-------
1426
733 FEDERAL SUPPLEMENT
sive Environmental Response, Compensa-
tion, and Liability Act of 1980. § 107(a). as
amended, 42 U.S.C.A, § 9607(a).
13. Federal Civil Procedure <3=2481
Party potentially liable under CERCLA
for response costs incurred by the United
States had obligation, if it intended to chal-
lenge response costs, to take apropnate
action to obtain necessary evidence and to
present evidence in response to motion for
summary judgment; having failed to do
that, it could not avoid entry of summary
judment by asserting that the United
States failed to produce adequate documen-
tation for it to determine what portion of
costs were response activities at disposal,
site at issue, which documentation had al-
ready been found to establish prima facie
case. Fed.Rules Civ.Proc.Rule 56. 28 U.S.
C.A.: Comprehensive Environmental Re-
sponse, Compensation, and Liability Act of
1980. § 107(a), as amended! 42 U.S.C.A.
§ 9607(a>.
14. Federal Civil Procedure «=»2481 .
Allegedly pending affirmative defens-
es to liability under CERCLA for response
cost did not bar entry of summary judg-
ment, though in stipulation potentially lia-
ble parties reserved right to contest costs,
where those parties wholly failed to
present materials or evidence in support of
affirmative defenses in opposing summary
judgment; time for parties to contest costs
was in response to motion for summary
judgment.. Fed.Rules Civ.Proc.Rule 56. 2?
U.S.C.A.; Comprehensive Environmental
Response. Compensation, and Liability Act
of 1980, § 107|ai, as amended. 42 U.S.C.A.
§ 9607(a).
15. Health and Environment «=25.5(5.5)
Parties potentially liable under CERC-
LA for response costs incurred by the Unit-
ed Stales failed to establish they were enti-
tled to recoupment, in that nexus or com-
mon denominator between relief sought by
the United States and precise nature of
recoupment claim was not demonstrated.
Comprehensive Environmental Response.
Compensation, and Liability Act of 1980.
§ 10725.5(5.5)
Standard level users charges incurred
' by the United States Government, includ-
. ing rent and property- management fees
paid by the Department of Justice (DOJ) to
the General Sen-ices Administration
Indirect costs incurred by the United
States in connection with disposal site could
be recovered as response costs under
CERCLA. Comprehensive Environmental
Response. Compensation, and Liability Act
of 1980, § 107iaM4«A), as amended, 42 U.S.
C.A. § 9607(a)(4MA).
19. Federal Civil Procedure «=>2481
Genuine issues of material fact existed
as to whether indirect labor costs attributa-
ble to disposal site were excessive, preclud-
ing summary judgment on claim of the
United States that it was entitled to recov-
er those costs as response costs under
CERCLA, where expert challenged one-to-
one ratio of indirect labor costs to direct
labor costs and asserted that charges were
being made to disposal site for work un-
related to site. Fed.Rules Civ.Proc.Rule
56, 28 U.S.C.A.; Comprehensive Environ-
mental Response. Compensation, and Lia-
bility Act of 1980. § 107iaM4MAl. as amend-
ed. 42 U.S.C.A. § 9607(aX4MA).
-------
L.S. v. HARDAGE
Cite ** 733 FSupp. 1424 (W.D.OU. 19891
1427
20. Declarator?- Judgment «=>82
District court could determine by way
of declaratory judgment future liability un-
der CERCLA of owners and operators of
disposal site and generators and transport-
ers of hazardous waste for response costs
incurred by the United States, though the
court could not actually award costs until
they were incurred. Comprehensive Envi-
ronmental Response. Compensation, and Li-
ability Act of 1980. § 107 of CERCLA1, 42 U.S.C.
§ 960"iaM4MA). for response costs incurred
by the United States in conjunction with
the Hardage site. The amount of response
costs requested by the United States in this
motion for partial summary judgment is
$6.292.065.25. In addition, the United
States also seeks a declaration that the
defendants are liable for the United States'
future response costs at the Hardage site.
Six individual defendants or groups of de-
fendants responded in opposition.2 With
this Court's approval, the United States
filed a joint reply to all the responses on
November 6, 1989. For the reasons set
CXTO cites to its pending motion for summary-
judgment on CERCLA'i constitutionality to ar-
gue this Court should deny the United States'
motion for partial summary judgment on re-
sponse costs or postpone ruling on the govern-
ment's motion until CATO's motion is decided.
This Court denied CATO's motion for summary-
judgment on November 28, 1989.
L'.S. Pollution Control, Inc. rtlSPCI") op-
posed the United States', motion on October 6.
1989 stating USPCJ has a pending motion for
•summary judgment based upon its status as a
common carrier. This Court denied USPCI's
motion for summary judgmeni on October 3,
19g9. However. I'SPCl has strongly defended
against the United States' motion for partial
summary judgmeni on I'SPCI's liability which is
. still pending.
JOC Oil Exploration Company. Inc. ("JOC")
filed a motion in opposition on September 27,
1989. JOC argues there has been no finding of
liability against JOC. therefore JOC cannot be
found liable for the United Stales' response
costs.
-------
1428
733 FEDERAL SUPPLEMENT
forth below, the United States" motion for
partial summary judgment for response
costs is GRANTED, with the exception of
the request for indirect costs of the Depart-
ment of Justice ("DOJ"), against defen-
dants who have stipulated to liability or
been found liable.3 In addition, the United
States' request for a declaratory judgment
finding the defendants liable for the United
States' future response costs is also
GRANTED against these same defendants,
with the exception of the indirect costs of
DOJ.'
I. STANDARD FOR
SUMMARY JUDGMENT
[1] The facts presented to the court
upon a motion for summary judgment must
be construed in a light most favorable to
the nonmoving party. Board of Educ. v.
Pico. 457 U.S. 853.' 864. 102 S.Ct. 2799,
2806. 73 L.Ed.2d 435 (1982): United States
v. Diebold. Inc.. 369 U.S. 654, 82 S.Ct 993,
8 L.£d.2d 176 (19621. If there can be but
one reasonable conclusion as to the materi-
al facts, summary judgment is appropriate.
Only genuine disputes over facts which
might affect the outcome of the suit under
the governing law will properly preclude
the entry of summary- judgment.
Anderson r. Liberty Lobby, Inc.. 477 U.S.
242. 106 S.Ct. 2505. 91 L.Ed.2d 202 (1986).
Finally, the movant must show entitlement
to judgment as a matter of law. Ellis r. El
Pasa \atural Gas Co.. 754 F.2d 884. 885
(10th Cir.1985); Fed.R.Civ.P. 56.
Although the Court must view the facts
and inferences to be drawn from the record
in the light most favorable to the nonmov-
ing party, "even under this standard there
are cases where the evidence is so weak
that the case does not raise a genuine issue
of fact." Burnette i\ Dow Chem. Co., 849
F.2d 1269. 1273 (10th Cir.1988). As stated
by the Supreme Court, "[s)ummary judg-
ment procedure is properly regarded not as
a disfavored procedural shortcut, but rath-
er as an integral part of the Federal Rules
as a whole, which are designed 'to secure
the'just, speedy and inexpensive determina-
tion of every action.'" Celotex Corp. r.
Catrett. 477"U.S. 317. 327. 106 S.Ct. 254S.
2555. 91 L.Ed.2d 265 (1986) (quoting Fed.R.
Civ.P. 1).
The Supreme Court articulated the stan-
dard to be used in summary judgment
3. Certain of the defendants, including but not
limned 10 CATO.. USPC1. JOC. Stock Yards, and
Rockwell International have noi stipulated to
Iiabiiitv nor been found liable under sections
106 & 107(a> of CERCLA. 42 L.S.C.
§§ 060613) & %07(a) Should these defendants
cases, emphasizing the "requirement is
that there be no genuine issue of material
fact," Anderson i: Liberty Lobby. Inc..
477 U.S. at 248, 106 S.Ct. at 2510 (emphasis
in original). A dispute is "genuine" "if a
reasonable jury could return a verdict for
the nonmoving party." Id. at 248, 106
S.CL at 2510. The Court stated that the
question is "whether the evidence presents
a sufficient disagreement to require sub-
mission to a jury or whether it is so one-sid-
ed that one party must prevail as a matter
of law." Id. at 251-52. 106 S.Ct. at 2512.
"The mere existence of a scintilla of evi-
dence in support of the [party's] position
will be insufficient; there must be evidence
on which the jury could reasonably find for
the [party]." Id. at 252. 106 S.Ct. at 2512.
"The very mission of the summary judg-
ment procedure is to pierce the pleadings
and to assess the proof in order to see
whether there is a genuine need for trial."
Matsushita Etec. Indus. Co. v. Zenith Ra-
dio Corp.. 475 U.S. 574, 587, 106 S.Ct.
1348. 1356. 89 L.Ed.2d 53? (1986) (quoting
Advisory Committee Note to-Fed.R.Civ.P.
56)e)).
[2] The Court determines whether the
nonmovam has submitted evidence of the
essential elements of the claim by viewing
"the evidence presented through the prism
of the substantive evidentiary burden" so
that a reasonable factfinder could find for
the nonmovant. Anderson v. Liberty Lob-
by. Inc.. 477 U.S. at 254. 106 S.Ct. at 2513.
The Court is only required to draw reason-
able inferences from the evidence. See
Lucas r. Dover Corp.. \orris Dir., 857
F.2d 1397, 1400 (10th Cir,1988) (J.N.O.V.
standard). Implausible inferences can be
rejected. Cf. Matsushita Elec. Indus. Co.
r. Zenith Radio Corp., 475 U.S. at 585-
598. 106 S.Ct. at 1355-1362 (rejecting im-
plausible inference of intent in antitrust
conspiracy).
[3-5]. A party resisting a motion for
summary judgment "must do more than
make conclusionary allegations, it "must
set forth facts showing that there is a
genuine issue for trial." Fed.R.Civ.P.
' 56le): Dart Indus, r. Plunkett Co. of
Okla.. Inc.. 704 F.2d 496, 498 (10th Cir.
1983): see Lake Hefner Open Space Alli-
ance r. Dole. 871 F.2d 943. 945-46 (10th
be found liable in the future, they would also be
jointly and severally liable for these response
costi
4. See footnote 3.
J
-------
U.S. v. HARDAGE
Cite «» 733 F.Supp. 1424 (W.D.OU. 1989)
1429
I
Cir.1989) (Plaintiff did not "by affidavits or
as otherwise ... set forth specific facts
showing that there is a genuine issue for
trial."}- The Court will not grant summary
judgment based on a battle of affidavits
that raise genuine material disputes. De
Vargas v. Mason & Hanger-Silas Mason
Co.. 844 F.2d 714, 719 (10th Cir.1988).
However, affidavits must be submitted in
good faith. Fed.R.Civ.P. 56. And, con-
. clusionary affidavits are insufficient to de-
feat summary judgment. Luckett r. Beth-
lehem Steel 'Corp.. 61? F.2d 1373, 1380 &
n. 7 (10th Cir.19801 Conclusionary opin-
ions of experts that fail to provide specific
facts are insufficient as well. Erers v.
General Motors Corp.. 770 F.2d 984. 986-
87 (llth Cir.1985).
11. UNDISPUTED FACTS
Rule 14(B) of the Western District of
Oklahoma provides a framework for deter-
mining undisputed facts at the summary
judgment stage. The Rule provides:
The brief in support of a motion for
summary judgment (or partial summary
judgment) shall begin with a section that
contains a concise statement of material
facts as to which movant contends no
genuine issue exists. The facts shall be
numbered and shall refer with particular-
ity to those portions of the record upon
which movant relies. Tht brief in opposi-
tion to a motion for summary judgment
(or partial summary judgment) shall be-
gin with a section which contains a con-
cise statement of material facts as to
which the party contends a genuine issue
exists. Each fact in dispute shall be
numbered, shall refer with particularity
to those portions of the record upon
5. The Lnned States statement of material facts
as to which there is no genuine issue contains
33 undisputed facts. Facts nos. 30 and 31 relate
to indirect costs of response activities per-
formed by DOJ personnel' at the Hardage site
and the amount of those costs. Because the
Court finds genuine issues of material fact as to
IJniled Slates' listed facts 30 and 31, these two
facts are not included in tht Court's statement
of undisputed facts, and the Court's undisputed
facts hax-e been renumbered
6. Stock Yards stipulated to undisputed facts no.
1. 2, and 5 in its stipulation on issues relating to
liability on May 10,
7. HSC. L & S Bearing by reference, and L'SPCl
either do not contest, or are willing that the
above-listed factual allegations nos. 1-4 be
deemed admitted, for purposes of this summary
which the opposing party relies, and. if
applicable, shall state the number of the
movant's fact that is disputed. All mate-
rial facts set forth in the statement of
the movant shall be deemed admitted for
the purpose of summary judgment un-
less specifically controverted by the
statement of the opposing party.
W.D.Okla.R. 14(B).
An analysis of the United States' motion
and reply and the responses of HSC. L & S
Bearing by reference. Stock Yards, and
USPCI reveal the following facts are undis-
puted within the meaning of Rule 14-33. 31 of
which are listed here and are incorporated here-
in as the Court's findings of undisputed facts.
As discussed in Section V of this Order, the
Court finds genuine, issues of material fact only
as to the Department of Justice's indirect costs.
United States' proposed undisputed facts nos. 30
& 31.
-------
1430
733 FEDERAL SUPPLEMENT
7. The United States has incurred costs
for the response activities performed at the
Hardage site by EPA Headquarters' em-
ployees, in the form of payroll expenses of
those employees, in the amount of at least
S49.795.S1. "
8. The United States has incurred costs
of at least 59.273.71 for the travel expenses
of EPA Headquarters employees traveling
to perform response activities at the Hard-
age site.
9. EPA Region VI employees have per-
formed response activities at the Hardage
site.
10. The United States has incurred
costs for the response activities performed
by Region VI employees at the Hardage
site of at least $288.160.95 in payroll ex-
penses for those employees.
11. The United States has incurred
costs of at least $4.158.65 in amounts paid
by Region VI to private vendors (exclusive
of travel expenses of Region VI personnel)
in connection with response activities of
Region VI personnel at the Hardage site.
12. Region VI personnel have traveled
to perform response activities at the Hard-
age site.
13. The United States has incurred
costs of at least S3S.92&.24 in paying the
travel expenses of Region VI employees
traveling to perform response activities at
the Hardage site.
1-4. CH2M Hill has conducted response
activities at the Hardage site pursuant to
EPA Contract No. 6Mil-669i. Work As-
signment No. 31-06M08.0.
15. The United States has incurred
costs of at leas i SS46.956.80 in payments to
CH2M Hill for the response activities
CH2.M Hill conducted at the Hardage site
pursuant to Contract No. 68-01-6692,
Work Assignment Nc. 31-06MOS.
16. CH2M Hili has performed response
activities at the Hardage site pursuant to
EPA Contract No. 68-01-7251, Work As-
L'SPC! dispuies the L niicd Stales' listed facts
6-33 alleging "noi all costs asserted are response
costs o: response activities which are not incon-
sistent with t'nt National Contingency Plan.
signments Nos. 106-6608.0, 142-6N08.0. &
167-6L08.0.
17. The United States has incurred
costs of at least $1.326.308.25 in payments
to CH2M Hill for response activities at the
Hardage site conducted pursuant to EPA
Contract No. 68-01-7251, Work Assign-
ment Nos. 106-6608.0. 142-6N08.0. & 167-
6L08.0.
18. Techlaw, Inc. ("TechLaw") (former-
ly known as Interat has performed re-
sponse activities at the Hardage site pursu-
ant to EPA Contract No. 68-01-6838.
19. The United States has incurred
costs of at least $13.955.38 in payments to
TechLaw for response activities at the
Hardage site conducted pursuant to Con-
tract No. 68-01-6838.
20. TechLaw has performed response
activities at the Hardage site pursuant to
EPA Contract No. 68-01-7104.
21. The United States has incurred
costs of at least $105.552.38 in payments to
TechLaw for response activities conducted
pursuant to Contract No. 68-01-7104.
22. TechLaw has performed response
activities at the Hardage site pursuant to
EPA Contract No. 68-01-7369.
23. The United States has incurred
costs of at least $162.458.57 in payments to
TechLaw for response activities conducted
pursuant to Contract No. 68-01-7369.
24. Jacobs Engineering Group. Inc.
("Jacobs") has performed response activi-
ties at the Hardage site pursuant to EPA
Contract No. 68-01-7351, Work Assign-
ment No. 172.
25. The United States has incurred
costs of at least $313,554.00 in payments to
Jacobs for response activities conducted
pursuant to Contract No. 68-01-7351.
Work Assignment No. 172.
26. Viar and Company ("Viar") and con-
tract laboratories participating in EPA's
Contract Laboratory Program have per-
formed response activities at the Hardage
site.
and/or to the extent the\ are indirect costs."
USPCI's Response at 2. However. t'SPCI pro-
vided no affidavits or evidence to support this
assertion as required b> Fed.R.Civ.P. 56(e}.
-------
Bfrfe"'- ••'•
s-sfw--,- -
,'*•
*
21. The United
costs of at least $433.425.87 in payments to
Viar and contract laboratories participating
in EPA's Contract Laboratory Program for
response activities conducted at the Hard-
age site. „
28. DOJ personnel have performed re
sponse activities at the Hardage site.
29. The United States has incurred
costs of at least $405.035.00 in payroll ex-
penses for the response activities conduct-
ed at the Hardage site by DOJ personnel.
30. DOJ has contracted with private
vendors to perform response activities at
the Hardage site.10
31. The United States has incurred at
least $1.438.638.00 in payments to private
vendors which have performed response ac-
tivities at the Hardage site under contract
with DOJ."
United States' Brief at 2-8: HSC's Re-
sponse Brief at 2-24: USPCI's Response
Brief at 2: Stock Yards' Brief at 2.
" III. AUTHORITY FOR AWARDING
RESPONSE COSTS
In December of 1980. Congress enacted
CERCLA. 42 U.S.C. §§ 9601-9675. "to initi-
ate and establish a comprehensive response
and financing mechanism to abate and con-
trol the vast problems associated with
abandoned and inactive hazardous waste
disposal sites." H.R.Rep. No. 1016(1). 96th
Cong.. 2d Sess. 22. reprinted in, 19*0 U.S.
Code Cong. & Admin.News 6119, 6125:
L'nited States r. R. H'. Meyer. Inc.. 869
F.2d 1497. 1500 (6th Cir.1989). CERCLA
was intended " 'primarily w> facilitate the
prompt cleanup of hazardous waste sites
by placing the ultimate financial responsi-
bility for cleanup on those responsible for
hazardous wastes.'" Walls i: Waste Re-
source Corp,, 823 F.2d 977. 981 (6th Cir.
198"i (citation omittedi.
Under Section 104ia) of CERCLA. 42
U.S.C. § 9604la). tht" President of tht Unit-
ed States is authorized to respond with
"remedial" or other "removal" actions
against any actua! or'threatened release of
10. Formerly United States' undisputed fact no.
32.
U.S. v. HARDAGE 1431
Che M 733 F-Supp. 1424 (W.D.OU. 1*89)
States has incurred any .hazardous substance that poses an im-
minent and substantial threat to the public
health and welfare. United States i: R. W.
Meyer. Inc.. 889 F.2d at 1500. In large
measure, the President has' delegated his
authority under CERCLA to the Adminis-
trator of EPA. id. at 1500 n. 7; see Execu-
tive Order No. 12.580, 52 Fed.Reg. 2923
(Jan. 23. 1987), reprinted in 42 U.S.C.
§ 9615 note. pp. 168-72 (1989).
Section 107(a) of CERCLA. 42 U.S.C.
§ 9607(a), imposes liability on four catego-
ries of persons, including owners, "genera-
tors." and "transporters" who selected haz-
ardous waste sites, 'for costs including:
(A) all costs of removal or remedial ac-
tion incurred by the United States
Government or a State or an Indian tribe
not inconsistent with the national contin-
. gency plan;
42 U.S.C. § 9607(aX4XA). This section au-
thorizes the government to recover all
costs of removal or remedial response ac-
tions. United States v. R.W. Meyer, Inc..
889 F.2d at 1500.
Crucial terms within this cost provision
have been broadly defined elsewhere in
CERCLA. The terms "remove" or "remov-
al" are defined in definitional section
9601(23) as follows: •
The terms "remove" or "removal"
means [sic] the cleanup or removal of
released hazardous substances from the
environment, such actions as may be nec-
essary |sic] taken in the'event of the
threat of release of hazardous sub-
stances into the environment, such ac-
tions as may be necessary to monitor.
assess, and evaluate the release or threat
of release of hazardous substances, the
disposal of removed material, or the tak-
ing of such other actions as may be nec-
essary to prevent, minimize, or mitigate
damages 10 the public health or welfare
or to the environment, which may other-
wise result from a release or threat of
release.. The term includes, in addition,
without being limited to ... action taken
under section 9604(b) of this title....
tl. Formerly United States' undisputed fact no.
33.
-------
1432
733 FEDERAL SUPPLEMENT
42 U.S.C. § 9601<23t (footnote omitted).
The section %04. See State of.\'.Y. r. General Elec.
Co.. 592 F.Supp. 291. 298 (N.D.N.Y.1984)
("initial response costs ... are clearly au-
thorized as costs of response under section
101(23). 42 U.S.C. § 9601(23)."); United
States v. Wade, 577 F.Supp. 1326. 1333 n. 4
(E.D.Pa.1983) (cost of "investigating, moni-
toring, testing, and evaluating the situation
at the Wade site ... is recoverable as a
cost of removal."); United States r. Con-
servation Chem. Co.. 619 F.Supp. 162, 186
(W.D.Mo.1985).
Courts have also held Section 104(b) en-
titles the United States to recover its litiga-
tion costs from liable panics. SEPACCO.
579 F.Supp. at 851 ("the Court finds that
under CERCLA. the defendants are jointly
and severally liabk for. and the plaintiff is
entitled to recover, all litigation costs, in-
cluding attorney fees, incurred by plain-
tiff."); United States r. South Carolina
Recycling £• Disposal. Inc. ("SCRPD. 653
F.Supp. 984, 1009 (D.S.C.1984) (holding the
United States can recover litigation ex-
penses), affd in part and vacated in part
in United States r. Monsanto Co.. 85? F.2d
160 (4th Cir.1988). cert, denied. — U.S.
, 10R S.Ct. 3156. 104 L.Ed.2d 1019
(1989); United States i: Conservation
Chem. Co., 619 F.Supp. at 186 (following
\EPACCO).
Courts have emphasized that liability ex-
tends to ALL response costs. United
States r. R.W. Meyer. Inc.. 889 F.2d at
1504 These costs also include enforce
.ment costs and administrative expenses.
SCRDl. 653 F.Supp. at 1009. In addition.
the United States has also been awarded
indirect costs. United States r. R. H'. Mey-
er, Inc. 889 F.2d 1497, 1501 (6th Cir.1989).
IV. BURDEN OF PROOF ON
RESPONSE COSTS
(61 As staled above, pursuant to section
107(aH4XA> of CERCLA. defendants found
-------
m
U.S. v. HARD AGE
Cite u 713 F-Supp. 1424 (W.D.Okl. 1W9)
1433
liable must pay "all costs of removal or
remedial actions incurred by the United
States Government ... not inconsistent
with the national contingency plan." 42
U.S.C. f 9607(aX4HAl (emphasis added).
The National Contingency Plan ("N.C.P."),
40 C.F.R. Part 300-300.71, was promul-
gated pursuant to Section 9605 of CERC-
LA. 42 U.S.C. § 9605. The N.C.P. is the
EPA regulation which establishes proce-
dures for selection of, response actions.
"As long as the actions taken by the
government were in harmony with the
N.C.P.. the costs incurred pursuant to
those actions are presumed to be reason-
able and therefore are recoverable." \'EP-
A CCO. 579 F.Supp. at 851.
Courts have determined that the defen-
dants bear the burden of proving that the
response costs sought by the United States
are inconsistent with the N.C.P. \EPAC-
CO. 810 F.2d at 747. In attempting to
establish the United States' response ac-
tion? are inconsistent with the N.C.P.. the
defendants must demonstrate that the
agency's choices of response actions wen?
arbitrary and capricious. Id. at 746: Unit-
ed States r. Ward. 618 F.Supp. 884. 900
.
Where appropriate, courts have upheld
summary judgment on response cost
claims. United States r. R. H'. Meyer. Inc.
889 F.2d 1497, 1505 (6th Cir.l9S9):'.SCV?£>/,
653 F.Supp. at 984.
V. ANALYSIS AND RESOLUTION
A. Response Costs. Excluding Depart-
ment of Justice Indirect Costs
that the defendants owe $5,441,201.25 in
EPA direct payroll and travel costs for
both EPA headquarters and Regional VI
staffs. DOJ's direct enforcement costs and
vendor costs, and contract costs.15 The
documentation includes affidavits of vari-
ous EPA and DOJ employees charged with
accumulating the cost data. See, e.g.. Affi-
davits of Willimiria Pipkin and Nellie
Boone. United States' Brief at Exs. A & B.
The affidavits are supported by summaries
of cost data accumulated in connection with
the Hardage site, and the source of the
data. For instance, the payroll for EPA
headquarters is kept based on time cards
and time sheets which were coded into a
computer program designed specifically for
Hardage. See United Stales' Brief at Ex.
A. For the contract costs, the United
States also provided affidavits and cost
summaries which refer to paid invoices,
cancelled checks and letter reports of con-
tractors to support the contract cost re-
quests." The Court has reviewed all of
the documentation offered in support of
the United States' response cost claim and
finds that the United States has presented
a prima facie case of its entitlement to
response costs in the amount of $5.441.-
201.25.
Once the United States presented this
prima facie case, under Fed.R.Civ.P. 56 the
burden then shifted to the defendants to
show -the United States' response costs
were inconsistent with the N.C.P.. or were
not response or remedial costs incurred in
connection with the Hardage site. \EP-
ACCO. 810 F.2d at 747.
[7] The United States submitted exten- HSC attempted to create fact disputes
sive documentation ir. support of it? claim concerning each category of United States'
12. The categories of costs included payroll and
travel, expenses for the EPA headquarters staff.
payroll and travel expenses for the EPA Region
VI staff, site sampling and inspection, installa-
tion of groundwater monitoring wells, prelimi-
nary assessment and site investigation, remedial
investigation and feasibility study, sampling..
aeria! photography, evidence audits. DOJ litiga-
tion support, document production, and techni-
cal assistance. See affidavit of Wiliimma Pip-
km. Untied States Brief ai Ex. A.
13. Up until 1985. the EPA did not require the
contractors lo submit site-specific invoices. The
contractors submitted letter reports. However.
in further support of the contract cost' figures
prior to 1985. the United Stales submitted affi-
davits of the project managers at Hardage who
detailed exactly what the job assignments were
for the contractors, and that the project manag-
ers personally, reviewed all of the progress re-
ports by these contractors. See affidavits of
Alan Tavenner and Barry Simmons. United
Staie> Brief at Exs. D & F.
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1434
733 FEDERAL SUPPLEMENT
response costs. HSC asserted anywhere
from three to seven reasons why liability
for each cost category was disputed, giving
a-total of ten separate reasons. A legend
of the alleged reasons and a grid sheet
showing which of the ten reasons were
asserted as to each cost category are at-
tached to this Order as Appendices A & B.
In support of its position, HSC attached the
affidavits of Richard Bost and Thomas Ma-
tunas. HSC Response Brief at Exs. A & B.
The affidavits of Bost and Matunas create
no genuine issues of material fact relating
to the award of response costs, other than
the DOJ indirect costs. For the reasons
set forth below the affidavits raise no gen-
uine issues of material fact as to whether
(a) United States' costs are inconsistent
with the N.C.P., or (b) such costs constitute
response or remedial costs incurred in con-
junction with the Hardage site.
[8] HSC first alleges the United States
should be denied the right to recover cer-
tain cost categories because the costs were
incurred during a period when HSC was
excluded from knowledge or participation
in response or remedial activities at Hard-
ape." In United States r. .Vottolo. 695
F.Supp. 615 ID.N.H. 19881. defendants
raised a similar argument urging the Unit-
ed States should be barred from recovering
any response costs. There the district
court rejected the argument stating "the
government has no affirmative duty to con-
sult with private panics before undertak-
ing response actions." Id. at 629. The
Court finds as a matter of law the United
States was under no duty to consult with
these parties before undertaking response
actions. Even if the facts alleged in HSC's
14. USPCI makes, (his same argument but rea-
sons ii to be a showing lhai the government's
response action? were capricious. L'SPCt's Re-
sponse'ai f^-7. The Court rejects this contention
for the reasons set forth in this paragraph.
15. I'SPCJ argues the United Slates selected and
pursued a remedy which is inconsistent with the
N.C.P USPCI's Response at 7-S. USPCI alleges
the United Slates failed to conduct a remedial
investigation as required by 40 C.F.R. 300.68td).
In addition, USPCI contends the United States
failed to follow appropriate procedures in per-
forming its feasibility stud} and selection of
affidavits are true, this would not be a
valid basis for denying cost recover,'.
19] HSC next challenges certain cost
categories, claiming certain tasks were un-
necessary or improperly performed, the
data was unacceptable or unusable, or the
results were not useful to remediation of
Hardage. HSC also argues that certain
costs were incurred for tasks that did not
contribute additional data at the site, did
not advance the evaluation of remedial al-
ternatives, nor yield information . upon
which EPA could make its response deci-
sions. For those reasons, HSC claims the
United States should be denied cost recov-
ery. As stated earlier, the United States is
entitled to recover all response costs at the
Hardage site not inconsistent with the
N.C.P. United States v. R. W. Meyer. Inc.,
889 F.2d at 1504. HSC has the burden of
showing the challenged costs are inconsist-
ent with the N.C.P., or were not incurred in
connection with the Hardage site. To suc-
cessfully establish that the United States'
response actions are inconsistent with the
N.C.P.. HSC must demonstrate the United
States' choice of response actions were ar-
bitrary and capricious. NEPACCO, 810
F.2d at 748. HSC failed to produce any
evidence in response to the summary judg-
ment motion demonstrating the United
States', actions were inconsistent with the
N.C.P. Nor did the conclusionary affida-
vits filed by HSC adequately challenge the
United States' assertions that the costs in
question were incurred in connection with
the Hardage site.13 HSC's arguments re-
garding the efficiency or redundant effica-
cy of the United States' actions do not bar
summary judgment.
remedy. USPCI presents no affidavits or evi-
dentiary materials to support these arguments.
USPCI merely argues that EPA's abandonment
of the selected remedy supports an inference
that the remedy is "both technically and proce-
durally flawed." USPCI s Response at 8. USP-
CI had the burden of presenting evidence to
show these actions were inconsistent with the
N.C.P. Dan India, v. Piunken Co. of Okla., Inc..
704 F.2d 496. 498 OOth Cir.I9S3t; see Lake
Hefner Open Space Alliance v. Dole. 871 F.2d
943, 945-46 (10th Cir.1989). li failed to do so '
J
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[10]
U.S. v. HARDAGE 1435
Clie •» 733 FAupp. 1424 (W.D.Okl. 1989)
'HSC also attempts to create a fact ument that the purposes of some of these
dispute claiming certain contract costs may
not represent the final, audited amounts
the United States will actually incur with
respect to the contract tasks performed."
The United States responds that it has
agreed with HSC to refund any subsequent
reimbursements from contractors, based on
later audits or negotiations. See United
States' Reply Brief at Ex. C, T 5. The
United States agiees the granting of any
summary judgment on response costs
should be subject to this agreement. For
that reason, the Court finds HSC has failed
to create a genuine fact dispute on this
issue that might bar the granting of sum-
mary judgment, and that any order for
recovery of response costs will direct re-
funds" if appropriate.
[11J HSC next opposes summary judg-
ment by contending a fact dispute exists as
to whether certain costs were incurred in
compliance with federal procurement laws
and regulations. HSC provides the Court
no authority showing that this factor is to
be considered in awarding response costs.
Nor does HSC provide any evidence that
there was any violation of federal procure-
ment laws in connection with the Hardage
site. It is not this CourtV role to make an
independent review of the United States'
procurement processes at the Hardage site
when awarding response costs. The
Court's consideration is limited to whether
the costs were in fact incurred in connec-
tion with the Hardage sitt. and whether
the costs were inconsistent with the K.C.P.
The Court finds this contention of HSC is
without merit.
(12) HSC urges a fact dispute is cre-
ated and summary judgment is improper.
because the United States failed to doc-
16. The United States clarified this issue in-its
repK brief b> explaining that some EPA pa>- .
ments 10 certain contractors are "provisional"
payments, subject to subsequent revision based
on audits or subsequent negotiations between
the contractor and EPA's contracting officer.
United Slates' Reply Brief at 32.
17. On November 22. 198$ this Court entered an
Order denying HSC's motion to compel the pro-
duction of certain government cost documents.
Order. No. CIV-8C-1401-P (W.D.Okia. Nov 22.
costs were for response activities at the
Hardage site. The Court has reviewed the
affidavits filed by the United States, and
finds the United. States has presented a
prima facie case that the response costs
were incurred at the Hardage site. Pursu-
ant to Fed.R.Civ.P. 56 and the caselaw
interpreting CERCLA response costs, the
burden then shifted to the HSC to show the
costs were not incurred at the Hardage
site, and the costs were inconsistent with
the N.C.P. HSC failed to produce any evi-
dence to meet this burden. The affidavits
supporting HSC's contention were merely
conclusionary, raising no genuine issue of
material fact within the meaning of fed.R.
Civ.P. 56. Luekett v. Bethlehem Steel
Corp.. 618 F.2d 1373, 1380 & n. 7 (10th
Cir.1980). The Court thus finds that this
contention is also without merit.
1131 Finally, HSC argues a fact dispute
is created because the United States failed
to produce adequate documentation for
HSC to determine what portion of these
costs were Hardage site response activities.
HSC continues to argue here, as it did in its
motion to compel, that it has inadequate
documentation due to the United States'
failure to supply certain requested doc-
uments. The Court has reviewed the docu-
mentation provided by the United States in
support of this motion for summary judg-
ment. As earlier stated, the Court find?
the United States has presented a prima
facie case. There was ar. obligation on the
part of HSC, if it intended to challenge
these response costs, to take appropriate
action to obtain the necessary evidence. It
was also incumbent upon HSC to present
the evidence in response to this motion for
summary judgment. HSC failed to do that
here.17 The Court finds HSC failed to pro-
|98«. docket no. 2261). The Order recognized
thai HSC had had notice that the United States
was seeking reimbursement from the defen-
dants for "all investigatory, enforcement, and
other response costs." Complaint at T 1 * C.
No. CIV-86-I401-P (\V.D.Okla. June 25. 1986).
The Order further noted HSC waited until one
month before the commencement of this trial to
try to compei the United States to comph with
HSC's production requests. HSC failed to file
any Fed.R.Civ.P. S6(f) request. This Court's
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1436
733 FEDERAL SUPPLEMENT
duce any evidence to sustain its burden on
this issue.
Lastly, both Stock Yards and HSC con-
tend summary judgment on the United
States' response cost claim is precluded
because of the defendants' counterclaims
and/or affirmative defenses which are still
pending. Stock Yards' Response at 2-3;
HSC's Response at 25. Stock Yards ar-
gues the response costs sought by the
United States are included in the Slock
Yards' counterclaim for contribution.
Stock Yards' Response at 2. On November
22, 1989, this Court entered an Order dis-
missing: the defendants' (including Stock
Yards') third and fourth counterclaims for
contribution and indemnity. Order Grant-
ing United States' Motion to Dismiss Third
and Fourth Counterclaims for Contribution
and Indemnity. No. CIV^6-1401-P (W.D.
O'kla. Nov. 22. 1989). Because Stock
Yards' counterclaim for contribution is no
longer pending, the Court finds the Stock
Yards' contention to l>e without merit.
[14] In considering HSC's contention
concerning its affirmative defenses, the
Court thoroughly reviewed the stipulation
between the United States and the majority
of the HSC defendants filed September 2,
1989. .Stipulation for Entry of Judgment
of Liability ("Stipulation"), No. CIV-8S-
1401-P (W^D.Okla. Sept. 2. 1988. docket no.
1428). The participating defendants stipu-
lated as follows:
The Participating Defendants reserve
their right to assert all defenses and
counterclaims that may be used to estab-
lish Plaintiff's liability. Such reservation
of defenses does not include reserving
the right to assert any defenses as af-
firmative defenses to avoid the liability
stipulated herein.
Stipulation at 3. T 2.
However, the participating defendants
reserved certain rights in the Stipulation as
follows:
-To conies: the entitlement to any costs.
including without limitation, the amount
and types thereof, and damages or other
January 20, IW scheduling order specifically '
noted tha: agreed discovers extensions would
not be permitted to adverseK impact dispositive
monetary relief that may be recovered
from the Participating Defendants, and
to pursue an opportunity for mixed fund-
ing
Stipulation at 3, H Sa-
in response to HSC's argument that their
affirmative defenses bar the entry of sum-
man- judgment, the United States contends
that those defendants which have stipu-
lated to section 107 liability in this case
have waived any affirmative defenses they
may have had to liability for the United
States' response costs. United States' Re-
ply Brief at 24.
It is clear from the Stipulation that HSC
reserved the right to contest the United
States' entitlement to these response costs.
However, as reasoned above, the time for
HSC to contest these costs was in response
to this motion for summary judgment.
Once the United States presented a prima
facie case for its response costs claim, pur-
suant to Fed.R.Civ.P. 56, the burden shift-
ed to HSC to present affidavits and docu-
mentation to substantiate HSC's affirma-
tive defenses. HSC wholly failed to
present such materials or evidence. HSC's
Response Brief at 25-26. Accordingly.
HSC's allegedly pending affirmative de-
fenses do not bar the entry of this sumrmi-
ry judgment.
As to the pending counterclaims, as stat-
ed above, the Court dismissed the defen-
dants' counterclaims for contribution and
indemnity on November 22, 1989. Order
Granting United States' Motion to Dismiss
Third and Fourth Counterclaims for Contri-
bution and Indemnity. No. CIV-86-1401-P
(W.D.Okla. Nov. 22! 1989). Accordingly,
because these two counterclaims are no
longer pending, they provide no basis for
denying summary judgment.
[15] Also, on November 22. 1989. the
Court entered an Order denying the United
States' motion to dismiss the defendants'
fifth counterclaim for recoupment. Order
Denying United States' Motion to Dismiss
Fifth Counterclaim for Recoupment. No.
motions. Order at S, No. C!V-St>-1401-P (W.D-
Okla. Jan. 20. 1989).
-------
U.S. v. HARDAGE
Ctle u 733 F-Supp. 1424 (W.D.OU. IW)
1437
I*'-
I
CIV-86-1401-P (W.D.Okla. Nov. 22. 1989).
However, the Order expressed this Court's
concern regarding the "alleged nexus or
common denominator between the relief
sought by the government and the precise
nature of the defendants' recoupment
claim." Id. at 3. Despite the continued
viability of HSC's recoupment counter-
claim, to successfully defeat summary
judgment for the United States' response
cost presented herein. HSC had the burden
under Fed.R.Civ.P. 56 to present evidentia-
ry materials to prove the existence of fact
disputes relating to the recoupment coun^ f gQ-21
terciaim. HSC's brief provides neither a
citation to evidentiary affidavits nor other
materials required to meet this burden.
HSC's Response Brief at 25-26. Accord-
ingly. HSC's pending recoupment counter-
claim does not bar the entry of this summa-
ry judgment.
For the above reasons, the Court finds
the L'nited States presented a prima facie
case for-partial summary judgment on the
response costs incurred by the United
States in connection with the Hardage site
in the amount'of $5.441.201.25. The bur-
den then shifted to the defendants to show
these costs were inconsistent with the
N.C.P.. \EPACCO. 810 F.2d at 747. or to
prove the costs were not incurred at the
Hardage site. As shown above, the defen-
dant; totally failed to meet this burden.
Accordingly, the United States' motion for
partial summary judgment should be
GRANTED on the response costs incurred
by the United States in connection with the
Hardage site in the amount of So.441.-
201.2-5
rect costs also include indirect labor costs
(for example, attorney and paralegal ad-
ministrative time, secretarial support, ac-
counting support, record keeping and time
keeping), compensated absences (for exam-
ple, vacation, holiday, and sick time), fringe
benefits, and training. United States'
Brief at Ex. K. p. 3. In support of this cost
request the United States attached the affi-
davit of C.P.A. Patrick McGeehin. which
describes the. methodology used to allocate
these indirect costs to the Hardage site.
United States' Brief at Ex. K, p. 3; Brief at
B. Department of Justice's Indirect'
The United States also seeks an award of
response costs for the DOJ's indirect costs
in the amount of $850,864.00. These indi-
rect costs are costs which are generally
necessary to support the functioning of
DOJ Land and Natural Resources Division
professional personnel in their case work.
but which are not allocated directly to spe-
cific cases. Those costs include the cost of
office space, utilities, and supplies. United
State? Brief a: 20. In addition, the indi-
M6) HSC's response concerning DOJ's
indirect costs is supported by the affidavit
of Thomas Matunas. HSC's Response
Brief at Ex. A. The response raises four
points. Matunas asserts that approximate-
ly $149.000.00 of DOJ's indirect costs are
Standard Level Users Charges (SLUG).
