothing in this Order shall limit the rights of
the parties to object to any evidence at trial or other
evidentiary proceeding in this case on grounds other than those
related to Fed. R. Civ. P. 26(c)(7), 40 C.F.R. Part 2, or 18
U.S.C. § 1905. No party shall refuse to comply with any
discovery request on the ground that the discovery sought is
confidential within the meaning of or prohibited by Fed. R. Civ.
P. 26(C)(7), 40 C.F.R. Part 2, or 18 U.S.C. § 1905.
16. The fact that a party designates a document,
interrogatory answer, admission, or discovery response as
Confidential Information pursuant to this Order shall not be
deemed to be determinative of what the Court and/or a trier of
fact may determine to be confidential. Any party may challenge
this designation through a motion to this Court upon notice to
the corporation or entity to which the Confidential Information
pertains and the other parties to this Order. This Court's
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- 9 -
decision shall be binding upon all parties to this Order. Prior
to the filing of such a motion, the parties to this Protective
order shall confer to determine whether they can reach agreement
as to whether the document contains Confidential Information
within the meaning of Paragraph 2 of this Protective Order, if
the party that designated the document as Confidential
Information concludes that such designation is unnecessary, it
shall so indicate to the other parties to this Protective Order
in writing and to the corporation or entity to which the
Confidential Information pertains. The fact that: any information
is disclosed, used or produced in discovery or trial herein shall
not be admissible or offered in any action or proceeding before
any court, agency or tribunal as evidence of or concerning
whether or not such information is confidential or proprietary.
17. No agency, officer, employee or attorney of the
United states shall be subject to any civil or criminal penalty
or sanction relating to the disclosure of Confidential
Information made in a manner not inconsistent with the terms of
this Order.
18. Notwithstanding any other provision of this
Protective Order, nothing herein shall affect the manner in which
the United States may disclose documents or information in
connection with cases other than this case.
19. Within tnirty days of termination of the
plaintiff's action by final judgment, including all appeals, all
parties shall return to counsel for the producing party all
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- 10 -
material designated as containing Confidential Information
produced or served in the action, all copies thereof, and any
extracts, summaries, or descriptions of the information contained
in such material; except that all extracts, summaries, or
descriptions that constitute attorney work product shall be
destroyed.
The United States and Atlantic Richfield Company, Inc., by.their
undersigned counsel, stipulate and consent to the entry of this
Protective Order:
FOR THE UNITED STATES:
BARRY M. HARTMAN
Actipg""Xssistant Attorney General
EnyiBprmieflt and Natural Resources Division
By:
OF COUNSEL:
D. HENRY ELSEN
JOSEPH M. SANTARELLA
SUSAN S. BOSTWICK
W. BENJAMIN FISHEROW
PHILIP E. KARMEL /
LYNN PENMAN
Environmental Enforcement Section
Environment and Natural Resources Division
U.S. Department of Justice
P.O. Box 7611
Ben Franklin Station
Washington, D.C. 20044
(202) 514-1113 or (FTS) 368-1113
DORIS POPPLAR
United States Attorney
District of Montana
KRIS A. MCLEAN
Assistant United States Attorney
District of Montana
Federal Building, Room 564
301 S. Park Avenue, Drawer 10031
Helena, Montana 59626
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- 11 -
Office of Regional Counsel
Region VIII
U.S. Environmental Protection Agency
Federal Building
301 S. Park Avenue
Helena, Montana 59626-0096
PEG ANDREWS
Office of Enforcement
U.S. Environmental Protection Agency
401 M Street, S.W. (LE-134S)
Washington, D.C. 20460
FOR/ATLANTIC R
in H. Fofete
A. Lorenz
ID & HART
175 North 27th St.
LD COMPANY, INC.:
Suite 1400
Billings, Montana 59101
Marilyn S. Kite
Edward W. Harris
HOLLAND & HART
2020 Carey Avenue, Suite 500
Cheyenne, Wyoming 82001
Lary D. Milner
Senior Counsel
ATLANTIC RICHFIELD COMPANY, INC.
555 17th Street
Denver, Colorado 80202
This Protective Order regarding confidentiality is hereby
Approved and Entered by this Court. Each party to this Order is
directed to comply with the requirements—of this Order.
Dated:
Uni
States District Judge
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RICHARD B. STEWART
Assistant Attorney General
Land and Natural Resources Division
PHILLIP BROOKS
VALERIE ANN LEE
Environmental Enforceme it Section
United States Departmen : of Jus
Ben Franklin Station, P O.(BOX
Washington, D.C. 20044
Telephone (202) 633-2779
'FILED
SEP I 81969
CLERIC US DISTRICT C
CENTRAL DISTRICT OF CMI
ROBERT C. BONNER
United States Attorney
ROBERT B. BRIGGS
Assistant United States Attorney
312 North Spring Street — llth Floor
Los Angeles, California 90012
Attorneys for Plaintiff United States of America
LATHAM & WATKINS
David L. Mulliken
Robert P. Dahlquist
Richard W. Raushenbush
701 »B" Street, Suite 2100
San Diego, California 92101-8197
Telephone (619) 236-1234
Attorneys for Defendant and Counter-Claimant
Montrose Chemical Corporation of California
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
UNITED STATES OF AMERICA, )
PEOPLE OF THE STATE OF
CALIFORNIA, et al.,
li
Plaintiffs,
v.
J. B. STRINGFELLOW, JR.,
et al.,
Defendants.
PROTECTIVE ORDER
GOVERNING CONFIDENTIAL BUSINESS
INFORMATION
After full consideration of the evidence, points and
authorities submitted by the parties, and the pleadings herein,
IT IS HEREBY ORDERED:
-------
1. When used in this Protective Order, the word
|! 'document* or "documents* means all written, recorded, or graphic
2 ij matter whatsoever, identified with the letters *SNC,* or *SDC*
3
produced by Plaintiffs during discovery, including, but not
limited to, interrogatory answers, requests to admit and
responses thereto, documents produced pursuant to Rule 34,
7
8
i subpoena, or by agreement, portions of deposition transcripts,
and exhibits.
2. When used in this Protective Order, the phrase
9 "Confidential Matter* means any information which has been
10 j( claimed as confidential business information under 40 C.F.R. Part
11 2, Subpart B. The United States will designate as confidential
r
12 . those documents identified with the letters *SNC* or *SDC* that
* >
13 :; contain Confidential Matter. Such designation shall be made by
14 placing a "Confidential* legend on each document which is to be
i,
15 ' designated as Confidential Matter.
16 3. Documents' produced may contain Confidential Matter.
17 i| Confidential Matter shall not be used or disclosed by any party
ii
18 for business or competitive purposes, or for any purpose whatso-
19 ever other than for the preparation for, and trial of, this
20 action and any appeal therein.
» *
21 4. Prior to the production of documents, counsel for
22 Montrose and counsel representing other defendants or third party
23 defendants who wish to review Confidential Matter must agree to
24 be bound by the terms of this Protective Order by executing the
25 I Confidentiality Agreement attached hereto as Exhibit A ('Agree-
L
»i
-------
j1 merit") . Executed copies of Exhibit A shall be kept in the files
2
1 !
'i of such counsel.
5. (a) Counsel for any 'party that obtains Confidential
Matter, or counsel for any other party or any person or entity
not a party, shall not disclose or permit disclosure of the
Confidential Matter to any other person or entity, including
without liaitation any officer, director, employee, agent, or
representative of the party who obtained disclosure, that is
8
' engaged in the business of providing environmental consulting,
9 ' environmental engineering, or other technical services in connec-
10 j. tion with hazardous waste clean-up efforts. Exhibit C is a
11 partial list of companies included in the above-mentioned
12 !' categories. Counsel for any party may request copies of documents
0
13 r containing Confidential Matter with the Confidential Matter
14 ' redacted. Documents with redacted Confidential Matter may be
15 shown to the foregoing persons or entities for purposes of the
16 Stringfellow litigation.
17 (b) The prohibition on disclosure of Confidential
il
18 i'Matter to certain persons or entities contained in subsection (a)
i
19 . above does not extend to (i) any entity or persons engaged in the
gi
20 i business of providing only accounting and financial auditing
21
22
23
24
25
26 I
services in connection with the clean-up of hazardous waste
sites; (ii) any entity falling within the categories set forth in
!Paragraph 5(a) if such entity has a discrete subdivision or group
i
jthat provides only accounting, and financial auditing work in
.connection with the clean-up of hazardous waste sites, Confiden-
- 3 _
-------
\, tial Matter would be disclosed only to individuals within such
]i subdivision or group, and such individuals certify to the Court
2 ' '
i that they will not disclose Confidential Matter to individuals
3 I
working in other portions or subdivisions of the entity that
4
provide environmental consulting, environmental engineering or
5 other technical services in connection with hazardous waste
I
fi I
0 I clean-up efforts; and (in) entities providing document manage-
8
ment services for the governments. Disclosure of Confidential
Matter may be made to those persons or entities identified in
9 this subsection pursuant to Paragraph 5(c).
10 " (c) The restrictions on disclosure of Confidential
11 Matter contained in this Paragraph 5(c) shall not apply to
12 •' employees of the United States but shall apply to outside
13 contractors hired by the United States. Counsel for any party
14 ' that obtains Confidential Matter, or counsel for any other party
15 I or any person or entity not a party, shall only permit disclosure
16 of Confidential Matter to any other person or entity, including
17 without limitation any officer, director, employee, agent, or
H
18 '' representative of the party who obtained disclosure, not falling
19 in the categories identified in Paragraph 5(a) above or falling
20 ''within the categories identified in Paragraph 5(b) above, only in
21
22
23
24
the following circumstances,
(i) Disclosure may be made to employees of counsel for
defendants and third party defendants who have a direct func-
tional responsibility for the preparation and trial of this
25 "action or any appeal therein. Any employee to whom disclosure is
i'
il
26
- 4 -
-------
F
,j made must agree to be bound by the terms of this Protective Order
1 ':
'I by executing the Confidentiality Agreement attached hereto as
2 !|
n Exhibit A ('Agreement"). A list of such employees and executed
3
copies of the Agreement for such employees shall be kept on file
4
by. the attorneys who employ them. Counsel for a party includes
in-house counsel. Employees do not include persons, firms, or
corporations engaged by counsel on a contract basis, who shall be
7 subject to the requirements of Paragraphs 5(c) (li) and 5(c)(m)
8 '! of this Protective Order.
* (ii) Disclosure may be made to consultants or experts
10 j ('expert(S)*) employed by a party or counsel to a party to assist
i
11 I' counsel in the preparation and trial of this litigation. Prior
12 to disclosure to any expert, the expert must agree to be bound by
13 i the terms of this Protective Order by executing the
\ ;
14 '' Confidentiality Agreement attached hereto as Exhibit B
15 '' ("Agreement"). In addition, such expert must certify that he or
16 . she is not a person or entity that is identified in Paragraph
17 5(a) above or is a person or entity identified in Paragraph 5(b)
18 '' above. The executed Agreement and certification must be filed
19 ',! under seal with the Court before Confidential Matter is disclosed
20
21
22
23
24
to such expert. No person or entity shall have access to the
executed agreements filed under seal absent an order from the
Court requiring disclosure of such Agreements granted following a
motion for such an order, an opportunity for interested parties
to respond to such a motion, and a showing of good cause for such
25 l! an order. Identification of the expert shall include the expert's
26 '
- 5 -
-------
, name, business address, telephone number, and the name(s) of
H
ii companies for which he or she is currently employed and by whom
O '
• he or she was employed for the preceding one year period.
(iii) With respect to any person who is a witness or
expert witness, disclosure shall not be made unless and until
that person agrees to be bound by the terns of this Protective
Order by executing the Confidentiality Agreement attached hereto
as Exhibit B ("Agreement*). In addition, such witness or expert
8
witness must certify that he or she is not a person or entity
9 described in Paragraph 5(a) above or is a person or entity
10 -I identified in Paragraph 5(b) above. The executed Agreement and
11 certification must be filed under seal with the Court before
12 Confidential Matter is disclosed to such expert. No person or
!
i
13 ' entity shall have access to the executed Agreements filed under
14 seal absent an order from the Court requiring disclosure of such
15 Agreements granted following a motion for such an order, an
16 opportunity for interested parties to respond to such a motion,
17 and a showing of good cause for such an order. Identification of
18 | the witness shall include the witness' name, business address,
j!
19 '.telephone number, and the name(s) of companies for which he or
20 i| sne is currently employed and by wliwm ue or she was employed for
21
22
23
24
25
the preceding one year period.
(d) Notwithstanding Paragraph 5(a), any party may move
the Court to allow disclosure of Confidential Matter, pursuant to
Paragraph 5(c), that is technical rather than financial in nature
to persons or entities described in Paragraph 5(a}. Confidential
26
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^ Matter of a technical nature may be shown to entities described
1 ':
in Paragraph 5(a) upon order of the Court, after an opportunity
2 '!
•' for interested parties to respond to such notion, and upon good
3
cause shown.
4
6. Counsel for any party, except counsel for plain-
tiff the United States, who obtains Confidential Matter under
this Protective Order from any other party, counsel to any other
7 ''
j1 party, or any person or entity not a party shall keep that
O 'l
8 " Confidential Matter within its exclusive possession and control
i
Q
* and shall immediately place the Confidential Matter in a secure
1^ and segregated location. Except as provided in Paragraphs 4 and
11 " 5 above, no person shall have access to that location.
12 7. All depositions of persons with knowledge of cost
13 documentation and EPA contractor costs in this action, where
14 ' Confidential Matter may be discussed, shall be held in the
15 presence only of the deponent, a Court reporter, representatives
16 designated by the Plaintiffs, persons described in Paragraph 5,
17 above, and counsel for defendants or third parties who are
18 ,! signatories to this Protective Order and have executed the
19 confidentiality agreement described in Paragraph 4 above.
20 i Deposition transcripts for depositions where confidential matters
21
22
23
24
were discussed must be labeled 'confidential*.
8. To the extent that any answer(s) to
interrogatories, exhibits, transcripts of depositions, responses
to requests for admission, or any other papers filed with the
25 I'Court, by any party except plaintiff the United States, or any
26 ,!
- 7 -
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jl third party, reveal, may reveal, tend to reveal, or may tend to
I' reveal any Confidential Matter, such documents shall be filed in
2 f
' sealed envelopes or other appropriate sealed containers on which
o
shall be endorsed the caption of this litigation, an indication
r
' of the nature of the contents of such sealed envelope or other
container, the word "CONFIDENTIAL*, and a statement substantially
in the following form:
•This envelope, containing documents which are
[i
8 ! filed in this case by , is not to be
9 opened and the contents are not to be displayed or
10 j revealed except by order of the Court or consent
11 ' of the producing party.
12 ' In addition, counsel for the party producing the
13 ' documents should be informed about such filing no less than ten
14 (10) business days before the date set for trial, motion, or
15 , other proceeding. Upon the request of the party or counsel for
16 the party producing the documents, the documents shall be
17 i submitted in camera and shall be sealed, and any proceeding
18 - involving disclosure of the evidence shall be held in camera.
19 j! 9. Within 60 calendar days after receipt of any
20
21
22
23
24
25
;materials designated as Confidential Matcer, any party ro the
litigation may serve an objection to the designation of such
materials as Confidential Matter. The objection shall set forth
the basis for challenging the designation. Within 45 calendar*
days after service of such as objection, the party producing the
|documents and the objecting party (or parties) shall meet and
26
i - 8 -
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Jl
,j confer in an attempt to resolve the dispute arising from the
| objection. If after such meeting the dispute remains, the
2 '!
i1 disputing party may apply to the Court for an order removing such
3
confidentiality provided, however (i) the party making such
M
^ motion shall comply with the Federal Rules of Civil Procedure and
5 applicable local rule, if any, in connection therewith; and (ii)
nothing in this Paragraph shall alter the burden of proof which
otherwise would apply to a determination whether the particular
8 claim of confidentiality is justified• Material or information
9 '' claimed to be confidential that is subject to a dispute as to
10 ii whether it is in fact confidential material or information shall,
11 until further order of the Court, be treated as confidential in
12 ' accordance with the provisions of this Protective Order.
13 10. Upon final termination of this action, whether by
14 , judgment, settlement, or otherwise:
15 (a) Any person who obtained Confidential Matter shall
16 assemble and return to the counsel of record who provided that
i
17 ; person with the Confidential Matter, all materials in his or her
1 j
18 I' possession or subject to his or her control and counsel of record
19 i
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shall destroy the documents. All such materials constituting the
work product of counsel of record shall be immediately destroyed.
(b) The Clerk of the Court shall maintain under seal
all papers filed under seal with the Court, including, without
limitation, transcripts of deposition answers to interrogatories,
responses to requests for admission, motion papers, memoranda of
- 9 -
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law, documents, and exhibits as to which material or information
a claim of confidentiality was made.
11. This Protective Order may be modified by further
»
7
written stipulation signed by the signatory parties andjac by
^^B hV ^10 ^^
order of this Court upon application to the Court with notice.
5
6
Dated: g£f5Mfl6& \
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EXHIBIT A
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CONFIDENTIALITY AGREEMENT
The undersigned counsel or employee hereby acknowledges that
he (she) has read the foregoing Protective Order executed by the
attorneys of record for the parties of the action presently
pending in the U.S. District Court for the Central District of
California, entitled United States, et al. v. J. B. Strinafellow.
Jr., et al.. understands the terms thereof, and agrees, upon
threat of penalty of contempt, to be bound by such terms. The
undersigned understands that certain documents or portions of
documents are likely to cause' substantial harm to the relevant
business' competitive position if disclosed or handled in any *
manner other than that expressly directed by the Protective
Order. Among other responsibilities, the undersigned shall keep
the material within his/her exclusive possession, place the
material in a secure and segregated location, shall not disclose
the information to persons other than those specifically autho-
rized by the Protective Order, and shall not use or disclose it
for business or competitive purposes. The undersigned under-
stands that the pledge of secrecy under this agreement continues
after the lawsuit is over, and extends to confidential informa-
tion disclosed in the future as well as to confidential informa-
tion already disclosed to the undersigned. Furthermore, the
undersigned understands- that a breach of this Protective Order
may constitute contempt of court and may result in damage to the
competitive position of one or more private entities which may
subject him (her) and/or his (her) employee to civil claims for
damages by these entities or to criminal penalties. In addi-
tion, the undersigned agrees to submit to the jurisdiction of
this Court for purposes of the enforcement of this Protective
Order.
Date:
Signed:
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8
10
EXHIBIT B
CONFIDENTIALITY AGREEMENT
The undersigned is currently working at which is
located at . During the past year the undersigned
has been employed by the following companies located at the
corresponding addresses:
The undersigned hereby acknowledges that he (she) has read
the foregoing Protective Order executed by the attorneys of
record for the parties of the action presently pending in the
U.S. District Court for the Central District of California,
entitled United States, et al. v. J. B. Strinofellow. Jr.. et
alt. understands the terms thereof, and agrees, upon threat of
penalty of contempt, to be */ound by such terms. The undersigned
understands that certain documents or portions of documents are
likely to cause substantial harm to the relevant business' corope-
titive position if disclosed or handled in any manner other than
that expressly directed by the Protective Order. Among other
11 " responsibilities, the undersigned shall keep the material within
,j his/her exclusive possession, place the material in a secure and
12 ,' segregated location, shall not disclose the information to
i( persons other than those specifically authorized by the Protec-
13 i' tive Order, and shall not use or disclose it for business or
,' competitive purposes. The undersigned understands that the
14 " pledge of secrecy under this agreement continues after the
lawsuit is over, and extends to confidential information dis-
15 ! closed in the future as well as to confidential information
" already disclosed to the undersigned. Furthermore, the under-
16 '' signed understands that a breach of this Protective Order may
j| constitute contempt of court and may result in damage to the
17 "• competitive position of one or more private entities which may
, subject him (her) and/or his (her) employee to civil claims for
18 i| damages by these entities or to criminal penalties. The under-
f, signed certifies that he or she is not a person or entity identi-
19 ', fied in Paragraph 5(a) of the Protective Order or is a person or
ij entity identified in Paragraph 5(b). The undersigned also
20 '! certifies, that if he (she) is employed by an entity that pro-
vides environmental consulting, environmental engineering, or
21
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23
24
25
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other technical services in connection with hazardous waste
cleanups that he (she) works within a subdivision or group of the
entity that provides only accounting or financial auditing
services or provides document management services for the govern-
ment and he (she) will not disclose confidential matter to indi-
viduals working in other portions or subdivisions of the entity
that provide environmental consulting, environmental engineering
or other technical services in connection with hazardous waste
cleanups. In addition, after consultation with counsel, the
j undersigned agrees to submit to the jurisdiction of this Court
!for purposes of the enforcement of this Protective Order.
i
.Date: Signed:
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EXHIBIT C
2
i Acres International Corporation
Advanced Engineering P.C.
4 AEPCO, Inc.
(Advanced Engineering 6 Planning Corp., Inc.)
B
8
Alliavoe, Inc.
(formerly GCA)
American Capital and Research Corporation
AMS, Inc.
9 ' Arthur D. Little, Inc.
10 A.T. Kearney
i'
11 AWD Technologies
12 , BCL Associates
13 i1 Michael Baker Engineering
14 j' Battelle
15 !' Bechtel Group, Inc.
16 '' Black and Veatch
li
17 ( Bpoz Allen
18 Brown and Caldwell
19 I, Brown and Root
20
21
22
23
24
25
26
Brunsing Associates
JK.W. Brown & Associates, Inc.
Burns & Roe Enterprises, Inc.
The Cadmus Group, Inc.
California H2O Laboratories
Canonie Engineers
i(
C.C. Johnson 6 Malhotra
'iCDM, Inc.
i,
i1
n - 3 -
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EXHIBIT C
Central Coast Analytical
2 ''
| CH2M Hill
3
The Chester Engineers
4
Clement Associates
5 esc
Dames and Moore
I Development Planning & Research Associates, Inc.
8
10
'j Donohue and Associates, Inc.
|
Donahue & Associates
DPRA
11 " Dynamac Corporation
12 l( The Earth Technology Corporation
H
13 '' Ebasco Services Inc.
if
f
14 ' Ecology and Environment, Inc.
15 ! E.A. Engineering, science and Technology
a
16 > EHCON Associates
17 j; Engineering, Design and Geosciences Group, Inc. (EDGe)
l"
18 n Engineering Science
19 ,Ensco Environmental Services
20
21
22
23
24
25
Ensotech
Envirodyne Engineers, Inc.
GS.T. Environmental Lab
Environmental Science & Engineering, Inc.
Environscience, Inc.
Fluor Engineers
26 (|Geraghty Miller Inc.
I'Gibbs & Hill, Inc.
- 4 -
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EXHIBIT C
Gradient Corporation
i
2 '
* Halliburton
i •<
3
Fred C. Hart Associates, Inc.
4 HDR, Inc.
ICAIR Life Systems, Inc.
' ICF, Incorporated
7 ij industrial Waste Engineering
o li
8 '' International Technology Corporation
9 IT Corporation
10 i Jacobs Engineering Group, Inc.
i
11 ' James M. Montgomery Corporation
12 '' C.C. Johnson & Associates, Inc.
13 J.H. Kleinfelder and Associates
• *
14 ': Kellogg
15 ' Lav Environmental, Inc.
16 Lee & Ro
17 Lee Wan & Associates, Inc.
18 Leighton & Associates
19 \ Levine-Fricke
H
20 '! Life Systems, Inc.
21
22
23
24
Lockmand i Associates
Los Alamos technical Associates, Inc.
Malcolm Pirnie, Inc.
Mark Group
25 |jMcClelland Engineers, Inc.
i
26 ' Med-Fox Associates
,Metcalf & Eddy
- 5 -
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4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
EXHIBIT C
Midwest Research Institute
! Montgomery Engineers
NUS Corporation
O.K. Materials Company
OMI Services
Pace, Inc.
PEI Associates, Inc.
PRC Engineering
PTI Environmental Services
Quality Assurance Laboratory
i
I Radian Corporation
i
' Research Triangle Institute
' Riedel Environmental Services, Inc.
j SAIC, Inc.
I Science Applications International Corporation, (SAIC)
; SCS Engineers
Sobatoka & Company, Inc.
! SRA Technologies Inc.
1 Bryan A. Stirrant & Associates
R.L. Stollar & Associates
Sverdrup & Parcel
TAMS
TechLaw, Inc.
Tetra Tech Services
TRC Environmental Consultants, Inc.
Truesdail Laboratories
URS Corporation
- 6 -
FORM OBO 1
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EXHIBIT C
2 ,
, VERSAR, Inc.
Viar
Roy F. Weston, Inc.
Woodward-Clyde Consultants
5
6
I'
7 <
!'
8 !
i
9
10 '
ii
11
12
13
14
15
16
17
18
!'
19 !
20
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25 ;!
i!
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FORM "BO I
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LATHAM *
at
•AH Dicoo
PROOF OF SERVICE BY MAIL
I, Becky J. Neidhardt, declare as follows:
I am employed in the county of San Diego, state of
California. I am over the age of 18 and not a party to the
within action. My business address is that of Latham & Watkins,
701 "B" Street, Suite 2100, San Diego, California 92101.
On September 20, 1989 I served the below listed
document on all other parties to this action by placing a copy
of such documents in a sealed envelope addressed to each person
listed on the attached liaison service list dated September 6,
1989 served the following listed documents entitled:
PROTECTIVE ORDER GOVERNING CONFIDENTIAL
BUSINESS INFORMATION
On September 20, 1989, I placed such envelope with
postage thereon fully prepaid for deposit in the United States
mail in accordance with the office practice of Latham & Watkins
for collecting and processing correspondence for mailing with
the United States Postal Service. I am familiar with the office
practice of Latham & Watkins for collecting and processing
correspondence for mailing with the United States Postal
Service, which practice is that when correspondence is deposited
with the Latham & Watkins personnel responsible for delivering
"correspondence to the United States Postal Service, such
correspondence is delivered to the United States Postal Service
that same day in the ordinary course of business.
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* WittOJW
K* ** L
•AH Di«ao
I declare that I am employed in the office of a
member of the bar of this court at whose direction the service
was made.
Executed on September 20, 1989 at San Diego,
California.
Becky J7 ^eidhardt
SD10\RUR\MONT\MONT-5.POS
2.
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1 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
? WASHINGTON. DC 20460
'"""<"' M-ARHM/SWMC OK , 5 es2
JANS."
rion VII K.C., MC
MEMORANDUM
SUBJECT: Treitment of State Recoveries from Responsible Parties
or
IOUO WAftTC ANQ f MCAGCNCV
FROM: William N. Hedeman. Jr., Director
Office of Emergency and Remedial Response (VH-548
TO: Superfund Coordinators
Regions I-X
SACKGROUND:
I have received Inquiries from several Regions regarding the treatment
of monies and services recovered from responsible parties it Superfund
sites prior to Federal Involvement at that site. Two types of recoveries
from responsible parties are Involved: (1) State Induced private party
cleanup (I.e. the situations In which a responsible party agrees to cleanup
as a result of State enforcement efforts); and (2) recovery of cash from
responsible parties.
This memo will address our policy on Superfund treatment of these
types of recoveries. It does not affect efforts by either the State or
EPA to recover any enforcement costs. 1n current or future enforcement actions,
DISCUSSION:
(1) State Induced Private Party Cleanup
Some States have proposed that they be permitted to apply the cost
of a responsible party cleanup to the State's cost-share, since the States,
through administrative or Judicial proceedings, caused the cleanup to be
undertaken.
CERCLA contemplates two types of action: Fund- financed response
and private party cleanup. The Fund-financed response must be taken In
accordance with EPA policies and regulations. Where the State has Induced
private party action, there 1s no prior EPA approval of the project to
assure that the project conforms to Fund-financed guidelines. It would
be difficult and resource Intensive to ascertain which components of
the project met Fund-financed requirements.
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-2-
Further, Section 104(a)(l) authorizes a Fund-financed response
if the response will not be done properly by a responsible party. The
fund is available to finance response activities that remain to be don
the site, after taking into account the work done by a responsible party.
Therefore, EPA will .no£ allow a State to apply the value of State induced
actions taken by responsible parties toward the State's cost-share,
(2) Cash Recovery
In order for a site to qualify for Superfund financing, a State
that recovers money from a responsible party must apply the recovery to
the cost of the remedial action. In those cases wnere the State has recove
roonUil trdin the responsible party prior to February 1, 1983, the State may
first deduct fron the recovery its reasonable enforcement costs as allowed
under EPA's Superfund enforcement costs policy (attached). In all recover!
after that date, the State may deduct reasonable anforeemant costs, only
when the settlement specifically provide! that the recovered amountTInclude
payment to the StaU of the&e pUSlflUaiy1 incurred cosla. ~"""
After the recovery is deducted froa the overall cost of the rerasdi
action, the balance of the cost of remedial action (if any) will be eligiW
for Fund-financing on a 90/10 basis (unless the State is required to pay tt
least 50 percent of the remedial action due to ownership at the tiws of
disposal).
Should you have any questions on this policy or its implementation,
please contact Doug Cohen on FTS 382-2206. , ^
Attachment
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON DC 204«0
AU6 29 1S83
SUBJECT
FROM:
TO.
Coordination of EPA and State Actions in CERCLA
Cost Recovery Negotiations and Litigation
Courtney Price
Special Counsel for
Lee Thomas
Assistant Ad-u^istrator
Solid Waste ans Emergency Response
*
Regional Ad~. " istrators , Regions l-\
Regional Cc--seis, Regions I-X
Director, Office of Intergovernmental Liaison
The ciean-up of hazardo-s waste disposal sites uncer tKe
Comprehensive Env:ro~ne-.tal Response, Compensation, and Liability
Act (CE'CLA) involves payment of monies fro-' the Hazardous Su!-"5t<*nc»
/
Response Fund (the Fund) created by Section 211 of CERCLA to
individual States or to contractors to finance clean-up activities.
In many cases, the State in which the site is located will also
contribute its own funds to the site clean-up _!_/. EPA and the State
may thereafter negotiate witn or take judicial action for recovery
of the amounts expended by them against the party or parties who
ly Under CERCLA $104(c)(3), the State must pay or assure payment
of 10 percent of the cost of remedial action and operations and
maintenance at a site and at least 50 per cent of the cost of
all response actions at a facility which was owned by the State
o-r a subdivision at the time of disposal of hazardous substances.
Current Agency policy allows CERCLA funding of remedial
investigation, feasibility study, and remedial design at privately
owned sites without a State cost-share. Accordingly, any cost-
share previously paid by the State (allowable State services,
statutory credit or cash) for remedial investigations, feasibility
studies, and remedial design at privately owned sites will h«>
applied toward the State's share of the cost for remedial construction
at the site, see May 13, 1983 Memorandum from Lee M. Thomas.
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-2-
are legally responsible 2/. In those cases, the question arises
wnether the separate negotiations or judicial actions of EPA or
the State to recover their respective funds might, in some way,
prejudice the other's right to recoup its monies, and if so,
what actions might be taken to avoid such prejudicial effect.
It may initially appear unreasonable to conceive that either
EPA or a State could take actic~ wh.ch would interfere'with f-e
other's rignt to recover monies expended for site clean-up.
However, the following points should be considered:
0 State as Aze^t - EPA will frequently transfer its share
of clean-up furds to the State whicn will, in turn, spena
it on the site under the cooperative agreement with EPA.
The cooperative agreement contains numerous protocols,
procedures, and other standards.with which the State must
comply to assure the quality of the site investigation and
clean-up. Because of EPA's control over these matters,
adverse parties may argue that the State is EPA's agent or
representative for the expenditure of the funds. This
misunderstanding might be asserted as a defense to recovery
of remedial costs by a potentially responsible party.
*2/ Further guidance on cost recovery procedures and responsible
parties is contained in a forthcoming policy entitled, "Cost
Recovery Actions under CERCLA."
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* Collateral Estccrel - An adverse judgment by a court in an
action by either EPA or a State on tue issue of recovery of
funcs expenced on the s.te r, *g-.t ce held to collaterally
estop the other gover-.-e^tal agency from successfully bringing
a subsequent action agairst that sane party 3^/.
* Insolvency of RespO"s:bl9 Partyfs) - A settlement or
judgment by EPA or the State might exhaust the available
resources of the responsible party(s), leaving the other
governmental agency witnout. possibility of a recovery.
Regardless of the rer.ts of arg-ne"ts which nay be made on
the foregoing co~s idera*.c-s, i- tne interest of prc-cting
Federal-state relations, trere are certain rights and ool^gations
which should be clearly definec at the outset of th*» relationship.
The Regions, in cooperation wit" OERR, have recog-ized the benefits
of identifying trese interests by reflecting then in the cooperative
agreements. Accordingly, this me^orandufi does not require the
Regions to adopt any new procedures or change any existing coopera-
tive agreements. Instead this document presents the rational*
for drafting cooperative agreements in the manner prescribed by
OERR.
3/ See United States v. I.T.T. Rayonier, Inc., 627 F.2d 996,
?9th Cir., 1980 ).
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-3-
or settlement wit-, tne responsible party, thereby gaining
a position o£ preference wit" respect to the assets of the
responsible party.
Inclusion of suci a provision in the cooperative agreement
is fair to totn EPA anc! t*e State, in that neither may gain an
unexpected advantage to the assets of the responsible party by
separate negotiations of wicu the other may be unaware.
•
Such a provision aiso provides a means whereby each part/ to
the cooperative agreement -ay take separate independent action
to protect its interests, after having given tKe necessary notice,
if there are reasons to not engage in joint E?A-State negotiations
or file suits in coordination with each other against the
responsible parties. S-ggeste-1 la^g-age for SUCK a provision
appears in the Appendix to t*".s memorandum, and provides for
written notice not less than 30 days in advance of settlement or
initiation of a cost reco.ery actio-.
3. Requirement for Cooperation and Coordination of
Cost Recovery Efforts
The cooperative agreement should also provide that- EPA-and
the State will cooperate with each other in efforts to recover
their respective shares of the costs of response activities at the
facility, and will coordinate their respective activities and
resources in such efforts, including the filing and coordination
of litigation for the recovery of costs and the use of evidence
and witnesses in such suits. This provision is desirable because
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cost recovery suits will involve considerable data, documents
and witnesses "Tron both EPA, the State and their contractors,
and close coordinatior bet«ee". EPA a-'d the State will be very
important to the efficient and effective resolution of those
suits. Model language for this provision also appears in the
Appendix.
4. Requirerent That Judicial Action Be Taken
in U.S._District Cc'-rt
The cooperative agree-ert should also provide that any suit
o
filed by either party to t~e agreerent against a"y third party for
recovery of response costs to which it rray be entitled, shall be
brought in the U.S. District Court for the judicial district in
which tne release or ca-ages occ-rrei. cr in whic" the defendant
resides, may be fourd, or has his principal office (§113(3)).
The purpose of this prc"isic-i is to avoid fragrenting the efforts'
of EPA and the State between Federal court (in which EPA would
bring a suit), and State court (in which the State could bring a
cost recovery suit uncer an/ applicable State law. See the
discussion of this point in the section entitled "Pending Cases",
infra). Model language for this provision also appears in the
Appendix.
NON-JUDICIAL SETTLEMENT
In the aosence of 'an agency relationship between EPA and the
"* State, there is little possibility that the State could enter into
a separate agreement with the responsible party (as distinguished
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THE COOPERATIVE AGREEMENT
1. Negation ot Agencyir Cooperative Agreement
The cooperative agreement should negate the principle that
the State is an agent for EPA. This is important for both govern-
mental agencies for a number of reasons. In the cooperative
agreement, EPA will necessarily require that the State ooserve
certain standards, procedures and protocols, such as in the
taking of samples, tneir chain-of-custody, analysis protocols,
and perhaps accounting procedures. The need to specify such
procedures could be argued to constitute a right to control the
actions of the State, an indicia of an agency relation-ship.
Neither EPA nor the State should wish to encourage such an
argument because of the potential exposure to tort liability
as well as the possibility of complicating a cost-recovery effort.
Therefore, the imputation of an agency relationship between EPA
and the State should be negated by appropriate language in the
cooperative agreement. Suggested language for such a provision
appears in the Appendix to this memorandum.
2. Requirement for Notice of Settlement or Action
The cooperative agreement between EPA and the State should
contain a provision that neither will initiate a cost recovery
proceeding or enter into a settlement with the responsible party
except after ample written notice in advance of the execution of
a^ settlement agreement or the filing of a suit. The provision
prevents rushing by EPA and the State to obtain a judgment against
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from a Decree or Judgrent/ whicn could affect EPA's ngr.ts against
the responsible party* ether t-.an to drain off that party's
assets which nngnt be available for payment of a cos.t-recovery
claim. In the case of a responsicle party witH substantial assets,
a separate settlement by the State or EPA may not present a
serious problem to the qt~er sart/. However, assuring EPA becomes
aware of an impending settlement between the State anc the
responsible party(s) 4/, the Agency should, before the settlement
is finalized, deter-,ne tKe probable extent of the responsible
party's financial ability to satisfy EPA's claim in addition to
N
payment of f.e sett.e-e-t -it- the State S/.
In most cases, the responsible party will probably wish
to simultaneously settle its liability with bot^i the State and
Collective negotiates- a-- settlenent procedures in"ol-. ng tKe
4/ EPA should becone aware of any impending settlement by the
State with a responsible party assuming there is a provision in
the cooperative agreement which requires the State to notify
EPA in writing thirty days in advance of any proposed settlement,
and the State complies with that agreement.
_5/ A determination of the financial ability of a potentially
responsible party can be made by the Financial Management Division
of the Agency, or by use of a Financial Assessment System which
has been developed by the Economic Analysis Division of the
Office of Policy Analysis of EPA. This system will provide case-
by-case, inexpensive and defensible estimates of aoility-to-pay
which will be useful for settlement consideration. This system
requires a minimum of financial data which will usually be available
from a Dun and Brads'treet report/ a Moody's listing, or an audited
financial statement. fchen that information is not available, the
system will enable enforcement personnel to focus data requests
^o that information necessary to perform a minimum financial assess-
ment. Any questions about this system and its uses should be
directed to Kathy Summerlee, FTS 382-3077, or David Erickson,
FTS 382-2764.
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State, EPA, ana the responsible parties should be encouraged
to avoid misunderstandings and to resolve all issues at the
same time. However, there will undoubtedly be circunstanc«s
under which the responsible party may believe that it would
be advantageous to settle with one clamant (either EPA or
*
the State) and not tne other. It is those cases wnere the
assets of the potentially responsible party would be sub-
stantially depleted by tne settlement which could prese-t
significant problems for each claimant.
It should se reccg-ized at the outset that, absent the
proposed notice and coordination agreements discussed above,
there is nothing to prevent the State or EPA fron settling
its clai-i in the abse-ce ard without the concurrerce cf the
otner. Where sucn a settlement would place either the State
or E?A in a more advantageous position with regard to the
assets of the responsible party, problems could arise which
could affect intergovernmental relations. In those cases,
the following options are available to EPA.
1. Should EPA determine that the State has independently
entered into settlement negotiations with the responsible
party, EPA should contact the appropriate State agency in an
effort to establish a joint settlement effort and strategy.
Simultaneously, EPA should notify the responsible party by
letter (if that has not already been done as part of the Agency's
cost recovery procedure), advising it of the Agency's claim, and
that no other person or entity is authorized to negotiate for or
-------
otherwise repres--t tu = Ace-r^ i" respect to t*at clair.
At tne sarre tme, t~e A-enc_, should initiate an investigation
a*
into the financial resources cf the respcns .rle party to
i
determine whether there w.1. be sufficient assets remaining
after the proposed State settlement to satisfy EPA's claim.
That investigation can be carried out in the manner described
in footnote 5.
2. If it is deter-.ned tKat tKe assets of f"e responsible
party »*!.. likely be ce^eter or s jcstant: al ly i-paired by a
separate settlement ^it" f-e State without provision being
mace for EPA's c-ia.-, a", -f efforts to est30l:su a ;c.-t
settlement effort *if t~e State are not successful, fen
consideration should be gi e- to E°A's applying to the appro-
priate u'.S. C strict Co^rt for t~e appo^ntr.ent of a receiver
to operate c. nanage t~e assets of tue responsible party for
the benefit of all creditors cf tuat party. This action, if
taken in a ti-ely manner, would prevent the responsible
party fron distributing its assets in a preferential manner.
However, the dec.s.c" to att ~pt to forestall a State
settlement wit" a responsible party should oe made only after
serious consideration cf all factors involved, including:
8 the amount of EPA's clair which might be prejudiced,
0 the past relations between EPA and the State agency
involved in the negotiations,
** the circumstances under which the State and the
responsible party entered into the negotiations
without the presence of EPA,
-------
-10-
* the existence of any agreement between EPA and
the Staoie pron isi ting sucn negotiations;
* and any other factors which might bear upon the
decision.
While tfiis action snould be taken only as a last resort, -
the Agency's responsibility to preserve and restore the Fund may
require such action. As 11 ether such actions, a decision to
seek the appointment of a receiver for the assets of a responsible
party will require f-e concurrence of the Special Counsel to the
Administrator for Enforce-ent.
ENDING C^SES
There are a nu.-oer of cases in which States have already
initiated a suit against responsible parties, and EPA has
contributed or intencs to ccntrioute a portion of the clean-up '"
costs. In such cases, what is the proper forun and the best
^s
method in which to proceed"9
In the aosence of an agreement with EPA to the contrary,
a State may, of course, proceed with an action in State court for
cost recovery clairs based upon any applicable State law 6/.
6/ CERCLA §107(1) pro-.ides "Nothing in this paragraph shall
affect or modify in any way the obligations or liability of any
person under any provision of State or Federal law, including
common law, for damages, injury or loss resulting from a release
of any hazardous substance or for removal or remedial action or
the costs of removal or remedial action of such hazardous
suostance."
-------
States are also a.t-.cnzed to make claims under CERCLA for
the cost of response acti"it:es which they incurred at a site.
Section 107(a) of C£?CLA, fcr exa-rle, provides for tue liar.l.t.
ft
of past and present owners and operators of a facility, generators,
transporters and others for "all costs of removal or remedial
t
action incurred by the United States or a_ 51 a t e not inconsistent
with the National Contingency Plan." Many other sections of
CERCLA refer to tKe right of the States to recover for their own
costs.
Howe/er, Sll3(c5 of CEPCLA pro.-ides
"... the United States district courts shall have exclusive
original jurisdiction over aj.1 controversies arising uncer
this Act, witnout regarc to tne citizenship of the parties
or the arount in controversy. Venue shall lie in any district
in wnic* tne release cr -'rages occjrred, or in wnici th<»
cefenca-t resides, m^ ~ze founc, cr has his principal office."
We interpret tKis pro*.*s.c~ to nean that any claii made
by EPA, the State or any ot~er person for recovery of response
costs, which is based upon the provisions of CERCLA, must be
brought un the appropriate U.S. District Court, and may not
be asserted on behalf of E?A by a State in a State court
action T/* Obviously, a"y claim asserted by EPA will be based
upon CERCLA and will be in U.S. District Court. Likewise, if
7/ In addition to the restriction of §113{b), there are additional
reasons why the State could not attempt collection of the Federal
share of response costs. Under CERCLA $112(c)(3) and 28 USC $516.
the U.S. Attorney General is required to represent EPA in these
proceedings. This may not be delegated to the States, and therefore
it is not possible to authorize the States to attempt collection
of the Federal share of response costs in a State court proceeding,
even should it be otherwise appropriate.
-------
-.2-
he State's clam against a third person for its share of the
osts relies in v*hoie or in part upon CERCLA, then it too must
e brought in U.S. District Court. A State may, therefore,
ttempt recovery of its share of response costs in State
ourt only under sorre law or theory other than CERCLA.
r*
We also oelieve it hig-.iy irportant that EPA and the State
ttempt to coordinate tfe.r respective clams because.
such actions will involve a substantial amou-t c: techn.cd.
data, docu-ents and witnesses from both EPA and t*e Stat*»,
and eacn party ccu^c deri/e the benefit of tKe ctner's
evidence and witnesses;
>
coordination would a/oid t*e necessity of maintaining two
separate proceedings -^.c1" wc.ii duplicate much of tfce sa"?
effort and resources, aic
coordination of the clams would avoid the ISSUP of collateral
estoppel discussed earlier in this memorandum.
& believe the States will &e receptive to joint or cooperative
DSt recovery actions with EPA for these reasons, and for rhe
iditional reason that the legal authority for the States to
scover is probably much clearer under CERCLA than it may he
nder the laws of most States.
The following options, or some variance- thereof, should
lerefore be followed in those cases where EPA provides CERCLA
-------
-13-
funds under a cooperative agreement to a State wKir1i has a suit
pending in State court against the resDonsible party:
Option I: EPA st^c-ld require, as a condition ofpayne^t cf
the CERCLA funds to tne State, that t*ie State will, within a
certain period of time (i.e., 30 days) after receipt of the
funds, dismiss without prejudice all claims for recovery or
reimbursement of any response costs at the sit«» 8/ from any
action then pending in State court. The provisions recommended
earlier in thrs Me""orand»Ti for inclusion in all cooperative
agreements shou.d also oe used _9/.
It is net -ecessar, to req^.re tu.at a s.ng.e su.t for cost
recovery be filed jointly by EPA and the State. It -ay be a
more simple proced-re, and avoid potential logistical problems,
for each party to file .ts own suit separately, and then reques1
8/ Note that this does not necessarily require a complete
dismissal of the pencing State court action. This recognizes
that there may be other claims of the State involved in the
case, with which the State may wish to continue in the State
court proceedings, and tnat the existence of counterclaims by
the defendant on other issues may prevent the State from
effecting a complete dismissal of the case. The important
point is to eliminate all cost recovery claims from the
State court proceedings. Of course, if those are the only
claims involved in the State case, a complete dismissal of
the case would be the desired result.
V The Attorney General of the State should agree to or
concur in this provision of the cooperative agreement, since
it affects pending litigation in which the Attorney General
is representing the State. Such agreement or concurrence may
b« limited to the particular provision requiring dismissal of
the case, and may be evidenced by an endorsement to the
cooperative agreement or by separate letter signed by the
Attorney General or his representative.
-------
the U.S. District Court before which they are pending to consoli-
date proceedings on tr.e salts pursuant to Rule 42 of the Federa1
Rules of Civil Procedure.
Note also that this option does not affirmatively require
that the State refile its clam in Federal court, but only
that if the claim is refiled, it will be in Federal court. The
requirement for cooperation and coordination between EPA and
the State will also apply to and encourage jci"t negotiations
with the responsible parties before filing of a suit in Federal
'court, as well as to s-osequent litigation in Federal court.
Option II; It is conceivable that a State may wish to continue
to pursue its cost recover/ ciairr in State court, or rray not
wish to coordinate its efforts witi ZP\. In sue" event, E?i
*
should not, even if it could, attempt to require it to do otHer-
wise. however, because col lateral "estoppel could be raised
against EPA by the responsible party(s) in event of an unfavorable
result in State court proceedings, EPA should, as a condition
of payment of the CERCLA funds, require that the State,
within a specified tine, dismiss without prejudice or OPit
from any action then pending or which it may subsequently
file in State court any claim for recovery of response costs
which in the opinion of EPA, are or may be based upon CERCLA,
or any law, regulation or authority other than that which
may exist under the laws of that State 10/.
10/ See comment at footnote 9.
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-15-
EPA sl*o-ld str~-;^ ^rte the States wit*- wHlc>- <* enters
into cooperate agreenents to accept Option I, since it will
res-it in much greater effectiveness and ccs t-ef f iciency in
recovery actions. Option II should be adopted only after
all efforts to persuade tke State have failed.
Note on Purpose a^d Lse cf t"is Me"
-------
prepare for sucn occasions so that they can be approached in
a rational ^..planned manner to minimze farther potential
i-pact on the relationship.
If you have any questions or proolems concerning any rratte:
contained herein, please call Russell B. Selman at FTS 426-7503,
Attachment
-------
APPENDIX
Under CERCLA, both EPA and affected States can institute
enforcement actions agai-.st anc/or negotiations witl parties
responsible for priority waste sites. When this occurs, a
settlement or legal action by either party could potentially
impede or e"?*1 ne^2to *K« ciii**s of t*e ctUl8T f~r r9cc**°T ***
funds expended at the site. Obligations, rights, and pro-
cedures for litigation must be defined as early as possible
in the working relationship between EPA and the State to avoid
this eventuality. Theretore, provisions concerning cost recovery
should be in the Cooperative Agreement application. Specific
provisions tha.t address different enforcement conditions are
presented below. These provisions should be reviewed, discussed
with the RSPO, and included in the application, as appropriate.
Please refer to the text of tne Memorandum for guidance on
the use of these provisions.
1. DisclaiTer of Ace-'cy °elatiorship
Nothing contained in t?
-------
recovery of such sums except after Kaving given notice in
wrinng to tne otner party to this Agreement not less th2~
thirty (10) days in advance of the cate of the proposed
settlement or commencement of the proposed judicial or
administrative proceedings. Neither party to this Agreement
shall attempt to negotiate for nor collect reimbursement of
any response costs on behalf of the other party, and
authority to do so is hereoy expressly negated and denied.
3. Cooperation and Coordination in Cost RecoveryEfforts
EPA and the State agree that they will cooperate and
coordinate in efforts to recover their respective costs of
response actions taken at the site described herein, including
the negotiation of settlement and the filing and management
of any judicial actions against potential third parties. This
shall include coordination in the use of evidence and witnesses
available to each in tne preparation and presentation of any
cost recovery action, excepting any documents or information
wnicn may be confidential under the provisions of any applicable
State or Federal law or regulation.
4. Judicial Action in U.S. District Court
EPA and the State agree that judicial action taken by
either party against a potentially responsible party pursuant
to CERCLA for recovery of any sums expended in response
actions at the site described herein shall be filed in the
United States District Court for the judicial district in
which the site described in this Agreement is located, or in
such other judicial district of the United States District
Courts as may be authorized by section 113 of CERCLA, and
agreed to in writing by the parties of this Agreement.
5. Litigation Under CSRCLA Sections 106 and 107
The award of this Agreement does not constitute a waiver
of £PA's right to bring an action against any person or persons
for liability under sections 106 or 107 of the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA),
or any other statutory provision or common law,
6. Sharing Recovered Funds with EPA
Any recovery achieved by the State pursuant to settlement,
judgment or consent decree or any action against any of the
responsible parties will be shared with EPA in proportion to EPA's
contribution to the site cleanup under CERCLA.
-------
7. Dismissal 3y State of Pending Cost Recovery Action - Opt ion
The State does -ere:;/ agree that *t will, not later than
thirty (30) 'days after tne date cf this Agreement ,~ cause to oe
dismissed, without prejudice to any subsequent refiling, any
and all claims of tne State (or any Agency thereof} in tkp
case of "(State or AgencyJ v. (defendant ) , now pending in the
(Circuit, Chancery, etc. ) Court of _ ,
Docket No. _ ,_, for recovery of any services, materials,
monies or otner tning of value expenoed or to be expended on
the site described in this Agreement. Any subsequent refiling
of said claims by the State or any agency thereof will be in
accordance with the provisions of this Agreement.
(See comment at footnote 9 of Memorandum regarding State
Attorney General concurrence wit1- tr.s provisic-.)
8 . Disnssal By State cf sendi"*c Cost Recovery Act.p" - OptiO" II
The State does hereby agree that it will, not later than
th.rty (30) days after tne date of th*s Agreement, cause to be
dismissed, without prejudice to any subsequent refiling, ar/ and
all claims of t".e State (or any Agency thereof) in the case of
"(State or Agency) v. (defendant ) , now pending in the Docket No.
_ , for recovery of any services, materials, rc-:es or
other thing of vaiu-e expended or to be expended on the site
described in this Agreene"t whicn are based or rely, in whole
or in part, upon the provisions of the Comprehens ive Environmental
Response, Corpensat ion, and Liability. Act of 1980. Any subsequent
refiling of said ciairs Dy the State will be in accordance with
the provisions of this Agreerent.
(See comment at footnote 9 of Memorandum regarding State
Attorney General concurrence with this provision.)
9. Eergency Pespo-^se Actig^
It may in the course of conducting the remedial activities
coveted by the Cooperative Agreement, become necessary to
initiate emergency response actions at the site. The Cooperative
Agreement application should contain a provision acknowledging
this eventuality and dealing with the effect any such emergency
actions will have upon the remedial project. The provision
below, or its equivalent, may be used in the application for this
purpose:
Any emergency response activities conducted
pursuant to the National Contingency Plan,
40 CFR section 300.65, shall not be restricted
by the terms of this Agreement. EPA and the
State may jointly suspend or modify the remedial
activities in the SQW of this Agreement during
and subsequent to necessary emergency response
actions.
-------
WASHINGTON, D C 20460
OCT 151985
MEMORANDUM
SUBJECT:
FROM:
Draft Appendix U - Cost
TO:
Jan B. Wine, Chief
State Programs Se _
State and Regional Coordinatio^n Branch
Hazardous Site Control Division
Addressees
AND EMERGENCY RES"C>ISE
As you are aware, OWPE has requested that an addendum which
identifies Superfund cost documentation requirements be added to
the guidance document, "State Participation in the Superfund
Remedial Program." The attached draft has been prepared in
response to this request.
Generally, the Superfund program does not differ in substance
from those Agency regulations stipulated in 40 CFR 30 and 33. It
embraces current Agency requirements with the major addition that
accounting and record keeping conducted during remedial activities
be detailed on a site-specific basis to ensure effective cost
recovery and to protect the integrity of site data. Both the
application of EPA requirements to Superfund and those require-
ments specific to Superfund are discussed in this document.
Please review Appendix U and submit your comments to Debby
Swichkow, of my staff by 10/28/85 at 382-2453. Your input is
important in this effort.
Attachment
-------
-2-
Addressees:
Dan Regan, Chief, Grants Administration and Procurement
Section, Region I
Rich Bartelt, Chief, Emergency and Remedial Response
Branch, Region V
Karen Clark, OGC
Tony Diecidue, OWPE
Janet Farella, OWPE
Becky Kennedy, OERR
Fred Meadows, GAD
Mike Simmons, DIG
Sam Morekas, SRCB
Tom Whalen, SRCB
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10/2/85
DRAFT
APPENDIX U
STATE COST DOCUMENTATION
-------
10/2/85
DRAFT
APPENDIX U
STATE COST DO(TJy.ENTATION
PURPOSE
This apppendix provides guidance to Regional officials
— especially Regional Project Managers (RPMs) — and to
State officials — especially State Project Officers
(SPOs) — in their efforts to catalog, file, and maintain
cost documentation developed during remedial response.
BACKGROUND
EPA's cvr-ent Agency-wide assistance requirements are
found in two pnnary sources
• * •
General Regulation for Assistance Programs (40
CFR Part 30, which codifies State
responsibilities for managing and administering
EFA-assisted projects
Procurement Under Assistance Agreements (40 CFR
Part 33), which codifies EPA's requirements for
U-l
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10/2/85
DRAFT
«
State procurement, administration, and management
of subagreements under assistance agreements.
** *r
These regulations are supplemented by the EPA Grants
Adrir.ist ration Division's (GAD) £ssista-ce
Manual (Dece-£er 1984)*, which outlines policies and
procedures that States and EPA must use in managing the
administrative aspects of EPA financial assistance
programs.
Both 40 CFR Parts 30 and 33 apply to the Superfund
remedial program The manner in which they apply,
however, differs depending upon the mechanism used to
document the remedial response agreement. If the State
elects to assure the lead, a Cooperative Agreement is
negotiated and executed, the State then must comply with
both cf these Agency regulations in their entirety On
the other hand, if EPA retains the lead management role,
* Contact EPA's Grants Policy and Procedures Branch,
Grants Administration Division, or, if copies are
desired, the National Technical Information Service
U-2
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10/2/85
DRAFT
Requiring contractors to retain site records for
three years or until after completion of any
enforcement actions begun during the
pr 03 ect /activity
*
In addition, the Superfund program adheres to the general
Agency-wide policy that, when requested by EPA, States
must provide.jdocun'entation to support cost recovery
pf f p- •< Documentation must be .sufficient to answer such
questions as what work was authorized, what work was
completed, what charges were incurred for the work, and
what payments were made for the work
This appendix describes the general Agency
requirements for cost documentation and, where necessary,
additional Super fund-specific requirements or procedures
for documenting State expenditure of CERCLA funds The
appendix is presented in five sections.
Cost Accounting, which reviews the requirements
tnat a State accounting system must fulfill
U-4
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10/2/85
DRAFT
State Recordkeeping. which summarizes general
file and record requirements, including the key
documents that a State should retain
extractor Files, which describes tr.e general
recordkeeping requirements for State contractors,
including the key documents that they must retain
Record Retention and Access, which discusses time
requirements for record retention, access to
State records by EPA and the U S Department of
Justice (DOJ), and related subjects
Internal Controls, which summarizes procedures
that States must have in place to oversee
accounting
To provide the maximum benefit to users of this appendix,
each of the first four sections is divided into two ma^or
subsections one which discusses general EPA requirements,
and one which explains any additional Superfund-specific
procedures Section 5, Internal Controls, is not
U-5
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10/2/85
DRAFT
subdivided since there are no specific requirements in
this area imposed by the Superfund program. As additional
assistance to users and to allow quick, convenient „
reference to existing Agency requirements, Exhibit U-l, on
the following pages, surnarizes the contents of this
appendix
U-6
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10/2/85
DRAFT
General EPA Requirements
EXHIBIT U-l
SUMMARY OF COST DOCUMENTATION REQUIREMENTS
Corresponding
Agency C t tat ions
1. Cost Accounting
CJ
t
-4
Document all costs, includ-
ing costs of all subagree-
ments, by EPA Assistance
Identification Number
Develop accounting system
in accordance with require-
ments of 40 CFR Part 30
- Complete records of fi-
nancial actions
- Records showing source
and application of all
project funds
- Control over all project
funds and property
- Comparison of actual vs.
planned costs
- Prompt disbursement of
Federal funds
- Procedures to determine
allowable, allocable, and
reasonable costs
- Audits of the system and
procedures to resolve find-
ings
Requirements
Unique^ to Super fund
40 CFR 30.510
Assistance Administration
Manual
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10/2/85
DRAFT
EXHIBIT U~l
SUMMARY OF COST DOCUMENTATION REQUIREMENTS
(continued)
Corresponding Requirements
General EPA Requirements Agency Cttat^ons^i tinigue to Superfund
^f
Incorporate generally recog-
nized accounting procedures i
into system
- Establishment of rost
center
- Recording of all transac-
tions in a timely manner
- Monthly financial reports
Maintain accounting records to
support all financial transac-
tions
^ - Cash receipts register
o° - General ledger
- Cost control ledger f
- Voucher journal
- Payroll records
- Property records.