Matunas argues these SLUG charges in-
clude rent paid by DOJ on government-
owned buildings and an internal "phantom
profit" amount for the General Sen-ices
Administration ("GSA"). Matunas con-
cludes it is unreasonable to charge the HSC
for such "phantom rental" charges.
In response to the SLUC assertion, the
United States attaches the affidavit of
Manfred Van der Walde. See affidavit of
Van der Walde, United States* Reply. Van
der Walde's affidavit indicates that Con-
gress has authorized GSA to finance the
property management activities for govern-
ment agencies, including DOJ. The agen-
cies then pay the GSA for these activities
which include- rent, heat and other utilities.
cleaning, and maintenance. The United
States argues these are actual costs to
DOJ. The Court agrees. The Court finds
that as to the SLUC charges, HSC has
failed to create a genuine issue of material
fact concerning the United States' right to
these costs.
[IT]. HSC next argues DOJ's indirect
costs violate interagency agreements be-
tween DOJ and the EPA. Matunas con-
tends the inieragency agreements between
DOJ and EPA provide only for recovery of
direct charges. Matunas asserts $329.-
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-------
1438
733 FEDERAL SUPPLEMENT
000.00 of the 1987 indirect costs for DOJ
were allocated to the Hardage site in viola-
tion of these agreements, and such costs
are not reimbursable. The United States
responds these interagency agreements are
irrelevant. Further, the United States ar-
gues as long as these indirect costs were,
in fact, incurred, they should be reim-
bursed. The Court finds these indirect
costs were, in fact, costs to the DOJ. The
interagency agreements only determine
whose budget, whether EPA or DOJ, ini-
tially absorbs the costs. The agreements
in no way affect the right of the United
States to obtain reimbursement for these
response costs. The Court finds HSC has
also failed to create a genuine issue of
material fact concerning these interagency
agreements.
[18.191 HSC next contends, through
Matunas' affidavit. DOJ's indirect costs of
$850.864.00 for 1987 and 1988 include indi-
rect labor costs at a ratio of 1 to 1 to direct
labor costs. Matunas asserts the Hardage
site has been assessed almost twice the
hourly rat* of DOJ employees when they
work at the Hardage site. Matunas argues
this results in an allocation to the Hardage
site of $370,000.00 in indirect labor costs
for activities thai have no direct benefit to
the Hardapt site. Matunas states in his
expert opinion, this- high proportion of non-
productive labor costs is excessive, and in-
dicates charges are being made to the
Hurdage site for work unrelated to the
Hardape site. HSC Brief at Ex. A. p. 9.
Matunas further points out. in documents
attached u> his affidavit, that over time, the
United States' witness McGeehin has
changed the factor for additional super-
fund overhead rate from 48.027' to o'7' for
the same lime period. HSC argues that
McGeehin, in his affidavit supporting sum-
man1 judgment for response costs, makes
no mention of this additional superfund
overhead, although he includes it in the
indirect costs allocated to the Hardage site.
HSC Brief at Ex. A, p. 9.
The United States responds by stating
McGeehin's affidavit makes clear this addi-
tional superfund overhead rate represents
" 'non-case specific charges related only to
Superfund cases' (i.e., charges which are
nqt assigned to individual cases, but which
do relate only to Superfund cases, rather
than to all cases in the Lands Division)."
United States' Reply Brief at 22. The Unit-
ed States' only response to the "excessive"
statements of Matunas is to say these
statements are conclusionary.
Finally, HSC points out from a legal
standpoint that the cases are divided on the
issue of indirect costs. Relying on United .
States T. Ottati & Goss. 694 F.Supp. 977
(O.K.H.1988). HSC urges the Court to deny
the United States' request for DOJ's indi-
rect costs.
The Court has thoroughly reviewed the
few cases which have considered the indi-
rect cost issue and finds the cases allowing
recovery of indirect costs to be persuasive.
In United States i: Ottati & Goss, 694
F.Supp. 977, the court denied EPA's recov-
ery of indirect costs for rent, utilities, sup-
plies, clerical support, and other overhead
expenses. There, the court determined
that indirect costs included expenses
sary to operate the Superfund
generally, and could not be attributed
rectly to a particular site. For that reason,
the court awarded no indirect costs to the
United States. However, because the Ot-
• tati £ Goss court offered no additional
explanation for its decision, the Court finds
the case to be of limited value. In con-
trast, the Sixth Circuit recently addressed
the indirect cost issue, allowing the United
States to recover indirect costs. United
States r. fl.H'. Meyer, Inc., 889 F.2d at
1503. The Sixth Circuit held that indirect
costs are attributable to response efforts.
because they represent a portion of over-
head expenses needed to . support the
government's direct response activities.
Id. at 1503.
The Court concurs with the reasoning of
Meyer, and finds that the United States'
indirect costs associated with the Hardage
site may be recovered as response costs
under Section 107(a«4)(A). However, on
the basis of the current record before the
Court on the motion for'partial summary
judgment, the Court cannot
whether the United States' requested
-------
. U.S. v. HARDAGE
Cite u 733 FSupp. 1424 fW-D.OU. 1989)
1439
indirect costs, particularly in the area of
indirect labor costs, should be awarded.
As with the direct costs, the United States
has presented documentation establishing a
prima facie case for an award of DOJ's
indirect costs in the amount of S850.86-l.00.
!n response to this, HSC filed Matunas'
affidavit attempting to contest the validity
of the United States' indirect cost alloca-
tion. Matunas questions the excessiveness
of the indirect labor costs attributed to the
Hardage site demonstrated by the ratio of
direct to indirect labor costs. In Matunas'
expert opinion, this ratio shows an improp-
erly high amount of indirect costs have
been allocated to the Hardage site which
should not be recoverable from the defen-
dants including HSC. While the Court
views this as a close case, the factual objec-
tions based on Matunas' expert opinion
raise a genuine issue of material fact which
precludes the granting of summary judg-
ment on this issue. Accordingly, the Unit-
ed States' motion for partial summary
judgment on DOJ's indirect costs in the
amount of $850.864.00 should be DENIED.
VI. DECLARATORY JUDGMENT FOR
FUTURE RESPONSE COSTS
f20] The United States seeks a declara-
tory judgment of the liability of these de-
fendants for future response costs associ-
ated with the 'Hardage site. HSC -re-
sponds, at present, tht amount of the costs
is purely speculative. HSC then asserts,
without authority, that declaratory, sum-
man- judgment is not an appropriate ve-
hicle for deciding unliquidated, future
claims. In .\'EPACCO, 579 F.Supp. at 852.
the District Court of Missouri held that
although the court could not award costs
until they are incurred, the court can pres-
ently determine liability for future costs.
• Accordingly, the United States' motion
for a declaratory judgment for liability for
future response costs associated with the
Hardage sit* except the DOJ indirect costs
shall aiso be GRANTED.
VII. CONCLUSION
For tht reasons stated above, the United
States motion for partial summary judg-
ment for response costs in connection with
the Hardage site in the amount of $5.441,-
201.25 is GRANTED as to all defendants
who have already stipulated to liability or
have been found liable. Should other de-
fendants later be found liable, they also
would be jointly and severally liable for
these same response costs. ' Should later
final, audited figures for contract work at
the Hardage site result in a reduction of
the figures in this Order, the United States
is ordered to refund such amounts. The
United States' motion for summary judg-
ment for DOJ's indirect costs in the
amount of 2850,864.00 is DENIED.
The United States' motion for declarato-
ry judgment for liability for future re-
sponse costs is also GRANTED except for
DOJ's indirect costs.
IT IS SO ORDERED.
APPENDIX A
LEGEND OF HSC OBJECTIONS TO
UNITED STATES' RESPONSE
COSTS
Hardage asserted liability for each cost
category was disputed for the 'following
reasons:
1. The government incurred some of
these costs for tasks performed in a time
period during which it excluded HSC defen-
dants from knowledge of and/or partic-
ipation in activities at the site. (HSC ex-
cluded i
2. The government incurred some of
these costs for tasks performed which, be-
cause they were unnecessary or improperly
performed, produced data which was unac-
ceptable or unusable, or results which were
not useful to remediation of the Hardage
site. < unnecessary (
3. The government incurred some of
these costs for tasks performed which nei-
ther contributed additional data regarding
site conditions, advanced the evaluation of
remedial alternatives, nor yielded informa-
tion upon which EPA has made or could
make its response decisions, (didn't con-
tribute)
4. The government has failed to doc-
ument that the purposes for which some of
these costs were incurred were response
"-^Pr- 1
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-------
1440
733 FEDERAL SUPPLEMENT
APPENDIX A—Continued
activities at the Hardage site, (failed to
document at Hardage)
5. The government has failed to pro-
duce adequate documentation to enable
HSC defendants to determine what portion
of these costs were for response activities
at the Hardage site, (not enough documen-
tation)
6. The government has failed to doc-
ument that these costs represent the final.
audited amounts it actually will incur with
respect to the tasks performed, (not final
figures)
7. The government incurred some of
these costs in a manner which is not in
compliance with its contracting require-
ments and/or applicable laws and regula-
tions, (not in compliance)
8. A portion of the amount claimed in-
cludes items which result in no actual cost
to the government, (not actual cost to
U.S.)
9. The amount claimed includes costs
which are not in accordance with EPA/DOJ
interagency agreements, (violate inter-
agency agreements)
10. The amount claimed includes costs
for work and expenses which neither were
caused by nor benefit response activities at
the Hardage site, (no benefit to Hardage)
-------
U.S. v. HARD AGE
Cite-733 F-Supp. 1424 (W.D.OU. I»W»
1441
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733 FEDERAL SUPPLEMENT
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ST H 6
XIT THE UNITED STATES DISTRICT COURT FOR THX
W1STIWJ DISTRICT OP OKLAHOMA
UNITED STATZS Of AMERICA,
Plaintiff,
V.
ROYAL K. HAADAQI, «t •!.,
AfiVAKCZ CKEKICAL COMPANY ,
•t Ai.,
Xard*g« Storing
and Third-Party
Plaintiffs,
v.
Aico, INC., at al.,
fhird-Party
Dafandanta.
)
)
) Civil Action No. CIV-Stf-1401-P
PLAIKTIPP'S MOTION FOR PARTIAL SUMMARY
JTJfVSIfBvf*" «" «f«*.*-."--
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jnarauant to Hula 5S(a) of tha Fadaral ftulaa of Civil
Procedure, th* Unitad Stttas novas for suaaary judgaant againat
aach of tha dafandanta harain on the iaaua of thair liability
undar saction 107(a)(4)(A) of the Coaprahanaiva Znvironaantal
•
Baaponaa, Coapana*tion and liability Act of 1910 (*tha Act*), 42
D.fl.c. | 9607(a)(4)(A) for raaponaa ooata incurrad by tha Unitad
fitataa aa daaorlbad in Attachment 1 to tha Unitad stataa'
Maaorandua In Support of tftia Notion. Tha Unitad Stataa fubalt*
that for tha raaaona atatad in tha aoooapanyiag Maaorandua in
Support of thia Notion, and on tha basil of that Naaorandua and
tha daclarationa aubalttad aa attachaanta tharato, auaaary
judgaant should ba grar.tad againat aaoh of tha dafandanta, and an
ordar iaauad atating that aach of aaid dafandanta it jointly and
aavarally liabla for all coata liatad in Attaohaant 1, which
total $ 6,292,065.33.
Zn addition, for tha raaaona atatad in tha Haaorandua in
Support of thia Notion, tha Unitad stataa aovaa tha Court for an
ordar granting a daclaratory judgaant pursuant to Xula S? of tha
fadaral Rulaa of Civil Prooadura that dafandanta ara liabla to
tha Unitad Stataa for ita futura raaponaa eoata aaaociatad vith
tha Rardaga aita,
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RICHARD B. STEWART
Ataiftant Attorney Ganartl
Land and Natural Raaourcaa
Division
lyt
ROBSRT I. MYDAHS
United Stataa A^tornay
STIVIN KULLZNS
Aaaiatant Unitad Stataa Attorney
4434 U.I. Courthoui*
Oklahoma City, Oklahoma 73102
JOHW R. BARX2R, Sanlor counaal
AKWA W01X3AST, Junior Attorney
8T8VEK HOVICX,Trial Attomay
Znvirohaantal Znforoaaant faction
Unitad Stataa Oapartaant of
Juatloa
P.O. Sox 7611
Ban Franklin Station
waahington, D.C. 20044
07 COUNfiSLl
VICXJ PATTOK-HUtCB
U.S. Environmental Protaetion
Aganey - Ragion VI
1201 Zla Straat
Dallaa, Taxaa 75370
CKARLI6 da SAILZAK
U.S. Znviron&antal Protaetion
Aganoy
401 M straat, S.v.
fraahington, D.C. 20460
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MAILING CERTIFIGATE
This is to certify that a true copy of the foregoing pleading was
served on each of the parties hereto by mailing the same to them
or to their attorneys of record on the 8th day of September 1989.
assistant U. S. Attorney
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IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
UNITED STATES OF AMERICA, )
)
Plaintiff, )
) Civil Action No. CIV-86-1401-P
v. )
)
ROYAL N. HARDAGE, -et al., )
)
Defendants, )
)
ADVANCE CHEMICAL COMPANY, )
et al., )
)
Hardage Steering . )
Committee Defendants }
and Third-Party }
Plaintiffs, )
)
v. )
)
ABCO, INC. , et al., ) . '
)
Third-Party )
Defendants. )
UNITED STATES' MEMORANDUM IN SUPPORT OF MOTION
FOR PARTIAL SUMMARY JUDGMENT ON RESPONSE COST ISSUES
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I
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STATEMENT OF MATERIAL FACTS"AS TO
WHICH THERE IS NO GENUIHZ ISSUE . . 2
INTRODUCTION . ...... 8
ARGUMENT ........ 10
A. The Statute And The Caselaw Establish That The
United States Is Entitled To Racover All Costs
Incurred In Carrying Out Its Response Actions
10
B. The Response Costs Which The United States Seeks By
This Motion Are Within The Categories Of Costs For
Which The Statute And The Caselaw Authorize Recovery
II
(1) EPA Costs
\
15
(ii) DOJ Costs 19
C. The United States Is Entitled To Recover All Response Costs
Unless Defendants Can Demonstrate That The Response Actions
For Which The United States Seeks Costs Are Inconsistent
with The National Contingency Plan
D, There is No Genuine Issue of Material Fact Regarding the
Costs Incurred by the Government at the Hardage Site
26
E. The Liability Of The Defendants For The United
States Response Costs is Joint and Several
29
CONCLUSION AND PRAYER FOR JUDGMENT ..... 29
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TABLE OF AUTHORITIES
CASES
Citv of Neu Vnr* v. Exxon Corp..
633 F, Supp. 609 (S.D.N.Y. 1986) 14
New York v. General Electric Co..
592 F. Supp. 291 (N.D.N.Y. 1984) 14
Union Petroleum CQ^- v. United States.
651 F.2d 734 (Ct. Cl. 1981) 24
United States v. Conservation Chenieal Co..
619 F. Supp. 162 (W.D. MO. 1985) 14, 23
qnited stataa v.Northeastern Pharmaceutical
and Chemical Co. r*NEPACCO*l,
579 F. Supp. 823 (W.D. Mo. 1984),
aff'd 810 F.2d 726 (8th Cir. 1986),
eert. denied. 108 S. Ct. 146 (1987) passim
United S^ateq v. N.orthernaIrji Platiqq Co. .
685 F. Supp. 1410 (W.D. Mich. 1988),
appeal pending. No. 88-2074 (6th Cir.) 2
United StatesV^ Shell Oil Co..
60S F. Supp. 1064 (D. Colo. 1965} ............ 23
United p.tate* V^. ^outh Carjalirra Recycling
and Diapagal. Inc. tfSCRDI*),
653 F. Supp. 984 (D.S.C, 1986),
aff'd ir^part. vacated in part
in United Stateq v. Moneanto Co..
858 F.2d 160 (4th Cir. 1988),
petition for eert. filed.
57 U.S.L.W. 3603
(U.S. Feb. 24, 1989) (No. 88-1404) . . 14, 28, 29
United States v. Wade.
577 F. Supp. 1326 (E.D. Pa. 1983) .... ^ ...... 14
United States v. Ward. 618 F. Supp. 884,' .
(E.D.N.C. 1985) 23, 24
Proehaska v. Mareoux.
632 F.2d 848
(10th Cir. 1980) 26
Retail Clerks Cnion Local 648
V^ Hufc Pha^npagy. Ing. .
707 F.2d 1030 (9th Cir. 1983) 26
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UNITED STATffS COpF SECTIONS
Federal water Pollution control Act (FWPCA), 33 U.S.c. § 1251 et
seq.: .
section 311 (f) 24, 25
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 CCERCLA*), 42 u.s.c. § 9601 et. seq.:
Section 101(23) (i.9. 42 U.S.C. § 9601(23)] . . 12, 14
Section 101(24) 12
scetion 101(25) 13
Section 104 . 12
Section 104 (b) 12, 14
Section 105 23
Section 107 ....................... passim
107(a) . 14
107(a)(l) through (a)(4) 11
section l07(a)(4)(A) passim
ADMINISTRATIVE^ DOCUMENTS
EPA Record of Decision (November 14, 1986) 16
EPA Technical Assistance Team (*TAT*) Report:
"Battle Creek Croundwater Survey*,
June 1982 . 9
CONGRESSIQVA^ ^EgTfiJATIPF
S. Rep. No. 96-848, 96th Cong. 2d Sess. 13," 98 (1980) .... 10
132 Cong. Rec, S14903 (daily ed. Oct. 3, 198_6) 11
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132 Cong. Rec. S14935 (daily ed. Oct 3, 1986) , 1
CODE OF FEDERAL RECUTATTOfls
National Contingency Plan (NCP) ,
40 C.F.R. Part 300 fit «ag
passim
FEDEBAT. HTTTJS ft?
RULE 100«, red. R. Evid
28
EEDERAL RULES OF CIVIL
RULE 57, Fed. R. Civ. Proc
30
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STATEMENT OF MATERIAL FACTS AS TO
WHICH THERE IS NO GENUINE
1. Hazardous substances are located at the Hardage site.
See Affidavit of Alan Tavenner, Exhibit A to Plaintiff's Motion
for Partial Summary Judgment on Liability filed on June 1, 1989 "
("Liability Motion*).
2. Hazardous substances have been released from the Hardage
site into the soil and groundwater at, around and beneath the
Hardage site. See Affidavit of Alan Tavenner, Liability Motion
Exhibit A; Affidavit of Kirk W. Brown, Liability Motion Exhibit
B.
3. Hazardous substances from the Hardage site have migrated
from the site and have contaminated or threaten to contaminate
the criner Creek/North Criner Creek alluvial aquifer. Affidavit
of. Kirk W. Brown, Liability Motion Exhibit B.
4. The hazardous substances at the Hardage site are
commingled. Affidavit of Kirk W. Brown, Liability Motion Exhibit
B.
5. Each of the defendants to this action is an owner or
operator of the Hardage site, a person who disposed of or
arranged for the disposal of hazardous substances at the Hardage
site, or a person who transported hazardous substances to the
Hardage site for disposal and selected the Hardage site as the
site for disposal of such hazardous substances. See generally
Liability Motion and Exhibits thereto; see this Court's Order of
November 10, 1988, entering stipulations of liability.
2
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6. Environmental Protection Agency ("EPA") Headquarters
employees performed response activities at the Hardage site.1
Declarations of wilhelmina Pipkin (f 8) and Nellie Boone (1 8),
submitted herewith, and attachments thereto.
7. The United States has incurred costs for the response
activities performed at the Hardage site by EPA Headquarters
employees^ in the form of payroll expenses of those employees, in
the amount of at. least $49,795.81. Declarations of Wilhelmina
Pipkin ( 1 8) and Nellie Boone (1 8) ("Pipkin Declaration,*
"Boone Declaration"), and attachments thereto.
8. The United States has incurred costs of at least
$9,273.71 for the travel expenses of EPA Headquarters employees
travelling to perform response activities at the Hardage site.
Boone Declaration, 1 9.
9. EPA Region VI employees have performed response
activities at the Hardage site. Declaration of Bonita King
("King Declaration"), submitted herewith, and attachments
thereto.
1 Throughout this brief and accompanying Attachments, the
United States shall use "at the Hardage site* as shorthand for
"in response to conditions at the Hardage site." The United
States acknowledges that not all of the response activities
conducted by the United states and its contractors and described
herein were actually conducted on location at the Hardage site
(Q.a^,m. analysis of samples taken from the site was performed at
off-site laboratories).
"Response activities* shall be used as shorthand for
"removal and remedial activities."
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10. The United States has incurred costs for the response
activities performed by Region VI employees at the Hardage .site
of .at least $288,160..95 in payroll expenses for those employees.
King Declaration and attachments thereto.
11. The United States has incurred costs of at least
$4,158.65 in amounts paid by Region VI to private vendors
(exclusive of travel expenses of Region VI personnel) in
\
connection with response activities of Region VI personnel at the
Hardage site. King Declaration and attachments thereto.
12. Region VI personnel have travelled to perform response
activities at the Hardage site. King Declaration and attachments
thereto.
13. The United States has incurred costs of at least
$38,928.24 in paying the travel expenses of Region VI employees
traveling to perform response activities at the Hardage site.
King Declaration and attachments thereto.
14. CH2M Hill has conducted response activities at the
Hardage site pursuant to EPA Contract No. 68-01-6692, Work
Assignment No. 31-06M08.0. Declarations of Alan Tavenner (H 8-
10), Stephen Phillips (11 7-11), Barry Simmons (11 7, 8), and
Bonnie Devos (11 7, 8).
15. The United States has incurred costs of at least
$ 846,956.80 in payments to CH2M Hill for the response activities
CH2M Hill conducted at the Hardage site pursuant to Contract No.
68-01-6692, Work Assignment No. 31-06M08. Boone Declaration (1
27), Pipkin Declaration (1. 28), and attachments thereto.
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16. CH2M Hill has performed response activities at the
Hardage site pursuant to EPA Contract No. 68-01-7251, Work
Assignments Nos. 106-6608.0, 142-6N08.0, and 167-6L08.0.
Tavenner Declaration, 11 8, 11-13.
17. The United States has incurred costs of at least
$ 1,326,308.25 in payments to CH2M Hill for response activities
at the Hardage site conducted pursuant to EPA Contract No. 68-01-
7251, Work Assignment Nos. 106-6608.0, 142-6N08.0, and 167-
6L08.0. Boone Declaration, 1 28, and attachment 1 thereto;
Pipkin Declaration, 1 29.
18. TechLaw, Inc. ("TechLaw") (formerly known as Intera) has
performed response activities at the Hardage site pursuant to EPA
Contract No. 68-01-6838. Declaration of Robert H. Laidlaw
('Laidlaw Declaration*) submitted herewith, 11 4-7.
19. The United States has incurred costs of at least
$ 18,955.38 in payments to TechLaw for response, activities at the
Hardage site conducted pursuant to Contract No. 68-01-6838.
Laidlaw Declaration, 1 20A; Pipkin Declaration, 1 22 and
attachments thereto; Boone Declaration, 121 and attachments
thereto.
20. TechLaw has performed response activities at the
Hardage site pursuant to EPA Contract No. 68-01-7104. Laidlaw
Declaration, H 4-7.
21. The United States has incurred costs of at least
$ 105,552.38 in payments to Techlaw for response activities
conducted pursuant to Contract No. 68-01-7104. Laidlaw
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Declaration, 1 2OB; Pipkin Declaration, 1 23 and attachments
thereto; Boone Declaration, 1 22 and attachments thereto.
22. TechLaw has performed response activities at the
Hardage site pursuant to EPA Contract No. 68-01-7369. Laidlaw
Declaration, 11 4-19.
23. The United States has incurred costs of at least
S 162,458.57 in payments to TechLaw for response activities
conducted pursuant to Contract No. 68-01-7369. Laidlaw
Declaration, 1 20C; Pipkin Declaration, 1 24 and attachments
thereto; Boone Declaration, 1 23 and attachments thereto.
24. Jacobs Engineering Group, Inc. ('Jacobs') has performed
response activities at the' Hardage site pursuant to EPA Contract
No. 68-01-7351, Work Assignment No. 172. Tavenner Declaration,
1 15.
25. The United States has incurred costs of at least
$ 313,554.00 in payments to Jacobs for response activities
conducted pursuant to Contract No. 68-01-7351, Work Assignment
No. 172. Declaration of Wiley R. Wright, III, submitted
herewith, and attachment thereto; Boone Declaration, 1 33, and
attachment thereto; Pipkin Declaration, 1 34, and attachments
thereto.
- 26. Viar and Company (*Viar*) and contract laboratories
participating in EPA's Contract Laboratory Program have performed
response activities at the Hardage site. Declaration of Pamela
Werntz Simons ("Simons Declaration"), submitted herewith, 11 12-
16, and Exhibits thereto; Tavenner Declaration, 1 16.
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27. The United States has incurred costs of at least
$ 433,425.87 in payments to Viar and contract laboratories
participating in EPA's Contract Laboratory Program for response
activities conducted at the Hardage site. Simons Declaration, 1.
13, and Exhibits thereto; Boone Declaration, 1 14, and attachment
thereto; Pipkin Declaration, 1 14, and attachments thereto.
•-*
28. United States Department of Justice (*DOJ*) personnel
have performed response activities at the Hardage site.
Declaration of Patrick A. McGeehin, submitted herewith (*McGeehin
Declaration*), 11 7-10; see also Declarations of Anne Hoke-
*
Witherspoon ("Hoke-Witherspoon Declaration*) and Lisa Polisar
("Polisar Declaration*).
29. The United States has incurred costs of at least
$ 405,035 in payroll expenses for the response activities
conducted at the Hardage site by DOJ personnel. McGeehin
Declaration, 11 6-9, and Attachment 1 thereto.
30. The United States has incurred indirect costs of the
response activities performed by DOJ personnel at the Hardage
site. McGeehin Declaration, 11 6-9, and Attachment 1 thereto.
31. The United States has incurred at least
$ 850,864 in indirect costs of the response activities performed
by DOJ personnel at the Hardage site. McGeehin Declaration, 1 6-
9, and Attachment 1 thereto.
32. DOJ has contracted with private vendors to perform
response activities at the Hardage site. Hoke-Witherspoon
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Declaration; Polisar Declaration; McGeehin Declaration, n 6-9
and Attachments 2 and 3 thereto.
33. The United States has incurred at least $ 1,438,638 in
payments to private vendors which have performed response
activities at the Hardage site under contract with DOJ. McGeehin
Declaration, 11 6-9, and Attachments 1, 2 and 3 thereto.
INTRODUCTION.
Plaintiff United States of>America, on behalf of the
United States Environmental Protection Agency ("EPA"), submits
this memorandum in support of its motion for partial summary
judgment against each of the defendants herein. In a prior
motion, filed on June 1, 1989, the United States has sought
summary judgment against several of the defendants in this action
on issues of their liability under Section 107 of the
Comprehensive Environmental Response, Compensation and Liability^
Act of 1980 (TERCLA*) , 42 U.S.C. § 9607. The remaining
defendants herein have'stipulated that they are liable under
Section 107.
The pending motion for summary judgment and the stipulations
of liability establish, based on the undisputed facts, the
liability of all defendants in this action under Section 107 of
CERCLA, 42 U»S.C. § 9607, to reimburse response costs incurred by
the United States in responding to the release and threatened
8
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release of hazardous substances in and about the Hardage site
("the site*), located in Criner, Oklahoma.
By this motion, the United States seeks summary judgment on
a number of issues relating to the specific costs for which
defendants are liable. Specifically, the United States asks this
Court to rule that, as to each of the items of cost described in
Attachment 1 to this brief, the undisputed facts establish the
United States' entitlement to recover those monies, and thus the
United States is entitled to summary judgment and payment of
those costs.
*
The United States does not now seek summary judgment against
Defendants as to all the costs for which the United States seeks
reimbursement under CERCLA. This case is proceeding to trial set
for November 27, 1989. The United States has limited the issues
upon which it seeks summary judgment in order to present clear
and straightforward issues upon which there is no colorable
dispute as to facts or law and upon which the Court could enter a
ruling prior to the November 27, 1989, trial date.
There is a basis for summary judgment as to the remaining
•costs; however, 'the United States has determined that it would be
more efficient to attempt to narrow the issues between the
parties with respect to these costs by further discussions with
defendants prior to trial than to seek a summary adjudication of
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those issues at this time/ Accordingly, the United states will
reserve its claim to those remaining costs for trial (to the
extent that defendants and the United States cannot reach
agreement on that claim prior to trial).
ARGUMENT
A. The Statute And The Caselaw Establish That The
United States Is Entitled To Recover All Costs
Incurred In Carrying Out Its Response Actions
From the inception of the Superfund program. Congress
sought to place the financial burden of hazardous waste cleanups
and associated investigation and enforcement costs directly on
those who created the threat to the environment posed by
uncontrolled hazardous waste sites. Congress intended that the l\
parties who benefited from the creation of a hazardous waste
site, rather than the public, should bear all costs incurred by
the government in actions taken in response to.conditions at such
sites. See, e.g... S. Rep. No. 96-848, 96th Cong. 2d Sess. 13,
98 (1980): '
[Sjociety should not bear the costs of
protecting the public from hazards produced
in the past by a generator, transporter,
consumer, or dumpsite owner or operator who
has profited or otherwise benefited from
commerce involving these substances and now
wishes to be insulated from any continuing
responsibilities from the present hazards to
society that have been created.
10
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To achieve its purpose, Congress, among other things,
enacted the Section 107 strict liability and cost recovery
.provisions. In the words of Senator Stafford: " -
The theory underlying Superfund's liability
scheme was and is, that the Government should
obtain the full costs of cleanup ...
132 Cong. Rec. S14903 (daily ed. Oct. 3, 1986) (emphasis added).
See also 132 Cong. Rec. S14935 (daily ed. Oct 3, 1986).
Section 107(a)(4)(A) of CERCLA states that the parties
described in Section 107(a)(l) through (a)(4) are liable for 'all
costs of removal or remedial action incurred by the United States
... not inconsistent with the national contingency plan.* 42
U.S.C. § 9607(a)(4)(A). As the court stated in United States v.
Northeastern Pharmaceutical and Chemical Co. f"NEPACQO* 1 , 579 F.
Supp. 823, 850 (W.-D. Mo. 1984) , aff'd in part and rev'd in part
on other grounds. 810 F.2d 726 (8th Cir. 1986), cert.den. — U.S.
—, 108 S.Ct. 146 (1987), "removal or remedial action[s]* include
the. following:
(a) Investigations, monitoring and testing to
identify the extent of danger to the public
health or welfare or the environment.
(b) Investigations, monitoring and testing to
identify the extent of the release or
threatened release of hazardous substances.
(c) Planning and implementation of a remedial
action.
(d) Recovery of the costs associated with the
above actions, and to enforce the provisions
of CERCLA, including.the costs.incurred for
the staffs of the EPA and the Department of
Justice.
11
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The NEPACCO court's description of the types of
response costs the Government is entitled to recover is firmly
based on the plain language of the statute. CERCLA explicitly
authorizes the United States to recover its investigative,
administrative and enforcement costs, as well as the costs of the
actual implementation of a remedial action. As noted above,
Section 107, 42 U.S.C. § 9607, allows for the recovery of 'all
costs of removal or remedial action ..." Section 104 of CERCLA,
42 U.S.C. § 9604, authorizes EPA to take "removal* or "remedial*
actions whenever there is a release or substantial threat of
release of a hazardous substance. "Remove* or "removal* is
defined in the Act to include, among other items, investigative
costs, described as:
. . . such actions as may be necessary to
monitor, assess, and evaluate the release or
threat of release of hazardous substances
. . . The term includes, in addition,
without being limited to ... action taken
under Section 9604(b) of this title . . .
42.U.S.C. § 9601(23).2 In addition, as noted above, Section
104(b) of CERCLA provides that:
"Remedy* or 'remedial action* is defined as:
. . . those actions consistent with permanent
remedy taken instead of or in addition to
removal actions in the event of a release or
threatened release of a hazardous substance
into the environment .... The term
includes, but is not limited to, such actions
at the location of the release as ... any
monitoring reasonably required to assure that
such actions protect the public health and
welfare and the environment ...
42 U.S.C. § 9601(24).
12
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the President may undertake such planning,
legal, fiscal, economic, engineering,
architectural, and other studies or investi-
gations as he may deem necessary or appro-
priate to plan and direct response actions,
to recover the .costs thereof, and to enforce
the provisions of this Act.
The definition of "respond* or "response" includes "remove,
removal, remedy, and remedial action, all such terms (including
the terms 'removal' and 'remedial action') including enforcement
activities related thereto." 42 U.S.C. § 9601(25).
Under the explicit language of the statute, then, the
United States is entitled to recover the costs of investigating
and monitoring releases of hazardous substances ("such actions as
may be necessary to monitor, assess and evaluate the release
. . . of hazardous substances"), the costs of designing a remedy
("the President may undertake such planning . . . engineering,
architectural, and other studies or investigations ... to plan •
and direct response }actions"), and the legal and enforcement
expenses incurred in seeking to recover its costs from a
responsible party ("the President may undertake such planning,
legal . . . and other studies and investigations to plan and
direct response actions, to recover the costs thereof, and to
enforce the provisions of the Act" (emphasis added).
In accordance with these statutory provisions, numerous
Federal courts have held that the United States is entitled to
13
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recover its investigative costs from parties liable under Section
107(a).3 Similarly, courts have held that Section 104(b)
explicitly entitles the United States to-recover its
costs from liable parties.4 Costs of administration
with cleanups and related enforcement efforts are also
recoverable.5
3 See C j..fry__of New York v .Exxon Corp. . 633 F.. Supp. 609
(S.D.N.Y. 1986) (recoverable response costs include costs of
collecting and analyzing ground water samples, hydrogeological
studies and remediation study); State of New York v. General
Electric Co.'. 592 F. Supp. 291, 298 (N.D.N.Y. 1984)
(investigation and initial "response costs* are clearly
authorized as costs of response under section 101(23), 42 U.S.C
§ 9601(23)); United States v. Wade. 577 F. Supp. 1326, 1333 n.4
(E.D. Pa. 1983) (cost of "investigating, monitoring, testing, a:
evaluating the situation at the Wade site ... is recoverable .
a cost of removal.*); United States v. Conservation Chemical Co..
619 F. Supp. 162, 186 (W.D. Mo. 1985).
4 NEPACCO. 579 F. Supp. at 851 (*the Court finds that
under CERCLA, the defendants are jointly and severally liable
for, and the plaintiff is entitled to recover, all litigation
costs, including attorney fees, incurred by plaintiff.*); United
States v. South Carolina Recycling and Disposal. Inc. ("SCRDI*),
653 F. Supp. 984, 1009 (D.S.C. 1986), aff'd in part, vacated in
part in United States v. Monsanto Co.. 858 F.2d 160 (4th Cir.
1988), petition for cert, filed. 57 U.S.L.W. 3603 (U.S. Feb. 24,
1989) (No. 88-1404) (holding that Government can recover
litigation expenses from liable parties); UnJ.ted states v.
Conservation Chemical Cot. 619 F. Supp. at 186 (following
NEPACCQ).
5 NEPACCO. 579 F. Supp. at 851-52 (finding defendants
liable "for all costs, including salaries and expenses, incurred
by plaintiff associated with such activities as monitoring,
assessing and evaluating the release of contaminants . . . .*);
SCRDI. 653 F. Supp. at 1009 (holding that Government can recover
administrative and investigative costs from liable parties).
14
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B. The Response Costs Which The United states
Seeks By This Motion Are Within The
Categories Of Costs For Which The Statute And
The Caselaw Authorize Recovery ._
.All of the costs for which the United States seeks
reimbursement in this motion clearly fall within the four
categories of recoverable costs described by the NEPACCO court.
.The costs described in Attachment 1 hereto include both EPA and
Department of Justice costs.
(i) EPA Costs
m
The EPA costs, summarized in attachments to the affidavits
of willimina Pipkin and Nellie Boone of EPA Headquarters and .
Bonita King of EPA Region VI, include: the salary expenses of EPA
Regional and Headquarters employees who worked on Hardage site
response actions; travel and other costs for services provided by
private vendors (i.e., court reporters) associated with the work
performed by these employees; and the payments by EPA to several
EPA which,have performed response activities at the site.6
6 EPA has incurred costs for.response actions at the site
performed by a number of contractors whose costs are not
addressed by this Motion. Costs for these contractors are
described in Attachments to the Pipkin and Boone Declarations.
The United States reserves the right to claim these costs at
trial. .
15
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The EPA contractors listed in Attachment A are CH2M Hill,
TechLaw, Jacobs, and Viar. CH2M Hill, as described in the
accompanying Affidavits of Bonnie bevos, Stephen Phillips, Barry
Simmons and Alan Tavenner, has been engaged in a variety of
investigative, enforcement and remedial activities at the Hardage
•site since June of 1983. Pursuant to EPA Contract No. 68-01-
6692, Work Assignment No. 31-06M08.0, CH2M Hill reviewed
previously compiled data regarding contamination at the site,
*
performed additional field investigations, and conducted a
feasibility study (*FS") developing and evaluating alternative
methods for remediation of the source areas of the site.
Pursuant to EPA Contract No. 68-01-7251, Work Assignment No.
142-6N08.0, CH2M Hill prepared a design for the remedial action
for the source areas of the site selected by EPA pursuant to the
•V
1
Declaration, 1 12.
CH2M Hill provided technical enforcement support and
performed additional investigations at the site under two other
Contract 68-01-7251 Work Assignments. Pursuant to Work
Assignment No. 106-6608.0, CH2M Hill participated in negotiations
with defendants, provided technical assistance in the course of
litigation over the appropriate source control remedy for the
site, and provided oversight of site investigations. Tavenner
Declaration, 1 11. And pursuant to Work Assignment No. 167-
6L08.0, CH2M Hill provided oversight of the Hardage Steering
16 ".
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Committee's field investigation for the second operable unit
remedial investigation and continued to provide technical
t
assistance in litigation. Tavenner Declaration, 1 13.
All of the work performed by CH2M Hill falls within the
statutory and caselaw definitions of response actions for which
the Government is entitled to recover its costs. CH2M Kill's
work consisted of investigation, monitoring and testing of site
conditions, planning remedial action for the site, and assisting
in enforcement efforts. The Government is entitled to recover
/
its'costs for these activities.7 See' NEPACCQ. 579 F. Supp. at
850.
Costs incurred by EPA for the services of Viar, the company
which operates EPA's Sample Management Office and provides
administrative support to EPA's Contract Laboratory Program and
for the services of the contract laboratories in the program
which have analyzed field samples taken from the Hardage site,
are also recoverable costs. EPA requested analysis of samples
from the Hardage site as necessary for investigation and
monitoring of site conditions, remediation planning, and
preparation for litigation (i.e. enforcement). Tavenner
Declaration, 1 16; Simons Declaration, 11 12-16. The United
7 Through this Motion, the United States, only seeks costs
incurred for work performed by CH2M Hill through approximately
December 31, 1988. Boone Declaration, 1 28. The United States
reserves the right to. claim at trial costs subsequently incurred
by EPA for work performed by CH2M Hill.
17
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States is entitled to recover the costs of work so essential to
evaluating the nature and extent of contamination at the site.8
As detailed in the attached Declaration of Robert H.
Laidlaw, contractor TechLaw provided support for EPA's
enforcement effort. TechLaw, inter alia, created a computerized
database of waste transactions at the site, conducted field
sampling audits and provided othe'r support with regard to field
sampling, and provided support on various issues involved in the
de minimis settlement effort.
Finally, EPA contractor Jacobs arranged for the services of
a number of expert witnesses who contributed to EPA's and the .
Department of Justice's investigative, enforcement, and
remediation planning efforts. As explained in the accompanying
Declaration of Alan Tavenner, services provided by these experts
included, inter alia, evaluating the potential for transport of
contaminants at the site through groundwater; evaluating the
risks presented by both EPA's and the Hardage Steering
Committee's remediation proposals; and review and evaluation of
sampling data and sampling procedures.
8 Again, the United States, through this Motion, only seeks
reimbursement of costs incurred for work performed by Viar and
the contract laboratories through approximately December 31,
1988. Boone Declaration, 1 14. The United States reserves the
right to seek at trial reimbursement for costs incurred for work
performed by Viar and the contract labs after that date.
18
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Sirjce each of the EPA contractors listed in Attachment 1
provided services which clearly fall within the definition of
response actions for which costs are recoverable under -CERCLA,
the United States is entitled to recover the costs it has
incurred for those services.
(ii) DOJ Costs
The costs incurred by the Department of Justice in this
action, as explained in the accompanying Declaration of Patrick
A. McGeehin, fall into three categories: direct labor costs,
indirect costs, and other direct costs (*ODC's*). Direct labor
costs are the salary expenses of Department of Justice Land and
Natural Resources Division ("LNRD") professional employees
(including attorneys and paralegals) for work performed by such
employees on the Hardage case. Rubino & McGeehin (an accounting
firm employed by LNRD) calculates an effective hourly rate for
each such professional employee for each month by dividing the
employee's monthly salary figure by the total number of hours
accounted for (including non-case hours and both Superfund and
non-Superfund case hours) by that employee for that month. The
cost of an employee's work on the Hardage litigation is then
computed by multiplying the hours the employee worked on the
Hardage litigation by the employee's effective hourly rate.
McGeehin Declaration, 16.
19
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The Dfcpartment of Justice indirect costs listed on
Attachment 1 are computed through an indirect cost allocation
system designed for the LNRD by Rubino & McGeehin. Indirect
costs are costs which are generally necessary to support the
functioning of LNRD professional personnel in their case work,
but which are not allocated directly to specific cases - such as
the costs of office space, utilities, and supplies.
•
Rubino and McGeehin calculates an indirect cost rate for
LNRD by the following process: computing LNRD's total indirect
costs for. a fiscal year; computing LNRD's total direct labor
costs for that fiscal year (i.e., the cost of attorney and
paralegal labor for both Superfund and non-Superfund cases); and
dividing the "indirect* figure by the "direct* figure to produce
the indirect cost rate for the fiscal>year. The indirect costs
for a particular case are computed by multiplying the direct
labor costs for that case by the indirect cost rate. Under this
system, the percentage of LNRD indirect costs allocated to a case
is the same as the percentage of LNRD direct costs incurred for
that case (i.e., if a case represents 0.25% of LNRD's direct
labor costs for a fiscal year, 0.25% of LNRD's indirect costs
will be allocated to that case).
Rubino & McGeehin has computed average effective direct .
hourly rates for the attorneys and paralegals who have charged
time to the Hardage case for the period for which LNRD costs are
20 -
-------
sought in this Motion.9 AS set out in Attachment 4 of the
McGeehin Declaration, the weighted average effective direct labor
rates are $19.38 per hour and $13.47 per hour, respectively.
Rubino & McGeehin have also computed average "fully loaded
rates* for attorneys and paralegals who have worked on the
Hardage case (i.e., a rate which adds indirect labor costs
allocated to the case to the direct labor costs). The "fully
loaded rates* are $59.99 and 41.98 per hour for attorneys and
paralegals, respectively. McGeehin Declaration, 1 10.
The "fully loaded rates" computed by Rubino & McGeehin
represent both the direct and indirect costs of attorney and
paralegal time. In this respect, they are somewhat similar to
the hourly billing rates of attorneys and paralegals in the
private sector. When a private firm bills its clients $120 an
hour for the time of an associate who makes $60,000 a year, the
firm recovers not only the associate's salary, but also a portion
of the firm's costs for rent, supplies, administration, et al. -
plus, presumably, a profit element. Rubino & McGeehin's "fully
loaded rates* incorporate such indirect costs as rent and
supplies, but do not, of course, include a profit element.
9 The United States seeks Department of Justice costs for
fiscal years 1987 and 1988 (October 1, 1986 through September 30,
1988) by this Motion, reserving the right to seek DOJ costs for
earlier years and for fiscal years 1989 and 1990 at trial.
21
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"Other direct costs* represent the third component of the
Department of Justice costs listed in Attachment 1 and in
attachments to the McGeehin Declaration. These are the costs o
services of outside vendors provided to support the enforcement
efforts of the Department of Justice in the Hardage case* As
explained in the McGeehin Declaration and the Declarations of
*•*• -
Anne Hoke-witherspoon, Lisa Polisar and Phillip B. stiness,
these costs include costs for expert witnesses, microfilming,
litigation support, court reporting services, and travel expenses
of LNRD personnel, all of which are recorded on a case-specific
basis.
C. The United States Is Entitled To Recover All Response
Costs Unless Defendants Can Demonstrate That The
Response Actions For Which The United States Seeks
Costs Are Inconsistent With The National Contingency
. Plan
Pursuant to Section 107(a)(4)(A) of CERCLA, defendants are
liable for "all costs of removal or remedial action incurred by
'the United States Government or a state not inconsistent with the
national contingencyplan." 42 U.S.C § 9607(a)(4)(A) (emphasis
added). Defendants bear the burden of proving that response
costs for which the Government seeks reimbursement are
inconsistent with the National Contingency Plan (*NCP*), 40
C.F.R. Part 300 et seq. See, e.g.. United States v. NEPACCO. 810
F.2d at 747 (8th Cir. 1986) ("the parties claiming the benefit of
the exception [that response costs inconsistent with the NCP are
not recoverable] have the burden of proving that certain costs
22
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are inconsistent with the NCP and, therefore, not recoverable.*
See also United States v. Ward. 618 F. Supp. 884, 899 (E.D.N.C.
1985) ; United states v. Conservation Chemical Co.. 619 F. Supp.
162, 186 (W.D. Mo. 1985).
The NCP is an EPA regulation which establishes procedures
for the selection of response actions. It. was enacted pursuant
to Section 105 of CERCLA, 42 U.S.C. § 9605, which requires that
the NCP include, i,n£er _alj.a..t
(1) methods for discovering and investigating
facilities at which hazardous substances have
been disposed of or otherwise come to be
located;
(2) methods for evaluating, including
analyses of relative cost, and remedying any
releases or threats of releases from
facilities which pose substantial danger to
the public health or the environment;
(3) methods and criteria for determining the
appropriate extent of removal, remedy, and
other measures .authorized by this chapter.
Since the NCP governs the selection of response actions, in
order to demonstrate that the government's costs are
''inconsistent with the NCP" the defendants must demonstrate that
the response actions taken by the Government were inconsistent
with the NCP. "As long as.the actions taken by the government
were in harmony with the national contingency plan, the costs
incurred pursuant to those actions are presumed to be reasonable
and therefore recoverable.* NEPACCO. 579 F; Supp. at 851. See
also United States v. Shell Oil Co.. 605 F. Supp. 1064, 1074 (D.
23
-------
Colo. 1985): "the [NCP] consistency requirement of Section
107(a)(4)(A) addresses the nature of- the response actions for
which costs can be recovered."
In attempting to establish that the Government's response
actions are inconsistent with the NCP, defendants bear a heavy
burden: they must demonstrate that the agency's choice of
response action was arbitrary and capricious. "Because
determining the appropriate removal and remedial action involves
specialized knowledge and expertise ... [t]he applicable standard
of review is whether the agency's choice is arbitrary and
capricious.* United States v. NEPACCQ. 810 F.2d at 748, citing
United States v. Ward. 618 F. Supp 884, 900 (E.D.N.C. 1985).
The Court of Appeals in NEPACCO also affirmed the District
Court's conclusion that as long as the response actions taken by
the Government are not inconsistent with the NCP, defendants
cannot challenge the Government's cost claim on grounds of
"reasonableness*:
The statutory language also supports the
district court's reasoning that under CERCLA
§ 107{a)(4)(A), 42 U.S.C. § 9607(a)(4)(A),
"all costs* incurred by the government that
are not inconsistent with the NCP are
conclusively presumed to be reasonable.
CERCLA does not refer to "all reasonable
costs* but simply to "all costs.* Cf.
Federal Water Pollution Control Act § 311(f)
(FWPCA), 33 U.S.C. § 1321(f) (responsible
parties are liable for "actual costs
incurred* by the government for cleanup);
see, e.g.. Union Petroleum Corp. v. United
States. 228 Ct.Cl. 54, 651 F.2d 734, 744
24 '- ..."
-------
(1981) (construing "actual costs incurred" in
33 U.S.C. §1321(f) to. apply conclusive
presumption of reasonableness). Case law
interpreting the FWPCA is relevant because
CERCLA defines the NCP by referring to the
NCP mandated by the FWPCA.
810 F.2d at 747-48.
Congress' decision that the Government is entitled to
recover all costs, rather than all reasonable costs, of response
actions reflects one of the fundamental purposes of CERCLA: to
encourage swift and effective response actions. By refusing to
permit defendants to defend against cost recovery actions by
engaging in detailed attacks on the "reasonableness* of
individual Government cost items. Congress provided an incentive
to those defendants to conduct the necessary response actions
themselves. In cases where defendants refuse to conduct
appropriate response actions, Congress' decision frees the
Government to undertake the response actions it deems necessary
and appropriate without being constrained by the possibility that
each line item of the costs of these actions will be challenged
in cost recovery* The message to defendants is, essentially, *if
you want detailed control over the cost of response actions,
perform them yourself."
In the present case, as explained abov,e, the response
actions the costs of which the United States seeks are those
investigative, remedial and enforcement actions which Congress
intended the Government to perform. Accordingly, defendants are
25
-------
liable to the Government for all costs incurred by the Government
in performing those response actions.
D. There is No Genuine Issue of Material
Fact Regarding the Costs Incurred by the
Government at the.Hardaae Site .
Rule 56 of the Federal Rules of Civil Procedure provides
that summary judgment
shall be rendered forthwith if the pleadings,
depositions, answers to interrogatories and
admissions on file, together with affidavits,
if any, show that there is no genuine issue
of material fact and that the moving party is
entitled to summary judgment as a matter of
law.
The party seeking summary judgment has the burden of
demonstrating the absence of any material factual issue that is
genuinely in dispute. Retail Clerks Union .I^ocal 648 v. Hub
Pharmacy. Inc.. 707 F.2d 1030, 1033 (9th Cir. 1983).. Once the
moving party has discharged this burden, however, the adverse
party "cannot rest on mere allegations or denials, but must, by
affirmative response in affidavits or otherwise, set forth
specific facts showing that there is a genuine issue for trial."
Prochaska v. Marcoux. 632 F.2d 848, 851 (10th Cir. 1980).
In the present case, there are no genuine issues for trial.
There is no question that the United States has incurred response
costs at the Hardage site. The declarations and verified cost
26
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summaries attached hereto establish the amounts cf- the response
costs for which plaintiff now seeks summary judgment.
The declarations of Willimina Pipkin and Nellie Boone
state that they investigated and reviewed each of the national
contract vouchers, treasury schedules and other appropriate
records to verify that the costs listed on EPA's cost summaries
were actually incurred. Ms. Pipkin and Ms. Boone reviewed these
records to determine that EPA was invoiced for work at the
Hardage site, that payment was authorized by EPA and that EPA
authorized the Treasury to pay the costs invoiced. They then
prepared the cost summaries attached to their Declarations.
The declaration of Patrick A. McGeehin states that
Rubino & McGeehin has reviewed the time sheets, vendor invoices,
and travel vouchers reflecting Department of Justice "costs on the
Hardage case for fiscal years 1987 and 1988 and prepared the
summaries provided in Attachments to the Declaration on the basis
of that review and the application of Rubino & McGeehin's
procedures for calculating direct labor costs and indirect costs.
for LNRD cases. The declaration of Philip B. Stiness states that
the records which -the Division provides to Rubino & McGeehin,
upon which Rubino & McGeehin's summary is based, are records of
costs which have been paid by the Division.
27
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The facts concerning the amount of the United States'
costs cannot reasonably be disputed by the defendant. The United
States has unquestionably incurred those costs, in the amounts
stated in the supporting affidavits and cost summaries,10 in
response to the release or threat of releases in the vicinity of
the Hardage site.
In UnitecL States v.Northernaire Plating Co.. 685 F.
Supp. 1410 (W.D. Mich. 1988), appeal pending. No. 88-2.074 (6th
Cir.), the Court granted summary judgment for the United States
on its claim for EPA and DOJ response costs under Section 107 of
CERCLA, on the basis of summary evidence similar to that
presented here: an EPA cost summary prepared by Ms. Pipkin, id.
at 1417, and an affidavit regarding DOJ costs prepared by Philip
Stiness. Similarly, in SCRDI. 653 F. Supp. at 1007-1009, the
court granted summary judgment on the government's claim for
response costs on the basis of the government's cost summary.
The United States submits t'hat the undisputed facts demonstrate
that the same result is appropriate in the instant case.
1° .Summaries of voluminous records, such as the accounting
records here, are admissible in lieu of all the underlying
documents where: all the underlying documents cannot be
conveniently examined by the Court, the underlying records have
been made available to all parties for examination, and a witness
testifies that he prepared the summary and is familiar with the
underlying documents and records. Rule 1006, Fed. R. Evid.
28 '
-------
E. The Liability Of The Defendants For The United
States' Response Costs Is Joint And Several
Liability under Section 107 of 'CERCLA is joint and several
unless defendants can demonstrate.that the harm caused by their
respective conduct is divisible. SCRDI. 653 F. Supp. at 994.
Where, as here, a combination of hazardous substances contributed
by a number of generators are thoroughly commingled, see
Affidavit of Kirk w. Brown in support of the United States'
Motion For Partial summary Judgment On Liability, filed herein on
June 1, 1989, the harm caused by conditions at the site is not
divisible. SCRDI at 994. Accordingly, the liability of
defendants herein for the United States' response costs is joint
and several.
•
CONCLUSION AND 'PRAYER FOR JUDGMENT
For the foregoing reasons, Plaintiff submits that summary
judgment should be granted against defendants herein, and an
Order issued stating that defendants are jointly and severally
liable for the costs described in the Statement of Material Facts
herein and listed in Attachment 1 hereto. The United States
reserves the right to claim at trial any response .costs incurred
or to be incurred by the United States which are not listed in
Attachment 1. The total -of the amounts listed in Attachment 1 is
$ 6,292,065.25.
29
-------
In addition, the United States respectfully requests that
the Court grant a declaratory judgment pursuant to Rule 57 of the,
Federal Rules of Civil Procedure that defendants are liable to
the United States for its future response costs associated with
the Hardage site. Such a declaratory judgment is appropriate
where, as here, the United States is continuing to incur respnse
•r*
costs. MEPACCQ, 579 F. Supp. at 852 (granting motion for
declaratory judgment that defendants were liable for the United
States' future response costs).
Respectfully submitted,
By:
RICHARD B. STEWART
Assistant Attorney General
Land and Natural Resources Division
ROBERT E. MYDANS
United States Attorney
STEVEN MULLINS
Assistant United States Attorney
4434 U.S. Courthouse.
Oklahoma City, Oklahoma 73102
JOHN R. BARKER, Senior Counsel
ANNA WOLGAST, Senior Attorney
STEVEN NOVICK,Trial Attorney
Environmental Enforcement Section
United States Department of Justice
Washington, D.C. 20044
(202)633-1200
30
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OF COUNSEL:
VICKI PATTON-HULCE
U.S. Environmental Protection
Agency - Region VI
1201 Elm Street
Dallas, Texas 75270
CHAHLES de SAILLAN
U.S. Environmental Protection
Agency
401 M Street, S.W.
Washington, D.C. 20460
31
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ATTACHMENT 1
I. ENVIRONMENTAL PROTECTION AGENCY RESPONSE COSTS CLAIMED
1. EPA Headquarters Payroll Expenses — $ 49,795.81.
This figure represents Environmental Protection Agency
('EPA') Headquarters payroll expenses incurred
through December 31, 1988.
t
2. EPA Headquarter* Travel Expenses — 9 9,273.71.
This figure represents EPA Headquarters travel
expenses incurred through December 31, 1988.
3. EPA Region VI payroll Expenses -- $ 288,160.95.
This figure represents EPA Region VI payroll expenses
incurred through December 31, 1988.
4. EPA Region VI Travel Expenses — $ 38,928.24.
This figure represents EPA Region VI travel expenses
incurred through December 31, 1988.
5. EPA Region VI Other Private Vendor Expenses —-
$ 4,158.65.
This figure represents EPA Region VI payments to
private vendors for Hardage site activity (exclusive of
travel expanses) through December 31, 1988.
-------
6. CH2M Hill Expenses, Contract No. 68-01-6692, Work
Assignment No. 31-06M08. — $ 846,956.80.
This* figure represents all payments made by EPA to CH2M
Kill for work performed under Contract No. 68-01-6692,
Work Assignment No. 31-06M08.
7. CH2M Hill Expenses, contract No. 68-01-7251, Work
Assignments Nos. 106-6608.0, 142-6N08.0, and 167-6L08.0
— S 1,326,308.25. .
This figure represents payments made by EPA to CH2M
Kill for work performed under Contract No. 68-01-7251,
work Assignments Nos. 106-6608.0, 142-6N08.0, and 167-
6L08.0 through. October 30, 1988.
\
IV .-' '
8.. TeehLaw Expenses, Contract No. 68-01-6838 —
$ 18,955.38.
This figure .represents payments made by EPA to TechLav
for work performed under Contract No. 68-01-6838 from
October, 1985 .to the present.
9. TechLaw Expenses, Contract No. 68-01-7104 —
$ 105,552.38.
This figure represents payments made by EPA to TechLaw
. for work performed under Contract No. 68-01-7104 for
work performed under contract No. 68-01-7104 from
October, 1985 to the present.
-------
10. TachLaw Expanses, Contract No. 68-01-7369 —
$ 162,458.57.
This figure represents payments made by EPA to TechLaw
for work performed under. Contract No. 68*01-7369 for
work performed through October 31, 19S8.
11. Jacobs Engineering Expenses,.Contract- No. 68-01-7351,-
. Work Assignment No. 172 — $ 313,554.00.
This figure represents payments made by SPA to Jacobs
Engineering for work performed under Contract No.
68-01-7351, Work Assignment No. 172, for which Jacobs
Engineering billed EPA through August 31, 1986.
12. Viar and Contract Laboratory Program Expenses ~
$ 433,425.87.
This figure represents payments made by EPA to Viar and
laboratories in the Contract Laboratory Program for
work performed through April, 1988.
-------
II. DEPARTMENT OF JUSTICE RESPONSE COSTS CLAIMED
1. Direct Labor Costs — $ 405,033.00
This figure represents payroll expenses of the
Department of Justice (*DOJ*) for work performed by
Department of Justice employees frsm October 1, 1986
through September 30, 1988.
2'. Indirect Costs — $ 850,864.00.
This figure represents indirect coats incurred and paid
by DOJ for work performed by Department of Justice
employees from October 1, 1986 through September 30,
/ 1988.
3. Other Direct Costs — $ 1,438,638.00.
This figure represents payments made by DOJ between
October 1, 1986 and September 30, 1988 to private
vendors for services performed.
-------
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
UNITED STATES OF AMERICA,
Plaintiff,
v.
ROYAL N. HARDAGE, et al..
Defendants,
ADVANCE CHEMICAL COMPANY,
et al. ,
Hardage Steering
committee Defendants
and Third-Party
Plaintiffs,
v.
ABCO, INC., et al. ,
Third-Party
Defendants.
Civil Action No. CIV-86-1401-P
DECLARATION OF NELLIE BQQNE
I, Nellie Boone, hereby depose and say: .
. 1. That I am employed by the United states Environmental
•
Protection Agency (EPA), 401 M street, S.W. Washington, D.C.
20460, as a Program Analyst in the Cost Recovery Operations and
Analysis Section in the Office of Waste Programs Enforcement
(OWPE). I have been employed by OWPE for eight years.
2. Pursuant to section 221 of the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980
("CERCLA"), 42 U.S.C. s 9631, enacted on December 11, 1980, the
-------
- 2 -
Hazardous Substance Response Trust Fund (the "Fund") was
established. This Fund originally consisted of 1.6 billion
dollars to be appropriated to EPA over a period of five years.
Subsequently, congress enacted the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), codified at 42 U.S.C. S
9601 e_t sea.. on October 17, 1986. Section lll(a) of SARA
provided for an additional 8.5 billion dollars for the Fund,
*
renamed the Hazardous Substances Superfund. The Fund has been
used to pay various government response costs associated with the
Hardage site.
3. One purpose of the Cost Recovery Operations and
Analysis Section of OWPE is to review and compile documentation
of response costs incurred by EPA in connection with Superfund
sites. One such site is the Hardage site, located in Criner,
Oklahoma. Responsibility for reviewing and compiling
documentation of response costs for the Hardage site has
generally^been assigned to Willimina Pipkin, another Program
Analyst in the Cost Recovery Operations and Analysis Section of
OWPE. However, due to Ms. Pipkin's absence from the office
during part of April 1989, this responsibility was assigned to
me. In the course of my duties, I personally compiled the
updated Cost Summary for the Hardage site dated May 5, 1989.
This Cost Summary is attached hereto as Exhibit 1 to my
Declaration.
4. In preparing the updated.Cost Summary for the Hardage
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- 3 -
site, I compiled the supporting documents from the EPA
Headquarters Financial Management Offices.
5. These documents or records are all kept in the course
of the regularly conducted activities of the various EPA and the
EPA contractor offices involved. These records are kept pursuant
to EPA's duties under section 111 of CERCLA, 42 U.S.C. S 9611.
These records include employee timesheets, time cards, and travel
vouchers, as well as contractor invoices and treasury schedules.
6. After collecting the above-mentioned documentation, I
personally compiled.the updated information found in the Cost
Summary. This updated information was added to the cost summary
that Ms. Pipkin initially prepared in May 1985 and updated on
nine previous occasions. To the best of my knowledge, based on
my review of the employee timecards, timesheets, and treasury
schedules, the contractor vouchers, and the treasury schedules,
the updated costs listed in the Cost Summary have been paid by
EPA.
7. The Cost Summary lists by category the response costs
incurred by EPA in connection with the Hardage site. It contains
summaries of costs incurred by EPA for employee salary and travel
expenditures and under interagency agreements and contracts with
private firms. These summaries were compiled in the following
manner:
A. On or about March 21, 1989, Willimina Pipkin sent
a memorandum to George Alapas of the-EPA Financial Management
.Division (FMD) requesting a Software Package for Unique Reports
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- 4 -
(SPUR) for the Hardage site, and requesting the corresponding
employee payroll timesheets, travel vouchers, contractor
vouchers, and treasury schedules. The SPUR is. a computer .
printout which lists the site-specific expenditures made by EPA.
OWPE received the Hardage SPUR and corresponding documents from
FMD on or about May 2, 1989. •
B. Upon receipt of the Hardage SPUR and supporting
documents, I reviewed the records for accuracy and prepared
summaries of the costs by category, as described in more detail
below.
8. The Cost Summary contains a summary of costs incurred
by EPA for Headquarters payroll expenditures. I personally
compiled this updated summary. Upon receipt of the Hardage SPUR
and supporting documents,. I reviewed the records for accuracy and
updated the summary of the Headquarters payroll expenditures by
employee name and total salary charged to the Hardage account.
Those costs totaled $49,795.81. This figure includes costs
incurred as of approximately December 31, 1988. .
9, The Cost Summary contains a summary of costs incurred
by EPA for Headquarters travel expenditures. I personally
compiled this updated summary. Upon receipt of the Hardage SPUR
and supporting documents, I reviewed the records for accuracy and
updated the summary of the Headquarters travel expenditures by
employee name and total travel costs charged to the Hardage
account. Those costs totaled $9,273.71. This figure includes
costs incurred as of approximately December 31, 1988.
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- 5 -
10. EPA has also incurred costs for Region 6 payroll
expenditures. These costs have been documented separately by EPA
Region 6.
11. EPA has also incurred costs for Region 6 travel
expenditures. These costs have been documented separately by EPA
**
Region 6.
12. EPA has also incurred indirect costs. These costs have
been documented separately by EPA Region 6.
13. EPA has also incurred other Regional costs. These
costs have been documented separately by EPA Region 6.
14. The cost Summary contains a summary of costs incurred
by EPA under the National Lab Contract with VIAR. The
documentation received from FMD indicated that no additional
costs had been incurred under this contract since the previous
cost update. I therefore relied on the summary of costs prepared
by Wiliimina Pipkin for the previous cost update, which I
incorporated into the Cost Summary. The summary lists the costs
incurred by EPA .under the National Lab Contract by contractor
name, contract number, and total contract costs. Those costs
totaled 3443,425.87. This figure includes costs incurred as of
approximately December 31, 1988.
15. The Cost Summary contains a summary of costs incurred
by EPA under the Field Investigation Team (FIT) contract with
Ecology and Environment, Inc. for a site sampling inspection and
the installation of groundwater monitoring wells (contract #68-
01-6056). I personally compiled this updated summary. Upon
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- 6 -
receipt of the SPUR and corresponding documents, I reviewed the
records for accuracy and updated the summary of the costs
incurred by EPA under this FIT contract by contractor name,
contract number, "and total contract costs. Those costs totaled
$158,877.71. This figure includes costs incurred as of
approximately December 31, 1988.
16. The Cost Summary contains a summary of costs incurred
by EPA under the Field Investigation Team (FIT) contract with
CH2M Hill and with Ecology and Environment, Inc. for a title
search, a preliminary assessment and site investigation, and
sampling of residential water wells (contract #68-01-6692). The
documentation received from FMD indicated that no additional
costs had been incurred under this contract since the previous
cost update. I therefore relied on the summary of costs
prepared by Willimina Pipkin for,the previous cost update, which
I incorporated into the Cost Summary. The summary lists the
costs incurred by EPA under this FIT contract by contractor name,
contract number, and total contract costs. Those costs totaled
$29,076.29. This figure includes costs incurred as of
approximately December 31, 1988.
17. The Cost Summary contains a summary of costs incurred
by EPA under the Field Investigation Team (FIT) contract with
Ecology and Environment, Inc. for oversight of sampling
conducted by the Hardage Steering Committee (68-01-7347). I
personally compiled this updated summary. Upon receipt of the
SPUR and corresponding documents, I reviewed the records for
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- 7 -
accuracy and updated the summary of the costs incurred by EPA
under this FIT contract by contractor name, contract number, and
total contract costs. Those costs totaled $119,134.92. This
figure includes costs incurred as of approximately December 31,
1988.
18. The Cost Summary contains a summary of costs incurred
by EPA under an interagency agreement with the Department of
Interior for a preliminary natural resources survey (IAG
#DW14038201>. The documentation received from FMD indicated that
no additional costs had been incurred under this interagency
agreement since the previous cost update.. I therefore relied on
the summary of costs prepared by Willimina Pipkin for the
previous cost update, which. I incorporated into the Cost Summary.
The summary lists the costs incurred by EPA under the Interagency
Agreement with the Department of Interi'or by agency, IAG number,
and total costs.. Those costs totaled $4882.82. This figure
includes costs incurred as of approximately December 31, 1988.
19. EPA has incurred costs under an interagency agreement
with the Department of Justice for litigation support. These
costs have been documented separately by the Department of
Justice.
20. The Cost Summary contains a summary of costs incurred
by EPA under'the National Enforcement Investigation Center (NEIC)
contract with Intera/TechLaw for evidence audits (contract #68-
01-6215). The documentation received from FMD indicated that no
additional costs had been incurred under this contract since the
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- 8 -
previous cost update. I therefore relied on the summary of costs
prepared by Willimina Pipkin for the previous cost update, which
I incorporated into the Cost Summary. The summary lists the
costs incurred by EPA under this NEIC contract by contractor,
contract number, and total contract costs. Those costs totaled
0*
S2090.80. This figure includes costs incurred as of
approximately December 31, 1988.
21. The Cost Summary contains a summary of costs incurred
by EPA under the NEIC contract with TechLaw for evidence audits
(contract #68-01-6838 ) . . I personally compiled this updated
summary. Upon receipt of the SPUR and corresponding documents, I
updated the summary of costs incurred by EPA under this NEIC
contract by contractor, contract number, and total contract
costs. Those costs totaled $40,972.00. This figure includes
costs incurred as of approximately December 31, 1988.
22. The Cost Summary contains a summary of costs incurred
by EPA under the NEIC Regional Evidence Audit Team contract with
TechLaw for the preparation of a computerized database and
computerized document inventory (contract #68-01-7104). The
documentation received from FMD indicated that ho additional
costs had been incurred under this contract since the previous
cost update. I therefore relied on the summary of costs
prepared by Willimina Pipkin for the previous cost update, which
I incorporated into the Cost Summary. The summary lists the
costs incurred by EPA under : this NEIC contract by contractor,
contract number, and total contract costs. Those costs totaled
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- 9 -
$122,918.05. This figure includes costs incurred as of
approximately December 31, 1988.
23. -The Cost Summary contains a summary of costs incurred
by EPA under the NEIC contract with TechLaw for field evidence
audits and document productions (contract #68-01-7369). I
personally compiled this updated summary. Upon receipt of the
SPUR and corresponding documents, I updated the summary of costs
incurred by EPA--under this NEIC contract by contractor, contract
number, and total contract costs. Those costs totaled
$162,458.57. This figure includes costs incurred as of
approximately December 31, 1988.
24. The Cost Summary contain a summary of costs Incurred
by EPA under a contract with Midwest; Research Institute for
litigation support (contract #68-01-7287). The documentation
received from FMD indicated that, no additional costs had been
incurred under this contract since the previous cost update. I
therefore relied on the summary of costs prepared by willimina
Pipkin for the previous cost update, which I incorporated into
the Cost Summary. The summary lists the costs incurred by EPA
under the Midwest Research Institute contract by contractor,
contract number, and total contract costs. Those costs totaled
$96,952.00. This figure includes costs incurred as of
approximately December 31, 1988.
25. The Cost Summary contains a summary of costs incurred
by EPA under a contract with Lockheed Engineering and Management
Service for aerial photography"(contract #68-03-3245). I
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- 10 -
personally compiled this updated summary. Upon receipt of the
SPUR and corresponding documents, I reviewed the records for -
accuracy and updated the summary of costs incurred by EPA under
the Lockheed Engineering and Management Service contract by
contractor, contract number, and total contract costs. Those
costs totaled $7500.00. This figure includes costs incurred as
of approximately December 31, 1988.
26. The Cost Summary contains a summary of costs incurred
by EPA under the overflight contract with EMS-Lockheed for aerial
photography, analysis, and expert witness support. The
documentation, received from FMD indicated that no additional
costs had been incurred under this contract since the previous
cost update. I therefore relied on the summary of costs
prepared by Willimina Pipkin for the previous cost update, which
I incorporated into the Cost Summary. The summary lists the
costs incurred ,by EPA under the overflight contract by
contractor, contract number, and total contract costs. Those
costs totaled $3263.27. This figure includes costs incurred as
of approximately December 31, 1988.
27. The Cost Summary contains a summary of costs incurred
by EPA under the Remedial (REM) contract with CH2M Hill for a
Remedial Investigation and Feasibility Study and community
relations (contract #68-01-6692). The documentation received
from FMD indicated that no additional costs had been incurred
under this contract since the previous cost update. I therefore
relied on the summary of costs prepared by Willimina Pipkin for
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ttie previous cost update, which I incorporated into the Cost
Summary. The summary lists the costs incurred by EPA under this
REM contract by contractor name, contract number, and total
contract costs. Those costs totaled $846,956.80. This figure
includes costs incurred as of approximately December 31, 198.8.
28. The Cost Summary contains a summary of costs incurred
by EPA under the Remedial (REM) contract with CH2M Hill for a
Remedial Design and litigation support (contract #68-01-7251). I
personally compiled this updated summary. Upon receipt of the
SPUR and corresponding documents, I reviewed the records for
accuracy and updated the summary of the costs incurred by EPA
under the REM contract by contractor name, contract number, and
total contract costs. Those costs totaled $1,326,308.25. This
figure includes costs, incurred as of approximately December 31,
•Cx
1988.
29. The Cost Summary contains a summary of costs incurred
by EPA under the. Technical Assistance Team (TAT) contract with -
Roy F. Weston for technical assistance contract (#68-01-6669).
The documentation received from FMD indicated that no additional
costs had been incurred under this contract since the previous
cost update. I therefore relied on the summary of costs
prepared by Willimina Pipkin for the previous cost update, which
I incorporated into the Cost Summary. The summary lists the
costs incurred by EPA under this TAT contract by contractor name,
contract number, and total contract costs. Those costs totaled
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- 12 -
$4272.96. This figure includes costs incurred as of
approximately December 31, 1988.
30. The Cost Summary contains a summary of costs incurred
by EPA under the Technical Assistance Team (TAT) contract with
Ecology and Environment for technical assistance (contract #68-
01-7368). I personally compiled this updated summary. Upon
receipt of the SPUR and corresponding documents, I reviewed the
records for accuracy and updated the summary of the costs
incurred by EPA under this TAT contract by contractor name,
contract number, and total contract costs. Those costs totaled
$17,276.60. This figure includes costs incurred as of
approximately December 31, 1988.
31. The Cost Summary contains a summary of costs incurred
by EPA under the Technical Enforcement Support (TES) contract
with Alliance/GCA for technical support (contract #68-01-6769).
The documentation received from FMD indicated that no additional
costs had been incurred under this contract since the previous
cost update. I therefore relied on the summary of costs
prepared by Willimina Pipkin for the previous cost update, which
I incorporated into the Cost Summary. The summary lists the
costs incurred by EPA under this TES contract by contractor name,
contract number, and total contract costs. Those costs totaled
$12,063.14. This figure includes costs incurred as of
approximately December 31, 1988.
32. The Cost Summary contains a summary of costs incurred
by EPA under the Technical Enforcement Support (TES) contract
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- 13 -
with Planning Research Corporation for technical support
(contract f68-01-7037>. I personally compiled this updated
summary. Upon receipt of the SPUR and corresponding documents, I
reviewed the records for accuracy and updated the summary of the
costs incurred by EPA under this TES contract by contractor name,
contract number, and. total contract costs. Those costs totaled
$42,141.78. This figure includes costs incurred as of
approximately December 31, 1988.
. 33. The Cost Summary contains a summary of costs incurred
by SPA under the Technical Enforcement Support (TES) contract
with Jacobs Engineering for technical support (contract #68-01-
7351). I personally compiled this updated summary. Upon receipt
of the SPUR and corresponding documents, I reviewed the records
A. for accuracy and updated the summary of the costs incurred, by EPA
under this TES contract by contractor name, contract number, and
total contract costs. Those costs totaled $839,952.60. This
figure includes costs incurred as of approximately" December 31,
•,*•••
19881
34. As of May 5, 1989, EPA had incurred at least
$4,339,593.95 in response costs associated with the Hardage site
for Headquarters employee payroll and Headquarters travel, arid
pursuant to the interagency agreement with the Department of
Interior an<3 various contracts with private firms, as summarized
in the Cost Summary. This figure does not include costs incurred
by EPA for Regional employee payroll, Regional travel, and
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- 14 -
indirect costs, and pursuant to the interagency agreement with
the Department of Justice, which have been documented separately.
35. All the records documenting the costs incurred for the-
Hardage site and authorizing payment of CERCLA funds are kept and
maintained in the Financial Management Office at EPA
Headquarters, the Financial Management Office at EPA Region 6,
and at the Financial Management Field Offices in Cincinnati,
Ohio, Research Triangle' Park, North Carolina, and Las Vegas,
Nevada, as part of the regular course of business of these EPA
Offices.
I declare under penalty of perjury that the foregoing is
true and correct to the best of my knowledge.
Date: September '....___• 1989
NELLIE^ BOONE
U.S. Environmental Protection Agency
Washington, D.C. 20460
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ATTMSMENT I
-------
-------
I
WASHINGTON, O.C. 20460
05/05/89
^^M
OFFICE OP
MEMORANDUM SOMO WASTE AND EME«CENCV
SUBJECT: Cost Recovery Documentation for Superfund Site No. 6 08,
Hardage/Criner
FROM: Nellie Boon*
Office of Haste Programs Enforcement
TO: Elizabeth Lovery
EPA Region 6
This is in response to your request for cost documented
through the period of 12/31/88. Attached are the following
documents for the Hardage/Criner site.
DOCUMENTS
1. Payroll (Headquarters)
2. Travel (Headquarters)
3. FIT Contract
4. Contract Lab Report
5. TAT Contract
6. REM Contract
7. OSC Contract
8. Expert Witness
9. Overflights
10. NEIC 7/0V
11. TES Contract
12. ERT Contract
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-2-
DOCUMENTS
13. Miscellaneous Contracts
14. lAGs
Please be advised that this material has not been reviewed
for confidential business information or Privacy Act
considerations. If you have any questions, please contact ae at
475-9782
Please sign, date and return copy of receipt to:
Nellie Boone
U.S. EPA
OWPE (OS-510) , Room 2709
401 M Street, SW
Washington, D.C. 20460
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IN-THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
UNITED STATES OF AMERICA,
Plaintiff,
v.
ROYAL N. HARDAGE, et al.,
Defendants,
ADVANCE CHEMICAL COMPANY,
et al.,
Hardage Steering
Committee Defendants
and Third-Party
Plaintiffs,
v.
ABCO, INC., et al.,
Third-Party
Defendants.
) Civil Action No. CIV-86-1401-P
DECLARATION OF BONNIE DEVOS
I, Bonnie Devos, declare under penalty of perjury as
follows: --*
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I, Bonnie Devos, declare under penalty of perjury as
follows:
1. I am a former employee of the Superfund Branch of the
Air and Waste Management Division of the Environmental Protection
Agency and was assigned to the Superfund Branch office in Region
VI as an environmental engineer and I have personal knowledge of
the matters stated herein.
2. The Superfund Branch was the office within EPA
«
responsible for investigative, enforcement and remedial
activities at uncontrolled hazardous waste sites on the National
Priorities List.
3. The statements made in this affidavit are based upon
information contained in the records and files of the Superfund
Enforcement Branch" ~of the Hazardous Waste Management Division,
created and maintained in the ordinary course of its business and
activities. (Through a reorganization, the responsibilities of
the Superfund Branch of the Air and Waste Management Division
have been transferred to the Superfund Program Branch and the
Superfund Enforcement Branch of the Hazardous Waste Management
Division of EPA. The Superfund Enforcement Branch assumed
responsibility for the Hardage site.)
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4. From 1982 to April, 1984, I was Remedial Site Project
Officer for the Hardage site, which is a site on the National
Priorities List.
•
5. As RSPO, my responsibilities included the technical
oversight of response activities at the Hardage site.
6. As part of my duties, I reviewed the Work Assignment
pursuant to which EPA contractor CH2M Hill performed response
activities at the Hardage site between June, 1983, and April,
1984. I reviewed each of the Monthly Work Assignment Progress
Reports submitted to EPA by CH2M Hill during that period. These
Monthly Work Assignment Progress Reports reflect the* work
performed under a specific work assignment by the contractor
during the month preceding the submission of the Report.
7. While I was RSPO for the Hardage site, CH2M Hill
performed response activities at the Hardage site under the
REM/FIT contract, EPA Contract No. 68-01-6692, EPA Work
Assignment No. 31-06M08.0.
8. Between June, 1983 and my replacement as RSPO (by
Stephen Phillips) in April, 1984, CH2M Hill prepared a work plan
for performance of a feasibility study of remedial alternatives
for the Hardage site, reviewed data from previous field
-------
investigations at the site, and began preparation for additional
field investigations.
I declare under penalty of perjury that the foregoing is
true and correct.
Executed on ^ Q&sjLkt/u 7 1989.
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IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
UNITED STATES OF AMERICA,
P,laintiff,
v.
ROYAL N. HARDAGE, et al.,
Defendants,
•ADVANCE CHEMICAL COMPANY,
et al.,
Hardage Steering
Committee Defendants
and Third-Party
Plaintiffs,
v.
ABCO, INC., et al.,
Third-Party
Defendants.
Civil- Action No. CIV-86-1401-P
DECLARATION OF ROBERT H. LAIDLAK
I, Robert H. Laidlaw, hereby depose and say:
1. That I am employed by the United States Environmental
Protection Agency (EPA), National Enforcement Investigations
Center (NEIC), Box 25227, Building 53, Denver Federal Center,
Denver, Colorado 802250, as Chief of the Information Management
Branch, Office of Planning and Management. My job title is
Program Manager. I have been employed at NEIC for nineteen
years. I have served as a project officer for eight years, i am
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- 2 -
currently project officer for NEIC's Evidence Audit and
Litigation Support contract.
2. The purpose of NEIC's Evidence Audit and Litigation
Support contract is to provide assistance to EPA regional and
headquarters staff in the development of enforcement cases. The
contractor is assigned to provide document management and
information summary services. The contractor submits monthly
bills to EPA for these services in the form of contractor
vouchers. Since October 1985, the contractor vouchers include a
site-specific breakdown of charges. The incumbent Evidence Audit
and Litigation Support contractor is1TechLaw, Inc (-formerly known
as Intera).
3. As project officer, I am responsible for the
administration and management of the Evidence Audit and
Litigation Support contract. My duties include providing
technical direction for contract work; reviewing project progress
and deliverables; inspecting project work; and reviewing
contractor invoices and recommending payment.
4. At the request of Jim Turner, Office of Regional
Counsel, EPA Region.6, TechLaw has provided assistance to EPA and
Department of Justice staff in the development of the Hardaoe
case under the Evidence Audit and Litigation Support contract.
TechLaw support for the Hardage case began in 1982 and has
continued to date under four Evidence Audit and Litigation
Support contracts: contract numbers 68-01-6215; 68-01-6838; 68-
01-7104; and 68-01-7369. TechLaw has worked on five projects in
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- 3 -
support of the Hardaoe case under these contracts. I served as
the project officer for each of these projects.
5. The first project assigned to TechLaw in support of the
Hardaae case was to organize case documents into separate files,
to create a computerized -inventory of the case documents, and to
create a computerized waste transaction database. An additional
task in this project was to prepare sample profiles to
demonstrate chain-of-custody for water and/or soil samples. As
project officer, I directed initiation of the work for this
project, and approved the contractor's work plan.
6. TechLaw submitted the following deliverables to EPA
under this first project: sample profiles for 69 samples
collected in March and April of 1982, Dun & Bradstreet reports
for certain companies, a summary printout of daily,shipments,
summary printouts of the transactional database, summary
printouts of the Hardage monthly logs, an address list, a
document inventory, a list of TechLaw personnel who worked on the
case, a draft printout of daily waste transactions for generators
and transporters, a printout of one party's daily transactions, a
drum transactions summary, documents in response to a discovery
request, documents containing confidential business information,
a waste summary report for selected generators, draft generator
and transporter lists, a generator summary report, and a
corporate affiliations report. As project officer, I reviewed .
each of these deliverables.