2. General Recordkeeping . 40 CFR 30 500, .510, and 2. General Recordkeeping
.531
. Maintain official records . AAM, Chapter 19, . Maintain all records on site-
for each EPA assistance paragraph 2 specific basis and identify
agreement and identify them . State Participation in the records by site number and
by EPA Assistance Identifica- Superfund Remedial Program activity code
tion Number (SPSRP), Chapter VII,
section D.3. . Maintain records for pre-remedial
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10/2/85
DRAFT
•T
VO
General EPA_Requir_ementg^
EXHIBIT U-l
SUMMARY OF COST DOCUMENTATION REQUIREMENTS
(continued)
Corresponding
Agency Citations
Requirements
IJnique to Superfund
- Amount, source, and dis-
position of all project
funds, including Federal
monies, by object class
category
- Program income
- Non-expendable personal
property purchased as a
direct cost under the CA
- Time records and other sup-
porting data
Maintain records on contrac-
tor, if one is being used to
conduct project under a CA
- Bid records
- Contract/statement of work
Delivery/work orders
- Change orders issued to
contractor
- Subagreement documents
- Payment vouchers
Document non-compliance or
disputes relating to a CA
- EPA stop-work orders
- Suspension/termination
notices
activities
Report personnel hours quar-
ter ly
Documentequipment costs by
Superfund Account Number and
EPA Assistance Identification
number
Document correspondence relating
to NPL deletion, if applicable.
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10/2/85
DRAFT
General EPA Requirement's
EXHIBIT U-l
SUMMARY OF COST DOCUMENTATION REQUIREMENTS
(continued)
Corresponding
Agency .Citations
Requirements
JJnique to Superfund
- Correspondence concerning
disputes and appeals
- Final determinations
. Maintain records concerning
agreement closeout and proj-
ect audits.
3. Contractor Files
. Contractors must retain all
records in accordance with
f Agency procedures (40 CFR
^ Parts 30 and 33); must in-
clude:
- Bid records
- Contract/statement of work
- Change orders
- Progress reports
- Invoices
- Stop-work orders
- Documentation concerning
disputes/claims
. Contractors must retain
similar records for all
subcontractors
40 CFR 30.500(b) and 33 275 3 Contractor Files
AAM, Chapter 19, paragraph
1-b, and Chapter 20, para-
graph 1-b.
Contractors must maintain records
by site-specific project for
three years or until enforcement
action is completed
Contractors must provide expert
testimony/witnesses and infor-
mation. upon requesfc--1iey~EPA><
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10/2/85
DRAFT
cj
General EPA Reguirementa
EXHIBIT U-l
SUMMARY OF COST DOCUMENTATION REQUIREMENTS
(continued)
Corresponding
Agency Citations
Record Retention and Access
Retain records for three
years from end of project
unless litigation, cost
tecovery and/or any dis-
putes are initiated before
the end of the three-year
retention period
All records are subject to
audit/inspection, transfer/
disclosure of information
. Allow EPA and the U S
Comptroller access to all
records.
Requirements
Unique to Superfund /
40 CFR 30.501
AAM, Chapter 19, paragraph 2
SPSRP, Chapter VII, sec-
tion 0 3
4. Record Retention and Access
Retain records for three years,
beginning with the date of the
final Financial Status Report
. Provide FPA/DOJ access to
specific project files
. Provide EPA/DOJ with original
or copies of specific docu-
mentation, when and as requested
Notify EPA prior to placing any
records in storage or archieves
Microform copies may not be
substituted for original EPA
assistance-related documents in
active files without EPA approval
. Archive research not permitted
without written authorization
from EPA.
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10/2/85
DRAFT
General EPA Requirements
EXHIBIT U-l
SUMMARY OF COST DOCUMENTATION REQUIREMENTS
(continued)
Corresponding
Agency Citations
5. Internal Controls
Develop internal controls
- Staff training
- Methods of authorization,
recordkeeping, and trans-
action coding
- Procedures for expen-
diture control
- Property safeguards.
Requirements
_Unjgue to Superfund
40 CFR 30 510
AAM. CHapter 20,
paragraph 3.
5. Internal Controls
No additions specific to Super-
fund.
G
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10/2/85
DRAFT
1 COST ACCOUNTING
Regulation (40 CFR 30 501) directs a State that'is
operating under an EPA assistance agreement to maintain an
accounting syste- that fulfills specific Agency
requirements This pertains to both CERCLA Cooperative
Agreements and SSCs under which the State is providing
services Requirements in 40 CFR Part 30 and in Chapter
20 of the Assistance Administration Manual which apply to
Superfund remedial response agreements are reviewed in
this section, those specifically imposed by the Superfund
program are also discussed. For additional details, refer
%
to Chapter 20 cf the Assistance Administration Manual.
A General EPA Recruirerents
State accounting systems must document all costs,
including costs of subagreements, incurred on a project
and must identify these costs by the EPA Assistance
Identification Nuroer In general, costs entered into the
system should be classified by the following categories*
U-13
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10/2/85
DRAFT
Personnel and fringe benefits
Travel
Equipment
Materials and supplies
Specific items in each category are shown in Exhibit U-2,
onf the following page.
Requirements for State accounting systems and for
operation procedures are found in 40 CFR Part 30. In
general, the State must develop and implement procedures
for exercising tight control over disbursements of funds,
»
including system audits and internal reporting of
financial status on a monthly basis. Both EPA accounting
system requirements and procedures are summarized in
Exhibit: U-3, following Exhioit U-2
Finally, States must support all entries in their
accounting systems by maintaining appropriate source
documentation and recorcs Supporting documentation may
originate from eitr.er within or outside the State's
U-14
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EXHIBIT U-2
ACCOUNTING urOHIRKMENTS ITIH PbKSONNFL, TRAVEL.
FQUIIWHT, AND SUPPLY COSTS
10/2/85
DRAFT
COST CATEI.OHY
Personnel
Prime Benefits
INFORMATION TO BL OOCUHFNTED
Position titles of staff
Number of hours
Salary of staff (annual or hourly rate) ^
Personnel costs, by individual, supported by
payroll and time records
Bants (percentage or other) upon which frinqe
benefits are calculated
Frlnqe benefit records and coils, by Individual
COST CATEGORY
Equipment*
INFORMATION TO BE DOCUMENTED
r ami type (a) of equipment purchased
<>f each piece
. Juat I Meat Ion for purchases over $10,000
'ilon of usage charge employed to allocate
coiti, -»»lnq records
. Provl-. i»r, that Statei
Properly allocates cost among
al(>- pacific renedlal projects**
- Ai i. urately documents the use o(
C'l'tfrnent on a remedial site-specific basis**
- I .Mills EPA's disposal instructions
Travel
purpose and number of trips
. Starting point and destination
«
. Transportation method
. Per diem/subsistence while on travel
. Numb«r of persons travel in
-------
10/2/85
DRAFT
EXHIBIT U-3
GENERAL EPA COST ACCOUNTING REQUIREMENTS/PROCEDURES
APPLICABLE TO SUPERRJND
COST ACCOUNTING REQUIREMENTS
ACCOUNTING PROCEDURES
Ledgers with accurate, current,
and complete records of finan-
cial actions
Records, with supporting docu-
rentE, sr.cwir.g tr.e source and
application of all project funds
Provision for control over, and
accountability for, all project
funds, property, and other as-
sets
Records that compare actual
costs with budgeted costs for
each project
Procedures to ensure prompt
disbursement of Federal funds
Procedures for determining
allowaole, allocabie, and
reasonable costs
-+*
Audits of the system at least
once every two years
Aadit files containing audit
reports (interir/final), in-
cluding correpondence related
to audits, resolution of audit
findings, appeal documents,
and final resolutions
Recording all transactions in <
timely and verifiable manner
Designation of one person, oths
than the individual responsible
for prefect operations, to ecc
for all project funas
Preparation of internal monthl:
financial reports (these are tl
basis for State quarterly prog:
reports to EPA and for Financic
Status Reports).
U-16
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10/2/85
DRAFT
offices, but must include complete records that explain
each transaction Such records should include at least
the following:
Cash receipts register
General ledger
Cost control ledger
Voucher journal
Payroll records
Property records
Employee tircesheets
Travel/per diem expenses
Additional documentation n-ay be necessary, depending on
the transaction For example, support for purchases of
materials would include purchase requests, requests for
proposals, purchase orders, contracts, receiving reports,
progress payrients, invoices, and progress reports
U-17
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10/2/85
DRAFT
*
8. Requirements Unique to Superfund*
Requirements for Superfund projects, either conducted
under Cooperative Agreements or applicable SSCs, include
those cited above The major difference for CERCLA
remedial projects is that, in addition to identifying
records using the Superfund Assistance Identification
Number, record files must also be identified with the
assigned Site Nunber and the appropriate Activity Code.
For Superfund, the State must record in its accounting
system all costs incurred during each project budget
period by activity and, for remedial projects, by site
name Unlike remedial activity procedures, pre-remedial
activities (-e.g , preliminary assessments and site
inspections) require only that the Superfund Cooperative
Agreement Number and the Superfund Account Number be
identified
* The State should also note that the cost of upgrading
existing accounting systems is an allowable, indirect
cost under a Cooperative Agreement Where the upgrade
is necessary solely to satisfy EPA or Superfund
requireTer.ts, the State may charge costs incurred as
direct costs, provided that this is consistent with
the State's normal procedure to account for such costs
U-18
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10/2/85
DRAFT
The State should pay special attention to costs that
>
may be specific to Superfund or that have special
documentation requirements in the CERCLA program, these
may include costs incurred by personnel supporting
litigation associated with the site/activity or may entail
costs of equipment purchase and use. Costs associated
with litigation must be documented by Site Number and
Activity Code, and should be specified in the State's
Cooperative Agreement application before they are
incurred> "This may be accomplished by including a
provision on the sab]ect; the following language may be
lased for this purpose*
The State shall provide documentation of all
costs incurred by personnel in the support of
litigation activites These support costs should
be limited to
Court expenses
Preparation of briefs
Legal research
Court time
Investigation reports
U-19
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10/2/85
DRAFT
•
Development of evidence
Legal fees
The Superfund program has developed specific
procedures for allocating and recording costs for
equipment purchase and use These are displayed
graphically in Exhibit tt-4, on the following page, and are
discussed in further detail in Appendix T of this manual.
When such costs are involved, all funds initially are
obligated to a non-site specific account (9ZZ). Once the
State develops a usage charge rate and obtains EPA
approval, the funds are transferred to a site-specific
account and filed by the Cooperative Agreement and
Superfund Account Nunbers. The State ultimately is
responsible for documenting expenses and usage by the
site-specific accounting system.
The State also mast be aware of the needs of possible
cost recovery actions Guidance on the development of EPA
cost recovery cases, and the types of documentation
necessary for them, can be found in the following
documents
U-20
-------
EXHIBIT U-4
PROCEDURES FOR
DOCUMENTING PURCHASE AND USE
OF
CERCLA-FUNDED EQUIPMENT
EPA Obligates Funds
to "9ZZ" Account
(Non-site Specific)
State Purchases
Equipment
State Develops
Usage Charge Rate
EPA Reviews/
Approves
Charge Rate
EPA Transfers Funds
to Site-specific Account
Using CA and Superfund
Account Numbers
State Documents
Expenditures and
Usage
U-21
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10/2/85
DRAFT
RCRA/CERCLA Case Management Handbook
Cost Recovery Procedures Under CERCLA (August 26,
1983)
Procedures for Documenting Costs for CERCLA
Section 107 Actions (January 30, 1985).
For cost recovery purposes, the State must designate one
individual to account for all project funds and must
identify this person to EPA This designated individual
must be someone other than the SPO or State official
responsible lor tne project WOTK ror pre—remedial
activities,,±his designated person must be responsible for
all such activities within the State To formally
0»
identify this individual to EPA, the State should include
a suitable provision in its Cooperative Agreement
application (a similar provision must be included in
SSCs). The following is an example of appropriate
language for such a provision
The State designates [name of individual,
telephone number, and mailing address] as the
individual responsible for accounting for all
U-22
-------
10/2/85
DRAFT
funds for the [nairse^ of _ac t1vity] at the [name]
<
site The Statetguarantees flhat this individual
will not be responsible for the performance of
any portion of tne worK to oe completed at tne
site This ir.eividuai uiii inform the E?A
Project Officer, as requested, of the
expenditures at the site and will be responsible
^
for ensuring that all transactions for the
project are recorded and documented according to
State cost accounting procedures, pursuant to 40
CFR Parts 30 and 33.
Further, Superfund cost recovery requirements dictate
that the State must contr.it itself to cooperate and
coordinate with EPA in cost recovery actions, as specified
in Appendices F and H of this manual To this end, the
State must maintain detailed records sufficient to
substantiate such actions, as specified in the guidance
documents cited above The State also should include a
provision on this subject in its Cooperative Agreement
application to demonstrate that it understands its
responsibilities (a similar article will be added to any
U-23
-------
10/2/85
DRAFT
SSCs under which the State is providing services). Sample
language for a remedial Cooperative Agreement application
follows:
t''a~9 cf Ststel and E?£ agree to cooperate ar.d
coordinate in all efforts relating to any
judicial actions taken against responsible
parties for injunctive relief and cost recovery
in regard to this site, including case
prosecution and negotiation of settlements.
This language may be modified, as appropriate
U-24
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10/2/85
DRAFT
2. GENERAL STATE RECORDKEEPING
*
Under EPA's regulation,, States must establish aft
f\
official file for each assistance agreement and must
maintain evidence to doc^-Ter.t activities conducted using
Federal funds. Both general requirements, applicable to
all EPA assistance programs, and Superfund-specific
requirements are outlined below
A. General EPA Reo-uiregents
Official State response agreement files must be
established upon ;joint signature of the agreement by EPA
and the Sta'te Files must be maintained by EPA Assistance
Identification Nur.ber and must contain agreement records,
accounting books, and other information that can be used
to trace all transactions for assisted activities In
general, tne State file must be sufficient to document the
following.
Assistance agreement development and contents,
including letter of credit drawdown records
U-25
-------
10/2/85
DRAFT
•
The amount, source, and disposition of all funds
. received for the project, including all Federal
monies
Prcgra-i incc-s, tr.at is, receipts ar.i
expenditures of income from charges generated by
the project (such as sale of a solid waste
by-product)
Non-expendable personal property purchased as a
direct cost under the agreement
Time records and other supporting data, including
justification for use of "force account" work
tta.
Compliance with applicable cross-cutting Federal
statutes and regulations.
The records kept must trace each/^rojec^ transaction^
Files should include records submitted to EPA and those
generated internally by the State. Thus, State files, at
a minimum, should contain all project records that relate
56061 U-26
-------
10/2/85
DRAFT
to financial transactions (including Financial Status
Reports and letter of credit drawdowns), technical
progress, and site visits.
The State ray perform all or part of trie VCTK Lr.isr
the agreement itself, using its own employees and
equipment — "force accounts" — or may procure a
contractor(s) to do so. In the latter case, the State
must retain detailed records in its files to document
contractor actions, these should include:
Bid records, including those relating to bid
protests
Contract/statement of work
Delivery/worK orders
v *
Change orders issued to the contractor by the
State
Contractor progress.reports
Subagreetrents and supporting documentation
Payment vouchers
m
Documentation concerning any claims, disputes, or
non-compliance actions on the part of the
contractor
U-27
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10/2/85
DRAFT
A similar level of detail should be maintained for all
force account work.
It is also necessary for State files to document any
audits conducted either during the project or at final
agreement closeout, and to contain any other records
generated in closing out the agreement Since audits are
essential for substantiating State costs, the State file
should include detailed records on all aspects of the
interim and final auditing process, including all records
pertaining to those reports and resolution of audit
findings, appeal documents, and final disposition.
Agreement closeout records retained should include the
final Financial Status Report, termination notices, if
applicable, and any documents or correspondence relating
* .
to final deobligation of funds
B RecuireT.ents Unique to Superfund
When Cooperative Agreements are initiated using
Superfund monies, the State must maintain project files
for remedial activities on a site-specific basis,
identifying them by Site Number andV^Activity Code^ as well
U-28
-------
10/2/85
DRAFT
as by EPA Assistance Identification Number. In addition,
other reporting of information is necessary to ensure the
accuracy and completeness of records for possible cost
recovery actions These include the following
Direct and indirect costs incurred during each
budget period for each site-specific remedial
activity
t
For pre-remedial activities, the State is not
required to maintain documents on a site-specific
basis, it should retain all personnel records and
financial documentation, and should report all
financial information using the Assistance
Agreement and Superfund Account Numbers. The
State also should retain copies of all guaterly
reports, which will display personnel hours by
activity and expeditures by object class category
(see Appendix A for additional information)
Costs incurred by personnel involved in
litigation support activities (e g., drafting
affidavits), in this case *he State is reguired
to keep records on ail litigation activities.
-------
10/2/85
DRAFT
whether or not the costs incurred are allowable
under the agreement, to ensure complete records
(see suggested language on page U-19).
Equip-ent costs and use, documented c~. a
site-specific basis, for pre-remedial activities.
equipment should be documented by Superfund
Account Number only (see Exhibit U-4 and the
discussion in Appendix T)
Agreement between EPA and the State to cooperate
and coordinate in efforts to recover respective
costs of response actions (see Appendix F for
derails).
i *
Superfund record^eeping requirements for SSCs oblige the
State to maintain detailed records on the amount, source,
•
and dispos*tion of all State cost-sharing funds, and on
A
non-expendable personal property contributed as part of
the State's cost share match The State also must
maintain a financial management system that meets the same
requirements imposed on Cooperative Agreements and must
U-30
-------
10/2/85
DRAFT
guarantee that it will make all financial records
available to EPA for audit to verify the eligiblity and
**
allowability of State costs.
U-31
-------
10/2/85
DRAFT
3. CONTRACTOR RECORDS
EPA regulations require State contractors to'maintain
financial and other records pertinent to a project. In
general, the rervirerects that apply to contractor records
under Superfund agreements are similar to those to which a
State must comply. This section discusses Agency-wide and
Superfund-specific contractor obligations in this area.
A General Super fund Recrui regents
Agency guidance requires that all contractor records
be in accordance with 40 CFR Parts 30 and 33 and Standard
Form 269 (used to record the financial status of all
project activities, visits, technical progress, etc.)
The Assistance Administration Manual (Chapter 19,
paragraph 1 b) further specifies that contractor records
must adequately reflect a contractor's participation in
the project
/
U-32
-------
10/2/85
DRAFT
The actual records that a Superfund remedial
contractor should maintain are comparable to those for the
State, identified in the previous section. These include'
Bid records
Contract/statement of work
Delivery/work orders
Change orders issued by the State
Progress reports
Invoices
Stop-work orders
Documentation concerning any claims or disputes.
Contractor invoices should iteTize expenses to the level
of detail shown in Exhibit U-2 and should include a
breakdown of overhead charges, reflecting the activities
performed for each project. Contractors also must
maintain similar records for all subcontractors
B. Requirements Unique to Superfund"
There are several requirements that the Superfund
program imposes upon contractors. They include the
requirements that contractors'
U-33
-------
10/2/85
DRAFT
Maintain detailed records by site and activity
Provide testimony/witnesses during cost recovery
actions, when requested by EPA
Provide information, upon request from EPA
Contractors also may be required to provide documentation
that there is no conflict of interest situation which may
affect their work on a remedial project
U-34
-------
10/2/85
DRAFT
\
4. RECORD RETENTION AND ACCESS
«
•
This section discusses several types of issues that
may be grouped generally under the category of record
retention and access.
A. General EPA Requirements
The State and its contractors must retain all
financial records, supporting documentation, and other
records pertinent to each remedial response agreement, or
to ar.v subaareenent thereunder totalling more than
$10,000, for three years beyond the end of the prefect
period. Exceptions to this three-year requirement are
Cost Recovery Action, Litigation, Claim, Appeal,
"c"r\ Audit - If any cost recovery action,
litigation, claim, appeal, 6r audit is begun
n
before the end of the retention period, records
must be kept until these actions are completed
and resolved, or until the end of the prescribed
retention period, whichever is later.
U-35
-------
10/2/85
DRAFT
Property Records - Records pertaining to the
procurement and use of real and non-expendable
personal property acquired with assistance funds
must be retained for three years following the
final disposition of the property.
Terminated Agreements - Records for a terminated
award must be retained for three years from the
termination date except that records of property
must be kept for_ three years after the property
i t f I-
is officially,disposed
t
All State and contractor records pertinent to an EPA
assistance agreement are subject to inspection and audit.
Such records, therefore, must be made accessible to EPA,
the Comptroller General of the United States, the
cognizant single audit agency, or any authorized
representative of these entities Access to records by
these entities is not limited to the mandatory retention
period. States and contractors must make such records
available, upon request, at any reasonable time as long as
the records exist.
U-36
-------
10/2/85
DRAFT
State and contractor records that are related to the
response agreement are subject to disclosure in accordance
with the provisions of the Freedom of Information Act. In
fulfillment of that Act, it is EPA policy to make the
fullest possible disclosure of infornation to any person
who requests it without unjustifiable expense or delay
States and contractors must respond to disclosure of
information requests in accordance with 40 CFR Part 2
However, they may claim non-disclosure rights for
information submitted to EPA provided that the information
is clearly marked "trade secret," "proprietary," or
"business confidential" at the time the information was
first received. The State or State Attorney General must
provide prior approval for the release of any information
requested when CERCLA enforcement is contemplated or
underway,
'B Requirements Ur.icie to Superfund
There are several record retention and access
requirements that are specific to the Superfund program
As stated above, States are required to retain records for
at least three years after the end of a project For
t
Superfund response actions, this three-year period begins
U-37
-------
10/2/85
DRAFT
with the submission date of the final Financial Status
Report., Contractors on Superfund response projects are
required to retain all records for three years after
project completion or until any litigation begun during
the project has been resolved.
The U.S Department of Justice (DOJ) is EPA's
authorized representative for CERCLA-funded response EPA
and DOJ jointly develop cost recovery cases and both
entities must be able to examine supporting documentation
as neeced. Therefore, both EPA and DOJ must have access
to original State and contractor records and files on an
on-going basis In addition, in its response agreenent
the State ccrnits itself to cooperating and coordinating
with EPA in cost recovery efforts. To this end, the State
also must provide EPA and DOJ with information on
site-specific costs and uith copies of substantiating
documentation when requested to do'so.% Sjch information
will be required to help ensure success
:ul recovery,
should such actions be initiated. If the State complies
with the provisions of 40 CFR Part 30./the Assistance
U-38
-------
10/2/85
DRAFT
Administration Manual, and Superfund-specific procedures
discussed in this appendix, the following information
easily should be accessible when requested:
Employee hours ar.d salary (tinesheets)
Employee travel and per diem expenses
Receipts for materials, equipment, and supplies
Sarrple collection and analysis costs
*
Subagreement costs (acknowledgement of completion
of-work, paid vouchers, payment schedules, copy
of subagreement).
S~ate Cooperative Agreement (invoices, letter of
credit drawdown vouchers, etc.)
Any costs not included in the above categories
associated with site response.
U-39
-------
10/2/85
DRAFT
The State should include a provision on this subject in
its Cooperative Agreement application; a similar article
will be added to all SSCs under which the State is
providing services Suggested language is as follows:
To assist in cost recovery actions, the State
agrees to provide EPA and DOJ, and their
representatives, on-going access to the files
that are maintained for this Cooperative
Agreement, and to instruct its contractors to do
likewise The State also agrees to provide both
EPA and DOJ access to any additional original
documentation required in HJuLUiii-j.-al 1 1 L ^-a a L -
cost recovery action' Should either EPA or DOJ
request information on site-specific costs or
copies of supporting documentation to use in
their cost recovery actions, the State agrees to
provide such information and/or copies of
documentation to EPA and/or DOJ within the time
specified in such request.
This provision can be' modified, as appropriate, ftJr'
SSCs.
U-40
-------
10/2/85
DRAFT
In Superfund, substitution of original
documentation by microform records is not allowable
due to the need for original documentation in cost
recovery actions. If a State has limited storage
capacity, it must request and receive written
-approval prior to substituting microform copies for
original documents that relate to Superfund response
agreements ^ The State should acknowledge this
"requirement in its Cooperative Agreement application
or SSC. a suitable Drovision is orovided below:
The State understands the need to'retain original
documentation for Superfund cost recovery
purposes- In accordance with 40 CFR Parts 30 and
33, the State will retain records generated under
* »
tnis Cooperative Agreement for three years from
the date of submission of tne final Financial
Status Report or until any litigation or cost
recovery actions begun during the project are
resolved, whichever is longer. The State will
*
notify the EPA Project Officer 30 days in advance
of the proposed disposition of any records from
the file developed for this project. The State
0-41
-------
10/2/85
DRAFT
further agrees to notify the EPA Project Officer 30
days in advance of the lapsing of the required record
retention period, to allow EPA to determine
appropriate disposition.
A similar article will be added to SSCs under which the
State supplies services as part of its cost share match;
the above language can be modified for this purpose, as
appropriate
U-42
-------
10/2/85
DRAFT
•
5. INTERNAL CONTROLS
A State accounting system must have internal control
procedures to ensure that all proiect funds, property, and
other assets are used solely for purposes authorized in
the remedial response agreement. The degree of internal
control that is necessary depends upon the State's size
and on the resources that it has available. Internal
control procedures either may be written or informal, but
must provide effective financial and operational
controls Specific requirements for internal controls
include
Appropriate staffing, with associated training
Adequate methods of authorization, recordxeeping,
and transaction coding
Expenditure controls to ensure that goods and
services are acquired at the lowest possible
price and reflect conformance with the
subagreement
U-43
-------
10/2/85
^ -^ DRAFT
Property safeguards and inventories to prevent
« misuse and loss
Monitoring of the subagreement to ensure that
contractor responsibilities are fulfilled.
An effective internal control operation provides a system
of checks and balances for all accounting and
recordkeeping in the cost documentation process and, thus,
is a vital part of the State's accounting system. Chapter
20 of the Assistance Administration Manual provides
{ additional details on internal control requirements, these
are equally applicable to a State's accounting system for
Suoerfund —
U-44
-------
United States - - *^-_
Environmental Ptotacttoo
Agency ,-" * » "
The
• .-> _ .-. P - • »
•5—- ^^ ^** <^ '>-" ^r*
-------
\
t
* UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
GTON cc 2c-s=;
12 see
THE ADMINISTRATOR
To the States'
One of the major Federal initiatives during the last few years has been
to pro\ide the States v,i± opportunities for substantial and meaningful
involvement in national programs. In writing the Superfund legislation
in 1980, it was Congress's intention that the States would assume much of
the responsibility for cleaning up the nation's hazardous waste sues. The
recent reauthorization of Superfund has furthered those opportunities by
increasing the size of the Trust Fund and by defining a greater role for
the States
^
In keeping with the new authorization, I am pleased to provide you
with this document. As Superfund cleanups rapidly increase over the
next few years and we near completion on many long-term projects, cost
recovery from Responsible Parties will become an ever important and
complex responsibility The approach taken in this guidance is
innovative in that it recognizes and allows for the uniqueness of each
State and \et permits us to achieve national consistency in the way we
approach cost recovery It is for this reason that I believe this document
will provide you vuth valuable guidance as >ou plan to participate in
future cost recovery actions
Lee M Thomas
EPA Administrator
-------
United S'ates
Environmental ? otection
Agency
Office Of
Tne Cornotroller
Washington DC 20*60
NoveiiDer 1987
Financial Management Division - Superfund Accounting Branch
r \ » • ^. _ ^ \
v\ * ; /. ( f ^ ' j i k •. f i ,= ; -i r /iv p)
TABLE OF CONTENTS
I.
INTRODLCTION
A
B
C
D
E
F
Purpose
Scope
Intended -\udicn>.e
Structure
Reicrcnccs
T^e Legal 82^15 For Co«;t Recovers
1 Gc"iC'al Legal Requircmcn «
2 Records Required To Document Expenditures
3 Rccuirc°i(.'"^ For DocLTcn's SLbmitted A^
R^uirerrem That Expenses Be Reasonable and
5 Testing Of Siaie Expense Records In Litigation
G An CKeme^ Of Cost Documentation Objeunes
Page Number
1
1
1
1
4
4
-------
TABLE OF CONTENTS
(Continued)
Page Number
*
II. FINANCIAL MANAGEMENT GUIDANCE 11
A Overview 11
1 State Superfund Financial Management Objectives 11
2 Accurate Sue and Actt\ ,u Sreciric Cos; Information 11
3 Complete Sue and Activity Specific Cost Information 11
B Guidance 12
1 Superfund Accounong Objectives 13
2 Accounting For Direct Costs 15
3 Accounting For Indirect Costs 16
4 Accounting For Core Program Costs 16
5 Superfund Reporting Requirements 16
ID RECORDKEEPING GUIDANCE 18
A Overview 18
1 State Superfund Recordkeepmg Objectives 18
2 Inabiho. Of Non-Centrali?cd Recordkeepmg 18
S>stems To Meet Superfund Recordkeepmg
Objectives
3 Acti\e Site Filing 18
4 Recordkeepmg Planning 19
B Guidance 19
1 Establishing Sac Files 19
2 Records To Be Retained In Sue Files 20
-------
TABLE OF CONTENTS
(Continued)
3 Reconciling Site Files
4 Storage Media And Record Safety Procedures
5 Record Retention Requirements
APPENDICES
A P.ar^"g Fo- S're S _:>:-*_-i Objectives
B State Legal Responsibilities
C EPA Audits
D Where To Go For Further Information
INDEX
P age Number
24
24
24
. 25
29
31
34
36
Cover photos
front cover Hilton Head South Carol-na
back cover Euclid Creek Park Cleveland Ohio
photos Oy N Smgelis 1987
-------
I INTRODUCTION
The Comprehensive Environmental Re-
sponse, Compensation, and Liability Act of 1980
(CERCLA) established the Hazardous Substance
Response Trust Fund (Superfund) to provide
monies for the identification, pnonnzation and
clean-up of the nation's uncontrolled hazardous
waste sues CERCLA, as amended by the Super-
fund Amendments and Reauthonzation Act of
1986 (SARA), provides for the recovery of re-
sponse costs incurred by the Federal government
and states from responsible parties Response
costs include expenses for mvesogatory, clean-up,
enforcement and administrative activities When
EPA provides funds to a state to undertake the
response action, the state must document its ex-
penses so that EPA may later seek to recover those
costs Although separate legal actions are possible,
generally the states and EPA cooperate and pursue
a joint cost recovery action against the responsible
party(ies)
The resulting need to document costs by sue
to facilitate Superfund cost recovery actions cre-
ates a complex set of financial management and
recordkeeping problems By pulling together ail
state Superfund financial management and
recordkeeping guidance in a single, comprehen-
si\ e presentation, this handbook is designed to help
state agencies receiving Superfund monies to
understand and meet their site-specific financial
management and recordkeeping responsibilities
A. PURPOSE
This handbook serves several purposes
Establishes consistent and complete
guidance covering state Superfund ob-
jectives in two areas
Financial management of Superfund
expenditures
Recordkeeping necessary for cost
recovery
• Provides a planning approach to meeting
Superfund financial management and
recordkeeping objectives
* Acquaints the states with their legal re-
sponsibilities and EPA's audit require-
ments
• Provides guidance on where to go for
further information
B. SCOPE
This handbook summarizes state Superfund
financial management and recordkeeping guid-
ance Because it applies to all U S states and
tern tones, it is necessarily broad in scope, focusing
primarily on how states can develop financial
management and recordkeeping systems that sat*
isfy EPA cost recovery documentation needs The
handbook provides a conceptual understanding of
EPA's financial management and recordkeeping
objectives, so that state managers have a frame-
work for developing their own procedures to meet
those objectives
C. INTENDED AUDIENCE
This handbook was written with the widest
possible audience in mind It is intended for all
state personnel wuh Superfund-related responsi-
bilities including staff outside the Superfund pro-
gram area who may have an important cost docu-
mentation role (for example, staff in tne state
controller's or treasurer's office) Appendix A, on
financial management and recordkeeping plan-
ning, contains a section on identifying who should
both receive a copy of this handbook and be in-
cluded in the state's planning process
D. STRUCTURE
The handbook is divided into three chapters
and four appendices The remainder of this chapter
explains the legal framework for cost recovery
actions, and provides an overview of EPA's finan-
cial management and recordkeeping objectives for
-------
Introduction
'Page 2
Superfund Chapter n details state financial man-
agement guidance for the Superfund program.
Chapter in provides guidance on the maintenance
and retention of supporting Superfund cost docu-
mentation - time sheets, travel vouchers, contractor
invoices and other records - in individual financial
sue files.
Appendix A, "Planning For State Superfund
Objectives," is intended for those states not cur-
rentlv meeting all of EPA's Superfund objectives
and in need of help in developing a plan to achieve
the objectives Appendix B, "State Legal Respon-
sibilities," provides information on documentation
and assistance that states are expected to provide
during litigation of a cost recovery case Appendix
C, "EPA Audits," describes the audit process and
the results of recent Agency audits of state Super-
fund programs. Appendix D, "Where To Go For
Further Information" is discussed below A topical
index can be found on page 36 at the back of this
handbook.
E. REFERENCES
While this handbook is intended to be the
primary source for state Superfund financial man-
agement and recordkeepmg guidance, other EPA
manuals and directives contain procedural guid-
ance and background information on many of tne
topics discussed here In particular. State Partici-
pation In The Superfund Program provides guid-
ance on all phases of a state Superfund effort
Appendix D is designed to help state managers
determine which reference materials cover the
topics in which they are interested
State managers should not limit themselves
to consulting reference materials EPA regional
staff, or Headquarters if necessary, should be con-
sulted for clarification or further detail on EPA
objectives EPA Headquarters staff will work with
regional staff to answer fulls any questions from
states on the topics discussed: in this manual
F. THE LEGAL BASIS FOR COST
RECOVERY
The primary purpose of the financial man-
agement and recordkeepmg objectives described
in this handbook is to facilitate Superfund cost
recoveries. Tax revenues, plus recoveries from
responsible parties, are the main sources of funds
for cleaning up hazardous waste sites, and the
amount of money that can be raised through taxes
is of course strictly limited Recoveries have the
potential of playing a major role in rcplemsmng tne
Superfund, thereby providing funds for additional
clean-up work.
It is important for administrative and pro-
gram managers as well as their staffs to understand
the legal principles underlying the cost recovery
objectives outlined in this text Management
should review all Superfund financial manage-
ment procedures to assess whether the expense
documentation their system produces satisfies the
legal standards outlined in this section
The remainder of this section is divided into
five pans. The first pan provides an overview of
CERCLA/S ARA cost recovery cases and explains
the role of cost documentation in the cases against
responsible parties. The three following pans
detail the specific legal requirements that must be
met in order to document clean-up cos>ts The final
pan of this section explains briefly how the
government's expense claims are tested in hnga-
non, a topic covered in more detail in Appendix B
Examples are provided throughout to illustrate the
legal issues involved
1. General Legal Requirements
In order to pursue a CERCLA cost recovery
action against a responsible pany, the government
must be able to prove three points first, that the
pany was responsible for the release or potential
release of a hazardous substance, second, that the
work the government did at the sue was necessary
-------
Introduction
Page 3
to remedy or prevent such a release of a hazardous
substance; and third, that the government can
accurately document the cost of the remedy or
prevention This handbook will focus on the docu-
mentation a state must provide to government
attorneys during a recovery action to prove suc-
cessfully the cost of the remedy Proof of respon-
sibility and proof of die necessity of the work done
are beyond the scope of this handbook
2, Records Required To Document
Expenditures
Over the course of work on a sue, a state
typically incurs costs in several categories* direct
labor by state personnel, travel, supply and equip-
ment costs, contractor costs, and administrative
and overhead ("indirect") costs A cost documen-
tation package submitted by a state must demon-
strate four points about each category of costs in
order to stand up in court
• That the work or purchase was author-
ized by the state
• That die work or purchase w as completed
• That the state was billed for the work or
purchase
V
• That the state actualk pjtd for the wont
or purchase
Together, these four po'mts establish the
"history" of an expense item and assure the court
of the validm of that expense
Clearly, proving all four of these points for
each type of expense requires supporting records
from various sources A detailed list of what types
of records should be retained for each category of
expense is provided in Chapter HI, the aim of this
section is to provide state personnel with an under-
standing of why specific documents should be kept
To illustrate the four requirements, some examples
are provided below
Contractor costs require extensive documen-
tation. In order to demonstrate that the contractor's
efforts were authorized, a copy of the contract
should of course be retained. But in this case, the
stale's authorization process begins with a Request
For Proposal (RFP) and detailed evaluations of
contractor bids, consequently, these should also be
retained Similarly, proving dial the agreed-upon
work was completed requires not just the state's
final sign-off on the contract, but also technical
progress reports detailing contractor activity at
each stage of the project. Copies of contractor
invoices satisfy the requirement for billing records,
while records showing payment dates, amounts
and reference or check numbers would be required
to demonstrate payment of invoices1.
Employee labor costs are somewhat easier to
document A list of staff assigned to work on a site,
with notation as to their titles, clearly establishes
state authorization for the work. Timesheets can
provide proof of the remaining points under most
circumstances The timesheet itself constitutes a
bill, moreover, as a form designed to be put directly
into the state's payroll system, it also provides
proof of payment as long as any subsequent correc-
tions are attached. The signature of the employee
and the employee's supervisor provide certifica-
tion that hours on the timesheet were spent working
on the site
3. Requirements For Documents Submitted
As E> idence
Each document submitted as evidence or
kept on file to support costs claimed by the state
must meet a number of legal requirements speci-
1A state's contractors must be able to provide documentation
demonstrating authorization completion, billing and pay-
ment for their own expenses such as salaries, supplies and
equipment, subcontractors and so on See Chapter III for
details on documentauon requirements for state contractors
-------
Introduction
fied in the Federal Rules of Ev idence The^e legal
requirements, designed to ensure the authenticity
and reliability of evidence, are as follow, i
• The document must ha\e been produced
at roughly the same time as the expense
was incurred.
• The document must be produced and
utilized in the normal course of business
• An expert witness must be provided if
requested to testify to the authenticity
and reliability of the document
For example, a consistent pattern of employ-
ees filling out timesheets several weeks or months
after the fact would raise questions as to the relia-
bility of the state's time records. Similarly, an
accounnng report not normally produced and dis-
tributed to appropriate supervisory personnel
might not be accepted as evidence, because a
supervisor not familiar with a report could not
testify in court as to the reliability of the informa-
tion it contains
4. Requirement That Expenses Be
"Reasonable And Necessary"
In addition to the above requirements, only
reasonable and necessarv' costs are recoveraDle
Mans of the records that a state must retain sen e to
prove thai costs are reasonable and necessary For
example, travel authorization foms documenting
the purpose of staff tnps should be retained in order
to prove that travel costs claimed by the state were
for reasonable and necessary trips
t
Recent audits of states' Superfund programs,
discussed more fully in Appendix C, have shown
that some states have awarded contracts in viola-
tion of EPA's procurement regulations as stated in
40 C F R Pan 33, and, indeed, in violation of the
states' own procurement standards, EPA's pro-
curement regulations are designed to ensure mat
competitive and cost-effective contractor services
Page 4
and equipment are obumed o> states Violations
of the regulations make it difficult to demonstrate
that contractor costs or equipment purchases are
reasonable and necessary Cost-plus-percentage-
of-cost contracts, improper bid evaluation proce-
dures and other violations of EPA's procurement
regulations may result in the coun disallowing
these claimed costs Furthermore, if auditors dis-
cover improper procurement practices, claimed
contractor costs may be disallowed by EPA, dra-
matically increasing the state's costs
5. Testing Of State Expense Records In
Litigation
A cost documentation package submitted by
a state in a cost recovery action may be successfully
challenged by lawyers for the responsible pany if
any of the standards described above are not met
Opposing counsel can question state personnel
under oath on state recordkeeping, financial man-
agement, procurement practices and other topics.
They can require state managers to respond to
written questions on these subjects In addition,
they have the right to examine all supporting ex-
pense records in order to search for inaccuracies,
inconsistencies and other flaws Appendix B pro-
vides further information on the kinds of inquiries
a state may have to respond to in litigation and
describes state responsibilities for assisting Fed-
eral government law >ers in their handling of a cost
recovery case
G. AN O\ ERV I£\\ OF COST "
DOCUMENTATION OBJECTIVES
This section provides a svstemaac overview
of all the financial management and recordkeeping
objectives discussed in this handbook Tne term
"systematic" applies because successfully meeting
EPA's Superfund objectives in these areas requires
coordinated action by staff in several functional
areas over a long period of time In order to initiate
and maintain this kind of closely-coordinated ac-
uvity, staff and management need to be able to
view specific objectives as pan of a larger process
-------
Lnuuuuiuun
Pages
The focus of this section is a four-page ex-
h bit depicting a hypothetical or "model" financial
management and recordkeepmg system that meets
all EPA Superfund-related objectives, with an
emphasis on cost documentation for successful
cost recovery actions The system depicted in the
exhibit is not "the answer" to meeting the objec-
tives presented in this handbook There is no one
answer applicable to all states, each state has devel-
oped or will develop its own system, according to
its own management, structure and internal proce-
dures The aim of the exhibit, and of this section,
is simply to stan managers thinking about financial
management and recordkeeping objectives in a
systematic way
Six "funcoonal areas" are used in the exhibits
on the follow ing pages Legal, Contracts Admini-
stration, Program Office, Recordkeeping, Ac-
counting Operations and Paying Agent In many
states, several of these functions will be housed
within the same organization For example, the
"Program Office" and "Contracts Administration1'
may well be pan of the same group Or, "Contracts
Administration" and "Accounting Operations"
could be separate offices under the state
comptroller's office Whatever organization they
are pan of, each of the six areas is likely to have a
different primary supervisor and hence, is treated
as a separate function
Activities in the financial management and
recordkeeping model presented here generally
occur in three phases, which are described below
Cost documentation is the "thread' which joins all
three phases, since cost documentation activities
begin the moment work starts at a site and do not
end until work is finished .ind the cooperative
agreement is closed out
Initiation describes the initial steps taken
when work (other than a preliminary assessment)
begins at a site Exhibit I-1 (a), the first of the four
exhibit pages, outlines the initiation phase
Ongoing Acti\iry represents the day-to-day
financial management and recordkeepirg activi-
ties that take place dunng work at the site Phase
two is depicted m Exhibit I-l(b) and I-l(c), the
second and third exhibit pages
Cost Documentation Package Preparation
begins when state program managers receive a
request from EPA or the state's own legal staff for
a package detailing the state's expenses at the sue
The key document in a cost documentation pack-
age is an up-to-date summary of costs This sum-
mary, which should break out costs by category
(salaries, travel, supplies and equipment, etc),
goes in the front of the package The rest of the
package is divided into sections containing sup-
porang documentation for each of the cost catego-
ries listed in the summary If there are a lot of
records in any one section, a "section summary"
should be included For example, contractor costs
could be summarized with an exhibit listing the
total amount paid to each contractor Reconcili-
ation of all the expense records in each section to
the cost summary is the final step in the preparation
of a cost documentation package No cost docu-
mentation should be submitted to Federal or state
legal staff until the expense records in the package
reconcile exactly with the cost summary Exhibit
I-l(d) on the fourth exhibit page describes the
process of preparing a cost documentation pack-
age
Of course, the activities described in the
following exhibit fall out from specific guidance
detailed later in this handbook Readers may want
to return to the exhibit after they have read the
remainder of the handbook minallv, however,
they should focus on trying to look at Superfund
financial management and recordkeepmg func-
tions as an interrelated cost documentation system
As intended, the exhibit leaves much unsaid
about the specific procedures used to ensure that
the six functional areas do exactly what they are
supposed to, when they are supposed to Proce-
dures for implemenong a system that meets EPA's
Superfund financial management and recordkeep-
-------
Initiation Phase: An Example
c.
rt
CJ
o
1-muliona)
Area
Arhvily
Adniinisir.il ion
tonnacl
»nd (inwards
copies to
recofillteeping
Program
Oil lie
W
-------
Activity: An Example
o
5
I IIIUtlOD.ll
A tea
Ailitilv
Ug.il
Contrails
Administration
Program
Ollke
A]i|>(iivis hills
pitivittt s U ih
inform Hinn i)ii
Wolk lIlltlL
m
X
Rttnrd-
kreping
K>
IIIIIL ami Uavcl
11 <>riK in silc lil
jrul i)ii(,nnl lik
Retains copies
of invoice* in
site file and
anginal file
Auouming
()|K*raiions
I DllK I UK. JIUl
Ir ivt I i li ii(,i*l In
Mil Hilti
it it
1 oads contract
coils by site
inlo accounting
system
Paying
Agent
Pays conli uiii
lurwaid^ I'cixi
of pa> mi nl
•0
09
fro
-------
Ongoing Activity: An Example
o
»*•*
>-*
o
At livily
Functional
A ro.i
Contrails
Administration
Program
fWiu:
ffl
1~>
IT
Keiuncilo
iumnury with
supporting
Jmumcnli
Rcuini copy of
and Si 272 in site
«nd original
Record-
keeping
Accounting
Operations
Paying
Agent
oo
o
00
-------
Cost HtKiimcnlahon Package Preparation Phase: An I \ample
•iiiulioii.il
A r«>a
Arhvilv
Ug,il
Krvitwi nisi
pai k^gc l»r
anil
roniraus
AdininistraliiHi
Program
(Mfite
Ketord-
ktxpmg
I'dying
Agi nl
Krtonnlcs
lumnuiy with
supporting
dicumenti
-------
Introduction Page 10
i I
i
ing objectives can only be designed by the states
themselves For managers who realize that their
states are not meeting those objectives, Appendix
A of this handbook may be helpful It describes
how to inmate a planning process aimed at devel-
oping policies and procedures to follow the guid-
ance contained in this handbook.
-------
Financial Manaeement Guidance
Page 11
D. FINANCIAL MANAGEMENT
GUIDANCE
This chapter provides guidancev to state
management personnel charged with meeting
EPA's objective of recording Superfund expenses
by site and activity The Superfund program re-
quires state financial management and accounting
systems to track expenses by site alid activity This
is necessary to ensure that the state and EPA
together can effectively recover their respective
co:»t snares from responsible panics In addition.
sue and activity specific accounting information
provides a crucial check on the completeness of a
state's Superfund expense records
A. OVERVIEW
This miaal section provides a general over-
view of the capabilities state accounting systems
should have, and discusses the role of accounting
and financial management systems in the cost
documentaiion process The second section of this
chapter provides specific guidance on meeting site
and activity specific accounting and financial re-
porting objectives
1. State Superfund Financial Management
Objectives
The state Superfund financial management
guidelines presented in this handbook are designed
to ensure that site and activity specific expenditure
information is available to state managers, ena-
bling them to file accurate drawdown requests,
Financial Status Reports (SF 269s) and Federal
Cash Transaction Reports iSF 272s), make sue-
by-site budgeting decisions and accurately docu-
ment site clean-up costs
To achieve these goals, states are expected to
implement sue and activity specific costing sys-
tems An integral part of those sv stems are control
procedures to ensure that such accounting informa-
tion is
• Accurate, that onh costs attributable to a
sue are charged
• Complete, that all costs attributable to the
state's Superfund effort are recorded and
charged to individual sues and activities.
These two primary objectives are discussed further
below
2. Accurate Site And Activit} Specific Cost
Information
State financial management departments
must ensure that sue.and activity specific account-
ing information is accurate. Audits of state Super-
fund financial management practices have shown
that many states have accuracy problems, includ-
ing
Inaccurate direct labor charging due to
clerical errors or questionable time re-
cording practices
I
• Incorrect application of indirect cost
rates
• Duplication of charges, for example,
where a cost included in the indirect rate
is also charged directly to a sue
There are two procedures to reduce or elimi-
nate the types of financial management problems
described above First, state managers should
thoroughly review important financial manage-
ment procedures Secondly, s»*e and actmtv spe-
cific accounting reports should be reconciled peri-
odically to supporting cost records, e g nmesheets,
voucners and contractor invoices EPA suggests
that such a reconciliation be performed at least
twice a year
3. Complete Site And Activity Specific Cost
Information
It is crucial for both program management
-------
Financial Management Guidance
Page 12
and cost recovery purposes that accounting infor-
mation provided by estate's Financial management
department record all Superfund costs In particu-
lar, staff who maintain files of supporting cost
documentation rely heavily on accounting infor-
mation to decide what expense records to obtain
and file. Site and activity specific expense reports
serve as a "roadmap" of the costs the state has
incurred Expenses that do not show up in account-
ing reports cannot be adequately documented,
moreover, management will be unable to plan for
these exp-nses in iu» budgeting process
Given the importance of recording all Super-
fund expenses, state managers should review their
financial management procedures to ensure that all
allowable costs as defined in their agreement with
EPA are recorded by site and activity in their
accounting system Guidance on conducting such
a review, which EPA calls a "Superfund Expense
Accounting Review", is provided in Appendix A
This overview simply outlines the review process
and provides some basic Superfund accounting
terminology used throughout this chapter and
Appendix A
In review ing Superfund accounting practices
and in reading the remainder of this handbook,
some distinctions between the various types of
costs a state accounting system must process
should be kept in mind
• Direct costs are those expenses whicn are
or should be charged to sues using
amesneets, vouchers and other bite and
activity specific records The second
section ot this chapter pro\ ides specific
guidance on which costs should be
charged directly to sues
• Indirect costs are administrative and
overhead expenses that support a state's
overall Superfund effort Each itate
negotiates an indirect cost^rate annually
with EPA, Department of Health and
Human Services (HHS) or another Fed-
eral agency, under the terms of Office of
Management and Budget (OMB) Circu-
lar A-87 Each state's rate agreement
differs in its terms, but typically the rate
includes common state charges for rent,
data processing, centralized financial
operations and other services, as well as
salary costs for top departmental manag-
ers
• Core Program Costs are Superfund
mr.3z.rnen! and di^rurujiriuon vosis
that states do not charge directly to sites
or include in the cost base of the negoti-
ated indirect cost rate Pnor to the Super-
fund reauthonzauon legislation, these
general program administration costs
could not be funded by EPA because only
management and administration costs
directly charged to sites were allowable
under Cooperative Agreements (CAs).
SARA allows EPA to enter into CAs to
fund "overall implementation .and ad-
ministration of remedial efforts " Cer- ,
tain management and administrative
costs that are not being charged directly
to sues and are not included in a state's
indirect cost base may be funded through
a separate Core Program Cooperative
Agreement (CPCA)
Using these distinctions, state financial
managers can catalog their state's Superfund costs
and assess whether the\ are completely accounted
for \ia direct, indirect or core program charges
State financial managers should refer to Appendix
f\ and the second section of this chapter for specific
guidance on how their accounting systems should
record and report Superfund costs
B GUIDANCE
This section presents EPA's accounting and
financial management guidance for states partici-
pating in the Superfund program The first pan of
the section describes how state accounting systems
-------
Financial Management Guidance
should record costs by site and activity, and pro-
vides suggestions on overcoming accounting sys-
tem software limitations The three following pans
provide specific guidance on accounting for direct
and indirect costs by site and activity, and on
accounting procedures for core program costs
Information on filing site and activity specific
Financial Status Reports and Federal Cash Trans-
action Reports for Superfund cooperative agree-
ments is provided in the last pan of this section
1 Superfund Accounting Objectives
The pnmary Superfund accounting objective
is that state accounting systems be capable of
producing repons for each Superfund assistance
agreement that break out costs by site, then by
acttviiy, and then by the object class categories
provided for in the state's assistance agreement
EPA has defined seven activities that should be
used m all cost repons submitted The activities
and their EPA account codes are as follows
• J - Pre-remedial Activities
• L - Remedial Investigation/Feasibility
Study
• NT - Remedial Design
• R - Remedial Action
E - Removal Action
• S - Operation and Maintenance
, • 3 - State Liaison
(A core program cooperative agreement
represents an exception to the above procedures, in
that core program expenses are for the benefit of a
state's overall Superfund program rather than any
one sue Consequently, recipients should track
core program expenses by object class category
onl\ For reporting purposes, all core program
expenses fall under EPA's acnv ity code 7, general
support and management)
Page 13
In order to produce reports at such a level of
detail that are both accurate and complete* state
accounnng systems should record site, activity and
expense class information with each accounting
entry for Superfund direct costs States may use
their own accounting codes for tracking costs by
activity, but the EPA activity codes must be used
for drawdown requests and Financial Status Re-
pons (FSRs),
Many states have developed accounting sys-
te-ns to track exre-ses by ass.?•_-.<.? agreeirsnt
number, which can readily be adapted to meet
Superfund sue and activity specific accounting
objectives For those states expenencmg problems
accounting for Superfund direct costs on a sue and
activity specific basis, Exhibit D-1 on the follow-
ing page provides some possible solutions.
The pnmary problem with many site and
activity specific accounting systems reviewed by
EPA has been that they calculate direct charges to
sites using budgeted, "estimated" or average data,
rather than actual salary, travel and other costs.
Actual costs should be the basis for all repons of
direct site charges and accounting systems that
cannot repon actual costs by sue and activity
should be updated2
' A state must assure EPA pnor to initiating a remedial action
that it will assume responsibility for all future operation and
maintenance (OA.M) EPA does not fund O&M of a
completed remedy EPA will onlv fund that pan of the
remedial action necessary to ensure that the installed rem-
ed v is operational and functional for a period up to one year
EPA will fund up to 10 vears of operation of such treatment
or measures involved with the restoration of contaminated
ground or sun ace water or unul le\ els that assure protection
of human health and the environment are achieved, which-
ever occurs first Both of these situations are considered pan
of remedial action and therefore, must be funded under the
'R code
2 A Core Program Cooperauve Agreement could be used to
fund or help fund certain accounting system updates neces-
sitated by Superfund accounting requirements It may also
be used for microcomputer systems and software to assist
states in meeting their Superfund accounting responsibili-
ties
-------
Financial Management Guidance
Exhibit II-1
Paee 14
Suggestions For Solving
State Accounting System
Limitations
Limitations
Possible
Solutions
5 2*? orT'r|ar\ firanciil
reporting system canncK
accept sue and acn\ ity
specific data
• Moaifv, accounting software
to support additional data fields
Use fields designated for another purpose
to record sue and activity information'
irinn I
• Develop m-house database to track
Superfund costs by site and activity
Other secondary accounting s\ stems
(e g pas roil) cannot accept sue and
acnvitv specific data
Modify accounting software to
support additional data fields
Ise fields designated for another purpose
to record site and activuv information1
Develop in-house database to track
Superfund costs by sue and activity
Difficult to transfer sus-spec'fic
data between pnmorv financial
reporting sv stem and o'her sv items
Develop software to 'down load"
from one svstem to another
1 For example, one State uses the field designating the assistance agreement number to designate site
and acuvuv instead Since thev know, which sue and activities perum to which cooperative agreements,
thev can siriplv pnnt out expense reports for all sues under a given C\ when filing a drawdown
request or Financial Status Report
-------
Financial Management Guidance
Page 15
2. Accounting For Direct Costs
Superfund direct costs should be charged to
specific sites and activities on a regular basis
Many states simply charge all direct expenses to
specific sues and activities as the outlays occur
Some states, however, charge direct expenses to a
general purpose account and then make periodic
accounting entries to transfer charges from that
account to site/acnvity accounts If such a proce-
dure is used, direct charges should be "backed out"
of general purpose accounts at least monthly, so
that the accounting entry is made at roughly the
same time the expenses are incurred The follow-
ing sections provide detailed guidance on account-
ing for the major categories of direct costs
a. State Salary Costs
Staff whose nme is to be charged to specific
sues should fill out sue-spccific timesheets for
input of site and activity specific charges into the
accounting system Once used to enter information
into the state's accounting system, the timesheet
becomes the primary salary expense record to be
retained by the recordkeepmg staff Staff whose
salary is included in the cost base for the state's
indirect cost rate cannot charge any hours directly
Other staff, however, may charge time directly to
either a CPCA or a site-specific CA, depending on
the nature of their work dunng a given time period
For example, a staff member may charge 30 hours
to the CPCA dunng a pay penod for general
administrative work and the rest of his or her time
to specific sites This type of charging must, of
course, be backed up by time sheets which clearly
document the activities being charged to either a
CPCA or a site-specific CA
b. Travel Expenses
All transportation, meal and lodging ex-
penses incurred traveling to and from sites or on
site-specific business should be recorded on a site
and activity specific basis' // is essential that
employee timesheets and ira\el vouchers agree If
an employee submits a voucher for travel to site X
and the employee's timesheet doesn't show any
time charged to site X for that day, both the salary
and the travel charges could be disallowed in an
audit In addition, such inconsistencies make re-
covery of those costs difficult.