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- 4 -
7. This first project was initiated under contract number
68-01-6215. Work on this project continued under contract
numbers 68-01-6838 and 68-01-7104, and is continuing under
contract number 68-01-7369. From October 1985 through October
1988, TechLaw billed EPA for work on this project by the
following vouchers:
A. Voucher numbers 44 through 58 under contract
number 69-01-6838;
* •
B. Voucher numbers 15 through 30 under contract
number 68-01-7104; and
C. Voucher numbers 1 through 12, 14, 15, and 17
through 23 under contract number 68-01-7369.
As project officer, I reviewed each of these vouchers and
recommended payment.
8. The second project assigned to TechLaw was to prepare
sample profiles to demonstrate chain-of-custody for water and/or
soil samples, to update previously prepared sample profiles, and
to conduct field sampling audits. As project officer, I
directed initiation of the work for this project, and approved
the contractor's work plan.
9. TechLaw submitted the following deliverables to EPA
under this second project: photocopies of sample tags, a field
audit report, nine sample profiles and eleven boxes of supporting
documents, and documents in. response to discovery requests. As.
project officer, I reviewed each of these deliverables.
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- 5 -
' 10.. This second project was initiated and completed under
contract number 68-01-7369. From October 1985 through October
1988, TechLaw trilled EPA for work on this project by voucher
numbers 1 through 22 under contract number 68-01-7369. As
,*
project officer, I reviewed each of these vouchers and
recommended payment.
11. The third project assigned to TechLaw was to continue
the preparation of sample profiles.to demonstrate chain-of-
custody for water and/or soil samples and to prepare requests for
admission regarding sample custody. As project officer, 1
directed initiation of the work for this project, and approved
thejj contractor's work plan.
12. TechLaw submitted the following deliverables to EPA
under this third project: 11 boxes of laboratory files, and 234
sample files. Preparation of requests for admission was
!!
postponed• after certain preliminary tasks on this project were:'
completed. As project officer, I reviewed each of these ,
deliverables.
I
13. This third project was initiated and completed.under
contract number 68-01-7369. From October 1985 through October
i
1988, TechLaw billed EPA for work on this project by voucher
numbers 15 through 23 under contract number 68-01-7369. As
.' '
prdject officer, I reviewed each of these vouchers and
recpmmended payment. .
i 14. The fourth project assigned to TechLaw was to audit the
. previously prepared transactional database' and to otherwise
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- 6 -
assist EPA in putting together a de minimis settlement. As
project officer, I directed initiation of the work for this
project, and approved the contractor's work plan.
15. TechLaw submitted the following deliverables to EPA
under this fourth project: -a draft de minimis generator summary,
an audit of de minimis parties, a de minimis generator summary
report, a case preparation assistance report (in three volumes),
an Index of documents contained in the de minimis Settlement
Record (subsequently revised) and a Supplemental Index,, a de
minimis settlement calculation, a printout of the transactional
database for specific parties, draft responses to certain
comments of the Hardage Steering Committee on the proposed de
minimis settlement, a list of responsible parties and their
waste-in volumes, Attachments 1 and 2 to the de minimis Consent
Decree (subsequently revised), a list of transporters, and an
address list.. As project officer, I reviewed each of these
deliverables.
16. This fourth project was initiated and is continuing
under contract number 6o-Ci-7Jia. From October 1935 tnrouc.^
October 1988, TechLaw billed EPA for work on this project by
voucher numbers 22 and 23 under contract number 68-01-7369. As
project officer, I reviewed each of these vouchers and
recommended payment.
17. The fifth project assigned to TechLaw was to continue
the preparation of requests for admission regarding sample
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- 7 -
custody. As project officer, I directed initiation of the work
for this project, and approved the contractor's work plan.
18. TechLaw submitted the following deliverables to EPA
under this fifth project: a list of sample numbers, a chart of
laboratory case numbers and sample numbers, two boxes of
laboratory documents, and cost documentation. Preparation of
requests for admission was postponed after certain preliminary
tasks on this project were completed, and was ultimately
cancelled. As project officer, I reviewed each of these
deliverables.
19. This fifth project was initiated and completed under
contract number 68-01-7369. From October 1985 through October
1988, TechLaw billed EPA for work on this project by voucher
number 23 under contract number 68-01-7369. As project officer,
I reviewed this voucher and recommended payment.
20. From October 1985, when TechLaw began itemizing site-
specific charges in its vouchers, through October 1988, EPA has
incurred at least the following costs for work on the projects
described above, each in support of the Hardaoe case, under the
Evidence Audit and .Litigation Support contract:
A. $18,955.38 under contract number 68-01-6838;
B. $105,552.38 under contract number 68-01-7104; and
C. $162,458.57 under contract number 68-01-7369.
EPA has continued to incur additional costs in support of the
Hardaoe case under contract number 68-01-7369.
I declare under penalty for perjury that the foregoing is
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- 8 -
true and correct to-the best of my knowledge,
Date: September
, 1989
ROBERT H. LAIDLAW
U.S. Environmental Protection Agency
National Enforcement Investigations Center
Denver, Colorado 802250
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IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
UNITED STATES OF AMERICA, )
Plaintiff, ) No. CIV-86-1401-P
v. ) DECLARATION OF
ROYAL N. HARDAGE, et al., ) PATRICK A. McGEEHIN
Defendants, )
ADVANCE CHEMICAL COMPANY, et al., )
Hardage Steering )
Committee Defendants )
and Third-Party )
Plaintiffs, . )
v. )
ABCO, INC, et al., )
. Third-Party )
Defendants. )
DECLARATION OF PATRICK A. McGEEHIN
I, Patrick A. McGeehin, depose and state the following:
1. I am Patrick A. McGeehin and I am a Certified Public Accountant and a
co-founder and shareholder in the certified public accounting firm of Rubino &
McGeehin, Chartered ("RAM").
2. R&M is under contract with the Department of Justice, Land and Natural
Resources Division ("LNRD"), to assist in the accumulation, processing and reporting of
information relating to costs incurred by LNRD in the prosecution of cases under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"). The contract commenced with the accumulation of costs for Fiscal Year
1987 (beginning October 1, 1986) and continues through the present.
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3. I am the officer/shareholder responsible for the work performed by R&M
on behalf of LNRD. All work performed by members of R&M relating to the
aforementioned contract is performed under my supervision and control, and I have
knowledge of all procedures undertaken by our Firm in recording and calculating costs of
attorneys and paralegals, as well as other related costs incurred by LNRD relating to
CERCLA cases.
4. In the course of our accumulation of LNRD- Superfund costs, we summarize
the direct labor, other direct costs and related indirect charges incurred by LNRD under
each CERCLA case.
5. R&M assisted in the design of the procedures used to accumulate the costs
relating to CERCLA cases. The procedures used to assign and allocate costs to specific
cases are based on generally accepted accounting principles, including references to cost
allocation guidelines outlined in Federal Acquisition Regulations and Cost Accounting
Standards.
6. R&M has accumulated, summarized and reported costs for all Superfund
cases up to and including the end of fiscal year 1988. The costs which LNRD has
incurred and paid are segregated into three areas. The areas are Direct Labor Costs,
Other Direct Costs and Indirect Costs, as more fully discussed below.
Direct Labor Costs of attorneys and paralegals are calculated using information
summarized from weekly timesheets prepared by LNRD employees and bi-weekly salary
information supplied to R&M by LNRD. R&M uses all hours (including non-case hours
and both Superfund and non-Superfund case hours) accounted for by a particular
employee for the month and the employee's monthly salary cost to calculate an effective
hourly rate for the month. Thus, e.g., if an attorney's monthly salary was $4,000 and the
attorney accounted for 200 hours that month, the effective hourly rate would be S20.
This hourly rate is then multiplied by the hours the employee worked on a case to
calculate the cost of direct labor for that case for that month.
Other Direct Costs are expenses specifically identified to a case through DOJ's
accounting system. These items include, but are not limited to, costs paid for travel,
expert witnesses, special masters, deposition and trial transcripts, and litigation support
costs.
' 2
-------
In addition to the directly identifiable costs associated with Superfund and other
LNRD cases, there are other Indirect Costs incurred by LNRD which support all LNRD
cases - both Superfund and non-Superfund. The indirect costs are the types of costs
which are incurred to support the functioning of LNRD attorneys in their performance
on individual cases. Specifically, these indirect costs include, but are not limited to,
f
indirect labor (e.g., attorney and paralegal administrative time, secretarial support,
accounting support, record keeping and time keeping), compensated absences (e.g.,
vacation, holiday, and sick time), fringe benefits, office space and utilities, supplies, and
training.
The indirect costs are allocated to ail individual cases through the use of an
indirect cost allocation system designed by R&M. The indirect cost rate is calculated by
dividing the total of the aforementioned indirect costs for a fiscal year by a base
consisting of the total LNRD direct labor costs for that fiscal year (i.e., the cost of
attorney and paralegal labor costs for both Superfund and non-Superfund cases) to
produce a division-wide indirect cost rate by fiscal year. Thus, if .5% of the total LNRD
direct labor costs are incurred on a particular case, then .5% of the total LNRD indirect
costs would be allocated to the case.
Through the development and application of the indirect cost rate, only a fraction
of LNRD's indirect costs are allocated to Superfund cases. In fiscal year 1987,
$15,501,371, or 73.37% of the total indirect costs were allocated to non-Superfund cases.
Similarly, in fiscal year 1988, 516,628,074, or 70.92% of the total indirect costs were
allocated to non-Superfund cases.
7. The accumulation and reporting of the costs relating to the case of U.S. v.
Royal N. Hardage, et al. were performed in the normal course of our contract with
LNRD.
8. We have reviewed the supporting documentation for the case of the U.S. v.
Royal N. Hardage, et al. for costs incurred during fiscal years 1987 and 1988. The
documentation reviewed by us include, but are not limited to, timesheets, vendor
invoices, and travel vouchers.
9. Based on the R&M system of accumulating costs as described above on
behalf of LNRD, and our specific review of the supporting documentation for this case,
-------
we have prepared a summary of LNRD's costs relating to the case of U.S. v. Royal N.
Hardage, et al. for the period October 1, 1986 through September 30, 1988. A copy of
this summary is attached as Attachment 1. Supporting schedules identifying other direct
costs by vendor or category for fiscal years 1987 and 1988 are attached as Attachments 2
and 3. These summaries were prepared under my supervision.
10. We have calculated the average effective direct and indirect attorney and
paralegal hourly rates for ail individuals charging time to the case of U.S. vs. Royal N.
Hardage, et al. for the periods summarized in Attachment 1. As presented in
Attachment 4, the weighted average effective direct labor rates for fiscal years 1987 and
1988 for all attorneys and paralegals are S19.38 and $13.47 per hour, respectively, and the
fully loaded rates (i.e., direct labor plus all indirect costs allocated to the case) are S59.99
and S41.98 per hour for the attorneys and paralegals, respectively.
I do affirm under penalties of perjury and upon personal knowledge that the
contents of the foregoing are true.
. Executed this ^^ day of **t. . 1989, at Bethesda, Maryland.
McGeehin, C.P.A.
4
-------
Attachment 1
SUMMARY OF DOJ COSTS
ROYAL N. HARDAGE
FISCAL YEARS 1987 and 1988
Other
Direct Direct
Labor Costs* Indirect Total
Fiscal Year
•
1987 S 149,812 S 357,153 $ 329,126. $ 836,091
1988 255.223 1.081.485 521.738 1.858.446
Total S 405.035 S 1.438.638 S 850.864 S2.694.537
'See Attachments 2 and 3.
-------
Attachment 2
SUMMARY OF DOJ COSTS BY VENDOR
ROYAL N. HARDAGE
FISCAL YEAR 1987
Category
Special
Master
Court Reporters
Litigation
Support
Travel
Total
Vendor
Alex H. Danzberger
United American
Viola J. Lundberg
Bailey Court Reporting
Lynn Hilton, CSR, RPR/CP
Maynard Peterson & Associates
Stanley, Harris, Rice, etc.
Frank L. Peterson & Associates
Peterson Reporting Co.
Howard W. Henry & Co.
CSR
Jim Blee
Lillian Z. Johnson
Fuller & Partners
Nogora Reporting Services
Bossard & Associates, Inc.
Allegro Reporting Services
Acumenics
Miscellaneous
Amount
$ 35,000
612
2,252
2,319
43
13,614
223
1,528
1,885
1,424
933
497
253
1,177
731
421
1,193
267,314
25.734
S357.153
-------
Category
Expen
Witnesses
Court Reporters
Litigation
Support
Microfilming
Travel
Total
5UMMAKI Uf UUJ COSTS BY VfcNDOR
ROYAL N. HARDAGE.
FISCAL YEAR 1988
4
Vendor Amount
Meyer Environmental Consultants $ 91,852
Rubino & McGeehin, Chartered 22,551
Bossard Associates - 13,488
Miller Reporting 2,398
Frank L. Peterson 11,193
Maynard Peterson . 45,654
United America 9,217
Fuller and Parkes 9,207
Geiger and Loria ' 570
Bobbie Ames . 3,950
Esteb and Associates 182
Gibson Sheirod 363
Dean Moburg 153
Allegro Reporting 4,023
Viola J. Lundberg 600
Popl Court Reporting . 99
Pamela Meade Court Reporter 2,037
A. William Roberts 559
Southern District Reporters -1,982
Bushman Court Reporters 472
Jim Blee 968
Victory Verbatim 4,560
Laurie H. Webbe 529
Lillian Z. John 650
Midtpwn Reporting 1,291
Hamilton, Legato & Assoc., Inc. 447
Petre's Stenographers 72
Elliot & Brow 2,603
Tri City Court Reporters 159
Affiliated Court Reporters 156
Lanes Court Reporting 247
Austin Court Reporting 316
Freelance Reporting 146
Powers & Garri 287
Walls Reporting 66
Acumenics 763,422
Data Films , 13,174
OCTO ' 9,626
Miscellaneous 62.216
S1.081.48S
-------
Attachment 4
SUMMARY OF HOURLY RATES
ROYAL N. HARDAGE
HSCAL YEARS 1987 AND 1988
Total direct labor
Total hours
Direct labor hourly rate
Total indirect costs
Total hours
Indirect hourly rate
Total direct labor and
indirect costs
Total hours
Fully loaded direct labor rate
Attorneys
$308,285
15.910
S 19.38
$646,129 '
15.910
S40.61
Paralegals
S 96,749
7.181
S13.47
$204,735
7.181
S28.51
$954,414
15.910
$301,485
7.181
$41.98
Note: All amounts presented represent totals for fiscal years 1987-and 1988.
8
-------
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
UNITED STATES OF AMERICA,
Plaintiff,
v.
ROYAL N. KARDAGE, et al.,
Defendants,
ADVANCE CHEMICAL COMPANY,
et al.,
Hardage steering
Committee Defendants
and Third-Party
Plaintiffs,
v,
ABCO, INC., et al.,
Third-Party
Defendants.
) Civil Action No. CIV-86-1401-P
DECLARATION OF LISA POLISAR
-------
I, Lisa Polisar, hereby depose and say:
1. I am the Chief of the Litigation Support Group of the
Land and Natural Resources Division of the Department of Justice,
and have held that position since November of 1986. Z am the
contracting officer's technical representative on the contract
between the Land and Natural Resources Division and Acumenics
Research & Technology, Inc. <'Acumenics*), a litigation support.
contractor which.provides litigation support services to the Land
and Natural Resources Division under contract to the Division,
and have held that position since August of 1984.
2. From September 1986 to January, 1987, Z acted as the
Litigation Support Croup's Case Manager for the Hardage
litigation.
3. My responsibilities as Case Manager included arranging
for private vendors to provide support services necessary to the
Department of Justice's enforcement efforts in the Hardage
litigation. One of my responsibilities was arranging for
Acumenics to provide litigation support services to the Hardage
litigation team.
. 4. Acting as Case Manager for the Hardage litigation, I was
responsible for reviewing bills submitted to DOJ by Acumenics and
other private vendors. I reviewed these bills to determine
-------
whether the bills properly reflected work that had been performed
for the Hardage litigation team and whether the vendors had
billed the Department for services at the rates agreed upon by
the vendors and the Department. If a private vendor's bill
properly reflected work performed at the agreed rate, I would
forward the bill to the Division's Financial Management Group
(except in the case of bills for microfilming services provided
by microfilming contractors OCTO and Datafilms, which were
forwarded to the Department of Justice's Justice Management
Division) with my recommendation that the bill should be paid.
5. After Anne Hoke-Witherspoon became Case Manager for the
Hardage litigation in January 1987, I continued, and have
continued to the present day, to review bills submitted for work
performed for the Hardage litigation team by microfilming
-contractors OCTO and Datafilms and by Acumenics (and forward such
bills to the Financial Management Group or the Justice Management
Division, as appropriate, with my recommendation for payment, if
appropriate). In the case of Acumenics, however, Ms. Hoke-
witherspoon, during her tenure as Case Manager, would conduct an
initial review of the bills submitted and make an initial
recommendation as to payment.
-------
r
I declare under penalty of perjury that the foregoing is
true and correct.
Executed on
., 1989.
-------
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
UNITED STATES OF AMERICA,
Plaintiff,
V.
ROYAL P. HARDAGE, et al.,
Defendants,
ADVANCE CHEMICAL COMPANY, et al.,
Hardage Steering
Committee Defendants
and Third-Party
Plaintiffs,
v.
A8CO, INC., et al.,
Third-Party
Defendants.
NO. CIV-86-1401-P
DECLARATION OF
WILEY R. WRIGHT, III
DECLARATION OF
WRIGHT. Ill
I, Wiley R. Wright, III, depose and state the following:
1. I am Wiley R. Wright, III, and I am a Certified Public
Accountant and a shareholder in the certified public accounting
firm of Rub i no & McGeehin, chartered (."R&M") .
2. R&M is under contract with the Department of Justice,
Land and Natural Resource Division ("LNRD") to provide
professional accounting services under which R&M has reviewed
copies of vouchers submitted by Jacobs Engineering Group, Inc.
("Jacobs") for billing the Environmental Protection Agency
("EPA") for work performed by Jacobs pursuant to EPA contract
#68-01-7351.
-------
3. I am the officer/shareholder'responsible for the
aforementioned work performed by R&M on behalf of LNRD. All work
performed by members of R&M relating to the aforementioned work
is performed under my supervision and control, and I have
knowledge of all procedures undertaken by our Firm.
4. R&M reviewed copies of the Jacobs vouchers for purposes
of identifying the expenditures billed by Jacobs under work
assignment No. 172, through August 31, 1988.
5. The amount billed to EPA by Jacobs under work assignment
No. 172, through August 31, 1988, is $ 313,554.00, as itemized on
•
Attachment 1.
I do affirm under penalties of perjury and upon personal
knowledge that the contents of the foregoing are true.
Executed this 7th day of September, 1989, at Washington,
D.C.
Wiley Rj^JIright, <£*!, C.P.A.
-------
ROYAL N. HARDAGE
SUMMARY OF WORK
ASSIGNMENT '1172
FOR JACOBS ENGINEERING VOUCHERS
Voucher
Number
Hardage
Site
Amount
Work
Assignment
#172
007
008
009
01
11
12
13
14
15
16
18
20
22
24
26
28
30
32
33
34
593.21
375.50
253.88
190.13
845.51
756.75
31.16
1,370.86
476.08
1,264.43
1,694.54
33,503.38
6,910.45
32,945.52
77,896.82
120,000.61
210,226.31
167,056.44
309.24
115.221.63
593.21
375.50
253.88
190.13
543.73
361.10
13.72
899.00
476.08
1,175.99
1,367.96
9,749.34
5,969.12
13,143.18
48,224.87
48,406.34
37,286.50
57,429.97
309.24
86.785.14
Totals
S771 .
AS
-------
-------
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
UNITED STATES OF AMERICA, }
)
Plaintiff, )
) Civil Action No. CIV-86-1401-P
v. )
)
ROYAL N. HARDAGE, et al., )
)
Defendants , )
)
ADVANCE CHEMICAL COMPANY, )
et al. , )
)
Hardage Steering )
Committee Defendants )
and Third-Party ) .
Plaintiffs, )
..-.....- )
v. )
J
ABCO, INC. , et al. , )
) .
Third-Party )
Defendants. )
DECLARATION OF ROBERT ALLHEIN . .
I, Robert Allwein, hereby depose and say:
l. That I am employed by the United States Environmental
Protection- Agency (EPA), 401 M Street, S.w. Washington, D.C.
20460, as a Supervisory Operating Accountant in the Superfund
Accounting Branch, Financial Management Division (FMD) of the
Office of the Comptroller. I have been employed in FMD .for 18
years.
2. Pursuant to section 111 of the Comprehensive
Environmental Response, compensation, and Liability Act (CERCLA) ,
42 U.S.C. § 9611, EPA maintains on file records documenting all
L.
-------
- 2 - "
response costs incurred by EPA pursuant to section 104 of CERCLA.
\ / Except for the documents described in Paragraph 3 below, FMD
serves as the custodian of these documents, which include
employee timesheet and travel vouchers, contractor invoices,
treasury schedules, and interagency agreement vouchers. FMD
receives these documents from the various EPA Headquarters
offices in charge of implementing section 104 of CERCLA and from
the Financial Management Field Offices in charge of disbursing
CERCLA funds under the various EPA contracts, and interagency
agreements. FMD keeps these documents on file in the course of -
its regularly conducted activity.
3. However, FMD does not maintain, and does not serve as
the custodian for, those documents pertaining to Region employee
~\ payroll and travel expenditures, which are maintained in the
• -•' Regional Financial Management Offices. Nor does FMD maintain, or
serve as the custodian for, those documents pertaining to certain
EPA contractor costs which are not site-specific, which are
maintained in the Financial Management Field Offices and by the
respective EPA contractors.
4. Upon receipt of all such documents described in
Paragraph 2 above, the Superfund Accounting Branch of FMD
verifies the accuracy of the documents against the site-specific
Financial Management System reports, known as the Software
Package for Unique Reports (SPUR).' The SPUR lists each item of
response costs incurred by EPA, broken down by site; it includes
the cost category of the expenditure (i.e., the type of
-------
- 3 -
expenditure), the amount of the expenditure, and reference
numbers for the corresponding supporting documents. These data
are entered into the Financial Management System by .the Financial
Management Office at EPA Headquarters, the Financial Management
Office at EPA Region 6, and the Financial Management Field
Offices in Cincinnati, Ohio, Research Triangle Park, North
Carolina, and Las Vegas, Nevada, which make the actual
disbursements.
5. FMD has maintained, and continues to maintain, records
documenting the response costs incurred by EPA pursuant to
section 104 of CERCLA for the Hardage site, except for
those documents described in Paragraph 3 above.
6. Between February 1985 and March 1989, George Alapas of
FMD received from the EPA Office of Waste Programs Enforcement
.(OWPE) several requests for the SPUR on Hardage and for all
supporting documents. These requests were dated February 1985,
February 3, 1986, May 15, 1987, December 3, 1987, June 10, 1988,
and March 21, 1989. As part of my duties as Supervisory
Operating Accountant, I was responsible for responding to these
requests.
7. In response to each of OWPE's requests, on February 23,
1985, February 24, 1986, June 24, 1987, January 15, 1988, July
19, 1988, and April 27, 1989, I sent to the CERCLA Cost
Documentation Section-of OWPE the SPUR for Hardage, and all
supporting documents, except for those documents described in
Paragraph 3 above. To the best of my knowledge., the SPUR and
L
-------
/
I
- 4 -
supporting documents sent to OWPE represent an accurate and
complete documentation — with the exception of those documents
described in Paragraph 3 above — of the response costs incurred
by EPA for the Hardage site as of approximately December 31,
1988.
8. In further response to each of OWPE's requests, on
February 2, 1986, May 18, 1987, December 10, 1987, June 16, 1988,
and March 28, 1989, I sent to the EPA Region 6 Financial
Management Office that portion of the SPUR for Hardage which
lists response costs incurred by Region 6 for the Hardage site.
.{The supporting documents.for these costs are maintained in the
Region 6 Office.)
I. declare under penalty for perjury that the foregoing is
true and correct to the best of my knowledge.
Date: September (£ 1989
A-..
ROBERT ALLWEIN
U.S. Environmental Protection Agency
Washington, D.C. 10460
-------
FILED
JUL - 3 1990
liS.DJST.COURT,W£STB?NDtST.OFOKL
** -- DEPUTY
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
UNITED STATES OF AMERICA,
Plaintiff,
v.
ROYAL N. HARDAGE, et,al.,
Defendants,
ADVANCE CHEMICAL COMPANY,
et al.,
Hardage Steering
Committee Defendants
and Third-Party
Plaintiffs,
) Civil Action No. CIV-86-1401-P
ABCO, INC., et al.,
Third-Party
Defendants.
UNITED STATES' SUPPLEMENTAL REPORT ON
REVISED PREJUDGMENT
INTEREST CALCULATION ON RESPONSE COSTS
Attached herewith is a revised prejudgment interest
calculation for EPA response costs prepared by Rubino & McGeehin.
(The calculation for DOJ response costs has not changed, and the
amount of prejudgment interest on DOJ response costs, as stated
-------
in the November 16, 1989 Supplemental Declaration of Patrick A.
McGeehin, remains $267,989.18.) The United States apologizes t
the Court1 for its failure to submit this calculation prior to t
June 27, 1990 date by which the United States had previously
indicated this report could be submitted. The Hardage Steering
Committee has not yet had an opportunity to review the
calculation, and requests leave to file comments if its
accountants discover any error in the calculation.
Also attached herewith is a summary document prepared by the
Hardage Steering Committee which details the Environmental
Protection Agency costs (other than indirect costs) reflected in
the EPA cost summary presented at trial as Exhibit 2571. As the
document reflects, the United States has withdrawn its claim for
all Environmental Protection Agency costs reflected in this
summary other than (1) those costs which were included in the
United States' Motion for Summary Judgment and (2) EPA indirect *
costs. Some of these "withdrawn* costs were reflected in
paragraphs 135-158 of the Plaintiff's Contested Facts at trial,
but the United States agreed to withdraw its claim for those
costs, as reflected in the June 11, 1990 Supplemental Report?
these costs are listed as "Costs Dropped By the Government Per
1 Exhibit 257 also contains line items for Department of .
Justice and Department of Interior costs. The Court may ignore
those figures, however. The Department of Justice costs have
been computed separately, as reflected in the summaries attached
to the affidavit of Patrick McGeehin, and the United states does
not rely on the Exhibit 257 Department of Justice figure for any
purpose. The United states does not seek the Department of
Interior costs listed in Exhibit 257.
-------
Paragraphs No. 135-158 of the Plaintiff's Contested Facts.*
Others of these "withdrawn* costs are not reflected in the
Contested Facts because the United States decided before trial
not to pursue them; these costs are listed as "Additional Costs
the Government Agreed to Drop.*
The revised pre-judgment interest calculation for EPA costs
reflects interest only on (1) EPA indirect costs and (2) the
costs included in the summary judgment motion
Thus, the costs sought by the Government at trial, as
revised by the Government's agreement to withdraw its claim for
certain EPA direct costs and by the revised pre-judgment interest
schedule, are as follows: (1) EPA indirect costs of $473,756.50
(Contested Facts, #133); (2) DOJ fiscal year 1989 payroll costs
of $93,934.00 (Contested Facts, #160); (3) DOJ indirect costs of
$1,042,489.00 (Contested Facts, #164); (4) DOJ fiscal year 1989
private vendor costs of .$831,750.00 (Contested Facts, #167); (5)
prejudgment interest of $470,849.42 (EPA) plus $267,898.18 (DOJ)
= $738,747.60, for a total of $3,180,677.10.
Respectfully submitted,
RICHARD B. STEWART
Assistant Attorney General
Land and Natural Resources Division
ROBERT E. MYDANS
United States Attorney
-------
By:
STEVEN MULLINS
Assistant United States Attorney
4434 U.S. Courthouse
Oklahoma City, Oklahoma 73102
,-•* /'
KALYN C. FREE, Trial Attorney
.STEVEN NOVICK,Trial Attorney
Environmental Enforcement Section
United States Department of Justice
Washington, D.C. 20044
(202)514-1200
OF COUNSEL:
CHARLES de SAILLAN
U.S. Environmental Protection
Agency
401 M Street, S.W.
Washington, O.C. 20460
-------
MAILING CERTIFICATE
This is to certify that a true copy of the foregoing pleading was
served on each of the parties hereto by mailing the same to them
or to their attorneys of record on the 3rd-day of July 1990.
Assistant U. S. Attorney
-------
-------
HttMfit STSm COtfllTTEE (HSC)
suivutr OF WST-TIHL STATUS or nc
COST cum
PA BKWITWB
ff A MWCLL - CWQUMTEftS
* RECIQI VI
IWIfKT COST . KCSIGK VI
£?A TJUVfl. - KAOOUtfTEfis'
- «SICN VI
one COSTS • SESION vr
m covnucT - 001 KILL (6692)
• «2J» HILL (72S1)
TEJ WTIIACT • CCA (67*9)
•PRC (7837)
.'WiN mm
NATIONAL LAI CONTRACT
uxatB asm. i K»T sew.
wnoNAi Of. IXVESTIWTION conn?
TfOUK (64-01-6838)
TSJIAJf (64-01-7104)
•IT CWTIUCT - m (wn\
• «£ (M54)
• £l£ (7347J
'AT CONTRACT - Uwton (6841-6669)
- VI (M41-7368J
nOTION FOft
. TOTAL f ARTIAL SUltUY
«9, 795.81 (1) 149,795.31
2IS.160.9S (2) 288.160.95
47}. 756.50 12)
J1.92S.24 (2} J8.92i.24
J0,17:.74 (1) Uii.65
U6.956.80 (1) 846.956.ffl
U26.J3I.25 (13 1.326.308.25
12.06J.14 (1)
42, 141. 7! (1)
SJ9.9S2.&0 ID JU.5i4.00
96.952.00 (1)
44J.i25.J7 (!) iJJ.42S,j7
7.50C.OO (1)
40.972.00 (1) 18.9S5.J4
122.9U.CS 1U 105.S52.J3
2.MO.S? til
29.076.29 (1)
1S8.JH.71 (1J
119,1X92 (1)
4.272.% (1)
17,276.40 (1)
ADDITIONAL
COSTS
REflJESTTO
W SOVERMOT'S
6-11-90 REPOitT
10.00
0.00
473. 756. SO
0.00
B.OO
0.00
0.00
0.00
0.00
0.00 -
0.00
0.00
0.00
0.00
0.00
0.00
_ c.x
0.00
0.00
0.00
0.00
BKJWCCOF
TOTAL CLAIfl
tt.OO
0.00
0.00
0.00
0.00
26.014.09
0.00
0.00
12.063.14-
42,141.71
526,391.60
96.952.00
10.000.00
7, &90.00
22.01t.62
17,365.67
2,990.80
0.00 .
29,076.29
1SU77.71
119.134.92
4,272.96
17,276.60
COSTS OHOfTO
!YT«
wusttxi Ftf *£~ •'•'
NO. 135-1SB PWSHfn
v ne a*wriFF'$ (SFesw
CONTESTED FACTS MIKRS
. •
,
•
U.380.49 . 1J9
25, 253.25 142
75,566.94 136
7,500.00 145
12.1J6.69 148
. II9.1J4.92 Ut
4,272.96 157
17.276.60 154
ADDITIONAL
COSTS TIC
covewcff
ACRES) TO DROP
t26.014.Q9 (J.i
3.682.65
'16,48t.£3
450,831.66
96,952.00
10.000.00 (3;
22.016.62
17.J6S.67
2.0%. 60
• 16,939.60
15S, 877.71
VUfUSHTS • EflSL
AOEBWTS -
Oeprtaent of Interior
J,?U.27 (II
4,f!2.«2 (I)
0.00
0.00
J.263.27
4,882.82
3,263.27
4,882.82
-------
(1)
(2)
(3)
taunt trees to 5/5/39 Cost Smaary. AH Mounts, except Other Costs - Region VI (on
which NtUir. Bocft/did not testify), also agrees to 11/9/89 Declaration of government cost
witness Nellie Boor*, for costs through 12/31/84.
Amount agrees to 11/1Q/89 Declaration of government cost witness Sonita King, for costs
through 12/31/88.
In its June 11, 1990 resort the government agreed to withdraw fn» its cost claifl
certain EPA direct response costs totalling 1269,521.25, which are addressed
in Paragraph Nos. 13S-IM of the Plaintiff's Contested Facts. In addition to withdrawing
these costs froa its claim, the government has agreed to recalculate the prejutoent
interest amount based on this reduction in its cost claia. ^government has
alreadx excluded froa tne base for calculating prejudgtent interest the aiounts shown in the
column entitled 'Additional Costs the Sflvernaent Agreed to Oroo', with the exception of
the ftegion VI Other Costs of t2i.OU.C9 (Houston Lab costs) and tte National Lab Contract
aiount of J10.000.00 (a typographical error in the aaount rwuested in tne governnent's •
•otion for oartial sumary judMent vs. the amount included-in the governaent's cost claia).
The base stount on which the government is recalculating prejuogaent interest snould
be further reduced by the J26.0H.C9 and the 110,000.00, naking the total additional
wount to be excluded froi the base 1305,535.94.
-------
•—
,
-.
• ••
•"
.
. -
,
^^
••
« •€ ! " ! S » S~ • 4 I ! • $ I ' » •< 5 S » !J
; r ' * » • ; •• » • £ M * » * 5
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IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
UNITED STATES OF AMERICA, )
)
Plaintiff, )
) Civil Action No. CIV-86-1401-P
v. )
) '
ROYAL N. HARDAGE, et al., )
)
Defendants, }
)
ADVANCE CHEMICAL COMPANY, )
et al . , )
)
Hardage Steering }
Committee Defendants )
and Third-Party )
Plaintiffs, )
)
v. )
)
ABCO, INC., et al., )
)
Third-Party )
Defendants. )
UNITED STATES' SECOND SUPPLEMENTAL REPORT ON
REVISED PREJUDGMENT
INTEREST CALCULATION ON RESPONSE COSTS
Attached herewith is a revised prejudgment interest
calculation for EPA response costs prepared by Rubino & McGeehin.
The Hardage Steering Committee, after reviewing the United
States' prejudgment interest calculation attached to the United
L
-------
States' first Supplemental Report on Revised Prejudgment Interest
Calculation, discovered that $12,136.69 which the United States
had dropped from its claim for EPA direct costs was still
included in the prejudgment interest calculation.. Rubino &
McGeehin removed this amount from the calculation, re-performed
the calcxulation, and arrived at a figure of $469,825.23 for EPA
prejudgment interest. This is $1,024.19 less than the
prejudgment interest figure of $470,849..42 previously claimed, for
EPA, bringing the total of the United States' trial-time costs
claim from $3,180,677.10 to a revised figure of $3,179,652.91.
The United States notes that the prejudgment interest
calculations performed by Rubino 6 McGeehin to date calculates
prejudgment interest only through May 1989. In addition, the
costs for which the pre-judgment interest calculation was
performed are EPA costs through December 31, 1988 and DOJ costs
incurred through March 31, 1989. See the trial Affidavit of
Patrick A. McGeehin at 6,8. The United States will submit an
updated interest calculation when, in accordance with the Court's
December 8, 1989 order granting the United States a declaratory
judgment for future response costs, it submits updated EPA and
DOJ cost summaries. Therefore, the Court's Order in this action
should require defendants to pay response costs of $3,179.652.91
to the United States, and reiterate defendants' obligation to pay
future response costs.
-------
Respectfully submitted,
RICHARD B. STEWART ,
Assistant Attorney General
Land and Natural Resources Division
ROBERT E. MYDANS
United States Attorney
By:
STEVEN MULLINS
Assistant United states Attorney
4434.U.S. Courthouse
Oklahoma City, Oklahoma 73102
KALYN C. FREE, Trial Attorney
STEVEN NOVICK,Trial Attorney
Environmental Enforcement Section
United States Department of Justice
Washington, D.C, 20044
(202)514-1200
OF COUNSEL:
CHARLES de SAILLAN
U.S. Environmental Protection
Agency
401 M Street, S.W.
Washington, D.C. 20460
-------
-------
MAILING CERTIFICATE
This is to certify that a true copy of the foregoing pleading was
served on each of the parties hereto by mailing the same to them
or to. their attorneys of record on the 25th day of July 1990.
Assistant U.S. Attorney
-------
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l.S.
UNITED STATES of America
,J V.
BELL PETROLEUM
SERVICES. INC.. et al.
No. MO-88-CA-fl.i.
United States District Court,
W.D. Texas.
• Midland-Odessa Division.
March 8. 1990.
Government brought action to recover
certs under Comprehensive Environmental
Papons*?. Compensation, and Liability Act
iCERCLA) for its ciean up of aquifer con-
taminated with chromium. On cross mo-
tions for summary judgment, the District
Court, Bunton. Chief Judge, held that: II)
Government's decision to connect citizens
affected by contaminated aquifer to alter-
nate water source was rational: i2l process
followed by Government in deciding to im-
plement alternate water system was not
improper: (3) recovery- costs incurn>d were
consistent with national contingency plan;
14) indirect costs were recoverable under
CERCLA; and (5) Government was entitled
prejudirment interest.
• So ordered.
I. Health and Environment «=>25.5<5.5)
In order for court to disallow recovery
of Government's claimed response costs un-
der Comprehensive Response, Compensa-
tion, and Liability Act. operator bears bur-
den of demonstrating that agency's choices
of response actions .were arbitrary and ca-
;>ncious. Comprehensive Environmental
BELL PETROLEUM SERVICES. INC. 771
ClicaiTM F.Supp. 771 IW.D.Tcx. l*»t
ganiless of number of residents who said
they did not drink contaminated water.
Government had no guaranty that those
who moved into area in future would not
consume water or that citizens did not use
tap water for cooking, bathing and other
activities which could bring contaminated
water into their bodies. Comprehensive
Environmental Response. Compensation;
and Liability Act of 1980. § 101 et seq.. as
amended. 42 U.S.C.A. § 9601 et seq.
3. Health and Environment «»25.5t5.5>
Government's decision, under Compre-
hensive Environmental Response. Compen-
sation, and Liability Act, not to supply bot-
tled water to citizens who used aquifer that
was contaminated by chromium1 was not
arbitrary or capricious, despite operators'
contention that no one drank ground water
affected by chromium: supplying bottled
wat«r would be labor and cost intensive
and Government could correctly decide to
take.even1 precaution to prevent contam-
ination. Comprehensive Environmental
Response, Compensation, and Liability Act
of 1980. § 101 et seq., as amended. 42
U.S.C.A. § 9601 et seq.
of liteU. §101 et seq.. as amended. 42
t.'.S.C.A. § 9601 et seq.
'L Health and Environment €=25.5(5.5)
Government's decision, under Compre-
hensive' Environmental Response. Compen-
sation. and Liability Act. to connect citizens
affected by chromium contaminated aqui-
fer to city water lines was rational, despite
operators' contention that no one drank
ground water affected by chromium: - re-
J. Health and Environment e=>25.5<5.5»
When considering action to be taken,
under Comprehensive Environmental Re-
sponse. Compensation, and Liability Act,
with regard to aquifer that was contam-
inated with chromium. Government proper-
ly used maximum concentration limits for
chromium set, forth in Safe Drinking Water
Act. Comprehensive Environmental Re-
sponse. Compensation, and Liability Act of
I960. § 101 et seq., as amended. 42 U.S.
C.A. § 9601 et seq.: Public Health Service
Act. 5 1401 et <«-n.. a? amended. 42 U.S.
L.A. S -MOl el ie^.
5. Health and Environment <=>-;5.5<5.5i
. • That aquifers contaminated by chromi-
um had previously produced single reading
of elevated nitrates did not make Govern-
ment's decision under Comprehensive Envi-
ronmental Response. Compensation, and Li-
ability Act to install alternative water
source arbitrary or capricious.' Comprer
hensive Environmental Response, Compen-
sation, and Liability Act of 1980. § 101'et
-------
5801
772
734 FEDERAL SUPPLEMENT
seq.. as amended.: 42 U.S.C.A. § 9601 et
seq.
6. Health and Environment 25.5<5.5i
Recovery costs incurred by Govern-
ment in its initial response to chromium
contamination found in aquifer were con-
sistent with national contingency plan and.
thus, wert recoverable under Comprehen-
sive Environments! Response. Compensa-
tion, and Liability Act. Comprehensive En-
vironmental Response. Compensation, and
Liability Act of 1980, §§ 101 et seq..
107ia)(4MA), as amended, 42' U.S.C.A.
§§ 9601 et seq., 960725.5(5.5i
Government's indirect costs connected
with cleanup of aquifer were recoverable
under Comprehensive Environmental Re-
sponse. Compensation, and Liability Act.
Comprehensive Environmental Response.
Compensation, and Liability Act of 1980.
§ 101 et seq., as amended. 42 U.S.C.A.
§ 9601 et seq.
12. Health and Environment <5=»25.5<5.5»
Under Comprehensive Environments.