Expenses for travel to multiple sites should
be divided among the sites in a logical way and
charged directly Depending on circumstances,
travel costs can be charged in several \», a> s In irost
cases, apportioning the total travel cost between
sues based on the relative amount of time spent at
each sue is acceptable The state's travel vouchers
should provide space for charges to multiple sites.
c. Equipment Costs
Equipment costs should be charged on a site-
specific basis Detailed guidance on procedures
for equipment cost accounting, equipment pur-
chases and disposal of equipment is contained in
State Participation In The Superfund Program and
40 C F R Part 30, EPA's general requirements for
assistance recipients, this section simply outlines
equipment accounting procedures
States have four options for acquinng the use
of equipment costing 510,000 or more
• Lease the equipment using Superfund
money
• Procure a contractor to perform the task
using their own equipment
• Purchase the equipment with state funds
and charge EPA a usage rate for the
equipment
• Purchase the equipment with Superfund
money
'Program staff and senior management whose salary is
included m the slate's indirect cost rate should ensure that
none of their travel is charged directly to cooperative agree-
ments
-------
Page 16
The first two of these options are the easiest,'
1 both from an administrative and accounting stand-
point If a contractor is used, accounting proce-'
dures are as described in the following secnon If
equipment is leased, sue charges should be gener-
ated each month for the sues on which the equip-
ment was used, based on relative amounts of time
the equipment was used at each sue
If the state purchases equipment, it should
develop a "usage rate" for the equipment based on
the estimated life of the equipment If a piece of
equipment is expected to last 1,000 hours, and its
cost (purchase price plus estimated maintenance
less salvage value) equals $10,000, then the usage
rate is $1000 per hour. States should set up a
voucher system to record by sue the hourly usage
of each piece of Superfund equipment and then
apply the equipment usage rates to calculate direct
equipment charges. A similar procedure should be
used for equipment purchased with Superfund
money. (Administrative procedures for Federally-
funded equipment purchases are more complex
than for the other equipment options, however
Before a state can purchase equipment with coop-
erative agreement funds, it must show that the
equipment could not be obtained through leasing,
contracting, or state purchase Also, states must
keep an inventory of Superfund equipment, and
follow EPA instructions for acquisition and dispo-
sition of the equipment as detailed in State Partici-
pation in the Superfund Program )
d. Contractor Costs
Contractor costs must also be accounted for
on a sue and activity specific basis EPA requires
us contractors to submit invoices with costs broken
down by sue and activity, states must do the same
Contractor invoices should be organized in such a
way that state staff reviewing the invoices for
payment can quickly identify which charges apply
to which sues, and, if the contractor has not already
done so, mark the invoices with designated sue
codes for input into the state accounting system
3. Accounting For Indirect Costs
Accounting for indirect costs by site and
activity is a straightforward process Each rate
agreement will specify the "cost base" to which the
rate is to be applied This information is usually
found under the heading "Basis for Application";
typical examples of wording are
• "Basis for application Direct salaries
and wages plus applicable fhnge benefit
costs"
• "Basis for application Total direct costs
including applicable fringe benefit costs
but excluding equipment and subcontract
costs "
The indirect cost rate should be applied to sue
costs exactly as specified Most state accounting
systems make this calculation automatically and
create indirect charge accounting entries for each
sue and activity on a monthly basis. If indirect
charges have to be calculated manually for
drawdowns and FSRs, accounting reports detail-
ing sue and activity costs by object class categories
will be helpful in calculating the correct "cost
base "
4 Accounting For Core Program Costs
Core program costs do not need to be attrib-
uted to specific sues and activities for drawdown
purposes since they are charged directly to a sepa-
rate core program CA For cost recovery purposes,
however, core program costs do need to be allo-
cated to sues and activities Separate guidance will
describe state responsibilities in this allocation
process
5. Superfund Reporting Requirements
Reporting requirements under Superfund
differ from those under other assistance programs
primarily in that financial reports must include sue
-------
Financial Management Guidance Page 17
and activity specific expense information EPA's
Financial Status Report (SF 269) must be com-
pleted on a site and activity specific basis, and filed
• annually
• within 90 days of the completion of each
activity at a site
• within 90 days of the termination of the
cooperative agreement
The Federal Cash Transaction Report (SF 272) is
required quarterly and must list drawdown activity
by site
-------
Recordkeeping Guidance
Page 18
III. RECORDKEEPING GUIDANCE
State recordkeepmg procedures for cost
documentation are receiving increased attention
due to the expansion of state participation in the
Superfund program This chapter provides guid-
ance to state personnel charged with implementing
EPA's objectives for the collection, filing and
retention of Superfund cost records It discusses in
detail the recordkeeping approach adopted by
EPA, colled actne site filing
It is important to note that the cost documen-
tation objectives described in this chapter apply to
both the state and the state's contractors States are
encouraged to move their contractors toward adop-
tion of the recordkeeping approach outlined in this
chapter through the use of specific language in all
procurements.
A. OVERVIEW
Effective recordkeeping procedures are es-
sential to cost recovery This overview describes
the objectives state recordkeeping functions arc
expected to meet and outlines some of the reasons
for EPA's adoption of active sue filing as the way
to meet those objectives Suggestions on
recordkeeping planning are also provided
I. State Superfund Recordkeeping
Objectives
The recordkeeping guidance presented here
has two objectives first, a complete set of ex-
pense-related records for each site, and second,
timely access to those site records As discussed in
the introduction to this handbook, incomplete
documentation of cleanup expenditures seriously
weakens a cost recovery action Similarly, EPA,
Department of Justice (DOJ) and state legal staff
need soeedy access to state expense records to
pursue cost recovery actions effectively
2. Inability Of Non-Centralized
Recordkeeping Systems To Meet
Superfund Recordkeeping Objectives
Active sue filing, described in detail below,
was developed in response to numerous cost docu-
mentation problems encountered at EPA Expense
records could not be obtained quickly enough to
meet Imgauon schedules, and they were frequently
incomplete The problems resulted from several
factors
• Records were stored in numerous loca-
tions, making retrieval a time-consuming
task involving coordination with each
location.
• Superfund expense records were co-
mipgled with other expense records.
• Records were not stored in a standard
order Timesheets from one region might
be ordered by pay penod and employee
name, while another region would order
them by section and employee number
• Required expense records were some-
times not retained due to confusion over
who was responsible for their retention
The problems described above are a by-prod-
uct of not having a centralized recordkeeping sys-
tem for Superfund expense records Active sue
files and standard agency-wide filing procedures
were developed to centralize the locanon and stan-
dardize the format of Superfund expense records
0
3 Active Site Filing
Active site filing is a simple, straightforward
process A unique file or set of files should be set
up for each site As money is spent on the site,
expense records are generated, and photocopies of
the expense records are placed in the active site
files The originals of expense records should be
-------
KecoroiceepLig uuiaance,
rage
..»ed in separate "Superfund onginai document
files " In some states, expense records must be
returned to the state treasury or a central record
storage sue. In such cases, it is advisable to store
Superfund records separately from other state rec-
ords, in order to prevent them from being disposed
of when other state records are "purged", since the
retention requirementsforSuperfund originals are
exactly the same as for the site files themselves
(Retention requirements and microfilming stan-
dards for Superfund originals are discussed at the
end of this chapter) EPA has found that the most
effective way to protect Superfund original records
from accidental disposal is to store them separately
from other records
Where expense records contain charges to
more than one site, multiple photocopies should be
made, one copy for each sue- specific file In order
to facilitate quick retrieval of Superfund expense
documents, the sue files should all be arranged in
the same way Filing procedures should be docu-
mented, to ensure that records are filed correctly A
list of the expense records that should be copied for
sue files is provided in the second section of this
chapter, along with requirements for how long the
originals and copies should be retained
Effective sue filing is facilitated if
• The sue files are under centralized con-
trol, since they are likely to be better
organized if only a few staff members
have day -to-day responsibility for updat-
ing them
• Staff responsible for maintaining sue
files have access to detailed site-specific
accounting reports as a check on the
completeness of their files (see "Recon-
ciling Sue Files" in the next section)
4. Recordkeeping Planning
A recordkeeping system to meet the objec-
tives described in this chapter cannot be developed
without some advance planning. Detailed guid-
ance on recordkeeping planning is provided in
Appendix A of this handbook, this section simply
discusses some of the basic points that should be
considered In developing a Superfund record-
keeping system, state managers need to decide
• Who should be responsible for collecting
and filing records in the sue and original
files''
• Which departments generate the expense
documents that rscorcxeepmg staff need
to pull and copy for sue files and then
store in original files''
• How do recordkeeping staff get access to
original expense documents forcopying7
• How should the expense records be or-
dered in the sue files9
• What arrangements should be made for
cost-effective and safe long-term storage
once activity at the sue has ceased and the
files are no longer being updated9
What measures should be taken to ensure
that the sue files and original files are
protected from fire, water and other
damage0
B. GUIDANCE
This section provides guidance for die devel-
opment of active site files It discusses what types
of documents should be retained in active sue files,
how the files should be ordered, how long the files
should be retained, and procedures for periodic
reconciliation of expense records.
1. Establishing Site Files '
As discussed in the previous section, active
sue filing involves the maintenance of a separate
set of files for each sue and procedures for copying
-------
Recordkeepmg Guidance
Page 20
original expense records and filing the copies tn the
sue files In order to minimize die copying burden
on the states, EPA has designated certain expense-
related records, primarily documents that apply to
multiple sites, as exempt from sue filing Exhibit
ID-1 on the following page lists those documents to
which a state's recordkeepmg staff should have
ready access An m-depth description of the docu-
ments that should be kept in site files follows in the
next section,
In addition to the general objective that states
maintain active site files, there are two specific ob-
jectives state recordkeepmg systems are expected
to meet
• All site files should be arranged in the
same way and states should develop a
single "filing protocol" for Superfund
sue files Records for the various types of
costs should be kept m the same order for
example, the sue file might begin with
employee timesheets, followed by em-
ployee travel costs, followed by contrac-
tor invoices, and so on V* ithin each cost
category, records should be filed the
same way in each sue file For example,
employee timesheets might be filed by
pay penod, division and employee num-
ber Each state will have us own filing
protocol, what is important is that docu-
ments be filed in a consistent order in all
site files
Regional Financial Management Office
is allowed 30 calendar days to compile a
cost documentation package detailing
state and regional expenses, so a state
would be expected to respond to EPA's
cost documentation request within that
time frame.
2. Records To Be Retained In Site Files
This section discusses in general terms what
types of documentation should be copied and filed
in active sue files In addition, notation is made as
to what documents should be readily accessable to
recordkeepmg staff State managers responsible
for Superfund expense recordkeepmg should read
carefully Section B of the introduction to this
handbook, "The Legal Basis For Cost Recovery,"
in order to understand the rationale behind the
guidelines provided in this section
Records documenting the following areas
should be retained for cost recovery purposes
• Payroll
• Travel
• Contractor Services
• Supplies and Equipment
Indirect Costs
• State recordkeepmg systems must be
able to provide EPA's regional offices
with complete site-specific expense
documentation within deadlines set fay
each regional office Typically, an EPA
1 While charges u> core program cooperative agreements are
not site-specific, the same types of documentation neces-
sary for a site-specific CA (payroll travel, etc ) should be
retained in support of core program charges Therefore, it
may be helpful 10 think of a CPCA as a "site " and sei up a
"core program cooperau\e agreement file for photocopies
•»f all core program expense records
Core Program Costs
Each category of records is discussed more com-
pletely below Exhibit III-2 on page 23 summa-
rizes those records that should be retained in sue
files
a. Payroll
Records that show time or attendance of
individuals at specific sues should be copied and
retained in site files Subsequent adjustments to
-------
Summary of Documents Required,
But Not in Site Files
AREA OF COST
DOCUMENTATION REQUIRED
Payroll
Contractor
Services
Supplies and
Equipment
Indirect Costs
CA and
Amendments
Core Program
Costs
• Position titles of staff
• Salary of staff (annual or hourly rate)
• Methodology for determining fringe berefit rate
• Authorization
* Proposal
• Contractor cost data (EPA form 5700-41)
* Cost price analysis of proposal and record of
negotiations
• Proposal evaluations
• Contract
• Work orders and change orders
• Reports on contractor work
• Audits of contractor
• Type(s) of materials and supplies furnished
• Tspe(s) of equipment
• Contracts
• Leases
• Purchase orders ,
• Receiving reports
• Explanation of usage rate" calculation
• Rate a greenest
• Rate documentation package
Cooperative Agreement
Amendments
All documentation described for categories abo\ e
-------
Page 22
any timesheet should be photocopied and clipped
to the copy of the timesheet in each sue file
Recordkeepmg staff should also have available
documentation on the position titles and salaries of
the staff who worked on that site
If the state's accounting system does not
calculate fringe benefit charges automatically,
each site file should contain worksheets showing
how fringe benefit charges were calculated for that
site. If an allowable fringe benefit rate is not
specified in the state's negotiated indirect cost rate
agreement, the methodology the state uses for
allocating fnnge benefit costs to sites should be
documented (copies of that documentation do not
need to be kept in individual sue files) In addition,
notation should be made of which state official
approved the fringe benefit allocation methodol-
ogy.
b. Travel
The following records relating to travel ex-
oenses should be retained in sue files travel au-
Jionzauons (containing sue names) that document
the purpose of the trip, travel vouchers submitted
by employees showing starting point and destina-
tion, transportation method, and the number and
names of persons traveling, receipts provided by
employees showing" actual costs incurred (only
major receipts need to be included in sue files -
hotel, airline, car rental, etc ), and proof that the
travel vouchers were paid (for example, a report
generated by the state treasury showing checks
issued)
c. Con i racto r Se r\ ices
A state should be able to document com-
pletely its relationship with its contractors Sue
files should contain
• Contractor invoices (contractors should
break out costs by site and activity)
Project officer approval of each invoice
• Proof of payment of the invoices
In addition, procurement or recordkeeping staff
should have available the following records for
each contractor doing Superfund work
• The contractor's proposal/bid
• The contractor's cost data, submitted as
pan of us proposal (usually on EPA Form
5700-41)
» Cost/pnce analysis of proposals received
and record of negotiations
• Other documents relating to the state's
evaluation of contractor proposals
• The contract/statement of work
* Work orders and change orders
• Quarterly technical progress reports
• State audits of the contractor.
d. Supplies and Equipment
Each sue file should contain equipment pur-
chase invoices, contractor invoices, or equipment
lease bills for all equipment used at the sue Proof
of payment records should also be provided in sue
files (for example, a report generated by the state
treasure showing checks issued) If EPA was
charged a 'usage rate" for equipment, hourly rec-
ords of equipment use at the sue should be included
in the sue file
The state should also have available docu-
mentation on the type of materials or supplies
purchased for use on the sue and copies of purchase
orders, receiving reports, leases and contracts for
supplies For purchased equipment that is shared
between multiple sues, a "usage rate" is developed
for each piece of equipment (see Chapter II), and
-------
cxmoii
Page 23
Summary of Documents Required in Site Files
AREA OF COST
DOCUMENTATION REQUIRED
Payroll
Travel
Contractor
Services
Supplies and
Equipment
Indirect Costs
Core Program
Costs
> Time attendance records
• Tune attendance amendments
• Worksheet showing fringe benefit calculations
(if not calculated b> accounting system)
• Authorizations (including purpose of tnp)
• Vouchers showing
Starting point and destination
Transportation method
Number and names of persons on tnp
• Receipts, (airline, hotel, etc )
• Proof of payment l
• Contractor invoices
« Project officer approval of invoices
• Proof of payment 1
1
• Invoices
• Proof of pavment'
• Hourlv records of equipment use
\Vorksheet showing calculations (if not calculated by accounting
• All documentation described for categories above
Proof of pavment must be documented for each expense charged to a sue Generally, a copy of a
payment schedule which includes the check number and the amount is sufficient
-------
Recordkeeping Guidance Page 24
the state should have a written explanation of how 4. Storage Media 4nd Record Safe'
the usage rate was developed for each piece of Procedures
equipment used on a Superfund sue
States should store active site files in loca-
e. Indirect Costs nons as secure as possible from fire, water and
other damage Once activity has ceased at a sue,
If the state's accounting system does not similar provisions must be made for safe long-term
calculate indirect charges automatically, site files storage of sue files. At thr time, microfilm copy-
should contain copies of worksheets used to make ing of inactive sue files and original expense rec-
mdirect cost calculations. Recordkeeping staff ords is allowed by EPA, provu'ed the microfilming
should also have available a copy of each year's meets certain technical standard, (see Appendix D
indirect cost rate agreement (a one to three page for references)
document), as well as the package the state pre-
pares to document us annual indirect cost rate 5. Record Retention Requirements
proposal
The state and its contractors are required to
f. CA and Other Amendments retain the documents described in this chapter for a
minimum of three years after submission of a final
Recordkeeping staff should have access to FSR for a sue, after which the state and us contrac-
copies of the state's cooperative agreements and tors must obtain written permission from the ap-
amendments to those agreements propnate regional sue project officer before dis-
posing of any of the records described in the
g. Core Program Costs chapter
If a state has entered into a Core Program
Cooperative Agreement with EPA, recordkecpmg
staff should have available a copv of the agreement
and any amendments In addition, a "core program
cooperative agreement file" should be set up for
timesheets, travel vouchers, equipment informa-
tion and invoices, and .ill other relev ant records
described above
3. Reconciling Site Files
To ensure that all active site files are com-
plete, the files should be periodically reconciled
with summary reports produced bv the state ac-
counting system This procedure vull ident.fy
needed records not included in the site files In
order to make reconciliation and subsequent copy-
ing of missing documents a manageable task, EPA
recommends that active sue files be reconciled to
accounting system reports at least twice a year
-------
APPENDICES
-------
Appendix A
Page 25
APPENDIX A
PLANNING FOR STATE SLPERFLND
OBJECTIVES
This appendix is intended to assist state
managers in developing a plan to meet the Super-
fund financial management and recordkeeping
objectives described in this handbook Effective
planning to meet those objectives involves four
steps:
1 Identify key players who should be involved
in the planning process, put together a group
to work on planning.
2 Conduct a detailed assessment of state finan-
cial management and recordkeeping prac-
tices to determine how well the state cur-
rently meets Superfund objectives m those
areas
3 Using the results of the assessment, develop
procedures to bnng state practices in line
with EPA financial management and
recordkeeping objectives
4 Document the new procedures in a handbook
or manual to v.hich all employees can refer
Each of these steps is discussed in detail below
A. Identify Key Pla>ers
Typically, one or two staff members in the
state's Superfund program and financial manage-
ment areas are assigned the task of bringing the
state into compliance with EP \ objectives These
staff members are unkkeh to have the authority
and knowledge to develop a new set of financial
management and recordkeeping procedures en-
tirely on their own For this reason, a planning
group made up of staff from several Supcrfund-
related areas is an ideal way to approach the plan-
ning process
In order to put together a planning group, it is
necessary to identify the "functional areas" that
should be represented in the group Exhibit M
may be helpful in this context, it provides an
example of a set of procedures to meet Superfund
financial management and recordkeeping objec-
Qves In the example, there are six "functional
areas" with Superfund responsibilities.
• Legal
• Contracts Admnisrraucn
• Program Office
• Recordkeeping
• Accounting Operations
• Paying Agent.
In this example, representatives from each of
the six functional areas would be included in the
planning group because each area has a Superfund
responsibility
State managers putting together a planning
group should ask themselves which divisions,
bureaus, sections or offices would logically have
responsibility for meeting the various financial
management and recordkeeping objectives de-
scribed in this handbook In some cases, there may
not be a formally established functional area, for
example, there may not be a recordkeeping section
per se Still, there is probably someone whose
responsibilities include Superfund expense
recordkeeping, essentially, that person represents
the recordkeeping section
Once the relevant functional areas have been
defined, managers leading the state's financial
management and recordkeeping effort should re-
cruit suitable staff members from each functional
area Ideally, each representative would be some-
one with authority who still has day-to-day super-
visory responsibility over the functional area. (For
-------
Appendix A
Pase 26
example, a senior manager of a functional area
undoubtedly has authority, but he or she may not be
close enough to day-to-day operations to contrib-
ute substantially to the development of proce-
dures )
B. Conduct An Assessment Of State
Practices
The planning group's first task should be to
conduct a detailed assessment of the state's Super-
fund financial management and recordAeeping
practices This handbook and the references listed
in Appendix D should provide the tools necessary
to determine whether state financial management
and recordkeepmg procedures meet EPA's objec-
tives EPA audits of these areas, if any have been
done, will also be useful in the assessment
This section provides guidance on one im-
portant aspect of a state financial management and
recordkeepmg assessment ascertaining whether
the accounting system tracKS and reports on all
allowable Superfund costs, as discussed m the
overview to Chapter II EPA recommends that
states conduct a "Superfund Expense Accounting
Review" as pan of its overall assessment of Finan-
cial management and recordkeepmg practices
The suggested steps in a Superfund Expense
Accounting Review are as follows
1 Determine all types of allow able costs that go
into the state's Superfund effort A checklist
similar to the hypothetical example provided
in Exhibit A-1 on the follow ing pages may be
helpful The exhibit organizes costs bv state
departments and subdivisions of those de-
partments, but stales should use whichever
format suits their situations
2 Determine whether the Federal cost share of
each allowable expense is currently being
charged to a site-specific CA or a core pro-
gram cooperative agreement (see Chapter II
for an explanation of these cost categories)
When the planning group begins work on
developing new procedures, it should make a de-
termination on how the state's accounting system
should record and report any allowable costs that it
currently does not
C. Develop Financial Management And
Recordkeepmg Procedures
The planning group should use this hand-
book, other references and EPA audit repons as
sources for suggestions on specific procedures to
meet Superfund financial management and
recordkeeping objectives In addition, EPA re-
gional office staff can answer specific questions
raised by the planning group and provide sugges-
tions on procedures based on practices in their
regional office
D. Document The New Procedures
After new financial management and
recordkeeping procedures have been developed, it
is important to document the procedures in a man-
ual or pamphlet for employees to use The docu-
mentation should cover
• The purpose of the procedures
• Responsibilities of the functional areas
assigned to implement the new proce-
dures
Filing procedures and protocols
• Document flows and sources
• Reconciliation procedures and how often
they should be performed
• Methods for updating the procedures in
response to new state or EPA initiatives
-------
Appendix A
Exhibit A-1
P32C 21
State Expense Accounting
Checklist: An Example
Cost Category
1 Department of Environmental Protection
Director^
Deputy Director
Rent, telephone, electncitv etc
DP and other centralized services^
Bureau of Waste Management
Bureau Chief
Deputy
Secretary / Clerical
DP and other centrahzed services
Division of Emergency and
Remedial Response
Division Head
Depurv Division Head
DP and other centralized services
Costs are eligible under this
Method of Charging*
Indirect
Indirect
IT direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Remedial Response Section And
Emergency Response Section
Section Heads
Deputy Section Heads
Remedial Project Manager
Secretarial / Clerical
DP and other centralized services
Personal Computers and software (general use)
Equipment
Contractor Costs
Direct or Core4
Direct
Direct
Direct or Core
Indirect
Core
Direct
Direct
Footnotes
1 Method of charging travel to Superfund will coincide exactK wnh me'hod of charging labor, i e
direct, indirect, or core
2 For the purposes of this example the functional areas used in Exhibit 1-1 are under three State
departments Program Office. Contract Administration, and Recordkeepmg are pan of the State s
Department of Environmental Protection, Accounting Operations and Paving Agent are under the
Department of Treasury, Legal is its own department
3 Includes charges for services supplied on a statewide basis data processing (computer time and
report generation), financial services (payroll and other pavment services), security, mailroom operations
and so on
4 Core program charging is an optional method of capturing a state's Superfund costs In this exhibi
v.e highlighted some of the areas that are eligible under Core Program CAs These CAs must be applied
for and negotiated separately, however Allowable expenses under CPCAs are decided on a case-by-case
basis
-------
Aprerdix \
Exhibit A- 1 (continued)
Page 28
Checklist (cont.)
Cost Category
Recordkeepmg Group Costs
P-oject Officers
Secretanal / Clencal
Personal Computers and software
for use m recordkeeping
Contracts Administration Dmsion
Secnon Head
Depurv Secnon Head
Project Officers
Secretarial / Clencal
DP and other centralized serv ices
Persona! Computers and sofrw are
for use in tracking Superfund contracts
2 Department of Treasury
Accounting Operations Dmsion
Project Officers
Secretanal / Ciencal
State Payments Dms»on
Project Officers
Secreranal / Clencal
Costs are eligible under this
Method of Charin
Core
Core
Indirect
Indirect
Direct
Direct
Indirect
Core
Indirect
Indirect
Indirect
InLiirect
Legal Department
Legdi Stan
Secretanal / Clencal
DP and other centralized ser\ ices
Direct or Indirect
Direct or Indirect
Direct or Indirect
-------
Appendix B
Page 29
APPENDIX B
STATE LEGAL RESPONSIBILITIES
As noted in the introduction, state expense
claims can be questioned in litigation Unless both
parties "stipulate" in advance the correctness of the
state's expense claims, which is extremely un-
likely, legal counsel for the responsible party is
entitled to review the evidence for a state's claims,
while the government's lawvers are allowed t."
introduce documents and testimony in proof of
those claims Information on the state's expense
claims can be included m the court record in four
ways
• Interrogatories
• Affidavits
• Depositions
• Expense documents
State responsibilities in each of these areas are
described below
A. Interrogatories
Interrogatories are a written set of quesoons
submitted by either parts in a lawsuit to the oppos-
ing party Unless improper under applicable legal
rules, the questions must be answered In a cost
recovery case, questions directed to state
recordkeepmg and financial management staff
generally will be directed toward identifying the
nature of documents submitted in the state's cost
recovery package and the process used to compile
that package State, EPA or DOJ legal staff litigat-
ing a cost recovery case can provide guidance to
'state financial management and recordkeepmg
staff in responding to interrogatories
B Affidavits
Affidavits are written statements of fact
based on personal know ledge that are made under
oath State financial management and recordkeep-
mg staff may be asked by state, EPA or DOJ legal
staff to prepare affidavits that can be used as
evidence to support elements of the state cost
documentation package.
C. Depositions
A deposition is typically an oral question and
answer session, completed under oath, that is ad-
i--ssib!e as e-. -asncL n court In a cost recover;
action, the potentially responsible parties may
depose state financial management or recordkeep-
mg staff Attorneys for the responsible party will
want to question state staff in order to highlight any
weaknesses in the cost documentation package.
Witnesses for the cost documentation por-
tion of a CERCLA/SARA recovery case arc typi-
cally asked detailed procedural questions about
how the state calculated various types of costs If
the cost documentation provided to the court falls
short in any of the areas discussed elsewhere in this
handbook, the witness will be asked about those
points For example, if the responsible party's
legal counsel noted that employee timesheets were
frequently filled out well after the fact, the state
witness would probably be asked what procedures
are in place to ensure that employees record ame
accurately If state accounting system reports
appeared inconsistent or incomplete, a witness
might be asked to describe how the accounting
system tracks costs by sue Or, if the state were
unable to provide bid evaluation records due to a
recordkeepmg deficiency, a witness might be
asked about state compliance with Federal pro-
curement regulations
Cost records that meet the requirements dis-
cussed in this handbook section make the witness'
job easier Effecnve preparation is also important.
The witness should be thoroughly familiar with the
portion of the cost documentation package on
which he or she is to testify, especially the more
complex pans of the package, such as the method-
ology for calculating equipment usage rates, or
procedures used in preparation of cost summaries
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Appendix B * Page 30
•\nv state employee scheduled to be deposed • Drivers license numbers
should be accompanied by a state, EPA or DOJ
lawyer, and all state activities in connection with a • Comments on travel vouchers
cost recovery case should be coordinated through
Regional Legal Counsel • Vacation and sick leave balances
D Expense Documents • Tirnecard or nmesheet comments
*
Lawyers for die responsible party are entitled • Coded information on the front of time-
to review all state expense records that are not cards
protected by a legal privilege If the state receives
a request for production of documents, it must 2. Business Information
comply Certain types of personal and business
information are protected by law in many states. Information that would allow a competitor to
however To protect such information, a state may deduce a state contractor's actual costs is protected
try to exclude documents containing protected in- in many states Invoices and cost data submitted
formation from the package to be delivered to with proposals typically fall into this category,
opposing legal counsel, or it may block out sensi- although other documents may also
tive information contained in the documents, a
process called "redacting " The following types of
information are often protected from public disclo-
sure under state law
1. Personal Information
In general, non-business information pro-
vided by individuals that is contained in state
records may be protected from disclosure under
state law The following list, which is not all-
mclusive identifies the kind of information that
may have to be removed from documents given to
opposing legal counsel
• Social security numbers
Credit card numbers
• Type of credit card
• Home addresses
• Home telephone numbers
Non-business calls on personal tele-
phone bills
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Appendix C
Page 31
PPENDEX C
EPA AUDITS
•
In signing an EPA/state cooperative agree-
ment, the state gives EPA the nght to audit that
agreement, pursuant to the Inspector General Act
of 1978 (PL 95-452), CERCLA Secnon 111 (k),
and 40 CFR 30.540 This appendix provides guid-
ance on how EPA auditors review state financial
management and recordkeeping procedures, and
the problems encountered in recent Superfurid
Cooperative Agreement audits
EPA may audit a Superfund CA while the
agreement is in effect, called an interim audit, or
may conduct a final audit at the completion of the
Federally funded activities. In either case, the
objectives of an EPA audit are twofold first, to
determine whether the costs the state has claimed
under the agreement are allowable and allocable to
the project under the terms of the CA and appli-
cable EPA and Federal regulations, and second* to
determine whether controls and procedures devel-
oped by the state in us financial ana project man-
agement, recordkeeping, accounting, procure-
ment, subagreement administration and property
management systems meet EPA and other Federal
requirements
This appendix vull concentrate on the issues
concerning the states' ability to provide respon-
sible accounting, timely and accurate reporting,
and effective procedures for indirect cost alloca-
tion, contractor procurement and equipment pur-
chases A detailed discussion of audit procedures,
schedules, tasks, findings and resolutions is ad-
dressed in State Participation in me Superfund
Program
A broad range of financial and administrative
areas are audited periodically for compliance with
Federal requirements This appendix will discuss
onl> those areas vt here requirements are specific to
Superfund CAs For further information on the
categones discussed below, refer to the appropri-
ate chapter of this manual or the Assistance Ad-
ministration Manual t Additional information on
audit procedures is found in Chapter 38 of the
Assistance Administration Manual and QIC Audit
Guide EAG-3 of CERCLA Cooperative Agree-
ments Detailed audit procedures and findings are
provided below for the following areas:
• Procurement
• Financial Recordkeepirg and Reporting
• Letter of Credit Drawdowns
• Indirect Cost Allocation
• Property Management
A. Procurement
States are required to provide auditors with
proof that they have complied with the require-
ments found in 40 CFR Pan 33, "Procurement
Under Assistance Agreements " Under these
Federal regulations, states are required to use the
process of formal advertisement and competitive
bids for procurement awards to the greatest extent
possible In addition, states are prohibited from
entenng into cost-plus-percentage-of-cost type
contracts Recent EPA audits have noted several
instances of non-compliance with procurement
requirements, due mostly to a lack of familiarity
with the requirements on the pan of state contracts
administration staff The audits have also noted
that the methodology used for awarding contracts
is often poorly documented or not documented at
all
B. Financial Recordkeeping and Reporting
Audits in this area are concerned pnmanly
with the states' accounting procedures for assign-
ing costs directly to specific sues, and applying the
state's negotiated indirect cost rate correctly. State
accounting system internal controls are also exam-
ined, as are state financial reporting practices.
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Appendix C
Page 32
Site-specific accounting procedures have
been the subject of several critical audit reports
The audits found state accounting procedures in-
adequate to record and accumulate costs and inca-
pable of properly distributing personnel and fnnge
benefits charges. The procedures used to record
and report employee time and fnnge benefits often
did not accurately represent the actual time worked
at a particular sue Unacceptable recordkeeping
practices allocated employee indirect time as direct
time expense in one case and transfer-ed labor
costs between agreements in another Also, audits
disclosed that some states are not separating allow-
able and unallowable costs in accounting records
C. Letter of Credit Drawdowns
Audits of letter of credit (LOC) drawdown
procedures focus on whether states have written
procedures to determine drawdown amounts and
whether they maintain complete records of
drawdown activity. Specifically, states arc re-
quired to keep a LOC payment schedule for indi-
vidual CAs The LOC payment schedule must
contain the existing balance, the drawdown date
and amount authorized, additional funding (if the
CA is amended) and the new beginning balance.
The drawdown voucher, or request for funds,
should reconcile "with the General Ledger The
drawdown amount should be supported by site-
specific computer summaries and expense records
State managers may find the Letter of Credit -
Treasury financial Communications System
Recipient's Manual useful in understanding LOC
.requirements (see Appendix D for reference infor-
mation)
Audit findings indicate tnat increased man-
agement attention must be focused on the LOC
system and written LOC procedures Audits dis-
closed (hat states failed to submit financial reports
and drawdown vouchers in a timely manner and
to calculate properly the drawdown amount Other
problems cited in connection with drawdown pro-
cedures include states using an incorrect account
number for activities at a particular site, states not
properly calculating their cost share at the time of
the drawdown, and states drawing down more than
the amount incurred for the completion of an activ-
ity
D. Indirect Cost Allocation
EPA audits of state indirect cost practices are
concerned primarily with whether the state'snego-
nated indirect cost rate is being correctly appbed.
Audits have disclosed that some states have misap-
plied the rate, while others have not used the
approved rate at all in calculating Superfund indi-
rect charges (For example, some state environ-
mental protection departments have simply calcu-
lated the percentage of their total funding coming
from Superfund and charged that percentage of
their indirect costs to Superfund CAs)
E. Property Management
EPA's property management requirements
are explained in Chapter 26 of the Assistance
Administration Manual, "Property Management,"
ana Chapter 27, "Real Property Acquisition"
These chapters are based on the property manage-
ment requirements contained in 40 C F R Part
30 531 The major requirements are that states
maintain accurate property records for Superfund
equipment and property, documenting
• Property identification information
• Acquisition data and cost
• Percentage of cost paid by the Federal
Government
• Holder of title (state or Federal Govern-
ment)
In addition, states are required to contact EPA for
instructions on disposal of unneeded property and
to pay EPA its share of the proceeds of a sale of
property Audits of state property management
practices have shown that many states have failed
-------
in some or all of these requirements In particular,
states frequently do not maintain an accurate prop-
erty hsong and often fail to record equipment
purchases.
Page 33
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Appendix D
Page 34
APPENDIX D
\M1ERE TO GO FOR FURTHER
INFORMATION
This appendix provides state managers with
information on available reference materials -The
appendix lists and gives a brief synopsis of the EPA
and other Federal reference materials that could be
useful to state managers
The references listed below contain informa-
tion that state managers can use to develop their
approach to the financial management and
recordkeeping guidance presented in this hand-
book Some of the manuals do not specifically
address state guidance, but they contain useful
background information Most of the references
listed can be obtained through the EPA's regional
offices or by contacting EPA Headquarters di-
rectly Materials published by other government
agencies can be obtained by calling the agency
directly Legal references can be obtained through
state legal departments Suggested reference
sources are as follows
A. Office of Management and Budget
Circular A-87
This circular discusses procedures for indi-
rect cost allocation and submission of state indirect
cost allocation plans for Federal approval It pro-
vides methods of calculating indirect cost rates and
obiaimng EPA approval for those rates
B. 40 Code of Federal Regulations (C.F R.)
Part 30
This pan of 40 CFR contains the EPA general
requirements for assistance recipients
C. 40 C.F.R. Part 33
This part of 40 CFR contains the EPA pro-
curement requirements for subagreements that
states award under their cooperative agreement
D. Federal Rules of Evidence
The body of rules relating to the adrmssibility
of documents as evidence in Federal court pro-
ceedings is called the Federal Rules of Evidence,
and can be found under Title 28 of the United S tates
Code (28 U S C).
E. Letter of Credit - Treasury Financial
Communication System (LOC • TFCS)
Recipient's Manual
This EPA manual discusses the requirements
for establishing a Letter of Credit and amending u
if necessary Also, procedures for drawing down
the necessary funds are explained. A section on
Financial Status Reporting is also included
F. State Participation In The Superfund
Program
This EPA manual provides detailed guidanc
on most state Superfund program and financial
requirements
G. Financial Management Procedures For
Documenting Superfund Costs
This EPA nunual, known as me Blue Book,
provides complete information on Superfund le-
gal, accounting, financial management and
recorokeeping requuements The Blue Book was
written for the ten EPA regional financial manage-
ment offices and can be used for general back-
ground information on Superfund financial man-
agement and recordkeeping requirements
H. Assistance Administration Manual
This EPA manual describes specific require-
ments for all EPA assistance recipients Key chap-
ters are as follows
-------
Appendix D ^ ^ ^ Page 35
• Chapter 19 - Recipient Record Require-
ments
• Chapter 20 - Accounting And Internal
Management
• Chapter 21 - Procurement Under Assis-
tance Agreements
• Chapter 22 - Cost and Pnce Analysis
• Chapter 26 - Property Management
• Chapter 27 - Real Property Acquisition
I. Resource Management Directive Svstem
2550 D
This EPA manual provides agency-* ide
policies and procedures for the Superfund pro-
gram
J. Hardcopy Standards Set
The American National Standards Institute
sets technical standards for microfilming of rec-
ords that should be followed by states wishing to
microfilm Superfund expense documents The
complete set of microfilm standards, called the
Hardcopy Standards Set, is available from
Association For Information And Image
Management
Suite 1100
1100 Wa>ne Avenue
Silver Spring, MD20910
(301)587-8202
-------
Index
Page 36
Accounting
system capabilities for Supcrfund 11.12
overcoming system limitations 13, 14
paying for st stem revisions 13
procedures for 13,1517
by site 13
by activity 13
by object class category 13
Active site files - see also, Tlecordkeeping
contents 20-24
background on 18
filing procedures 18-20
mcrofilnurg 24 35
now long to retail 2-
Activiues, description of 13
Affidavits 29
Audits
tuning 31
authority for 31
procedures for scheduling 31
topics covered 31 33
CERCLA
reauthonzaiion 1
cost recovery 1
nfidenual Information
general procedures for protecting 30
types of information protected 30
Contractor Costs
accounting for 16
keeping records of 22
ho* contractors should uiv oice 16
Core Program Cooperative Agreements
purpose 12
uhat they can be used for 1213 27 28
accounting for expenses under 16
keeping records of expenses under 24
Depositions 29 30
Direct Costs
description of 12
categories of 15 16
accounting for IS
keeping records of 22
Equipment
accounting for 15
keeping records of 22 24
options for acquiring 15 16
storage and disposition requirements 16 32
inancial Reporting
types of reports required 16 17
frequenc) of reporting 16-17
--.ancial Reporting (continued)
reporting costs by sue 16-17
fringe Benefit Costs
as pan of indirect cost agreement 22
accounting for 22
keeping records 22
Indirect Costs
development of negotiated rale 12
Office of Management and Budget Circular A-87 12
accounting for 16
keeping records of 24
Interrogatories 29
Labor Costs
accounting for 15
keeping records of 22
Materials - see' Equipment'
Microfilming
when permitted 24
technical standards 35
Original Expense Records • see "Recordkeeping
Hung procedures 18-19
microfilming 24
how long to retain 24
Payroll see 'Labor Costs"
Pnvacv Act see Confidential Infonraiior"
Procurement
requirements under EPA regulations 31
improper practices 4, 31
importance to cost recoven 4
Reconciliation
procedures 5 11 24
importance to cost recovery 5
Recordkeepmg
importance for cost recovery 3
procedures 19 24
acceptable storage media 24
retention requirements 24
planning for 19 25 26
Record retention - see Recordkeeping'
Redacting 30
References 34-35
SARA 1
Travel Costs
accounting for 15
keeping records of 22-23
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UNITED STATES ENV'«O^VE\*A. °RO~ECT C\ AGENC
APR T '^
9831.6
MEMORANDUM
, \
Interin F.-al /Guidance Package on F-ndirg CERCl^ Stare
ions at NPL Sites
Assistant Adrtiinistrator
FROM:
TO: Regional Administrators
Regions I - X
On October 1, 1986, the Office of Solid Waste and Emergency
Response issued two separate guidances on funding States in
support of their enforcement actions at CERCLA National
Priorities List (NPL) sites. One guidance covered activities
related to negotiations with and administrative and judicial
enforcement actions against potentially responsible parties
(PRPs); while the other covered activities related to the
oversight of PRP response actions.
This package includes updated guidances which supersede the
October 1, 1986 guidances. The revised guidances on funding
Siate erforcener.t and PRP oversight incorporate relevant
comments, as well as consider various issues that have arisen
since passage of SARA. Therefore, along with this memorandum the
attached package is made up of the following components:
o Guidance on CERCLA finding of State enforcement
actions at National Priorities List sites (9831.6a);
o Guidance on CERCLA funding of Potentially Responsible
Party Oversight by States at National Priorities List
Sites (9831.6b);
o Cost Estimates for Budgeting State Enforcement
Activities (9831.6c); and
o Recommended Procedures for Headquarters/Regional Review
and Concurrence of Initial Enforcement Cooperative
Agreements {9831.6d).
-------
9831.6
Along with this "interim final" package, the Grants
Administration Division (GAD), in conjunction with OSWER, has
developed an assistance-related manual entitled "Guide for
Preparing and Reviewing Superfund Cooperative Agreements"
(September 1987). This manual is to be used when reviewing and
awarding actual cooperative agreement applications submitted by
States. In the near future, this manual will include a model
enforcement cooperative agreement application, which will be
representative of the scope and content expected from the states.
A copy of this manual can be obtained by contacting your Regional
Assistance A-r.inistration Lnit (AAU) .
This package and GAD'S guidance, along with the Office of
Emergency and Remedial Response's manual on "State Participation
in the Superfund Program," the "Interim Guidance on State
Participation in Pre-Remedial and Remedial Response11 (OSWER, July
21, 1987) , the regulation on "Intergovernmental Review of
Environmental Protection Agency Programs and Activities" (40 CFR
Part 29), the "General Regulation for Assistance Programs" (40
CFR Part 30), the guidance on "State Procurement under Superfund
Remedial Cooperative Agreements (OERR, March 1986) and the
regulation on "Procurement Under Assistance Agreements" (40 CFR
Part 33), should form the basis for preparing and administering
cooperative agreements concerning CERCLA State-lead enforcement
actions at NPL sites.
In addition, the upcoming revisions to the National '
Contingency Plan and the draft "Guidance on Preparing a Superfund
Memorandum of Agreement11 (SMOA) jointly issued by OERR and OWPE
on October 5, 1987 will provide EPA Regional offices and States
with a specific understanding of the extent and manner in which
States should involve themselves in CERCLA enforcement and
remedial responses and the extent of involvement and oversight
expected of EPA during State conduct of such responses.
"•irtherpore. some issues outlined during review of tne previous
funding guidances will be further addressed in future guidance on
CERCLA State enforcement. Please see the attachment to this
memorandum for those issues and the direction to follow.
There are several additional policy points to follow when
implementing this guidance package.
1. States should clearly understand that funding under the
guidances is related to encouraging or compelling PRPs to
undertake traditional response activities to clean up a
site (such as negotiations for remedial investigations,
feasibility studies, remedial designs and remedial actions)
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9831.6
and to conduct necessary technical, administrative and
enforcement activities during their oversight of the PRPs'
response (such as oversight in the field, compiling
administrative records, preparing remedy decision documents
and enforcing the provisions of settlement agreements). At
this time, EPA will not provide funding solely to litigate
claims such as to recover past costs or natural resource
damages.
2. Although the guidances do not specifically address
funding States during Federal facility response actions
at National Priorities List sites, funding by E?A will
nonetheless be considered under the following
situations. Management assistance funding may be
provided to support State involvement in pre-remedial
activities and activities leading to signature and
execution of an agreement under Section 120(e) of
CERCLA. If the State is a. signatory to the agreement.
the agreement should spell out the State's
responsibilities for the site, including oversight
responsibilities. Funding through a cooperative
agreement may then be available to conduct these
oversight responsibilities. In the absence of an
oversight role spelled out in the agreement, management
assistance funding may be available to ensure adequate
State involvement during the facility's response
action. If the State is not a signatory to the
agreement, oversight activities will be conducted by
EPA. However, management assistance funding may still
be available to ensure adequate State involvement.
Furthermore, EPA's current position is to net f-rd
States for litigating or taking any enforcement actions
against a Federal facility. Finally, per Section
120(g) of CERCLA, EPA must retain lead responsibility
with respect to its Section 120 authorities over
Feaeral facility sites on the National Priorities List.
As such, Federal facility sites cannot be designated as
"State-lead."
3. Cost documentation of State intramural and extramural
activities continues to be a critically important
aspect of the Superfund program. As such, the
Financial Management Division's soon to be published
"State Superfund Financial Management and Recordkeeping
Guidance" should be clearly understood and followed by
the Regions and States for all enforcement-related
cooperative agreements developed and funded under this
guidance package. FMD's guidance replaces Appendix U,
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9831.6
"Cost Documentation Requirements for Superfund
Cooperative Agreements" of the Manual "State
Participation in the Superfund Program." The need for
cost recovery, particularly regarding PRP oversight,
should be considered in drafting cooperative
agreements.
4. Provisions outlined in the funding guidances may be
alternatively addressed and agreed to in the SMOA. Of
course, actual funding is done only through a cooperative
agreement. The Region and State should discuss tne best
approach to ensuring compliance with the provisions outlined
in the guidances. However, the Region should ultimately
decide whether reiteration or expansion of SMOA provisions
should be made in the cooperative agreement application.
When making this determination, the Region should employ
such criteria as the level of State experience and
capabilities, and past State performance in the CERCLA
cleanup program.
5. Per Section 104(d)(l)(A) of CERCLA, as amended by SARA, EPA
must make a determination on cooperative agreement
applications within 90 days of receipt. Since the 90 day
clock begins when the Regional Assistance Office receives
the final application from the State, the Regional program
office must ensure that the application is properly logged
in and dated by the Assistance Office. See the "Interim
Guidance on State Participation in Pre-Remedial and Remedial
Response" for further direction on the 90 day review
requirement.
6. EPA Headquarters does not intend to be routinely involved in
reviewing and concurring on enforcement cooperative
agreement applications. However, some Headquarters
involvement in the initial applications received bv the
Fegion is necessary to eis.je tne guidance is interpreted
correctly and consistently. Therefore, at least the first
application received in each Region under the negotiation
and litigation guidance and under the oversight guidance
should be submitted for review and concurrence to the
Director, CERCLA Enforcement Division, Office of Waste
Programs Enforcement. (See the section entitled "Recommened
Procedures for Headquarters/Regi.onal Review of Initial
Enforcement Cooperative Agreements" for the suggested
approach.) After having gone through this mutual
Headquarters and Regional review, the Regions will only need
to keep Headquarters informed of subsequent applications
through the SCAP and by providing a copy of awarded
-------
9831.6
agreements. Management assistance cooperative agreements
need not be submitted to Headquarters for review prior to
their award. Rinally, per the program delegation,
enforcement cooperative agreements will be awarded by the
Regional office.
7. Beginning in Fiscal Year 1988, State yearly funding
requirements for activities outlined in this guidance
package must be included in the Region's Superfund
Comprehensive Accomplishments Plan (SCAP). The Region and
State should be vcr^irg clcse.lv dur.ng the SCA? c=.=lcp-_"
process to ensure that State funding requirements are
adequately addressed in the final plan.
8. The Administrator is highly interested in improving the
"role and relationship of State Attorneys General
offices in the Superfund program. In this regard,
during development and review of enforcement
cooperative agreements and SMOAs, the Regional office
should ensure that relevant responsibilities of the
State Attorney General are adequately addressed in the
document. At the request of the Administrator, my
office is also looking into the possibility of
earmarking some Core Program funds for relevant State
Attorney General CERCLA program activities.
As you go about developing cooperative agreement
applications to support CERCLA State enforcement actions, please
feel free to contact Tony Diecidue on FTS(202)-382-4841 or the
appropriate Regional Coordinator in OWPE for assistance on the
various policy or site-specific issues that may need resolution.
cc: Director, Waste Management Division
Regions I, IV, V, VII and VIII
Director, Emergency and Remedial Response Division
Region II
Director, Hazardous Waste Management Division
Region III and VI
Director, Toxics and Waste Management Division
Region IX
Director, Hazardous Waste Division
Region X
Regional Counsel, Region I - X
Regional Assistance Management Contact, Region I - X
Regional CERCLA Branch Chief, Region I - X
Regional CERCLA Enforcement Section Chief, Region I - X
-------
9831.6
ISSUES ON DRAFT GUIDANCE ON
FUNDING CERCLA STATE ENFORCEMENT ACTIONS
The following issues received on the draft guidance on
funding CERCLA State enforcement actions will be further
addressed in future guidance on State involvement in CERCLA
enforcement actions. However, here is policy direction on
proceeding with these issues.
1. Must the State outline their enforcement authorities for the
entire action, or only the authorities for performing a
particular action (such as PRP searches or negotiation)?
When the State submits a cooperative agreement application,
it is assumed the site has already been designated a State-
lead enforcement site. It is also assumed the State will
carry the enforcement response as far along as possible and,
therefore, should spell out the authorities to be used by
the State. Since part of the initial classification process
includes whether adequate enforcement authorities are
available, the State would only need to reiterate them in
the application. For example, a letter from the Attorney
General outlining these authorities could be prepared and
the same letter could be used for each cooperative v
agreement. A Superfund Memorandum of Agreement (SMOA) could
also suffice in ensuring that adequate enforcement
authorities are available.
2. Is there any intent to require States to follow the CERCLA
Section 122 settlement provisions?
The procedures spelled out in Section 122 of CERCLA are
related to settlements pursued by the Federal government and
threir use is subject to sound discretion at a particular
site (See Section 122(a)). While States can avail
theirselves of eguivalert proce-^res, they are rot a-tu.rr.re3
by EPA to use Section 122 when pursuing enforcement actions
under their own authorities. However, in pursuit of
consistency with the intent of CERCLA, State settlements
will need to be consistent with certain Section 122
procedures and related EPA Superfund enforcement policy and
guidance when negotiating and settling with PRPs under a.
cooperative agreement. These include giving notice and
establishing negotiation time frames (Section 122(e));
ensuring adequate public participation (Section 122(d)); and
requiring that covenants not to sue contain a "reopener"
provision (except for a special covenant not to sue, a de
minimis settlement, or in an extraordinary circumstance)
(Section 122(f)). Other Section 122 provisions clearly do
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9831.6
not apply to State-lead enforcement sites, such as mixed
funding (Section 122(b)), since provisions such as this can
only be implenented through settlements with the Federal
government. Therefore, please note that the negotiation and
litigation funding guidance requires a State assurance on
this issue.1
3. There is nothing in the guidances on EPA participation in
Sta£e-lead enforcement actions. There is no discussion of
having, or letting, EPA sit in on negotiations or
participate in setting up the strategy for such
negotiations. Should this not be a reciprocal requirement?
The draft guidance on preparing a SMOA discusses, in the
enforcement section, that when developing an agreement the
Region and State should consider and address to what extent
each party will be involved in the other's negotiations with
PRPs. Furthermore, the Region and State continue to have the
discretion of also preparing site-specific enforcement
agreements. The extent of involvement should be based on
various factors. These include the level of confidence in
and past experience with the state, and site-specific
factors such as the complexity or national significance of
the response action. Consistency of the remedy with Section
121 of CERCLA, the upcoming revisions to the NCP and
applicable EPA guidance, and assurance that it will be
implemented correctly through an enforceable pleading are
the most important concerns. Also, EPA and the States
should not be duplicating the others activities at sites.
Regardless of the extent of Regional involvement in State-
lead enforcement negotiations, settlements at these sites
would typically be two party agreements (State and PRPs)
under State authorities.
Since the reauthorization of CERCLA, EPA has issued
several policies concerning Federal government
implementation of the various Section 122 settlement
procedures. Because these policies are designed for
Federal settlements, they contain numerous requirements
that are irrelevant to or need not be adhered to by
States during their enforcement actions. Also,
consistent with Section 122(a), EPA and the State can
jointly waive use of the procedures outlined in the
Section. EPA is developing additional guidance to
specifically address and clarify the relation of the
Section 122 settlement procedures and related policy to
State enforcement actions.
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9831.6
Is EPA responsible for the final selection of remedy at
State-lead enforcement sites'1 Should EPA participate in the
development of the remedy at these sites even if the work
will be done by the PRPs under a State settlement agreement?
What authority does EPA have if the State believes its
remedy is consistent with the NCP and EPA disagrees?
The upcoming revisions to the NCP state that unless a
State Record of Decision (ROD) or other decision
document is concurred with and adopted in writing by
EPA, EPA shall not be deemed to have approved of tr.e
State decision. The NCP and upcoming guidances will
set forth the procedures for and intent of EPA's
concurrence and adoption of the remedy, states must
recognize that if their procedures and remedies are not
consistent with EPA's (including RI/FSs and Section 121
of CERCLA), it should not be expected that EPA will
approve the remedy. With or without EPA's approval,
however, States may decide to proceed under their own
authorities and funding. In turn, EPA has the
authority under CERCLA to proceed with its own
enforcement action or attempt to intervene prior to a
State settlement with or litigation against PRPs.
However, one purpose of establishing SMOAs and seeking
EPA concurrence and adoption of the remedy is to avoid
such problems at the remedy selection stage by
outlining roles and responsibilities up front,
including the extent of support agency participation in
lead agency negotiations and other legal efforts, and a
process for informally resolving disputes (i.e., short
of the courts). Furthermore, please note that when E?A
is paying for these activities under a. cooperative
aqreemert. the State is assuring that their oversight
of PRP technical activities and their selection of a
re-eiy for twe site will be co'-siste'-t wit.* CEPCLA, 23
amended by SARA, tne NCP and applicable EPA guidance.
The guidance assumes that States can issue standard notice
letters. Should careful examination of standard notice
letter content be done to ensure that a State letter
provides adequate notice for future State or Federal claims,
and to ensure that the State letter is sufficient to EPA and
DOJ attorneys? Should there be a requirement that EPA
approve the general form notice letter the State intends to
use?
It has always been assumed that States would attempt to
notify PRPs of their potential liability and offer them an
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9831.6
opportunity to conduct necessary response actions at State-
lead enforcement sites. These activities are to be .
perfomed under State authorities (note that statutory
authority is generally not required for these activities).
However, as stated in question #2 above, States will need to
be consistent with the Federal procedures for notifying PRPs
and establishing negotiation timeframes when funded under a
cooperative agreement. Any review, consultation and/or
concurrence role for EPA with regard to State notice letters
should be worked out during the SMOA or CA development
process.
-------
CERCLA FUNDING OF
STATE ENFORCEMENT ACTION AT
NATIONAL PRIORITIES LIST SITES
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9831 6a
CERCLA FUNDING OF
STATE ENFORCEMENT ACTIONS
AT NATIONAL PRIORITIES LIST SITES
PURPOSE
The purpose of this guidance is to assist EPA Regional offices and States on
funding, under a CERCLA cooperative agreement (CA), of State search and
notification, negotiation and administrative and judicial enforcement efforts to
encourage or compel hazardous waste site cleanups by potentially responsible parties
(PRPs)
BACKGROUND
In its opinion of Februar> 12, 1986, regarding CERCLA funding of State
enforcement efforts, the Office of General Counsel reconsidered and expanded upon
a July 20, 1984, opinion to allow limited assistance for identification of PRPs and
gathering of evidence, remedial investigations and feasibility studies (RI/FS) to
support State or Federal enforcement actions, and oversight of RI/FSs and remedial
designs (RD) conducted by PRPs The February 12, 1986, opinion allows such
activities as oversight of PRP-conducted remedial actions (RA), reporting to the
public on private partv response actions, negotiation, and administrative and judicial
enforcement to encourage or compel PRPs to initiate response actions at National
Priorities List (NPL) sites The Superfund Amendments and Reauthonzation Act of
2986 (SARA) also confirms this interpretation by expanding the activities eligible for
CA funding under Section 104(d)(l) of CERCLA
The intent of funding for these activities is to successfully secure the greatest
number of private par., cleanup actions possiole in acmevmg this goal, States *il!
need to be consistent with EPA's Superfund enforcement policies and procedures
This is necessarv to ensure that site cleanups
o Are consistent with CERCLA, as amended by SARA, and the National
Contingency Plan (NCP),
o Are conducted in a timely manner and allow for deletion from the NPL,
and
o Enable EPA and States to conduct future CERCLA cost recovery actions
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9831 63
GUIDANCE
Cooperative Agreement funding for PRP searches, issuance of notice letters,
negotiation, or administrative and judicial enforcement will onl\ be provided at NPL
sites that rme been designated as State-lead enforcement In determining lead
designation, Regional offices and States should use the criteria outlined m the
EPA/Association of State and Territorial Solid Waste Management Officials
(ASTSWMO) policv memorandum of October 2, 1984 In addition, EPA Headquarters
is in the process of developing additional classification guidance based upon SARA
and the upcoming revisions to the NCP Prior to drafting or accepting a
cooperative agreement application for review and award, the criteria should be
applied to the site This includes sites currently designated as State-lead
enforcement and sites States are seeking to place in the State-lead enforceme't
category Once the designations made and a State requests CA funding, the
Region should pay particular attention to the itemized budget submitted along with
the application The budget should be carefully reviewed to ensure that adequate
resources and staff expertise are devoted to the site Along with these
considerations, the conditions and requirements outlined in this guidance must be
incorporated into the CA application prior to award
This guidance does not preclude the Regions from including additional
enforcement-related conditions m the application, if warranted Furthermore, it is
imperative that applicable provisions outlined in Appendix F of the EPA manual
State Participation in the Suoerfund Program be incorporated into each CA
application See Attachment A for those applicable provisions and sample language
for the enforcement provisions
s~
State annual funding requirements for activities outlined in this guidance must
be included in the Region's Superfund Comprehensive Accomplishments Plan (SCAP)
The Region and State should be working closely during the SCAP development
process to ensure that State funding requirements are adequately addressed m the
final plan When developing CA applications for these activities, the State Project
Officer (SPO> should work closely with the Remedial Project Manager (RPM) and
Regional Counsel to ensure that the application is sufficient and complete SPOs
should also coordinate closely with their Headquarters Regional Coordinator in the
Office of Waste Programs Enforcement (OWPE) The Regions will continue to be
responsible for awarding the CA
I Funding State PRP Searches at Pre-NPL and NTPL Sites
If EPA and the State agree to designate sites as State-lead enforcement, the
State should identify PRPs In order to conduct PRP searches in a timely manner,
EPA may fund States to perform this activity prior to proposal of a site on the
NPL Candidate sites for this funding are those undergoing a listing site
investigation or the NPL scoring quality assurance process This will enable PRP
searches to be completed within six months of proposal of the site on the NPL
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9831 6a
A Conditions for Funding State PRP Searches Under a CooperativeAgreement
In order to receive funding for PRP starches, the State must agree to include
the following information in its CA application and be prepared to make the
lolloping assurances in the final CA Except where noted, the ft lowing
information and assurances must be certified by the State's Governor, Attorney
General, dcsignee, or appropriate State agency In States where these authorities
overlap among different State offices, all applicable signatures will be required
1 The State must provide a letter outlining the State enforcement
authorities that provide the basis for initiating enforcement actions
against PRPs (eg, administrative or judicial enforcement) which can
result in securing the necessary response
2 The State must designate a lead agency RPM and lead State attorney for
the site * Also, if multiple State offices are funded for a sue, one must
be designated as the lead State agency
3 The State must agree that PRP searches will be consistent with relevant
EPA Superfund enforcement policy and guidance
4 The State must retain, in a central file, all documents produced,
collected, received, or issued as part of the PRP search funded through
the CA These documents may be required for subsequent State or
Federal enforcement action, or future cost recovery activities Examples
of such documents include
a Site histories (such as ownership of property through titles or
% property sales, operations at the facility, and compliance or non-
compliance with environmental regulations),
b Title searches and summary of findings,
c Lists of names, addresses (past and current, if applicable), and phone
numbers of PRPs identified (such as owners, operators, generators,
and transporters), volume and nature of substances sent to the site
and volumetric ranking,
d Files on each PRP with evidence (including responses to information
requests) of shipments to the site, amount shipped and the fact that
hazardous substances were shipped
e Corporate histories, status, and information relating to the
availability of PRPs to pay for or perform a cleanup, including
financial assessments and insurance information as available, and
The same RPM and attorney can be designated the lead for more than one
site, if a multi-site CA is developed b> and awarded to the State
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983! 6a
Conclusions and recommendations for pursuing additional leads or
enforcement actions (such as unconfirmed PRPs that could not be
conc!usi\eh linked to the site)
B Fundable PRP Search Tasks
This section outlines specific fundable tasks for conducting PRP searches
These tasks parallel those conducted by EPA
1 Identifying site owners or operators during a preliminary assessment and
site inspection
2 Conducting searches to examine legal descriptions and owners of pro?s-t\
(e g , title searches), government files, reports, and court files i Also, to
examine technical information on the types of waste disposed of and
methods of disposal used
3 Identifying initial contacts (such as site owners or operators) to gather
documents regarding names and addresses of other parties involved and
their contributions to the sue
4 Reviewing information provided by initial contacts, which may lead to the
discover> of additional PRPs This information may include documents
such as customer lists, generator invoices, bills and receipts, and owner
or operator records and manifests
5 Conducting on-site investigations to identify additional PRPs These
investigations mav include an inventory of drums, and wastes found on '
site, review of abandoned records, vehicles, buildings, etc
6 Conducting off-site investigations to provide new leads and identifx
additional PRPs These investigations ma\ include interviews with local
police, fire and health department personnel, local residents. Chamber of
Commerce staff, bank personnel, and local industry representatives
7 Issuing information request letters
8 Reviewing and retrieving information from various data bases
Commercial data bases mav provide corporate information about PRPs,
technical information on specific chemicals, ownership of property, and
operations and employees of various firms
* i.
9 Verifying and documenting the various types of information collected
during the PRP search process This effort may include establishing a
data base to maintain this information and information collected through
notice and information request letters
10 Identifying PRPs by name and address, indicating the volume and nature
of substance contributed b> each PRP and ranking PRPs by volume
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9831 6a
11 Securing site access to conduct any of the above mentioned tasks "so
EPA funds ma\ be used to compensate site owners for access
Community relations tasks are also allowable activities under a CERCL4 CA
Specificallv, States should contact appropriate local officials and communm
representatives if there is any possibility of citizen interest or concern about
potential State enforcement actions This should also include conducting community
interviews to assess public concerns, learn about additional information on the site
and PRPs, and prepare a community relations plan Chapter 6 of the guidance
entitled Community Relations in Superfund • A Handbook should be consulted when
requesting CA funds for, and when developing, such tasks
II Funding State Issuance of Noficg Lette-s and Negotiation Acm t :: 21 NPL
Sues
If EPA and a State agree to designate sites as State-lead enforcement, the
State should attempt to notify PRPs of their potential liability and attempt to
secure their commitment for site cleanup Therefore, general notice as well as
special notice to PRPs and negotiation for PRP conduct of the RJ/FS and/or RD/RA
should begin within the time frames established by Section 122 (e) of CERCLA and
relevant EPA Superfund enforcement policy and guidance
In order to issue notice letters within a reasonable timeframe upon proposal of
a site on the NPL, EPA mav fund States to prepare notice letters prior to such
proposal Candidate sites for this funding are those having received a preliminary
MRS of 28 5 or better and planned to undergo NPL quality control review
A Conditions for Funding State Issuance of Notice Letters and Negotiations
Under a Cooperative Aereement
In order to receive funding for issuing notice letters and negotiating with
PRPs. the State must agree to include the following information in its CA
application and be prepared to make the following assurances in the final CA
Except where noted, the following information and assurances must be certified by
the State's Governor, Attorney General, designec, or appropriate state agenc> In
States where these au'honties overlap among different State offices, all apphcacuc
signatures will be required
1 The State must provide a letter outlining the State enforcement
authorities that provide the basis for initiating enforcement actions
against PRPs (eg, administrative or judicial enforcement) which can
result in securing the necessary response
2 The State must designate a lead agency RPM and lead State attorney for
the site Also, if multiple State offices are funded for a site, one must
be designated as the lead State agency
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9831 63
The State must conclude successful negotiations by entering into an
enforceable order or decree, or by issuing some other enforceable
document requiring the PRP to conduct an Rl/FS and/or RD RA in
accordance vnth CERCLA, as amended by SARA (including remedies
consistent *ith Section 121 cleanup standards), the NCP, and applicable
EPA policy and guidance
The State must agree to conduct negotiations and develop settlements
consistent with CERCLA Section 122 procedures on notice and negotiation
time frames (Section 122(e)), ensuring adequate public participation
(Section 122(d)) and requiring that covenants not to sue contain a
"reopener" provision (except for special covenants, dje. mimmis settlements
or extraordinary circumstances)(Section 122(f))
For issuing notice letters and negotiating with PRPs to conduct an RI/FS,
the State must agree that the issuance of notice letters and negotiations
will be consistent with CERCLA, as amended by SARA, the NCP, and
relevant EPA Superfund enforcement policy and guidance
o If a settlement is not reached within 90 days after notice to PRPs,
the State must notify EPA and recommend either continuing with
negotiations or other enforcement actions or requesting initiation of
a State- or Fund-financed RI/FS (If negotiations have begun prior
to awarding the CA, the State must notify EPA within 90 days after
award } If EPA and the State determine that negotiations should
not continue, the State may request that the CA be amended to
redirect remaining funds toward a Fund-financed RI/FS (subject to
availability of funds) If EPA and the State determine that
negotiations should continue, the State must provide a revised time
schedule and date for conclusion of negotiations.
For issuing notice letters and negotiating with PRPs to conduct an
RD/RA, the Slate must agree that, the, issuance of notice letters and
negotiations will be consistent with CERCLA, as amended by SARA, the
NCP, and relevant EPA Superfund enforcement policy and guidance
o If a negotiated settlement is not reached within 120 da\s after
notice to PRPs, the State must notify EPA and recommend either
continuing with negotiations, proceeding with Other enfor:emert
actions, or establishing a schedule for conducting a Fund-financed
cleanup (If negotiations have begun prior to awarding the CA, the
State must notify EPA within 120 davs after award ) If EPA and
the State determine that negotiations should not continue, the State
may request that the CA be amended to redirect remaining funds
toward other administrative or judicial enforcement activities
(subject to availability of funds) If EPA and the State determine
that negotiations should continue, the State must provide a revised
time schedule and date for conclusion of negotiations
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9831 6a
7 The State must compile and maintain an administrative record as required
under Section 113 of CERCLA, the NCP and applicable EPA guidance
8 The State must conduct a commumt\ relations program in accordance
' vuth the NCP and applicable EPA guidance
9 In the event that the State determines after execution of the CA that
State laws or other restrictions prevent the State from acting consistent
with CERCLA, as amended by SARA, the State must agree to promptly
notify and consult with EPA regarding the use of such laws or other
restrictions6
10 The State must retain in a central file all document produced collected,
received, or issued as part of its issuance of notice letters and
negotiations with PRPs These documents may be required for subsequent
State or Federal enforcement action or future cost recovery activities.
Examples of such documents include
a. Lists of names of PRPs receiving notice letters or information
request letters and copies of the letters,
b Information and data collected as a result of PRP searches and
nonce letters or information request letters (waste-in lists,
volumetric rankings, etc ),
c Descriptions of the problems at the site (such as the site history,
environmental and public health concerns, and previous response and
enforcement activities),
d Negotiation strategies or goals and specific response actions sough',
e Listings of PRPs involved in the negotiations (such as names,
addresses and phone numbers, and other possible PRPs and reasons
they were considered or rejected),
f Expected and actual tirre schedules and dates for conclusion of
negotiations (such as first negotiation session with PRPs, etc ), and
g Copies of the final order or decree and accompanying documents
(RI/FS or RD/RA statement of work and work plans)
In the course of negotiating the CA, consistency with Section 121 and Section
122 (notice, public participation and covenants not to sue) should be assured
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9831 6a
B Fundable N'once Letter and Negotiation Tasks
This section outlines specific fundable tasks for conducting negotiations with
PRPs Thesejasks parallel those conducted b> EPA
1 Various tasks mav be conducted to notify PRPs fundable tasks include
a Identifvmg recipients of notice letters by reviewing the results of
PRP searches
b Drafting notice letters to be issued to PRPs This task may mciuae
tailoring EPA's model notice letter to address the specifics of the
case or to request specific responses from various PRPs
c Mailing notice letters This task also includes ensuring knowledge
that the letters are received by PRPs (e g , certified return receipt)
and that replies are sent to the State
d Receiving and sorting out response letters and reviewing and
answering questions raised by PRPs
e Maintaining copies of notice letters issued, responses received, and
other documents relevant to the site.
f Releasing the names of notified PRPs, m order for all notified
parties to begin organizing among themselves m anticipation of
negotiations with the State Releasing the names of notified PRPs
to other interested parties may be done in accordance with State
Freedom of Information laws and requirements
g Constructing other relevant information (such as a summary of
volumetric contribution) to help in organizing PRPs and preparing
for negotiations with PRPs
2 Various tasks mav be conducted during negotiations with PRPs These
tasks can be broken down into three broad areas project management,
technical tasks, and legal tasks (Project management and technical staff
mav perform parts of some legal tasks and legal staff mav perform pa"s
of some project management tasks) Fundable tasks for these three areas
include
a Analyzing information provided by PRPs in response to"notice letter
and information requests (such as development of transactiona! data
bases using waste-in lists, volumetric rankings, and type"of
involvement and years of association with the sue)
b 'Reviewing relevant and applicable policies and guidance documents
c Analyzing, reviewing, and providing comments on work plans,
samples, studies, and other scientific and technical data
d Assessing site conditions
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983163
e Defining technical points open for discussion (such as number and
placement of samples, scope of the investigation, remedial options
to be considered, cleanup standards and techniques to be met, and
operable units to be addressed)
f Reviewing and responding to PRP proposals and/or counter proposals
g Identifving applicable and relevant and appropriate requirements
(ARARs)
h Establishing a negotiation team (legal and technical members) and
defining each team member's rote, authority, and responsibilities
i Holding meetings to follow up the notification process
j Performing legal research (such as applicable laws, need for
precedent, etc ) to support the negotiation effort
k Negotiating with PRPs (including d_£ minimis parties, et al)
1 Analyzing settlement alternatives
m Monitoring strengths and weaknesses of State and PRP positions and
evidence to be taken to trial should the negotiations fail
n Preparing draft orders and decrees for PRP review and comment
o Assessing PRP comments on the draft order and preparing and
issuing the final order
p Meeting with EPA and/or expert witnesses to discuss the draft order
and other aspects of the enforcement action
a Developing a pavment plan for fines or cash settlements
Community relations tasks are also allowable activities under a CERCLA CA
The State is responsible for conducting a community relations program during
negotiations with PRPs The State should refer to Chapter 6 of the guidance
entitled Commur t\ Re!aT ors in Superfund - A Handbook when requesting CA funcs
for, and when developing, such a program
HI Funding State Administrative and Judicial Enforcement Actions at VPL Sites
If EPA and a State agree to designate sites as State-lead enforcement, and
private parties do not agree wilhnglv to clean up the site, the State mav pursue
administrative or judicial enforcement action against PRPs to compel cleanup (in
State or Federal Court, as appropriate) These actions are considered while an
Rl/FS is being completed in order to plan, in the event that a settlement is not
reached, whether the design is to be financed by the Fund, whether to issue a
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9831 6a
unilateral order and/or whether to file a judicial action for injunctive relief
Therefore EPA will not fund these actions unless the steps outlined atxne ha%e
been completed or pursued NVhere this situation occurs, EPA may fund the State
for these actions against the PRPs
*
However, EPA will consider other factors that justify or require pursuing
administrative or judicial enforcement to compel performance of the RI/FS For
instance, States as part of their enforcement process may typically issue unilateral
administrative orders either to initiate the negotiation process (tantamount to a
notice) or at the termination of negotiations where no settlement is reached (t e ,
PRPs failed to execute or sign the enforcement document) EPA may fund the tasks
necessary to prepare and issue the unilateral administrative order The State must
outline the factors for pursuing this method of enforcement in the CA application
A Conditions for Funding State Administrative or Judicial Enforcement Actions
Under a Cooperative Agreement
In order to receive funding from EPA for administrative or judicial
enforcement actions against PRPs, the State must agree to include the following
information in its CA application and be prepared to make the following assurances
in the final CA Except where noted, the following information and assurances
must be certified by the State's Governor, Attorney General, designee, or
appropriate State agency In States where these authorities overlap among different
State offices, all applicable signatures will be required
I The State must provide a letter outlining the State enforcement
authorities that provide the basis for initiating enforcement actions
against PRPs (e g , administrative or judicial) which can result in securing
the necessary response
2 The State must designate a lead agencv RPM and lead State attorney for
the site Also, if multiple State offices are funded for a site, one must
be designated as the lead State agency
3 The State must issue a unilateral order and/or file a judicial action
requiring the PRP to conduct an RI 'FS or RD/RA in accordance with
CERCLA, as amended bv SARA (including remeaies consistent with Section
121 cleanup standards), the NCP and applicable EPA pohc> and guidance
4 The State must agree to conduct negotiations and develop settlements
consistent with CERCLA Section 122 procedures on notice and negotiation
time frames (Section I22(e)), ensuring adequate public participation
(Section 122(d)) and requiring that covenants not to sue contain a
"reopener" provision (except for special covenants, £j£ mimmis settlements
or extraordinary circumstances)(Section 122(0)
5 The State must compile and maintain an administrative record as required
under Section 113 of CERCLA, the NCP and applicable EPA
guidance
10
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7OJ 1 UJ
The State must conduct a community relations program in accordance
with the \CP and applicable EPA guidance
In the event that the State determines after execution of the CA that
State laws or other restrictions prevent the State from acting consistent
with CERCLA, as amended b> SARA, the State must agree to prompth
notif> and consult with EPA regarding the use of such laws or other
restrictions'1
The State must retain in a central Tile all documents produced, collected,
received, or issued as part of its administrative or judicial enforcement
against PRPs These documents are generally required as part of an
action to compel PRPs to take a response action or for cost recovery
Examples of such documents include
a Descriptions of problems at the site (such as the site history,
environmental and health concerns, and responses and enforcement
activities preceding litigation)
b Objectives of litigation (such as relief and/or monetary penalties
sought)
c Statutory provisions upon which the case is being built (such as
State and/or Federal statutes)
d Factors leading to the need for litigation (such as the legal history
of the case and other elements of the case)
e Proposed litigants and evidence of use of the site (such as names,
how they are linked to the site, and other possible litigants and
reasons they were considered or rejected)
f Potential problems with the litigation (such as anv anticipated
defenses, problems with consistency with NCP, and reasons for
urgency in proceeding with litigation).
g Summary of the contents of the documentary file (such as technical
documents, administrative decisions, correspondence, pleadings,
documentation and minutes of negotiations and techr-csl discussions
with PRPs, and other relevant documents)
h Previous settlement discussions and proposals made by the State
and/or PRPs
In the course of negotiating the CA, consistency with Section 121 and Section
122 (notice, public participation and covenants not to sue) should be assured
II
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983! 63
i Expected and actual time schedule for litigation (such as motion for
first discovery, first summary judgment, first deposition, etc )
j Copies of final judgments or consent decrees and accompan>mg
documents
B Fundable Administrative or Judicial Enforcement Tasks
This section outlines specific fundable tasks for administrative or judicial
enforcement against PRPs These tasks parallel those conducted by EPA
Various tasks may be conducted during an administrative or judicial
enforcement action against PRPs These tasks can be broken down into three broad
areas, project management, technical tasks, and legal tasks (Project management
and technical staff may perform parts of some legal tasks, and legal staff may
perform parts of some project management tasks) Fundable tasks for these three
areas include
1 Analyzing information provided by PRPs in response to notice letters and
information requests (such as development of transactional data bases
using waste-in lists, volumetric rankings, and type of involvement and
years of association with the site)
2 Reviewing relevant and applicable policies and guidance documents
3 Analyzing, reviewing, and providing comments on work plans, samples,
studies, and other scientific and technical data
4 Analyzing previous negotiations and PRP proposals and/or counter
proposals
5 Defining technical points to be addressed during litigation (such as
technical and scientific data supporting selection of a particular remedv,
cleanup standard and/or technique and endangerment, and release of other
elements of proof under State law)
6 Compiling and evaluating testimonv and depositions Hiring expert
witnesses through the State's procurement procedures
7 Identifving ARARs
8 Developing a litigation team (legal and technical members) and defining
each team member's role, authority, and responsibility
9 Organizing all documents collected and generated throughout the case
10 Performing legal research (such as legal history and theory of the case
and statutes upon which to proceed)
12
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983163
11 Reviewing proceedings of previous negotiations and settlement offers
12 Conducting discovery and deposition tasks
13 Preparing pleadings, motions, and briefs
14 Preparing expert witness testimony
IS Analyzing potential defenses to the case
16 Assessing settlement alternatives
17 Preparing pretml order
18 Trying the case in court, if a pretnal settlement cannot be reached
Community relations tasks are also allowable activities under a CERCLA CA
The State is responsible for conducting a community relations program during an
administrative action or litigation against PRPs The State should refer to Chapter
6 of the guidance entitled Community Relations in Superfund - 4 Handbook when
requesting CA funds for. and when developing, such a program
13
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9831 6a
ATTACHMENT A
PROVISIONS SPECIFIC TO STATE-LEAD ENFORCEMENT
ACTIONS AT CERCLA NATIONAL PRIORITIES LIST SITES
State-lead enforcement Cooperative Agreements should contain the provisions
found in Sections 1 (A-F) and 2 (B-M, O-T) of Appendix F of the EPA manual State
Participation in the Suoerfund Program In addition, they should also contain the
following provisions
A State Enforcement Authorities
In providing CERCLA funds for State-lead enforcement PRP search,r
notification, negotiation, and administrative and judicial enforcement, the State has
shown it possesses the legal authorities to pursue such actions to ensure
performance of the response action EPA asks the State to outline these authorities
in the Cooperative Agreement application
"The State possesses the legal authorities to pursue enforcement actions to
ensure performance of the private party response action. The State agrees to
use these authorities if private parties are unwilling to implement the
necessary response action These legal authorities are outlined m a letter
from {official providing letter], dated [ J and is attached to the
Cooperative Agreement application."
B Designation of Lead Site Protect Manager and Lead Attorney/Coordination
Among Appropriate State Offices
CERCLA enforcement actions are a joint effort, involving individuals with
project management, technical, and legal expertise To this extent, enforcement
actions require close coordination and cooperation between technical experts and
attorneys to ensure successful results EPA asks the State to identify State
officials who »ill represent this expertise and ensure that the various State offices
involved in the enforcement action are involved in the development and execution
of the Cooperative Agreement
"The State has designated [nang^mle^addr?;;. phone number] to serve as lead
agency remedial project manager for the (sue] The State has designated
[name, title, address, phone number] to serve as lead attorney for the [site]
All appropriate Slate offices involved in the execution of the enforcement
action planned for the [sue] have been coordinated with in developing this
Cooperative Agreement application"
14
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9831 6a
C Consistency mth EPA Policy and Guidance1
In pursuing enforcement actions against PRPs, the State must assure that such
actions are consistent with CERCLA, as amended b\ SARA, the NCP, and rele\ant
EPA Superfund enforcement polic\ and guidance
For PRP Searches
"In conducting PRP searches funded by this Cooperative Agreement, the State
agrees to ensure that such activities will be consistent with relevant EPA
Superfund enforcement policy and guidance, including but not limited to
o US EPA Office of Waste Programs Enforcement P_L.-ent'3nv
Responsible Part% Se:~ch Manual. August 27, 1987 "
F_or_Fss_uancc of Notice Letters and RI/FS Negotiations with PRPs
"In issuing notice letters and conducting RI/FS negotiations funded by this
Cooperative Agreement, the State agrees to ensure that such activities will be
consistent with CERCLA, as amended by SARA, the National Contingency Plan,
and relevant EPA Superfund enforcement policy and guidance, including but not
limited to
o US EPA, Office of Solid Waste and Emergency Response, Interim
Guidance on Notice Letters. Negotiations and Information Exchange.
October 19, 1987,
o US EPA, Office of Solid Waste and Emergency Response, Interim
Guidance on Potentially Responsible Party Participation in Remedial
Investigations and Feasibility Studies, (pending).
o US EPA, Office of Emergency and Remedial Response. Guidance on
Remedial Investigations under CERCLA and Guidance on Feasibility,
Studies under CERCLA. June 1985 "
For Issuance of Notice Letters and RD/RA Negotiationsjwjih PRPs
"In issuing notice letters and conducting RD/RA negotiations funded bv this
Cooperative Agreement, the State agrees to ensure that such activities will be
consistent with CERCLA, as amended by SARA, the National Contingencv Plan,
and relevant EPA Superfund enforcement policy and guidance, including but not
limited to
o US EPA, Office of Uaste Programs Enforcement, Interim Guidance
on Notice Letters. Negotiations and Information Exchange.
October 19. 1987,
The policies cited in this section should not be construed as all inclusive or
entirely relevant to each site-specific enforcement action Other policies that
ma> exist or be developed in the future may also need to be referenced in a
Cooperative Agreement In addition, some of the policies listed above are
currentU being revised (such as the RI/FS and RD/RA guidances)
15
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o US EPA, Office of Solid Waste and Emergency Response, Office of
Enforcement and Compliance Monitoring, US Department of Justice,
Interim CERCLASettlement Pohc\. December 5, 1985 (to the extent
not superseded b> Section 122 of CERCLA)
o US EPA, Office of Emergency and Remedial Response,
Suoerfund Remedial Design and Remedial Action Guidance.
Revised, June 1986"
For Administrative and Judicial Enforcement Actions against PRPs
"In conducting administrative and judicial enforcement actions funded bv this
Cooperative Agreement, the State agrees to ensure that such actiM.ies w il be
cons-stem -with CERCLA, as amended by SARA, the National Contingency Plan,
and relevant EPA Superfund enforcement policy and guidance, including but not
limited to
o US EPA, Office of Solid Waste and Emergency Response,
Office of Enforcement and Compliance Monitoring, U S
Department of Justice. Interim CERCLA Settlement Policy.
December S, 1985 (to the extent not superseded by Section 122
of CERCLA),
o US EPA, Office of Emergency and Remedial Response, Suoerfund
Remedial Design and Remedial Action Guidance. Revised, June 1986'
D Consistency with Section 122 of CERCLA
State negotiations and settlements will need to be consistent with Section 122
of CERCLA and relevant EPA Superfund enforcement policy and guidance when
State enforcement actions are funded under a cooperative agreement
"In conducting negotiations and developing settlements funded by this
Cooperative Agreement, the State agrees to be consistent with CERCLA Secuon
122 procedures on giving notice and establishing negotiation time frames
(Section 122(e)), ensuring adequate public participation (Section 122(d)), and
requiring that covenants not to sue contain a "reopener" provision {except for
a special covenant not to sue, a o^ mtnimis settlement, or in an extraordinary
circumstance) (Section 122(0)"
E Time Frame for Negotiations
When conducting negotiations funded under a CERCLA Cooperative Agreement,
the State must attempt to settle with PRPs within a specified time frame EPA
asks the State to notify EPA if a settlement is not reached within this time frame
and to recommend whetner negotiations should continue with the PRPs
16
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9831 6a
For RlFS Negotiations
"If a settlement is not reached within 90 davs after notice to potential!)
responsible parties for their conduct of the RI/FS, the State agrees to notify
EPA and recommend either (I) continuing with negotiations or other
enforcement actions or (2) requesting initiation of a State or Fund-financed
RI/FS (If negotiations have begun prior to award of the Cooperative
Agreement, the State agrees to notify EPA within 90 days after award ) If
EPA and the State determine that negotiations should not continue, the State
may request that the agreement be amended to redirect remaining funds toward
a Fund-financed RI/FS (subject to availability of funds) If EPA and the State
determine that negotiations should continue, the State agrees to provide a
revised time scheme and dafe for conclusion of negot^a .ans"
ForRD'RA Negotiations
"If a settlement is not reached within 120 da\s after notice to potentially
responsible parties for their conduct of the RD/RA, the State agrees to notify
EPA and recommend either (1) continuing with negotiations, (2) proceeding
with other administrative or judicial enforcement actions, or (3) having EPA
establish a schedule for conducting a Fund-financed cleanup (If negotiations
have begun prior to award of the Cooperative Agreement, the State agrees to
notify EPA within 120 days after award ) If EPA and the State determine that
negotiations should not continue, the State may request that the agreement be
amended to redirect remaining funds toward other administrative or judicial
enforcement actions If EPA and the State determine that negotiations should
continue, the State agrees to provide a revised time schedule and date for
conclusion cf negotiations"
*
%
F Formalizina Successful Negotiations, and Administrative or Judicial Enforcement
Actions
In pursuing negotiations with or enforcement actions against PRPs, the State is
required to culminate successful actions by entering into an enforceable order, or
decree or issuing some other enforceable document requiring the PRP to conduct the
response action m accordance with the NCP and relevant EPA policy and guidance
"Tr.e State agrees to culminate a successful rt\r?..5.r.e.n fare?.Tie nt 3c»ionl bv
issuing a [tMje of enforceable document] for the [name of^sne). requiring the
private parties to conduct the response action in accordance with CERCLA, as
amended by SARA, NCP, and applicable EPA policy and guidance"
G Admmistrame Record
"The State agrees to compile and maintain an administrative record consistent
with Section 113 of CERCLA, as amended by SARA, the National Contingency
Plan, and relevant EPA policy and guidance, including but not limited to
o US EPA, Office of Uaste Programs Enforcement/Office of Emergency
and Remedial Response, Administrative Records for Decisions on Selection
pf CERCLA Response Actions. May 29, 1987
IT
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9831 6a
The record shall contain information upon which the decision on selection of
the response action was based The record shall be maintained at or near the
sue, and a copv shall be maintained at the fname of State lead agency
receiving the cooperative agreement]
H rqmjtiunuv Relations
"The State agrees to prepare and implement a community relations plan for
this site The State further agrees to comply with the National Contingency
Plan and all relevant EPA policy and guidance on community relations,
especially Chapter 6, Community Relations in Superfund A Handbook when
implementing the community relations plan throughout the response "
I Deviation From CERCLA. As Angnded B> SARA
State laws or other restrictions may prevent States from acting consistent with
CERCLA, as amended by SARA In those instances, the State must agree to
promptly notify and consult with EPA regarding the use of such laws or other
restrictions.
"Where State laws or other restrictions may prevent the State from acting
consistent with CERCLA, as amended by SARA, the State agrees to promptly
notify and consult with EPA regarding the use of such taws or other
restrictions "
J Maintaining Enforcement-Related Documents m a Central File
"The State agrees to maintain a central file of all documents produced.
collected, received, or issued as part of the enforcement activities funded
under this Cooperative Agreement The State understands that these
documents mav be required for subsequent State or Federal enforcement action
or future cost recovery activities "
k Changes to Scope of Mork
The State must agree to notify EPA in the event that State or PRP plans or
actions substantially change the scope of work for tasks funded under the C\
"The State agrees to notify EPA in the event that State or PRP plans or
actions substantially change the scope of work for tasks funded under this
Agreement Prior to issuance, such changes will be submitted to EPA for
review to ensure technical adequacy and compliance with the terms of this
Agreement "
1$
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CERCLA FUNDING OF
POTENTIALLY RESPONSIBLE PARTY OVERSIGHT BY
STATES AT NATIONAL PRIORITIES.LIST SITES
-------
9831 6b
CERCLA FUNDING OF
POTENTIALS RESPONSIBLE PART\ OVERSIGHT
STATES AT NATIONAL PRIORITIES LIST SITES
PLRPOSE
The purpose of this guidance is to assist EPA Regional offices and States in
funding, under a CERCLA cooperative agreement (CA), of State oversight of
potentially responsible parties (PRP) conducting remedial investigations (RI),
feasibility studies {FS>, remedial designs (RD), and remedial a;'ions (RA) at sites on
the National Priorities List (NPL) The guidance also discusses funding of States
during an EPA-lead enforcement response action
BACKGROUND
The Office of General Counsel has concluded that CERCLA funding may be
provided to States to support a broad range of enforcement-related response
activities This is in addition to State-conducted, Fund-financed RI/FS activities to
support enforcement actions at NPL sites The reason is that such activities are
included under CERCLA Section 104{b) and consequently are eligible for CERCLA
funding *
The role of States in oversight of a PRP-conducted RI/FS and RD/RA depends
on whether the State or EPA negotiated and entered into the administrative order
(AO) or consent decree (CD) If the State negotiated the AO or CD. then the State
has the lead for oversight of the PRP's work If EPA negotiated the AO or CD,
then EPA has the lead for oversight of the PRP's work When EPA has the lead
for oversight the State mav receive management assistance funding in order to
review PRP response activities at the sue
The State may also, under certain circumstances, undertake various, mutually
agreed upon oversight activities at Federal lead sties These circumstances include
Federal CERCLA Section 104 and 106 settlements with PRPs in which the State is a
participant, as authorized under Section 12i'vf) of CERCLA, as amended by SARA,
and State oversight that can result in a more effective and timel) response to PRP
implementation activities Furthermore, States may be used in place of EPA
contractors to meet the qualified third partv oversight requirements outlined in
Section 104(a)(l) of CERCLA, as amended b> SARA
L A DeHihns, Authority to Use CERCLA to Providc^nforcement Funding
Assistance to States. Julv 20, 1984, and February 12, 1986
19
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9831 6b
GUIDANCE
In determining whether to fund a State to provide oversight of a PRP response
action the Region should employ the same standard of review it uses to evaluate
contractors pro\iding oversight for the Regional office The Region should also
assess the State's ability to meet the classification criteria outlined in the EPA and
Association of State and Territorial Solid Waste Management Officials (ASTS^MO)
policy memorandum of October 2, 1984 entitled "EPA/State Relations in
Enforcement Actions for Sites on the National Priorities List" In addition. EPA
Headquarters is in the process of developing additional classification guidance based
upon SARA and the upcoming revisions to the National Contingency Plan (NCP) In
reviewing a CA for award, the criteria should be applied to the site Once the
S'ate requests CA funding, the Region should pay particular attention to the
itemized budget submitted along with the CA application The budget should be
carefully reviewed to ensure that adequate resources and staff expertise are devoted
to the site Along with these considerations, the conditions and requirements
outlined in this guidance must be incorporated in the CA application prior to award
The guidance explains the conditions for awarding funds and lists the fundable
tasks for each activity This guidance does not preclude the Regions from including
additional enforcement-related conditions in the application, if warranted
Furthermore, it is imperative that applicable provisions outlined in Appendix F of
the EPA manual State Participation in the Superfund Program be incorporated in
each CA application See Attachment A for those applicable provisions and sample
language for the enforcement provisions
State yearlv funding requirements for activities outlined in this guidance must
be included in the Region's Superfund Comprehensive Accomplishments Plan (SCAP)
The Region and State should be working closely during the SCAP development
process to ensure that State funding requirements are adequately addressed in the
final plan When developing CA applications for these activities, the State Project
Officer (SPO) should work closely wuh the Remedial Project Manager (RPM) and
Regional Counsel to ensure that the application is sufficient and complete SPOs
should also coordinate closely with their Headquarters Regional Coordinator in the
Office of Waste Programs Enforcement (OWPE) The Regions will continue to be
responsible for awarding the CA
I Fundirp State Oversight of PRPs • State Ei^CiTi"* Res?:""?
If a State successfully negotiates to have the PRPs conduct the RI/FS or
RD/RA, it will be in the State's interest to oversee their work States should
obtain a commitment from PRPs to pay for their RI/FS oversight costs when
negotiating with PRPs, prior to either requesting funds from EPA or drawing down
on monies already awarded in a CA The PRPs may want to reimburse States for
their oversight costs at the end of each year or at the completion of the response
action, rather than providing the monies up front In this case. States should
assure initial funding of oversight of the PRPs' RI/FS This may be done using
State funds or EPA funds, to the extent available Where EPA funds are used.
States may pay back EPA upon receipt of the PRPs' money, or EPA may receive the
money directl> from the PRPs
20
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9831 6b
There ma> be situations where post-SARA State RI/FS negotiations and
settlements b\ States do not include a PRP commitment to pav for oversight The
Regional office must remind the States of the CERCLA Section 104(a)(l) requirement
and closelv scrutinize State capabiht\ or willingness to seek oversight costs before
proceeding uuh a CA Ordinarily, Regions will not fund State oversight costs when
States ha\c not obtained such costs in an order or decree In addition. States
should arrange for PRPs to pa> for their RD/RA oversight as well when negotiating
with PRPs
A 1 Conditions for Funding Under a Cooperative Agreement Oversight of RI/FS
In order to receive funding from EPA for oversight of a PRP-conduct;d RI/FS,
the State must include the following information in its CA application and be
prepared to make the following assurances in the final CA Except where noted,
the following information and assurances must be certified by the State's Governor.
Attorney General, designee, or appropriate State agency
1 The State must have issued or negotiated an enforceable order, decree, or
other enforceable document requiring the PRP to conduct an RI/FS in
accordance with CERCLA, as amended by SARA, the NCP, and applicable
EPA policy and guidance A copy of the order must be included in the
CA application b
2 The State must provide a letter outlining the State enforcement
authorities that resulted in the issuance or negotiation of the
enforcement document '
3 The State must assure that it beheves the PRPs have the technical,
managerial, and financial capability to conduct the RI/FS
4 The State must assure that it will prepare a Record of Decision (ROD) or
other decision document and select a remedy that is consistent with
CERCLA, as amended by SARA, the NCP, and relevant EPA policy and
guidance
5 The State must conduct a community relations program in accordance
with the NCP and applicable EPA guidance11
If the enforceable document is a three partv agreement (EPA, State, and
PRP), the CA need only cite it since a copy should already be in EPA's
possession
See the document Community Relations in Suoerfund A Handbook, especially
Chapter 6 which deals with community relations during enforcement actions
21
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983! 6b
6 The State must compile and maintain an administrative record as required
under Section 113 of CERCLA, the NCP and applicable EPA guidance
7 ^ The State must agree to the following general principles concerning PRP
'paNment of RI/FS oversight costs, which ma\ be spelled out in the
State's order or decree
a The State will document its oversight costs.
b PRPs will reimburse EPA for its oversight costs (either directly or
through the State)
c PRPS agree that they are liable to EPA under Section 107 or
CERCLA for unpaid oversight costs, plus associated enforcement
costs and interest from the date of demand by EPA or State
8 In the. event that the State determines after execution of the CA that
State laws or-other restrictions prevent the State from acting consistent
with CERCLA. as amended b% SARA, the State must agree to promptly
notify and consult with EPA regarding the use of such laws or other
restrictions'1
A 2 Conditions for Funding Under a Cooperative Agreement Oversight of RD/RA
In order to receive funding from EPA for oversight of a PRP-conducted
RD/RA, the State must include the following information in its CA application and
be prepared to make the following assurances in the final CA Except where noted,
the following information and assurances must be certified by the State's Governor,
Attorney General, designee, or appropriate State agency
1 The State must have issued or negotiated an enforceable order, decree, or
other enforceable document requiring the PRP to conduct an RD/RA in
accordance with CERCLA, as amended by SARA, the NCP, and applicable
EPA policy and guidance A copy of the order must be included in the
CA application *
2 The State must provide a letter outlining the State e-'o"*~s^:
authorities that resulted in the issuance or negotiation of tr>e
enforcement document
r cite it since a copy should already be in EPA's possession
22
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9831 6b
The State must assure that it believes the PRPs have the technical
managerial, and financial capability to conduct the RD/RA
The State must submit a ROD or other decision document consistent with
CERCLA as amended by SARA, the NCP and relevant EPA policy and
guidance This documentation must be included in the CA application or
be submitted as a condition to drawing down on oversight funds'
Funding wiil not be allowed unless EPA formally concurs in writing with
the State's ROD or other decision document
The State must conduct a community relations program m accordance
vuth CERCLA, as amended by SARA, the NCP and applicable EPA
guidance
In the event that the State determines after execution of the CA that
State laws or other restrictions prevent the State from acting consistent
with CERCLA, as amended by SARA, the State must agree to promptly
notify and consult with EPA regarding the use of such laws or other
restrictions'
B 1 Fundable Oversight Tasks RI/FS
In preparing and reviewing the CA application, it might be helpful for States
and Regions to consider oversight as consisting of review tasks, field-related tasks,
and enforcement tasks A community relations program is also an essential aspect
of the response action States should attempt to specify, in the enforceable
document, the roles and responsibilities of the PRP as distinguished from the roles
and responsibilities of the State in each of these major activities
1 Res iew tasks conducted by the State include
a Review prehrmna-> planning documents,
b Review and comment on scope of work and work plans.
If the enforceable document is a three party agreement (EPA, State and PRP),
the CA need only cite the ROD since a copy should alread> be in EPA's
possession
In the course of negotiating the CA, consistency with Section 121 and Section
122 (notice, public participation and covenants not to sue) should be assured
23
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9831 6b
c Reuewr and comment on standard operating procedures (such as
quaht> assurance/qualitv control plans, sampling plans, health and
safet} plans, and data management plans),
d Review and comment on draft RI reports,
e Review final RI reports,
f Review and discuss FS objectives,
g Review and comment on draft FS,
h Review final FS,
e.
i Prepare the proposed plan for remedial action and draft and final
ROD.
j Compile and respond to public comments on the RI/FS and proposed
plan for remedial action,
k Review PRP monthly progress reports,
1 Organize and participate in technical meetings on the RI/FS with
the PRPs, PRP contractors, and/or EPA
2 Field-related tasks conducted by the State include b
a Conduct environmental monitoring (e g , air, water),
b Take and anahze split samples or confirmatory samples,
c Provide on-site presence/inspection of PRP field activities
3 Enforcement tasks conducted by the State include
a Track deliverable schedules and submission dates spelled out in the
enforcement document,
b Initiate enforcement action for non-compliance with terms and
conditions of the enforcement document
4 Communit% relation1: tisi-s conducted by the State include
a Notify- local newspapers of site activities planned or underway.
The amount and scope of field-related tasks to be funded by EPA during
oversight should be negotiated on a case-by-case basis
24
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9831 6b
b Conduct discussions with the affected communit\ m the locale of the
site,
c Prepare cornrnumtv relations plans,
d Hold public c'omment period on the RI/FS,
e Brief local and State officials,
f Hold public meetings on technical aspects of the site,
g Prepare fact sheets and press releases and disseminate information,
h Prepare summaries of public concerns
Fundable Oversight Tasl.* RD'RA
I Fundable oversight tasks RD
a Review tasks conducted by the State for RD include
o Participate in technical design briefings for RD initiation,
o Review- design scopes of work,
o Conduct technical meetings on the RD with the PRPs, PRP
contractors, and/or EPA,
o Assist in reviewing preliminary design documents and design
changes which may affect remedy selection,
o Review and comment on value eig'ntsnr.g isreer.rg SLr-nu.4 „
o Review and comment on quality assurance project plans, site
safety plans, and intermediate design documents,
o Review and comment on plans for ope'a'ion and maintenance
developed bv PRP,
o Review final RD
b Enforcemerr ta
-------
9831 6b
c Community relations tasks conducted b> the State for RD
include
o Prepare fact sheets and notif\ public on RD activities and on
what the RD is expected to entail,
c Continue prior community relations activities as needed
Fundable oversight tasks RA
a Review tasks conducted by the State for RA include
o Review and comment on PRP or PRP contractor work plans,
site safety plans, and QA/QC procedures,
o Review any construction change orders that may alter the
approved remedy and amend the CA, prepare a discussion of
significant changes from the proposed plan in the Record of
Decision (ROD), and/or amend the ROD as appropriate subject
to adoption of the amended ROD by EPA,
o Review and comment on draft and final RA reports,
o Participate in pre-constructaon and pre-fmal construction
conferences,
o Review PRP or PRP contractor monthly progress reports,
o Organize and participate in technical meetings on the RA with
the PRPs, PRP contractors, and/or EPA,
o Ensure that the remed\ is completed and operational
b Field-related tasks conducted b> the State for RA include
o Provide monitoring and oversight of construction activities,
o Take and anal>ze split samples or confirmatO'> samples,
o Be present at trial runs and shakedowns of major equipment,
o Participate in pre-fmal and final inspections and project
acceptance
c Enforcement tasks conducted by the State for RA include
o Track deferable schedules and submission dates spelled out >n
the enforcement document.
26
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9831 6b
o Initiate enforcement action for non-compliance with terms and
conditions of the enforcement document
d Cornrnunitv relations tasls conducted b> (he State for RA
include
o Revise original community relations plans to incorporate any
changes required due to remedial design and construction
activities,
I
o Conduct discussions with the affected community on the
selected remedy and planned construction activities,
o Hold meetings with the puolic during the RA
II Fundma State Manaee.F'e.ri.t Assistance and Oversight of PRPs - Federal
Enforcement Response
A Management Assistance During a Federal Enforcement Response
If EPA has negotiated the administrative order or consent decree with the
PRPs, EPA will have the lead for oversight of PRP activities and for community
relations In this situation. States may receive funding for management assistance
Management assistance essentially will involve review tasks and is explained in
Volume I of the EPA manual State Participation in the Superfund Program EPA
will not fund States to hire contractors for management assistance tasks
B Oversight During a Federal Enforcement Response
The State mav also, under certain circumstances, undertake various mutualh
agreed upon oversight activities in place of EPA These circumstances may include
the following
I Federal CERCLA settlements with PRPs in which the State is a
participant, as authorized under Section 12l(f) of CERCLA, as
amended by SARA
2 State oversight that can result m a more effective and timely
response to PRP implementation activities
3 Furthermore, States may be used in place of EPA contractors to
meet the qualified third party oversight requirements outlined in
Section 104(a)(l) of CERCLA '
Under this scenario, the State would conduct oversight activities in-house
27
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9831 6b
This means the State would be conducting some re\iew, field-related, and'or
community relations tasks along with or in place of EPA or EPA's contractor For
each task, the CA application should clearl> outline the roles and responsibilities of
the State as distinguished from the roles and responsibilities of EPA or EPA's
contractor
*
Where EPA has the lead for oversight, EPA encourages the State to conduct
oversight tasks only if it has the m-house capability to do the work Generally,
EPA will not fund the State to hire contractors for oversight tasks unless it
provides adequate justification for their use Furthermore, EPA will not fund States
to conduct oversight tasks that duplicate EPA's efforts
28
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9831 6b
ATTACHMENT A
PRO% ISIONS SPECIFIC TO STATE-LEAD ENFORCEMENT ON ERSIGHT
OF POTENTIALLY RESPONSIBLE PARTIES
State-lead enforcement oversight Cooperative Agreements (CA) should contain
the provisions found in Sections 1 (A-F) and 2 (B-M, O-T) of Appendix F of the
EPA manual State Participation in the Superfund Program In addition, they should
also contain the following provisions
A. Issuing an Enforceable Order. Decree, or Other Enforceable Do;urne"t
Before EPA funds oversight, the State is required to issue an enforceable
order, decree, or other document that requires the PRP to conduct a RI/FS and/or
RD/RA in accordance «.uh CERCLA, as amended by SARA, the NCP, and applicable
EPA guidance A copy of this enforcement agreement must be included in the CA
application
"The State issued a (type of enforceable document] for the fname of site]
dated ( 1. requiring a (type of response actionl m accordance with
CERCLA, as amended by SARA, the NCP. and applicable EPA policy and
guidance A copy of this enforcement agreement is attached to the
Cooperative Agreement application*1
^
B Srate Enforcement Authorities
In providing CERCLA funds for State-lead oversight of PRPs. the State has
shown it possesses the legal authorities to pursue administrative or judicial
enforcement action to ensure performance of the response action EPA asks the
State to outline these authorities m the CA application
"The State possesses the legal authorities to pursue administrative or judicial
enforcement action to ensure performance of the private party response action
The State agrees to use these authorities if private parties (1) do not meet the
terms of the order, decree, or other enforceable document, or (2) are unwilling
to undertake subsequent phases of the response action These legal authorities
are outlined in a letter from fofficial providing lette'1. dated [ ], and
is attached to the Cooperative Agreement application"
If the enforceable document is a three party agreement (EPA, State, and
PRP), the CA should read "and EPA" after "The State" and only cite the
enforceable document since a copy should already be in EPA's possession
29
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9831 6b
C Ability of PRPs to Undertake and Finance the Response Action
In settling with PRPs to undertake the response action, the State believes that
the PRPs ha\e the technical, managerial, and financial capabilit> to conduct the
response action
For RI'FS oversight
"The State believes that the PRP has the technical, managerial, and financial
capability to undertake the RI/FS"
For RD/RA oversight
"The State believes that the PRP has the technical, managerial, and financial
capability to undertake the RD/RA " ;
i
D Consistency vmh EPA Pohcv and Guidance1
In overseeing PRP conduct of response actions, the State must assure that
such actions are consistent with CERCLA, as amended by SARA, the NCP, and
applicable EPA policy and guidance
For RI/FS oversight
"In conducting RI/FS oversight funded by this Cooperative Agreement, the
State agrees to ensure that the private party RI/FS is consistent wuh
CERCLA, as amended by SARA, the National Contingency Plan, and relevant
EPA policy and guidance, including but not Einuted to.
o US EPA, Office of Emergency and Remedial Response, Guidance on
Remedial Investigations Under CERCLA and Guidance on Feasibility
Studies L7nder CERCLA. June 1985
0 US EPA, Office of Solid Waste and Emergency Response. Interim
Guidance on Potentially Responsible Party Participation in Remedial
Investigations and Feasibility Studies, (pending)
o US EPA, Office of Solid Waste and Emergency Response, Interim
Guidance on Compliance with Applicable or Relevant and Appropriate
Requirements. Federal Register. August 27. 1987"
The policies cited in this section should not be construed as all inclusive or
entirely relevant to each site-specific enforcement action Other policies that
may exist or be developed in the future may also need to be referenced in a
Cooperative Agreement In addition, some of the policies listed above are
currently being revised (such as the RI/FS and RD/RA guidances)
30
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9831 6b
For RD RA o%ersieht
"In conducting RD'RA oversight funded by this Cooperative Agreement, the
State agrees to ensure that the private part\ RD/RA is consistent with
CERCLA, as amended by SARA, the National Contingency Plan, and relevant
EPA policy and guidance, including but not limited to
o US EPA, Office of Emergency and Remedial Response, Manual Suoerfuad
Remedial Design and Remedial Action Guidance. June, 1986"
E Selection of Remedy
"At the completion of the private party RI/FS, the State agrees to recommena
a proposed remedial action plan, develop a Record of Decision (ROD) or -other
decision document, and select the remedy consistent with CERCLA, as amendea
by SARA, the National Contingency Plan, and relevant EPA policy and
guidance, including but not limited to
o US EPA, Office of Solid Waste and Emergency Response, Interim
Guidance on Suoerfund Selection of Remedy. December 24, 1986 "
F Changes to Scope of Work
The State must agree to notify EPA in the event that State or PRP plans or
actions substantially change the scope of work for tasks funded under the CA
"The State agrees to notify EPA in the event that State or PRP plans or
actions substantially change the scope of work for tasks funded under this
Agreement Prior to issuance, such changes will be submitted to EPA for
re%ie* to ensure technical adequacy and compliance with the terms of this
Agreement "
G CC|T'?T!'-'" '^
"The State agrees to prepare and implement a community relations plan for
this sue The State will not initiate oversight field activities until EPA has
approved the plan The State further agrees to comply with the National
Contingency Plan and relevant EPA policy and guidance on community
relations, especiallv Chapter 6, Community Relations in Surerfund A Handbook
when implementing the commrunitv relations plan throughout the response "
31
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9831 6b
H Administrative Record
"The State agrees to compile and maintain an administrative record consistent
with Section 113 of CERCLA, as amended bv SARA, the National Contingent}
Plan, and relevant EPA policy and guidance, including but not limited to
o US EPA, Office of waste Programs Enforcement/Office of Emergency
and Remedial Response, Administrative Records for Decisions on Selection
of CERCLA Response Actions. May 29, 1987
The record shall contain information upon which the decision on selection of
the response action was based The record shall be maintained at or near the
site, and a copy shall be maintained at the [name of State lead Ace~c\
receiving th? cooperative agreement]"
I PRPJPavment of Oversight Costs
"The State agrees with the following general principles concerning PRP
payment of RI/FS oversight costs, which may be spelled out in the State's
order or decree
o The State will document its oversight costs,
o PRPs will reimburse EPA for its oversight costs {either directly or
through the State), and
o PRPs agree that they are liable to EPA under Section 107 of CERCLA for
unpaid oversight costs, plus associated enforcement costs and interest
from the date of demand by EPA or State"
J Deviation Fron CERCLA. As Amended Bv SARA
State laws or other restrictions may prevent States from acting consistent with
CERCLA, as amended by SARA In those instances, the State must agree to
promptly notify and consult with EPA regarding the use of such laws or other
restrictions
"\fchere State laws or other restrictions ma\ prevent the State from acting
consistent with CERCLA, as amended by SARA, the State agrees to prompt!}
notify and consult with EPA regarding the use of such laws or other
restrictions "
32
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COST ESTIMATES FOR BUDGETING STATE ENFORCEMENT ACTIVITIES
-------
9831 6c
COST ESTIMATES FOR BUDGETING STATE ENFORCEMENT ACTI\ ITIES
Cost estimates have been developed for CERCLA enforcement activities, which
arc fundable through EPA cooperative agreements (CA) The cost estimates are to
be used solelv ai a. guide in assisting the State and EPA in budgeting these
activities during development of the Superfund Comprehensive Accomplishments Plan
(SCAP)
EPA has set forth policv on the types of activities to be funded through CAs
in the Office of Solid Waste and Emergency Response (OSWER) guidances which are
listed below and are part of this package
o CERCLA Funding of State Enforcement Actions at National Priorities List
Sites (OSWER Directive Number 9831 6a)
o CERCLA Funding of Oversight of Potentially Responsible Parties by States
at National Priorities List Sites (OS^ER Directive Number 9831 6b)
Each of these guidances describes the conditions for funding under a cooperative
agreement and the activities that will be funded What follows are cost estimates
which States and EPA may use, at their discretion, for budgeting each of the
activities during the SCAP development process
In developing these cost estimates, staff were interviewed in the EPA Office
of Enforcement and Compliance Monitoring (OECM) and the Office of \Vaste
Programs Enforcement (O\VPE) Both offices maintain workload budget models which
assign resources to different activities In both models, the activities are similar to
those fundable under CAs
The OECM model contains budget estimates for EPA attorneys and other legal
costs The OWPE model contains budget estimates for both intramural (EPA
technical and administrative) and extramural (contractor) costs The extramural
costs were based on a separate ONVPE report. At enforcement sites ail three
general cost categories - (1) legal, (2) technical and administrative, and (3)
contractor ~ are realized in varving proportions depending on the activity taking
place
The following sections discuss the EPA budget models The first section
discusses the underlying assumptions applicable to th. models and to each
enforcement activity The remaining sections provide budget estimates for each
activity aod the considerations that may have an impact on the estimates
33
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9831 6c
ASSLMPTJONS
The three following general assumptions should be made
1 One full time equivalent (FTE) is equal to 2,080 hours per year based on
220 active davs (out of 260) An FTE includes technical and
administrative costs, as well as travel and communications One FTE,
based on a mean salary of $30,000 a year, is equal to $52,500
2. An overall rate of $60 per Level of Effort (LOE) hour was used to
estimate the extramural costs
3 These cost estimates are based solely on Federal experience Although
States may emplov similar cost estimates when developing their SCAP
requests actual State costs funded through CA may be significantly lower
than described by the models
POTENTIALLY RESPONSIBLE PARTY SEARCHES'
•
PRP search procedures have become more clearly defined as EPA's program
experience has increased Additionally, EPA has developed a PRP search manual
which serves to streamline the process and reduce the variance in costs The costs
may vary depending on the number of PRPs at the site The point at which a PRP
search is terminated is an additional consideration in the cost estimate PRP
searches are to be substantively completed in order to issue general notice letters
sufficiently in advance of the RI/FS special notice to allow PRPs to come together
Nonetheless, at some sues, EPA Regions are continuing PRP search activities during
negotiations and throughout the remedial investigation and feasibility study (RI/FS)
and even into the remedial design and remedial action (RD/RA) While these search
actions are appropriate, the costs of PRP searches should not be attributed to these
activities but rather should be attributed to the PRP search activity
Average Duration of PRP Search 2 Quarters (or 6 months)
Average Cost Estimate $15,225 - Technical and Administrative
$50.000 - Extramural
$ 7,875 - Legal
$73,100 - Total
The PRP search cost includes names and addresses of generators, but does not
include information on the volume or nature (especially hard evidence that the
materials were hazardous substances) of the hazardous substances or a
volumetric ranking, or the PRP's ability to pay Information on the voiume
and nature of the substances, a volumetric ranking, and ability to pay are part
of the NEAR process This is described as "NEAR information Collection" in
the OWPE workload budget model
34
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9831 6c
ISSLANCE OF NOTICE LETTERS AND NEGOTIATIONS'1
Costs for issuing notice letters and conducting negotiations var> depending on
the number of PRPs at a site The cost of issuing notice letters and conducting
negotiations also varies depending on the phase of response, RI FS or RD/RA
Since RD'RA negotiations involve selection of the remedv and development of the
Record of Decision (ROD) or other decision document, this activity usually takes
longer but requires less extramural support
Average Duration of Notice Letter
Issuance and Negotiations for RI/FS 2 Quarters (or 6 months)
Average Cost Estimate $14,175 - Technical and Administrative
S5C,OCO - Extramural
$13,125 - Legal
$77,300 - Total
Average Duration of Notice Letter
Issuance and Negotiations for RD/RA
and Operation and Maintenance 3 Quarters (or 9 months)
Average Cost Estimate $18,375 - Technical and Administrative
$30,000 - Extramural
$ 7,875 - Legal
$56,250 - Total
ADMINISTRATIVE AND JUDICIAL ENFORCEMENT ACTIONS
^f:st Gf the c--rerf
-------
O\ERSIGHT OF RI/FS
RI FS oversight costs mav increase because of the new requirements of the
Supcrfund Amendments and Reauthonzation Act (SARA) For a PRP-conducted
RI FS SARA requires competent third party oversight personnel and allows qualified
contractors to conduct the work EPA is currently developing guidance that will
define more clearly what appropriate oversight should entail during hazardous waste
sue cleanups (RI/FS and RD/RA) This guidance when issued should help with more
effective cost estimates of such oversight
Average Duration of RI/FS Oversight 10 Quarters (or 30 months)
Average Cost Estimate S 99,750 - Technical and
$200,000 - Extramural
$ 0 - Legal
5299,750 - Total
O^ ERSIGHT OF RD/RA
A project's construction costs cannot be precisely predicted at the completion
of the RI/FS, and the project error range is as much as 50 percent more to 30
percent less than estimated costs Non-construction specifications and
environmental controls may require more review than a typical construction project
not related to hazardous waste The costs for these controls are difficult to
predict Overall, however, project design and construction costs and the costs to
review the design are interrelated and somewhat predictable given the following
assumptions
o Construction costs for Superfund remedies are approximately 50 percent
of the cost of total remedial action, and they exclude transportation,
disposal, incineration, and other such costs
o The estimated average RA cost is $10 million, but may increase to $20
m.llion by 1989 due to SARA s requirement of more permanent remedies
which may call for using alternative technologies
o Design costs are roughly 6 percent of the total project construction
costs
o Design review costs are roughly 25 percent of design costs
Again, EPA is currently developing oversight guidance that will set forth detailed
procedures for RD/RA oversight
36
-------
•\\crage Duration of RD Oversight
A,erase Cost Estimate
9835 6c
4 Quarters (or 12 tftonths)
S 31.500 - Technical and Administrative
$150,000 - Extramural
S 0 • Legal
$181,500 - Total
Average Duration of RA Oversight
Average Cost Estimate
12 Quarters (or 36 months)
$ 94,500 • Technical and Administrative
$300,000 - Extramural
$ 0 - Legal
S354.500 - Total
37
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V*
RECOMMENDED PROCEDURES FOR
HEADQUARTERS/REGIONAL RE\ IEW AND CONCURRENCE OF
INITIAL ENFORCEMENT COOPERATIVE AGREEMENTS
-------
9831 6d
RECOMMENDED PROCEDLRES FOR HEADQUARTERS/RECION'AL REVIEW
AND CONCURRENCE OF INITIAL ENFORCEMENT COOPERATIVE AGREEMENTS
1 PROCEDURES FOR REQUESTING FUNDS AND REVISING THE CASE
MANACEMENT-BLDGET DRAFT COOPERATIVE AGREEMENT APPLICATION
o The Region should request cooperative agreement funds during the SCAP
development process The SCAP should be revised quarterly, if necessary
The Region should consult with the respective States prior to developing
and revising the SCAP
o The State may develop a cooperative agreement application and submit it
to the Regional State Project Officer (SPO)
o The Regional Coordinator (RC) in the Compliance Branch, Office cf V^aste
Programs Enforcement (O\VPE), will review the draft application in
coordination with the Contracts Management Section (CMS) in the
Technical Support Branch,
o OWPE will send its comments on the application to the SPO The Region
should give the State combined EPA comments (HQ and Region) The
State will then prepare a final application for submmal to the Regional
Administrator for award
2. REGIONAL SUBMITTAL AND HEADQUARTERS SIGN-OFF FINAL
COOPERATIVE AGREEMENT APPLICATION
o CMS will receive a copy of the final cooperative agreement application,
which will have a commitment notice attached The dollar amount for
award, cooperative agreement number, and description should alreadv be
entered on the commitment notice
o CMS and the RC will review the final application 3"d have the
commitment notice signed by the appropriate Headquarters managers For
CAs of S250K. or less, the Director of OWPE's signature is required For
CAs of o^r S250K, the Assistant Administrator of the Office of Solid
\Vaste and Emergency Response's signature is required
o After signatures have been obtained, CMS will obtain the proper
accounting information from OWPE's Program Management and Support
Office (PMSO)
o After signatures are obtained and accounting information has been
entered on the commitment notice, the CMS will send only the
commitment notice back to the Region for use in awarding the CA
Delegation has given CA award authority to the RA (CMS will keep the
copy of the CA application and a photocopy of the commitment notice on
file for budget purposes) The SPO will send a signed copy of the CA
document to CMS after award and acceptance by the State
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23174
Federal Register / Vol 54. No 102 / Tuesday May 30 1989 / Rules and Regulations
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 304
IFRL-3521-8]
% *
Arbitration Procedures for Small
Superfund Cost Recover/ Claims
AGENCY: Environment.il Protection
Agency
ACTION- Final rule
SUMMARY: Pursuant to sections 107(a)
and 122(h)(2) of the Comprehensive
Environmental Response
Compensation, and Liability Act of 1980
as amended by the Superfund
Amendments and Reauthorize lion Act
of 1988 ("CERCLA ), and Executivp
Order No 12580, 52 FR 2923 (January 29
1987), the Environmental Protection
Agency (' EPA') is promulgating today a
rule which establishes and govprns the
procedures for EPA'3 arbitration of
small CERCLA section I07(a) cost
recovery claims. This rule implements
EPA's authority under section 122(h)(2)
of CERCLA, which authorizes the head
of any department or agency with
authority to undertake a response action
under CERCLA to use arbitration as a
method of settling CERCLA section
107(a) claims for recovery of response
costs incurred by the United States
pursuant to section 104 of CERCLA,
when the total response costs Xor the
facility concerned do not exceed
$500,000. excluding interest, and when
the claim jiBfl-not beenreferred to the '<•
Department of Justfoe for civil action
DATES: This final role is effective on
August 28.1989.