Response. Compensation, and Liability Act.
indirect costs incurred by Environmental
Protection Agency (EPAI in connectior
•.<.:::. jieir, u; •:•:" a^-i;:.r were ;»<..; r .-.--"'•'•
to be equal, percentage-wise, to indirect
costs documented by other agency involved
in cleanup. Comprehensive Environmental
Response. Compensation, and Liability Act
of 1980. § 101 et- seq., as amended. 4-
U.S.C.A. § 9601 et seq.
13. Health and Environment <£=>25.5<5.5>
Under Comprehensive Environmental
Response. Compensation, and Liability Act.
Government's legal expenses were recover-
able as part of total cost Government
forced to undertake due to responsible
ties' inaction regarding clean up: however.
Government's litigation expenses would be
apportioned among responsible parties to
reflect ont- responsible party's initial bank-
ruptcy action, which was removed to dis-
-------
U.S. v. BELL PETROLEUM SERVICES. INC.
Cite u 734 F.Supp. 771 (W.D.Tu. 1*901
773
trict court, and Government's suit against
potentially responsible parties which was
later consolidated with bankruptcy remov-
al. Comprehensive Environmental Re-
sponse. Compensation, and Liability Act of
1980. § 101 et seq.. as amended. 42 U.S.
C.A. § 9601 et set).
14. Health and Environment 025.5(5.51
Entire amount of Government's fea-
sibility study costs was recoverable under
Comprehensive Environmental ' Response.
Compensation, and Liability Act as part of
remedial action: feasability study was con-
sistent with national contingency plan and
plan contemplated study of ultimate reme-
dy to be implemented at site. Comprehen-
sive Environmental Response, Compensa-
tion, and Liability Act of 1980. §§ 101 et
seq.. 101124). 107, as amended. 42 U.S.C.A.
§§. 9601 et seq.. 9601(241. 9607.
15. Health and' Environment <£=25.5(5.5i
Indirect costs incurred by Texas Water
i Commission in cleaning up chromium-con-
taminated aquifer were recoverable under
Comprehensive Environmental Response,
Compensation, and Liability Act. Compre-
hensive Environmental Response. Compen-
sation, and Liability Act of 1980. §£ 101 et
seq.. 107, as amended. 4;.' I'.S.C.A. §§ %01
et seq.. 9607.
16. Interest C=66
Under Comprehensive Environmental
R<-?p"We. Compensation, and Liability Act.
(jiivvriirvieJii v.'u^ jiu'. r-.-qu'.mi !>.' iiiiif.i- f\'r-
cific demand for payment before prejudp-
ment interest was allowed. Comprehensive
Environmental Response. Compensation.
and Liability Act of 19K». §§ 101 et seq.,,
lOTlai. as amended. -1'J U.S.C.A. §£ 9601 et
seq.. %07
-------
774
734 FEDERAL SUPPLEMENT
Marc A. Sheiness and Jose A. Berlanga.
Hirsch. Glover, Robinson & Sheiness,
Houston. Tex., for Southland Royalty Co.
Max Edwin Wright. Cotton. Bledsoe.
Tighe & Dawson. P.C.. Midland. Tex., for
Phillips Petroleum Co.
Timothy D. Yeats and Richard L. Palmer,
Little. Palmer & Williams. Big Spring,
Tex., for Pacific Indem. Co. and Chubb and
Son. Inc.
William M. Kerr. Kerr. Fitzperald &
Kerr, Midland. Tex., and John G. Niles and
Ralph W. Dau. O'Melveny & Myers. Los
Angeles. Cal., for Cipna Property Cas. Ins.
Co.
Russell S. Johnson. Donald D. Gavlick
and Man, T. Mishtal. Sawtelle. Goode.
Davidson & Troilo. San Antonio. Tex., for
U.S. Fire Ins. Co.
George V. Basham. III. Lloyd. Gosselink.
Ryan & Fowler. Austin. 'Tex., and Thomas
Butler Alleman, Niewaid. Waldeck. Norris
& Brown. Houston. Tex., for Granite State
Ins. Co.
Donald Warner Griff is. Griffi* & Griffis.
San Angelo. Tex., for Republic Ins. Co.
MEMORANDUM OPINION ON CROSS
MOTIONS FOR SUMMARY
JUDGMENT
BUNTON. Chief Judge.
BEFORE THIS COURT are cross M*v
I'lamuff ami i>\ tviit-tiivt'
qua and Chromailoy (hereinafter referred
to as "Sequa"). The issue before the Court
is whether the recovery costs incurred by
the Government in its initial response to
the chromium contamination found in the
Trinity Aquifer underlyinp -the "Chromium
I Site" in Odessa. Texas are consistent with
the National Continpency Plan. This
Court, on September l!0, WW and Novem-
ber 9. WW found Defendants Bell. Sequa
and John Leiph liable for tht- Government's
Response Costs under § 107 of the Com-
prehensive Environmental Response. Com-
pensation. and Liability Act ("CERCLA").
42 U.3.C § Will el wg. The question now
l*>fore the Court was reserved for "Phase
II" of the proceedinps. Havinp reviewed
the voluminous Motions of the parties and
the various responses thereto, the Court is
of the opinion that the response costs in-
curred by the Government in this case were
jn fact consistent with the National Contin
gency Plan and Summary Judgment should
be planted for the Plaintiff. The Court
shall reserve its rulinp. however, on the
exact amounts of some of the Govern-
ment's costs pending the filing of affidavits
by the Government. Sequa. Bell and.Leigh.
. BACKGROUND
This suit originated in the United States
Bankruptcy Court as a bankruptcy petition
styled In re Bel! Petroleum Services. Inc.
The Government filed as a creditor and Belt
objected to its alleged liability for response
costs incurred by the Government at the
Chromium I Site (the "Site"), Odessa. Tex-
as. A joint Motion for Withdrawal of
Bankruptcy Reference was signed by
Judge Glen Avers in June of IS'PS. In
December of 1988. this Court granted the
Government's Motion v> bring into the ac-
tion all of the Potentially Responsible Par-
ties.
The controversy at bar involves the ini-
tial response of the State of Texas to citi-
zen complaints of discolored water around
the Site in Odessa. Texas. The State com-
missioned studies of the area and deter-
mined thu*. th- Trmitv Aauift-r which fl«w-c
tial source of contamination..
In September of 19K4. the Environmental
Protection Agency (the "EPA") authorized
a response action at the Site pursuant to it?
authority under Section 1U4IO of CERCLA.
42 U.S.C. Section %04
-------
U.S. v. BELL PETROLEUM SERVICES, INC. 775
Cite u 714 F.Supp. 771 (W.D.Te*. 1940)
businesses beyond the Liberty Lobby, Inc.. 477 U.S. 242, 247-48,
106 S.Ci. 2505. 2509-10. 91 L.Ed.2d 202
(19861: Phillips Oil Co. r. OKC Corp.. 812
F.2d 265. 272 (5th Cir.1987). cert, denied.
484 U.S. Sol. 108 S.Ct. 152. 98 LEd.2d 107
<1£)87). and the cases cited therein.
to residences and
Odessa City Limits, with chromium. The
contaminants now extend north and north-
west from 4318 Brazos Street because of
the flow of the groundwater in the area.
Chromium is a "hazardous substance" as
that term is defined in CERCLA. 42
U.S.C. Section 960iil4).
EPA. as required by CERCLA. main-
tained a position of oversight, but still par-
ticipated in planning the State's studies and
remedial design of the alternate water sys-
tem at the Site. EPA then reviewed these
activities and memorialized them in reach-
ing its Record of Decision which approved
the State selected alternate water system
response. Finally, as per the agreement.
EPA reimbursed 'the State's costs t>y a
letter of credit with the State of Texas on
August 27. 1987. Section 107 of CERCLA.
42 U.S.C. Section 9607. authorizes EPA to
seek reimbursement of these payments
from persons responsible for contamination
at the Site.
On December 1. !9S8 and with permis-
ion of the Court, the Government filed a
Complaint against, among others. Bell. Se-
qua anc Leigh based on Section 107 of
CERCLA.
STANDARD ON MOTION FOR
SUMMARY JUDGMENT
Rule .VMCI of thv Federal Rules of Civil
Procedure provides- for summary judgment
"if the pleadings, depositions, answers to
interrogatories, and admissions on file, to-
j:r;:,•.: \s.i:. tin- aff:auv;u-. if u::y. .-i.v\\
thai the moving party is entitled to a judg-
ment as a matter of law." Rule 56tei pro-
vides:
When a motion for summary judgment is
made and supported as provided in this
rule, an adverse party may not rest upon
the mere allegations or denials of the
adverse party's pleading, but ... roust
set' forth specific facts showing that
there is a genuine issue for trial.
Thus, the focu:- of this Court is upon
disputes over material facts; facts that
might affect the outcome of the lawsuit
under tht- governing substantive law will
reciude summary judgment. Anderson t: .
The Supreme Court's 1986 trilogy- of
summary judgment cases clarified the test
for granting summary judgment. In
Anderson r. Liberty Lobby, the Court stat-
ed that the trial court must consider the
substantive burden of proof imposed on the
party making the claim. In the case before
this Court, the Government has the burden
with respect to its claims: the Defendants
have the burden with respect to certain
defenses they 'raise. The Court in
Anderson i: Liberty Lobby defined "mate-
rial" as involving a "dispute over facts
which may affect the outcome of the suit
under the governing law." Anderson t:
Liberty Lobby requires this Court to sub-
stantiveiy evaluate the evidence offered by
the moving and non-moving parties to de-
termine whether the evidence raises a "ma-
terial" fact question which is "genuine."
In a second case, the Supreme Court
reiterated that where the party moving for
summary judgment has established prima
facit that there is no genuine issue as to
any material fact, the non-moving party
mus: then come forward with "specific
fact*" showing a gf nuine issue for trial. It
must be "more than simply ... that there
is some metaphysical doubt as to the mate-
rial fart:-.." Maljtufhilr. Flc'-trir Industri-
al <.'v..-Lid. r. zcHji/. hudiu Cor^.. +','.,
U.S. 57-i. 106 S.Ct. 1S48. 89 L.Ed.2d 538
(1986). A third case. Celotrr Corp. r. Ca-
trett. 477 U.S. 317. 106 S.Ct. 2548. 91
L.Ed.2d 265 (1986) held that where the
moving party shows that the opposing par-
ty is una'tiie to produce evidence in support
of iui ca?t-. sum man- judgment is appropri-
ate. In Cclotcr Corp.. it was not neces-
sary for the motion for summary judgment
to bt supported by affidavits or other ma-
terial specifically negating the non-moving
party's claim so long as the District Court
was- satisfied that there was an absence of
evidence to support it. At that point the
burden shifted to the non-moving party to
-------
776
734 FEDERAL SUPPLEMENT
produce 'evidence in support of its claims:
if it did not produce any. summary judg-
ment was required.
This Court has demonstrated its willing-
ness to allow non-moving parties their day
in court in borderline cases where under
governing law or reasonable extensions of
existing law. the hearing of some testimo-
ny would be helpful to understand the
proper application of the law. Such is not
the case in the suit subjudice. According-
ly, the Court shall grant the Government's
Motion ir. and allow for additional briefing
where necessary.
DISCUSSION
In itfs Motion, the Government supplies
this Court with the a figure of $1.628,-
142.89. representing the costs incurred by
the Government in responding to the con-
tamination found under the 24-block site
known as the Chromium I Site (the "Site").
Persons found to be an owner or operator
of a site where hazardous substances have
been deposited are statutorily liable for:
(A) all costs of removal or remedial
action incurred by the United States
Government or a State or an Indian tribe
not inconsistent with the national contin-
gency plain:
any. other necessary cost.* of re-
sponse incurred by any other person con-
sistent with the national contingency
. plan: and
i'0' camaL'-- f-T injury :< fit-:-'.rue-Jo:.
of. or loss of natural resources, including
the reasonable cost* of assessing such
injury, destruction, or los> resulting from
such a release: ....
The amounts recoverable in an action
under this section shall include interest
on the amounts recoverable under sub-
paragraphs (Ai through (Di. Such inter-
est shall accrue from the later of (it the
date payment of a specified amount is
demanded in writing, or liii the date of
the expenditure concerned.
Superfund Amendments and Reauthoriza-
tion Act ("SARA"). 42 L':S.C. -5 f»607(a)(4)
.(Supp.l9*9). Ser also: SARA. 4i U.S.C.
§ 9601(9* (Supp.lf»s#i. SARA further pro-
vides:
(1) Limitation
In any judicial action under this chap-
ter, judicial review of any issues concern-
ing the adequacy of any response action
taken or ordered by the President shall
be limited to the administrative record
Otherwise applicable principles of admin-
istrative law shall govern whether any
supplemental materials may be con-
sidered by the court.
(2) Standard
In considering objections raised in any
judicial action under this chapter, the
court shall uphold the President's deci-
sion in selecting the response action un-
less the objecting party can demonstrate.
on the administrative record, that the
decision was arbitrary and capricious or
otherwise not in accordance with law.
(3) Remedy
If the court finds that the selection of
the response action was arbitrary and
capricious or otherwise not in accordance
with law. the court shall award tA> o
the response costs or damages that a
not consistent with the national contin-
gency plan (sio. and (B) such other relief
as is consistent with the National Contin-
gency Plan.
(4( Procedural errors
In reviewing alleged procedural errors.
the court may disallow costs or damage-4-
only if the errors were so serious and
related to matters of such central
10 t;tr aClK'.'. II
have been significantly changed had such
errors not been made.
42 U.S.C. § 9613(jt (Supp.l9S9(. In discuss-
ing the costs incurred, the Court shali re-
view each of the objections made by Sequa
in its Motion and Responses and by Bell m
its Response to the Government's Motion
for Summary Judgment.
DEFENDANTS' OBJECTIONS
In Sequa s Motion for Summary Judg-
ment as to the Invalidity of EPA's Imple-
mentation of an Alternate Water Supply-
Sequa argues:
1. EPA> decision'to implement an alter
nate water supply must be set aside be-'
cause of the failure of EPA to consider
-------
U.S. v. BELL PETROLEUM SERVICES. INC.
Cll«**734 F.5vpp. 771 (W.D.Tcx. IWOt
777
certain relevant factors, and because there
is no rational connection between the facts
found and the decision made.
2. The decision to implement an alter-
nate water system is not cost effective in
comparison to the "no action" alternative.
3. EPA's decision to implement the ex-
tension of city water is invalid because the
focused feasibility study failed to consider
the alternative of supplying bottled water
to users of welis producing groundwater
affected by chromium.
4. The process followed by EPA in de-
ciding to implement an alternate water sys-
tem was fundamentally flawed and re-
quires EPA's decision to be set aside.
Additionally, the following arguments
are found in Sequa's Reply to the United
States' Motion for Summary Judgment on
Costs:
5. A determination of the response
costs, if any. EPA can recover from Defen-
dants must be based on,- the evidence
presented to the Court in a de novo pro-
ceeding.-
6. EPA's Motion for Summary Judg-
ment incorrectly suggests the standard for
reviewing whether the agency selected the
proper remedy also serves to establish
whether the costs of reaching and imi)lt>-
menting that decision are consistent with
the National Contingency Plan ("NCP").
7 Th1" rr:-!'."1!'.,1 •, I'-'-.-".- KPA .-"—"k:" " .*>--
cover in this action are not consistent with
the NCP because of the absence of ade-
quate accounting or documentation con-
cerning such costs.
S. CERCLA does not provide EPA with
the authority to recover its indirect costs or
those of the Texas Water Commission
rTWC">.
9. The costs associated with the DOJ's
involvement at this site either should be
denied in toto or apportioned between the
two cases joined in this consolidated pro-
ceeding.
10. A variety of disputed facts exist
with respect to'the"actual cost? incurred
that prevent the granting of a Motion for
Summary Judgment
11. EPA's request for pre-judgment in-
terest must be denied because EPA failed
to observe the procedural prerequisite es-
tablished by Congress.
Each point shall be discussed seriatim.
THE ALTERNATE WATER
SUPPLY DECISION
The first issue raised by Sequa is the
decision to connect the citizens affected by
the chromium plumes to an alternate water
source, namely an extension of water from
the City of Odessa lines was not rational
for two reasons: (a) no one drank the
ground water affected by chromium and (bl
no health threat was posed by the chromi-
um in the groundwater. Defendant Bell
Petroleum Services. Inc. ("Bell") also
raised this issue in its Response to the
United States' Motion for Summary Judg-
ment and included the argument that with
or without the chromium levels, the water
was not fit for human consumption.
[1] In order for this Court to disallow
recovery of the Government's claimed- re-
sponse costs, the Defendant bears the bur-
den of demonstrating that the agency's
choices of response actions were arbitrary
and capricious. United States v. .\orth-
eastern Pharmaceutical and Chemical
Co. rS'EPACCO"). 579 F.Supp. 823 (W.D,
Mo. 198-1). affd in part and rer'd in part
u>i other grounds. 810 F.2d 726 (Sir. Cir.
li^v . ccr:. d--;:ifd. -5S4 U.S. ?•',:. iUf T '"•..
146. 9t- L.Ed.2d 102 (1987); L'.S. r. Hard-
aye. 733 F.Supp. 1424 (W.D.Okla.1989) (or-
der granting Plaintiffs motion for partial
summary judgment on response cost is-
sues, denying summary judgment for De-
partment of Justice's (the "DOJ's") indirect
costs, ordering refund, if appropriate, and
declaring liability for future response
costs i; l',S. t: Mot tola. 695 F.Supp. 615
(D.N.H.1988); O'AVi'/ r, Picillo, 682
F.Supp. 706 (D.R.l.iaSSi.
[2. 3] The Court is of the opinion Defen-
dants have not met their burden. As point-
ed out by the Government, regardless of
the number of residents who said they did
not drink the contaminated water, the
Government had no guaranty that those
-------
778
734 FEDERAL SUPPLEMENT
who move into the area in the future will
not consume the water. Nor does the
Government have any guaranty that those
citizens who claim to hot drink the water
do not use tap water for cooking, bathing
and other activities which could bring the
contaminated water into their bodies. Fur-
ther, this Court is of.the opinion that the
Government's decision not to supply bot-
tled water to the residence within the con-
taminated area was not arbitrary or capri-
cious. The Government found that "Sup-
ply inp bottled water, over a 15 year design
life, would be labor and cost intensive:
therefore, [it] was not considered a viable
alternative." Administrative Record at
page 3168. For these reasons, this Court is
not convinced that the mere fact those citi-
zens who could be reached for comment
responded they did not drink the water
proves the Government's actions arbitrary
and capricious. To the contrary, the Court
is of the opinion the Government was cor-
rect in deciding to take every precaution
lest an unwary citizen suffer some ill effect
from the contamination for which the De-
fendants are responsible.
[4] Defendants next claim an alternate
water source was an arbitrary and capri-
cious decision because chromium does not
pose a threat to human life. Again, this
Court finds Defendant Sequa's reasoning
unappealing. In making its assessments of
the situation in l»*m}>»iie'i hy thv NCP in effec: ^; ;h<- t:rm
to follow the standard? set in -the Safe
Drinking Water Act (the "SDWA"l. 42
l.'.S.C. § 300f et srq. Chromium is one
element for which maximum concentration
limits ("MCLs") were set under the SDWA.
Further. Section 9G21 of SARA states:
With respect 10 any hazardous sub-
stance, pollutant or contaminant that will
remain on site, if—
(ii any standard, requirement, criteria.
or limitation under any Federal environ-
mental law. including, but not limited to
... the Safe Drinking Water Act ... is
legally applicable to the hazardous sub-
stance or pollutant or amiaminam con-
cerned ... • the remedial action selected
under section 960-J of this title or secured
under section 9606 of this title shall re-
quire, at the completion of the remedial
action, a level or standard of control for
such hazardous substance or pollutant or
contaminant which at least attains such
legally applicable or relevant and appro-
priate standard, requirement, criteria or
• limitation. Such remedial action shall re-
quire a level or standard of control which
at least attains Maximum Contaminant
Level Goals established under the Safe
Drinking Water Act ... where such
goals or criteria are relevant and appro-
priate under the circumstances of the
release or threatened release.
42 L'.S.C. § 9621 nitrate as
nitrogen, which conversion demonstrates
the nitrate readings for two of the three
wells tested for general quality are belo»"
the MCL found in the SDWA' One well
tested above the MCL for nitrate. This
Court agrees with the Government's posi-
tion a single reading of elevated nitrates
-------
U.S. v. BELL PETROLEUM SERVICES.
CKc u 734 rSupp. 771 (W.D.Tc*. IWOt
does not make the Government's decision
to install an alternative water source arbi-
trary or capricious.
INC.
779
COST OF ALTERNATE WATER
SYSTEM V. NO ACTION
16]. The second argument championed
by Sequa is a comparison of the alternate
water system and the "no action" alterna-
tives sheds light on the ineffectiveness of
the alternate water system. In light of the
reason? stated above. thi.« Court does not
agree. Naturally a "no action' alternative
will always prove to be the more cost effec-
tive of two choices where the other choice
involves incurring costs. Although resi-
dents in the affected area denied drinking
the contaminated water, these responses
must be viewed in light of the fact many of
the residents were opposed to being an-
nexed to the City of Odessa and extension
of Odessa's water wells- would prompt such
' a result. As discussed above, this Court
agrees with the Government that reliance
on the residents' affirmation they would
not drink the water gave the Government
no comfort that in fact contaminated water
would not be ingested in the next 12 to 15
years, whether by mistake, necessity or
through other means such as use of water
in cooking, for bathing, etc. Therefore.
this Cnurt is of the opinscin the selection of
int- alU'rnate water source "Vtr IIH-. "IK>
action" option was prudent and neither ar-
bitrary nor capricious.
THE BOTTLED WATER
ALTERNATIVE
Sequa's third argument is the focused
feasibility study failed to consider the alter-
native of supplying bottled water to users
of wells producing ground water affected
by chromium. Again, as noted above, the
administrative record reflects consideration
of supplying bottled water to the residents
of the affected area, but the bot;ied water
option was tabled because it was labor and
cost intensive over the expected 15 year life
of the project. This Court therefore finds
Sequa's third poin: not well taken.
EPA'S DECISION MAKING PROCESS
[7] Sequa next argues the process fol-
lowed by the EPA in deciding to implement
an alternate water system was fundamen-
tally flawed and therefore should be set
aside. Sequa opines EPA violated the re-
quirements of the NCP by selecting a rem-
edy in advance of completion of the Reme-
dial Investigation and EPA's failure to
properly consider and evaluate public com-
ments requires its decision to be set aside.
This'Court disagrees.
As outlined by the Government and doc-
umented in the Administrative Record.
EPA solicited public comment on the Fo-
"cused Feasibility Study from "July 30, 1986
to August 27, 1986. {Record at 3115). Nu-
merous responses were received (Record at
3107-3128). including memoranda from Se-
qua (Record at 3113. 3190) and Bell (Record
at 3125). On August 13. 1986. EPA called
a public meeting in Odessa. Texas, at which
time EPA explained the findings of the
study and took oral comments. The tran-
script of such meeting is part of the Admin-
istrative Record at 3031-3096. In the in-
vestigation by ERM Southwest. Inc. autho-
rized by Bell and Sequa, ERM suggested
that a three-inch main water line (as op-
posed to the EPA's proposed eight-inch
mainl from the Odessa water system
"would be the most easily implemented and
most cost effective alternative." Record at
31-3. The conclusions of EhM Southwest,
Inc. were submitted to the EPA by Sequa.
In the EPA's Record of Decision of Sep-
tember 8. 1986. the EPA responded to the
various questions raised in responses and
comments at the August 13 meeting.
Record at 3129-3170. In response to the
3-inch pipeline suggestion, the EPA noted
that the City of Odessa requires £-inch
lines unless otherwise negotiated. Record
at 3165*. See also Record at 2566. Thus,
this Court is of the opinion that the record
reflects adequate solicitation by the EPA
of public comment as well as a concerted
effort, to respond to questions and con-
cerns. To fault the EPA for missing a
question or two doe? not comport with this
Court's sole task of reviewing the record
for arbitrary or capricious conduct.
-------
734 FEDERAL SUPPLEMENT
A? for Sequa's complaint about1 the deci-
sion to implement the alternate water sys-
tem, this Court is of the opinion Sequa's
point is not well taken. The fact EPA
began negotiations with the State of Texas
for a cooperation agreement does not con-
vince thi5 Court the EPA had in fact made
a final decision to implement the alterna-
tive water source option. Any decision
making process is. by the nature of the
action, fluid and malleable. Regardless of
any preliminary actions on the part of the
EPA. the Court notes from the record ef-
forts were made to contact the public, an-
swer their questions and make these ac-
tions a pan of the record. This Court
refuses to go through each date and each
action of the EPA with a fine-toothed comb
since Sequa was given the opportunity to
conduct the Remedial Investigation and
Feasibility Study itself, .which it declined to
do. From that point. CERCLA dictates
this Court review EPA's actions under an
arbitrary or capricious standard. Alleged
procedural errors trigger disallowance of
cost* "only if the errors were so serious
and related to matters of such central rele-
vance u< the action that the action would
have been significantly changed had such
errors not been made." 42 U.S.C.
§ %lftjM-ti. Thi? Court finds no evidence
that had the EPA started the initial negoti-
ations ai a later date, the selection of a
remedial option would have keen any other
than the alternate water source remedy.
STANDARD OF REVIEW FOR COSTS
Sequa next seeks to distinguish thf
EPA's costs of decision (i.e. the Remedial
Investigation and Feasibility Study Costs i
and costs of implementation (i.e. costs assi-
ciated with installation of the water lines i.
As pointed out by Sequa. in order for the
Government to recover its decision and im-
plementation costs, the underlying decision
on the appropriate remedy must not be
arbitrary or capricious. 42 U.S.C
§ 9613(jK2l. This Court found the decision
to implement the alternate water supply
was neither arbitrary nor capricious. Se-
qua then points to the language of Section
107 which holds responsible, parties such
as Bell, Sequa and John Leigh, liable for
(A) all costs of removal or remedial
action incurred by the United State?
Government or a State ... not inconsist-
ent with the national contingency plan:
(B> any other necessary costs of re-
sponse incurred by any other person con-
sistent with the national contingency
plan
42 U.S.C. § 9607. Sequa then
argues the process that led to the decision
to implement an alternative water source
must be consistent with the NCP. the costs
of the decision-making process must be rea-
sonable and necessary and the costs mu>:
have been incurred due to the release from
the Odessa 1
DE NOVO REVIEW OF EPA'S
RESPONSE COSTS
Sequa next argues, and the Government
concurs, the standard for review of wheth-
er the EPA actually incurred certain costs
i? dc rtoro rather than arbitrary- and capri-
cious. This Court agrees. Sequa does not,
however, contend certain costs were not in
fact incurred. Instead. Sequa argues costs
incurred should not have been so incurred
or are not' recoverable under CERCLA.
Thusi the dc noro standard of review, al-
though applicable to "actual costs" chal-
lenges, fails'" to stave off summary judg-
ment when the challenge goe? to the "rea-
sonableness" of the costs incurred.
|8J This Court disagrees with Sequa'.*
premise the Government's costs must t>e
shown to be reasonable and necessary.
Subsection B of Section 9607 refer? to
costs incurred "by any other person." Thi-c
Court reads such language to apply w
costs incurred consequent to private party
cleanup actions, not EPA response costs
Thus, the Government need only maintain
consistency with the NCP to recover it*
costs under a CERCLA action.
Taking a broader look at the purposes
behind CERCLA, the Court does not find
therein Congress' desire to allow a respon-
sible party to sit back and watch the
Government sift through the rubble of a
polluted site, formulate a remedial solution
and uke action and then attack even- cost
-------
U.S. v. BELL PETROLEUM SERVICES. INC.
Cite «* 7J4 F.Supp. 771 (W.D.Tei. 19901
781
VTsTP-
•V. * '
>=v.<:i--.
*?r>.
it*'
associated therewith. This Court is of the
opinion gross misconduct on the part of the
Government could bar recovery. Yet the
Court keeps in mind the fact the wrong-
doers herein had the option of taking re-
sponsibility for their own actions at the
outset, which, had they done so. would
unquestionably have limited certain costs.
Our Government. God bless her. is a bu-
reaucratic monster which, by definition,
runs inefficiently. Forcing the Govern:
ment's hand at the Chromium I Site natu-
rally increased costs because the EPA had
to gear up its various support staffs and
offices, reconstruct the entire scenario of
the chromium dumping and then begin the
arduous process toward recovery including
the infamous study, comment period, etc.
Many, many costs would have been unnec-
essary had the Defendants shouldered the
burden and sought to quickly and efficient-
ly clean up the mess they made. Instead.
their free ride has increased costs exponen-
tially, including all the bureaucratic ex-
penses typical of a large Government, costs
of discovery and trial. Court costi- .. the
list is unending. For the Defendants to
come to the Court now with white gloves
and complain of dust is.-in this Court's
opinion, unbecoming of any member of this
society. In a free country such as ours, al!
citizens owe a duty to' take responsibility
for their actions.
19] The Court reiterates the Govern-
ment is not free from sin. Yet. as Section
113 of CERCLA indicates, it is only when
inequities rise to a. level of gross miscon-
duct that a Court should consider taking
away the Government's right to reimburse-
ment. Defendants chose to pay the piper
after the dance and. the dance now conclud-
ed, they seek to extricate every sour, note
along the way from the fee. This "Court
'finds that Defendants have not shown arbi-
trary or capricious decisions or pointed to
specific costs that are not in keeping with
the NCP.
ABSENCE OF ADEQUATE ACCOUNT-
- ING DOCUMENTATION
Sequa next argues absence of proper ac-
"*onnting documentation should bar any re-
covery by the Government for its response
costs. In discussing this point, the Court
turns to the NCP. 40 C.F.R. § 300. et seq.,
which states:
la) During all phases of response, docu-
mentation shall be collected and main-
tained to support all actions taken under
this Plan, and to form the basis of cost
recovery. In general, documentation
shall be sufficient to provide the source
and circumstances of the condition, the
identity of the responsible parties, accu-
rate accounting of Federal or private par-
ty costs incurred and impacts and poten-
tial impacts to the public health and wel-
fare and the environment.
40 C.F.R. § 300.69. Sequa points to the
fact that time sheets maintained by the
contractors. EPA personnel and TWC per-
sonnel lack a description of the tasks per-
formed and the tasks described in the con-
tractual scope of the work between the
T\VC and International Technologies Cor-
poration ("IT Corporation") do not corre-
spond to the description in IT Corporation's
invoices. The Court notes the extensive
accounting documentation attached to the
affidavit of Randy Cunningham, which affi-
davit supplements the Government's Mo-
tion for Sum man- Judgment. The account-
ing summaries used by the Government
reflect the man hours expended and the
rate per hour and were submitted in lieu of
extensive documentation as requested by
Sequa. The Court notes the underlying
record? have been made available to the
Defendants by the Government and thus,
forcing the Government to go to the addi-
tional expense of compiling more detailed
summaries would only increase costs un-
necessarily.
[10] Further, failure to provide descrip-
tive documentation does not make the
Government's accounting inaccurate even
if 'it did. disallowance of costs for that
reason is too harsh a sanction for the omis-
sion, if any. involved. Sequa is at liberty to
inspect the Government's records at any
time for flaws in the figuring but the un-
derlying remedy has been found by this
Court to bt consistent with the NCP and
"reasonableness" is not a factor. As for
-------
r82
734 FEDERAL SUPPLEMENT
specific instances of incongruity between
the scope of work 10 be performed by IT
Corporation for TWC and the description of
work in the invoices submitted by IT Cor-
poration, this Court is of the opinion Sequa
and the Government shall submit a joint
work sheet of those expense items upon
which they can agree and those .items in
dispute with reasoning for each of their
respective positions within thirty (30) days
of the date below. The Court shall with-
hold its ruling on the issue until that time.
INDIRECT COSTS
[11] Sequa then argues indirect costs
are not recoverable under CERCLA. Indi-
rect costs are those costs generally neces-
sary to support the work performed by the
EPA and the DOJ on Superfund sites, but
which are not directly allocated to specific
cases. The Court finds disingenuous Se-
qua's position CERCLA's silence on indi-
rect costs is dispositive. In order for the
Government to promptly remedy hazardous
situations discovered across the country', it
must necessarily maintain offices and sup-
port staff on a continuous basis. To create
staffing and offices for each Superfund
site would unnecessarily increase costs for
each site. Further, the Government- con-
tracted with the accounting firm of Ernst
& Whinney to provide an accounting meth-
od for computing those indirect costs re-
flecting administrative costs proportional
to sen-ices rendered to a specific Super-
fund site. That method is described in
detail in iht- affidavit of William Cooke
attached to the Government's Motion for
Summary Judgment.
Several courts have upheld the Govern-
ment's claim for indirect costs, citing the
broad remedial purposes of CERCLA as
well as the language of Section 9(>04(bl
allowing recovery of "all of the costs in-
curred in a remedial or removal action."
United Stolen i: R.W. Meyer. Inc.. 889
F.2d 1497, 1503 (6th Cir.1989). See also:
United States i: South Carolina Recy-
cling £• Disposal. Inc. <"SCRDI"), 653
F.Supp. 984 (D.S.C.). affd in part, vacated
in part and remanded. I'nited States t.
Monsanto Co.. 858 F.2d 160 (4th Cir.l9S8|.
rrrt. denied. — U.S. . 109 S.Ct. 3156..
104 L.Ed.2d 1019 (19891: United States r.
.Northeastern Pharmaceutical &• Chemi-
cal Co. ("NEPACCO"), 579 F.Supp. 823
(W.D.Mo.1984), affd in part, rer'd in
part, and remanded. 810 F.2d 726
-------
U.S. v. BELL PETROLEUM SERVICES, INC.
Cite u 7J4 F-Supp. 771 (W.D.Tex. 1MO)
783
um I site. In addition, or in the alternative.
one agency's indirect costs has no bearing
on another agency's, as the tasks per-
formed by each are as varied as the agen-
cies themselves. The imposition of an in-
variable percentage structure would un-
duly limit the responsive actions of the
EPA and the state agencies with which
they work and would not serve the broad
remedial purposes of CERCLA. For thi?
reason, the Court is of the opinion Sequa'?
argument- indirect costs should be tied to
one agency's percentage is without merit
and improper under CERCLA.
APPORTIONMENT OF LEGAL FEES
[13] Sequa also challenge? the Govern-
ment's claim for litigation expenses. This
Court is of the opinion legal expenses, like
indirect costs, are recoverable as pan of
. the total cost the Government was forced
to undertake due to the responsible parties'
inaction regarding cleanup. Other courts
found likewise. Sec: SCKDf. supra:
XEPACCO, supra. Sequa then argues the
Government's litigation expenses should be
apportioned among the responsible parties
to reflect Bell's initial bankruptcy action.
which was removed to this Court, and the
suit filed against the potentially respon-
sible parties in Ian- 19S? which was later
consolidated with the bankruptcy removal.
This Court agrees the litigation expenses
should be so apportioned, in acco.-dar:;-v
therewith, the Government shall file an af-
fidavit reflecting those costs incurred prior
to the filing of case no. MO-88-CA-300 and
those costs incurred thereafter.within thir-
ty (30) days of the date below. Costs in-
curred following the filing of MO-St-CA-
300 shall be divided equally among Bel!.
Sequa and John Leigh.
QUESTION OF FACT RE: COSTS
Sequa further points to the fact doc-
umented costs and claimed costs of the
£:'A and DOJ do not correspond. The
Court is • of the opinion the Government
shall submit an affidavit detailing exactly
those costs claimed including a breakdown
of thr type of cost (indirect, legal. RL>. RA.
state-funded, etc.i within thim (30i dav~ of
the date below for edification of the Court
and opposing counsel.
[14] As for the costs associated with
the remaining portion of the feasibility
study, this Court finds the entire amount of
feasibility study costs are recoverable un-
der CERCLA as part of the remedial ac-
tion. 42 U.S.C. § 9607
removal actions in the event of a release
or threatened release of a hazardous sub-
stance into the environment, to prevent
or minimize the release of hazardous
substances so that they do not migrate to
cause substantial danger to present or
future public health or welfare or the
environment.
42 U.S.C. § 9601(241. Further., the NCP
makes the following reference to the Reme-
dial Investigation/Feasibility Study
(RI/FS):
An RI/FS shall, as appropriate, be under-
taken by the lead agency conducting the
remedial action to determine the nature
and extent of the threat presented by the
release and to evaluate proposed reme-
dies. This includes samiiling. monitor-
:nr. and exposure assessment, as neces-
sary, and includes the gathering of suffi-
. cient information to determine the neces-
sity for and proposed extent of remedial
action. Part of the Rl/FS may involve
assessing whether the threat can be pre-
vented or minimized by controlling the
source of the contamination at or near
the area where the hazardous substances
were originally located (source control
measures) and/or whether additional ac-
tions .will be necessary because the haz-
ardous substances have migrated from
the area of or near their, original location
(management of migration). Planning
for remedial action at these releases
shall, as appropriate, also assess the
need for removals. During the remedial
investigation, the original scoping of the
-------
784
734 FEDERAL SUPPLEMENT
project may be modified based on factors
in § 300.68ie|.
40 C.-F.R. § 300.68(d). It is clear the RI/FS
is consistent with the NCP and the NCP
contemplates a study of the ultimate reme-
dy to be implemented at the site.
As for the differential between the IT
Corporation estimates and the IT actual
costs, the Court previously opined costs
incurred need not be "reasonable and nec-
essary" so lonp as they are consistent with
the NCP. SEPACCO. supra, at 851.
Keeping in mind the Court's finding the
alternate water supply system is consistent
with the NCP. this Court is once again of
the opinion Sequa and the Government
shall submit a joint work sheet of those
items upon which they can agree and those
items in dispute regarding the IT Corpora-
tion's cost overruns and the reasons there-
for within thirty (30) days of the date be-
low. The Court shall withhold its ruling on
the issue until that time.
[ 15] Sequa also claims the indirect costs
of the TWC are no: properly recoverable.
In light of the language of § 9607. as previ-
ously cited, and of this Court's discussion
of the EPA's indirect costs, the Court is of
the opinion those indirect costs proportion-
ately i attributable to time spent on the
Chromium 1 site art properly reimbursable.
PRE-JVPGMENT INTEREST
(56] fc- .-•>• h- ;.«ir.: i- !:,., <"k-v— -
ment faiiea to follow statutory prerequi-
sites in order to recover pre-judgment in-
terest on the response costs. Sequa ar-
gues because the Government did not make
a demand for payment to the Defendants,
the Government is barred from recovering
pre-judgment interest. The cases cited by
Sequa. General Electric. Co. r. Litton
Business Systems. Inc.. 715 F.Supp. 949.
963 (W.D.Mo.lSSW): I'nittd States r. Mot-
tolo 695 F.Supp. CIS. 631 (D.N.H.1988).
show pre-judgment interest is in fact
awardable in CERCLA actions. Further.
as Sequa points out. both cases involve an
action wherein a demand for payment was
in fact made upon the Defendants i by the
Plaintiff. Neither Court dealt with the di-
rect issue of whether' pit-judgment interest
was awardable in cases where the Plaintiff
failed to make a demand for pre-judgment
interest.
Having reviewed the statutory language
in light of the broad remedial purpose un-
derlying CERCLA and SARA, this Court is
not inclined to accept Sequa's reading of
§ 9607 as requiring a specific demand for
payment before pre-judgment interesj is
allowed. Instead, this Court reads the stat-
utory language as a guideline for the Court
to follow in determining the date from
which pre-judgment interest begin? to ac-
crue should a conflict arise, as opposed to a
strict requirement which, if not followed.
would result in a bar to the Government's
claim of pre-judgment interest. Accorcfing-
iy. this Court finds prejudgment interest
shall be recoverable by the Government as
of the date the cost accrued.
The operative SARA language is as fol-
lows:
The amounts recoverable in an action
under this section shall include inures;
on the amounts recoverable under sut>-
paragraphs (A) through (Di. Such inter-
est shall accrue from the later of (il the
date payment of a specified amount i?
demanded in writing, or iii) the dale of
the expenditure concerned.
42 U.S.C. § %07)ai.
In light thereof. :he Court direct? the
1'>v"rr.^i*"i' ''i >'"' ' ''• 'a lire-judgment in-
terest ngurr ii- the umrt within thirty (Jtl'i
days of the date below justifying the datf
upon which the Government claims the in-
terest begins to accrue.
Having made the above findings,
IT IS ORDERED the Government shall
recover those costs outlined in the fore-
going, opinion.
IT IS'FURTHER ORDERED the parties
shall submit the following affidavits within
thirty (30) days of the date below in keep-
ing with the directives listed above:
(Da joint worksheet detailing specific
incidence? of incongruity between the
scope of the work to be performed by IT
Corporation for TWC and the description of
work in the invoices submitted by IT Cor-
-------
ENVY LTD. v. CITY OF LOUISVILLE
CltruTM F-Supp. 785 (W.D.Kt. 1940)
poration upon which the parties can and 2. Licenses ®=>7(I)
785
cannot agree:
(2) an affidavit by the Government show-
ing those legal costs incurred prior and
subsequent to the filing of case no. MO-
8&-CA-300:
(3) a joint work sheet showing the differ-
ences between the IT Corporation cos: esti-
mates and actual costs including the tasks
performed and the reasons for the cosi
overruns: and
<4' the Government's pre-judgment inter-
est figure anc justification for the date
upon which interest begins to run.