ADDRESSES: The public docket for this
final rule is located in Room M3105, U S
Environmental'Protection Agency. 401M
Street. SW., Washington. DC 20460, and
is available for viewing by appointment
from9-00am to400pm Monday
through Friday, excluding holidays For
an appointment, please call Janice lanett
at (202) 382-3077.
FOR FURTHER INFORMATION CONTACT
Janice Linett. U S Environmental
Protection Agency, Office of
Enforcement and Compliance
Monitoring. Waste Enforcement
Division, Room M3105, Mail Code LE-
134S. 401 M Street. SW. Washington.
DC 20480, (202) 382-3077
SUPPLEMENTARY INFORMATION The
contents of today's preamble are set
forth in the following form
I Introduction
II Responsiveness Summary
III Changes from Proposed to Final Rule
IV Summary of Supporting Analyses
A Executive Order No. 12291
B Rugulatory Flexibility \iA
C Paperwork Reduction \i I
Li«t uf Sub|i»m in 40 TI-R P.irl 3O4
I Introduction
Section 122(h)(2) of CERCLA provides
EPA as wel! as any other department or
agency authorized to undertake a
response action under CLRCLA, with
authority to promulgate regulations,
aflur consulld*ion vvith the Attorney
Cericr.nl, for the use of arbitration as a
method of settling certa n CERCLA
section I07(a) claims for recovery of
response costs incurred by the United
States pursuant to section 104 of
CERCLA This authority is limited to
cases in which the total response costs
for the facility concerned do not exceed
S500 000, excluding interest and which
have not been referred to the
Department of Justice for civil action
On August 4,1988, EPA proposed a
regulation to implement its authority
under section 122(h][2) of CERCLA [53
FR 29428) The August 4.1988 preamble
discussed the purpose of the proposed
rule in Part I and provided a detailed
summary of the proposed rule m Part IL
EPA accepted public comment on the
proposed rule for 60 days and received 4
letters totalling 12 pages of comment
Today, EPA is promulgating the final
rule to implement its CERCLA section
122(hj(2) authority This rule establishes
and governs the procedures for EPA's
arbitration of CERCLA section I07(a)
cost recovery claims In preparing this
final rule, JSPAias carefully considered
all pubBc^ommenta on the proposed
rule and is making some modifications
in response to those comments A
. summary of-allcomments received and,
EPA's response to each comment is- • J
provided in VartTI of today's preamble
.All changes framihe proposed to final
rule are discussed m Part III of today's
preamble Part TV of this preamble
presents supporting analyses, and Part
V of this preamble provides a list of
subjects addressed by this rulemaking
II Responsiveness Summary
Comments were received from 4
commentera Commenter 1 is Texaco
Inc Commenter 2 is Ford Motor Co
Commenter 3 is The Washington Legal
Foundation Commenter 4 is The MITRE
Corp Comments that do not relate to
any particular subpart of the proposed
rule are identified as General
Comments relating to specific portions
of the proposed rule are organized
according to the subpart. section, and
paragraph of the proposed rule to which
they relate Each comment contains a
summary of the comment and EPA's
response
Comment #1 (Commenter 1, General)
Sites with roaponse costs that do not
pxcpcd $500 000 will probably result in
settlement rather than arbitration,
unless there are only a handful of PRPs
Response In enacting section
122(h)(2) of CERCLA Congress
recognized that arbitration could be a'
valuable settlement tool in appropriate
circumstances While the Agency
recognises that small cost recovery
cases will often be settled by traditional
means rather than through arbitration
the Agency believes that arbitration
offers a useful alternative It may be
particularly useful where there are
multiple PRPs because the parties maj
request that the arbitrator allocate
responsibility for payment of EPA s
response costs among the participating
PRPs
Comment #2 (Commenter l General)
EPA s various attempts to favor itself in
the proposed rule and to retain
considerable unilateral authority in the
proposed rate will make it less likely
that arbitration will be used.
Response This commenter also
provides specific comments on the
portions of the proposed rule that it
considers biased in favor of the Agency
Each specific comment is discussed
below
Comment #3 (Commenter 2. General)
This comment expresses support for the
use of arbitration to settle cost recovery
claims and regrets that the statutonly
imposed $500.000 cost limitation will
minimize the availability of this process
Response No response needed.
Comment #4. (Commenter 2, General)
The proposed rule contains some flaws,
•which, if left imcorrected. will limit the
appeal of the process to PRPs and
reduce its potential effectiveness
Response. This commenter also
provides specific comments on the
portions of the proposed rule which it
believes to be flawed Each specific
comment is discussed below.
Comment #5 (Commenter 3, General)
This comment expresses support for
EPA's proposed rule because it benefits
ail parties involved by keeping potential
litigants out of the overcrowded federal
courts, avoids needless expenditure of -
tone and resources, avoids the
atmosphere of hostility that may result
from delays encountered in litigation.
and offers a speedy settlement by an
impartial party whose decision is not
subject to de novo review in court and is
not susceptible to multiple appeals This
commenter strongly favors EPA's
implementation of its CERCLA Section
122(h){2) authority and agrees with EPA
that arbitration ts especially appropriate
when the case does not present issues of
-------
national or precedential sign.f carce
T eco-.-rrc-'er aUo suppc 3 t- s
vo^'ar} arbi'ratior. process beca.so it
uui rCj-'t tr a b.rd rg dec, sun on
issue: a_"3ad upcn b> the par' es a"d
.'1 f.v.5 obv a'e any future d spj'es as
ti iia \^i d 'v of the settlement
fi.'jpo-js1 \oresponseneedad
Cf - --• -8 (Conunen'e- 1 S-bpart
A 1 3C4 tC'dj; J' is unclear vvher the
-is—ciat -n t i'1 be selec'-'d b EP\
T-ojii., r- c f? c-s *j 'n
i *«.'" r ^" j " * ~r "" ^ r 3
I Rr ffc^-ij <3rC*J "3 C-
/u^rr-se E? -\ag-ess '-at for
a'b.tri* ors to b5 adm-n ste'ed b> the
bat '*c*ed c-.or to a PRP revest for
?-D. -. j' E^pla-s tc select \*-
Assci, a'icn bv cotrpe"tjve
prccL-e.Trt Eccs-ise the prcc .-e-.ent
prcce:s ,s a !e-g -, procedure it is
1 ke'. that t-a's will be a pe-'cd oft re
bituee- >^e e'.ecti.e date of t>.s f'^dl
rJe a-J twe s vardof a cc-'ract to f-e
$r od EPA be'.eveslhat a veh-c'e
snzudbia sJable for conducbrg
a*b fa' ^-3 pw-s.,a->t »o this reg-JaUon
Thu« £°A h is ane-ded the p-oposed
r-le tj p= — t E?A a-d one or-ro-e
PRPs at a faci' *y to s«/o~..: one or rro-e
i.Su?3 ;r sj:s ir a- EPA coat reco\er>
c'a-— far resc'- c;-, b> a-b.lraticn
dunrg the irter^-n period between the
effective date of the final rule and the
a.vard of a contract to the
"Association During the mtenzn
period referral of a clam shall be
accomplished b> EPA a-d the .
p;" opstirg PR?(s) entenra m'o a jo nt
reqaest for arsit-atisn and reaching
n~..-a' ag"BBr*ert upon the se'ection
ard appomtirent of an crbitrator on a
case-b> case basis in acco'dance with
appropriate procu'ement procedures
Ary arbitra'ions agreed upon in this
nanrer shaU be conducted m
accordance with ail provisions of this
rule except for those provisions relating
specsfca'h to the duties of tne
Association which duties shall be
performed in a oanaer agreed upon by
the part'es All costs of such
arbitrations including the arbitrator's
fee, s^all be dmded equally among all
parties except that expenses of
witnesses shall be borne b> the party
producing such witnesses the expense
of an interpreter shall be borne by the
party requesting such interpreter and
the expense of the stenographic record
and all Lranscnpts thereof shall be
prorated equally among all parties
ordering copies Amendments to the
proposed rule which provide for these
interim procedures are found at
55 304 21 (e) (Referral of claims).
3O4 22{e) (Appoint^er' of Axb.fator)
a-d 3C441[e] (Ad-.,r,st-a' \e !**=
expenses a-3 A-b'irators fee)
CoT.T.e*' =7 (Corr.en»er2 S-bpart
A S 304 12(d)) The p-eanble states that
an orgar-zat c-. defined as the
Associa'ioT " wiU be selected based
upon its ab.litv to provide technicailj-
ccpaale arb 'rators 8"d that such
organization v, ! be required to rrake
d'sc'osu-es des 2-ed tc e-sure tkat a is
f-*e f-c-i z-t\ irsM^.ion?' bases The
r"?r"s=2 -J= jv;u'd r,cl_de c( r^j to
se e~i suc.i a- o';i~ z; c- spec1,; tn»
techi,ca' capabif'.es that arbi'ro'ors
should possess andircludea
requtrene'-t that the selected
orgaTzat-on make full d-sclcsure
F;i;r"5e E? A plans to se'«t the
a'2-jation assccia^icn b> cc—pet t \e
p-ocurerrsnt A great deal of
ir/or-ation is rout."el> requ'*cd of
organizations interested in an EPA
coiiractfef financial rJonaation pjst
p9-ror~ia-'ce on othe'contracts 1-ej
p»rsorrel) tha' will sss.st th» ^sencv m
ice- mmg ar\ posiib'e b as EFA
fegula.ions also specr'callj address
or,jani2a*iQial co-f-c»s of mteres' (i3
CFR 1509 1532 209-70.1532 20^-71 and
1552209-72) If'-ecessan EPA na\
request further o'gan'zat'onal
irfoTnat'on and cake it part of the
evaluation critena in se'ectirg the
organization Section 304 23 of the
proposed rule includes procedures for
disclosure by each individual arbitrator
and for disqualification of the arbitrator
based on circumstances like!) to affect
his or her rrparuality
Com~:e"t «8 (Corranenier 4 Sjbpart
A 5 30412;d)) 1 re ent.r> to sen e as the
Association should not be selected
through a competitive process which
includes cost m addition to
qualifications and suitability, as one of
its critena Including the cost cntena
will preclude organizations that have
chosen not to compete on the basis of
cost from consideration Such
organizations are intrinsically freer from
conflict of m'erest and bias and are
better suited to sene as the
' Association than those which belong
to the profit naking or cost-compel ng
sector A not for profit status coupled
with a refusa' to coirpete ere indicative
of a corrpany s determination to provide
independent and objective analysis and
to work in the public interest rather than
as the agent of a client This posture is
essential in any third-party neutral and
is particularly important in Superfund
settlements Selection on the basis of
cost may create the impression that the
entity serves at the pleasure of EPA
rather than occupying a neutral position,
because an entity selected due to -
f narc.al considerations is "are su'^j^ct
tn influence or the ba> s of t^sf
considerations t"3n o*e tkat -s ro'
S^ct'on on the bnsis of o.^! "cj '•"*
and sui'abih'y without co** v< „ d
achieve farness witnout enJa-ser rj
the success of the process Tr.s is rot t j
sav that not-for-profit, non cost
conpetirg co-npames a*e not s-b|»:t to
costcontro's ere) urd?*gor;gc.-o_5
ccnt.ni.3l federal go\er-Tiert a.di s
v%h ch resji'.- gove—.Te-'tj! ?rr-o\ i1
of cos* s:-si iv e p^;a— ^ for e, c*
Lpca- -5>c-«rS3 :c , • :1.*'--
adhe-e to tne Cost Acco.- -3
Standards incorpo'3'ed bv re'"sre ice n
the Federal Acqu'Sit o- Reg-.'a'.o'-s E
procuring the services of or^ cf i-r?se
co" p2T»s on t'^e bss'S o' 0,3' i ,-'i, >
trs government p-oc^res se- crj --
costs of v.hich have been p-suo—1.
determined bv the gcverr-j'" tj b^
app'opridte and coiTpe.it ve
Response As no'ed m E?\ s
Response toComrrc-ts6aid 7 ab^ e
EPA pta-s to Stlect fe Asscu. »ii •-
b; ccnpstitive p*ocu'errert
Cor-petit-ve procurerent is ths p--Arv
rre'hod b: which Federal ageic-es
award contracts EPA has not
determined that p-of t-r-aking
organizations are inherently bused
SLb,ect to influence, or otherwise
incapable of performing the functions cf
the Association.' or that tuere is so—.e
other compelling reason to restrict the
basis for the selection of the
"Association' in the manner requested
by the commenter Accorcmflv EP-\
declines to adopt the corrrren^er s
suggestion
Convent =9 (CoT"ne"''er 1 S'jbp^'t
B. 5 304 20(b)J As vvnfen \f. during t1-"
course of the arb.tration projected
response costs exceed S500 000 the
arbitration will become nonbmdmg o*
terminate Instead the arbitrator shou'd
retain (unsdiction and the arbitration
should proceed as a binding arbitration
so long as the original estimate of
5300 000 was made in good fa<*h and
was supportable when the request for
arbitration was submitted
Response EP\ s suborn to USP
arbitration is contained tn section
122(h)(2) of CERCLA That section
authorizes use of aroit-a'ion as a
method of settling cost racov s-% clairrs
of the United States ' where the total
response costs for the facility concerned
do not exceed S500 000 (excluding
interest] If response costs increase to
an amount that exceeds this statutory
ceding prior to the rendering of a final
arbitral decision, EPA lacks authority to
resolve the claim by binding arbitration
and, therefore declines to make the
change requested As noted in Part IIB
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23176
Federal Register/ Vol 54. No 102 / Tuesday. May 30, 1989 / Rubs and Regulations
of the preamble to the proposed rule
EPA does not anticipate that the
procedure for converting the procewhnR
to a non-binding arbitration will be
often invoked, because the Agency does
not intend to use arbitration under this
rule unless and until it can establish,
with reasonable accuracy and certainty
the total amount of response costs
incurred and to be incurred at the SUP
Comment ~10 (CommenterZ Subpart
B § 304 20(c)) The second sentence of
this paragraph states, "Any issues
arising in EPA'a claim that are not
submitted for resolution shall be
deemed lo be not in dispute and shall
not be raised tn any action seeking
enforcement of the decision for the
purpose of overturning orotherwise
challenging the final decision, except as
provided in section 30440(c) of this
part Thre sentence and the last
sentence of § 304 40{c){3) should be
deleted (The last sentence of
§ 304 40(c){3) restates the prohibition
and includes an exception that allows a
party to raise new issues if necessary to
show that the decision was achieved
through fraud misconduct, partiality,
excess of jurisdiction or authority or
violation of public policy) These
provisions should be deleted because
the language can be interpreted to mean
that any issue not raised-during the
arbitration, including anforseeable
issues or issues that are not yet ripe.
cannot be disputed in the future in any
forum. For example, a PRP group may
wish to implement a proposed remedy, '
but may dispute EPA's claim for
response costs In such a case.
arbitration of EPA's costs may be useful.
Since the above language could be
interpreted to mean that PRPs may not
dispute issues winch arise thinng
implementation of the remedy, they may
be reluctant to Bobmrt cost issues to
arbitration or feel compelled to raise all
imaginable remedy issues, thereby
increasing the complexity and eo«t of
the artubBDon. CERCLA cases typically
involve several phases and *U issues
may not be npe for resolution at the
same tune,
ResponsK'Fmt, at is fagWy unlikely
that arbitration-under Ais role oouJd be
used in the hypothetical situation posed
by the commenter, because it can only
be used if the total past .and future
response costs of the United States do
not exceed $500,000 The United Stales'
response costs at a site at which
remedial action will be undertaken will
most likely exceed this statutory ceitmg
Second, the purpose of the language to
which the commenter refers is to ensure
that the arbitral proceeding results in a
final and binding decision on the EPA
cost recovery claim submitted for
arbitration by precluding the parties
from subsequently raising issues not
presented to the arbitrator as a defense
to payment of the arbitrator's award
The achievement of a final and binding
decision is one of the primary
advantages of arbirn>f•on which
benefits EPA and the participating PRPs
alike Third § 304 20(c) deals only with
issues in the arbitration proceeding and
enforcement thereof and does not
purport to limit the issues parties may
raise m other proceedings Finally, the
decision will not produce the result the
commenter fears because under
§ 304 40(d) of the proposed rule, the final
decision is not admissible as-evidence
of any issue of fact or law in any
proceeding except as needed for the
United States to enforce the decision
and obtain payment -and except as
needed for a participating PRP to defend
against a contribution action concerning
the EPA cost recovery claim submitted
for arbitration Tar these reasons, EPA
declines to make the change requested
Comment &11 (Commenter 2, Subpart
B. §§ 304 20 (d}(3) and (d](4l(i]J The
proposed rale m § 304 20(d)(4)(i)
identifies ability to pay as one of the
factors that an arbitrator may use to
allocate costs among participating PRPs
tf the joint request for arbitration does
not specify the factors Ability to pay
should be deleted as one of the factors
because {1J it is dissimilar to the other
factor* which relate to the relative
hazard to the public, «£„ mobility,
toxicity, volume; (2) it may sanction the
fundamentanytinhistpraposFrlon that
liability should be assessed based on
ability tp pay; (3) it may result rn "deep
pockeffRPschimningthe arbitration
process, and (4) ft may be used as
guidance by the arbitrator when
allocating liability under § 304 20[d}(3),
which allows the arbitrator to allocate
liability even if not requested by tire
parties
Response- As the commenter pomts
out. § 304 29fd)(4)fn. without waivmg the
general applicability of the joint and
several liability standard, offers the
parties the option of specifying m the
joint request for arbitration, the factors
to be applied by the arbitrator m
performing the allocation Thus, the
parties may agree on a case-by-czrse
basis that ability to pay will not be
considered by the arbitrator as one of
the factors If the parties do not supply
their own factors, this section specifies
that the arbitrator shall base the
allocation on such factors as the
arbitrator considers relevant, tn hts or
her sole discretion, such as volume.
toxicity. and mobility of the hazardous
substances ability to pay and me < les
and aggravating factors EPA belt.
that ability to pay is an appropn
factor because among other reasons, it
is among the factors Congress has
authorized the President to consider
when evaluating CERCLA settlements
In addition to permitting the parties to
specify their own allocation factors the
rule also addresses through
§ 304 20(d)[4)fn), the commenter s
specific concern that PRPs will avoid
using arbitration if certain PRPs at the
site are non-viable That section permits
the parties to specify tn the joint request
that the arbitrator may allocate less
than all response costs awarded to EPA
As noted in Part H B of the preamble to
the proposed rule, one of the reasons
this provision-was included is to
encourage PRPs to use arbitration even
if certain PRPs at the site are non-viable
Finally the oommenter's concern that an
arbitrator-will consider abibty to pay
when allocating liability for payment
under the second sentence of
§ 304 20(d)(3) is unfounded That
provision directs the arbitrator to
allocate liability based upon the portion
of the harm attributable to each
participating PRP, if the arbitrator finds
that the actual or threatened harm at the
facility is divisible The provision
applies only if the arbitrator finds
harm at the facility is divisible an
specifically directs the arbitrator to
allocate liability for payment of EPA's
award based upon the portion of the
harm attributable to each participating
PRP It does not provide the arbitrator
with the discretion to apply-anyother
factors For these reasons. EPA declines
to make the change requested.
Comment #12 \Commenter 3, Snbpart
B. § 304 20(dK4)(tf)}The Commenter
agrees with this provision, which allows
the parties to specify in the jomt request
that the arbitrator may allocate less
than T8Q% of response costs awarded to
EPA The commenter notes that this
provision is more generous than the rale
enunciated m US v NEPACCO, 819
F 2d 728,747 fBth Cir 1986} fUmted
States entitled to recover all costs
associated with any response action
upheld as not-arbitrary and capricious),
but believes that it should be included
since rt will encourage PRPs lo use
arbitration because they will not be
penalized by having allocated to them
response costs attributable to non-
participahng omen-viable PRPs
Response EPA agrees that the
proposed arbitration rule sets forth
standard of review and procedure
more generous than that provided
under the statute and case law Jt is
EPA's conclusion that, under section 107
-------
•"/ CE7.CLA £-d es'ab' shed case law
EPA is en»n!ed to recover til costs
r Cir-ed b> EPA IT. ccn-sction wi'h a!t
aspects of a response action upheld as
ot arbi'-ary and capricious For the
u-i'ed purpose of encouraging PRP
pa-nnpa'-on in arbitrations under this
rt 'e 'he Asencv has adopted the
approach conta-ned in 5 304 20(d)f4)(u)
Co~rer -IS (Cc-*—--te'>I Sjbpart
D § ">-42C(?;U )Thj - EPA. as would
be required under thus provision
Rsi^crse Under section 113(]) of
CEPCLA judic'al review of any issues
co-car- ••g 'he adequacy of ary
respc-se actica taken or ordered by the
President is (united to the adTTJS'rative
i eco'd upon which the Presider-t hss
based the selection of the response
action See eg US v Se^nour 679 F
Supo £59 (SD Ind 196;} US v Pahn
f-h;a* oeoF Stp 67: (D \'J 1967) As
noted in Part II3 of the preamble to the
proposed rule EPA iramtams tnat
consistent with section 113(j) the
arbitrator's review of any issue
concerning EPA j response action shell
be based upon the docume-ts which
formed the basis for thp selection of the
response action. / e, the administrative
record These documents will include
any wntten public comments received
by EPA concerning the selection of the
response action and any EPA responses
thereto For Una reason. EPA declines to
rake the change requested EPA has.
however deleted the phrase ' compiled
bv EPA from this section because, in
addifcn to EPA. a Slate or political
subdivision of a State, or an Indian
Tribe or another Federal agency may
compile the administrative record when
it has been designated as the lead
ac»ncy for the site within the meaning
c.f the National Contingency Plan. 40
CFR Part 300 A conforming change has
been made to f § 304 30(b)(3)
304 30(c)(3). and 304J20K«)
Coma-eat *H (Coctmenter S, Sabpart -
B § 304.20 (e)(2Kin) and (eK3)(m))
Under the proposed rule, once EPA's
resporse action is upheld (in part or in
full) the arbitrator Is required to review
EPA s costs on an arbitrary and
capricious standard and to award EPA "..
al! costs Incurred (for the portions of the'
response action upheld) unless the
participating PRPs can show the costs
were (1) Not actually incurred or to be"
incurred, or (2] not actually incurred or .
to be Incurred in connection with the ' .
response action, or (3) dearly excessive.
taking into account the circumstances of ,
the response action and relative to ' "*
acceptable government procurement
and contract'ng pract-ces in hgvt of the
c.-CLrs'ances of the response ac*ion
Under US v i\EP*CCO the Um'od
Sta'es is entrled to recover all costs
associated with any response acron
upheld as not arb'trary and capricious
As such the'clearly excessive
standa'd is more generous than the
standard applied -n judicial cost
recoie'v prcveea ~ss However, it has
ssvera' clear ber«fi's that weigh in
r<- c- cr J LSr [t) It ercoordges PRPs to
Lae a-oi'raticn ra_-e- mar uke uieir
chances in court in which fonim t^e
issue of excessive costs is not
necessani) relevant. (2) it places the
burden of proof upon the PRP and thus
r?qu res ImJs add"ional work or 'he
par of the Agency, (3} it conta-s
sufftc'ent qualifications that PRPs will
rarelv be able to prove the costs were
excessive Thus, although the standard
is more generous than that which would
be applied in the jud'aal arena the
beref ts dearly cutwe-gh on> detriment
Resporse Aga n as set forth in the
Response to Comment *12. EPA agrees
that the standard of review provided in
S 3C4JO (e)(2)(tn) and (e)(3)(m) is more
generous then PRPs are entitled to in
judicial cost recovery actions It is EPA s
Mew that, under the language of section
1C? of CERCLA, Judicial review of EPA s
costs is limited to whether the costs
incurred were not inconsistent with the
ttCP Under this standard, matters to be
reviewed are confined to Whether the
implemented cleanup was consistent
with the response action selected by
EPA, whether the response action was
performed, and whether the claimed
costs were actually incurred. Unless the
selection of the response action is
determined to be inconsistent with the
\CP. based on a standard of review of
arbitrary aad capricious or otherwise
not m accordance with law EPA is
entitled to recover all rta actual coats of
implementation of the response action
This circumscribed review of costs is
intended to support the principal
objectives of CERCLA (l) To place the
ultimate financial burden of hazardous
waste cleanup on those parties
responsible for the problem, and (2) to
assure prompt replenishment of the
Superfund so that monies can be
rededicated to response work at the
thousands of other hazardous waste
site* in the country that remain
unaddressed EPA has developed a more
flexible standard of review for the
limited purpose of encouraging use of
the arbitration regulation for small cost
recovery cases Permitting PRPs to*
challenge actual costs to the extent they
are dearly excessive, an issue w~hich is
not relevant in litigation, may make
arbit-ation r-.o"e at'-acti\e to PR^s tu n
lit.gation
Comment ~15 (CoT.neiter 1 Subpa-t
B § 304 2i;b){2)) U aiver of the rght to
notice and service by a part} who fa.'s
to furnish information relating to me
serv ice (; e. a party's name, address
and telephone number and if the part}
is represented bj an attorney the
attomev s na^.e address, and telephone
number) should be lirrued cttlv to the
per od of tin* ciur^g v>hicLt*
partj may move to wthdrav, frocn the
arbitral proceed^ withir th. :•> davs
after receipt of notice of appomttrejit of
the arbitrator After this tb.rty day
period only EPA iray withdraw f-ora
the proceeding ui according with
§ 304 20{b)(3) or § 304 33(e) Sections
304 20(b)(3) and 304 33(e} address EPA's
right to withdraw if public comments
received on the proposed arbitral
decision disclose to EPA facts or
considerations which indicate the
proposed decision is inappropriate
improper or inadequate Section 122(i] of
CERCLA requires that EPA provide a
thirty day public com.T'ent period on all
settlements reached through a-nitration
pursuant to section 122(n}(2) Section
122(0(3) of CERCLA requires EP^ to
consider any comments filed in
determining whether to finalize the
settlement and authorizes EPA to
withdraw from the settlement if the
comments disclose facts or
cons.derations waicr indicate the
proposed settlement is mappropna'e
improper or inadequate EPA s nghi to
withdraw based upon publ.c comments
is authorized by section 122(i)i3] of
CERCLA and. for this reason EPA
declines to make the rwquesled change
As noted in Part II C of the preairble to
the proposed rule, EPA anticipates that
withdrawal from the proceeding as a
result of public comment will be an
infrequent occurrence because small
cost recovery decisions of this kind are
not likely to generate a large amount of
public comment.
Comment 917 (Comroenter 1 Subpart
C 4 304 32(j)(6JJ This subparagraph
unfairly gives only EPA the right to
- supplement the documents compiled by
EPA which formed the basis for the
selection of the response action
-------
23178 Federal Register / Vol 54, No 102 / Tuesday. May 30, 1989 / Rules and Regulations
Response As noted m EPA s
Response to Comment ii3 above, EPA
maintains that any review of any issue
concerning the adequacy of any
response action taken or ordered by
EPA should, consistent with section
ll3(j) of CERCLA, be based upon the
documents which formed the basis for
the selection of the response action
Section 113(j){l) of CERCLA permits
supplemental materials to be considered
by a court in accordance with applicable
principles of administrative law EPA
has, therefore, amended $ 304 32())(6) to
authorize the arbitrator to permit any
party to supplement the documents
which formed the basts for the selection
of the response action if any party
demonstrates that supplementation is
appropriate based upon applicable
principles of administrative law The
language to which the commenter
objects has been deleted
Continent #18 (Commenter 1 Subpart
D, § 304 40(c]{2J(iv)J Among the grounds
provided for challenging a final arbitral
decision is that it violates "public
policy " This term is so broad that
arbitral decisions will be subject to
challenge for virtually any reason so
long as the appeal is couched in terms of
"pubhc'pohcy "
Response Section 304 40(c){2)
provides four grounds for challenging
the final arbitral decision, the last of
which is that the decision violates
public policy. As noted in Part El D of i
the preamble to the proposed rule, these'"
four grounds are based upon generally ' -*
accepted common law grounds for ' '' '
overturning an arbitrator's decision, as'' *
reflected in case law. See, Local Union Jf<
No. 28 v. Newspaper Agency Corp^ 485-*r
F. Supp. 511 (D Utah 1380). The Agency"''
does not agree that allowing challenges "
based upon violation of public policy >
will permit challenges for virtually any • •
reason Whether an arbitrator's decision
violates public policy is an issue for •.
resolution by the court, see. eg.. W R,
Grace » Co v. Rubber Workers. 461 U S.
757,768 (1983). and as the Supreme
Court has stated. "Js]uch a public policy
. . must be well defined and dominant. '
and a to be ascertained, 'by reference to
the laws and legal precedents and not -
from general considerations of supposed
public interests.'," Id* quoting
Muschany v. United States. 324 U S. 49, -
68 (1945). EPA therefore declines to
make the requested change
Comment #19 (Commenter 2, Subpart
D, § 304 40{c)(3)) See Comment #10 and
EPA's Response thereto
HI. Changes From Proposed to Final
Rule
This section summarizes the changes
that have been made to the proposed
rule The reason for each of these
changes is discussed m Part II of this
preamble or is provided below
Section 30410 The authority citation
m this section has been changed from
section 122(h) of CERCLA to section
122(h)(2) of CERCLA to provide a more
accurate citation
Section 30412 Two clarifying changes
have been made to this section
Paragraph (d) of this section, which
defines the "Association," has been
amended to add the words "to conduct
arbitrations pursuant to this part" to the
end of the definition Paragraph (g) of
this section, which defines "interested
person," has been amended to add the
words "to the proceeding" after the
word "party "
Section 304 20 Two changes have
been made to this section. First, for
clarification, the words "actual or -
threatened" have been inserted before
the word "harm" each time it appears in
the second sentence of paragraph (d)(3)
of this section-'Second. the words - "> •>«
"compiled by EPA" have been deleted •.
from the last sentence of paragraph
(e)(l) of this section because the - -
administrative record may be compiled
by a Federal agency other than EPA. or
by a State or political subdivision of a
State, or by an Indian Tnbe when, such /
non-EPA entity is designated as "lead, s' c
agency" within the meaning of the NCP. >
The identical change has been made to i
§S304.30(b)(3),304.30(c)(3}.and .-
304 32(j)(8). This change is explained in -j,
preamble, u..
been made to this sections First, the 5 «'»£i i
words i.*may be'Mn the.flrsr. clause of ol 104
paragraph (a) of this section have beenww,
changed,ta"i3," for clarification-Second,'\
the last-sentenceof paragraph (b)(2) of ''h
this section has been amended to-clarify- -'
that a party who fads to furnish the ' '
information necessary for notice and <
service under this part is deemed to -
have waived hia or her right to notice- <
and service only until such time as that
party furnishes the missing information.'
(See Comment #5, Part n, of this , , _,
preamble for explanation.) Third. <~ < i
paragraph (b)(ix) of this section has -••>,/,,
been deleted. This preamble clanfied .< j *
that EPA'will select theCAssodabon'V -
through competitive procurement Since --
EPA cannot advance funds to a * > , •
contractor, references in the proposed , •<,
rule implying advances by EPA of filing
fees, administrative fees and expenses,,
and the arbitrator's fee have been
deleted. (See § 304 41 (a) and (d) and the
discussion of changes to these two
paragraphs below) Fourth, a new
paragraph (e) has been added to this
section. This paragraph explains that. -
pnor to EPA's selection of the -
Association. EPA and one or more PRPs
at a facility may agree to submit one or
more issues arising m an EPA co
recovery claim for resolution b
arbitration. Any such agreemen be
contained in a joint request for
arbitration which meets all requirements
of paragraph (b) of this section New
paragraph (e) also provides that any
arbitration agreed upon in this manner
shall be governed by this final rule,
except for those provisions which
pertain specifically to the duties of the
Association, which duties shall be
performed in a manner agreed upon by
the parties It also explains that in any
arbitration initiated pursuant to new
paragraph (e), the selection and
appointment of the arbitrator shall be
governed by new § 304 22(e), and
payment of all costs of the arbitration ,
shall be governed by new § 304 41(e), <•
both of which are described below. The
third and fourth changes to this section
are explained in Comment #8, Part II. of
this preamble. N *-x> („- ' 5 , v
Section 30432: Two changes have -"
been made to this section. First, the ' '
word "accepted" in the fifth sentence of-
paragraph (b) has been changed to
"invited" for clarification Second, a
new paragraph (e) has been added to
this section. This, new paragraph (e)
explains that if EPA and one or more
PRPs at a facility agree to arbitr
EPA cost recovery claim pnor t
selection of the Association as pro ed
m § 304.21(e), they shall reach mutual''
agreement upon the selection and '•>'>•"-
appointment of an arbitrator on a case-* -
by-case basCs, and the Administrator' ">
shall obtain the services of the'"^ 1'^ -
arbitrator using appropriate '<•*$ **&&•'•
'procurement procedures. New' <•""*'> -
paragraph (e) further provides that any-'
person appointed as an arbitrator in this
manner shall make disclosures to the v-
parties pursuant to § 304 23 of this part,
shall arbitrate the claim pursuant to the -
jurisdiction and authority granted to the
arbitrator under S 304 20 of this part,
and shall otherwise conduct the ' •
arbitration pursuant to the procedures
estbhshed by this rule This second' '-
change is explained in Comment #8, •' -
Part U, of this preamble, f' - ' >- >•>-•
Section 30431: Paragraph (e) of this''-' '
section has been amended to require a .,
party who intends to be represented by
counsel to provide the telephone number
of counsel in addition to the name and
address. The identical change has been
made to 5 304 32(e). This change is
needed to make the information
required by § § 304 31 (e) and 304 32(e)
consistent with that required by
S 304-21{b}(2) (Referral of Claim
' Section 304 32: Paragraph (j)(6) s
section has been amended The first
-------
s-n'e'ce nas been changed to a1! j \ »-.e
a-bitra'cr to pemr an> part., to
Surp'ement tne documents which
forrred the basis for the selection of the
response acLon (with additional
documents affidavits, or oral tesLmonv)
i* am party demonstrates that
S-.5?I9~'9Valion is appropriate based
upon appi.caoie p-maples of
ad- risva ive la.v Tne second
s-^tence or t certified ma 1 rei_rn rece'pt
r=c jested, e* b> pc;»a ,al se'vn.e (3
ensure that the aeosion is received b>
tne pan ej
Sec'un ?W -A5 Tvvo changes have
been made to tVs sec'ion First.
paragraph (chl) of this secLon has Deer
en ecced 'o cian'j nai the firal
dc>. s on is a se'tie^ent uudar secuan
I22,n) of CERCLA v i>ch nay be
d recilv enforced pursuant to section
t22(h)(3)ofC£RCLA As amended the
t.-st and second sentences of paragraph
(cjfl) ha.e beer, modified to provide
tral If an> award trade in tne hnal
dsc sicn is not paid witnui tse Lme
required by $ 304 33tf) cf »h.s part, the
f.nal ceciston rray be enforced as a
settlement under section 122(h) of
CERCLA 42 U S C 9622(b). by the
; Attorne\ General on behalf of EPA in an
"''appropriate Federal district court
pursuant to section lZ2jh)(3) of
CERCLA, 42 I' S C S6:2(h)!3) The
'eniindsr cf th.s parag-aph is
L-cua-sed Second the f-st clause of
paragraph (d) of this section (ejxcept
as otherwise provided in this secion."
^as been ar*enced for clarification to
indicate the more precise cross-
refs'e-ce to paragraph (c) of this
section
Sect or 304 41 Three changes have
been rrads to tnis section First, the last
IN a sentences oC paragraph (a) of this
sett'on have oeen deleted As noted in
the cisrjss.on of S 304.21 above. EPA
can-ct advance fees to a contractor
Accurd rgiy the requirement that all
pa ties advance the filing fee has been
deleted from paragraph (a). PRPs may.
of course provide such an advance -
Second paragraph (d) of this section has
been similarly revised to delete
references to advance deposit* from all
parties for the arbitrator s fee and the
administrative fee. and to provide -
nutead that the "Association * make
appropriate arrangements for payment
of these fees by the parties. Third, a new
paragraph (e) has been added to this
section Jt provides that in any
o-b.'.-jt.on conducted pr.or to t;ie
se'ectiop of the Association (see
I 304 21{e]] all fees and expenses of trie
arDitral proceeding inclcdnjj the
arb'lra'or'a fee. shall be divided equal'y
a-iong all pal.es except that expenses
of wii-esses shall be borne bv the partv
p'ctLc -g s.ich witnesses expenses of
an in'erpreter shall be borne bv the
par:v recjest^-g sach interp-eter and
expc-sea of the stenographic re-0'd a»-d
s!. '--s'sr-p-s thereof s-1^" b» p "-.'i d
ec-a1^ arnorg all pd-,.es orae. r^
copies This change is expla ned in
CoTiirent ^8. Pan IL of this preamble
Secf en 304 *2 Paragraph (c) o' tp_s
sectjjn has been araerded to requ-re L*-e
parties to serve all papers asso:,af»j
vvith the proceedjr.gby personal service
o^fa. cer'Jied nail re >ji rece-pt
requested, or bj First c'ass ma-l crd to
requi-e Lne arb trator ard the
AsaOC'ation to serve all pape~s
associated with the proceed -; b,
pe-soral se-^ice or b> cen fi«d rrail
return receipt requested Tms cr.a.nge is
to ersure that all papers from the
aTb>ira'cr and the Associate.- are
received by the parties
TV Summary of Supporting Analyses
4 ExecM.ve Order fro 12291
Regulations must be classified as
maior or non-major to satisfy tne
rulemaking protocol established by
Executive Order No 12291 According to
Executive Order No 12291 irajor rules
are regulations that are likely to resolt
in
[1} An annual effect on tne economy
of $100 million or more or
(2) A major increase in costs or prices
for consumer*, individual industries.
Federal State or local government
agencies or geographic regions or
(3) Significant advene effects on
competition, employment, investment.
productivity, innovation, or on the
ability of United States-based
enterprises to compete with foreign-
based enterprises m domestic or export
matters
EPA has determined that this
regulation is a non-major rule under
Executive Order No 12291 because it
will not result in any of the impacts
identified above. This regulation
provides an entirely voluntary
procedure by which PRPs at a facility
may reach agreement with EPA to have
their liability for a CERCLA section
107(a] cost recovery claim resolved by
arbitration. Arbitration U an alternative
dispute resolution technique that should
provide a quicker and less costly -~
method of resolution than traditional .
litigation or negotiation. Therefore, the'
Agency baa not prepared a regulatory
irpsc* ar.a'vsis far this reg-V-or This
reea!a':o- v\as submitted to tne 0'" ice
of Ma"ig:r^e"t and BLCjet for reve*
as 'eqjred by Executive O'der "So
12291
B RegJc'vy Flexibility Act
T^s Resjld'ory Flevbil'tv Ac' of
rcqu'res f.at a Regulatory Flejufai.i'v
AraHsij b" pe"foT"ed for all rule* that
2"e 1 %e'. to have "sig-'ficant econor*,c
ir:<»rt c~ » s-bs'4r»* a! r.uro!:** f* sr- >tl
K~ ' ra E" v ce" i •>» ;~jt 'rii
regu'a' or v.i'l no' ha.e a S'g"1 >"-d"»
econo-'c impact on a substar* ai
"w-be* ot s-?'! er'i'.es because the
rjle prox ides a who!1, vo'untar,
p'Dced,-; bv \ fc ch PRPs a- s c-, ' '.,
r,a> reatk agree-ie-.t v%i'h E?A to h.a.e
trer l>ab i- > for a CERCLA secw
15"va) rost reco^e-v cla-T re^oHed b
arbitratio1" 'Vrb'tra''on is an a''er-=' e
d spLte rp«o!u"on tec*"nc!'je t*1-1? s^-o^ld
pro\ a? d qu cker and less expe^sne
•^le'hi J of rc«o'ution than trad ' o"al
lit gvion or "ego»iation The-ecorp EP\
his no* p-eptred a Regulato-v
Fietibi'.iv A-saKsis
C Pops-*o~k Reduction Acl
This regulation is not subject to the
provision^ of tne Paperwork Reduction
Act Any collection cf information in
this regulation is required 01 the course
of an enforcement action against a
specific party or parties and therefore,
is exempt from coverage under the Act
List of Subjects in 40 CFR Part 304
Adn-mistrattve p-ac'-ce and
procedure C'ajais. IrJe-gove-nmeaUJ
relations Hazardous substances
Hazardous vvastes Natural resources
Superfund
Date Wa> 22.1989 A
William K. ReiU)
Administrator
For the reasons set forth in the
preamble Part 304 Title 40 of 'he Code
of Federal Regulations is added as set
forth below
PART 304—ARBITRATION
PROCEDURES FOR SMALL
SUPERFUND COST RECOVERY
CLAIMS
Subpart A—General
Sec.
30410 Purpose-
30411 Scope and
30412 Definitions.
Subpart 8—JurhtdtetSon of Arfettrater,
Rcftfral of Oaima, and AppointmvfM of
Arbitrator
3042) jurisdiction of Arbitrator
304 2t s
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23180
Federal Register / Vol. 54, No. 102 / Tuesday, May 30. 1989 / Rules and Regulations
Sec
304 23 Disclosure and challenge procedures
304 24 Intervention and withdrawal
304 23 Ex parts communication
Subpart C—Hearings Before the Arbitrator
304 30 Filing of pleadings
304.31 Pre-heanng conference
304 32 Arbitral hearing.
304.33 Arbitral decision and public
comment
Subpart D—Other Provisions
304 40 Effect and Enforcement of final
decision.
304 41 Administrative fees, expenses, and
Arbitrator's fee
304 42 Miscellaneous provisions. (
Authority 42 U S C. 9607(aJ and 9622[h){2).
Executive Order No 12580,52 FR 2923
(January 29.1987)
Subpart A—General - - ->
5304.10 Purpose. '( :
, This regulation establishes and
governs procedures for the arbitration ot
EPA cost recovery claims, arising under,
secuon,lp7[a) of the Comprehensive > ,;
Environmental Response,
Compensation, and Liability Act of 1980.
42 U.S.C. 9807(a), as amended by the
Superfund Amendments and
Eeauthorizadon Act of 1988, Pub. L. 99-
499,100 Stat 1013 (1985) fCERCLA").
pursuant to the authority granted EPA ,
by section 122(h)(2) of CERCLA, 42 j
U.S.C. 9622(h)(2), and Executive Order
No, 12580,52 FR 2923 (January 29,1987} t
$304.11 Scope MdapptfcaMSty. - '"
"- The procedures' established by this J"
regulation govern the arbitration of EPA'
dates for recovery^ under section 107fa).
pfCERCLAr42U:SLCr96U7ta).of ^ i
response costs Incurred at or in v- -„ t f
''t»nnection wiUi atadlity by the United'
.States pursuant to section 104 of ; ~ ?'''
-, CERCLA, 42 US C. 9604~The procedures-
are applicable when: ' ,--I-"?.- rt"t
(a) The total past and projected
response costs for the facility concerned
do not exceed $500,000, excluding / ,^,
interest and, , „„ • „- • - , 0
(b) The Administrator and one or >, ~
more PRPs have submitted a joint
request for arbitration pursuant to , ',".
§ 304.21 of this part ;c? »= '"J '.M
$304.12 ^dennltocm: ^ Jo ^J^g
Terms aot defined in this section have
the meaning given by section 101 of •'-'"-
CERCLA. 42 U.S.C. 9601, or the National-
Oil and Hazardous Substances Pollution
Contingency Plan. 40 CFR Part 300. All
tune deadlines in this part are specified
in calendar days and shall be computed
in the manner described in Rule 6(a) of
the Federal Rules of Civil Procedure „- *
Except when otherwise specified, the >
following terms are defined for purpose*
of this part as follows: ,
be present and to participate therein. '„
(g) "Interested person" means the
Administrator, any EPA employee, any :,
patty to the proceeding, any potentially
responsible party associated with the *
facility concerned, any person who filed
" written comments in.the proceeding, any
participant or intervenor in the ,n h \ t»
proceeding, all officers, directors* >v,- < •
employees, consultants, and agents of <
any party-, and any attorney of record »
for any- of the foregoing persons. • - • >
-, (h) "National Contingency Plan" or ,
"NCP" means the National Oil and <
Hazardous Substances Pollution ^ /
Contingency Plan, developed under '
section 311(c)(2} of the Federal Water
Pollution Control Act, 33 U.S C. 1251. ef
seq, as amended, revised periodically
pursuant to section 105 of CERCLA. 42< '
U.S C. 960% and published at 40 CFR T i
PartSOOu^co •< " o m . >- •"."..-_ 'uc <• v
(i) "National Panel of Environmental >
Arbitrators" or "Panel" means a panel *>
of environmental arbitrators selected'"'
and maintained by the Association; to
arbitrate cost recovery claims under this
part - -,' • " " ' " '
f j) ^'Participating PRP" is any
potentially responsible party who has •
agreed, pursuant to $ 304 21 of this part, >
to submit one or more issues arising (n
an EPA claim for resolution pursuant to
the procedures established by this part
(k) "Party" means EPA and any
person who has agreed pursuant to
§ 304 21 of this part, to submi r
more issues arising in an EP for
resolution pureuantjfo,the proc ores
established by this part, and any persoi
who has been granted leave to interven
pursuant to § 304 24(a) of this part
(1) "Persons" means an individual
firm, corporation, association,
partnership, consortium, joint venture,
commercial entity. United States
Government. State, municipality,
commission, political subdivision of a
State, or any interstate body
(m) "Potentially responsible party" or
"PRP" means any person who may be
liable pursuant to section 107(a) of
CERCLA. 42 U S C 9607(a), for response
costs incurred and to be incurred by the
United States not inconsistent with NCF
(n) "Response action" means remove
removal, remedy and remedial action, a
those terms are defined by section 101 o
CERCLA, 42 USC. 9601. including ,
enforcement activities related thereto.
(o) "Response costs" means all costs
of removal or remedial action incurred
and to be incurred by the United States
at a facility pursuant to section 104 of
CERCLA, 42 U S C. 9604, including, but
not limited to, all costs of investigation
and information gathering, planning and
implementing a response actio
administration* enforcement, h n,
interest and indirect costs.
Subpart B—Jurisdiction of Arbitrator,
Referral of Claims, and Appointment
of Arbitrator - f**i«
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Federal Register / Vol 54
102 / Tuesday May~33~l
u.es an_ egu at.ons
'rendered bv the Arbitrate' pursuant to
§ 304 13 of th s part shall not bo b'nd -g
upon the parties unless all of the part.es
agree to adopt the proposed decision as
a adnvnistrative settlement pursuar" to
section 122(h)(l) of CERCLA 42 U S C
96:2(h)(l) Any adnm stratn e
s »Mier-er. ag-eed upon m this n^~-cr
s'ra'l be subject to the pno* wniten
app-oval of ike At'o-r.ey Gene-31 [o- *• s
des gree) pu'suar* to sectn.. 122. -)i' J
e'CFRCLAends"2 b2Si.br-'->
publ'C com.Ten» pjrs.a-'t to scc'ior
122(i) of CERCLA 42USC 9622'vi)
(Jj if the parties do not agree to
continue the proceeding as non-b'ndin,>
arbitration or if the adnvmstrative
settlement agreed upon is not appro' ed
by the Attorney Genera! (or his
des'g~ee) orif EPA withdraws or
withholds corsert from the
aiT.Tisffdiive settlement as a result of
pjblic corrmert EPA s^all w.thdrdw
froT thc-proceed-ns and the Associa'nn
suali assess or refund as appropn?'e
any adr- "istrative fees expenses cr
A/b trator t fees
(cj The Arbitrator s authont> as
defined by paragrap-s (d) and (e) of this
section to determine issues an sing m
EPA s claim is limited only to the issues
subrri'tsd for resolution by the parses
in the joint request for arbitration
pursuant to § 3W21 of th'a part Any
issues artsirg in EPA s claim that are not
submitted for resolution shall be
deemed to be not m dispute and shall
not be raised m any action seeking
enforcement of the decision for the
purpose of overtumir.g or otherwise
challenging the final decision excep' as
p-OMded in § 304 40(c) of this part
(d)(l) If the issue of liability of any
puriicipat ng PRP has been submitted for
resolution the Arbitrator shall
determine whetner the participating PRP
is liable pursuant to section 10"(a) of
CERCLA 42 U S C 960T(a) s-bject only
to the defenses specifically enumerated
in section 107(b) of CERCLA 42 U S C
9GOr(bl
(2) If the issue of the dollar amount of
response costs recoverable by EPA has
been submitted for resolution, the
Arbitrator shall determine, pursuant to
paragraph (e] of this lection, the dollar
amount of response costs recoverable
by EPA pursuant to section 107(a) of
CERCLA 42 U S C 9607(a). and shall
award the total amount of such costs to
EPA
(3) Unless the Arbitrator finds that the
actual or threatened harm at the facility
is divisible any participating PRP whom
the Arbitrator determines to be liable
shall be jointly and se\ erally liable for
the total amount of response costs
awarded to EPA If the Arbitrator finds
that the actual or threatened harm is
div.sible the A-b'trator sJul al
liab'lity for pa^Trent of EPA s a.va-d
among tre part'C'pati-ng PRP» bised 01
the portion of the actual or t^reate^d
haT. at'nbutab'e to each participating
PRP
(4) Notwithstanding the mdnisibil'ty
of the actual or threatened harm a"d •
witnout waiving 're general
appucab.Lty of tne joint a-d se.e'i1
l.ab .'y standard es an a'ic T.O', e'J
P- ->:-3ph (dj,j) cf :>• s s:c' ~- L".
par'.js nay request tre ArD '_-j's- *j
atloca'e responsibility forpayrr.e?t o*
response costs awarded to EPA air.org
tre participating PRPs who-n the
Arbitrator determines to be liable Any
such request shall be made in the jo-rt
request for arbitration pursuant to
5 304 21 of this part If su:^ a reques' is
rade, theprovis.or.s of paraj'aphs
(d)(4)(t) (d)(4j(ii) ard(d;(4](mjofthb
section shall apply
(i) The joint requesf fo' •i'bitratio*1
may specify the factors to be applied by
Ire arbitrator when alloca:i-g anong
the participating PRPs responsibi'.tj for
payrrent of the response costs awarded
to EPA. If the joint request does not
specify such factors, the Arbitrator shall
base the allocation on such factors as
the arbitrator conside-s re!e\ ant in Ls
or her sole discretion, such as volume.
toxjcity, and mobility of the hazardous
substances contributed to the facility by
each participating PRP ability to pay.
and inequities and aggravating facton
(n) The joint request for arbitration
may specify that the Arbitrator mav
allocate among the participating PRPs
less than all response costs awarded to
EPA If this is not specified the
Arbitrator shall allocate among the
participating PRPs 100*% of the response
costs awarded to EPA
{m} The burden of establishing the
appropriate allocation of responsibility
for payment of the response costs
awarded to EPA shall rest entirely with
the participating PRPs
(5] The parties may request that the
Arbitrator perform an allocation even if
the issue of the liability of the
participating PRPs is not submitted for
resolution m the joint request for
arbitration Such a request for allocation
shall be made m the joint request for
arbitration pursuant to i 304 21 of this
part If such a request IB made, the
provisions of paragraphs (d)(4}(i).
(d)(4](u). and (d)(4)(iu) of this section
shall apply
(e](l) If any Issue concerning the
adequacy of EPA s response action has
been submitted for resolution or arises
during the Arbitrator s determination of
the dollar amount of response costs
recov erable by EPA. the Arbitrator shall
uphold EPA • selection of the response
action unless ary part cip-' -; F""1
establish that the select.on was
inconsistent with the NCP Tne
Arbitrators review of the adjq.jcj i/
any response acuor take'-b> EP\ s-. .
be based upon the documents wh-ch
formed the basis for the selection or 'h->
response action
(2) If the Arbitrator upholds EPA s
se'ect'on cf the respo-se ac^o" i~ f Ji
«"e A'bi-ator shall awa-d EFA a"
r^>po"30 ccs's incuTpd s-i '. b1*
incurred in cornec'.cn w..- re <-:sr5'.
act.on unless any part-c'pa^ •>; FPPca-
establish that all or part of such ccs's
were
(i) Not actually incur-ed 0' 'o be
marred or
(it) Not actually tncured or to be
rcu.—cd in connect.o- with tr.s -esr•>"<•'
action or
(•»] Clearly exces«i.e «ak>r«i" i
account the circumstances of t-3
response act.on and rs'a' ve ts
accepiablcgo%err%ent p'oc--9";"'t
and contracting p^act ces in 1'gr» of t-.
circumstances of the response ac* on
(3) If the Aroitrator uph.o'di EPA s
selecfon of the response action or.K i-
part. the Ara tra'sr s-.ail award EP \
only those respc-se cos's incurred and
to be incurred m co.nrec' or. witn tie
portions of the respc-se act on that
were upheld urJess any pa^tic.paling
PRP can establish that all or pa't of sach
response costs were
(i) Not actually incu-red or to be
incurred or
(u) Not actually i-cur-ed 0' to be
incurred in correct o- wuh tre per* _r.s
of the response acLsn that v,e-a us'-e'c
or
(» } Clearly excessive tab"3 into
account the circumstances of the
response action and re'ative to
acceptable government procurement
and contracting practices in Lght of the
circumstances of the response action
(4) The standard of review to be
applied by the Arbitrate- under
paragraphs {e)(l). (e){2) and (e)(3) of
this section is arbitrary and capric-cus
or otherwise not in accordarce win
law
(5) In reviewing any proced j-al e'-c-s
alleged by any party, the Arbitrator rr 3\
disallow response costs only if the
errors were so senous and related to
matters of such centra! relevance that
the response action would have been
significantly changed had such errors
not been made
} 304.21 RrftfTd of claims.
(a) If EPA believes that a claim is an
appropriate candidate for arbitration.
EP^ wtll notify all identified PRPs for
the facility concerned and provide such
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23182 Federal Register / Vol 54. No 102 / Tuesday. May 30. 1989 / Rules and Regulations
PRPs with an opportunity to disruss
referral of one or more issues ansirg in
the claim for resolution pursuant to ibc
procedures established by this part
Alternatively, one or more PRPs at a
facility may propose lo FP*\ use of
arbitration, after receipt of a demand by
EPA for payment of a claim but prior to
commencement of civil htigation of the
t-Idiim Where practicable before an
agreement to refer a claim for
arbitration is made final under this
alternative, either the PRPs or EPA shall
notify the other PRPs at the faniity of
the potential use of arbitration
(b](l) The Administrator and one or
more PRPs associated with a facility
may submit to the Association a joint
request for arbitration of one or more
issues arising in an EPA claim
concerning the facility The joint request
shall be signed by all of the parties and
shall include
(i) A bnef description of the facility,
the EPA response action taken at the
facility, the EPA claim, and the parties.
(u) A statement of the issues arising in
the claim that are being submitted by
the parties for resolution by arbitration.
(111) A statement that the parties
consent to resolution of the issues
jointly submitted pursuant to the
procedures established by this part by
an Arbitrator appointed pursuant to
§304.22 of this part
(iv) A statement that the parties agree
to be bound by the final decision on all
issues jointly submitted by the parties
for resolution and to pay any award
made in the final decision, subject to the
nght to challenge the final decision
solely on the grounds and In the manner
prescribed by { 304 40(c) of this part,
(v) A statement that the parties agree
that the award made in the final
decision may be enforced pursuant to
§ 304 40fc) of this part
(vi) A statement that the parties agree
that the final decision shall be binding
only with respect to the response costs
at issue in the claim submitted for
arbitration:
(vn) A statement that the parties
agree that the statute of limitations
governing the EPA claim submitted shall
be extended for a tune period equal to
the number of days from the date the
joint request for arbitration is submitted
to>the Association to the date of
resolution of any enforcement action
relating to the final decision: and
(vm) A statement that each signatory
to the joint request is authorized to enter
into the arbitration and to bind legally
the party represented by him or her to
the terms of the joint request
(2) The joint request shall also Include
the name, address and telephone
number of each party, and, if a party is
represented by an attorney, the
attorney's name address md telephone
pLmber A party changing any of this
information must promptly communicate
the change in \/riting to the Association
and all other parties A party who fails
to furnish such information or any
changes thereto is deemed "o have
waived his or her nght to notice and
service under this part until such time as
the party furnishes the missing
information
(c) Any party may move to modify the
joint request for arbitration to include
one or more additional issues arising in
the referred claim To be effective any
such modification must be signed by the
Arbitrator and al! other parties The
joint request for arbitration may also be
modified to add one or more additional
parties, if such intervention is permitted
by § 304 24(a) of this part To be
effective, any such modification must be
signed by the Arbitrator, the intervening
party or parties, and all other parties
(d) The statute of limitations
governing the EPA claim submitted for
arbitration shall be extended for a tune
period equal to the number of days from
the date the joint request for arbitration
is submitted to the Association to the
date of resolution of any enforcement
action relating to the final decision.
[e) Prior to the selection of the
Association, the Administrator and one
or more PRPs associated with a facihty
may agree to submit one or more issues
arising m an EPA claim for resolution by
arbitration. Any such agreement shall be
contained fa a joint request for
arbitration •which meets all requirement*
pf paragraph (b) of this section. In any
such arbitration, the arbitrator shall be
selected pursuant to S 304-22[e} of this
part, and payment of aft costs
associated with the arbitration shafl be
made pursuant to $ 304 41(e] of this Part
Arbitrations agreed upon pursuant to
this paragraph shall be governed by the
procedures established by this part
except for those procedures which
pertain specifically to the duties of the
Association. AH duties of the
Association shall be performed in a
manner agreed upon by all of the
parties.
§304.22 Appointment of Arbitrator.
(a) The Association shall establish
and maintain a National Panel of
Environmental Arbitrators
(b) Within ten days of the filing of the
joint request for arbitration, the
Association shall identify and submit
simultaneously to all parties an
mdenrical list often persons chosen
from the National Panel of
Environmental Arbitrators, whom the
Association believes will not be subject
to disqualification because of
circumstances likely to affect
impartiality pursuant 1^»,§ 304 23
part Each party shalkfeav^'ien d
from the date of receipt of, the list to
identify any persons objected to, to rank
the remaining persons in the order of
preference, and to return the list to the
Association If a party does nut return
the list within the,time specified, al!
persons on the list are deemed
acceptable to that party From among
the persons whom the parties have
indicated as acceptable, and, in
accordance with the designated order of
mutual preference if any, the
Association shall invite an Arbitrator to
serve If the parties fail to mutually
agree upon any of the persons named, or
if the invited Arbitrator is unable to
serve or if for any other reason the
appointment cannot be made from the
submitted lists, the Association shall
make the appointment from among the
other members of the Panel In no event
shall appointment of the Arbitrator by
the Association take longer than thirty
days from the filing of the joint request
for arbitration
(c) Within seven days of the
appointment of the Arbitrator, the
Association shall mail to each of the
parties notice of the identity of the
Arbitrator end the date of the
appointment, together with a copj ^
these rules. The Arbitrator shall, wit in
five days of his or her appointment file '
a signed acceptance of the case with the
Association. The Association shall,
within seven days of receipt of the
Arbitrator's acceptance, mail notice of
such acceptance to the parties
(d) If any appointed Arbitrator should
resign, die. withdraw, be disqualified or
otherwise be unable to perform the
duties of the office, the Association may,
on satisfactory proof, declare the office
vacant. Vacancies shall be filled tn
accordance with the applicable
provisions of this section, and the matter
shall be resumed.
(e) If the Administrator and one or
more PRPs associated with a facility
enter into a joint request for arbitration
prior to the selection of the Association
(see § 304 21(e) of this part), the
Administrator and the participating
PRPs shall reach mutual agreement upon
the selection and appointment of an
Arbitrator on a case-by-case basis, and
the Administrator shall obtain the
services of that person using appropriate
procurement procedures. Any person
appointed as an Arbitrator pursuant to
this paragraph shall make disclosur o
the parties pursuant to § 304,23 of
part, shall resolve the issues submi
for resolution pursuant to the
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]„• . J .! or. 3"^ aa uir 'v g*i". cJ to t'
A-D.'rator ir $ 304 20 of th-s pe't a"d
sLi'i ct'ervvise co"du;t the a~b "al
prDcscJ "5 pa*s»ant to fe prcced *es
PS Jjl >red b> tiis part
§ 334 23 Disclosure and challenge
EJ) \ p,"su" appo "t.^das an
\-i ?»o' under § 304 22 oftu s p-"t
<- !»>'--* .- d\ i orre-e.p oh*
->- * • re -s c p.-, - ••-• c ' I"1
i . -•-" -'.-<• -i - ,.
I t. v to e'iszl ir-pa"f a'1 i-c1-- ''S
a-, b as cr anv f-ranc al or persona1
u ':-C3' in the res J.' of the a-b "C sn
o- 2"\ past or p-escn. re'atic-iu p v\ 'a
t1 : - .-* " c- tue*- C3_**s;' c- £"i p^s1
cr p-:, r3'aficnsnip wrh a". P^F o
, *- c' t"e claim n?v rsla'e
(t) Lpc -ccc.p* c' such infer—a* c-
f-j- an appo -*ed Arb trs'o* o- o'hcr
da scfrece-p* CG-J-J-:a*e sue11
i-';-" ;• on to tre pi- -Js S.th
cc- - ."va"oa r av be - :d° c-ar v c»
n\rr'f.ng but if irase cfa .» shall be
cc—~-~eJ i" w- rj
(c) liarv pa::, u s-;3 to recast
d j,.Ji f ca'ion cf c- Arc ca'c- s.c'-1
p—•. shall ra'-Tj t"2As::ca .ona-d
t-s oi^e- parties of such reques' ana '".a
b-s.- t-e"i"or\v'il<.r. seven cavs of
'jcs ?t of the rfarr-iucn on wh :h such
request is based
(d) The Assoc.ation sha'l make a
ds'e'-nination on any req-est for
d sqaahfication of an Arbitrator v\ i»htn
save- da>s afte" the Assoc.ation
rsieives ar^ such recaest a-*c shall
-_" . t^spa.-fes in v *), "gof s-:h
d3ls-r-inc"on Th.s detem..nat on sna'l
be v " i tre sole discretion o' the
\ssocwt en and its decision shall be
f-na!
$ 304 24 tnlervar.tien and withdrawal.
(a) (1) No late: tha- thirtj davs prior
to the p-e-hearing conference (see
5 304 31 of this part) anv PRP
associated v it'- the fac litv which is the
Swb.ect of the referred claim may move
to inte-\en« ir the arbitral proceeding
fur the purpose of having one or more
is5ucs relating to his or her
respo-sibt1 tj for payment of the
referred cla-m resolved
(2) If the Arbitrator has been
appointed a motion to intervene shall
be filed with the Arbitrator and a cop>
s^1 j'l be ssned upon ell parties If the
Arb'trator has not yet been appointed a
motion to intervene svall be sabm tted
to the Association and a copy shall be
sen ed upon all parties.
(3) Any such motion to intervene may
be granted only upon the written
approval of the Arbitrator and all of the
pa-ties in the form of a modifies'ion to
"•e )v. ".! 7eq-.2St for a'b ••-••c- pa-».--1
to 5 504 21(c) of this part fcv s gn-rg
s-ch a mod Hca'.oT trj inter. ening
pj-f\ consents to be bou"d b> the terrs
of the |0 r/ req jes1 for a-b ^:af>on
Subr ttedpj'-sja-tto § 30421{b) of this
part and a"v nod'*.cat'ors prcv iouslv
r.3 1? >l-e-Eto p'.*s.ant to § 3W :i(c) of
this PO-; apd CC-..-..S to be bo.r J bj
s .c" rev s'D"s to tre t.-c l"~i's fc- 1^2
f ,-3 o.'p'esd -:3 as t*e A'o ^c*:- r =\
r - j to p-a 3-' da'av -; f= p >.
Subpart C— Hesnnss Be'sra f*
Arbitrator
$ 304 30 Fil'fig of piece1 ngs.
(a) D.sco' erj shall bs i- a:cc--_*r
with this section and $ 304 31 o/ 1- s
(?1 An> pat> rr-iv rrove to
fro-n tre arbitral proceed r? v*i
t-1*^ dajs afte- receipt of t"s ro» :c cf
aopor '--snt of trie A-b'**3'o- U??
I 3Ci 22 if ir . pa;^ Tr^ A bi'r.-'tsr raj
approve Su:h v*iL*d-a va' vvithou
p-tj'-d'cc to L"i? rrc ""j pa-tv a-'
as.^js s-cn ad-rn.strat • e fees and
expensof { see } 3C4 41 of th>.s part]
c;:'"s( tre v, trdra\virg parr, as the
A'c w2':-d5S~sap?-opr.2'e Nop;*'y
r :; v% •ndra-v f-an lfi arb. ral
p'oceedirgs af er th.» th rtj dav p:ncd
e t:e?i tha* EPA rr.aj v\n'J>draw"fro"i the
p*oi.eed .-3 r arcordancs vviA
§ 3C4 20;b){3) or 5 304 33'*] of th » p-i"
$ 3^4.25 Ex perte corrnun'cjtJon,
(01 No i"'arested person shall r.ai e or
krovnngiv causa to be made to the
Arbitrator an expert* corrmunicatio".
(b) The Arbitrator shall not rrake or
knowingly cause to be made to an}
in'eres'ed person an etpcrte
communication
(c) The Association may remove tue
Arb Irstor in arv proceeding ir w'-'ch it
is d^Tonstrated to the Association s
sj'jsfact on that the Arbitrator has
ergaged in prohibited ex pate
conrnuncation to the prejudice of a-y
party If the Arbitrator is removed, the
procedures in § 304 Z2(d) of this par*
shall apply.
(d) Uhenever an e\ pcrte
communication in violation of this
sect, on is received by or made known to
the Arbitrator, the Arbitrator shall
irjssd.ately notify in writing alJ parties
to ire proceeding of the circumstances
ard substance of the comaunicatio"
ani may require the part} vvbo made the
communication or caused the
communication to be made or the party
whose representative made the
communication or caused the
coalman. cation to be made, to show
cause why that party's arguments or
claim should not be denied disregarded,
or otherwise adversely affected on
account of such violation.
(e] Tne prohibitions of this section
apply upon appointment of the
Arbitrator and terminate on the date of
the final decision.
r pa-qgrapn (D) 2)cf
( (b)\Ni>'ntn'r'j davs a' s-rc;e ?.J
the notice of appoint.— ent of we
A-b "ator (a?? S 304 22 of tv s p_-M
T^A s\j'' suur i to *-: ^rs : :•
t 7 '. c a u- • - s' --».-•,- js
s.- e c c p. cf .-; t - "c" i .' —
upon a' o'rerpar'-as T"evsr,t'en
s'jtenent shall ir aj] cases IT'I de t--
irfo-na>'0- -e~u^s'3d in p-*2- :ks
'te; and[=;;r)oftnss-. -
a' ' ---- : .-- -_
-«.: -- t -
.ue of1 abil/v o'a"v p_->.c -. -r r""
fiis bn>n s-b*7" * ed f?' res?1. - s*
include w inforrctiC-, r'c.s ;'sz i-
parajraphfbJfSlcft1- s sec .-ifd'
ijs ^s co^cer"1"" •"• ad?c .= : c' F3 J. ^
respor.se at' 3n has bee'- s.:- •• *- ' "
resolL"on o- r =v e-se d-r ~z t :
Arfaitra»3r s d»te-rrir,at.on of'tre do' d-
emou-»of respj-secos s reic.e-ab J
by EPA sha'l ir.Lda the .-for- a- en
req.ested tr pa-:j-2p»n (a)"4) of th s
section if the issae of the dollar £-:.-•
of resporse cos's recove'able bv EPA
has been subni"ed ror resolut c- ar *
shall include the ir.forrat.CR rea^cstsd
in paragraph (b)(S) of this section if arv
issue concerning a Jloca*'o.n of l-abil'tv
for payment of EPA s award has be*n
submitted for resolution
(1) As'ateTertof facts unclad -,a
descnpt.on of the fac'l 'v tke En \
response act.or* taken at tr.a fact:.'; '
response costs incurred ard to ba
incurred b> the United S'ates in
connection with the response action
taken at the factli'y. and the part es
(2) A descnption of the evidence .n
support of the following four elements of
Labil.ty of the participat.rg PRPisJ
whose liability pursuant to section
10-(a)ofCERCLA 42USC 960"{a] is
at issue, ard any supporting
documen'a jon therefor
(i) The site at which EPA s rcspor=e
ac'ion was taken is a facility as
defined by sectior 101(9) of CEBCLA 42
USC 9601 [9).
(u) There was a release or th'eat of
release" within the meamrg of sections
101(22} and 104(a) of CERCLA 42 U S C
9601(22) and 9604(a). of a ' hazardous
substance" as defined by section 101(14)
ofCERCLA.42USC9601{14) at the
facility at which EPA s response action
was taken;
(at) The release or threat of release
caused the United States to incur
' response costs" as defined m .
$ 304.12(0) of this part, and
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23184
Federal Register / Vol 54, No 102 / Tuesday. May 30, 1989 / Rules and Regulations
(iv) The participating PRP is in one of
ihc categories of liable parties m section
107(d) of CERCLA, 42 U S C %07(a)
(3J An index of any docurm-nts wh.ch
formed the basis for the selection of the
response action taken at the facility (all
indexed documents shall be made
available to any participating PRP).
(4) A summary, broken down by
category, of all response costs incurred
and to be incurred by the United States
m connection with the response action
taken by EPA at the facility (supporting
documentation for the summary shall be
made available to any participating PRP
pursuant to the procedures described m
Rule 1006 of the Federal Rules of
Evidence),
(5) To the extent such mform
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23184 Federal Register / Vol 54. No. 102 \ Tuesday. May 30. 1989 / Rules and Regulations
) The participating PRP is m one of
ones of liable parties m section
CERCLA. 42 U S C 9€07(a};
. ^ index of any documents which
formed the bas.s for i^e se'ec'ion of the
response action taken at the facility (all
fiex»d doc-nc-ts sha'l be ~iade
jva 'asle to any partcipd'-rg PRP1
(4) A summary broken dcw-n by
category, cf all resocr.se costs -c^-^d
d-d to be Jicurred by ihe United States
n carnection wth the response actioa
taken by EPA at the facility (supponrg
docuTen.taUon for the summary shall be
-ade ava''able to <.n> par'tcpa-j-g PR?
pursuant to the p-ocedures descrbed ji
Ru'e 1008 of the Federal Roles "f
Ev,dence),
(5) To the extent such info-nation s
s\ a 'able the "ames and addresses of
j'l identified FRPs for 'he facility the
volume and nature 01 the s^bs'arces
cor'r bated to the facih'y by each
de~:if ed FRP ard a ra-ik ng by «o'-jr.e
of J~.e substances uontnbu'ed to ihe
racilitv
(5) A recommended bcaLon 'cr •ue
pre-riea>\r.3 co--e'cnce and Le a-b k-dl
uea- ra C'hsr s'w 3-=rt rr
'A vLr JLTi> dajS at er r°cc'pt of
itten statement each
rg FFP shaJ s is- t \a ±e
A-.- ,r wo ccp es of dr 3_-s \era-d
--3 ' .erv» 3 cop. cf i-.e 2-5 \2- .pc.n
,i I .-"'••"• par rs Tha - is =r s-t ' in aJ
cic^s rc'^de ue'-f—atcnrrq.ased
S • C' 0" £-a '•C1 JCi "3
ft • Jl -i • s Sect cn i w e -sa-e c* ~e
= -* ^ of'hs ans xe--g pa;'c-pa1-^
•*. ] — ~ ~ * 4
? •''a arec-3-v uf EPA s
c .5 ,-.-.•.,
\ "a'c-sdc .-—."a'.o-.of'hedollar
~;»"t of-es^crre costs reco\erable
o> =.P-\ <-a 1 rcluue re'"fomanon
"- j-?s ed n pang-aph (c1f4) of th •
jec o". f '*• a issue of the dol'ar amount
nf resporse costs reco\ erab'e by EP\
UES been subr.t'ed fcr •e5Ct-'icn s~d
,~a 1 ~ci.ce ve r'r ~H CTrec-=stsJ
n p^"3g-arn (cMSfof mis' scci-o*1 f ary
issue conce^-rg the a locat-on cf
responsibility for pa>ment of EPA s
an ard has been submt'ed 'or
-eso'utjon
'•>! Any objecnors to the statemeri of
n EP^ s \\nfen statement and if
terstatement of facts
cbiections to EPA s position
.• i ability of the ansvsenrg
pa-t.c.pattrg PRP pursuant to section
107(a1 of CERCLA. 42 U S C 9607(3]. a
description of the evidence in support of
the defenses to liability of the answering
participating PRP which are specifically
e'-urerated in sect'on 107(b) of
CERCLA. 42 U S C 9607f> '• », L*-at the
release or threat of release of a
hazardous substance at the facility vtas
caused solely by an act of Cod an act of
war, an actor omission of an unre'ated
third partv or any combination thereof).
and any supporting documentation
thereof
(3) Anv objections to the -esporsa
action 'aken by EPA at the facik.)
based upon any docimeats whica
formed the ba s a-» ser .\ .."_n
^\er'> da,s cf •5':= p* -f s-ch -isv.er
Tv\o ccpics cf ».-, s»cu -2s;c-;e .rail
be soned _r:- L2 '-. -£'" a- da
sened -rsn a1' ss'- ss
(e) lf E? \ Jjc.3 a -»spcrLsa ±-.,
P~r'.c*pa"z3 DD? — 3y ' '2 a r»p >
*fe o .\ _LJI L<;n as>s 5 a*re:e 7' cf
Surr -=-pcn-.e TA 3 cop es cf ary s-cn
ren'y srall be ser sd urcn ^e
Vbura'or and a co?> cf aj:y s>.c- -°p'v
sha'i Be served upcr aJ par_?s.
§304 31 Pre-he»r r.j confersrce
(a] The Arb -Q'or 3=d ^-e par ^s
shad e^c^a-ge v--*s£s ' sis ( ^il^ a br ef
summary of t1- 3 a5f~c~> cf each
v\itze«s) and a-y exhibit or doc^rents
that the par*:ss nave not submi'ted 'n
their pleaa.r-s p-rrja^t to J 304 30 of
tLia pa-t « '• - 113 GC.S a'ter he
appointre-t ot he Arbitrator (see
5 304 22 of tuis part) or .Mth.n 10 de\ s
pr.or to the pre-heanng conference.
whiche\ens ear'ier
(b) The Arbi'rator shall select the
location, date, and tune for the pre-
hearmg corference, givfg due
consideration to any reconrrcndaMons
by the parties
[c) The pre-heanrg conference shall
be he'd within r»ne hurdred h>enty dajs
after the appointment of the Arbitrator
(see § 304 22 of this part).
(d) The Arbitrator shall mail to each
parry notice of the pre-hearing
ccnference not later than Uventv d;us n
advance of such conference unless the
part.es by mutual agreement uai\e sjch
notice
(e) Any partj rcay be represented bj
counsel at the pro-hear rg cor.fererica A
party who intends to be so represented
shall notify the other par'ies and the
Arbitrator of the name address a~d
telephone cumber of coursel at '^st
three daj s pnor to the da'e set for ue
pre-heanng con/e'ence V\ hen an
attorney has initiated ti e a'b'"Jt on bv
signing rhe joint reqjest for aio.jd^o'-
on behalf of a parry or.vhena^1
attorney has r.'ed a plead eg en be-all
of a party, such notice -s deemed to
have beeng-ven
(f) The pre-hearvig confere-cs may
proceed in the absence of an> party
who. after due notice fails to appear
(g) (I) At the pre heanrg co—'srence
the Arbitrator ard the pa^t-es s».iil
exchange vtcess statemei s. a
stipuJa. jn of urco.n'estea fac's a
s'atetre-t of dispu'ed issues and a.-.y
cl£er dcccmects. including .en"en
direct testimony that will assist ^n
orompt reso.unon of the dispute a-d
avoid unnecessary proof
(2) The Arbitrator and t^e parses
shail cons der ihs settien-ert of a J cr
pan of .re claim T-e Vbirra'ar r-iv
ercourags further settlerrert djscjs9ic-s
a-"en^ ue par*>es Ary ss"lc'ne''t
rsached -~a> be set forth .n a proposed
decsion n accordance M'h530433ci
th'S part If such a set'.emeit is no :e
for.h .n a proposed dec sion the
s»i 'e-"«' t suail be »r£3 ad 3s =n
adr"-j—a'tve se'Uement p-rsua-i 3
secfcn n:(h1'tl) cf CERCLA 42 b S C
IteZ?*}^) ardsnaUbesjb.ecttop-- r-
ccTTsnt ojrs-ant to sec* en 122f ) •>(
CERCLA 42 I. S C 9S22(,J
5 304 32 Arb-traJ hear'ng.
[a) T-tf Arb'iralor rray -n h's sc'2
d'sc'encn schedile a Bearing %% n us
par'ies on ere or more of tk.e c.spu(ed
issues idpntified m »he s'atement of
disputed ssues pursuant to SSOiSltg"!'
cf 'his 3"t
(b) The Arbitrator shail se'ect the
locafcn date and time for the arbitral
hearing gi%irg due consideration to any
recommendations by the parties
(c) The hearmg shall commence
within forty-five days after the pre-
hearmg conference (see 5 304 31 of this
part) The Arbitrator may upon a
showing by the parties tnat settlerrert is
likely extend the date for the hear."g
for up to th-rty additional days, if further
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Federal Register / Vol 54 No 102 / Tuesday May 30 1989 / Ru'cs and Rg-JatT-s 23183
5,-> lr>'-*>nt discussions hdve been rHd
p.-i^-t to §30431fg)(2) of !Ks pa-t
(c1) T ne A'b''rafor shall mail to each
••» no'ice of tne hearing rot late" than
entv da,s m advance of the hearing
-ss 'he oar'ies bv mutual agreement
s s..- rj' ce S-ich notice s^a'1
""<<. le a staterrer.t of the disputed
»-.5> '•? be aJri*essc?d ?! tv" hea- rg
-' -ep-- ~. f-. <•- ' r -"
. 5 e\ anaed px.-s-Jr> io
r >^-j;n (cj of this sect on,
f-1 An% party rr.av be represented bv
L. .-j:! ct 'ne hear.rg A pdrti wo
d* ID be so rcoresentcd aha'! no'-fv
s i. -*- par* 35 v-d the A'b fra'or cf
'-2n2-~2 ac"dress and t<;le;Kone
-.- »• cf counsel at ksst tr-ce ^-\s
,.,cr t, ,.s ^-..g 5e, for {ne ijea. n^
V -c" arrangements for the services
"an i-*e-preterupon me request of one
r-ore c' the parties
'-)Tre Vb tratorr*ej take
u >i*™.\~--ts upon tre request of anv
"( The Vb t-?"3- s^-al1 ? J- -is'er
.T^S to ell vMtres'es bero-e they test:f>
the c-b 'ra' he^r ^
I'M } \ hea-'-s shall be opened b>
e record -g of the loca on aate ar.d
— s cf trs hear'TB f Ke p-""serce of the
•; -a or a'-d tre paves aid counsel
?-% a-d b\ the A'bitrator s
:«-:ulecir-ent for t^e record of all
ea2."£s a-'d all other documents that
i\e beei fJedbj the parties
(2; The hearing shall be corduc'ed m
c:c-cc-;e vnth the Arbitrators
j- sdiction as defined by S 304 20 of th.s
(31 The Arbitrator rra\ at ar\ fne
reqj-re oral sta'emsr.ts clanf>mg the
issues to be addressed at the hearing
(4) The Arbitrator maj require the
pa-ties to p-esent witnesses for
questioning by the Arbitrator and for
direct and cross-examination by the
Dairies on any of the disputed issues.
except for any disputed issues
nce-ning the lelection or adequacy of
e response action which shall be
gen e"*isd bv pa-?g-aph (jl(6) of this
section
{5)TheVa rater s"al! cVi-e Ps
scope or oral testimoij A partv rra^
present o-a1 d'-ect tes'imonj onK upon
a sho \.r.g of g«od cause whv sjcn
tesf1*T;o'iv cot'd re' hav e been
?d in t\n'(e- forn or upon
cr nil of '**« ari S3
ga r:t
c =:^:. e, ;;crt- s ua-t tre
A*;it'«i'o-rdv pa-n t a"v par',, to
s.-p*e~ en1 fe docu~cnts wh.ch
fa"-ed t-e bas s for the selection of the
response ac' on [ vi.h ajdiuon^l
co--si»-*a 2rrJ? its orcral
tss-T*11 s." par j or—c"s^*a*es
'"a* Swpp'e'ne- « or is apprcp- ate
basec upcs ap:. c«sb'e prncip'es of
ad,- .-.:'JT3t:>eIu>v
(V.) [*) Excep> a,s provided in
p_,,,,.3pv. ((](6» Or {f.,s secnon evf- Ol»a
a-f o.ne- c^ru-1*"!-
,-:t...i'u '- a PJ- \ » p
e\cra~--d p* 3- to t-e p-e hea---g
co-fa-e-ce pu-Sua" to § 304 31(a) of tr.a
pa" o- rot e\cnc-aed at the pre hearing
cc-fs-£r:e purs.a""' to S 304 3l!g)(l} of
r-s re t rrav be ii'-oduced a' *-"e
hea-'-gon'j Lp'jr a sho* ngofg'icd
cajse b, tr.e rovi-g par<5 cr upon
cc-se-t of a" cf fe pari es
(2) Exctpt sa p-cv.dad in paragraph
(j]'5j cf tbs sec"on witnesses not
identified m a par'j s v mess list mav
be presented at the bea-r g onlv upcn a
s^ovvirg of good cause bv,
par', cr upon co~.se— of a'l of the
pa- |«s
(3J Tr.e
l' b? t>-e l
tra 'sle' ar~e ard
e\>ce"ce ofle:ed d-r.rg tre p-oceed "a
ard of tre appLcab-' tj of legs'
pr •u'eaes Co-Jo-rr '\ to legal rules of
e\ de-:e svah "ot be requ>red
[4] The Arbifa'o' ra\ make such
ordc-s as mav be "ecessa*^ for /-
ccner3 considtrat.on of evidence for
reasor* of bus.-ass co-f de*T3l '» as
def red bv 40 CFR 2 201 [ej and as
corSiSte-t vsi'h section 104;e)(T) of
CEKCL^ «USC 9604'e)'-J
(1) The hea-ng na> proceed i" >he
absence cfa-j pa* j uno af'—Hje
nofce fa Is *o appea- op fa"S to obij.n
ar adjou—rie1" lf a partv after due
notice fails to appear or fails to obtain
an Bdjourr-ient such partv will be
deeded to have waived the nght to be
p-esent at the hear.ng
(n) After all disputed issues hav e
been heard bj tre Arbitrate* the
Arbitrator ma> permit the parties to
make closing statements after which the
Arbitrator shall declare the hearing
closed
(r) The heanrg shall be completed
within two weeks unless the Arbitrator
extends the hearing for good cause
(olT'e Vb.--3*orrra. p:*r t '^L
part :s to s-b- t p-c^ ^bed f -d -;< o
fact n.li~gs o'orcJe's u th - !c~ d^i
after rcceio* of tre h^dr.rg tr-t-^crip* c.
such logger tine upo" a frd "g orgojcl
cause
(p) Tns p2r*'cs r~~] p*jvsdc b;
wn'ten ac-pc—e"" fo't"9v\?i\c-o"i~'<
§30133 »*rt -31 (J*C so- 3-i-p-f =
(a) Tke \rb 'toiO- s^a' re->Jc"a
proposed dcC'S'O" w •h,'> for'v fvcciis5-
ar.er iuc hss-.-i is closed o-ur-r
*or!v five d vs cr er tkc p-e u_" -.
c."fc-s-i e 'f r_ -^p- -£ - r " .-
fe parties '•ave s- ued r, a "_• > p- ^~
to t^e rerc"c" -s cf <.-? p-opo«->J
decis 0"
(b) (''JTre p'opo^pd dec sic- su i' v
n v\r n-g a-d b- " oe s r-vj bv >r .
A;b frato- I s "! b» ' -' t -
dCCO'J^-re VM •; *' -r , • 3
jansw ;tic>r as ce -ed cv 5 3 "-4 2j or 'u -,
pa^t ard s^ali it :ucr isa eshavtE_ c t-e par 55 for
reso'utio- co-i= " -,s Vb '-a'ors
detern -d is- ^'
(i) VVb chpar. . pat.ng PRfb ifar.
a*e I ab'?r p'--s_?-' ID set! on tO"(- -
da- ~g tve ccw-se cf the c-c:-er -2 "•*
Arbitrator rray upon tne pa1- 5s
r°c^sst set fa-*" i- *j:e 'e — s r»f tue
£g-eed sc't'e—er* n a p-:rosed
cecis on Excep' as p-3\ dsc ir
§ 304 20(0) ort^ s D3-» 2 r-rp-sed
dec'sio" vvn ch e*"Dodies an a--;ed
setner-ent sua'! be s.b]°c' ID al!
appVab'e p-cvisions of '• s pa-i
including but not L— "ed to pa*a:'i?h
(e) of this section and 5 3C4 40 of th.s
part
(d) The part'es sha!l accept as le?al
del \erj of tne proposed dec-sio-1 tra
placing m the United States mail of a
true copy of the proposed dec'Sion s»rt
b> certified mail return receipt
requested addressed to each partv's last
known address or each part> s
attorney s last known address or b>
personal se-vice
(e1 (1] Pu-suant to sec'- an 122( ) of
CERCLA 42U3C 9622[i) nonce of "e
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23186
Federal Register / Vol. 54. No 102 / Tuesday. May 30, 1989 / Rules «ind Regulations
proposed derision sh.il! be published
promptly by FPA in the Federal Register
Such notice shall include the name and
location of the facility concerned the
i.. mcs of the parties to the pros * ng
and d brief simmary of the proposed
decision and shall provide persons who
ar" not parties to the proceeding a
thirij day period m which to file written
comments relating to the proposed
derision Any filed comments shall be
made available to the participating PRPs
and to the public The participating PRPs
shall have ten days from the close of the
public comment penod in which to
submit to EPA in writing their views on
the ments of any comments filed EPA
shall consider any comments filed, and
shall wiihm thirty days after the close
of the ten-day period during which the
participating PRPs may submit their
views on any comments filed, provide
written notice to the Arbitrator and the
participating PRPs The written notice
shall be made available to the public
and shall include.
[)) A summary of any comments filed,
(it) Responses to any comments filed.
(in) A discussion of whether any
comments filed disclose to EPA farts or
considerations which indicate the
proposed decision is inappropriate
improper or inadequate, and
(iv) EPA's determination as to
whether modification of the proposed
decision or withdrawal from the arbitral
proceeding is necessary based upon
such comments
(2) If EPA's written notice does not
state that modification or withdrawal is
necessary based upon public comments,
then the proposed decision shall become
final thirty days after the date of
issuance of EPA's wntten nonce If
EPA's wntten notice states that
modification or withdrawal is
necessary, the parties shall have thirty
days from the date of issuance of EPA's
wntten notice to modify the proposed
decision so that it is no longer
mappropnate, improper or inadequate
and to set forth the proposed decision.
as modified, in an agreed settlement If
an agreed settlement is reached, such
agreed settlement shall be the final
decision If the parties do not modify the
proposed decision in an agreed
settlement within thirty days, the
proposed decision shall be null and void
and of no legal effect. EPA shall
withdraw from the proceeding and the
Arbitrator shall assess such
administrative fees and expenses (see
§ 304 41 of this part) against the parties
as the Arbitrator deems appropriate
(f) Payment of EPA's award, if a"ny,
and any fees or expenses due pursuant
to the final decision, shall be made
within thirty days after the <5a}i> of the
final decision
(g) The Arbitrator shall, upon written
request of any party, furnish to such
party certified facsimiles of all papers •*
the Arbitrator's possession that may be
required in judicial proceedings relating
to the arbitration pursuant to § 304 40 of
this part
Subpart 0—Other Provisions
§ 304 40 Effect and enforcement of final
decision.
(a) Pursuant to section 122(h)(4] of
CERCLA. 42 U S C 9622(h)(4), any
participating PRP who has resolved his
or her liability for an EPA claim through
a final decision reached pursuant to the
procedures established by this part shall
not be liable for claims for contributions
regarding matters addressed by the final
decision
(b) The final decision shall be binding
and conclusive upon the parties as to
issues that were jointly submitted by the
parties for resolution and addressed in
the decision.
(c) (1) If any award made in the final
decision is not paid within the time
required by § 304 33{f) of this part, the
final decision may be enforced as a
settlement under section 122(h) of
CERCLA. 42 U S C 9622(h), by the
Attorney General on behalf of EPA in
any appropriate Federal district court
pursuant to section 122(h)(3) of
CERCLA. 42 U S C. 96Z2(h)(3) Pursuant
to section 122(h](3) of CERCLA. the
terms of the final decision shall not be
subject to review in any such action
(2) In any such enforcement action
initiated by the United States, the final
decision may be challenged by any
party if:
(i) It was achieved through fraud,
misconduct, or partiality on the part of
the Arbitrator .
(ii) It was achieved through fraud or
misconduct by one of the parties
affecting the result.
(in) The Arbitrator exceeded his or
her jurisdiction under 8 304 20 of this
part or failed to decide the claim within
the bounds of his or her authority under
this part; or
(iv) It violates public policy
(3) Except as necessary to show such
fraud, misconduct partiality, excess of
jurisdiction or authority, or violation of
public policy, in any such enforcement
action, a party may not raise for the
purpose of overturning or otherwise
challenging the final decision, issues
arising m the claim that were not
submitted for resolution by arbitration
(d) Except as provided m paragraph
(c) of this section, and except as
necessary for a participating PRP to
defend against an action seeki
contribution for matters addr v
the final decision, no final deci srw
be admissible as evidence of any issue
of fac* or law in any proceeding bscug^
under any provision of CERCLA or am
other provision of law
(e) Neither the initiation of an arbitm
proceeding nor the rendenng of a final
decision on an EPA claim shall precluc
or otherwise affect the ability of the
United States including EPA, to
(1) Seek mjunctive relief against any
participating PRP for further response
action at the facility concerned pursuai
to CERCLA or any other applicable
statute regulation or legal theory, or
(2) Take further response action at th
facility concerned pursuant to CERCLA
or any other applicable statute,
regulation or legal theory; or
(3) Seek reimbursement from any
participating PRP for any costs not the
subject of the arbitral proceeding
pursuant to CERCLA or any other
applicable statute, regulation or legal
theory, or
(4) Seek any relief for any violation o
criminal law from any participating PRl
or
(">) Seek damages for injury to,
destruction of or loss of natural
resources from any partacipati *Pr o
(6) Seek any relief, civil or c 1,
from any person not a party to t e
arbitral proceeding under CERCLA or
any other applicable statute, regulation
or legal theory.
S 304 41 Administrative fees, expenses,
and Arbitrator's fee.
(a) The Association shall prescribe ai
Administrative Fee Schedule and a
Refund Schedule, which shall be subjec
to the approval of EPA. The schedule in
effect at the time of filing or the time of
refund shall be applicable.
{b) Expenses of witnesses shall be
borne by the party producing such
witnesses The expense of the
stenographic record and all transcripts
thereof shall be prorated equally amon;.
all parties ordenng copies, unless
otherwise agreed by the parties, or
unless the Arbitrator assesses such
expenses or any part thereof against an
specified party in the decision The
expense of an interpreter shall be borne
by the party requesting the interpreter
(c) The Association shall establish the
per diem fee for the Arbitrator, subject
to the approval of EPA, pnor to the
commencement of any activities by the
Arbitrator Arrangements for
compensation of the Arbitrate be
made by the Association
(d) The Association shall ma
appropnate arrangements to pay the
-------
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*:. < •*-s-3li re^cs-en actx." rg;-
,-ij - es i« acco-dance v\i'h th?
'• w.i'='"r 3 a.\a*d v% ran tmrtj dd.s
date or Pe *>il decisio-
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cr req.'-eTe- of t^ia part has not be;n
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t-;fe'o e.>v-e' ora'!> or •? ur.urg ir a
l -e1. rra—e- snail be deemed to have
.va ' ed fe ' g-'t to object
(o) The 0*15 nal of any |0'nt request
fcr arbi"atiOr mod (.cation to ai> joint
rc^ cii^ora o'Tation plead'rg tetter
c- o ~£" doc a~e-' f''s s attcrrei or if
iue par'y i? r jt represer'ed b\ an
a'to-nej ci it a'tomev cannot be
toe l2d to tue las'k-c - edj-.ss of" i
Prf i % ?«•?= 5 .-,::: _ «.: k
procee.-g'"it are Se"%s^ b trs
A'bitiS'jro'bj fe AJSGCM on s .
ser\ed bv pe'so 2! service o'L\ L" J
S.a'es certified rra'l re'j-n rs.e p(
req es'sd addressed to th? pj''j s
a'torre1 o* if the partv -s rot
rsprci£-'ed bv an at'orrev or i* e
at:c"-ev carrot be located to t1-- (-3
k-»v\n z<* lt^~,, of fke> pa-*
fd) If a-\ p"_ s an c''- s o:*' c- •-.
^p? :*' -e . v p-; - — c - s---
to an perso-o-c re ~.s a-« ia held
in.a^ feap?' ca' jn orsucu. p^ •« .
to o'us- pc^so-s or c rr -.s'd-ces 2"d
the rerv rJsp of f-s 371"' s^^j r ^' IJ
a ec ed rr:!;.
[r« DO: s'Mrs: F •«
Bli.U <3 CCDE «5«3-SO-M
-------
I UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
/ WASHINGTON, D C 20460
«&
21AUG 1984
Mail Code LE-134S
ENfOWEMFNT AND
COMPLtAiyrE MONITORING
MEMORANDUM
SUBJECT: Contractor" Cost Allocation Methodology
FROM. David Van S
Attorney/Adviser
TO Addressees
As promised in our meeting of August 21 , 1984, I have
attached a copy of the Ecology and Environment cost allocation
methodology for the FIT and REM/FIT contracts.
If I can answer any questions not addressed at the meeting,
please call me at 382-3082.
Addressees Dave 0'Conner, Contracts
Barbara Grimm, OWPE
Scott Fredericks, OERR
Ron Kovach, OERR
Stan Fredericks, FMD
Jack Jojokian, OERR
Jim Jowett, OERR
Janet Farella, OWPE
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ecology and environment, inc.
ROSSLYN CENTER, 1700NORTH MOORE ST , ARLINGTON. VA 22209. TEL 703-522-6065
International Specwktts tn the Environmental Sciences
TO: ' USE? A
Office of Waste Programs Enforcement
FROM: REM/FIT Zone II
AZPMO-FIT Operations, L. Welzel
DATE: March 9, 1984 (Revised May 23, 1984)
SUBJECT. Cost Estimates for Field Investigation Team
Effort-Under EPA Contracts #68-01-6056 (FIT)
and #68-01-6692 (REM/FIT)
Over the past three years, various cost analysis techniques for
establishing realistic U.S. Government costs for Field Investi-
gation Tea-a (FIT) effort on specific site investigations have be-
en evaluated by EPA and E&E program management personnel. The
concept that has been successfully employed under the FIT and
REM/FIT programs for several cost recovery ^negotiations -and/or
litigations, is based on the paranetric distribution of all coses
associated with the FIT programs via a unit cost per -ranhour of
effort expended on a specific site.
Early in the FIT prograa (1981), our cost analysis indicated tuat
the appropriate rate was approximately S35.00 per direct labor
hour expended on a specific site tasking. This rate was gener-
ated by tabulation of all program costs, removing subcontracting
expenditures, which are highly variable fro-i site to site, and
then dividing by tne total nurber or alrect lasor hours. The
parametric rate could be used to determine the cost associated
with a particular site by multiplying the number of direct labor
hours expended on an investigation bv the S35.00 per hour rate,
and then adding the cost of subcontracts specific to the site to
establish the total cost of the investigation.
While the fully loaded rate of 535.00
continued to remain essentially valxd,
per direct labor hour
experience and further
analysis of this approach have shown that many direct labor hours
(management and secretarial effort) are not uniquely charged to
specific site investigations, but are spread over several sites.
Consequently, not all direct labor hours are identifiable to
specific sites and the cost value generated by this methodology
is somewhat understated.
recycled paper
-------
4. A more precise method to determine specific site investigation
costs under the previous FIT contract evolved through refinement
of the earlier technique. The net program costs were again
derived by subtracting all subcontracting costs from the overall
cost of the contract*. This net cost vas then divided by the
total number of level of effort manhours to arrive at an average
cost p«r manhour of technical personnel. Based on contract costs
and time records through the end of the FIT Contract, 31 December
1982, the parametric cost was computed to be $40.62 per level of
effort hour as follows:
a. Total Program Cost including Base Fee
and Award Fee - $37,434,249
b. Less Cost of Subcontracts - S 3,152,808
c. NET Distributable Costs (a - b) - $34,281,441
d. LOE (Technical) Hours - 844,027
e. Unit Cost Per LOE Hour (c * d) - $40.62
NOTE' It must be recognized that two major cost elements remain to
be resolved which will affect this parametric cost. At issue are
overhead and G&A race adjustments for E&E FY 83, and final
settlement of the F.C. Hart Inc. claims for operation of two
regional offices. In addition, the program costs cited have not
received DCAA final audit for EaE FY 81 through FY S3.
5. The above unit cost incorporates all contractor incurred direct
and indirect charges associated with the administration,
management, and performance under the FIT contract, to include
all wages, fringe, overhead, clerical support, travel, office
rental and supplies, field equipment, expendable materials,
general and ad-ainistrative expenses, and fees. Subcontracting
costs for site specific tasks such as well drilling, surveying,
engineering consultants, expert witnesses, etc. are not
included in this unit cost. Tne figure cited also does not
address EPA internal costs associated wtn the administration and
management of the contract, nor the cost of sample analysis
performed by EPA or contract laboratories.
6. Before application of this parametric cost rate to determine cost
recovery values for litigation, another point must be considered.
Our initial experience on the FIT contract indicated that 75% of
the technical effort was utilized on site specific tasks assigned
by Technical Directive Documents (TDD). However at least 25% of
all available level of effort hours are expended on essential
investigation activities that cannot be identified or tabulated
to specific hazardous waste sites (Non-TDD effort). Some
examples are equipment cleaning, repair, and maintenance;
instrument calibration, technical literature research; refresher
training, planning and coordination of multi-site projects; and,
field t£2jn management. In recognition of this fact, the number
-------
*f technical personnel hours that have been charged Co a specific
idtc.matK.har mltiplied by a factor (previously 1.323) In order
4y distribute all costs at the $40.62 per hour rate
iipd above. As a result x>f a DCAA review of the parametic
coaC^Bjtcovery methodology, conducted on 28 February 1984, the TDD
vs. IS**!* tOE hours overall program factor was established as
l.37VrtoT the PIT program.
After the site pro rata costs based on LOE hours are extended and
calculated using the parametric factors, the value of the site
specific subcontracts can then be added to obtain the total cost
of the field investigation effort on a specific hazardous waste
site.
REM/FIT Program Costs and Factors
*
Since 1 Januarv 1983, all LOE technical effort expended on field
investigation-? is charged to the new REM/FIT program (EPA
Contract ^68-01-6692). Ac the present time the parametric unit
cost per LOE hour comoarable to that calculated in the preceding
paragraphs is computed to be $39.08 per hour, as follows:
a. Total Pr«sram Cost including
Base and \u^ra Fees * S15,7i
(through 28 Annl 198-O
b. Less Cost of iubcnnfacts - S 1 ,?al OQ >
c. NET Distributable Costs ( n - b > » SI-, 33*», 3-i
d. LOc (Technical) hours
(through 26 April 19d*) 367,339(
e. Unit Cost Per LOE Hour (c - d) - S39.03
As in tbe previous FIT contract, this unit cost will vary
sligncl.' as additional costs and hours accrue to the REM/FIT
program. Award fees are now distributed on a trimester basis and
sone rate chances are bein^ negotiated with the Contracting
Officer. The current factor tor accounting for \oji=TOCL LOE
effort on tne REM/FIT prograr has been establishedxa^l .437 as^of
April 198*.
cc: S. Parrish
S. Fredericks
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 3— >»«
WASHINGTON, O.C 20460
J,^ b
MEMORANDUM JUN 26 1989 0"i« Of
ADMINISTRATION
AND RESOURCES
MANAGEMENT
SUBJECT: Historic Site-Specific Cost Reports for Superfund
Contracts Active Prior to October 1, 1985
FROM: Gary M. Katz, Director
Financial Management Diy.sion
*
TO: Addressees
I am pleased to bring you up-to-date on the Historic
Site-Specific Cost Project, now nearing completion by my staff.
During what we refer to as the historic period (inception
of Superfund through September 30, 1985) , many Superfund
contractors engaged in site work were not required to account
for or invoice their contract costs by site. This practice
meant that contract payments in the Agency's Financial Management
System (FMS) were not accounted for by site. Consequently, FMS
reports did not reflect a complete site/non-site breakdown of
Superfund costs and were of limited use for EPA's cost recovery
Nprograra, necessitating the use of "letter reports" to support
site-specific contract costs.
The Historic Project's objective was to determine the
site-specific portion of these historic contract payments and
to adjiust the FMS accounts. The ma} or vehicle was an historic
cost report submitted by each contractor under the direction of
the Superfund Accounting Branch (SAB) . Each report consisted of
allocation schedules breaking down contract payments by site, a
description of the contractor's methodology, and a certification
that the data was supported by the contractor's records. SAB
reviewed the reports for compliance with prescribed instructions
(including reconciliation of each contract's total payments with
FMS records) and obtained Project Officer input for overall
reasonableness. Once accepted in final, the reports were used
to enter the costs into applicable FMS site-specific accounts.
Attachment A shows we have completed 19 historic contracts.
We will keep you informed of the eight remaining contracts.
Attachment B contains the EPA review procedures. Please direct
any general questions or requests for individual contract
information to Bill Cooke or Barbara Edmondson, FTS 382-2268.
Attachments
cc: David P. Ryan
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ADDRESSEES:
Director, CERCLA Enforcement Division, OWPE, OSWER
Director, Office of Program Management, OERR, OSWER
Director, Resource Management Staff, OPMT, OSWER
Associate Enforcement Counsel for Hazardous Waste Enforcement
Regional Comptrollers
Financial Management Officers
Regional Counsels
-------
Attachment A
SUPERFTJND CONTRACTORS SUBJECT TO HISTORIC COST REPORTING •
COMPLETED
Roy F. Weston, Inc.
GCA Technologies Corp.
Techlaw, Inc.
Haztech, Inc.
Reidel, Inc.
O. H. Materials Corp.
PEI Associates, Inc.
Camp, Dresser, & McKee, Inc.
Planning Research Corp.
Ecology & Environment, Inc.
Fred C. Hart, Inc.
Tichenor and Eiche
Life Systems, Inc.
SAIC
68-01-6669
68-01-6769
68-01-6215
68-01-6859
68-01-6860
68-01-6893
68-01-6894
68-03-1612
68-01-7037
68-01-5158
68-01-6546
68-01-6985
68-03-3136
68-03-3113
68-01-6838 68-01-7104
68-01-6939
68-01-6056
68-01-6640
IN PROCESS
NUS Corp.
CH2M Hill, Inc.
Black and Veatch
Bionetics Corp.
IT Corp.
Roy F. Weston, Inc.
Viar and Company, Inc.
68-01-6699
68-01-6692
68-03-1614
68-01-3161
68-03-3069
68-03-1613
68-01-6354
68-01-6702
All contractors performing laboratory services under the Contract
Laboratory Program
-------
ATTACHMENT B
HISTORIC SITE-SPECIFIC REPORTING PROJECT
PROCEDURES FOR PROCESSING CONTRACTOR REPORTS
OVERVIEW
The purpose of the historic site-specific reporting project was to accurately
account for site-specific Superfund contractor costs, for purposes of cost recovery and
external reporting. To this end, all contractors who performed Superfund site work
prior to October 1, 1985 were requested to submit reports to EPA segregating into site
and non-site categories all costs incurred and paid in this time period, known as the
historic period.
During this historic period, Superfund contractors performed work under two
general tjpes cf contracts, generic and site-specific. Funds for generic ccatrccis were
not obligated by site, while the majority of funds for site-specific contracts were
obligated site-specifically. For generic contracts, the objective of this project was to
reassign to site-specific accounts those costs which originally had been paid out of
general management accounts. For both types of contracts, however, many of the costs
incurred were not direct site costs, but were costs that supported site work. Following
specific EPA guidelines, contractors who performed work in the historic period
allocated these costs for program management and certain non-site activities to
Superfund sites.
-------
Contractors were required to include in the historic reports a breakdown of their
historic costs by the following categories:
•
Site-specific Superfund costs
Program management and base and award fees
**
Allocable and non-allocable non-site activity Superfund costs
Non-Superfund costs
Contractors first submitted draft reports for review. The Superfund Accounting
•
Branch, Financial Management Division (SAB) reviewed these reports and directed any
necessary corrections or additions to the contractor for inclusion in a final report
Upon submission of the final report, SAB conducted a final review, assigned the
appropriate accounting data, and transmitted the reports to the Servicing Finance
Office, Research Triangle Park (RTF), for data entry into EPA's Financial Management
System (FMS).
The purpose of this report on historic report processing procedures is to
document the steps taken by SAB to ensure the reasonableness of the direct site costs
a'nd the accuracy of the allocated costs reported by historic contractors. This
document also describes the steps taken by SAB to assign the necessary accounting
data to contractor historic reports and to establish in FMS the corresponding new
account numbers.
-------
SUMMARY OF REVIEW PROCEDURES
X
The steps taken by SAB to review and process contractor reports encompassed
the following four areas:
Reconciliation of the contractor's record of total contract payments with
EPA as recorded in FMS
. . Determination of the allocability of non-site activities
Review of the contractor's draft report
Review and coding of the contractor's final report for entry into FMS.
The following sections of this document provide a description of each of these
activities.
REVIEW PROCEDURES
The review process and procedures outlined below apply to all historic
Superfund contracts. Exceptions or deviations in the review process, such as those for
ERCS contracts, are addressed as needed.
1. Reconciliation of the Contractor's Record of Payments from EPA with the
FMS
The first step in the historic site-specific reporting process was the reconciliation
of each contractor's record of payments from EPA with the Agency's FMS. The
following steps were taken to accomplish this reconciliation:
-------
Each contractor submitted a listing of all payments received for work
performed and invoiced in the historic period, including invoice number,
paid amount and paid date
SAB reviewed this contractor invoice listing against reports from the
agency's financial systems (REMARC, CPS, VSS, and FMS, as
applicable)
SAB identified in writing for the contractor any discrepancies between the
contractor's total paid amount and EPA's, including the specific reasons
for the discrepancies. This "Reconciliation Acceptance Letter" also
indicated the total amount paid under the contract which was to be used
as the basis for the historic report
2- Determination of the Allocabilitv of Non-site Activities
The second step in the historic report review process involved the determination
of the allocabtlity of any non-site activities to sites. In order to complete this process:
Each contractor submitted a list of non-site activities performed under
the contract
On a contract-by-contract basis, SAB, in conjunction with the Project
Officer, determined which of the non-site activities would be allocated to
sites SAB sent a "Non-Site Activity Notification Letter" to the contractor,
detailing the allocability or non-allocability of each non-site activity.
3. Review of the Contractor's Draft Report
-------
SAB received two copies of each contractor's draft report, which permitted
concurrent review by two individuals. Upon receipt of the draft reports, EPA notified
•
the contractor that the draft reports had been received by sending a "Draft Report
Acknowledgement Letter."
**
The SAB review of the contractor draft reports evaluated such factors as
completeness, format, and content of the reports, as well as compliance with the
prescribed methodology. The result of each review was documented on a Draft Report
Review Checklist which was Tiled with a copy of the draft report after completion of the
review.
a. Completeness Review
The purpose of SAB's completeness review was to ensure that all of the required
documents were included in the draft report.
These documents included the following:
Attachment A ~ Summary of Historical Costs Before Allocation
Attachment B - Summary of Allocation of Historical Superfund Non-site
Costs
Attachment C - Summary of Costs After Allocation of Superfund Non-
site Costs
Statement of Methodology
Contractor Certification Statement
Cost Element Breakdown (CEB) (Optional)
-------
The reviewer indicated on the Draft Report Review Checklist which of the above
documents were included in the draft report Inclusion of the Cost Element
Breakdown was optional.
If the report did not include Attachments A, B, or C, the contractor was
notified to provide the missing statement. If the Statement of Methodology or
Contractor Certification Statement were omitted, SAB could not complete the review
process.
b. Format Review
After performing the completeness review, the format review was conducted. The
purpose of the format review was to ensure that all of the required data were included
on Attachments A, B, and C. The reviewer compared the formats, as detailed in the
contract requirements, for Attachments A, B, and C, with the formats used in the
contractor's draft report. The reviewer checked that all of the appropriate headings
(horizontal) and categories of costs (vertical) were included on each Attachment and
that site costs were sorted by Region and site. The Draft Report Review Checklist was
need to indicate which items were present and which had been omitted.
c. Transmittal to Project Officer for Review of Reasonableness
Once completeness and format reviews were finished, the reviewer forwarded
copies of Attachment A and the Statement of Reasonableness (Exhibit 2) along with a
transmittal letter to the Project Officer. The purpose of this review was for the Project
-------
Officer to assess the reasonableness of site charges, by reviewing Attachment A, which
indicates the historical distribution of costs. After the SAB reviewer completely
reviewed the draft report, Attachment A was sent to the Project Officer for review.
SAB was responsible for ensuring that the Project Officer reviews were
completed and that the Project Officers signed the Statement of Reasonableness.
ERCS contractor reports did not require Project Officer review, because all site costs
<•
had previously been obligated and paid under site-specific delivery orders.
d. Content Review
SAB performed a review of the content of the draft report. The purpose of the
content review was to ensure that the contractor had complied with EPA data
requirements in preparing the draft report This review used data from three EPA
documents in addition to the contractor's draft report:
Reconciliation Acceptance Letter
Non-Site Activity Notification Letter
FMS report showing appropriations and payments made under each
contract.
The reviewer completed the following steps:
. Checked totals on Attachments A and C, to ensure that the total amount paid
according to the reconciliation acceptance letter was used.
Checked that the total amount paid on the cost element breakdown was
correct, if it was included.
-------
Checked designation of allocable and non-allocable non-site costs to
ensure that the breakdown detailed in the non-site notification letter was
used.
Consulted the FMS report to determine if the contract was funded with
any non-Superfund monies. If non-Superfund monies were included,
determined the total amount of Superfund and non-Superfund monies
paid, then checked to see that the draft report broke out the correct
amount of non-Superfund monies. The amount of monies from each
source was noted on the Draft Report Review Checklist. In cases where
variances occurred, the reviewer determined the reason for the variances
and noted them in the "Comments" column of Draft Report Review
Checklist
Verified that the costs were consistent throughout the report; specifically,
that the direct site cost breakdown was the same on Attachments A and
C, and the allocated costs per site were the same on Attachments B and
C
e. . Statement of Methodology Review
The purpose of the Statement of Methodology review was to ensure that the
contractor's assignment of direct site costs and allocation of non-site costs was done in
accordance with the requirements, and that the contractor had documentation
8
-------
supporting the costs in the historic report The reviewer determined that the following
was clearly stated in the draft report:
Method used to record costs in the contractor's accounting system
Description of the documentation maintained to support site-specific
reporting of costs
Method used to allocate program management costs, fees, and allocable
non-site activity costs.
The reviewer compared the Statement of Methodology with the contractor's
statement of work (submitted with each contractor's proposal to prepare the historic
report), to ensure that direct site costs were assigned and supported as indicated. The
reviewer also ensured that the Statement of Methodology described an allocation that
was performed in accordance with the requirements set forth in the statement of work.