ENVY LIMITED, a Kentucky
Corporation. Plaintiff.
v.
The CITY OF LOUISVILLE, a
Municipality, Defendant.
Civ. A. No. C-87-006ft-L( M).
United States District Court.
\V.D. Kentucky,
at Louisville.
Jan. 1J-. 1990
Adult entertainment establishment
challenged ordinance regulating location
and operation of such establishments. On
plaintiff's motion for summary judgment,
the District Court. Meredith. J., held that
ordinance was rationally related to reduc-
tion in secondary effects resulting from
adult entertainment businesses and. thus.
was constitutional. •
Motion denied.
1. Constitutional Law
State may use content of sexually ex-
plin: matem: a> basis- for- differentiating it
from other maieriai without violating Con-
stitution. L.S.C.A. Const.Amenc. 1.
Ordinance prohibiting adult entertain-
ment establishments from displaying any
form of entertainment in any medium be-
tween hours of 12 midnight and 6 a.m. and
requiring disclosure of information regard-
ing ownership of such establishments was
rationally related to reduction in secondary
effects resulting from adult entertainment
businesses and. thus, was constitutional.
U.S.C.A. Const.Amends. 1. 14.
Stephen P. Durham and Benjamin C.
Johnson. Louisville. Ky.. for plaintiff.
F. David Banks. Louisville, Ky.. for de-
fendant.
•]
MEMORANDUM OPINION
AND ORDER
MEREDITH. District Judge.
F'ending before the Court is the motion
of the plaintiff. Envy Limited, for summary-
judgment under Rule 56 of the Federal
finite of Civil Procedure. Federal jurisdic-
tion is properly invoked in that plaintiffs
claim for relief is under 42 U.S.C. § 1983
thereby invoking the jurisdiction of this
Court under l£ U.S.C. § 1343la)<3).
ThL- action seeks declaratory relief re-
garding the Constitutionality of City Ordi-
:::»:ice N" 320. Series li^'T. The ordinance
»-...• •.•i.a-.-ied as law on Noven:; • - :": '!••?•
LIV trit defendant, the City of Louisville.
Tije ordir.anffr regulates the location and
operation of adult entertainment establish-
ments including "cabarets" which feature
nude dancing. The plaintiff operates a cab-
are:.
The ordinance prohibits any establish-
•ment licensed to engage in adult entertain-
ment from displaying any form of enter-
tainment in any medium between the hours
of 12:00 midnight and 6:00 A.M. Ordinance
Ss'ction in.OOSiEi. The ordinance provides
as- a prerequisite to the issuance of a li-
cense u> engage in adult entertainment that
any applicant for such a license to make
disclosures as to the name, address, social
security number, age, photograph, and
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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF MICHIGAN
UNITED STATES OF AMERICA,
Plaintiff,
v.
THOMAS SOLVENT COMPANY; et al.
Defendants.
Civil No. K86-167 CAS
Hon. Richard A. Enslen
FRANK J. KELLEY, Attorney
General of the State of
Michigan and THE STATE OF
MICHIGAN,
Plaintiffs,
v.
THOMAS SOLVENT COMPANY; et al.
Defendants.
Civil NO. K86-164 CAS
MEMORANDUM OF THE UNITED STATES IN SUPPORT OF
ITS MOTION IN LIMINE TO EXCLUDE EVIDENCE
ROGER J. MARZULLA
Assistant Attorney General
Land, arid Natural Resources Division
JOEL M. GROSS
NANCY BOYLAND COLLINS
MICHAEL J. McNULTY
THOMAS A. MARIAXI, JR.
SAMUEL BOXERMAN
Environmental Enforcement Section
Land and Natural Resources Division
U.S. Department of Justice
Washington, D.C. 20530
(202) 633-1307
OF COUNSEL:
ROGER GRIMES
Regional Counsel
Environmental Protection Agency
Region V
230 South Dearborn Street
Chicago, Illinois 60604
-------
-------
INTRODUCTION 2
A. PROCEDURAL POSTURE OF THIS CASE 2
-B. SUMMARY OF ARGUMENT 4
C. STATUTORY BACKGROUND 7
ARGUMENT 9
I. Introduction 9
II. The United States is Entitled to Recover
Its Actual Costs Incurred in Carrying Out the
Response Actions Unless the Defendant Proves that
the Response Actions Were Inconsistent with the
NCP 13
A* The Plain Language of the statute Provides
that the United States Shall Recover All
Costs Incurred in Carrying out Its Response
Actions • 13
B. If Resort to Materials Beyond the Text of
CERCLA Section 107(a)(4)(A) Is Needed, Then
The Structure, and Legislative History of
CERCLA Also Demonstrate that the United
States is Entitled to Recover the Actual
Costs Incurred in Carrying Out
Its Response Actions 16
1. CERCLA Delegates to EPA Broad Discretion
to Select and Take Response Actions; the
Only Limitation on Recovery of Costs is
thi- the Response Action hot Jc-e
Inconsistent with the NCP. 17
2. The NCP Governs the Selection of
Response Actions; It Does Not Govern the
Incurrence of Costs in Implementing
Response Actions ....... 20
\
3. Costs are Inconsistent with the NCP under
Section 107(a)(4)(A) Only If They were Spent
for a Response Action Which Itself was
Inconsistent with the National Contingency
Plan 27
4. Defendants' Challenge to EPA's Implementation
Decisions Is Foreclosed By The Different
- i -
-------
5.
Statutory Standards That Apply to Recovery of
Costs Under Other Provisions of CERCLA . 29
Judicial Review of EPA Decision-making
is Limited to the Administrative Record
for Selection of the Response Action
III. Construing CERCLA to Preclude Review of
Implementation Decisions Comports With the
Response Scheme Established By the Statute
and With Federal Contract and Procurement
Law 33
IV. Judicial Review of the Response Action Taken
is Governed by the Provisions of CERCLA and
not by the Administrative Procedure Act .... 41
V. If this Court Determines that Some Review of •
Implementation Decisions is Permissible, EPA's
Decisions Regarding Response Activities are
Entitled to Great Deference and Should Not Be
Overturned Unless Arbitrary and Capricious . .42
CONCLUSION 49
- ii -
-------
,• ft. '
TABLE OF CASES AND AUTHORITIES
American Paper Institute. Inc . v. American
Electric Power Service Corp. . 461 U.S. 402
(1983) ..................... ..... 44
Angelina Holly Corp. v. Clark r 587 F. Supp. 1152
(D.C. Cir. 1984) .... ................. 46
Baltimore Gas & Electric Co. v. NRDC,
462 U.S. 87 (1983) .................... 46
Block v. CoT^pupitv Nut^rJ^tion Institute.
467 U.S. 340 (1984) .............. ..... 33
•
Camp v. Pitts. 411 U.S. 138 (1973)
(per curiaa) ....... ....... ...... ... 44, 49
Chrysler Corp. v. Brown. 441 U.S. 281 (1979) ....... 45
Citizens to Preserve Overton Park v. Voice .
401 U.S. 402 (1971) ............. ...... 43, 44
45, 49
Compensation Dep't of Dist. Five v. Marshall.
667 F.2d 336 (3d Cir. 1981) ........ ....... 41
Dedham Water Co. v. Cumberland Farms Dairy. Inc..
805 F.2d 1074 (1st Cir. 1986) ....... . ..... . 8, 13
Donaldson. Hoffman & Goldstein v. Gaudio. 260 F.2d 333
(10th Cir. 1958) ......... ......... ... 31
*
Dov Chemical v. Csstle.
480 F. Supp. 315 (E.D. Mich. 1978),
aff'd. 659 F.2d 724 (6th Cir. 1981) .... ....... 27
Dunloo v. BachovsV.i. 421 U.S. 560 (1S75) ......... 4 =
Eaole-Picher Industries. Inc. v.
United States Environmental Protection Aaencv.
759 F.2d 905 (D.C. Ci- 1985) ...... . ........ 27
tt
Environmental Defense^Fund. Inc. v. Costle.
657 F.2d 275 (D.C. Cir. 1981) ...... ...... . . 49
Ethyl Corp. v. EPA. 541 F.2d 1 (D.C. Cir.)
fen bane) . cert, denied. 426 U.S. 941 (1976) ....... 42, 45
46
- iii -
-------
Falzarano v. Unitedgrates.
607 F.2d 506 (1st Cir. 1979) 33
EloridaPower & LiahtCo. v.'Lorion.
470 U.S. 729 (1985) 44
Hahn v. Gottlieb.
430 F.2d 1243 (1st Cir. 1970) 33
Heckler v. Chanev.
470 U.S. 821 (1985) -. 33
J.V. Peters S Co. v. Ruckelshaus.
767 F.2d 263 (6th Cir. 1985) 16
Kellev v. Thomas Solvent Co..
146 Mich. .App% 55 (1985) 12
Lead Industries Association v.
Environmental Protection Aoencv. 647 F.2d 1130
(D.C. Cir.)» cem. denied. 449 U.S. 1042 (1980) ..... 42
Lone Pine Steering Comm. v. EPA. 777 F.2d 882
(3d Cir. 1985), cert, denied. 476 U.S. 1115 (1986) 8
Louisville and Nashville Railroad Co. v. Donovan.
713 F.2d 1243 (6th Cir. 1983), cert, denied.
466 U.S. 936 (1984) 41
•~
455 F.2d 1289 (D.C. Cir. 1971) 47
New York v. General Electric Co^f
5?2 F. S'-pp. 231 JN.S.N.v. 1964; . . . < ..... 15 .
New York v. Shore Realty Corp..
759 F.2d 1032 (2d Cir. 1985) 13
NL Industries. Inc. v. Kaplan.
792 F.2d 896 (9th Cir. 1986) 20
Panama Canal Co. v. Grace Li •*. Inc..
356 U.S. 309 (1958) . . . . , .33
Rochester v. Bond. 603 F.2d 927
(D.C. Cir. 1979) 41
Rural Electrification Administration v.
Northern States Power Co.. 373 F.2d 686
(8th Cir. 1967), cert, denied.
387 U.S. 945 (1967) . 33
- IV -
-------
SCA Services of Indiana v. Thomas.
634 F. Supp. 1355 (N.D. Ind. 1986) ............ 27
Sehalk v. Thomas. No. IP 88-344-C
(5.0. Ind. Dec. 6, 1988) ......... ........ 41
Sierra Club v. Costle. 657 F.2d 298
(D.C. Cir. 1981) ..................... 42
Small Refiner Lead Phase-Down Task Force v.
U.S.E.P.A. . 705 F.2d 506 (D.C. Cir. 1983) ........ 42
Southern Railway Co . v. Seaboard Allied Milling Corp. .
442 U.S. 444 (1979) ................... 33
Sunshine State Bank v. Federal Deposits Ins. Corn. .
783 F.2d 1580 (llth Cir. 1986) ............. 45
Textron. Inc.. Bell Helicopter Textron
Division v. Adams. 493 F. Supp. 824 (D.D.C. 1980) .... 40
Town or Orange town v. Gorsuch. 718 F.2d 29
(2d Cir. 1983), cert, denied 465 U.S. 1099 (1984) .... 49
Union Petroleum Corp. v. United States.
651 F.2d 734 (Ct. Cl. 1981) ................ 14
United States v. Beatty Incorporated. 401 F. Supp. 1040
(W.D. Ky. 1975) ..................... 14
United States v. Carlo Bianchi & Co.
373 U.S. 709 (1963) ............. ...... 44
I'T.lts* Ftst?- v. Clark. 454. U.S. 555 (IScI) ....... .13
United States v. Conservation Chemj.ca| Co..
619 F. Supp. 162 (W.D. Mo. 1985) ............. 16
United States v. Ethvl Ccrs..
761 F.2d 1153 (5th Cir. 1985), cert, denied.
474 U.S. 1070 (1986) ................... 27
United States v. Menasche. 348 U.S. »?8 (1955) ...... 31
United States v. Northeastern Pharmaceutical &
Chemical CO. . "NEPACCO* 810 F.2d 726
(8th Cir. 1986), cert, denied. 108 S.Ct. 146
(1987) ................. ........ passim
United States v. Northernaire Plating Co..
685 F. SUpp. 1410 (W.D. Mich. 1988),
- v -
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appeal docketed. No. 88-2074 (6th Cir. Nov. 1, 1988).
United States v. Shell Oil Co..
605 F. Supp. 1064 (D.Colo. 1985)
United States v. Ward.
618 F. Supp. 884 (E.D.N.C. 1985)
16, 23
27
28, 43
United States v. Western Processing.
No. 83-252M (W.D. Hash. Feb. 19, 1986) , . 28, 43
Walls v. Waste Resource Corp.,
761 F.2d 311 (6th Cir. 1985) 8
Wheelabrator Corp. v. Chafee. 455 F.2d 1306
(D.C. Cir. 1971) . . 47
Wickland Oil Terminals v. ASARCO. Inc..
792 F.2d 887 (9th Cir. 1986) 13
- vi -
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STATUTE?
Administrative Procedures Act (APA),
5 U.S.C. §551 et sea. 41,44
Brooks Architect-Engineers Act ('Brooks Bill*),
40 U.S.C. f§541-54.4 . 35
Clean Water Act, 42 U.S.C. §7607(d) 42
Competition in Contracting Act of 1984 (Small Business and
Federal Procurement Competition Enhancement Act of 1984),
41 U.S.C. §§251 et sea. 35,37
Comprehensive Environmental Response,
Compensation, and Liability Act ('CERCLA*), 42 U.S.C. §9601
et seq^, as amended by the Superfund Amendment and
Reauthorization Act
Section 104, 42 U.S.C. §9604 7,18
Section 104(a), 42 U.S.C. §9604(a) ; ... 17
Section 104 (b) , 42 U.S.C. §9604 (b) . 1 . . 17
Section 104(c)(4), 42 U.S.C. §9604(c) . . . is
Section 104 (f) and '(g) , 42 U.S.C. §9604(f) and (g) . 34,38
Section 105, 42 U.S.C. §9605 ... .19,21
Section 105(a), 42 U.S.C. §9605(a) ...... 20
Section 105(a),(7), 42 U.S.C. §9605(a), (7) 22,23
Section 106, 42 U.S.C. §9606 ...... 10
Section 106(a), 42 U.S.C. §9606(a) 30
Section 106(b)(2)(D), 42 U.S.C. §9606(b)(2)(D) . ... .30
Section 107, 42 U.S.C. §9607 10,14
Section 107(a), 42 U.S.C. §9607(a) 27
Section 107(a)(4)(A), 42 U.S.C. §9607(a)(4)(A). . . passim
Section 107(a)(4)(B), 42 U.S.C. §9607(a)(4)(B) . . . .29,30
Section 110(32),42 U.S.C. §9610(32) 15
Section 111, 42 U.S.C. §9611 7
Section lll(k), 42 U.S.C. §9611(k) .39,40
Section 113(a), 42 U.S.C. §9613(a) 27.
Section 113(h), 42 U.S.C. §9613(h) . . . 41
Section 113(j)(l), 42 U.S.C. §9613 (j)(l) 9
Section 113(j)(2), 42 U.S.C. §9613 (j)(2) 9,31
Section 113(j)(3), 42 U.S.C. §9613 (j) (3) . ..... 28,29
Section 119, 42 U.S.C. §9619 34
Section 119(f), 42 U.S.C. §6919(f) . . . .• 36
Section 121, 42 U.S.C. §9621 . . 32
Section 122, 42 U.S.C. §9622 10
Section 122(h)(2), 42 U.S.C. §6922(h)(2) 47
Section 310, 42 U.S.C. §9659 .32
Davis Bacon Act, 40 U.S.C. §276a . .36
Oeepwater Port. Act Amendments of 1984,
33 U.S.C. §§1501, 1517 . 14
- vii -
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Federal Mine Health and Safety Act of 1977, 30 U.S.C. §§801, 931
30 U.S.C. § 931 si sea. 14
Federal Property and Administrative Services Act of 1949, 40
U.S.C. §§471 et sea. 35
Federal Water Pollution Control Act, (Clean Water Act),
33 U.S.C. §1251 et seq.
Section 311, 33 U.S.C. §1321 14,15
Outer Continental Shelf Lands Act Amendments of 1978, 43 U.S.C.
§§1801, 1814 '. 14
Truth in Negotiating Act, 10 U.S.C. §2306(f) 36
It£clfrTfATIVE HATTiRTftTn? , • "
S. Rep. No. 848, 96th Cong., 2d Sess. (1980) passim
H. R. Rep. No. 1016, 96th Cong., 2d Sess., Part I (1980) ... 8
S.-Rep. No. 11, 99th Cong., 1st Sess. (1985) 32
H. R. Rep. NO. 962, 99th Cong., 2d Sess. (1986) 19,24
126 Cong. Rec. S33834 (daily ed. Dec. 12, 1980) 20
126 Cong. Rec. 30,933 (1980) 15
132 Cong. Rec. S14900 (daily ed. Oct. 3, 1986) 34
132 Cong. Rec. S14903 (daily ed. Oct. 3, 1986) 11
132 Cong. Rec. S14909 (daily ed. Oct. 3, 1986) 10
132 Cong. Rec. S14922 (daily ed. Oct. 3, 1986) 11
132 Cong. Rec. S14935 (daily ed. Oct 3, 1986) ........
132 Cong. Rec. H9564 (daily ed. Oct. 8, 1986)
132 Cong. Rec. H9624 (daily ed. Oct. 8, 1986) 11
REGULATIONS .
1980 National Contingency Plan, 40 C.F.R. Part 1510
40 C.F.R. §1510.1 (1980) 21
40 C.F.R. §1510.45 (193C) . 22
40 C.F.R. §1510.51 (1980) '. 21
40 C.F.R. §1510.52 (1980) 22
40 C.F.R. §1510.53 (1980) 22
40 C.F.R. §1510.54 (1980) 22
National Contingency Plan, 40 C.F.R. Part 300 21,25
40 C.F.R. §300.64 (1982), (1985) . 21,22
40 C.F.R. §300.65 (1982J, (1985) '. . 22
40 C.F.R. §300.66 (1982) 22
40 C.F.R. §300.66 (1985) 22
40 C.F.R. §300.67 (1982) 22
-•Vlll -
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40 C.F.R. §300.67 (1985) 22
40 C.F.R. §300.68 (1982), (1985) . 22,23,25
40 C.F.R. §300.68(j) 19
40 C.F.R. §300.69 (1982), (1985) 22,23
Federal Acquisition Regulation (FAR), 48 C.F.R. §1, et sea.
48 C.F.R. §15.804-2(b) 37
48 C.F.R. §15.904(3) 38
48 C.F.R. §15.904(d) 37
48 C.F.R. §16.301.1-3. 37
48 C.F.R. §16.305 37
48 C.F.R. §30.101(b) 38
48 C.F.R. §31.201-2 38
48 C.F.R. §31.201-4 38
48 C;F.R. §31.205 38
48 C.F.R. §31.203(d) 38
Environmental Protection Agency Acquisition Regulations (EFAAR),
48 C.F.R. §1500, et sea. (1987) .37
48 C.F.R. §1516.404-272 ...... 37
48 C.F.R. §1552.212-70 37
MISCELLANEOUS
Exec. Order 12316, §2e, 42 Fed. Reg. 42237 (1981), reprinted in
42 U.S.C.A. §9615 app. at 544-48, as amended by Exec. Order No.
12418, 48 Fed. Reg. 20891 (1983). After passage of SARA,
Executive Order No. 12316 was revoked by Exec. Order 12580, 52
Fed. Reg. 2923 (1987), reprinted in 42 U.S.C.A. §9615 app. art 153
(West Supp. 1988) 9
5 Mezines, Stein, & Gruff, Administrative Law.
§51.04 (1987) .
1 K. Davis, Administrative Lav Treatise. §1:4 (2d ed. 1978)
44,49
44
44 Fed. Fea. 31181-311S2 (1982) * . . 25
44 Fed. Reg<
47 Fed. Reg.
47 Fed. Reg.
50 Fed. Reg.
53 Fed. Reg.
21184 (1982) 23,25
31180 (1982) 20,21
55488 (1982) . . . 21
47951 (1985) 21
29428 (1988) 47,48
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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF MICHIGAN
UNITED STATES OF.AMERICA,
Plaintiff,
v.
THOMAS SOLVENT COMPANY; et al.
Defendants.
) Civil No. K86-167 CAS
Hon. Richard A. Enslen
FRANK J. KELLEY, Attorney
General of the State of
Michigan and THE STATE OF
MICHIGAN,
Plaintiffs,
V.
Civil No. K86-164 CAS
THOMAS SOLVENT COMPANY; et al. )
Defendants. )
MEMORANDUM OF THE UNITED STATES' IN SUPPORT OF
ITS MOTION IN LIMINE TO EXCLUDE EVIDENCE
The United States by this motion seeks to have this
Court rule on the/'S^cope^of judlr:;! rwie.v of. j^3_tjie_b•.:rd_er-_g_c_f _
procf r&_i.&tLiva tof decisions made by the. United States
Environmental Protection Agency (*EPA*) ^n imnlemen'tina clean-up
actions at the Verona Well Field site _and of the qiean-up costs
.incurred by the Unitprf g^at«»g aja a
Further, the United States seeks a ruling excluding evidence of
certain issues at the time of trial.
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INTRODUCTION
A. PROCEDURAL POSTURE OF THIS CASE
In this action, the United States seeks to recover
costs incurred by EPA in carrying out clean-up actions at the
Verona Well Field site in Battle Creek, Michigan. A proposed
partial Consent Decree has been lodged with the Court which.
would, if approved, resolve the claims of the United States and
the State of Michigan against Defendant Grand Trunk Western
Railroad Company for most costs already incurred at the Verona
Well Field site. All claims, however, against the other
defendants, Richard Thomas, Thomas Solvent Company and related
Thcnas companies, (collectively the 'Thomas Defendants"), remain.
The United states and Michigan have filed, and briefing is
completed on, two summary judgment motions with respect to
liability. One motion would establish the liability of the
Thomas Defendants under the Comprehensive Environmental ResponseJfe
Compensation and Liability Act. The second motion, which has
been granted by this Court, established the liability of the so-
called Thomas Solvent spin-offs on fraudulent conveyance ffTV*
.successor corporation claims. See this Court's opinion dated
Dece-iber 2, 1988. If the former motion is also granted, the
remaining issue will be the amount of costs which the United
States and the State of Michigan are entitled to recover. All
discovery is completed with the exception of certain depositions
of expert witnesses on issues of costs.
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.. .
The United States previously filed a motion for a
ruling as to the appropriate standard and scope of judicial
review of EPA's selection of clean-up actions for the Verona Well
Field site, and defendants filed responsive briefs, as well as
motions for a declaration of the standard of review.1 As set
forth in the United States' Memorandum in Support of its Motion
for a Ruling as to the Appropriate Standard and Scope of Review
of Agency Action (hereinafter 'U.S. Brief on Standard and Scope
of Review*), explicit statutory language establishes that
judicial review of EPA's ^electioiyof clean-up actions2 is
limited to the administrative Record of Decision and subject to
an arbitrary and car^g|r»u« Bfranrfin-rt Of review.3 This motion in
\ The .United States' filed a Memorandum in Support of its
Motion for a Ruling as to the Appropriate Standard and Scope of
Review of Agency Action. ("U.S. Brief on Standard and Scope of
Review"). Grand Trunk filed a Motion for Declaration on Standard
of Review and supporting brief which incorporates its opposition
to the United States' Motion. Defendants Richard Thomas and
Thomas Solvent Company joined in the Grand Trunk Motion by a
separate filing. The United States filed a Reply Memorandum in
Support cf Motion for a Ruling as to the Appropriate Scope and
Standard of Review and in Opposition to Defendants' Motion for
Declaration of Standard of Review (hereinafter 'United States'
Reply Brief*).
2 This case involves a number cf clean-up ri.e.. 'removal*
and 'remedial') actions at the Verona Well Field site. EPA has
undertaken, and is undertaking, removal and remedial actions at
both the Well Field itself, and at the identified sources of
contamination, including the Thomas Solvent Raymond Road facility
and the Annex operated by Thomas Solvent. Clean-up .actions are
called 'response actions* and as that term is used in this brief,
it includes all response actions at both the Well Field and the
identified sources.
3 v The United States' Reply Brief discussed very generally
the scope of review of implementation decisions made by EPA in
carrying out the Record of Decision ('ROD') and indicated its
(continued...)
3
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limine focuses on the reviewability of EPA activities that
follow the selection of tha ramarty thA jmplgTOgntalH
selected clean-upy^respojise* actions and the costs inenT-refj in
doing so. '
The United States has recently filed a motion for
partial summary judgment on certain actual incurred costs.
Through that motion, as well as this one, the United States seeks
to narrow substantially, in accordance with the provisions and
policies of CERCLA, the issues remaining for trial.
B. SUMMARY OF ARGUMENT
The United States expects defendants in this case to
argue at trial for de novo. micro-review of the myriad of
:al ludoments made by EPA in
rimplementinqlresnanse actions.
it and around the Verona Well
Field site. The Thomas Defendants seek jludicial review of the
jsosts incurred for .the j-gsponso »<~t- ir.no purportedly to
if the project was prudently effectively a** rff 1r1 mifly manr>grr!
by EPA and its contractors ._, See Supplemental Designation of Cost
Expert Opinions of Defendants Thomas Solvent Company and Richard
Thomas, February 12, 198? (*Surp. Desic.*)? Deposition of Thosas
Dakar {'Dekar'), pp. 237 to 288. Per exacpie, tne Inooas
^(...continued)
intention to file this motion and brief. Reply Brief pp. 13-16.
In addition, in their brief the defendants touched upon but did
not directly address the standard of review to be applied to
costs incurred by the United States in carrying out the remedial
and removal actions in this case. Opposition of Defendants'
Thomas Solvent Company and Richard Thomas to United States'
Motion for a Ruling as to the Appropriate Standard and Scope of
Review.
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Defendants question 'whether cost efficiencies were realized from
the project management and control,* including questioning the
scheduling of work and its impact on cost effectiveness. Supp.
Desig. 1 2. Defendants seek judicial review of the prudency and
efficiency of contractors' use of their employees. Supp. Desig.
12. In addition, defendants have asked that the court review the
prudency of terms of cen^yaefca under WH^VI ^fae. ^^"pTnse— acfe-i-errs
were carriedL^ut. Jjl^l^J.^jJ^hfL^"*1?."^ rtf._r^''^t1-*'h^r"7 ""*"* r*TLti*"
jnarg.in in those contracts and whether the fee structure selected
a disincentive to efficiency. . Supp. Desig. 12. The detailed
judicial review defendants seek would even extend to the
* "
appropriateness of the number of contractor staff who worked on
the response actions and the amount of time each employee worked
on the project to determine whether each was sufficiently
dedicated or efficient. Dekar, pp. 330 to 335. 4 In short, the
Thomas Defendants would ask this Court to become an after-the-
fact auditor, efficiency consultant and contract manager,
substituting its judgment for EPA's .in determining how the Agency
went about fulfilling its task of protecting public health and
the environment in Battle Creek.
But defendants' position is flatly inconsistent with
the exp-^ss .terms of CERCLA and, if adopted, would frustrate the
principal objectives of the statute: (1) to place the ultimate
financial burden of hazardous waste cleanup on those parties
responsible for the problem, and (2) to assure prompt
See Section III, p. 40 infra.
5
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replenishment of the Superfund so that monies can be rededicated
to response work at the thousands of other hazardous waste sites
in the country that remain unaddressed. See, e_.g.. S. Rep. No.
848, 96th Cong., 2d Sess. 98 (1980). With these objectives in
mind, Congress has strictly limited judicial review in cost
cases. As discussed in the U.S. Brief on Standard of Scope of
Review, judicial review of EPA'a/selection of remedial actions^
/^^ -x -~^ . '
is quite limited. Review of thte^imBleroentatiQn^ieeisiQns is even
more limited. Unless theCJselectio.nVgt response action is
determined to be /arbitrary and
violation of lav. EPA is entitled to recover its actual easts
implementation; technical •^dermenfcg »«s veil .as managerial »r>rt
--»»-"°
^rm*T-a,-t: decisions mAJe during the course of^^plementatlorgfrre
committed to the discretion of the Aoencv. Judicial, review of
(Implementation decisions and cost^ is confined to proof that the
implemented cleanup wasConsistent with the respons^ action
selected by EPA, that the (response action^was performed and that
the claimed (costs/were Actually incurred^ This reading of the
statute is compelled by the language of CERCLA, its legislative
history, the relevant case law under CERCLA, and general
principles of federal contract and procurement law.
Alth ~igh Congress has removed the thousands of
implementation decisions from the purview of judicial review,
this does not suggest that EPA does, or may, incur costs in an
unreasonable or imprudent manner. To the contrary, we contend
that EPA incurred costs at these sites in a reasonable and
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prudent manner. ,However, in order to ensure the Superfund is
replenished expeditiously and not bogged down in needless
litigation Congress created a system which limited judicial
review, but required various non-judicial safeguards. It
provided judicial review of the remedy selection decision,
requiring the exacting
C^scrutiny of federal contract law^yicluding its audit
requirements, and required regular audits of the Superfund
program as a whole. This system^in lieu of judicial reviev^ of
each of the thousands of implementation decisions, -protects the
interests of the public as well as those of responsible parties.
Given the obvious and substantial implications that
determination of the standard of review issue has for the nature
and scope of the evidence to be presented at trial, the United
States is filing this motion so that the Court can decide these
issues in advance of trial.
C. STATUTORY BACKGROUND
Congress established through CERCLA, and reauthorized
through the Superfund Amendment and Reauthorization Act, ("SARA")
the Hazardous Substances Response Trust Fund ("Superfund*} to
provide a pool of working capital that would enable EPA to
address expeditiously >he hazards at problem .waste site's. 42
U.S.C. § 9611. CERCLA authorizes the EPA to conduct such
investigations as it believes necessary to evaluate potential
hazards and to take appropriate removal and remedial actions
where necessary. 42 U.S.C. § 9604.
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In creating the.Superfund, however, Congress
recognized that the amount of capital in the pool would be
inadequate to accomplish the nationwide task at hand.5 CERCLA,
therefore, places the ultimate financial burden of toxic waste
cleanup on those responsible for creating the harmful conditions.
See. e.a.. Dedham Water Co. v. Cumberland Farms Dairy. Inc.. 805
F.2d 1074, 1081 (1st Cir. 1986); Lone Pine Steering Comm. v. EPA.
777 F.2d 882, 886 (3d Cir. 1985), cert, denied. 476 U.S. 1115
(1986)? Walls v. Waste Resource Corp.. 761 F.2d 311, 318 (6th
Cir. 1985).
Since Congress sought to ensure *that those responsible
for any damage, environmental harm or injury from chemical
poisons bear the cost of their actions,*6 it authorized the
Attorney General to recover from responsible parties al\ of the
monies expended by EPA from the Superfund for site investigation,
studies, cleanup and the cost of enforcing the provisions of
CERCLA. Specifically, Section 107(a) of the Act provides for
reimbursement from such responsible parties of "all costs of
removal or remedial action incurred by the United States
Government or a State not inconsistent with the National
Contingency Plan.* 42 U.S.C. § 9607(a)(4)(A). EPA's regulations
in the National Contingency PI^n (*NCP*), (40 C.F.R. Part 300 et.
seo.) guides the Agency's response actions.
5 See. S. Rep. No. 848, 96th Cong., 2d Sess. 18; H.R. Rep.
No. 1016, 96th Cong., 2d Sess., Pt. I 22 (1980).
6 S. Rep. No. 848, 96th Cong., 2d Sess. 13.
8
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.Section 113 (j)(l) of SARA explicitly provides that
"judicial review of any issues concerning the adequacy of ariy
response action taken or ordered by EPA7 shall be limited to the
administrative record.* CERCLA § 113(j)(l), 42 U.S.C. § 9613
(j)(l) (1986)(emphasis supplied). Section 113(j)(2) of CERCIA
provides further that •£&«. court shall uphold rthe EPA's? .
decision irMselectino^fche response action unless the objecting
party can demonstrate, on the administrative record, that the
decision was Arbitrary and capricious or otherwise not in
accordance with law.* (Emphasis, added.) This basic statutory
background provides the framework for the relief requested by the
United States.
ARGUMENT
I. Introduction
From the inception of the Superfund program. Congress
sought to place the financial burden of hazardous waste cleanups
directly on those who created the toxic perils and to recover all
response costs incurred by the government. Congress sought to
make certain that:
7 The President delegated this authority, as well as
other authorities conferred upon the "resident in CERCLA, to the
Administrator of EPA. Exec. Order 12:v.6'> §.2e, 46 Fed. Reg.
42237 (1981), reprinted in 42 U.S.C.A. § 9615 app. at 544-48, as
amended by Exec. Order No. 12418, 48 Fed. Reg. 20891 (1983)
(•Executive Order No. 12316*). After passage of SARA, Executive
Order No. 12316 was revoked by Exec. Order 12580, 52 Fed. Reg.
2923 (9187), reprinted in 42 U.S.C.A. §9615 app. at 153 (West
Supp. 1988). The EPA Administrator has further delegated this
authority to the EPA Regional Administrators and others via'
CERCLA delegations number 14-1-A through 14-8-B.
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society [w]ould not bear the costs of
protecting the public from hazards produced
in the past by a generator, transporter,
consumer, or dumpsite owner or operator who
has profited or otherwise benefited from
commerce involving these substances and now
Wishes to be insulated from any continuing
responsibilities from the present hazards to
society that have been created.
S. Rep. No. 848, 96th Cong., 2d Sess. 98. To achieve this
purpose, Congress enacted the Section 107 strict, joint and
several liability and cost recovery provisions, as well a's
Section 106, which gives EPA a means to compel a responsible
party to perform the remedy itself, and Section 122, which
outlines procedures which facilitate settlements with potentially
responsible parties.
Indeed, when Congress reauthorized the Superfund in
1986, it was reemphasized that Congress had re-enacted the CERCLA
strict liability and related sanctions provisions in order to
encourage responsible parties to accept their responsibilities
quickly and avoid the costly and lengthy guagmire of litigation:
[We gave EPA] sweeping authority to respond •
to virtually any type of release of virtually
any harmful substances whether it is released
or only threatened to be released. He put in
piece a legal regime of strict liability
whicr-. v*> believed vo'jld encourage responsible
parries tc- rapidly resolve their
responsibilities in order to avoid
potentially enormous litigation cos^s.
potentially large penalties associa-od with
the failure to respond to site cleanup
activities under a regime that largely is
. weighted toward the Federal Government*
132 Cong. Rec. S14909, (daily ed. Oct. 3, 1986) (remarKs.of Sen.
Bentsen) (emphasis added). The Superfund 'was designed to be
10 .
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available to the, President to respond instantly where necessary
and to handle those situations where responsible parties were
unavailable for cleanup action.* Id. (emphasis added). It was
not to be expended primarily in litigation. 132 Cong. Rec.
S14922 (daily ed. Oct. 3, 1986)(remarks of Sen. Simpson) ('We
must work to have more societal resources spent on necessary and
effective cleanup of Superfund sites, and less on convoluted
litigation which merely extends any public health threat that
exists from-these sites.*).
Finally, and most importantly, Congress left little
doubt that it intended that all costs incurred by the United
States in responding to the dangers of hazardous wastes would be
recovered. In the words of Senator Stafford, Senate floor
manager of SARA:
The theory underlying Superfund's liability
scheme was and is, that the Government should
obtain the full costs of cleanup ....
132 Cong. Rec. S14903 (daily ed. Oct. 3, 1986) (remarks of
Ser.atcr Stiffcrf,} (Irphasis idded). .See alro i:i Cong. Rec.
S14935 (daily ed. Oct 3, 1986) ('The President can recover every
dollar of the broad-based tax inposed by the Act by pursuing the
poilurers in cost-recovery cases.*) (remarks of Sen. Dure.ibergsr.)
(Emphasis added); 132 Cong. Rec. H9624 (daily ed. Oct. 8, 1986)
("it is expected that the EPA and the Department of Justice will
vigorously pursue cost recovery actions for all moneys expended
pursuant to the act where responsible parties can be identified*)
(remarks of Rep. Eckart.) (Emphasis added).
11
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At the Verona Well Field site, the issue of liability
and duty to implement cleanup of the site had initially-been
litigated by the State of Michigan, and Thomas Solvent Company
had been ordered to clean up the site in May of 1984.8 Faced
with the refusal of the Thomas Defendants to implement the
cleanup, the United States incurred all the costs of the Verona
Well Field response actions while the Thomas Defendants sat idly
by and waited. If judicial review of thousands of<[imp 1 ementatioit)
decisions is permitted, responsible parties, like the Thomas
Defendants here, will have every incentive to sit back and wait
to be sued in a cost recovery action rather than perform the
cleanup themselves. At the time of trial the once idle
defendants would challenge the government's response costs by
questioning each and every one of EPA's technical and n^naggrift''
m decisions — judgments which the responsible part
i,
could have made and paid for while performing the cleanup on itj
own. The responsible parties must be required to reimburse the
United States for its actual incurred costs. A contrary reading
of the statute might well force the public to foot the bill for
the unwilling responsible party and undermine the intent of
Congress and jeopardize the viability of the Superfund.
8 See Kellev v. Thomas Solvent Co.. 146 Mich. App. 55
(1985) (attached hereto)..
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II. The United States is Entitled to Recover
Its Actual Costs Incurred in Carrying Out the
Response Actions Unless the Defendant Proves that
the Response Actions Were Inconsistent with the
NCP
A; The Plain Language of the Statute Provides
that the United States Shall Recover All
Costs Incurred in Carrying out Its Response
Actions
Under generally accepted principles of statutory
construction, the United States is entitled to recover all of its
costs incurred in carrying out the cleanup at the Verona Well
Field site unless defendants can establish that those costs were '
incurred in a manner inconsistent with the NCP. The language of
the statute is clear and unambiguous in this regard and it must
therefore be followed. United States v. Clark. 454 U.S. 555, 560
(1982) (*if the statutory language is clear, it is ordinarily
conclusive*).9 Pursuant to Section 107(a)(4)(A) of CERCLA
defendants are liable for *all costs of removal or remedial
action incurred bv the United States Government or a State not
9 Moreover, even if there were any ambiguity, the court
should construe the statute in accordance with CERCLA/s'broad
remedial purpose. Wickland Oil Terminals v. ASARCO Int.. 792
F.2d 887, 892 (9th Cir. 1986); See also. Dedham Water Co. v.
Cumberland Farms Dairy. Inc...805 F.2d at 1081; New York v.
Shore Realty Corp.. .759 F.2d 1032, 1045 (2d Cir. 1985)., The
general rule to be applied is that remedial statutes are to be
liberally construed to give effect to the remedial provisions.
CERCLA is no exception. Id.
13
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inconsistent with the national contingency plan.*1** (Emphasis
added.)
This 'actual cost* standard of recovery is not unique
to CERCLA. It is the standard of the oil spill response
provision of Section 311 of the Federal Water Pollution Control
Act (also known as, the Clean Water Act), 33 U.S.C. § 1321, after
which CERCLA Section 107, 42 U.S.C. § 9607, is patterned.11 As
stated by Senator Randolph, a sponsor of the amended bill that
became CERCLA: • . '
The purposes of the bill were: ... to make those who
release hazardous substances .strictly liable for
cleanup costs' ....
10 The actions of EPA in carrying out response actions and
in incurring consequent costs are presumed to be consistent with
the NCP unless otherwise shown. United States v. Northeastern
Pharmaceutical & Chemical Co. f'NEPACCO*!. 810 F.2d 726, 747
(8th Cir. 1986), cert, denied. 108 S.Ct. 146 (1987).
11 See e.g. . United States v. Beatty Incorporated. 401 F.
Supp. 1040, 1045 (W.D. Ky. 1975), in that Clean Water Act case,
the court refused to entertain allegations by the defendant that
government clean-up costs were excessive. CERCLA and the Water
Act are hardly unusual statutes. Congress has frequently imposed
strict liability schemes under which the United States can
recover all costs incurred in responding to hazardous materials-
released to the environment. These include the Deepwater Port
Act Amendments of 1984, 33 U.S.C. §§ 1501, 1517, the Outer
Continental Shelf Lands Act Amendments of 1978, 43 U.S.C. § 1801,
1814,- and the Federal Nine Health and Safety Act of 1977, 30
U.S.C. §§ 801, 931; see S. Rep. No. 848, 96th Cong. 2d Session
34-35 (1980). See also: Union Petroleum Corp. v. United States.
651 F.2d 734, 744 (Cl. Ct. 1981) (construing *actual costs
incurred* in 33 U.S.C. § 1321 (f) to apply conclusive presumption
of reasonableness to government's clean-up costs under Section
311 of Clean Water Act).
14
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Unless otherwise provided in this act, the standard of
liability is intended to be the same as that provided
in section 311 of the Federal Water Pollution Control
Act (33 U.S.C. § 1321).
126 Cong. Rec. 30,933 (1980).12
In construing the language of Section 107(a)(4)(A),
courts have held that the United States is entitled to recover
alx/costs incurred in implementing r«»«spr»r.c.n »^tion6__wj[**'">'^ proof
(s^£___x, _
of the rgJigrmafrdftTWgff Qf t^"co '*"e^e In NEPACCO, the Eighth
"""" ~ — % .
Circuit stated: ' ' -
The statutory language also supports the
district court's reasoning that under
CERCLA § 107(a)(4)(A), 42 U.S.C. §
9607(a)(4)(A), 'all costs' incurred by
the government that are not inconsistent
with the NCP are conclusively presumed
•* to be reasonable. CERCLA does not refer
to 'all reasonable costs' but simply to
'all costs.'
810 F.2d at 747-748.13
Moreover, it is well established that where the United
States seeks to recover its response costs under CERCLA §
107(a)(4)(A), 42 U.S.C. § 9607 (a; (4)(A), the burden rests upon
the defendant .tg^ demonstrate as a defense to the action that
government response costs were incurred in a manner ineons i
with the^NCP.- NEPACCO. 810 F.2d at 747; United States v.
1242 U.S.C. § 9610(32) provides that the terms 'liable or
liability . . .shall be construed to be that standard of
liability which obtains under Section 1321 of title 33.*
13 In reaching the conclusion, the Court of Appeals cited
authority interpreting Section 311 of the Clean Water Act,
emphasizing that 'case law interpreting the [Clean Water Act] is
relevant because CERCLA defines the NCP by referring to the NCP
mandated by the [Clean Water Act].'
15
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Northernaire Plating Co.. 685 F. Supp. 1410 (W.D. Mich. 1988),
appeal docketed. No. 88-2074 (6th Cir. Nov. 1, 1988); United
States v. Ward. 618 F. Supp. 884, 899 (E.D.N.C. 1985) ("The
burden of raising and proving inconsistency with the NCP is,
however, on the . . . defendants.*); United States v.
Conservation Chemical Co. . 619 F. Supp. 162, 186 (W.D. Mo. 1985)
("the burden of proving, that the costs incurred were
inconsistent with the National Contingency Plan is on the
defendants . . . .*); J.V. Peters & Co. v. Ruckelshaus. 767 F.2d
*
263, 266 (6th Cir. 1985) ; New York v. General Electric Co.. 592
F. Supp. 291, 303-304 (N.D.N.Y. 1984).
Any suggestion by defendants that the United States has
the burden of establishing as part of its case that each dollar
of costs was reasonable and prudently incurred and that the
response actions were efficiently and cost-effectively managed by
EPA and its contractors runs counter to the express language of
Section '107 (a) (4) (A) . Thus the United States is entitled to
recover (all 'ccsts^} incurred unless defendants can meet their
burden of establishing that those costs were incurred in a manner
i r-rs^s i?t snt vfth ths KCP.
B. li" Ktsorv to Materials beyond the Text of CEriCLA
Section 107(a)(4)(A) Is Needed, Then The
Structure, and Legislative History of CERCLA Also
Demonstrate that the United States is Entitled to
Recover the Actual Costs Incurred in Carrying Out
Its Response Actions _
The structure and legislative history of CERCLA confirm
that the United States is entitled to recover all costs incurred
in carrying out its response actions. As will be detailed in
16 . .
-------
this subsection, the only limitation in CERCLA on the recovery of
response costs is that the response action must not be
inconsistent with the NCP. (The NCPJ however, governs the
selectioj of response actions. Thus, costs nay be found
inconsistent with the NCP under section 107 (a) (4) (A) of CERCLA
only if they were spent for a /response actiorMwhich itself was
inconsistent with the NCP basedLon the administrative record.
Any other reading of CERCLA would be contrary to Congress'
expressed intent that the government shall recover alj its
response costs unless it acted in a manner that was arbitrary and
capricious, and would ignore the fact that Congress imposed an
w .
entirely different standard of scrutiny when private parties are
seeking recovery of response costs incurred.
1. CERCLA Delegates to EPA Broad Discretion to
Select and Take Response Actions; the Only
Limitation on Recovery of Costs is that the
Response Action Not be Inconsistent with the
NCP _
The limited judicial review of EFA's selection of
response actions and the Agency's costs incurred for those
acticr.s finds its' origin in the discretion which Congress granted
and necessary to respond to releases or threatened releases of
h« • ardous substances. Sections 104 (a) and (b) of the Act, 42
U.S.C. § 9604, grant broad discretion to EPA in undertaking
response actions:
(a) (1) (B)
. . ., [EPA] is authorized to act, consistent with
the national contingency plan, to remove or
17
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(b)
arrange fortheremoval of. and provide for
remedial action relating to such hazardous
substance, pollutant, or contaminant at any time
. . ., or takeany other response measure
consistent with the nationalcontingency plan
which fEPAl deems necessary to protect the public
health or welfare or the environment. . .
Whenever [EPA] is authorized to act pursuant to
subsection (a) of this section, ... it may
undertake such investigations, monitoring,
surveys, testing, and other information gathering
as fitl mav deem necessary or appropriate to
identify the existence and extent of the release
or threat thereof, the source and nature of the
hazardous substances, pollutants or contaminants
involved, and the extent of danger to the public . '
health or welfare or to the environment. In
addition, [EPA] may undertake such planning,
legal, fiscal, economic, engineering, architec-
tural, and other studies or investigations as
[itl may deen necessary or appropriate to plan and
direct response actions, to recover the costs
thereof, and to enforce the provisions of this
Act. 42 U.S.C. § 9604.
(Emphasis added) .
Moreover, Congress has delegated to EPA broad
to select remedies: Section 104 (c) (4) provides that:
shzll select arrrr-rists remedial
actions
determinedto be necessary to carry out this section
which are to the extent practicable-in accordance with.
the national contingency plan and which provide for the
cost-effective- response which provides a balance
Fund
i.-± i.ie availability of amounts from the
Under the clear language of Section 104, Congress
placed within the discretion of EPA the implementation of
response actions and conferred upon EPA extremely broad authority
to investigate, plan, contract for and direct the work of
contractors with respect to those response actions.
18
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Implementation, management and technical decisions are subsumed
within this broad grant of authority to take and pay for response
actions which EPA determines to be necessary, appropriate and
cost effective.14
The only limitation which Congress placed on the .
recovery of (response, cos ta bv the United States under Section
107 (a) (4) (A) , is that the costs be^ot inconsistent with the
' National Contingency J>lan. * The requirement for an NCP
originates in Section 105 of CERCLA, 42 U.S.C. § 9605, which
requires EPA to adopt a National Contingency Plan that provides
more detailed guidance for responding to problems posed by
releases of hazardous substances. However., even Section 105
builds in a certain measure of flexibility in EPA's adherence
with the NCP. It highlights Congress' recognition of the need
to provide for flexibility: "actions to minimize damages from
hazardous substances release shall, to the greatest ...extent
pos s ib^e ,_ b^in accordance with _the provisions of jthe^NCP] . * 42
U.S.C. § 9605 (emphasis supplied). This flexibility and emphasis
on the^ protection of the public rather than -on blind adherence
to the NCP has been rerrr-ired by t^e courts, SJP* Kl^lndustries ,
^ s~ -__
'The requirement of ycost effectiveness isx4J.mited__t
a'ctl'oris^ and does not ajjpl v "to "re^ov*^ agt- i on«t . see f n
19, infra. Morec-v er the "cost-effective* requirement of CERCLA
does not mean cost-effectiveness in a lay sense, i.e. , spending
money and incurring costs in an effective and economical manner.
Rather, cost-effective is a term defined by Congress and
interpreted by EPA regulation as the selection of the lowest cost
alternative to achieve the clean-up standards necessary to
protect human health and the environment. See H.R. Rep. No. 962,
99th Cong., 2d Session 245 (19861 . NEPACCO. 810 F.2d 748; 40
C.F.R. §300.68(j). This is discussed more fully at pp. 24-26 infra,
19
-------
Inc. v. Kaplan. 792 F.2d 896, 898-99 (9th Cir. 1986), and is
expressly stated in the legislative history of-CERCLA, see, e.g.
126 Cong. Rec. S33834 (daily ed. Dec. 12, 1980) (comments of
Senator Stafford); S. Rep. No. 96-848, 96th Cong., 2d Sess. at 55
(July 13, 1980); see also 47 Fed. Reg. 31180 (1982) (1982 NCP
states that it "does not contain unnecessarily rigid or
cumbersome provisions.*).
2. The^HCJvfeoverns theC^Select
Actions} It Does NotGuverrrthe nCUirtmUSe of
^in Implementin Response Actions
An examination of the statutory requirements relating
to the NCP in CERCLA and a review of the NCP itself demonstrate
that the^NCp)was intended by Congress to be almost exclusively a
regulation governing theC technical recruirementsJfor the selection
of response actions. Section 105(a) requires that the NCP
include, inter alia;
(1) methods for discovering and investigating
facilities at which hazardous substances have been
disposed of or otherwise cc=e 10 be located;
(2) methods for evaluating, including analyses of
relative cost, and remedying any releases or threats of
releases from facilities which pose substantial danger
to the public health or the environment;
(3) methods and criteria for determining the
appropriate extent of removal, remedy, and other
measures autho 'ized by this Act;
* * *
(7) means of assuring that remedial action measures
are cost-effective over the period of potential
exposure to the hazardous substances or contaminated
materials;
20
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(8)(A) criteria for determining priorities among
releases or threatened releases throughout the United
States for the purpose of taking remedial action, and
to the extent practicable taking into account the
potential urgency of such action, for the purpose of
taking removal action . . .;
Section 105 further provides' that 'the plan shall specify
procedures, techniques, materials, equipment, and methods to b.e
employed in identifying, removing or remedying releases of
hazardous .substances comparable to those required under [the
Clean Water Act] . . . .*
The NCP adopted pursuant to Section 105 is an EPA
regulation. It establishes the procedures for selection of
response actions of the 'Federal and state governments.15 Thus,
the/NCP sets^step-by-step technical directions and limitations
j^"* ^\ • *^M*
for_the ^selection) of appropriate response actions,(beginning with
the discover yt5r hazardous.releases through each stage of
response to final cost recovery.16
1? . The N'CP first utilizer fcy E?A under CEPCLJ". v?.s ths
'National oil and Hazardous Substances Pollution Contingency
Plan* that was developed .in compliance with the Federal Water
Pollution Control Act, as amended, 33 U.S.C. §§ 1251 et seq. See
1980 NCP, 40 C.F.R. §1510.1 (1980). The revised plan was
promulgated on July 16, 1962, 47 Fed. Reg. 31180, and appears at
40 C.F.R. Part 300. The revised plan was made effective as of
December 10, 1982. 47 Fes. P.eg. 55435.. The 1SS2 KC? was the
first NCP which specifically *effectuate[d] the new
responsibilities and powers ere.-ted by CERCLA." 47 Fed. Reg.
31180. The NCP was again revised in 1985, 50 Fed. Reg. 47951,
and codified at 40 C.F.R. Part 300. The United States undertook
response.actions at this site in accordance with the NCP which
governed at the time of each action.
-* • •
16 The phases in the NCP have remained very similar in •
various versions: Step I: Discovery and Notification, 40 C.F.R.
§1510.51 (1980), 40 C.F.R. §300.63 . (1982) , (1985). Step II:
Evaluation and Initiation of Action, 40 C.F.R. .§1510.52 (1980);
(continued...}
21
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The courts have agreed that the^NCP^fs a regulation
which guides(technical decisionmakingp As the Court stated in
Western Processing;
It seems clear that the statutory scheme affords
EPA the flexibility to proceed to address
hazardous waste sites in a variety of ways, at its
discretion; that it has the ability to proceed
quickly in conjunction with the State, using
government funds;-and that Congress contemplated
that technical expertise repose withthe EPA to
make cleanup decisions consistent with the
National Contingency Plan fNCPl.
United States v. Western Processing. No. 83-252M, slip op. at 6
(W.D. Wash. Feb.. 19, 1986) (emphasis added, attached hereto).
TherfNCpJsets limits .on the (selection/ of technically '
appropriate response actions, but jppt on the costs in_c_urred__fey.
EPA in executing response decisions. Nowhere in Section 105 did
Congress suggest that the NCP include cost standards with respect
to implementation of response decisions.17 The provisions of the
*^(...continued)
Preliminary Assessment, 40 C.F.P.. §300.64 (199?), (1985). Step
III: Containment and Counter-measures, 40 C.F.R. §1510.53 (1980);
Immediate Removal, 40 C.F.R. §300.65 (1982), (1985). Step IV:
Cleanup, Mitigation and Disposal, 40 C.F.R. §1510.54 (1980);
Evaluation and Determination of Appropriate Response-Planned
Removal and Remedial Action 4C C.F.R. §300.66 (1982); Site
I-a.uc;^ic.r. F;.ase £:.u Sdticr.a- r^r r.itier List Determination,, 40
C.F.R. §200.66 (1955). Step V: Planned Removal, 40 C.F.-R.
§300.67 (1982); Community Relations 40 C.F.R. §300.67. (1985).
Step VI: Remedial Action 40 C.F.R. §300.68 (1982), (1985). Step
VII: Documentation and Cost Recovery, 40 C.F.R. §1510.45
(1980), 40 C.F.R. §300.69 (1982), (1985).
17 The requirement of cost-effectivesness articulated in
§ 105 (a)(7) is not a standard.applied to implementation
decisions. In selecting the most cost-effective alternative for
remedial action, both the statute and the NCP require that the
alternative be cost effective during the entire period from
selection through the end of the "period of potential exposure."
(continued...)
22 .
-------
NCPDelate to jsosta in only^'tao^respectst^> first, Section 300.69
-i
requires EPA to keep documentation to support cost/recovery
actions and, second, Section 300.68 requires that |cost-
effectiveness of every remedial action b«» Mng-^Hgred as a
criterion in selection of the remedial alternative, 40 C.F.R.
§300.68.
With respect to cost documentation, §300.69 of the NCP
requires only that:
'documentation shall be collected and
maintained to support all actions taken under
this Plan and to support cost recovery. In
general, documentation shall be sufficient to
provide . . . accurate accounting of Federal
, . . costs incurred. . .18
^(...continued) . •
42 U.S.C. §9605(a)(7), 40 C.F.R..{300.68. The sections of the
NCP relating to remedy selection were specifically adopted to
address the requirement of § 105 of cost effectiveness throughout
the implementation and operation phases:
EPA notes tr.it., in both the initial
screening and the detailed analysis o-f
alternatives, the cost alternatives must be
compared -over time and must include operation
and maintenance costs .(§300.68(h)(1) and
(i)(2)(ii). This ensures that the statutory
requirement for consideration of the Gyration
of cos^s is satisfied.
Preamble to NCP. 44 Fed. Reg. 31184 (July 16, 3?82).
18 In a recent decision, the Court held.that the cost
records and summaries of EPA were sufficient to withstand a
challenge to those records under.Section 300.69 of the NCP.
United States v. Northernaire. 685 F. Supp. at 1415. The.cost
summaries and documentation in the instant case has been far more
extensive than in Northernaire.
23
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'Cost-effectiveness* is a tern of art in both CERCLA
. «t
and the NCP, used to.describe the means employed by EPA to
evaluate whether or not alternate options for remediation meet
statutorily defined clean-up goals. Cost-effectiveness under
CERCLA is not a measure of whether items of cost were incurred in
an economical or efficient manner. Congress clearly limited
f*cost-efffeetiyenesaJ to theCselectipn of the reme
as a means
of assuring that after EPA chose the appropriate cleanup level,
it would select a cost-effective remedy. It did not extend this
requirement to the thousands of implementation decisions made by
EPA and its contractors. The Conference Report on Section 121 of
CERCLA made clear that, cost-effective was a term of art
applicable to selection of response actions:
The provision that actions under both
sections 104 and 106 must be cost-effective
is a recognition of EPA's existing policy as
embodied in the_National Contingency Plan.
The term fcbst-effectiyB* means that in _ .
tjigEarTBjning.^fche ajgpZPJr 1aj^g_level Of Cleanug>
the President first determines the*
appropriate level of environmental and health
protection to be achieved and then selects a
cost-efficient means of achieving' that goal.
/Only after the President determines, by the
jselection of applicable or relevant and
^ /appropriate requirements, that adequate
| protection of human health and the
/ environment will ce achieved, is it '
(appropriate to consider cost effectiveness.
See H.R. Rep. No. 962,*99th Cong., 2d Session 245 (1986)
The NCP requires that EPA examine and weigh the cost
effectiveness of. the various alternatives as one 'criterion in
their selection of the appropriate remedial action. 40 C.F.R.
24
-------
t
§300.68. Section 300.68 of the NCP is intended to implement a
process which 'will insure the cost effectiveness of remedial
action measures." 44 Fed. Reg. 31184 (July 16, 1982).19
The Court of 'Appeals in NEPACCQ. agreed that cost
effectiveness is an issue which is subsumed within EPA's
selection of a remedial action and is not an .issue to be
V .
analyzed apart .from that selection process:
Appellants also argue, the district court
erred in requiring them to establish that the
government's cleanup .actions were not cost-
effective and necessary. This argument
challenges the government's choice of a
particular method. We note, however, that
CERCLA § 105(3), (7), 42 U.S.C. § 9605(3),
i ^ 19 The NCP does not require that EPA evaluate the cost of
*"*"> removal actions, as with respect to removals, there is no .
/ requirement of cost effectiveness. The Preamble to the 1982 NCP
Vpointed out:
... once the Agency determines that an
immediate removal is necessary, the Plan
vests in the lead agency the authority to
take whatever action the lead agency deems
necessary to abate the emergency. In an
t emergency, it is not possible to require"
detailed cost evaluation because of the
critical need to act as rapidly as possible.
44 Fed; Reg. 31181-31182 (July 16, 1982).
EPA used even stronger language in the Preamble to the
1985 NCP in eliminating ccst as an issue in removal actions:
"Requiring costs to be considered in determining whether a threat
necessitates a removal action. . . is neither desirable nor
authorized by CERCLA.* 50 Fed. Reg. 47930 (Nov. 20, 1985).
Thus, with respect to removal actions, including, the remedial
investigations and feasibility studies done at the Verona Well
Field site (which are removal actions under the statutory:
definitions), there is no requirement that the actions of EPA be
cost effective and no inquiry into the. costs is permitted unless
the defendant can establish that theLremoval activities were __
inconsistent with the NCP on some technical or scientific basisTl
25
-------
(7), requires the EPA, as the agency
designated by the President, to revise the
NCP required by §311 of the FWPCA, 33 U.S.C.
§ 1321, to include the "national hazardous
substance response plan,4* which is specifi-
cally required by CERCLA to include "methods
and criteria for determining the appropriate
extent of removal, remedy, and other
measures," and "means of assuring that
remedial action measures are cost-effective.*
Consideration of whether particular action is
^\ "necessary" is thus factored into the "cost-
* I *+. £ Jf ^* jtfW^ v « » «v if «•
-------
include criteria for evaluating the costs incurred. The
National Contingency Plan is a rule adopted under CERCLA.
Section 113(a) of CERCLA provides that any rule promulgated under
CERCLA may be challenged only in the United States Circuit Court
of Appeals for the District of Columbia within ninety days after
the rule is promulgated by EPA. -The statute further expressly
provides that review of the rule may not thereafter be obtained
in a district court action under § 107 (a). 42 U.S.C. § 9613(a),
Eaqle-PicherIndustries. Inc. v. United States Environmental
Protection Agency. 759 F.2d 905, (D.C.Cir. 19851. SCA Services of
Indiana v. Thomas. 634 F. Supp. 1355 .(N.D. Ind. 1986>.20 The
time has long since passed for any defendant to challenge the
•*
scope or contents of the NCP.
3. Costs are Inconsistent with the NCP under
Section 107(a)(4)(A) Only If They were Spent
for a. Response Action Which Itself was Incon-
sistent with the National Contingency Plan
As the Court in the Shell Oil case concluded, "the
.[NCP] consistency requirement of Section 107(a?(4)(A) addresses
the nature of the response actions for which costs can be
recovered." United States v. Shell Oil Co.. 605 F. Supp. 1064,
at 735. Thus, in order to establish that costs are inconsistent
20 See generally. United States v. Ethvl -Corp.. 761 F.2d
1153 (5th Cir-. 1985), cert, denied. 474 U.-S. 1070 (1986) (to same
effect under parallel provision of Clean. Air Act); Dow Chemical
v. Costle. 480 F. Supp. 315 (E.D. Mich. 1978), aff-'d. 659 F.2d
724 (6th Cir. 1981)(Same).
27
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with the NCP, the defendants must establish that the response
action selected, because of some departure from the National
Contingency Plan, resulted in demonstrably excessive costs for
which they should not be responsible.
Once the EPA has chosen the remedial plan,
the Federal and State Governments may go
ahead using their own funds to clean-up the
site. .No review of the remedy is available
until clean-up costs are assessed against
responsible parties. Then those parties mav
grque that the remedy is inconsistentwith
the National Contingency Plan. The remedy of
the Governments will be reviewed on the basis
of EPA's administrative record and the
responsible parties will not have to^
reimburse the Governments for those
unsupported portions of a remedy. Because
selection of the remedy involves balancing of
numerous complex technical factors within
EPA's expertise, its remedy must be upheld
unless the agency,was "arbitrary and
capricious' in selecting it.
Western Processing, slip- op. at 5 (emphasis added).
Moreover, the NEPACCO. Ward. 618 F. Supp. 884, and
Western Processing- decisions establish that, even prior to the
adoption of SARA, judicial review of costs was limited to
determining on the basis of the administrative record what, if
any, portions of the selected remedy were inconsistent with the
NCP. If such inconsistency were established, the cc;-r^ say ths:
disallow certain costs associated with those portions of the
remedy which were inconsistent with the NCP.21 As to all parts
-21 section 113(j}(3), enacted in 1986, permits the
recovery of all costs not inconsistent with the NCPCjverTTj") a
portion of the selected response is inconsistent with 'the NCP.
(j)(3) provides that
(continued...)
28
-------
of the selected remedy which were not incon'sistent with the NCP,
the standard for which costs are recoverable is clear on the face
of Section 107: the United States can recover *all costs*
incurred in carrying out the response action.
4. Defendants' Challenge to EPA's Implementation
Decisions Is Foreclosed By The Different
Statutory Standards That Apply to Recovery of
Costs Under Other Provisions of CERCLA
The limited scope of judicial review of costs incurred
by federal and state governmental entities is further supported
by comparison with Section 107(a)(4)(B), which provides that when
private parties implement response actions, incur costs, and
attempt recovery of those costs, CERCLA mandates an entirely
different standard of review and burden of proof. Specifically,
Section 107(a)(4)(B), 42 U.S.C. § 9607(a)(4)(B), provides that
responsible parties are liable for ^necessary costs of response
incurred by any other person consistent with the national
contingency plan
(Emphasis added.) The language of
REMEDY - If the court finds .that the selection of
the response action was arbitrary and capricious
or otherwise not in accordance with law, the court
shall award (A) only the response costs or damages
that are not ir.c^r.s jgtert v.ith the net, ion a 1
ccrtinser.cv plar.. ana (£}• such other relief as is
consistent with the National Contingency Plan.
(emphases added)
Thus, for example, 'if remedy selected requires a barrel removal,
a protective cap, a treatment system and an air stripper, under
Section 113(j)(3), even if the court determines the agency acted
arbitrarily when it selected one of those components of the
response action, the defendants still are liable for all costs
incurred by the government which are not inconsistent with the
NCP for the remaining components.
29
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Section 107(a)(4)(A), "all costs of removal or remedial action",
stands in bold contrast to the language of Section 107(a)(4)(B)-
"necessary costs of response incurred by any other person
consistent with the national contingency plan." On its face,
CERCLA Section .107 (a) (4) (B) intends that a different, more
stringent standard apply to cost recovery by nongovernmental
entities.
The language of § 107(a)(4)(B) is especially important
in light of the fact that when Congress meant to limit cost
recovery or damages under CERCLA to all reasonable costs, it said
so. For example, Section 106(b)(2)(D) provides that a liable
party who performs a remedy ordered by EPA under Section 106(a),
may recover 'all reasonable response costs incurred by petitioner
pursuant to the portion of the order found to be arbitrary and
capricious or otherwise not in accordance with law.* 42 U.S.C.
§9606(b)(2)(D) (emphasis added). Similarly, with respect to
natural resource damage claims, under Section 107(a)(4)(C) a
plaintiff is entitled to recover the "reasonable costs of
assessing* natural resource damages. 42 U.S.C. •§ 9607(a)(4)(C).
Accordingly, if Congress intended to limit the United
States' right to cost recovery to ail "pruient and reasonable"
cos^s it would have included such a limiting phrase in Section
107(a)(4)(A). Common sense requires this conclusion; so does the
elementary rule of statutory construction that effect must be
given every word, clause and sentence of a statute and to assume
that each was put there for'a purpose. United States v.
30
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Ker.asche. 348 U.S. 528, 538-39 (1955); Donaldson. Hoffman &
Goldstein v. Gaudio. 260 F.2d 333, 336 (10th Cir. 1958).
In sum, the scope and standard of review must be based
on the purposes and provisions of CERCLA. Any attempt by the
Thomas Defendants to suggest a reasonableness requirement that is
foreclosed by the very terms of the statute should be rejected,
and evidence on the irrelevant issue of reasonableness should be
excluded.
5. Judicial Review of EPA Decision-making is
Limited to the Administrative Record for
Selection of the Response Action
In its earlier filed U.S. Brief on Standard ar.d Scope
•of Review, the United states discussed fully the record review
standards under CERCLA and SARA at pp. 11-17. Section 113(j)(2)
clearly provides that the remedy selected shall be subject to
judicial review and shall be upheld "unless' the objecting party
can demonstrate, .on the administrative record, that the decision
was arbitrary or capricious or otherwise not in accordance with
the law." As discussed above, the^election^decision includes
consideration of the appropriateness and necessity of all
response actions and the ccst-effectiveness of the remedial
actions as required by Section 105 and the-KC?. (K.ecord review
therefore ii applicable to these issues as essential elements of
response selection.
Congress intended that a court not review the day-to-
day implementation decisions made by EPA and its contractors and
the costs incurred for those actions. In discussing the record
31
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review provisions of SARA., the legislative history unequivocally
supports this reading of the statute: "This amendment clarifies
and confirms that judicial review of a response action is limite
to the administrative record and that the action shall be upheld
fand all government response costs shall be awarded) unless the
action was arbitrary and capricious or otherwise not in
accordance with law.* See S. Rep. No. 11, 99th Cong., 1st Sess.
57 (1985) (emphasis added). No.statement of Congressional
intent could be more clearly expressed.
This is not to say that a Court may not assure itself
the work was in fact performed; that the costs were incurred for
the response action selected in the ROD; and that all the claimed
costs were in fact paid. However, once the court assures itself
that these elements are met, the thousands of implementation
decisions with respect to that response action are immune from
review in a cost recovery action.^2
22 CERCLA as amended by SARA contemplates that the Agency
will undertake remedial actions that meet the 'Cleanup Standards"
specified in Section 121 of CERCLA, 42 U.S.C. § -9621. If the
remedy selected and implemented fails to achieve those standards,
then citizens may sue pursuant to Section 310, 42 U.S.C. § 9659
to compel compliance with the requirements of Section 121.
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III. Caasimiiis_CERCLA to Preclude Review of
^gplementatiorT)Decisions Comports With the
Response Scheme Established By the Statute and
with Federal ContractandProcurement Law 23
Congress' decision to preclude judicial review of
EPA's implementation decisions is further evidenced by the
* safeguards in place that govern the implementation process. In
23 It is not surprising that Congress would limit judicial
review of the detailed decisions involved in implementing a
CERCLA remedy. Courts have held that similar decisions are
immune, from judicial review under the APA. See. e^g_. . Heckler v,
Chanev. 470 U.S. 821, 831 (1985) (decisions peculiarly within
agency expertise are unsuitable for judicial review); Block v.
Community Nutrition Institute. 467 U.S. 340, 345 (1984)
(Congressional intent to preclude judicial review can be found
not only in a statute's 'express language, but also from the
structure of the statutory scheme, its objective, its legislative
history, and the nature of the administrative action involved*);
SouthernRaj,lwav Co. v. Seaboard Allied Milling Corp.. 442 U.S.
444, 457 (1979) (judicial review precluded where such review
would have 'disruptive practical consequences* for program
involved); Panama Canal Co. v.Grace Line. Inc.. 356 U.S. 309
(1958) (ratezaaking procedures and tolls established for Panama
Canal found committed to agency discretion because, "The judicial
system is not in a position, to calculate appropriate rates of
return and decipher from quantities of financial data which
charges are legitimate and which-are not ...These are matters on
which experts may disagree; they involve nice issues of judgment
and choice which require the exercise of informal discretion");
Falzarano v. United States. 607 F.2d 506, 512-13 (1st Cir. 1979)
(*[t]he judicial system is not in the position to calculate rates
of return and decipher from quantities of financial data which
charges are legitimate and which are not. This is a managerial
function with which the Secretary [of HUD] has been encharged and
which is inappropriate for the courts to assume*); H»hn v.
Gotrlie::. 430 F.2d 1243, 1249 (1st Cir. 1570) (In ruling that
public housing tenants' challenge of HUD's approval of increased
rents was not reviewable, .court opined that *[c]ourts are ill
equipped to superintend economic and managerial decisions of the
kind included here. This is not a case which can be resolved by
'judicial application of canons of statutory-construction'*);
Rural Electrification Administration v. Northern' States Power
Co.. 373.F.2d 686, 700 (8th Cir. 1967), cert, denied. 387 U.S.
945 (1967) (agency decisions unreviewable where they entail
engineering know-how and accounting procedures which the
executive and legislative branches cf government are better
equipped to handle).
33
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CERCLA, Congress expected EPA to use private contractors to
perform Superfund work, e.g.. CERCLA §§ 104(f) and (g), 42 U.S.C.
§ 9604(f).and (g),24 and required it to procure those contractor
in accordance with the network of federal contract and
i
procurement laws and their underlying regulations. See 5. Rep.
No. 848, 96th Cong., 2d Sess. 62 ("Existing Federal procurement
procedures [w]ould be utilized to the greatest extent practicable
in order to preserve the.competitive bidding process*); see also
Section 119 of CERCLA, 42 U.S.C. § 9619 (SARA confirmed the
application of federal contracting law).
The complex network of federal procurement/contracting
statutes and regulations closely regulates an agency's right to
expend resources from the public fisc. The laws circumscribe
EPA's contracting decisions and require a vast system of audited
cost controls. It is this network of regulatory control which
provides the safeguards which obviate the need for judicial
review of each of the contract terms and contracting decisions
and which supplant the detailed and disruptive review that the
defendants would have this court undertake in this case.
24 132 Cong. Rec. H95.64 (etatement of Rep. Lent) (daily
ed. Oct. 8, 1986) ("all of the money in the world—and all of the
Congressional mandates to EPA to complete cleanups—will not
guarantee effective cleanups unless there are responsible,
skilled, cleanup contractors willing'to do the work.*) See also
132 Cong. Rec. S14900 (daily ed. Oct 3, 1986)(statement of Sen.
Stafford)(important element of successful Superfund program is
development of a private sector to perform scientific and
technical analyses, and to design and implement the appropriate
remedy.)
34
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In accordance with Congressional intent and the
requirements of federal contract, law, EPA entered into a
nationwide system of removal, support, and remedial response
action contracts with private contractors which establish a
hazardous substance clean-up infrastructure. Under the
contracts, EPA has the ability to assign a contractor to conduct
sampling, test the samples, perform short-term cleanups, conduct
«
long term investigations and studies, and perform a permanent
remedy at superfund sites as the need arises. The contractors
working under these large, multi-site contracts develop the
a
expertise which Ccr.gress fc-j-d so escar.tial to the statutory
goals. In sum, these contracts are the fundamental building
blocks of the Superfund program. They are the product of EPA's
technical, scientific, contracting and - management judgment,
acting within the discretion specifically granted to the Agency
under CERCLA. Here, for example, EPA incurred 'costs under
approximately twenty (20) different contracts, including removal,
remedial and national support contracts and pursuant to
cooperative agreements and interagency agreements with both the
State of Michigan and federal agencies.
/The network of conzrsls applicable to these contracts
is exceedingly detailed. For example, th Competition in •
Contracting Act of 1984, (Small Business and Federal Procurement
Competition Enhancement Act of 1984), 41 U.S.C. §§ 251 et sea..
requires open, competitive bidding procedures in specified cases.
The Federal Property and Administrative Services Act of 1949, 40
35
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U.S.C. §§ 471 et seg^ 544, requires an agency to contract for
engineering services with the highest quality bidder at
compensation which the agency head determines is fair and
reasonable. Also, here, in procuring,the later CH2M Hill
Remedial Contract, EPA had to follow the Brooks Architect-
Engineers Act ('Brooks Bill"), 40 U.S.C. § 541-544, which
requires an agency, in certain types of contracts, to use
technical merit as the key factor for selecting contractors and
to award contracts based on the qualifications if a reasonable
and fair price can be negotiated. 40 U.S.C. § 544. .See 40
U.S.C. § 543. Congress confirmed the application of the Brooks
Bill when it amended section 119(f) of CERCLA, 42 U.S.C. §
6919(f), in SARA.
Further, during negotiation, the Truth in Negotiating
Act, 10 U.S.C.'S 2306(f), requires contractors to certify that
costs or pricing data submitted are accurate, complete and
current. In addition, the United States is required in procuring
and negotiating federal contracts to ccr.ply with a number of
statutes and regulations which are mandated by Congress to assure
that federal contracts are consistent with important public
policy ccncer-3, including 'pclicies o'f enc=ursging fair
competition regardless of the size of the businer^ and
encouraging contracting with minority businesses. One such
statute, the Davis Bacon Act, 40 U.S.C. § 276a, requires the
agency to agree to labor rates at a level commensurate with those
36
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on projects of a similar character in the locality where the
project is located.
These statutory safeguards are supplemented by the
Federal Acquisition Regulation (FAR) (see 48' C.F.R. § 1, e_£ sea.
(1987)) and the EPA regulations supplementing the FARS known as
the Environmental Protection Agency Acquisition Regulations
(EPAAR) (48 C.F.R. § 1500,- e_t sea. (1987)). These regulations
closely regulate nearly every aspect of EPA contracting from pre-
bid procedures to final audit resolution at the close of the
contract. , • :
• •
• As one of many, many examples, before procuring the
contractors for the remedial response action contracts, EPA's
contracting branch chose a "Cost-Plus-Award-Fee* contract
specified by 48 C.F.R. § 16.305. Once EPA chose-this contract "
type, the .terms of the contract all flowed from the requirements
of federal contract law. Federal statutes and the FARs and the
EPAAR provide most of the terms for a Cost Plus Award Fee
contract, see e.J. 48 C.F.R. § 1552.212^70. -Thus, the allawed
"level of effort* clause for cost-plus-fee-award contracts, as
well as the range of fee permitted under that contract, were
C.F.R. §15.904(a); 48 C.F.R. § 16.301-3; 48 C.F.R. § 151*.404-
272; 41 U.S.C. § 254(b). -Any additional terms would be tne
37
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product of a process of procurement negotiations outlined by
federal statute.25
Further, the federal contract system is replete with
controls to assure that costs are accurately accounted for. The
FAR requires a contractor to comply with relevant standards of
the Cost Accounting Standards Board (CASE), 48 C.F.R. §
30.101(b), and allocate costs in compliance either with CASB
Standards or with Generally Accepted Accounting Principles
•
(GAAP). 48 C.F.R. §31.203(d). Further, under the FARs, all
costs must be reasonable, allowable, and allocable to the
.contract. See 40 C.F.R. §§ 31.201-2-; 31.201-4; 31.205.
In order to assure that contractors will satisfy these
regulations, EPA evaluates the accounting and financial systems
of contractors at every stage of the contract process. First,
EPA's Office of Inspector General ("DIG") audits contractors'
accounting and financial management systems to assess
contractors' cost data and accounting, procurement, and property
management, systems. Bradley Dec. at ^10(a): Second, OIG or
another federal agency must annually assess whether a
contractor's prospective or incurred indirect cost rate properly
23 In order to assure that EPA obtains a "fair and
reasonable* price, the FAR requires that the potential contractor
furnish to EPA during the negotiations cost data which are
"accurate, complete, and current.* 48 C.F.R. § 15.804-2(b). To
help ensure against overpricing, the EPA Washington Cost Advisory
Office analyzes the pricing data during the pre-award phase, and
determines -whether the contractor's prospective cost or pricing
data are "complete," accurate, and current.* The relevant wage
rates are also constrained by CERCLA. Section 104(gj of CERCLA,
42 U.S.C. § 9604(g).
38
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allocates costs under federal cost principles. Bradley Dec. at.
*10(b). These audits allow EPA to determine whether the
contractor's management controls provide adequate assurance that
costs claimed will be reasonable, allowable and allocable to the '
contract. Bradley Dec. <[12(a).
Further, EPA audits contractor costs to ensure that
only allowable, reasonable, and allocable costs are charged
against the Superfund, and ultimately, the responsible parties,
Bradley Dec. at 513. Claimed costs which are questioned by the
auditors may be disallowed by the contracting officer and payment
to the contractor withheld or future claims offset unless the
contractor submits adequate information to refute the auditor's
findings and"convinces the contracting officer that the claimed
costs are acceptable.26 The United States does not seek recovery
from a defendant of contract costs disallowed after final audit
resolution. Should any audit of contract costs in the instant
case be disallowed after this process, the United States will
credit the disallowed amounts against future cost recovery.
In addition to the external contractor audits, Congress
determined to keep close watch over the management of the
Under Section lll(k) of CERCLA, 42 U.S.C. § 9611(k), Congress
26 The- audits of cooperative agreements and lAGs are
conducted in the same manner as the audits of contractors.
Cooperative agreements are audited by EPA's OIG or by independent
accountants. Bradley Dec. at 'IS. EPA's OIG obtains -audits of
lAGs from the Offices of Inspectors General and/or Offices of
Audit of other Federal agencies. Bradley Dec. at ^
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required the OIG to audit the overall Superfund program. These
annual Section lll(k) "programmatic audits* cover all EPA
payments, obligations, reimbursements, or other uses of the
Superfund, and assess whether the Fund is being properly .
administered.
Finally, the logic to Congress' intent to rely on
federal contract law to safeguard the Superfund is highlighted by
the alternative offered by defendants: ad hoc review by
accountants hired by responsible parties who would engage in a
battle of experts with the United States in federal court. This
process would 'consume additional Superfund resources, result in
potentially endless litigation and delay return to the Fund of
response costs that could be dedicated to hazardous waste sites.
Further, de noyo review would contravene the strong public
interest in avoiding constant disruption in the government
procurement process which often is "vital to the functions
performed by the sovereign.* Textron. Inc..Bell Helicopter
Textron Division' v. Adatr.s. 493 F. Supp. 824 (D.D.C. 19SO)
(quoting Blackhawk Heating and Plumbing Co. v. Driver. 433 F.2d
1137 (D.C. Cir. 1970)). Under CERCLA these concerns taVe or.
are applicable to a large proportion of CERCLA remedial actions
in the nation. If the terms and conditions of these contracts
were to be tested in each court where a cost recovery case is
filed, EPA could not be expected to fulfill Congress' mandate
that the Superfund be replenished expeditiously.
40 . . .
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respect to the response actions taken operate to the exclusion of
the APA.27
Accordingly, courts have held under analogous statutes
that Congress has precluded APA review. Courts have recognized
that the statutory scheme for review provided by § 307(d) of the
Clean Air Act, 42 U.S.C. § 7607(d), supplants the APA. Small
Refiner Lead Phase-Down Task Force v. U.S.E.P.A.. 705 F.2d 506,
520-23 (D.C. Cir. 1983) ; Lead Industries Association v.
EnvironmentalProtection Agency. 647 F.2d 1130, 1145-46 (D.C.
Cir. 1980), cert, denied. 449 U.S. 1042 (1980); Sierra Club v.
Ccstle. 657 F.2d 298, 323 (D.C. Cir. 1981), Ethvl Corp. v.
Environmental Protectier. Agency. 541 F.2d 1, 37, n. 79 (D.C.
Cir.) cert, denied. 426 U.S. 941 (1976).
V. If this Court Determines that Some Review of
Implementation Decisions is Permissible, EPA's
Decisions Regarding Response Activities are
Entitled to Great Deference and Should Hot Be
Overturned Unless Arbitrary and Capricious
In the event the Court determines that implementation
decisions are subject to judicial review, it is well-settled that
the Court nay not supplant its views for that of the agency and
conduct de novo review. Rather, the Court must afford great
deference to the expertise of the Agency and may cverrurn
If this ccurt vere to determine that the AFA is
applicable to the implementation decisions related to EPA
response actions, the result concerning reviewability of these
decisions would remain the same. Under the APA review of these
decisions would be precluded. See generally, Section II, supra.
and footnote 23, supra. To the extent that any review of these
decisions were permitted, the.APA requires that great deference
be given to the Agency's decision by the Court. See Section V,
info-a.
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-------
•s
implementation decisions and the accompanying'response costs(only}
if the decisions were arbitrary and capricious or otherwise not
in accordance with law. See, e.g., Ward. 618 F. Supp. at 900
(E.D.N.C. 1935); Western Processing, slip op. at 5.
in Ward. the court held that in order for defendants to
prove that EPA had incurred response costs in a manner
inconsistent with the NCP, they must establish that EPA acted in
an arbitrary and capricious fashion. 618 F. Supp. at 899-901.