*
Specifically, the allocation should have been performed in the following order
First, program management costs and base and award fees were allocated
over all direct site and non-site activity costs, as well as over non-
Superfund costs, if applicable
Second, allocable non-site activity costs (along with their share of
program management and fees per above) were allocated only over direct
site charges.
In cases where non-site costs related to specific Regions, the Regional non-site
costs were to he allocated across all Regional direct site costs before the allocation of
-------
national program management costs and award fees. If this allocation process was not
clearly presented in the Statement of Methodology, the reviewer first checked to see if a
change in the allocation requirements was made for the contract. If a change in
requirements was made for the contract under review, the allocation was checked for
accuracy against the contractor's statement of work. If not, the reviewer:
Performed the allocation on all of the sites and compared the results with
the contractor's report, or
Performed the allocation on a sample of the sites and compared the
results with the contractor's report to determine if the allocation was
done properly.
The reviewer determined which method was appropriate considering the volume
of sites worked on under the contract Either method compared EPA-calcuIated costs
%
to costs shown on Attachment B.
f- Contractor Certification Statement Review
The purpose of reviewing the certification statement was to ensure that the
contractor did, in fact, certify the accuracy of the site-specific cost data presented in
the draft report. The certification statement also needed to stipulate the following:
The data provided in the attachments and in the explanation of
methodology accurately reflected the costs incurred at each site
The data were supported by the contractor's records.
10
-------
In addition, the reviewer made sure that both copies of the statement bad
original signatures, and were dated.
g. Concluding Draft Report Review
Once the SAB review was completed, SAB personnel combined their findings
with those of the Project Officer and sent a letter to the contractor indicating the items
which were to be added or modified for the final report. If the draft report was
•
acceptable, EPA instructed the contractor to submit the final report.
The contractor incorporated any necessary changes or modifications subsequent
to the draft report review, based on instructions from SAB, and then submitted a final
report.
4. Final Report Review
Upon receipt of the final report, the reviewer used the Draft Report Review
) Checklist and copies of relevant correspondence concerning the draft report to verify
that all necessary changes and additions were incorporated in the final report. The
reviewer also compared draft attachments A, B and C to final attachments A, B and C
to ensure that only the indicated, and no additional, changes were made. If the
contractor dia not incorporate all necessary changes, the reviewer sent a letter to the
contractor indicating the items that still needed to be added or modified, and
instructed the contractor to submit another final report incorporating these changes.
The final report also included a statement of contractor's methodology and certification
if significant changes from the draft were required.
11
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ASSIGNMENT OF ACCOUNTING DATA
Using Attachment C of the final report, SAB assigned the necessary accounting
data to record the site costs in the Agency's FMS. For each site, two line items of
costs were recorded: (1) direct costs identified by the contractor's report as directly
site-specific, and (2) allocated costs consisting of the site's share of program
management and allocable non-site activity costs described previously. These steps
were taken to transfer costs from generic program management accounts to the
appropriate site-specific accounts.
The two general types of Super-fund contracts, generic and site-specific, required
different actions for accomplishing the assignment of accounting data. Funds for
generic contracts were not obligated or paid site-specifically. Thus, for generic
contracts, site-specific accounts were established, as needed, and payments were
transferred from generic program management accounts to the site-specific accounts.
Site-specific contracts are those for which funds were obligated and paid site-
specifically. For each of these contractors, the historic report identified all direct site-
specific costs incurred by the contractor. These amounts were recorded for entry into
the FMS only to the extent that they exceeded the amounts already recorded during the
historic period as site-specific. These "net" amounts were entered into site-specific
accounts by transferring costs from general management accounts or, in rare cases,
other site-specific accounts. The allocated non-site costs were transferred from the
general program management accounts to the appropriate site-specific accounts.
12
-------
For both generic and site-specific contracts, the coder distributed amounts to
sites with and without S/S IDs. For all contracts, the assignment of the accounting
data was done directly on Attachment C of the contractor's final report Alter the
necessary site-specific accounts were listed on Attachment C, an FMS MCDF listing of
all established account numbers was used to determine which account numbers were
new. These new account numbers were reported to the Reports and Analysis Branch
for establishment in FMS.
COMPLETION OF THE PROCESS
Once the new account numbers were established, SAB sent the contractor's
Attachment C to EPA's Research Triangle Park Servicing Finance Office for entry into
FMS. Following data entry, RTP verified the amounts entered into FMS against a
subsequent FMS report to ensure that the data had been captured correctly.
13
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. DC 20460
NOV 6 IS37
COMPTROLLER POLICY ANNOUNCEMENT
No. 88-01
MEMORANDUM
SUBJECT:
t
FROM:
TO:
Allocation /of Agency
Among the Salaries
and LUST Ap'pro
ts ard PC&3 Costs
Upenses, Superfund
David P.\Ryan
Comptroller
Assistant Regional A'dfoinistrators
Management D^vis.ion ^Directors
Senior Budget Officers
Regional Comptrollers
Financial Management Officers
OFFICE OF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
This Policy Announcement establishes Agency policies and
procedures for allocating PC&3 costs and FTEs to the Superfund
and the Leaking Underground Storage Tank (LUST) appropriations.
This guidance is necessary to ensure proper charging of the
appropriations funding EPA's programs. This Policy Announcement
supplements Corptroller Policy Ar^ouncement 86-02, dated
Octooer "31t, 1985, on allocation of regional FTEs and PC&B costs.
BACKGROUND
Normally, EPA's operating costs are charged directly to
an appropriation through the Agency's account number structure,
e.g., a Superfund Program employee's pay would be charged to
the employee's "Fixed Account Number," or FAN. If the employee
worked hours that benefited accounts other than the FAN, the
employee would complete an Agency timesheet to distribute the
payroll charges accordingly.
, - t
However, where hours worked cannot be identified directly
with a specific appropriation, "allocation" of that time among
the benefitting appropriations may be an acceptable method for
charging the time worked. In the past, we have approved requests
to distribute costs using this cost accounting technique. However,
with an increasing number of requests to allocate costs, this ad
hoc approach is no longer adequate. As a result, we are setting
forth these general policies and procedures for future requests.
-------
-2-
POLICY
Where there are FTEs and PC&B costs readily identifiable and
directly assignable to a specif.c appropriation, those costs should
be charged to the proper appropriation accounts.
However, with Office of the Comptroller (OC) approval, EPA
offices with allowances under more, thin one appropriation may
allocate staff FTEs and PC&B costs among the benefitting appro-
priations. Offices that received approval earlier to allocate
may continue to do so, as long as the allocation methodology does
not change or the organization grouping of employees for which the
methodology was approved does not change.
PROCEDURES FOR C^ST. ALLOCATION
t
Attachment I describes the procedures for requesting OC
approval of allocation methods and Attachment II describes the
procedures for calculating the allocation percentages and recording
PC&B costs and FTEs in the Payroll System.
EFFECTIVE DATE
This Policy is effective immediately.
FOR ADDITIONAL INFORMATION
If you have any questions on this Policy Announcement, please
contact Bob Cluck, Fiscal Policies and Procedures Branch, at'
382-5160.
Attachments
cc: J. Richard Bashar
John J. Sandy
Alvin Pesachowitz
Vincette L. Goerl
Tony Musick
John Elliott
Carole Ansheles
FMD Branch Chiefs
-------
ATTACHMENT I
PROCEDURES FOR REQUESTING PC APPROVAL
TO ALLOCATE FTEs AND PC&B COSTS
*
Any office wishing to allocate their FTEs and PC&B costs
must submit their request, with the concurrence of the responsible
Allowance Holder, to the Director, Financial Management Division.
In order to obtain OC approval, the requesting office must:
1) Define the group ("pool") of office employees whose time
will be allocated (e.g., Region personnel management
section. Immediate Office of Division Director,
etc.).
2) Explain briefly why direct charging of time to the
benefitting appropriations is not practical or would be
less accurate than the proposed allocation method.
3) Identify the statistic you propose to use to distribute
FTEs and PC&B costs among the source appropriations.
(For example, regional Financial Management Offices use
a ratio of regional Superfund FTEs to total FTEs for
allocating costs. Because a regional FMO staff provides
services to the region as a whole, the percentage of
Superfund FTEs in that region is a reasonable and
readily available basis for determining the percentage
of the FMO's resources spent in support of the Superfund
program. In other administrative offices, a percentage
of "transactions" may be a more appropriate measure.)
4) Identify the time period for which you w\ll calculate
the ratio.
(For FTE ratios, the ratios should be calculated for
each pay period. The data used to calculate the ratios
would*, of course, be "net" of the FTEs being allocated.
For "transaction ratios," the ratios will normally be
calculated for each month.)
5) Explain briefly why you believe this measure, of the
various alternatives, is the best indicator of benefit
to the respective programs served. If the time period
differs from the "standard" periods just mentioned,
exolain why the alternative would be more appropriate.
+
A concurrence block for the signature of the Director,
Financial Management Division must be included at the end of the
memorandum.
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ATTACHMENT II
PROCEDURE FOR ALLOCATING COSTS
In order to properly record the allocated charges (also
called layoffs) in the Agency's accounting system, the allocated
FTEs must be entered through EPA's Payroll labor distribution
subsystem.
Determination of Allocation Percentage. When the approved
allocation methodology uses data from the Financial Management
System (FMS) to determine allocation percentages, the office
allocating costs may obtain the necessary data: 1} from the
Financial Management Office (FMO) if the data is routinely
generated on standard reports, 2) by directly accessing FMS
through SPUR or other report generators or, 3) with the assis-
tance of the Financial Management Office, by development of
other special reports.
Documentation of Calculations. The office allocating costs must
maintain in readily availaDTe files documentation on the procedure
by which the data is collected and, for each pay period or month,
as appropriate, copies of the reports used and calculations made
to determine the allocation percentages.
Use of "Lagged" Data. Ideally, offices allocating their FTEs and
PC&B costs for any given pay period will use data for the same
time period to calculate the percent of those costs that may be
charged to the respective appropriations. Because of the
availability of the "PARS" system to the regional offices for
redistributing payroll charges, Comptroller Policy Announcement
86-02 requires use of concurrent data in doing these allocations.
However, because the procedure described in Policy Announcment
86-02 may not be practical for all Agency offices, "lagged" data
may be used. Specifically, an office allocating costs may use for
any given pay period the percentage calculated for the immediately
preceding time period. For example, if costs are being allocated
for pay period 12, and the office is using FTE ratios, the per-
centage to use in allocating those costs would be the FTE ratios
for pay period 11. Or, if costs are being allocated for the pay
periods ending in April, and the office is using transaction
ratios, the percentage to use for the April pay periods would be
the transaction ratio for March.
Generally, use of "lagged" data will result in a reasonably close
approximation of the results obtained if the same time period as
the pay period being allocated were used. However, offices using
the lagged data should compare at the end of each fiscal year the
charges allocated against what would have been allocated if
concurrent data were used. If the difference is more than $1,000,
the office should process an adjusting entry through the servicing
Financial Manaaement Office.
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ATTACHMENT II (can't)
-2-
Manual Recordingof Allocated Time. The standard document from
which allocated time is entered is the EPA Form 2560-28 (10-86),
"Payroll Distribution Timesheet." Unless automated processes are
used (see below), a labor distribution time sheet must be completed
for each employee whose time is allocated. The timesheet may be
completed by the employee or by an individual designated by the
respective office head.
Normally, when actual hours are recorded, employees fill in hours
worked each day to the benefit of the respective accounts. However,
when employee time is allocated among accounts, the daily columns
need not be completed. Instead, the allocated hours should simply
be entered in the summary coluinn(s). For example, as shown in the
attached exnibit, where an employee worked 80 hours in a pay period,
and where the allocation ratio was calculated to be 10%, 72 hours
would be entered in the summary column for the fixed account number
and 8 hours for the Superfund or LUST account. (The calculations
will generally not result in whole numbers; the hours recorded on
the time sheet should be rounded to the nearest 1/4 hour).
No Signature Required on Timesheets for Allocated Time. Because
the allocated hours on the timesheets are simply a statistical
determination of hours chargeable to an employee's account number,
and the timesheets in this use serve solely as a medium for enter-
ing that data in EPA's Payroll System, no signatures are required
on the timesheets themselves. However, these timesheets must be
transmitted to the servicing finance office by a memorandum signed
by the respective office head attesting to the accuracy of the
allocation. The transmittal memorandum must include control totals
for the number of timesheets and total hours allocated to each
appropriation.
The labor distribution time sheets rust be submitted to the
servicing financial management office by the standard due date
establisned by that office.
EXCEPTION: In some instances, direct* charging may be irixed
with allocation methods for any given individual's labor
distribution. If work is performed solely benefitting
Superfund and is clearly identified as such (e g., assembly
of Superfund site cost documentation by a regional FMO
staffer), those direct hours should be entered on the
timesheet. If Superfund direct hours are charged, any
similarly identifiable hours worked that do not benefit
Superfund (e.g., a special project in the FMO to review
construction grant obligations) must be recorded against
the appropriate Salaries and Expenses account number.
Where direct charging is included on a timesheet, the
timesheet must be signed by the employee, timekeeper and
supervisor. This exception applies to charging for the
LUST Program as well.
-------
ATTACHMENT II (c on't)
-3-
Automated Recording of Allocated Time
A number of offices have developed computer programs to
automatically perform the allocation calculations and either print
out the data necessary for the labor distribution information to be
Keypunched in to the Payroll System, or to perform the transfer of
data directly into that System. Any computer applications should
be submitted to the Microcomputer Applications Clearinghouse so that
other offices may benefit from these programs (see the Comptroller's
March 24, 1987, memorandum on this sub}ect). A printout of the data
transferred must be maintained as part of the documentation cited
above. The accuracy of the data on the printout should be attested
to by the signature of both the respective office head and financial
management officer.
-------
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^
OSWER Directive 9610.10
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, O.C 20460
OC
OFFICE Of
SOLID WASTE AND EMERGENCY flESPONS
MEMORANDUM
SUBJECT
FROM:
TO:
ATTN:
LUST Trust Fund Cost Recovery Policy and Special
Conditions
xi
J. Winston "Porter
Assistant Administrator
Regional Administrators
Regions 1-X
Waste Management Division Directors,
Regions I-III, V-IX
Water Management Division Directors, Regions IV, X
Attached is the final Cost Recovery Policy for the Leaking
Underground Storage Tank (LUST) Trust Fund. Also attached is a
set of special conditions for LUST Trust Fund cooperative
agreements that reflect the policy. Both are products of an
intensive effort to develop a framework for cost recovery that
incorporates the State-centered design of the Underground Storage
Tank program.
The Office of Solid Waste and Emergency Response worked
closely with the Office of General Counsel, the Office of the
Comptroller, the Regional UST programs and other Headquarters
offices over the last year to develop this innovative policy.
These offices were also instrumental in helping us obtain
concurrences on our approach from the Department of Justice
(DOJ), the office of Management and Budget, and Congressional
staff.
The two most innovative aspects of the policy should provide
States with the autonomy and incentive to pursue recoveries
aggressively and efficiently. First, to streamline the recovery
process, States will generally be able to litigate and settle
cost recovery claims without the involvement of EPA or DOJ.
Second, to provide incentives for pursuing cost recovery, States
will retain recovered Trust Fund expenditures to perform
additional cleanups or to satisfy their cost share requirements.
-------
OSWER Directive 9610.10
-2-
This policy replaces the cost recovery section (Section
II.I) of OSWER Directive 9650.7 fSupplemental Guidelines for FY
89 LUST Trust Fund Cooperative Agreements!. dated April 7, 1988.
This policy will also be incorporated into a set of consolidated
LUST Trust Fund Guidelines that will be released in the next few
weeks.
To encourage States to proceed with recoveries on cleanups
now underway, Regions should amend all existing LUST Trust Fund
cooperative agreements to include the attached special
conditions. This will also eliminate inconsistencies in
recordkeeping and recovery procedures that would otherwise make
oversight of the program unnecessarily complex.
I am certain that this policy will help us continue to build
strong State underground storage tank programs. I want to
congratulate everyone who contributed to the development of the
policy.
Attachments
cc: Charlie Grizzle
Larry Jensen
Dave Ryan
Harvey Pippen
Tony Mus.ick
Ron Bachand
Howard Corcoran
Louise Wise
Regional UST Program Managers
-------
OSWER Directive 9610.10
COST RECOVERY POLICY FOR THE LEAKING UNDERGROUND
STORAGE TANK TRUST FUND
A. Overview
This is EPA's first complete statement of its policies on
cost recovery under the Leaking Underground Storage Tank (LUST)
Trust Fund. It has required a year of coordinated effort by
various EPA offices to develop and to secure necessary approvals
within the Agency and from other agencies and officials in the
executive and legislative branches of government. Working with
and through States to implement this policy, EPA expects that it
.will help cost recovery to become a practical and effective tool
that States will use to both stimulate and fund more cleanups of
releases from underground storage tanks.
Objectives of cost Recovery
The primary purpose of cost recovery under the LUST Trust
Fund is to provide incentives for owners and operators to comply
with technical and financial responsibility requirements, and
most importantly to clean up releases from their own tanks. EPA
expects that State-lead cleanups followed by cost recovery will
continue to occur in a minority of cases, because the majority of
cleanups are conducted by owners and operators. When cost
recovery is necessary, it will generate income for additional
cleanups.
Cost recovery as practiced under the LUST Trust Fund will
depart significantly from the approaches taken in other Federal
environmental resporse programs. Consistent with the State-
centered design of the underground storage tank program, States
will implement the cost recovery program, have considerable
discretion in operating it, and benefit directly from their
successful recoveries.
The two most innovative aspects of EPA's cost recovery
policy for the LUST Trust Fund should provide States with the
autonomy and the incentive necessary to pursue recoveries
aggressively and efficiently. First, States with cooperative
agreements will litigate and settle recovery claims without the
routine involvement or concurrence of EPA or the Department of
Justice. Second, States may retain any Trust Fund monies they
recover for use on additional Fund-eligible cleanups and
activities.
Legal Rationale
The legal rationale behind this approach was developed by
the Agency in consultation with the Department of Justice.
-1-
-------
OSWER Directive 9610.10
Under 28 U.S.C. Section 516, the Department of Justice
(DOJ) must conduct any litigation in which the United States has
an interest unless there is an exception authorized by law. EPA
interprets section 9003(h) of Subtitle I to be such an exception,
allowing States under cooperative agreements that have the
capabilities to carry out effective corrective actions and
enforcement activities to exercise various program authorities,
including the cost recovery authority provided in section
9003(h)(6). These States may also settle cost recovery litigation
as part of the exercise of enforcement discretion conveyed by
section 9003(h).
Additionally, EPA interprets section 9003(h) to provide
authority for States to administratively settle cost recovery
claims. EPA believes that this authority includes the ability to
compromise or terminate Trust Fund claims based on considerations
of equity as described in section 9003(h)(6)(B) (e.g., reducing
the claim to the amount of required financial responsibility).
Finally, EPA has determined that, consistent with the
"program income" concept described in OMB Circular A-102, that
States may retain recovered Trust Fund monies to perform
additional eligible activities under their cooperative
agreements. Thus, appropriate requirements in 40 C.F.R. Parts 30
and 31 on the documentation and use of program income apply to
recoveries of Trust Fund money.
Recovery Procedures
Variations in State recovery procedures can be expected,
but generally States will be responsible for all of the following
activities in cases that they deem to be high priorities:
o Determination of a release
o Notification of responsibility to the owner or
operator
o Negotiation for corrective action (in non-emergency
situations)
o Cleanup (if the owner or operator is incapable or
unwilling to clean up)
o Demand for payment
o Negotiation for a settlement of the recovery claim
-•9-
-------
OSWER Directive 9610.10
o Litigation (when demand for payment and efforts to
reach an administrative settlement fail)
o Collection and case closure
States are encouraged to tailor the specifics of these
procedures to suit their individual programs and to save program
resources. In addition, the detailed policy guidance that
follows has been developed to help ensure that cost recovery
resources are used efficiently and stimulate compliance by owners
and operators.
-3-
-------
OSWER Directive 9610.10
B. State and Federal Roles in Cost Recovery
Policy
Under their cooperative agreements, States are responsible
for all legal, programmatic, and administrative activities
necessary to recover their expenditures from the LUST Trust Fund.
This includes undertaking administrative and judicial recovery
actions and settling claims. They are responsible for required
reporting and recordkeeping including documenting that their
Trust Fund recoveries are used for additional eligible
activities under their cooperative agreements. EPA will provide
general policy guidelines to States and make funding available
for recovery programs through the states' cooperative agreements.
EPA will also assess the performance of state cost recovery
programs and provide support and assistance to States where they
are needed to improve performance. The Agency will generally be
bound by settlements and judgments reached in States, but
reserves the right to pursue recoveries independently in the
extreme case. Also, EPA may pursue recoveries in those rare
cases where the Agency has performed a federal-lead response.
Guidance
States are expected to have adequate legal authorities to
undertake cost recovery either by having or acquiring their own
authorities, or certifying that they are able to use federal
authorities. States with their own recovery authorities should
also cite Subtitle I in their recovery actions (i.e., demand
letters, administrative orders, and judicial complaints) to
establish the liability of owners/operators to the federal
government for Trust Fund expenditures.
EPA is currently formulating policies on a number of issues
related to recovery litigation. One major unresolved issue is
whether States should bring judicial recovery actions in State or
federal courts. Until these issues are resolved, States should,
within one week, notify EPA's Office of Regional Counsel when
filing judicial recovery actions for sites where they have used
Trust Fund money for cleanup or enforcement. This will give EPA
the opportunity to consult with the State, determine whether the
action might affect the scope of the Agency's Subtitle I
authorities, and if necessary, provide technical or legal
assistance to the State. However, EPA will not require States to
delay recovery litigation while the Agency reviews complaints
submitted by States.
-4-
-------
OSWER Directive 9610.10
States must maintain accounting and recordkeeping systems
that will document all Trust Fund expenditures, support cost
recovery with site-specific records, and demonstrate that
recovered funds are retained and used for additional eligible
activities or as matching funds under their cooperative
agreements. State recordkeeping and accounting must conform to
requirements in these guidelines and in the forthcoming LUST
Trust Fund State Financial Management Handbook, when it becomes
available.
States will have considerable discretion in prioritizing
cases for cost recovery and determining an appropriate level of
effort to devote to each case. At a minimum, in each case States
should make reasonable efforts to contact owners and operators
who are liable for releases, notify them of their liability for
enforcement and corrective action costs, and demand payment. In
those rare cases where equitable factors support compromise or
termination1 of the Trust Fund claim, States should ensure that
the bases for any compromise or termination are adequately
supported in the records of the State and reflect the efficient
use of Trust Fund resources. States may compromise Trust Fund
claims when, for example, an owner/operator demonstrates that
he/she lacks the financial resources to pay the claim; the State
determines that the likelihood of success on litigating the
claim as small because of the absence of proof of liability or
unavailability of required witnesses; or costs of judicial
collection is disproportionately high. States should note that
their ability to reduce claims based on the equities described in
section 9003h(6)(B) is limited to cases where owners/operators
have maintained required levels "of financial assurance.
Because they are more cost effective, negotiated settlements
are generally preferred over "litigation. In many cases, however,
EPA expects that it will be necessary for States to initiate and
pursue judicial action to compel recalcitrant owners and
operators to pay cleanup costs. In deciding whether to litigate
individual cases States should consider the solvency of the
owner/operator, the costs of cleanup, the likelihood of recovery,
the case's deterrence value and the opportunity costs (the
resources necessary to proceed that could otherwise be used in
pursuing other cases or in other parts of the State's Trust Fund
program).
I/ As used here, the term "compromise" means accepting less
than the full value of the claim. The term "termination"
means forgoing any cost recovery whatsoever.
-5-
-------
OSWER Directive 9610.10
Even where no administrative or judicial settlement is
reached, States must formally close out all cases and document
the reasons for deciding not to proceed further. Factors
justifying case closure include the situations where costs of
pursuing a case further will approach or exceed the potential
recovery, bankruptcy of the owner/operator, and other reasons.
States should not allow the statute of limitation (SOL) to run
and justify closure solely on that basis. States should
generally pursue cases promptly and file actions in a timely
manner to enhance the chances for recovery, states should revise
their priorities for individual recovery cases as SOL deadlines
approach. Until the issue is resolved by the courts, States
relying solely on Subtitle I cost recovery authorities should be
prudent and proceed assuming a three year limit applies, despite
the fact that EPA believes that a six year limit is applicable.
This is necessary because some courts have applied the three year
limit to similar cases.
When States make successful recoveries at sites where Trust
Fund monies were used, they may retain the Trust Fund share as
program income consistent with OMB Circular A-102 and 40 CFR
Parts 30.525 and 31.25. This means that States may use
recovered federal Trust Fund monies for additional Fund-eligible
cleanups and activities under their agreements. When States
choose to do so, they must inform EPA, and keep appropriate
records of how the recoveries were used. States may also use
LUST Trust Fund recoveries to meet their cost share requirement
under section 9003(h)(7)(B). If a State elects to do this, it
must be specified in their cooperative agreement. In
negotiating their cooperative agreements, States and Regions
should develop contingency plans that will allow States to
obligate their recoveries efficiently. States should calculate
the federal Trust Fund share of their recoveries on a site-by-
site, pro rata basis. For example, if a State spends 50
thousand dollars of LUST Trust Fund money at a site, and the
State ultimately recovers 50 percent of all Federal and State
money used at the site, it must redirect 25 thousand dollars of
"program income" into Fund-eligible activities.
EPA expects States with cooperative agreements to
adequately fund and staff recovery efforts to deal with
anticipated case loads. Cost recovery activities are allowable
costs under Subtitle I. Where the recovery program is dependent
on the Attorney General's Office, the State should consider the
need for formal funding arrangements (e.g., a memorandum of
agreement) to ensure legal staffing for cost recovery referrals.
When the Trust Fund is not used to pay for such legal staffing,
States may wish to investigate the possibility of counting these
legal services as "in-kind contributions" toward satisfying their
match requirements under 40 C.F.R. Part 31.24.
-6-
-------
OSWER Directive 9610.10
EPA's principal responsibilities in cost recovery are to
provide funding, policy, guidance, oversight, and assistance to
States. The Agency's operational role in cost recovery will
generally be limited to pursuing recoveries in those cases where
EPA responds directly to a release, and in rare cases of
overfiling.
EPA intends to make its expectations for the activities and
performance of cost recovery programs reasonable and clear to
States in advance. This will occur through policy, guidance,
routine communications, program appraisal and reviews, and the
negotiation of cooperative agreements. The oversight and
assistance functions of EPA's program, grants, and financial
management offices will accommodate variations in State
procedures and capabilities to the maximum extent possible. The
Agency's goals will be to help build State capabilities,
particularly in developing recovery programs and to improve
performance. At present, EPA has no numerical expectations for
the performance of State recovery programs. Early in the
recovery program it will focus on States' progress toward
putting basic systems, policies, and procedures in place that
will enable them to recover Trust Fund expenditures efficiently
and effectively.
EPA is working with several States on pilot projects to
develop realistic expectations for program performance, and to
identify effective recovery procedures. The results will help
EPA support State programs with tools and guidance. They will
also help the Agency formulate and communicate more precise
expectations for program performance.
Generally, EPA will be bound by States' judicial actions and
settlements. However if EPA finds that a State is not
effectively implementing cost recoveries, the Agency will offer
the State necessary assistance in correcting any problems. The
Office of Underground Storage Tanks will be most interested in
seeing that states have adequate accounting and recordkeeping
systems in place and that States identify, develop, and pursue
appropriate recovery cases in a timely and sound manner. If
problems in these or other areas persist, the Agency may take
appropriate action under regulations governing cooperative
agreements. In extreme cases, EPA may consider filing a recovery
action against the owner/operator even though the State has the
authority to initiate an action or has already done so.
-------
OSWER Directive 9610.10
C. Recoverable Costs
Policy
Owners and operators are liable for all costs of corrective
action and enforcement, including interest, indirect and
"management and support11 costs associated with these activities
that are paid for by the Trust Fund. States are not required to
pursue Trust Fund expenditures for program management costs
incurred by the U.S. E.P.A.
States will assess and may collect interest on Trust Fund
expenditures used for corrective action and enforcement.
Interest charges should provide incentives for responsible
parties to settle cost recovery claims. Procedures for assessing
interest charges are described separately in this document.
Owners and operators are also liable for Trust Fund
expenditures made by States in overseeing responsible party
cleanups. Generally, the costs of oversight are comparatively
low and the number of cases is very large. Therefore, EPA
expects that states will exercise discretion in determining an
appropriate level of effort to devote to pursuing oversight
costs.
Guidance
In each case, States will exercise their discretion in
determining exactly which costs they will pursue. EPA is more
interested in a State's overall record in cost recovery than, in
retrospectively examining decisions to pursue particular costs in
hundreds or thousands of cases. Direct costs are most easily
documented and defended in litigation. However, EPA is
developing, and will soon distribute a simple procedure which
will allocate all non-site Trust Fund costs including "management
and support" costs to individual sites. Using this methodology,
States will have available to them the full cost of a particular
site cleanup at the time of the cost recovery action. To the
extent that they are legally able, States should allocate all
Trust Fund expenditures to sites for the purpose of cost
recovery. States may also develop their own systems for
allocating non-site costs and/or include additional State
overhead costs that are beyond the scope of their cooperative
agreements.
-8-
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OSWER Directive 9610.10
EPA expects that the costs of overseeing cleanups by
cooperative owners and operators will usually be a lower priority
for recovery because Fund expenditures for oversight of a typical
cleanup will be comparatively small. In addition, States may
wish to exercise their discretion and not pursue these costs in
cases where this will provide valuable incentives for owners and
operators to clean up releases from their tanks.
In some cases States will expend significant enforcement
resources to compel reluctant owners or operators to cleanup or
to pay cleanup costs (e.g., legal costs associated with cost
recovery, protracted negotiations, issuance of cleanup orders and
litigation). These costs are recoverable. Presenting these costs
to liable owners and operators with the direct costs of cleanup
will give States additional leverage in theip attempts to reach
agreements for responsible party cleanups and recovery of costs.
-------
OSWER Directive 9610.10
D. Interest Charges
Policy
Owners and operators are liable for interest charges on
Trust Fund expenditures at their sites. States should assess
interest on expenditures froa the Fund in the cost recovery
process. States are allowed to retain recovered interest for
additional eligible activities.
I
Guidance
Section 9003(h) of the Resource Conservation and Recovery
Act (RCRA) describes the States' role in recovering LUST Trust
Fund expenditures - but does not specifically address the
collection of interest on those expenditures. However, EPA is
entitled under the Debt Collection Act and common law authorities
to collect interest on Trust Fund expenditures. Since States
will have responsibility for recovering Trust Fund expenditures
under section 9003(h), the States will also assess and are
encouraged to pursue interest charges. Because States are
permitted to retain recoverable Fund expenditures for additional
cleanups and recoveries, they can also retain recovered interest
for use on additional eligible activities. The States'
collection of interest will deter responsible parties from
resisting payment in order to gain an interest-free loan on the
uncollected expenditures.
Before assessing interest, the State should notify the
debtor through a written notice (demand letter explaining the
agency's requirements concerning the debt and the interest).
Interest shall accrue from the date on which notice of the debt
and interest requirements is mailed or hand-delivered to the
responsible party.
The minimum recommended rate of interest that States should
assess for the current year is 6.00 percent. It is found in the
Yearly Percentage Bulletin printed every December with the rate
for the following fiscal year. The rate is equal to the average
investment rate for the Treasury tax and loan accounts. It
represents the current value of funds to the United States
Treasury, and is published by the Treasury's Financial Management
Service. EPA will notify States of the new rates each year.
EPA is examining the possibility of calculating a minimum
interest rate that more closely approximates the yield on Trust
Fund investments. The Agency will notify States if and when they
are to use this type of minimum rate.
-10-
-------
OSWER Directive 9610.10
A State may assess a higher rate of interest if it
reasonably determines that this is necessary to protect the
expenditures from the Trust Fund. The rate of interest as
initially assessed will remain fixed for the duration of the
indebtedness, except where a debtor has defaulted on a repayment
agreement and seeks to enter into a new agreement. New
agreements should reflect the current value of funds to the
Treasury at the time the new agreement is executed.
Interest should not be recovered if the amount due (Trust
Fund expenditures) is paid within 30 days after the date from
which the written notice was delivered to the responsible party.
However, the State may decide, on a case-by-case basis, to extend
the 30-day period for payment.
As part of their responsibility for settling claims, States
may decide not to pursue the collection of interest on a debt
entirely or in part once it has been assessed when they determine
it is in the best interest of the program. States may decide
not to pursue interest if the collection of interest puts the
responsible party in financial distress, or the cost of
collecting the interest will be more than the amount collected.
-11-
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OSWER Directive 9610.10
E. Priorities For Cost Recovery
Policy
Under their cooperative agreements States should have or
should develop systems to set priorities for cost recovery cases.
They should devote greatest efforts to cases where owners or
operators are solvent but recalcitrant, and to cases where they
fail to comply with applicable financial responsibility
requirements. Some effort should be devoted to all cases
involving Trust Fund cleanups or enforcement actions. This
means, at a minimum, a search for responsible parties (RPs) and a
demand for payment if an RP is located.
Guidance
Where the State expends Trust Fund money for corrective
action or enforcement, and "action thresholds" (see section MF")
have triggered site-specific accounting, the State will pursue
recovery of costs from responsible parties. Timely processing of
cases (and litigation where necessary) increases the chances of
successful recovery. However, the level of recovery effort that
should be devoted to any case should be based on a weighing of
the resources necessary to recover the claim against the amount
that may be recovered and the prospects for recovery. The
determination should be based on factors such as: the solvency of
the RP, the cost of cleanup, the likelihood of recovery, the
deterrent value of the case, and the opportunity costs (resources
that could be used in pursuing other cases or in other parts of
the State's Trust Fund program).
States will develop their own priority systems based on
these and other relevant considerations, but there are general
circumstances where cost recovery should be assigned a high
priority, low priority, or is impracticable because owners^or
operators cannot be located. l
High priority - Solvent RPs who refuse to comply with
corrective action orders or are otherwise recalcitrant
should be pursued aggressively, to serve as a warning
to the regulated community and to stimulate compliance
by other RPs.
-12-
-------
OSWER Directive 9610.10
High priority - Owners and operators who do not comply
with financial responsibility requirements should be
pursued vigorously. Although Section 9003 of RCRA
generally allows consideration of whether pursuit of
full cost recovery will significantly impair an HP's
ability to continue in business, States are precluded
by statute from considering this factor if the RP has
not complied with financial responsibility
requirements in effect at the time.
Low priority - States should generally commit fewer
resources to insolvent or financially distressed RPs,
although selective pursuit within the class should be
undertaken where the RP could afford lesser amounts,
is hiding assets, fails to cooperate, or was negligent
in allowing the release to occur. Whenever States
perform corrective actions using the Trust Fund, the
RP should, at a minimum, be sent a demand for payment.
The level of additional State effort beyond this point
should be based on an evaluation of the factors listed
above. Where cooperative owners and operators perform
cleanups, States may wish to make recovery of
oversight costs a low priority, to encourage voluntary
cleanups.
Impracticable - Sites where a liable owner or operator
cannot be identified will require expenditures from
the Trust Fund for cleanup. Efforts to recover costs
expended at these sites will rarely result in recovery
of funds. However, States should make reasonable
efforts to locate a liable owner or operator before
assigning a low priority to cost recovery in these
cases.
-13-
-------
OSWER Directive 9610.10
F. Documentation Of Costs
Policy
States are required to document all Trust Fund expenditures
and all corrective action and enforcement costs on a site-
specific basis at each site where they have met any one of the
following "action thresholds": 1) performed an emergency
response; 2) begun a detailed site investigation; or 3)
determined that an owner or operator is or is likely to be
recalcitrant.
Guidance
States must establish a financial cost accounting system
that tracks the costs of cleanup and enforcement activities on a
site-specific basis when any one of the specified "action
thresholds'* is met. States are normally not required to begin
site-specific accounting until States or their contractors begin
a Trust Fund-financed, detailed site investigation or an
emergency response has begun. A detailed site investigation is
an attempt to determine the source, extent and severity of a
release. An initial site visit (e.g., to determine if a release
has occurred) should generally not trigger site-specific
accounting because not all sites will be candidates for
significant Trust Fund expenditures and cost recovery. Zf an RP
is clearly recalcitrant, however, site-specific accounting
should begin as soon as costs are incurred. Generally,
contractor activity at a site will trigger site-specific
accounting.
Site-specific information needed on corrective action
activities and costs for sites where Trust Fund monies are used
includes:
- Site location and description
Results of site investigations (including
identification of responsible parties)
Enforcement actions taken
Documentation of responses taken and time frames
Documentation of all costs, identifying Trust Fund
monies expended including contractor invoices
Enforcement costs include all expenditures reasonably
related to inducing a recalcitrant RP to comply and to recovering
clean-up expenditures. They include the salaries and other
expenses associated with case development, negotiations, and
litigation.
-14-
-------
OSWER Directive 9610.10
States should establish cost-effective accounting systems
to support recovery of Trust Fund monies in courts. Features of
cost documentation that are essential to recovering costs in
court include:
- Systems that are adequate for both cost recovery purpdses
(i.e., will support the State's claim in administrative or
judicial action to recover) and audit purposes. At a
minimum, the system should provide proof that the vork or
purchase was authorized by the State; the work or purchase
was completed; the State was billed; ana the bill was
paid.
In many cases, States may have to respond to arguments
that the costs claimed are unreasonable and unnecessary.
The Financial Management Division of EPA's Office of the
Comptroller is developing more detailed guidance for State
accounting and recordkeeping. The LUST Trust Fund State
Financial Management Handbook will be made available by early FY
1989 to help States meet these accounting requirements.
-15-
-------
OSWER Directive 9610.10
Special Conditions
REQUIREMENTS FOR INCLUSION
IN LUST STATE COOPERATIVE AGREEMENTS
1. State agrees to maintain a financial cost accounting system
which meets the requirements of 40 CFR 30.510 or 40 CFR
31.20. For this and other requirements on grantees, Part
31 applies to all cooperative agreements with budget or
project periods beginning on or after October 1, 1988.
Part 31 also applies to all amendments of existing
agreements in which all of the activities in the
amendment's scope of work will be performed after October
It 1988. Parts 30 and 33 (for procurement) apply to other
cooperative agreements and amendments.
2. State agrees to organize and maintain site-specific
information consistent with accounting thresholds and
policies described in the Supplemental Guidelines for FY
89 LUST Trust Fund Cooperative Agreements (OSWER Directive
9650.7) where Trust Fund monies are used. Prior to making
expenditures of Trust Fund monies for corrective and
enforcement actions, a system must be in place to record
these types of costs on a site-specific basis. When site-
specific accounting is required, all costs that can be
identified to a particular site should be charged
accordingly and State contractors must bill costs on a
site-specific basis for corrective action and enforcement
work performed at those sites. -
3. The State acknowledges that expenditures from the LUST
Trust Fund constitute a liability of the owner/operator to
the United States. The State agrees to retain recoveries
of any LUST Trust Fund expenditures as program income, as
described in OMB Directive A-102 and 40 C.F.R. Parts
30.525(a) or 31,25(g)(2), to be used for additional
eligible Trust Fund activities. The State may also use
LUST Trust Fund recoveries to meet its cost share
requirements under RCRA Section 9003 (h)(7)(B), in
accordance with 40 CRF 31.25 (g)(3).
-------
OSWER Directive 9610.10
(CONTINUATION OF SPECIAL CONDITION 3 —
INSERT 1 OR 2 BELOW)
(INSERT 1. for States which have State authority consistent vith
those in RCRA Section 9003fh) to recover response expenditures
The State therefore agrees that:
(a) It will make reasonable efforts to recover these costs,
including interest, from liable owners/operators.
States must send a copy of their complaint to EPA's
Office of Regional Counsel within one week of filing
judicial recovery actions for Trust Fund expenditures.
(b) It will report on any amounts received from the
owner/operator as recovered costs, or agreed or
adjudged to be owed by the owner/operator as
settlements for site clean-up, in accordance with
applicable guidance on Trust Fund Financial and
Quarterly reporting; and
(c) To the extent the State is successful in recovering
these costs, it will dedicate and use these funds for
additional Trust-Fund-eligible activities or for State
cost share requirements, and maintain appropriate
accounting of recovered funds in order to document the
reuse of recovered funds in accordance with the
requirements of 40 CFR 30.525 or 31.25, as
appropriate, and in accordance with applicable
requirements of this Cooperative Agreement.
(d) If the State has not yet done so, the State will submit
certification of its authorities to EPA within 120 days
after the award of this Cooperative Agreement. The
certification will be signed by: (1) the State's
Attorney General, (2) someone designated by the
Attorney General to sign such documents, or (3) the
State's or Governor's General Counsel or other such
official who is responsible for advising all executive
branch agencies on the scope of their authority.
(e) It will notify EPA promptly of any reduction in its
authority to recover response expenditures (e.g.,
successful challenge to its State statutory authority).
fINSERT 2, for States lacking State authorities consistent with
those in Section 9003fh) of RCRA to recover response expenditures
-------
OSWER Directive 9610.10
The State therefore agrees that to the extent the State lacks the
authority or procedure to recover response expenditures on
behalf of the LUST Trust Fund fi.e.. the authority to recover
such costs from owners/operators and retain such monies for
additional LUST Trust Fund corrective action and enforcement),
the State will delay taking cost recovery action until the State:
(a) Obtains legislative authority for cost recovery which is
consistent with Section 9003(h)(6) of RCRA and provides to
EPA certification of such authority from: (1) the State's
Attorney General, (2) someone designated by the Attorney
General to sign such certifications, or (3) the State's or
Governor's General Counsel, or other such official who is
responsible for advising all executive branch agencies on
the scope of their authority. This certification should be
provided by the end of the next legislative session. (The
State understands that if it has not made a good faith
effort to obtain this authority,' EPA may decline to enter
into subsequent cooperative ^agreements.)
OR
Provides EPA with certification from the State officials
described above that State law permits it to exercise the
authorities in Sections 9003(h)(6) of RCRA. (The State
understands that if it has not provided this certification
to EPA within 120 days after the award of this Cooperative
Agreement EPA may withhold payment of LUST Trust Fund money
consistent with 40 C.F.R. 30.902 or 31.43).
Once the state has obtained the legislative authority or made a
certification under paragraph (a) above, the State agrees that:
(i) It will make reasonable efforts to recover these costs,
including interest, from liable owners/operators.
States must send a copy of their complaint to EPA's
Office of Regional Counsel within one week of filing
judicial recovery actions for Trust Fund expenditures.
(ii) It will report any amounts received from the
owner/operator as recovered costs, or agreed or
adjudged to be owed by the owner/operator as
settlements for site clean-up in accordance with
applicable guidance on Trust Fund Financial and
Quarterly Reporting; and
-------
OSWER Directive 9610.10
(iii) To the extent the State is successful in recovering
these costs, it will dedicate these funds for
additional Trust-Fund-eligible activities or for State
cost share requirements, and maintain appropriate
accounting of recovered funds in order to document the
reuse of recovered funds in accordance with the
requirements of 40 CFR 30.525 or 31.25, as
appropriate, and in accordance with applicable
requirements of this cooperative agreement.
(iv) It will notify EPA promptly of any reduction in its
authority to recover response expenditures (e.g.,
successful challenge to its State statutory authority).
[END OF INSERT 2]
4. State agrees to maintain supporting documentation and
appropriate records in support of any future cost
recovery efforts. The State shall adhere to the
principles of documentation and records retention
specified in the OSWER Directive 9610.10 Cost Recovery
Policy for the LUST Trust Fund (October, 1988) . On
topics not addressed by these guidelines, the State
agrees to adhere to the principles of documentation and
record retention specified in The State Superfund
Financ ia1 Management, and Recordkeeping Guidance until
such time as the State and EPA agree to implement the
requirements of The Leaking Underground Storage Tanks
TrustFund State FinancialManagement Handbook. The
State agrees to make these records available to the
federal government, as needed, on a case-by-case basis.
5. State agrees to provide reports as outlined in the
Supplemental Guidelines for FY 89 LUST Trust Fund
Cooperative Agreements: (Apr_l 7, 1988). These reports
consist of Quarterly Progress Reports, Financial Status
Reports (SF 269) F.ederal Cash Transactions Report (SF
272), and Exception Reports.
6. State agrees to identify Letter of Credit drawdowns
under EPA's three ma;]or activity codes. The three
codes are: "7" — General Support and Management, "E"~
Site Cleanup Actions, and "4" — Enforcement.
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UNITED STATES ENVIRONMlklTAL PROTECTION AGENCY
REGION 5
230 SOUTH DEARBORN ST
CHICAGO, ILLINOIS 60604
REK.Y TO THE ATTtHTlON OF
MEMORANDUM
SUBJECT: Requirements for OSC Reports under the NCP —
Definition of "Resources Committed"
FROM: Robert B.
Regional
TO: Lisa K. Friedman Glen Unterberger
Assoc. General Counsel Assoc. Enforcement Counsel
Solid Waste and Emerg. for Hazardous Waste
Response Div. Enforcement
The Emergency Response Branch has requested advice from our
office on what information needs to be included in the OSC report
in order to comply with the NCP requirement that the report
accurately record the resources committed in conducting a
removal action. This is a concern because the time required to
finalize the contract costs associated with conducting response
activities delays the finalizing of the OSC report.
Based on discussions with attorneys in our office, OECM, OGC, and
DOJ, there does not seem to be an interpretation of what is
meant by the term "resources committed." Our concern is that in
negotiations to resolve cost recovery cases there *ill be
confusion generated if the OSC report is interpreted as a report
to reconcile the costs associated with the Site or if there are
large disparities between the costs reported in the OSC report
and those reported in the financial management SPUR report.
Attached is a memorandum drafted to address the concerns raised.
I would appreciate any comments or other advice that you or your
staff could provide on this issue.
cc. E. Salo (OGC)
D. Van ^Slyke (OCEM)
S. Fulton (DOJ)
N. Collins (DOJ)
S. Conners (OCEM)
K. Clark (OGC)
E. Knuti (OWPE)
M. cade
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION 5
230 SOUTH DEARBORN ST.
CHICAGO, ILLINOIS 60604
REPLY TO THE ATTENTION OF
f/l/11
MEMORANDUM
SUBJECT: OSC Report— "Resources Committed"
FROM:Thea Dunmire
Assistant Regional Counsel
TO: Pam Schafer
Emergency Response Branch
•s
You have requested advice on what information needs to be
included in the OSC Report to comply with the NCP requirement
contained in 40 CFR 300.40(b) that the report "accurately record
.. the resources committed..." in a removal action.
This is not a new concern. I have attached copies of the minutes
of the Region V Cost Recovery Taskforce meetings (dated April 26,
1988, May 27, Z988, and August 16, 1988) where this issue was
previously discussed. I have again contacted Office of General
Counsel and the Department of Justice for guidance on what the
language "resources committed" means as far' as what information
needs to be included in the OSC's report.
As past discussions indicate, this issue should be resolved by
looking at the role OSC reports play in the statutory framework.
One of the primary purposes of the Report is to help support the
Agency's cost recovery activities. There are four separate
aspects to the part of a cost recovery case involved in proving
the "costs incurred were not inconsistent with the NCP"*: (1)
the costs were authorized, (2) the work paid for was performed,
(3) the government was billed, and (4) the government paid the
costs.2
The OSC Report can and should supply information necessary for
proving the first two elements — that the costs were authorized
and the work paid for was performed. The SPUR Report is a
financial accounting report which summarizes the last two
elements — that the government was billed and that the
I/ CERCLA Section 107(a), 42 U.S.C. Section 9607(a).
2/ For removal contracts, there will also probably be a
requirement that the costs be "definitized" by audit.
-------
government paid the costs. These last two elements are
frequently not completed within 60 days after completion of the
removal, which is currently the deadline for submission of the
OSC Report under 40 CFR 300.40.
Thus, the OSC need NOT wait on or expect to rely on the
financial management SPUR report for writing the "resources
committed" section of the OSC Report. The OSC Report and the
SPUR Report serve independent and very different functions,
particularly when it comes to pursuing a cost recovery case.
The principal kinds of information that the OSC Report should
contain include:
A. Reference to and copies of all action memoranda relating
to agency authorization of expenditures at the Site.
B. Description of and copies of all delivery orders,
amendments, technical direction documents, and acknowledgements
of completion. The delivery orders and technical direction
documents are the main documents which would indicate the
"resources committed." The site log and other records kept on
Site on a daily basis may also help demonstrate that the OSC
maintained adequate supervision over activities performed by
contractors for which U.S. EPA incurred costs.
C. A description of any intervening circumstances which
resulted in the original cost estimates in the authorization
documents to be incorrect. For example, (1) the original
disposal facility selected went out of compliance and increased
costs were incurred in shipping to an alternative facility or (2)
unexpected buried wastes were encountered after the removal
action was initiated or (3) bad weather resulted in high stand-by
costs. This information helps prove that the work paid for was
performed.
One additional caution, any indication of "resources committed"
should contain appropriate qualifier language so that it is clear
that if there is any discrepancy between the numbers in the OSC
Report and the SPUR report, it is clear that the SPUR report is
the report from the official EPA accounting system. Any
indication of specific costs incurred in the OSC report is only
an approximation and is subject to internal audit and final
"definitization." The OSC report is not a final reconciliation
of the costs associated with a Site.
cc. L. Peterson T. Audia
H. Elam
B. Frey
O. Warnsley
T. Geischecker
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY -
REGION 5
230 SOUTH DEARBORN ST.
CHICAGO, ILLINOIS 60604
REPLY TO THE ATTENTION OF
MEMORANDUM
SUBJECT: Cost Recovery Taskforce Minutes
FPOM: Thea Dunmire
Assistant Regional Counssl
TO: Cost Recovery Taskforce Members
Decoding SPURS
Due to the large number of cost documentation packages currently
being assembled, progress has yet to be made on a memorandum explaining
SPUR reports.
Prioritizing Requests for Cost Documentation Packages
Cost Documentation packages are currently needed not only for
supporting cost recovery actions but also for RD/RA negotiations and
for annual billings on Orders and Consent Decrees. Because of the
large number needed, it was decided that the best approach would be to
prioritize the requests so that those most important or time critical
are handled first. It is critical that the cost documentation packages
be assembled for some of the Consent Decrees because of wording that
allows the PRPs to delay payment until 30 days after they receive the
cost documentation or as a condition precedent to their payment. In
order to aid the prioritization it was agreed to include the amount at
stake, date required, reason required and name of person making the
request, in case Financial Management needs to contact that individual.
It may be important to consider resource constraints in negotiating
future Orders and Consent Decrees so that not all annual billings
documentation packages are required at the same time.
CBI Determinations
It was discussed that since the cost documentation packages
contain information that is Confidential Business Information for EPA
contractors, who have done site work for which EPA is seeking
reimbursement, the information needs to be handled appropriately and
not released unless in accordance with CBI restrictions. This means
that when PRPs request this information it must be 1) redacted 2)
released under court order 3) released upon consent of the affected
contractors or 4} withheld. Financial Management has a form that they
need to have filled out whenever cost documentation is released.
-------
O5C Reports
Lee Tyner at Headquarters (OGC) was contacted about the amount
of detail required in OSC Reports on costs to satisfy the "resources
committed" requirement in the NCP. She said she would lodk into it.
t
Cost Recovery Close-out Procedure
The Region V procedure for the the close-out of potential cost
recovery cases which are not goifig to be pursued has been signed off by
Regional Counsel and given to Chris to put into sign-off in Waste
Managsnent.
manual of Cost ~-gc? *ar /
Headquarters turned down the request for contractor funds to aid
Region V in assembling information for producing a cost recovery
procedures manual. The reason given was that Headquarters is currently
in the process of assembling this information and that such a work
assignment would be duplicate effort. In the meantime, the list of
documents attached to the draft Cost Recovery Strategy can be used for
guidance. Also, Region IV will be contacted to get a copy of the model
danand letter that they are in the process of developing to aid in
putting together Regional Demand Letter procedures.
Regional Training
As cost- recovery activity increases, there will be more need for
training of regional personnel. It was suggested that a comprehensive
training program for Program, Financial, and Regional Counsel personnel
be planned for late October.
Agenda T*:"?"? fe- s-r-l 2°, :2-3 at 10 a .
1. Prioritizing Requests for Cost Documentation (L. Peterson)
2. Demand Letters and Procedure (J. Oaks)
3. OSC Reports
4. Status of Cost Recovery Close-out Procedure (S. Dorsey)
5. Cost Recovery Guidance Manual (L. Peterson)
cc: T. Geishecker (VMD)
K. Niedergang (WO)
M. Strimbu (l-MD)
B. Bowden-.(WO)
R. Schaefer (ORC)
D. Ullrich (ORC)
M. Elam (ORC)
L. Kyte (ORC) '
R. Field (ORC)
-------
PRIORITIZING ReO'JCSTS TOP CJST FOCO
«
Lists v/h1ch prioritized request for Cost Pocinentation were su'i'iitto'i to
thf tasv»etin«3.
SIGNAL TRAINING
Regional Counsel has ta«*cn a bi«j step in providing an opportunity for tha
attorneys to receive infomatiort, connont and question cost recovery
Issues by having several brovn has lunches tms past tnonth. General
topics *»ere Cost Documentation anJ 1r.fcnat1on required for Cost Recovery
referrals. Participation was 000-: and -we training seens indicated.
Rick reminded us that he is avail
-------
*'«»3'J lunrters is m t!n'J .TOCSSS of ^r-Hrui, •» •ivisf' irift ' JSL
Stratejy t1^ senr! to t^t r?_.i ns t'»o firs* f>an of 157. \1oij »ntn this
th'jy hope to fa*/.1* a drafTi of f"»ir P-sHanci
UPDATE ON SHHE?FLNn ACCO'JNTI^ SECTION STAFFING
Toty shared with the nenbers the staffing status of the Saperfund
Accounting Section. Tms has been a concern of tie task force because of
the impact in the large numbers of Cost Documentation Requests we now
have and anticipate having. Presently a Cost Recovery Tea*n Leader
position is at the interview stage and they are progressing'Sn the
filling of other positions such as back up for Rick, QA position, and
several temporary positions.
DEMAND LETTERS ..MID PPQCEDIPES
ORC has requested a copy of the demand letters used by Region IV.
will be reviewed and possibly used to develop a new nodel dsnand letter
for us. Sone discussion developed as to the soundness of sending a copy
of a lien with the denand letter or considering advance notice of a lien
after the clean up.
There is a small cost involved in filing a lien. Tony and Lynn are going
to investigate the possibility and procedure for getting a small
"Impress" Fund for ORC for a linited nunber of items. This would
streamline the process for the filing liens.
AGENDA ITEMS FOR fOT MEETING
•
This meeting will be held on Wednesday, June 1, at 10:00 a.n. in the 12th
floor conference roon, NE corner, 230 Building.
1. Reraoval and Remedial Tracking Report (S. Dorsey)
2. Demand Letters and Procedures ( J. Oaks)
3. Prioritizing of Cost Documentation Request (L. Peterson)
4. Report on conference call concerning OSC reports (L. Peterson)
S. Extended use of optical disc technology (STARS) (group and T. Audia)
6. State Superfund Contracts (R. Hackley)
April neeting attendees were T. Audia, R. Hackley, T. Dunmire, L.
Peterson, h. Stnnbu, J. Van Bosse, 0. Warnsley, J. Oaks.
5HR-ll:C£RCLA:RP/CRU:SOorsey:ng:5/Q/88:disk 10:nuntneet.men
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Ait ^,.
-* * UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
^ REGION 5
? . 230 SOUTH DEARBORN ST.
' CHICAGO, ILLINOIS «M04
"R<^ KEFLY TO THE ATTENTION Or
i g Abu K>;-5
MEMORANDUM
**
SUBJECT: Cost Recovery Taskforce Minutes
FROM: Thea Dunmire
Assistant Regional Counsel
TO: Cost Recovery Taskforce Members
Meetings of the Cost Recovery Taskforce were held on June 1, 1988
and on July 19, 1988. The next meeting is scheduled for August
18 at 1O a.m.
Attendees at the June 1 meeting were Thea Dunmire, Lynn Peterson,
John Oaks, Shirley Dorsey, Oliver Warns ley and Jackie Van Bosse.
Attendees at the July 19 meeting were Thea Dunmire, Mike Berman,
John Oaks, Oliver Warnsley, Shirley Dorsey, Rich DeVitto, Jackie
Van Bosse, Pam schafer. Rich Hackley, and Tony Audia.
Items Discussed at the June 1 Meeting
The first issue discussed was the pnoritization of cost documentation
packages. Lynn Peterson and John Oaks had worked on a prioritized
list to insure that the first priority sites were documented
first. This is going to become more of an issue as more and more
sites move into a cost recovery phase. It was discussed whether
this should be a standing agenda item for this Taskforce.
Another important cost documentation issue is the fact that many
of the documents which are part of the cost documentation package
contain confidential business information (CBI). It is illegal
to release CBI information, and the individual who releases the
information could face criminal sanctions. It was discussed that
there has not been much guidance from headquarters on how to
handle CBI information and that information with is CBI is not
always identified as such, for example, information on 1900-55
Forms. One possiblity for dealing with the release of CBI
information is to get the contractor to release the CBI claim.
We discussed who should be responsible for this within the
Region.- It was decided that it was a topic that needed to be discusses
further at the next meeting.
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Also discussed was the progress being made in closing out cases e
cost-recovery is not going to be pursued. It was discussed that
an estimate of the personhours required for closing out cases
should be made.
Several issues were discussed which related to the removal/remedial
tracking report. First, several sices showed up on the financial
management report where site identifiers were assigned and monies
were spent but where there is no indication that any removal
action was done on the site. Usually only a small amount of
money was spent. It was discussed whether these sites should be
closed out, it was decided to explore this further at a later
meeting. Second, there are several sites, approximately 22,
where there were multiple removal actions. These are more
complicated sites to track, however it was decided that the
earliest completion date should be used as the trigger for
initiating cost recovery action. It may be necessary to expand the
comments section of the tracking report for these sites. Third,
there is another group of sites were EPA has gotten a partial
settlement. Shirley agreed to make a list of these sites so that
they could be discussed further.
The issue of how to deal with the issue of "resources committed"
in OSC reports was again discussed. It was agreed that the OSC
Report should concentrate on the resources obligated to the site
and a description of the work performed. It was felt that it was
better not to wait until invoices were received for completing
the OSC report because in many cases they are not received until
several months after the removal is completed. In order to meet
the statutory requirement for completion of the OSC Report within
60 days after completing the response action, the report should
document the estimated costs with the proper disclaimers that
they are not the final numbers.
The SCAP committments for next year were briefly discussed. It is
likely that the cost recovery referral projections will increase.
Lynn Peterson put together a memo recommending 12 sites as
possible cost recovery referrals backed up by 18 other sites as
potential substitutes.
Items Discussed at the July 19 Meeting
The first issue that was discussed was how to "find" the documentation
necessary for cost recovery actions. This includes information
such at-IG audit reports, contracts, cooperative agreements,
technical decision documents, work plans, deliverab-les, invoices,
travel documents, timesheets, and information on pay grades and
job titles. This information is not kept in one place within the
Region and in fact much of it is kept at other EPA offices at
Headquarters or elsewhere. It was decided that we would come to
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the next meeting with ideas for finding where the information is
and for assembling it for cost recovery actions.
Locating where this information is located is going to become very
important for dealing with the cost documentation FOIA requests which
are increasingly betng received from PRPs and their attorneys. "
It is going to be necessary to develop an approach for dealing
with these requests. It was discussed that it may be necessary
to have someone pull all the information on where to find cost
documentation into one source document.
Another issue which was discussed was the fact that much of the
documentation contains information which is protected from disclosure
by the Financial Privacy Act or by CBI. It was decided that a
methodology needed to be developed for handling this information.
Mike Berman and Thea Dunmire are to develop a list of information
that may be protected by CBI.
Demand Letters were again discussed. There are several issues that
need to be resolved about demand letters and it was decided that
a working group of Taskforce members should work on developing a
model demand letter and procedure for issuing demand letters.
Each person is to come to the next meeting with ideas for what
they believe needs to be in the model or procedure. The issues
that were discussed at this meeting relating to demand letters
were: (1) interest clauses — is it on an open amount or on a sum
certain?, (2) where does the cost figure come from?, (3) who
should be responsible for initiating a demand letter, when, and
who should sign-off on it?, (4) should demand letters be used for
annual oversight costs?, and (5) can demand letters be used in
any innovative ways for getting recovery in small dollar cost
recovery cases?
A new National Cost Recovery Taskforce is being established A copy
of the memo from Headquarters discussing its purpose is attached.
Lynn Peterson has been appointed from Region V to serve on this
Taskforce.
The allocation of cost to sites or operable units was discussed.
The problem with the Elkhart sites was discussed. The Taskforce
is going to discuss further the impact of separating out "operable
units" on cost recovery and how site spill identifiers are assigned.
Oliver announced that he had hired a civil investigator who would
be available for helping with developing cases against PRPs.
Agenda for August 18 Meeting
Model Demand Letter and Procedures
Locating Cost Documentation
Handling CBI and Privacy Protected Information
Closeout of Sites where no Response Action was taken
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. O C 20460
JUN »2«rr
OFFICE OF
SOLID WASTE AND EMERGENCY BESPONS
MEMORANDUM
SUBJECT: Cost Recovery Actions/Statute of Limitations
Gene A. Lucero, Director \jtAAJL n-
Office of Waste Programs Enforcement
FROM:
TO:
Directors, Waste Management Division/
Regions I, IV, V, VII, VIII
Director, Emergency and Remedial Response Division,
Region II
Directors/ Hazardous Waste Management Division/
Regions III, VI
Director/ Toxic and Waste Management Division/
Region IX
Director/ Hazardous Waste Division/ Region X
The purposes of this memorandum are to:
1. Update EPA's policy on timing of cost recovery action (This
memorandum supersedes Timing of Cost Recovery Action/ G.
Lucero/ October 7, 1985).
2. Request that you bring your personal attention to the
accuracy of data being used to brief Congress on the status
of cost recovery efforts at sites.
3. Request the initiation of cost recovery action for those
sites where the statute of limitations date is approaching.
It re«*ins the Agency's goal, where appropriate/ to seek recovery
of all monies expended at Superfund sites. Moreover/ to promote cost
recovery and obtain interest, the Agency will transmit demand letters
as early as practicable. Additional guidance on the timing and content
of demand letters, including guidance on maximizing interest, will be
sent in the near future.
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*• Timing ofCost Recovery
Section 113(g)(2) of the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA), as amended by the Superfund
Amendments and Reauthorization Act (SARA), contains specific provisions
on the statute of limitations for cost recovery actions under section
107. This memorandum does not set forth the statute of limitations for
pre-SARA response actions. Section 113(g) requires that cost recovery
actions be commenced:
A. for removal actions, within three years after completion of
the removal action. Where the Agency has made a deter-
mination to grant a waiver under section 104(c)(lMC) for
continued response action, the cost recovery action must be
brought within six years after this determination; and
B. for remedial actions, within six years after the initiation
of physical on-site construction of the remedial action. If
the remedial-action is initiated within three years after
completion of the removal action, the removal costs may be
recovered under the remedial action statute of limitations
for cost recovery (i.e. within six years after the initiation
of on-site construction of the remedial action).
The term "commenced" as used in section 113(g) means a
filed section 107 cost recovery action. As a matter of policy, th
Agency views completion of the removal action as the day the cleanup
contractor demobilizes at the site and completes the scope of work
identified in the original or modified action memorandum. The final
Pollution Report (POLREP) submitted by the OSC normally contains this
information. (See Superfund Removal Procedures, Revision |2,
August 20, 1984). Remedial investigations/feasibility studies (RI/FS)
may fall within the statutory definition of removal action. For
purposes of cost recovery they should be treated as a separate removal
action. Therefore, a cost recovery action should be commenced within
three years of completing the original removal (exclusive of the RI/FS)
unless physical on-site construction has started.
Although section 113(g)(2)(A) of CERCLA, as amended, allows three
years froa completion of a removal to initiate cost recovery action, it
still remains our policy to begin cost recovery activi^ty^ within one
year after completion of the removal. For remedial actions, Agency
policy requires that cost recovery Activity be initiated within 18
months after the signing of the Record of Decision (ROD) or during the
later phase of construction of the remedial action, if the construction
is expected to take more than two years after the ROD is signed.
Adherence to these time frames will ensure that current, not stale,
evidence and knowledgeable witnesses will be available to support the
prosecution of the action and that the Agency will not be faced with
statute of limitation risks.
-------
At this point it is appropriate to clarify the Agency's position
on priorities for removal cost recovery referrals. Due to the resource
commitment of litigation, the Agency has established that cost recovery
cases where the costs exceed $200,000 should take priority for
referral. There is no prohibition on referring cases under $200,000.
However, the judicious use of limited resources dictates that the
Agency first address those sites which promise a better return on the
Agency's time and money investments. Where appropriate, cases under
$200,000 have been and should continue to be referred. Selection of
cases for referral is a Regional determination which should be based on
a variety of factors including strength of evidence, financial
viability of defendants and likely return to the Agency including
enforcement costs.
Section 122(h) of CERCLA now provides the Agency with the
authority necessary to compromise claims for cost recovery actions
where the total* or 'all response costs expended at a site is less than
$500,000. This new authority should assist the Agency in addressing
the lower dollar value cases without litigation where an appropriate
settlement can be made. The Agency is currently developing procedures
for settlement of claims under $500,000.
II. Update of In forma 11o n
Attached for your review is information on completed removals for
each of your Regions. Please review this information and, using the
comment field provided, indicate your schedule for referral of cost
recovery action. Cost recovery actions may not be appropriate for some
sites: for example, where no PRP can be identified, or where the PRPs
are not financially viable. If you do not intend to refer the case,
please note this fact. Where you decide that cost recovery action is
inappropriate, you should explain the decision not to take cost
recovery action in a signed memorandum in your files. You should
assume that there will eventually be audits of these cases, by
Headquarters, and perhaps the Inspector General and Congressional
oversight Committees.
Please use the following categories when completing the comment
field for sites where actions will not be referred:
1) No PftPs identified
2) PRFft not financially viable
3) Questionable evidence
4) Questionable legal case
5) other (specify)
The accuracy and completeness of this information is critical to
our ability to demonstrate the effectiveness of EPA's cost recovery
program. The current data, which has been provided in response to
Congressional requests, indicates that EPA has initiated cost recovery
efforts at only 29% of the completed removal sites. (They account for
approximately 52% of the available obligations). To the extent
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information was available, the above figure on cases subject to co
recovery was determined by subtracting from the universe of completed
removals, those where it appeared that cost recovery is inappropriate.
While we believe that our data base may not be current, the low
level of case initiation does point out the need for serious management
attention. A referral should be planned in this or next years
Superfund Comprehensive Accomplishments Plan (SCAP) and so indicated or
the attached reports. Where action is not appropriate, it is cntica(l
that the data base be adjusted to so indicate. Please provide your
comments and schedule for activity on the attached material within two
weeks.
III. Initiation of Actions
If, after review of the attached site information, there are any
cases which require filing immediately or in the near future, please
advise OWPE, OECM and the Environmental Enforcement Section of the
Justice Department immediately, so that we may expedite the referral
and filing process. All planned referrals should be incorporated into
the Integrated SCAP.
We will provide you with updates of removal completions and
ongoing remedial actions (similar to the attached charts) on a
quarterly basis for your review and comment. He also solicit your
suggestions on the'chart format and content.
Any questions on this memorandum or the attached information may
be addressed to Janet Farella of my staff. She may be reached on
PTS 382-2034.
»
ATTACHMENTS
cc: Edward E. Reich, OECM
David Buente, DOJ
Regional Counsels, Regions I-X
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w
UNITED STATES ENVIRONMENTAL PROTECTION
WASHINGTON, D.C. 20460
OFFCEOF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
MEMORANDUM
SUBJECT: Superfund Cost Recovery and Debt Collection
, Alternative*
FROM: ^/TMSal^yanne Harper, Director
v Financial Management Division
TO: Jerry Clifford, Deputy Director
Hazardous Waste Management Division
I am responding to your June 18, 1991, memorandum, and Kim
Rietdorf's research paper (dated May 30, 1991) entitled
"Superfund Cost Recovery: Debt Collection Alternatives to
Litigation." I apologize for not responding earlier, but Vince
Velez of the Superfund Accounting Branch has been in contact with
Regional and Headquarters staff to discuss the research paper and
elated issues in greater detail.
Ms. Rietdorf's research paper was well-written and provided
helpful suggestions on how to improve the Agency's Superfund cost
recovery efforts through the use of debt collection "tools." We
agree that the Agency needs to be more aggressive in pursuing
cost recovery at smaller dollar (e.g., less than $200,000)
Superfund sites. Placing greater emphasis on these debts should
increase cost recoveries significantly, and more importantly,
increase pressure on Potentially Responsible Parties (PRPs) to
comply with EPA enforcement actions.
As you may already be aware, on October 24, 1990, guidelines
authorizing the use of debt collection "tools" were issued in
FMD's Resources Management Directives (RMDS) 2540, Chapter 9,
"Receivables and Billings." In addition, these directives are
referenced in Chapter 12 (Cost Documentation and Cost Recovery)
of RMDS 2550 D, "Financial Management of the Superfund Program."
We have recently taken steps to implement these authorities,
specifically the use of "Debt Collection Agencies" and
"Administrative Offsets." In addition, we are completing
negotiations with the Department of the Treasury (Treasury) and
other Federal agencies (OFAs), to implement the use of Credit
Bureaus, IRS Refund Offsets, and Federal Salary Offsets.
Printed on Recycled Paper
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-2-
To ensure that the Agency completes these negotiations
successfully and takes full advantage of these and other debt
collection methods for both Superfund and non-Superfund debts, we
have established a debt collection workgroup. The workgroup
will:
o Develop additional Agency policy regarding the use of
debt collection "tools."
o Coordinate the development and establishment of Agency
procedures for each debt collection method.
o Determine the feasibleness of each debt collection
method for use by the Agency.
o Work directly with Treasury and OFAs to develop and
meet data transmission requirements.
o Develop standardized Agency desk operating procedures
for each debt collection method.
I have also attached a brief issue paper on establishing
Superfund receivables when Superfund cost recovery cases are not
referred to the Department of the Justice for litigation. We
welcome your comments.
Vince Velez will keep your staff apprised on the status of
the workgroup and will solicit your office's input on the
implementation of these debt collection "tools." If you have any
questions or comments on the above, or the issue paper, please
contact Vince at FTS 475-7465.
Finally, I would like to thank your office for taking the
time to research and initiate action for Superfund cost
recoveries under $200,000 — it's an area that truly needs
additional work. We will continue to work closely with you on
this project in the future.
Attachment
cc: Kim Rietdorf, HWMD, Region IX
Ray Spears, OGC
Frank Biros, OWPE
Ron Bachand, FMD
Bob Cluck, FMD
Kevin Brittingham, FMD
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ISSUE PAPER
Establishing "Definite Debt" Under Superfund
8TATEMZMT OF ISSUE
Hov and when is a Superfund cost recovery under $200,000
established as a "definite debt"/accounts receivable to the
Agency, and is eligible for debt collection?
II. BACKGROUND
— Generally, because of attorney resource limitations, only
Superfund cost recoveries over $200,000 are referred to DOT
for litigation and subsequent debt collection.
— Cases under $200,000, typically removals or other non-NPL
site actions, often are not acted upon by either DOJ or EPA.
Failure to act on these cases means there is no
reimbursement to the Trust Fund for these costs, and sends a
signal to PRPs at smaller sites that they can ignore EPA
enforcement actions.
III. ANALYSIS
-- Since the Agency does not usually send cases under $200,000
to DOJ for litigation and debt collection, the Agency must
develop and implement administrative procedures to:
establish a "definite debt," establish an accounts
receivable, and send billings.
— Other Agency debts have distinct milestones for when a debt
is created for the purposes of establishing accounts
receivables, etc. For example, when all relevant parties
sign a consent decree, or when a final determination letter
based on an audit of an EPA grant is signed.
However, the Agency does not have such milestones or
criterion defined for Superfund cost recovery cases under
$200,000.
~ To establish a "definite debt" in these cases, OGC advises
us, that at a minimum, we must establish administrative
procedures which: 1) places the PRP on notice that we have
determined that they owe the Agency a "particular sum," 2)
allows the PRP "due process" to appeal (i.e., provide
evidence or justification to contest the determination)
within a specified timeframe (e.g., 30 days), and 3) warns
the PRP that the Agency will pursue the debt through the use
of various "debt collection tools" if it is not paid in a
timely manner.
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NEXT STEPS/RECOHMENDATIONS
Draft, circulate for comment, and issue new policies and
procedures for establishing accounts receivables for
Superfund cost recoveries not referred to DOJ.
Review further the draft "final demand letter" prepared by
Roger Klein, ORC, Region IX, for use pending issuance of
Agency-wide guidance, and provide Region IX and FMO with
determination on its use.
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J* ».
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION IX
75 Hawthorn* Street
San Francisco, Ca 94105
June 18, 1991
MEMORANDUM
SUBJECT: Debt Collee
FROM:
TO:
Jerry Cliffo
Hazardous
Addressees
rnatives Report
Director
lanagement Division
As discussed in the OE/OWPE- Memorandum of August 15, 1990
entitled "Tactics for Removal Cost Recovery Actions", several
regions agreed to look into Superfund cost recovery alternatives to
litigation. Region XX volunteered to conduct a pilot program
using Debt Collection Act "tools" such as collection agencies,
credit bureaus, IRS tax offset, etc.
Region IX1 s pilot program is. divided into tvo parts: research
d implementation. The first part has been completed with the
eparation of the attached report which analyzes various debt
collection options and concludes with a flowchart of recommenda-
tions that would be applicable to all appropriations, including
Superfund. The next step, implementation, will depend on obtaining
HQ cooperation and support in establishing some of the written
agreements with other Federal agencies that will be necessary. For
example, the IRS tax offset requires a Memorandum of Agreement
between the participating agency and the IRS. Fortunately, much of
the "ground work" has already been accomplished insofar as other
agencies are already participating in this and other programs. As
a result, many of the initial operating difficulties have been
ironed out, including establishing a body of case law that supports
the use of Debt Collection Act remedies.
If you have any questions regarding the information contained
in the attached report, or would like to comment on this proposal,
please send your written comments to either Betsy Curnow, Case
Development Section Chief, or legal questions may be addressed to
Roger Klein of our Office of Regional Counsel:
Betsy Curnow (H-7-4)
U.S. EPA, Region IX
75 Hawthorne St.
San Francisco, CA 94105
Roger Klein (RC-3-2)
U.S. EPA, Region IX
75 Hawthorne St.
San Francisco, CA 94105
Primed an Rtc\cled Paper
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Attachment
Addressees: Chris O'Conner, Region I (Program)
Alice Fitzgerald, Region I (Comptroller)
Bill Walsh-Rogalski, Region I (ORC)
Paul Simon, Region II (Program)
Ronald Gherardi, Region II (Comptroller)
Delmar Karlen, Region II (ORC)
Jim Webb, Region III (Program)
Riobert Reed, Region III (Comptroller)
Bill Early, Region III (ORC)
Dick DeBois, Region IV (Program)
Janice Hash, Region IV (Comptroller)
Joan Sasine, Region IV (ORC)
Oliver Warnsley, Region V (Program)
Ivars Antens, Region V (Comptroller)
Roger Field, Region V (ORC)
Buddy Parr, Region VI (Program)
John Eagles, Region VI (Comptroller)
Barbara Greenfield, Region VI (ORC)
Karen Flournoy, Region VII (Program)
Mary Melton, Region VII (Comptroller)
Baerbel Schiller, Region VII (ORC)
Kelsy Land, Region VIII (Program)
Stephen Tuber, Region VIII (Comptroller)
Lynn Kershner, Region X (Program)
Don Larsen, Region X (Comptroller)
Barbara Lither, Region X (ORC)
Kevin Brittingham (PM-226F)
Bob Cluck (PM-226F)
Frank Biros (OS-510W)
Bill White (OS-240)
Larry Starfield (LE-132S)
Richard Gold (LE-134S)
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SUPERFUND COST RECOVERY: DEBT COLLECTION
ALTERNATIVES TO LITIGATION
Prepared by Kim Rietdorf
Case Development Section, EPA
Hay 30, 1991
-------
-IS sr4..
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION ix
75 Hawthornt Str««t
San Francisco, Ca. 04105
June 18, 1991
MEMORANDUM
SUBJECT:
FROM:
TO: <
Debt Collee
Jerry Cliffo
Hazardous
Addressees
Report
Director
fanagement Division
As discussed in the OE/OWPE Memorandum of August 15, 1990
entitled "Tactics for Removal Cost Recovery Actions1*, several
regions agreed to look into Super fund cost recovery alternatives to
litigation. Region IX volunteered to conduct a pilot program
using Debt Collection Act "tools1* such as collection agencies,
credit bureaus, IRS tax offset, etc.
Region IX's pilot program is divided into two parts: research
and implementation. The first part has been completed with the
preparation of the attached report which analyzes various debt
collection options and concludes with a flowchart of recommenda-
tions that would be applicable to all appropriations, including
Super fund. The next step, implementation, will depend on obtaining
HQ cooperation and support in establishing some of the written
agreements with other Federal agencies that will be necessary. For
example, the IRS tax offset requires a Memorandum of Agreement
between the participating agency and the IRS. Fortunately, much of
the "ground work1* has already been accomplished insofar as other
agencies are already participating in this and other programs. As
a result, many of the initial operating difficulties have been
ironed out, including establishing a body of case law that supports
the use of Debt Collection Act remedies.
If you have any questions regarding the information contained
in the attached report, or would lixe, to comment on this proposal,
please send your written comments to either Betsy Curnow, Case
Development Section Chief, or legal questions may be addressed to
Roger Klein of our Office of Regional Counsel:
Betsy Curnow (H-7-4)
U.S. EPA, Region IX
75 Hawthorne St.
San Francisco, CA 94105
Roger Klein (RC-3-2)
U.S. EPA, Region IX
75 Hawthorne St.
San Francisco, CA 94105
Printrd on Rte\cltd Paper
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-2-
Attachment
Addressees:
Chris 0'Conner, Region I (Program)
Alice Fitzgerald, Region I (Comptroller)
Bill Walsh-Rogalski, Region I (ORC)
Paul Simon, Region XI (Program)
Ronald Gherardi, Region II (Comptroller)
Delmar Karlen, Region II (ORC)
Jim Webb, Region III (Program)
Riobert Reed, Region III (Comptroller)
Bill Early, Region III (ORC)
Dick DeBois, Region IV (Program)
Janice Nash, Region IV (Comptroller)
Joan Sasine, Region IV (ORC)
Oliver Warnsley, Region V (Program)
Ivars Antens, Region V (Comptroller)
Roger Field, Region V (ORC)
Buddy Parr, Region VI (Program)
John Eagles, Region VI (Comptroller)
Barbara Greenfield, Region VI (ORC)
Karen Flournoy, Region VII (Program)
Mary Melton, Region VII (Comptroller)
Baerbel Schiller, Region VII (ORC)
Kelsy Land, Region VIII (Program)
Stephen Tuber, Region VIII (Comptroller)
Lynn Kershner, Region X (Program)
Don Larsen, Region X (Comptroller)
Barbara Lither, Region X (ORC)
Kevin Brittingham (PM-226F)
Bob Cluck (PM-226F)
Frank Biros (OS-510W)
Bill White (OS-240)
Larry Starfield (LE-132S)
Richard Gold (LE-134S)
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SUPERFUND COST RECOVERY: DEBT COLLECTION
ALTERNATIVES TO LITIGATION
Prepared by Kim Rietdorf
Case Development Section, EPA
Hay 30, 1991
-------
SUPERFUND COST RECOVERY: ALTERNATIVES TO LITIGATION
BACKGROUND:
Until recently, Superfund cost recovery has not been a high
priority in the Agency, with the result that EPA has yet to recover
several billion dollars in incurred costs. Standard practice in
cost recovery has been to refer cases to the Department of Justice
(DOJ) for litigation when the amounts involved are over $200,000,
adequate cost documentation has been compiled, the statute of
limitations deadlines for initiating court action has not expired,
and the cost recovery cases are "strong" from a legal standpoint.
The $200,000 referral cutoff primarily affects sites which are
not on the National Priorities List; i.e., removals. Most NPL
sites have costs that are greater than $200K. With the exception
of a relatively few small cases which are pursued in court for
purposes of setting an example for Potentially Responsible Parties
(PRPs), cases are less than $200K are generally not referred to DOJ
for collection. Instead, Regional EPA staff attempt to recover
Superfund costs administratively, through negotiations with PRPs
following the issuance of letters demanding payment.
Unfortunately, many cases are not resolved in this fashion, and the
Agency is left with unrecovered debts.
Although the percentage of total site costs represented by
sites that have incurred costs of less than $200X is very small
(currently only 1% of the total costs), it is important for the
Agency to pursue recovery at smaller dollar sites as well as at
sites which have incurred larger costs. When the Agency does not
enforce collection of costs which the federal government has
incurred at a given Superfund site, no matter what the size, it
encourages PRPs to avoid compliance with future collection demands.
A management initiative to find a cost effective approach to
recover site costs of less than $200K is the focus of this paper.
As outlined in an 8/15/90 EPA Memorandum entitled "Tactics for
Removal Cost Recovery Actions (SMR #13)" issued jointly by the
director of the Office of Waste Programs Enforcement and the Acting
Associate Enforcement counsel for Superfund, EPA is committed to
improving its removal cost recovery efforts. As part of this
improvement effort, several regions have volunteered to conduct
pilot programs in the areas of Alternative Dispute Resolution,
increased use of contractors in preparing cost recovery cases, and
the use of Debt Collection Act "tools" such as collection agencies,
credit bureaus, etc. Region 9 has volunteered to pioneer the use
of Debt Collection Act tools. Regional efforts to date have
entailed researching all available collection methods for pursuing
cost recovery for those cases not referred to DOJ (recoveries under
$200K which in most cases are non-NPL removal actions). Region 9's
goal is to pioneer implementation of those methods which
demonstrate the most potential for recovering dollars spent and
thereby increase the level of Superfund cost recoveries, create an
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-2-
incentivc for PRPs to conduct the removals themselves (which
generally costs PRPs less than having the Government do the cleanup
and obtain reimbursement), and to create uniformity in the debt
collection process.
RESEARCH APPROACH!
A bibliography is provided in Appendix A. Zn addition,
inte'rviews (phone and/or personal visit) were conducted with
representatives from the Internal Revenue Service (ZR5), Dept. of
Education (DOE), Veteran's Administration (VA), Financial
Management Service/Treasury (FMS), Department of Justice (DOJ),
National Enforcement Investigations Center (NEIC), Payco American
Corporation collection agency, TRW Information Systems credit
bureau, as veil as with various staff within EPA Region 9 and HQ.
Contact names and telephone numbers are provided at the end of this
report in Appendix B. A survey on debt collection methods was
conducted of all ten regions with responses obtained from both
Superfund program staff and Comptroller non-Superfund staff for
each region. A summary of the survey results is presented in
Appendix C.
FINDINGS:
There is general consensus among staff surveyed in all ten
regions that debt collection performance, both for Superfund and
non-Superfund debts, can be (and should be) strengthened.
Currently, the most common debt collection process among the
regions for all appropriations is to send out a succession of
demand letters. If no payment follows, the delinquent accounts are
either referred to Regional Counsel (in the case of non-Superfund
debts), or in conjunction with Regional Counsel referred to DOJ
(for Superfund cost recovery debts), or recommended for write-off.
Supplementary collection techniques employed sporadically by
the regions include telephone follow-up to demand letters (used by
several regions with success), administrative offset (used once by
one region without success), installment payments (successful), and
referral of delinquent accounts to the HQ Claims Office (not
successful). Other than litigation and the one instance of
administrative offset, the methods to be discussed in this paper
have not yet been employed.
The range of cost recovery and reporting options available to
EPA through the Debt Collection Act of 1982 are presented below,
along with brief descriptions of each. Telephone follow-up is not
discussed as a separate item as it is a component of collection
agency activities, and referral to the HQ Claims Office is also not
included due to historically poor performance. Installment
payments are presently in use. Although the focus of this report
is on Superfund debt collection, most of these procedures apply to
non-Superfund debts as well:
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-3-
, o Litigation: EPA can request litigation through a CERCLA
Section 107 referral to the DOJ Division of Environmental
and Natural Resources, although this is usually reserved
for Superfund debts over $200K which have adequate cost
documentation in place. For non-Superfund debts, EPA can
refer items for litigation to the DOJ Central Intake
Facility which handles general debts.
o Alternative Dispute Resolution: Includes both binding and
nonbinding arbitration (Regions 3 and 5 are looking into
this method on behalf of the Agency).
o IRS tax offset: At the Agency's request, the IRS nay deduct
the amount of the debt owed (including interest) from a
refund due to any debtor and transfer payment to the
creditor agency.
o Collection agencies: Collection agencies generally use
phone calls and letters to follow up on overdue accounts.
Their fee (EPA currently pays 15.1%) is added onto the
amount owed and is only received if the debt is collected.
o Credit Bureaus: The threat of reporting unpaid debts to
private credit bureaus can act as an incentive for payment
of outstanding debts. Information reported to credit
bureaus by federal agencies is treated the same as
information reported by the private sector and is subject
to Fair Credit Report Act requirements.
o Administrative offset: Debts owed to EPA can be offset
against Government payments owed to the debtor (contractor
payments for example), even if the payment owed to the
debtor is from another federal agency.
o Revocation of licenses, suspension from doing business with
government, termination of loans or grants: Failure to pay
a debt owed to EPA can result in both EPA and other federal
agencies revoking or suspending any federal licenses held
by the debtor, suspending or disqualifying the debtor from
doing further business with the government, and terminating
or not making future awards of loans, grants, guarantees,
assistance, or contracts.
o Offset federal salary: If the debt owed to EPA is from a
civilian or military employee of the federal government,
the amount owed can be deducted from the employee's salary
or retirement pension.
o Report written-off debt to the IRS: As a last resort, when
EPA with concurrence from DOJ decides to write off a debt
as uncollectable, it can report this amount to the IRS. In
some cases, this writeoff must be reported as taxable
income by the debtor, requiring that taxes be paid on this
amount.
ANALYSIS OF OPTIONS:
Debt collection litigation is conducted by DOJ attorneys upon
referral from EPA. For non-Superfund debts, referrals are sent to
the DOJ Central Intake Facility. From here, debts under $500K are
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-4-
f armed out for litigation to district U.S. attorneys, while non-
Superfund debts over this amount are litigated by the Assistant
Attorneys General Office in Washington. All Superfund cost
recovery debts, no matter what the dollar amount, are litigated by
the DOJ Environmental and Natural Resources Division.
EPA's highest priority for Superfund referrals are those cases
over $200K, primarily because that is where the bulk of the costs
are and litigation of the larger cases is the most cost effective
strategy for maximizing limited attorney resources both at EPA and
DOJ. The Superfund Comprehensive Accomplishments Flan (SCAP)
manual and report which are used to target planned accomplishments
in the Superfund program target very few referrals of cases under
$2QOK. Likewise, the EPA Enforcement Project Management Handbook
of January 1991, the Strategic Targeting Activities ' Reporting
System (STARS) reporting system specifically gives credit for cost
recovery referrals that are S200K or larger. In general, what this
means is that regions receive minimal FTE for pursuing cases under
S200K, which in turn creates a defacto litigation dollar threshold
for referral. It also results in PRPs having little incentive to
settle cases under S200K since these cases are not a high priority
for litigation. This "hole" in cost recovery makes it important
for EPA to pursue other efficient avenues of collection.
The major impediment to the use of debt collection
alternatives to litigation is the question of whether a Superfund
cost recovery debt is legal for collection if a court judgement has
not been rendered. Of concern is EPA's current method of con-
ducting PRP searches whereby a field of individuals identified as
PRPs at a given site are each sent letters demanding payment of EPA
past and future costs. There is currently no administrative
process for narrowing the field of Potentially Responsible Parties
down to Responsible Parties (liability established) in between the
steps of identification of PRPs and the issuance of demand letters.
Instead, this liability issue is usually resolved when the case is
taken to court (if not negotiated beforehand).
Since the debt collection methods listed above are intended to
be used in lieu of litigation, there are no court decisions to set
legal precedent for EPA. However, there is a body of case law
involving other Federal agencies1 use of these debt collection
methods that has confirmed the legality of their use. In addition,
Federal law and EPA guidance appears to authorize and encourage
EPA's use of Debt Collection Act tools for recovering Superfund
site costs. Chief among them are the following:
o Public Law #97-365: "Debt Collection Act of 1982"
o 40 CFR Chapter 1, Part 13: "Claims Collection Standards"
o Comptroller Policy Announcement #90-07: "Referral of
Delinquent Debts to Collection Agencies"
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o August 15, 1990 memorandum from the Office of Waste
Programs Enforcement and the Acting Associate Enforcement
Counsel for superfund to regional Waste Management Division
Directors and Regional Counsels: "Tactics for Removal Cost
Recovery Actions*
Given this authorization, it may be appropriate to implement
the use of Debt Collection Act tools. The Agency will have to be
prepared to address lawsuits that may arise until legal precedent
has been established.
IRS Tax Offset
Of the alternatives, IRS tax offset shows the most promise due
to its low cost of implementation, relatively simple operation, and
the demonstrated effectiveness achieved by other Federal agencies.
A two-year pilot program with the Departments of Agriculture,
Education, Housing and Urban Development, Small Business, Veterans
Administration, Department of Defense, Health and Human Services,
Department of Justice, and the Treasury has been a huge success
with over $1.6 billion dollars collected that would likely not have
otherwise been received. Discussions held with several
agencies who are participants in the program indicate that although
there is considerable start-up effort needed, once underway the
level of effort required to maintain the program is minimal.
The IRS tax offset program is very cost-effective. The
combined fee paid to IRS and the Financial Management Service/
Treasury is minimal; it currently runs about $8 per IRS match
(where debtor information matches IRS information and IRS can
attach the debtor tax return flie). This fee is added to the
amount owed by the debtor. If the debtor does not receive a refund
in a particular year or if the full amount of the debt is not
recovered through any one year's refund, the debt can'be referred
to the IRS each year for up to 10 years. The primary concern of
participants in this program is whether debtors will become
sophisticated and rework their taxes to avoid receiving a refund.
Although the IRS has legal authority to attach both individual
and corporate tax refunds, the IRS's pilot program currently
addresses only individual accounts. Although many non-NPL sites
have individuals rather than corporations as PRPs, in order to
achieve maximum effectiveness froa the program, EPA will need to
convince the IRS to add corporate accounts. Start-up preparations
must begin over a year in advance of the tax filing season. There-
fore, EPA will need to begin preparations this year in order to
participate in the 1993 tax filing season (covering calendar year
1992}.
Collection Agencies
Collection agencies are probably the easiest way for EPA to
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-6-
pursue collection of overdue debts. Once the debt is referred to
the HQ office coordinating collection agency activities, the region
takes no other action on the debt while the collection agency is
working the account. The collection agency has up to six months to
try to recover the amount owed. Only if the agency is successful
in collecting payment does it receive a fee for its service. This
fee is tacked onto the total amount owed and is paid by the debtor.
The primary disadvantage with the use of collection agencies is the
steep cost of the service. For example, a $15,100 fee on top of a
$100,000 debt may mean the difference in the debtor's financial
ability to pay the debt.
, Authority for the use of collection agencies has been in place
for some time. However, EPA HQ has just this year (February, 1991)
issued guidelines for the program's implementation, including
designation of contractors and provision of sample forms.
Credit Bureaus
The threat of reporting delinquent debts to credit bureaus can
act as an incentive for debtors to pay their overdue accounts.
According to the TRW Information Systems (a credit bureau), for the
Department of Education the IRS tax offset is their primary means
of collection, and the use of credit bureaus is their second most
effective method. The IRS requires that debtor information be
reported to a credit bureau prior to being submitted for tax
offset.
•
Administrative Offset
Administrative offset is an appropriate tool for cost recovery
debts where the debtor is either a contractor, grantee, or any
other person to whom the Federal government owes or plans to owe
money to. The advantage of applying administrative offset (where
debts owed to EPA are offset against payments owing to the debtor
either from EPA or another federal agency) is that EPA can imple-
ment this in-house or in conjunction with other federal agencies.
Revocation/Suspension
The threat of revocation of federal licenses or suspension
from doing business with the federal government can be an incentive
for the debtor to pay its federal debts if the contractor were to
have business dealings with more than one agency or had large
dollar contracts. The primary disadvantage to this method, as with
administrative offset or salary offset, is the effort needed to
coordinate with other Federal agencies in its implementation.
SalaryOffset
Federal salary offset will only work for cost recovery if a
PRP happens to be a federal employee. Although this limits its
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-7-
application signficantly, it is an appropriate tool to use when it
applies, and the information is readily available as part of a PRP
search.
•
IRS Write-off
Cost recovery debts on which EPA has been unable to collect
payment and has DOJ concurrence (for amounts over $500,000) for
write-off can also be reported as write-off to the IRS. The
amount of the write-off nay have to be reported as income by the
debtor. Although this action does not collect the debt for EPA, at
least the federal government nay receive some payment in the form
of additional taxes due on the reported amount as well as serve as
a warning to PRPs that non-paying debtors will be pursued. The
threat of employing this technique nay induce some PRPs to settle.
RECOKMENDATTONS;
Chart 1 is a flow chart of the recommended sequence of actions
to be taken with delinquent Superfund cost recovery debts while
Chart 2 presents recommendations for non-Superfund debts. The
difference in the approaches is that for Superfund cost recovery,
debts over $200K are normally referred to DOJ for litigation. For
all non-Superfund debts, DOJ collection (through the Central Intake
Facility) would be undertaken as a last resort prior to write-off,
after having first attempted to collect the debt through other
means.
The recommended sequence of debt collection actions begins
with the issuance of demand letters once a debt has become
delinquent. Standard EPA protocol is to send out three demand
letters 30 days apart, each with progressively stronger wording.
If the demand letters do not generate repayment of the debt, then
this paper recommends taking the following sequence of actions:
1) Refer the debt to DOJ (for Superfund debts over S200K where EPA
has adequate evidence of liability and financial viability); 2)
Initiate debtor suspension from doing further business with the
Government; 3) Initiate administrative or federal salary offset
where applicable; 4) Report the delinquent debt to credit
bureau(s); 5) Refer the debt to collection agencies; 6) Refer the
debt to IRS for tax offset; 7) Refer the debt to DOJ general debt
collection attorneys (for non-Superfund debts); 8) Write off the
debt (discontinue collection efforts); and 9) Report the written-
off debt to the IRS.
The rationale for the recommended sequence of actions is to
first use collection methods within EPA's own power to implement,
either with or without the cooperation of other federal agencies.
Initiating debtor suspension, administrative and federal salary
offsets fit into this category. Next, reporting of the debt to a
credit bureau can be done concurrently with referral to a
collection agency (during which time the Government is to take no
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N
»-H-0"« It jjSJ
-------
*«•»» chart of Debt Collection Free*duri
For Gti.wi«i Account* Rtcmtbie
- T
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-8-
further collection action on its own). IRS tax offset is the next
available option. Unfortunately, tax offset cannot be invoked
earlier in the process since the IRS requires that Agencies atteapt
all other available collection methods prior to referring the debt
to them. Finally, EPA nay wish to refer the Debt (if non-
Super fund) to OOJ for one last atteapt at collection prior to
seeking write-off authority and discontinuing collection efforts.
IMPLEMENTATION;
Region 9's goal is to put the recommended debt collection
procedures in place for both Superfund and non-Superfund in as
short a time frame as possible. In the event that implementation of
Superfund debt collection procedures are held up in the chain of
command, efforts would continue to implement the non-Superfund
procedures while approvals are secured for the Superfund component.
* Superfund Case Development staff will need to work closely
with EPA HQ policy offices in order to implement these
recommendations, as well as working with Regional Comptroller staff
and the Office of Regional Counsel. Some of the activities that
will be required include the following:
o Prepare three standardized, progressively stronger demand
letters to be sent out to debtors prior to initiating
other collection actions.
o Research the particular requirements/procedures for
each collection method and establish procedures with HQ.
o Publish required notice provisions in the Fed. Register.
o Write Standard Operating Procedures (SOPs) for staff
for each of the collection methods.
o Prepare a Memorandum of Agreement between EPA and the
IRS to establish EPA's participation in the IRS tax off-
set program.
o Establish a magnetic tape or electronic data transmission •
mechanism for reporting data to the IRS.
Due to Comptroller Office and ORC staff resource constraints,
the Superfund Case Development Section will take the lead on
implementation of this project. There are two levels of effort
required: initial implementation (start-up) and ongoing operations.
It is estimated that Region 9 start-up resource costs are as
follows:
o One employee from the Case Development Section working 1/2
time for one year ( 0 FTE if the work is performed by a
Career Rotational employee or Presidential Management
Intern).
o One Accountant or Accounting Technician from the Accounting
Section in the Office of the Comptroller working part time
for one year ( .3 FTE).
o One attorney from the Office of Regional Counsel working
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•9-
intenaittently on a consultant basis for one year ( . 1 FTE).
This level of effort should result in most of the recomnenda-
tions being implemented by the end of FY 1992, given the
cooperation of management within Region 9 and in HQ. Ongoing
operational costs will fall most heavily on the Office of the
Comptroller and the Office of Regional Counsel, as follows:
o Accounting Section ongoing operations (sending out billings,
making and tracking debt referrals, etc.) ( .5 FTE in
Accounts Receivable).
o Office of Regional Counsel resolution of debtor objections
and questions regarding Superfund liability raised during
the collection process ( .2 FTE).
o Case Development Section/Emergency Response Enforcement
staff assistance in helping ORC resolve debtor objections/
questions ( .1 FTE).
Designated contacts in other federal agencies such as with the
Department of Treasury/Financial Management Service and the IRS are
available to assist EPA with start-up and operational guidance for
the various debt collection programs being implemented.
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Appendix A
Bibliography:
1. 40 CFR Chapter 1, Part 13: "Claims Collection Standards"
2. "Managing Government Credit: A Supplement to the Treasury
Financial Manual"
3. OMB Circular A-129 (November 25, 1988}
4. 4 CFR 102.11: "Collection in Installments"
5. 26 CFR 301.6402-6T: "IRS Tax Refund Offset Program"
6. EPA Comptroller Policy #90-07: "Referral of Delinquent Debts to
Collection Agencies"
7. Treasury/FMS: "Guide to Credit Bureau Reporting"
8. QMS-Treasury Credit Policy Guidelines #G-l-86: "Agency
Reporting to Credit Reporting Bureaus"
9. Resource Mangement Directives System, Chapter 12: "Cost
Documentation and Cost Recovery"
10. Title 15 DSC, Section 1692: "Debt Collection Practices"
11. Title 5 USC, Section 552a: "Privacy Act of 1974"
12. Title 31 USC, Section 3716: "Administrative Offset"
13. Title 31 USC, Section 3718: "Contracts for Collection Svc's."
14. Public Law #97-365: "Debt Collection Act of 1982"
15. SPA memorandum from OE and OWPE dated August 15, 1990: "Tactics
for Removal Cost Recovery Actions (SMR #13)"
16. EPA memorandum from the Financial Reports and Analysis Branch
dated February 13, 1991: "The Use of Private Sector Collection
Agencies"
17. EPA Administrator William K. Reilly's "A Management Review of
the Superfund Program" also known as the 90-Day Study
18. EPA Enforcement Project Mgr.'s Handbook, Ch. 12: "Cost
Recovery"
19. Region 9 model demand memo: "Demand for Payment of EPA Costs
and Information Request" (draft prepared by ORC attorney Roger
Klein)
20. FMS: "Federal Tax Refund Offset Pilot Program"
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Appendix 0
Telephone/Personal Visit Contacts and Telephone Numbers:
1. IRS: Scott Smith (202) 233-1814
2. Financial Management Service/Treasury:
o Don Rouse (202) 287-0646
O Stacy Lovegren (415) 744-7967
3. NEIC: Tina Wilson FTS 776-2383
4. Fayco collection agency: Dick Sikorski (614) 766-0803
5. TRW credit bureau: Margarita Gesell (301) 312-6965
6. DOE: Roseaarie Beavers (202) 708-4766
7. VA: David Sturm FTS 373-6589
8. DOJ:
.o Diane Miller,"Central Intake Facility (301) 585-2391
o Bob Ford, Director, CIF (202) 514-5343
o Kathleen Haggerty, Financial Mgmt. Staff (202) 501-7017
o Anna Swerdel, Env. Enforcement, Lands Division (202) 514-3659
9. EPA Region 9:
o Betsy Curnow, Chief, Case Development FTS 484-2378
o Steven Simanonok, Civil Investigator FTS 484-2358
o Clifford Davis, Civil Investigator FTS 484-2377
o Mark Calhoon, Civil Investigator FTS 484-2376
o Roger Klein, superfund Attorney FTS 484-1312
o Becky Tudisco, Accounting Section Chief FTS 484-1725
o David Wood, Team Leader, Superfund Cost Documentation
FTS 484-1738
10. EPA HQ:
o Vince Velez, Superfund Program Development and Implemen-
tation FTS 475-7465
o Kevin Brittingham, Financial Reports and Analysis FTS 475-8170
o Ray Spears, Collection Officer FTS 382-4548
o Frank Biros, Superfund Cost Recovery FTS 398-8635
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4/03/91
SUMMARY OF SUPERFUND DEBT COLLECTION SURVEY RESULTS
(Regions I - X)
*
The purpose of this survey was to ascertain which methods other
Regions are using to collect on overdue debts, both for Superfund
and for non-Superfund programs. Two individuals were surveyed in
each Region; one in the Superfund program office, and one in non-
Superfund accounting in the Comptroller's Office. The results are
as summarized as follows:
1. What actions does your Region taJce to collect on overdue debts?
For both Superfund and non-Superfund debts, the most common
process among the regions is to send out a succession of demand
letters. Then if no payment follows, the delinquent accounts are
either turned over to Regional Counsel (for referral) -or written
off. Four regions said that they were either in the process or
planned to sign up with collection agencies to assist in debt
collection. Two of the four regions (Regions 2 and 5} indicated
that they would only be using collection agencies for non-Superfund
cost recovery debts, one region (Region 1) had not yet decided
under what circumstances collection agencies would be used, and one
region (Region 3) felt that it would be appropriate to use
collection agencies for all debts.
Other collection methods, employed sporadically, include:
1) Telephone follow-up to demand letters: Several regions
(Regions 4, 5, and 9) have had success with this method, two
of whom use it for Superfund and one for non-Superfund
debts. In the case of Superfund, program staff make the
phone calls; for non-Superfund debts, staff in the
Comptroller's Office do the telephoning.
2} Administrative offset: One region (Region 1) used this
method once for a non-Superfund debt, without much success
as a result of the intervention of local politicians.
3) Installment payments: Several regions have used installment
payments successfully to collect on Superfund accounts.
Region 6, for example, usually requires 50% up front and
arranges with the debtor to pay the balance in anywhere from
three to six equal payments.
4} HQ Claims Office: Several regions in the past have turned
over delinquent non-Superfund debts to the HQ Claims Office
without success, so the regions are no longer employing this
method of collection.
To date, no region reported that they have used IRS tax
offset, collection agencies, reporting to credit bureaus, writeoff
to IRS, administrative offset, or revocation of permits as debt
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-2-
collection tools. Many regions felt that their debt collection
performance could be (and should be) stronger.
*
2. What kind of tracking system does your region use for monitoring
overdue debts?
All of the regions have soae sort of tracking system for
monitoring open accounts receivables, both for Superfund and for
other programs. At a minimum, there is the IFMS open accounts
receivable tracking report which is not veil liked as it mixes
appropriations and does not provide information program staff finds
useful for identifying the receivables. Most of the regions
supplement this report vith in-house designed PC-based reports,
either using Lotus or d-Base. Region 5 has a d-Base report which
is scheduled to become available agency-wide through SCORES in
approximately 4 months.
3. In your opinion, what methods do you think would work best to
collect overdue debts (Superfund in particular)?
Litigation of small cases to set an example for the PHP
community was the number 1 choice of the regions. Other
suggestions (in no particular order) include the following:
1) Increase enforcement/cost recovery staffing.
2} Make the debtor place money in a trust fund.
3) Improve'tracking of'A/R and updating of CERCLIS.
4) Improve identification of the financial capability of
PRP's.
5) Improve negotiating skills.
6} Form a quality circle to work on improvements.
7) Use administrative offsets.
8) Use collection agencies.
9} Factor debts (sell off A/R to private companies}.
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.3-
Superfund Program Contacts:
Region I:
Region II:
Region III:
Region IV:
Region V:
Region VI:
Region VIZ:
Region VIII;
Region IX:
Region X:
Chris 0'Conner FTS 833-1688 (Superfund Enforcement}
Paul Simon FTS 264-4710 (Regional Counsel)
Jim Webb FTS 597-6624 (Cost Recovery)
Dick DeBois FTS 257-5059 (Cost Recovery)
Oliver Warnsley/Ron Pieman FTS 886-0442 (Cost
Recovery)
Buddy Parr FTS 255-6670 (Cost Recovery)
Xaren Flournoy FTS 276-7782 (Pre-Remedial)
Xelsy Land FTS 330-7639 (Superfund Enforcement)
Betsy Curnow FTS 484-2378 (Case Development)
Lynn Kershner FTS 399-2141 (Program Management)
Comptroller Office Contacts (Non-Superfund):
Region I:
Region II:
Region III:
Region IV:
Region V:
Region VI:
Region VII:
Region VIII:
Region IX:
Region X:
Mike Manlogon FTS 835-3338 (Finance)
John Spec FTS 264-2627 (General Accounting)
Howard Hughes FTS 597-6162 (General Accounting)
Peggy Whitney FTS 257-3278 (Accounts Receivable)
Betty Loftin FTS 886-7510 (General Accounting)
Ray Gomez FTS 255-6515 (General Accounting)
Jerry Lee FTS 276-7324 (Financial Mgt. Officer)
Frank McFadden FTS 330-1466 (Finance)
Becky Tudisco FTS 484-1725 (General Accounting)
Dennis Thurston FTS 399-2918 (General Accounting)
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I UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
/ WASHINGTON. D C 20460
' 7 1985
"MEMORANDUM
SUBJECT: Tiro
of CERCLA Costj Recovery Actions
FROM
Administrator =
ent and Compliance Monitoring
.our
:f ice,
'Winst/nSorter, Assistant Administrator
jffice of Solid Waste and Emergency Response
TO:
-*
Regional Counsels, I-X ,^ ,
Waste Management Division Directors, Regions I,IV,V,VII,VIII
Emergency Remedial Response Division Director,'Region II
Hazardous Waste Management Division Directors, Regions III,X
Air & Waste Management Division Directors, Regions I"
Toxics and-,Waste Management" Director, Region IX
II, VI
This memorandum provides guidance on, when cost recovery J/
action should be initiated under S107 of the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA).
Timely initiation of such actions will facilitate early replenish-
ment of the Hazardous Substances Response Fund (the Fund) and w'lll
assure that negotiations and litigation take place while evidence
is^ fresh and witnesses available. It will also provide the
foundation for an orderly planning a*nd management process for
cost recovery. It should also be noted that this guidance is not
intended to limit any action by EPA pursuant to S107 of CERCLAr
and is only intended to assist EPA Pegional offices in the manage-
ment of cost recovery actions.
TIMING OF COST RECOVERY ACTIONS
For Removal Actions at Non-National Priorities List (NPL) Sites
Cost recovery action should be initiated* within one year of
the completion of a removal action.
f - *
For Removal Actions at NPL Sites
If there will b,e a significant gap (18 months or more) between
the completion of the removal action and the signing of the Record
of Decision (ROD), cost recovery action should be initiated within
one year of the completion of the removal action. If the ROD is
expected to be signed in less than 18 months, the removal and
*Initiation of a cosjt recovery action is defined as submission
of a referral action to headquarters for judicial action.
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- 2 -
remedial cost recovery actions should be consolidated according
to the timetable listed for remedial actions below. Tv
For Remedial'Actions ''
, . . mt -...» , ' , _3 ' , w ,
Cost, recovery actions should be initiated as soon as
practicable^after the signing of" the ROD, usually within 18 months
of" that time. However, cost recpvefy action should not begin
until the Remedial Design (RD) stage has been completed. In most
instances," cost recovery action will be initiated about mid-way "
through the'construction phase™of a remedial action, which would
be about 18 months after the ROD is signed. At that time, costs ! -
should be fully known through the RDvphase and most if not all
of the construction costs should be available by the time the
§107 action is filed. ' '
'In certain limited instances, completion of the RD may be
delayed beyond 18 months after the' ROD is signed. Since any cost -
recovery"is" predicated on both ^in'curred costs and an estimate of
the costs for the remedy which "is provided by the RD, cost recovery,'
should^not be initiated before completion of the RD phase.
TIMING OF DEMAND1 LETTERS *
- •> ,.'j
The purpose of demand letters in CERCLA cost recovery actions
is to inform potential defendants of the Agency's costs of a CERCLA*
cleanup and to make demand for payment of those costs. Under *^*
current policy, demand letters'are typically sent by the Regions ^"
prior to referral of a case to EPA Headquarters and the Department^
of Justice (DOJ).
•\
Sinc«j rthe policy set out in this document calls for initiation
of some cost recovery actions prior £o the completion of- the
remedial cleanup~"(and, therefore, prior to expenditure of all
costs), demand letters sent in those cases will necessarily make
demand for costs that have yet to be incurred. Under those circum-
stances^ the letter should explicitly reference actual past costs
and provide an estimate of future costs as delineated in the RD.
Similarly, in the event the case is referred and subsequently
filed before the remedial" action is completed, the complaint will "
contain a request for a declaratory judgment as to future costs.
i
MANAGEMENT OF THE PROCESS'
=--:._• "
v *** ^
Regions are responsible for tracking all CERCLA response
actions to identify when cost recovery action should be
initiated. Yearly plans for cost recovery actions, including
determination of the number of cost recovery actions to be
initiated, and the identification of specific cost recovery
sites, will take place through the SCAP process.
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Cost recovery does not take place in a vacuum. At times, '
other enforcement activity may be underway at a site whenca cost
v recovery action is due 'to b.e initiajtedT^'.Negotiation^, with ^
potentially responsible; parties for future cleanup work'may besinV*«
process, for example. .^In such'instances, close cooperation'-"-' o~»-
be'tween Regional staff-handling'cost recovery and the^case manage-
ment or litigation team is essential to assure all actions'^ --> /T1 *•
including cost recovery, are parfc oS &? coordinated enforcement
strategy. Timing^o'f^cojst'recovery-Actions', including issuance of
demand lette'rs* ano> case^ referral's, should"''take into1 account^ojther*?
aspects of fthe enforcement activity* ai: the site.' "' " "•:„.";
- ' * r* (A- , 3, '/.'".I- jf - . - .. "- , •* -5,/Jl,
THE STATUTE OF-'LIMITATIONS 'a t'»* *- '*' --" • '-r ' " " '•*'>. "•<*,
?*v •3«JVC* JCOC "«•!, F ft >. . lh *-' ^-,^11^-
"£JL_ CERCLA, as culrrently enac!tea"Y,eo'oes"-J1not 'contain ment"ion--6f a"c
'statute of limitations (SOL) for" §107, actions..-' It is" the-pQ.siJtipn_
of the Agency and DOJ that there" is noc SOL but^'i'f" there-were, -*,'"
i,t would be six years from the completion of 'a^ response actions--
Congress is considering such a six year SOL as part of the
reauthorized CERCLA. Pending any explicit SOL legislation, it-r-*-
is important that timely cost recovery actions-be taken to minimize
'"the1 chances that an adverse ''Court-ruling might"-Iresul't"4"rf loss of
mollies0 to the Fund. The- timetables es'tablishe'd l*n~ 'thi-*s memorandum
seek to strike a balance1'be'tween 'the re'alities'o'f' the remedial"'--
•a'ct'ion process and 'the mo*re* conservative- views of 'how Courts
mVgtht rule on the 'SOL. In "this context/ it should" be1 no'ted
tthe_U.S.
veiew, tha
'District Court for New Hampshire has upheld -the Aqencyt*s
t the*re is curren'tly no SOL'^for §107 actions.' ^ "
' The'"primary purpose of this memo'randura is to assure timely
return of expended monies to, the Fund. Even if a six -year-SOL ^
should be enacted, it would not affect the timetables descriKer1
in this document^. - ''w r -cir
RELATIONSHIP p¥o 'PREVIOUS GUI-DANCE 1*-^ -- -*• -t
• ' ash > - ? c L n _ "i „> M
This guidance supplants Charter IV," Paragraph A, Timing of
Cost Recovery Proceeding, in the Gu'i'daric'eTro'n Pursuirig Cost Recovery
Actions Under CERCLA issued by Courtney M.^ Price, 'Special Counsel
for Enforcement and Lee M. Thomas, Assistant f Administrator for
Solid Waste and Emergency Response, on August 26V 1983.*- It 'also
modifies Paragraph B, Statute of Limitation's*,"-' rof that^document .
The referenced material is found'^on Paqes'^16-18 of thWbove-'
mentioned issuance > -wJiicKT with' ^th'e"except?ibn of the "refe'renced
material supplante'd by 1:n"irs guidance p^rep^'esents current policy
guidance on CERCLA cost recovery.
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-4-
- The Cost Recovery Procedures Manual issued on January 30, 1985,
by Gene A. Lucero, Director,,Of £ice of Waste Programs Enforcement^
provides detailed information and instructions on the development
of cost recovery documentation -packages prior to case referral to
Headquarters.
In addition, on July 12, 1985, a memorandum titled Small Cost'
Recovery-Referrals was issued by Frederick T. Stiehl, Associate
Enforcement Counsel for Waste,'Office of Enforcement-and Compliance
Monitoring and Gene A. Lucero, Director, Office of Waste Programs
Enforcement,^Office of Solid Waste and Emergency Response. This
memorandum discusses instances when cost recovery cases involving
less than $200,000 should be referred. The Interim CERCLA Settle-
ment Policy, issued by Courtney M» Price, Lee M. Thomas and F. Henry
Habicht -II. on December 5, 1984 also addresses the setting of
priorities for cost recovery and other CERCLA cases.
CONCLUSION
Initiation'of cost recovery actions- accordinq to an established,
predictable* tt-imetable is a critical step in the implementation of ,
an efficient and effective cost recovery proqram. CERCLA cost
recovery will involve hundreds of cases over the next several»years,
many of them highly complex with voluminous documentation required?.
with this timetable, plans can be made, resources allocated, and *
the proqram implemented in a way which will meet the goals of timely
negotiation and litigation and, most important, early replenishment
of the Fund to permit the Agency to address additional uncontrolled
hazardous waste sites.
*
Your cooperation in implementation of the tine schedules
provided ^n this memorandum is appreciated. Questions s'Kbuld
be addressed to Janet Farella, Office of Waste Programs Enforcement
(WH-527). Ms. Farella may be reached at 382-2016.
cc: Morgan Kinqhorn, Comptroller
William N. Hedeman ~Jr., OERR
Gene A. Lucero, OWPE
John J. Stanton, OWPE
Frederick F. Stiehl-r OECM
RCRA/CERCLA Branch' Chief s , ORC
Regional Superfund Branch Chiefs, Regions I-X
Regional Superfund Enforcement Section" Chiefs, Regions I-X
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