Relying upon Citizens to Preserve Overton Park v. Voice. 401 U.S.
402 (1971) the court held that EPA's determination of appropriate
remedial action .is "entitled to great deference* and that its
actions are 'presumed to be consistent with the NCP unless
otherwise shown.* Ward at 899-900. The court further observed:
The statute provides liability except for costs
'not inconsistent' with the NCP. This language
requires deference by this court to the judgment of
agency professionals. The defendants, therefore,
may not seek to have the court substitute .its own
judgment for that of the EPA.
*****
[I]t would be an unreasonable waste of •judicial time
ar.j 'ocverr.re .-.t_r_es_curr££ r.rt _tc rentier, an usurpation
cf__agency_authority,_to require the EPAtojustify i~s
every action in order-to recover under FCERCLA]
section 107.
Ward. at 900 (emphasis added) .
Limited review also.comports with general principles of
administrative law which limit the scope of judicial review of
informal agency action. Here, the agency decisions pertaining to
the implementation of remedies at hazardous' waste sites are
43
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informal agency actions.*8Indeed, the Supreme Court has made
quite clear that in the absence of an explicit statutory standard
or contrary Congressional intent,29 informal agency action must
be reviewed under the 'arbitrary and capricious" standard of
review, 5, U.S.C. § 706(2)(A), and the scope of review is limited
to the administrative record. E.g.. Camo v. Pitts. 411 U.S.
138, 142 (1973) (per curiam)(vacated appellate court's order
requiring trial court to conduct d$ poyo review of informal
agency decision); Citizens to Preserve Overton Park v. Voice. 401
U.S. at 413-14, 420 (1971) ; Florida Power & Light Co. v. Lorion.
470 U.S. 729, 743 (1985); American Paper Institute^ Inc. v.
Arierican Electric Power Service, Corp. . 461 U.S. 402, 412 & n.7
(1983) (informal rulemaking); see also United States v. Carlo
" »
Bianchi & Co.. 373 U.S. 709, 714-15 (1963) (if the relevant
statute does not specify de novo review it is rjofr to be
presumed); 5 Mezines, Stein, & Gruff, Administrative Law. §51.04
at 51-68 (1987).
2® Implementation decisions are not formal adjudications,
because neither CIr.rLA ncr SARA requires these derisiors be
cet.erir.ined "on the record after opportunity for an agency
hearing." 5 U.S.C. § 554. These decisions are also not rules,
since they have no "general or particular applicability and
future effect designed to implement, interpret or prescribe law
or policy . ..." 5 U.S.C. § 551(4). Therefore, agency
decisions rev. »rding ir.pler.entation are neither a formal
'„ *•• — .,,»..„... >. . „ . * f. . _ „ ., ... ,_ * ^ .' — *; . ' ^» ,. ^» . . 4 ^ W, »•,.,--.
~. — >— M_^._ ^__., r . _ . .. »_._-, — — «. . _ ^ M«.i.««>.*4»4»Cw* &^.M..— W» * ^,. *. **»..-— J
percent of all government actions as informal agency actions. See
1 K. Davis, Adrir.istr2t.ive Lav Treatise. § 1:4 at 13 (2 ed.
1978) .
29 As argued at Section II supra, both explicit statutory •
language and evidence-of Congressional intent counsel against any V,
judicial review of the post-ROD implementation decisions.
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managerial approaches to abate the problem and to minimize injury
to hur.an health and the environment. The essence of the EPA
program, therefore, is the exercise concerning scientific,
technical and managerial judgment. Where, as here, the response.
actions include innovative new technology, the role of Agency
expertise in the exercise of scientific judgment is even more
crucial.
The deferential review which courts extend to decisions
within an agency's expertise and Congressionally delegated
authority is only one of several bases upon which the Court
should to uphold EPA's implementation decisions unless they are
proven to be arbitrary and capricious. The appropriateness of
limited judicial review is strongly reinforced because the
technical, managerial, and procurement decisions made by EPA and
its contractors in carrying out selected "response actions are the
types of decisions which courts have been" loathe to disturb.
Indeed, as the Supreme Court has emphasized, when' examining a
"scientific determination, as opposed to simple findings of fact.,
a reviewing court must generally be at its most deferential."
Baltimore Gas & Electric Co. v. NRDC. 462 U.S. 87, 103 (1983).
See a'.sc Ar.=relina Hcllv Core, v. Clark. 587 F. Supp. 1152, 1155
^S f* , ^ S *" ^ J V
(C . •- . Cir. 1» c •»;
541 F.2d at 36:
As r-,atez tv r.-e cruri in Ethyl Corr. v. £?.-.
[A]fter our careful study of the record, we.must
take a step back from the agency decision. We
must look at the decision not as the chemist,
biologist, or statistician that we are qualified
neither by training nor experience to be, but as a
reviewing court exercising our narrowly defined
46
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duty of holding agencies to minimal standards of
rationality.
While courts routinely refuse to review the procurement
decisions of Federal agencies, in those very limited
circumstances where judicial review has been allowed, the review
is extremely deferential. The procurement decision must be
upheld as long as the contracting officer's decision had some
rational basis and was not prejudicial or in violation of law.
E.g. M. Steinthal & Co. v. Seamar.s. 455 F.2d 1289 (D.C. Cir.
1971); Wheelabrator Corp. ;v. Chafee. 455 F.2d 1306 (D.C. Cir.
1971). Defendants' suggestion here that .this court engage in de
novo review ignores this well-settled body of law requiring very
deferential review.31 - '
31 Limiting judicial review of costs comports with the
standard of review proposed by EPA for resolving cost recovery
claims by alternate dispute resolution. Pursuant to its
authority under Section 122(h){2) of CERCLA, EPA recently
proposed a rule allowing liable parties to arbitrate cost
recovery claims of less than $500,000. See 53 Fed. Reg. 29428
(1988) . The purpose of the rule is to provide an expeditious,
less expensive alternative tc litigation.. Under the rule, EPA's
selection of the response action will be upheld unless, based on -
the administrative record compiled by EPA which formed the basis
of EPA's selection decision, defendants establish the selection
was inconsistent .with the NCP based on an arbitrary and
capricious standard of review. For any portion of EPA's response
action which the arbitrator upholds, EPA shall be awarded all
costs incurred ur.less
participating ??.?s car- establish rr.at all cr
part of,-such 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)
clearly excessive, taking into account the
circumstances of the response action and
relative to acceptable government procurement
and contracting practices in light of the
(continued...)
47
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Thus, if this court decides that some review of
implementation decisions is appropriate, it is clear that the
court must apply an arbitrary and capricious standard of review
and inquire only into the administrative record. • The court must
determine what constitutes the administrative record of
implementation decisions. CERCLA neither requires nor
contemplates that EPA prepare a formal administrative record for
the thousands of implementation decisions. Indeed to require
such a record would hinder an essential purpose of the Act: the
«
prompt cleanup of Superfund sites. Nor does CERCLA require EPA
to issue a formal statement of reasons justifying each of its
31(...continued)
circumstances of the response action.
Id. at 29430. The proposed rule thereby allows PRPs to challenge
the implementation decisions, but places the burden of proof on ,j
the PRPs to show costs were clearly excessive under the .
circumstances and in light of government procurement law. The
standard of review in a judicial proceeding must be narrower, cr
at least as narrow, or a liable party would have no incentive *3
use arbitration. That judicial review should be more limited is
recognized in EPA's preamble to the proposed rule, which states:
In particular, the third factor, relating to
whether EPA's costs were excessive, is not
necessarily relevant in judicial cost recovery
" ~' '.. L ; 7. ~ H Scscific? 11-'. "^stalrlis^sd case ] 3v
t
States is entitlsd to
recover all costs associated with anv response
action upheld as not arbitrary and capricious.
See United States v. NEFACCO. 810 F.2d 726, 747
(Sth Cir. 1986) .
Id. at 29430 (emphasis added). Although the rule is not final,
the comment period has ended .and none of the comments challenged
the "clearly excessive" standard.
' 48
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decisions.32 Although EPA does not compile an administrative
record in the traditional sense for each such decision, it does
articulate reasons for each of its major decisions. It is
appropriate to limit review to this statement of reasons. See
Camp v. Pitts, supra? Dunloo v. Bachowsk.i. .421 U.S. 560 (1975),
In Dunlop, the court concluded that if Secretary's decision is
reviewable, the review must be based on the Secretary's statement
of reasons. This narrow scope of review was compelled by the
Secretary's broad discretion and the absence of any statutory
requirement to create an administrative record. See also.
Environmental Defense Fund. Inc. v.'Costle. 657'F.2d 275 (D.C.
Cir. 1981) ; Town of Oransetovn v. Gorsuch. 718 F.2d 29 (2d Cir.
1983), cert, denied 465 U.S. 1099 (1984).33
3^ with respect to decisions to incur costs under remedial
contracts, for example, EPA does outline tne scope of the work to
be performed and .the cost of each task in an authorization
package that is reviewed by the regional project managet and the
contracting officer. These authorization packages constitute an
informal record of EPA's implementation decisions and these
packages - and not every underlying document - represent a
"recori* of the agency's decisions, and if thtre is to- be any
judicial review the focus should be on these packages.
33 If the Court determines that the available
administrative record is somehow inadequate, the court may
require agency officials to give testimony explaining a decision,
but should not go so far as to conduct de novo review. See
Overton Park. 401 U.S. at 419-21; 5 Mezines, Stein, & Gruff,
Administrative Law. §51.03 (1937).
49
-------
CONCLUSION
The entire statutory scheme of 'CERCLA was established in
order to protect the public health and welfare and the
environment by cleaning up environmentally threatening sites on
an emergency basis. Fundamental to the statutory scheme is a
requirement that responsible parties bear the economic burden of
cleaning up the sites where hazardous substances have been or
threaten to be released into the environment. If the responsible
parties failed or refused to implement the cleanup at sites on
.the National Priority List themselves, EPA was to do the cleanups
within the discretion granted it by the statute, using the
resources of the Superfund. In cases where the Superfund
•»
financed the cleanups, all costs of the response actions were to
be recovered by the Fund unless the responsible party could
establish by a preponderance of the evidence that some pcrtion of
the response actions was inconsistent with the National
Contingency Plan.
The statutcry sphere fcr reccverirg crstr i-r:rre- by
the Fund was intended by Congress to be swift and summary,
striking the balance in the favor of the government in order to
er.ccurage the responsible .parties tr carry cut the response
activities themselves. The goals' of the statute can • • •• realized
only if cost recovery actions are resolved rapidly, thereby
replenishing the Fund and discouraging responsible parties from
50
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reiusing to iiripxesient cxean-up activities tnemseives. 10
end, Congress has precluded review of implementation decisions.
Respectfully submitted,
ROGER J. MARZULLA
Assistant Attorney General
Land and Natural Resources Division
By:
V.
JOEL M. GROSS
NANCYkBOYLAND COLLINS
MICHAEL J. McNULTY
THOMAS A. MARIANI, JR.
SAMUEL BOXERMAN
Environmental Enforcement Section
Land and Natural Resources Division
U.S. Department of Justice
Washington, D.C. 20530
(202) 633-1307
OF COUNSEL:
ROGER GRIMES
Regional Counsel
Environmental Protection Agency
Region v •
230 South Dearborn Street
Chicago, Illinois (50604
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-------
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF MICHIGAN
UNITED STATES OF AMERICA,
Plaintiff,
v.
THOMAS SOLVENT COMPANY; et al.
Defendants.
Civil NO. K86-167 CAS
Hon. Richard A. Enslen
FRANK J. KELLEY, Attorney
General of the State of
Michigan and THE STATE OF
MICHIGAN,
Plaintiffs,
v.
THOMAS SOLVENT COMPANY; et al.
Defendants.
Civil No. K86-164 CAS
DECLARATION OF ERNEST E. BRADLEY III
-------
r
-------
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
v.
THOMAS SOLVENT COMPANY,
et al.
Defendants.
FRANK J. KELLEY, et al.,
General of the States of
Michigan, and the STATE OF
MICHIGAN,
Plaintiffs,
v.
Civil Action No. K86-167 CAS
Honorable Richard A. Enslen
Civil Action No. K86-167 CA8
Honorable Richard A. Enslen
THOMAS SOLVENT COMPANY,
'et al.
Defendants.
DECLARATION OF ERNEST E. BRADLEY III
I, Ernest E. Bradley III, do hereby depose and state:
1. I am the Assistant Inspector1 General for Audit in
the Office of Inspector General (»OIG») of the United States
Environmental Protection Agency ("EPA"). I have held this
affidavit is submitted in support of Plaintiff's Motion in Liinine
to Exclude Evidence in the above-captioned case.
2. In my capacity as the Assistant Inspector General
for Audit, I supervise a staff of approximately 200 employees who
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- 2 -
conduct audits of EPA's programs and operations or who arrange to
have independent audits of EPA's programs and operations conducted
by independent public accountants, other Federal auditing agencies,
and State auditing agencies. I am responsible for planning,
developing, and directing a comprehensive audit program designed
to ensure that all EPA programs and operations are effectively,
efficiently, and economically administered. The EPA/OIG issued
1,933 audits from April 1, 1987, to March 31, 1988, of which
58 were related to Superfund. I establish standards, criteria,
and plans for the scope, frequency, and focus of audits. I
participate with key officials in developing long-range and
current .au.di.t- policies, procedures, and standards-for conducting
complex internal and external audits of EPA programs and operations.
I coordinate with top Federal, state, and local agency program
and audit officials in matters pertaining to EPA audit programs.'
I advise the Inspector General and other key officials concerning
rr.e extent of ex=r.ir.2ticr.s necessary tc adequately appraise. EPA
programs and operations. Within the scope of delegated authority,
I.establish goals, develop plans, determine the number and kinds
cf staff er.^lcy?es needed, prepare staffing and program budget
:=c-j£Sts for audits, establish internal operating policies and
procedures, allocate resources, assign and evaluate work, provide
for training and support services, select or recommend the
selection of staff, arrange for the performance appr-aisal of
employees, counsel employees, and carry out EPA's personnel manage-
ment and equal employment opportunity goals and objectives.
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_ 3 -
3. From 1971 to 1980, I served as the Assistant Director
of Audit and the Director of Audit Operations in EPA's Office of
Audit. As the Assistant Director of Audit, from 1978 to 1980, I
worked with the Director of Audit to manage all audits undertaken
by the Office of Audit.' As the Director of Audit Operations from
1971 to 1978, I played a major role in the organization and
initial operation of the newly-created Office of Audit and
subsequently developed and managed program audits undertaken by
the Audit Operations Division.
4. From 1963 to 1971, I was an auditor and Branch
Manager at the Department of Health, Education, and Welfare
("DHEW") Audit Agency. From 1963 to 19,67, I performed external
audits of agencies and institutions receiving Federal funds from
DREW and internal audits of DHEW field installations. From 1967'
to 1971, i was a Branch Manager for the States of Alabama and
Mississippi, responsible for developing, directing, and completing
external and internal audits. In that capacity, ,1 planned and
directed nationwide audit programs for reviews cf the Head Start
Program, the Elementary and Secondary Education Program, and
systems reviews in universities and nonprofit organizations.
5. I received a Bachelor of Arts degree in accounting
from Georgia State University in 1963. I have taken graduate
courses at the University of Georgia and Mississippi-.College. In
1973, I was certified as an internal auditor by the American
Institute of Internal Auditors.
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- 4 -
6. One of EPA's major programs and operations is the
cleanup of hazardous waste sites that pose threats to the public
health, welfare,- and the environment under the authority 'of the
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 ("CERCLA"), as amended by the Superfund Amendments •
and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. SS 9601 et.
s eg . one major aspect of this cleanup program, in the absence
of private efforts to clean up hazardous waste sites, by the
persons who are responsible for the hazardous conditions at these
waste sites, is to have EPA undertake removal and remedial cleanup
actions. To accomplish the necessary removal and remedial cleanup
•»
actions,- EPA enters into contracts with private contractors,
cooperative agreements with States, and interagency agreements
("lAGs") with other Federal agencies. These response actions'
were funded by expenditures fronv the Hazardous Substance Response
Trust -Fund established under Section 221 of CERCLA, 42 U.S.C.
S S631,
ex; •= - zi v J: £3. fr-~
Substance Superfund established under Section 517 of SARA,
26 U.S.C. S 9507.
7. Under Section UK*} of CERCLA, 42 U.S.C. S 9611U),
t-e L"A/CIG ii inquired to audit all EPA .payments, obligations,
reimbursements, or other uses of the Fund, to assure that the
Fund is being properly administered and that claims are being
appropriately and expeditiously considered. The EPA/OIG was
required to submit to Congress an interim report for fiscal year
1981 and a final report for fiscal year 1982. Thereafter, the
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- 5 -
EPA/01G was to audit EPA payments, obligations, reimbursements,
or other uses of the Fund as the EPA Inspector General deemed
appropriate.
8. Under Section lll(g) of SARA, which amended Section
lll(k) of CERCLA, 42 U.S.C. S 9611U), the EPA/OIG is required'to
conduct an annual audit of all EPA payments, obligations,
reimbursements; or other uses of the Fund in the prior fiscal
year, to assure that'the Fund is being properly administered and
that claims are being appropriately and expeditiously considered.
Section lll(g) also r'equired the EPA/OIG to conduct an examination
of a sample of agreements with States carrying- out response
actions under CERCLA and an examination of remedial investigations
and feasibility studies prepared for remedial actions.
9. As required by Section 4(b) of the Inspector General
Act Of 1978, as amended, 5 U.S.C. app., the EPA/OIG audits
described in Paragraphs 7 and 8, above, must comply with standards
established by the Corprrolle: General of the United States for
audits of Federal establishments, organizations, programs,
activities, and functions. The standards are published in the
c»s-. £a-»c f^r Auiitc: --•-.------_•;• - — ~ • •• - * ;:— . ? - - ~_- ^-_f_^
Activities, '..id Functions, issued by the Comptroller General of
the United States.
; 10. The EPA/OIG is responsible for auditing all of the
major Superfund contractors for removal actions (e.g., PEI
Associates, OH Materials, HAZTECH, and Riedel Environmental
Services) and, from fiscal year 1985 to the present, for.auditing
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- 6 -
one of the major contractors for remedial actions (CH2M Hill).
Audits are performed either by my staff, under my direction and
supervision, or by independent public accountants under contracts
with the EPA/OIG, other Federal auditing agencies under lAGs, and
State auditing agencies under cooperative agreements. The various
kinds of audits performed are described as follows:
a. A pre-award audit is a review and evaluation
conducted to determine whether a contractor's prospective cost or
pricing data submitted are current, accurate, and complete. A
review may include an assessment of the contractor's accounting,
procurement, and property management systems. Tr.e co-r^ted
audit report is submitted to the Government contracting officer
for use in negotiating with prospective contractors before a
contract is awarded.
b. An indirect cos_t__ audit is a review and evaluation
conducted to assess whether a contractor's prospective or incurred
ir.di.rect cost rate properly allocates costs allowable under
Federal cost principles. The completed audit report is suomitted
to the Government contracting officer for use in negotiating wit'h
prospective contractors before a contract is awarded and periodi-
cally curing z~:.::zz ;•-.: :;•::•,...- ; • .
c. A cost audit .is a review and evaluation conducted
to assess the allowability of costs claimed or reported under a
contract and to ensure compliance with applicable statutes,
regulations, and terms and conditions of the award. These audits
may include a review of incurred direct costs and indirect costs
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- 7 - •
and the contractor's policies, procedures, and practices that
influence and control contract costs. A cost audit may be an
interim cost-audit (i.^,, an audit of all costs incurred on the
contract up to the cutoff date of the audit) or a final cost
audit (i.e.. an audit of all costs claimed after the contract has
been completed). The completed audit report is submitted to the
Government contracting officer for use in negotiating the accept-
ability of contract costs incurred to date (for interim cost
audits) and to close out a contract (for final cost audits).
11. Ir. perf orr.ir.:: a-di'ts of a particular contract,
auditors follow generally accepted auditing standards. Auditors
use the applicable statutes, regulations, guidelines, and official
EPA policy statements as criteria' for determining the acceptability
of costs claimed. Auditors use their professional judgment to
apply appropriate audit procedures to meet conditions at the audit
site to achieve audit objectives.
12. The objectives of tr.e audits of contracts are:
a. TO determine whether the management controls
exercised by the contractor through its management, accounting,
procurement, and property ccr.tri1! systems are acecuate to provide
assurance that costs claimed are reasonable, allowable, and
allocable to the sponsored project under the contract terms and
applicable sections of the Federal Procurement Regulations
("FPR"), 41 C.F.R. Chapter 1, and th6 Federal Acquisition
Regulation ("FAR"), 48 C.F.R. Chapter 1.
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- 8 -
b. To review operations and report any noncompliance
with applicable contract provisions or EPA regulations and, based
upon the review, to provide recommendations for improvement.
c. To determine whether the"costs claimed under the
EPA contract are reasonable, allowable, and allocable to the
*
sponsored project.
13. In conducting cost audits of an EPA contract,
auditors express an opinion as to the acceptability of costs
claimed on reimbursement vouchers submitted to EPA. Costs that
are not acceptable are questioned by auditors. When costs are
questioned, the auditor recommends that the contracting officer
not authorize reimbursement for the costs claimed or, if
reimbursement has already occurred, offset future claims by the
questioned amount. The acceptability of costs is examined from
several aspects:
a. Allowafaility: The costs claimed are examined for
compliance with applicable statutes, regulations, Federal cost
principles (e.g., the FPR, the FAR, Office of Management'and
Budget Circulars), and the terms of the contract.
b. P«>gsgr3bler;ggs! The costs claimed are examined
to ensure that they are generally recognized as ordinary and
necessary for the performance of the contract and to determine
whether significant deviations from established practices occurred
which may have unjustifiably increased contract costs.
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- 9 - .
c. Allocability; The costs claimed are examined
to ensure that they are charged to the contract only to the
extent of benefits received.
14. In addition to the contractors named in Paragraph
10, above, EPA uses the Fund to pay for response actions performed
by other major contractors (e.g., Ecology and Environment, NUS,
Roy f. Weston, and Camp, Dresser & McKee). The Defense.Contract
Audit Agency {"DCAA") is responsible for auditing those contractors,
and for CH2M HilT'up to and including fiscal year 1985. The
EPA/OIG obtains audits of those contractors from DCAA under an
IAG. DCAA examines the accounting records and financial operating
procedures of the contractors in accordance with generally accepted
auditing standards .and, accordingly, includes such tests of the
accounting records and other auditing procedures considered
necessary.
•
" . 15. In addition to response actions being performed by
•private contractors, EPA uses the Fund to pay for response actions
performed by States 'under cooperative agreements between EPA and
the States. Cooperative agreements are audited by my staff,
under my direction and supervision, or by independent public
i zcc-ritar.is under contracts with the EPA/01.'
16. In addition to response actions being performed
by private contractors, EPA uses the Fund to pay for response
actions performed by other Federal agencies (e.g., the U.S. Army
Corps of Engineers and the U.S. Coast Guard) under lAGs between
EPA.and those acencies. The EPA/OIG obtains audits of the lAGs
-------
from the Offices of Inspector General and/or Office*? of Audit of
other Federal agencies.
17. In addition to all of the external aucUts of
contracts, cooperative agreements, and IAGs, the EPA/OIG conducts
internal audits of EPA's hazardous waste cleanup progr-.ara. Internal
audits are designed to determine whether desired results and
objectives are being achieved effectively; resources aro managed
and used economically and effectively; operating procedures are
effective and being carried out; applicable laws and regulations
have been complied with; financial operations are conducted
properly; and financial reports are presented fairly. For: example,
•*
in accordance with Section lll(k) of CERCLA, 42 U.S.C. 5 9611(k),
the EPA/OIG conducted audits of payments, obligations, reimburse-
ments, or other uses of the Fund for fiscal years 1981, 1982,
1983, 1984, and, 1986 to assure that the Fund was being properly
administered. The Fund audits were performed by my staff, under
my direction and supervision, or by independent public accountants
under contracts with the EPA/CIG. As another example, the EFA/OIG
conducted an audit of EPA's planning,.negotiation, awarding, and
administering of the Emergency Response Cleanup Services { "ERCS"}
contracts to evaluate the economy, efficiency, and effectiveness
of the ERCS contracts. The ERCS audit was performed by my( staff,
under my direction and supervision. j
18. According to EPA's Financial Management Division
and CH2M -Kill's historical contract documents, EPA expende^
S3,415,396 at the Verona Wellfield site from November 1982' through
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- JLi -
January 1987 under EPA Contract 68-01-6692 with CH2M Hill-. .The
EPA/OIG has obtained audits of that contract for 1982 through
1984 from DCAA and an independent public accountant. For calendar
year 1982, DCAA performed an interim audit of the $386,256 in
costs claimed by CH2M Hill under this contract and accepted all
the costs claimed. See EPA Audit Report 50790. For calendar
year 1983, DCAA performed an interim audit of the $21,801,570 in
costs claimed by CK2M Hill under this contract and accepted all
the costs claimed. (The $21,801,570 includes $12,471,036 in
subcontractor costs which CH2M Hill actually paid; DCAA did not
examine the books and records of those subcontractors.) See EPA
<
Audit Report 50892. Finally, for calendar year 1984, the most
recent year audited, an independent public accountant performed
an interim audit of $37,801,208 in costs claimed by CH2M Hill
under this contract and accepted all the costs claimed. (The
$37,801,208 Includes $25,430,843 in subcontractor costs which
CH2M Hill ?rt'j£l2" osif; t^e ir.der
-------
standards and are typical of those audits accepted by Federal
agencies". Based on the results of those audits, it is my opinion
that $2,854,562 in costs claimed by CH2M Hill under EPA Contract
68-01-6692 at the Verona Wellfield site from 1982 through 1984 is
acceptable. (For 1985 through 1987, CH2M Hill claimed 5560,834
in costs at the Verona Wellfield site under EPA Contract 68-01-6692.
Those costs have not been audited, and I express no opinion about
the acceptability of such costs).
20. Based on all of the above information, and my
personal knowledge of the audit procedures used and the audit
results obtained, I believe that the contracts, cooperative
agreements, and lAGs which EPA enters into in support of the
hazardous waste cleanup program are extensively and successfully
audited. I believe that such audits ensure that all costs are
properly incurred in accordance with all applicable statutes,
regulations, EPA policies, and Federal cost principles, and
ensure that the hazardous waste cleanup program is being managed
effectively and efficiently.
I hereby certify under pe-slty of perj-ry tr.at: tc- tne t-..-
of my knowledge and belief the foregoing is true and correct.
Dated this &
ERNEST E. SRADLEY^III
of
, 1988,
-------
ATTORNEYS.,- L/.'Y
O*V*fi wAM
o
August: 14, 1989
Clerk of the Court-
United States District Court
Western District of Michigan
410 W. Michigan Avenue
Kalamazoo, Michigan 49005
Dear "ierk:
Re: Kelley v Thomas Solvent Company
File No. K86-164 CA8
United States v Thomas Solvent Company
File No. K86-167 CAS
Enclosed for filing please find original and two copies
f Defendants' Richard Thomas and jr_hgmas_
Supplemental Brief in Opposition rb^tTnTted States' Motion'in
Limine to Exclude Evidence, Motion to Exceed Page Limit and Proof
Thank vou.
Very truly yours,
FOSTER, SWIFT, COLLINS & SMITH, P.C.
•
— XZ^Lh
K. Richardson
LKR/CT
Enclosures
cc w/encs: Robert P. Reichel
Nancy B. Collins -''
R. Craig Hupp
James M. Sullivan
Hon. Richard A. Enslen
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-------
UNITED STATES DISTRICT CODRT
FOR THE WESTERN DISTRICT OP MICHIGAN
FRANK J. K2LLEY, Attorney
General of the State of
Michigan? and THE STATE OF
MICHIGAN,
Plaintiffs,
THOMAS SOLVENT COMPANY- T" -~
DEVELOPMENT, INC. ; ?'.
SOLVENT COMPANY OF DE?RG.
THOMAS SOLVENT J.:MPAN£ OF
MOSKEGON, INC. ; "HOMAS SOLVENT,
INC. OF INDIANA; TSC TRANSPORTA-
TION, INC.; RICHARD E. ' =*OMAS ;
and GRAND TRUNK WESTERN RAILROAD
File No. K86-164 CAS
MPANY,
Defendants .
Hon. Richard A. Enslen
Civil Action No. K86-167 CAS
UNITED STATES OF AMERICA,
Plaintiff,
7* SJ ***M * O ^ »•* * * T^ 1 »-^ /^^"*^| ^ * * * V »
THwftAS DEVELOPMENT,.INC.;
THOMAS SOLVENT COMPANY OF
DETROIT, INC.,; THOMAS SOLVENT
COMPANY OF MUSKEGON, INC.; -
THOMAS SOLVENT, INC. OP
INDIANA; TSC TRANSPORTATION
COMPANY; RICHARD E. THOMAS;
and GRAND TRUNK WESTERN
RAILROAD COMPANY,
Defendants.
SUPPLEMENTAL BRIEF IS OPPOSITION TO UNITED STATES'
MOTION IN L:MIXE TO EXCLUDE EVIDENCE
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ARGUMENT
PAGE
*
I. SUMMARY 0? ARGUMLKT 5
II. THE LEGISLATIVE HISTORY OF CERCLA IS SKETCHY
AND UNRELIABLE ' 11
*•»•
III. THE GOVERNMENT'S STATUTORY ANALYSIS IS
FATALLY FLAWED 13
IV. DEFENDANTS ARE ENTITLED TO DE NOVO REVIEW OF
THE .COST ISSUES IN THIS ACTION ......... 18
V. ASSUMING, ARGUENDO, THAT JUDICIAL REVIEW IS
LIMITED TO IHE ADMINISTRATIVE RECORD, THIS
ADMINISTRATIVE RECORD IS INSUFFICIENT FOR
APPROPRIATE REVIEW 3Y THE COURT '32
A. Summary of Remedial Activities 32
3. Tne Administrative Record is Insufficient . 40
yi. ASSUMING THAT JUDICIAL REVIEW IS LIMITED TO THE
ADMINISTRATIVE RECORD, SUCH REVIEW APPLIES ONLY
TO MATTERS OF DISCRETION -44
VII. FEDERAL CONTRACTING AND PROCUREMENT REGULATIONS
ARE INSUFFICIENT TO ASSURE A PROMPT, ADEQUATE AND'
'COST-EFFECTIVE RESPONSE 46-
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UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MICHIGAN
FRANK J.'KELLEY, Attorney
General of the State of
Michigan; and THE STATE OF
MICHIGAN,
Plaintiffs,
THOMAS SOLVENT COMPANY; THOMAS
DEVELOPMENT, ISC. THOMAS
SOLVENT COMPANY 0: DETROIT 'T. ;
THOMAS SOLVENT CC: ANY OF
MUSKEGON, INC.; T:i-MAS SOLVENT,
INC. OF INDIANA; TSC TRANSPORTA-
TION, INC.; RICHARD E. THOMAS; .
and GRAND TRUNK WESTERN RAILROAD
COMPANY,
Defendants.
UNITED STATES OF AMERICA,
Plaintiff,
THOMAS SOLVENT COMPANY;
T-::•".;.s DEVELCPMENT, INC.;
THOMAS SOLVENT COMPANY OF
DETROIT, INC.,; THOMAS SOLVENT
COMPANY OF'MUSKEGON, INC.;
THOMAr SOLVENT, INC. OF
• I .« L. . rwv-i I . C.'x_ i ;^-_> i jr ^r. *r. . _ - .»
COMPANY; RICHARD E. THOMAS;
and GRAND TRUNK WESTERN
RAILROAD COMPANY,
Defendants.
File No. K86-164 CA8
Hon. Richard A. Enslen
Civil Action No. K86-167 CA8
SUPPLEMENTAL BRIEF IN
OPPOSITION TZ UNITED STATES'
MOTION IN LIMINE TO EXCLUDE
EVIDENCE
-------
Stewart H. Freeman (P13692)
Robert P. Reichel (P31878)
Attorneys for Plaintiffs Frank
J. Kelley and. State of Michigan
F. Henry Habicht, II
J.oel M. Gross
Steven J. Willey
Assistant Attorneys General
Attorney for Plaintiff United
States of America
John L. Collins (P12065)
Charles E. Barbieri (P31793)
Attorneys for Defendant Thomas
Solvent Company and Richard E.
Thomas
313 South Washington Square
Lansing, MI 48933
Telephone: (517) 372-8050
Fredrick J. Dindoffer (P312?l,
Attorney for Leienaarits Grarv-
Trunk Western Railroad
James M. Sullivan (P21143)
Robert P. Hamilton (P14575)
Attorneys for Defendants Thomas
Solvent of Detroit, Thomas
Solvent of Indiana, Thomas
Solvent of Muskegcn, Thomas
Deve-lopment and TSC Transportation
CTJCCT r
Qppoc •"" T
MOTION IN LIMINE TO EXCLUDE EVIDENCE
The United States' has moved to exclude evidence
challenging the costs allegedly incurred by the federal
government for removal and remedial activities undertaken at the
Verona Well Field in Battle Creek, Michigan. Essentially, the
government moves to strike all defenses to the claimed costs,
arguing that because the money was spent by the United States, it
was incurred not inconsistent with the National Contingency Plan.
-------
In truth, tne government s cleanup operations ace expectea to
Jouble the initial $2.5 million estimate. Because of the massive
~ost overran, the soil vapor extraction system and groundwater
Extraction systems were recently shut down while the federal and
state governments quarreled over the contracts. See excerpts
from the Battle Creek Enquirer, appended as Exhibit A. For the
reasons set forth herein as well' as in previously submitted
briefs-. n°*r=>ndants Thomas Solvent Company and Richard Thomas
oppost ernments' motion.!
INTRODUCTION
...is action is brought by the United States pursuant to
§ 1C7* of the Comprehensive Envircrjnental Response., Compensation &
Liability Act ("CERCLA"), 42 U.S.C. S 9607, for the recovery of
costs allegedly incurred in implementing a remedial action to
address hazardous substances in the Verona Well Field. As of
Sarch B, 1989, the United States claimed costs totaling
')
$7,199,611.82 for remedial activities allegedly undertaken a't the
Verona v- ;:;•.:•••,;••••.•• -. "' ' :'~ .
Isee, Richard Thomas and Thames Sclver.t Company's Brief in
Opposition to United States' Motion for Ruling as to Appropriate
Standard and Scope of Review of Agency Action, filed on
January 30, 1988; Richard Thomas and Thomas Solvent Company's
Supplemental Brief in Opposition to United States' Motion for
Ruling as to Appropriate Standard and Scope of Review of Agency
Action filed on March 15,. 19-88; Thomas Solvent Company and
Richard Thomas'.adoption by reference of Grand Trunk'Western .
Railroad's Briefs Regarding Appropriate Scope and Standard of
Review filed January 29, 1.988 and March 17, 1988, and Thomas
Solvent Company and Richard Thomas' Opposition to United States'
Motion for Summary Judgment filed December 2, 1988.
-------
government but has no bearing on the issues addressed by the
motion ir. iimine.
The United States filed this motion on December 23,
1988. -Defendants filed a response and brief in opposition to the
motion on January 17-, 1989.
also has claimed costs of $949,723 for response actions allegedly
undertaken at the site.
Cross motions for summary judgment have be;. . t.iled on
the liability aspect of this litigation, and they presently
remain unresolved. Although these Defendants deny that they are
liable, the United States' motion in limine assumes that these
motions will be resolved in favor of the Plaintiffs..
There are also pending before the Court motions for
summary disposition regarding the recovery or disallowance of
certain costs claimed by the federal and state governments. The
Ccurt has entered a consent decree resolving the costs allegedly
owed by Grand Trunk Western Railroad. The entry of the consent
decree affects the ultimate liability, if any, of the Thomas
Defendants insofar as the government has attempted to attribute
certain costs to Grand Trunk western Railroad ($5,495.75 of the
V'
federal costs) and ethers to the Thomas Defendants '^^
•'- • • .: • • ' ~* , ----;:: t :'. 7". ~f ~u~ TC?S motions recarciir.a
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ARGUMENT
I • SUMMARY OF ARGUMENT
The United States declares that the -purpose .of its
motion is to delineate the "reviewability of EPA activities that
follow selection or the remedy: the implementation of selected
cleanup/'response' actions and the costs incurred in doing'so,."
United States' Brief, page 4. The real purpose of the
government's motion is to conceal the truth from this Court:'
EPA's management of the Superfund program has been and continues -
to be^questionable and even irresponsible. The government
actually is seeking suppression of evidence that it sanctions the
tvre cf overcharges and tilling practices for which the Defense
Department has been so heavily"criticized. As an example from
this case, indirect costs assessed against an employee's time in
some cases exceed the dollar amount paid to that employee, and"
**"" »
She indirect cost rates charged by the government to Defendants
,
ar"? more than ten times those permitted to be charged by the
their own contractors. See, infra, at 20-22. Neither does the
United States want its technical measures and associated costs
publicized for to do so would reveal an embarassment to EPA
equivalent to that of the Bradley "tank."
The government objects to criticisms of- the cost
experts, arguing that they constitute a postcontract audit that
frustrates the "goals of Superfund." According to the United
States, one of the goals of Superfund is to place the financial
-------
Burden of hazardous waste cleanup on those parties'responsible
for th« problem. Although this, in theory, may be true the
7'. , :"*?!• •'., through its motion, also would have the potentially
responsible parties (PRPs) bear the financial burden of the
government's incompetence, dilatory tactics and excesses in
contracting simply because the government did the job. Nowhere .
in the Superfund legislation, either in CERCLA or the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), is there any
statement that the wasteful actions of the government and its
contractors should be visited on the PRPs.
• The United States also contends that review of the cost
of remedial activities undertaken by the government would
frustrate the second goal of Superfund, that is, the
replenishment of the fund to address other sites. This argument
is wholly specious. There is no danger of Superfund petitioning
for bankruptcy. The fund is financed by excise taxes levied upon
crude oil, petroleum products, and chemicals, as well as'
penalties coiiecte-, punitive damages, or.a gen«rc.i i^. r ~~r--^ ">---•""'*'
42 U.S.C. § 9507. Only if the unobligated balance in the fund
exceeds S3, 500,000,000. will no tax be imposed. 26 U.S.C. S 4611
et'sejg. Hence, the sources of funding are unlikely to dissipate
if the Superfund has obligated its funds as alleged.
Moreover, it is doubtful that there are "thousands of
other hazardous waste sites in the country that remain not
addressed." The National Priorities List, 40 CFR Part 300, App,
B, identifies and ranks 770 non-federal sites which have been
-------
identified for the purpose of taking remedial or removal actions.
2 U.S.C. S 9605(a). An additional 32 federal sites are listed.
The Verona Well Field is rr.'ikeci 227 on this list., and there are
16 sites in Michigan ranked higher. There is absolutely no
evidence to suggest that other sites have not been added to this
list because of this cost recovery action, nor is there any
showing that remedial actions at sites with higher priorities are
suffering due to this cost recovery action. Moreover, Michigan,
like many states, has developed its own environmental response
program, which has spent over S34 million addressing over 400
sites already. See MCL § 299.601 e_t seq. In order to provide
additional funds for the state program, Michigan voters approved
a massive $660 million bond proposal last year. See MCL
5 299.651.
Finally, the government argues that review of the
selected remedial actions and the governmental audit procedures
ere sufficient to safeguard Dfef sr.iarits' interests'. Acain, in
theory this may be true. But, where, as here, the administrative
record is not produced for review until December 1988, more than
five years after EPA became active at the site, after the close
of discovery, less than one month before the originally
anticipated trial date, and after more, that $7 mill-ion of
expenditures^, one scarcely can say that review of the record by
the court or any other entity provides Defendants with any
assurances of the reasonableness of EPA's undertakings. The
administrative record is notoriously silent on the specific costs
-------
of performing the various activities at the site. Indeed, in
support'of iti. cost recovery claims, the government provides
recci .-!•'. r -r\iry • cuchers totaling $20,203,807, of which the
United Statr. claims $22,934.57 was spent specifically for
activities ac. the Thomas Solvent site. None of these vouchers or
any other vouchers are included in the administrative record.
Defendants only have been provided with copies during discovery
in the cost recovery phase of this action. This situation is
particularly egregious because there is no evidence of control of
the site by the federal or state project managers, the onscene
coordinator, or the zone contractor.
For example, Patricia McKay assumed her responsibility
as project manager in approximately May 1984. Prior to that
time, -she only had worked on one Superfund project and, on that
project/ she simply performed some community relations duties.
See McKay deposition, November 4, 198p, pp 21-23. When asked to
describe what she was required to do as project- manager on a
Superiuni site, y.s.'-x-f.*y -a,* -ni-._ -.c-_provide an answer. ^ .
at 6, Ms. McKay stated that she had not received any instruction
in cost control or cost recovery on Superfund projects until two
days prior to her deposition. Id, at 12-14. Ms. McKay admitted
that she never compared costs for running water samples among the
various facilities. Id. at 77-78. More importantly, when asked
how she cou-ld monitor costs of a contractor when invoices were
not sent until almost nine months after the project was
initiated, Ms. McKay was only able to say that she relied upon
-------
the contractor's 'work plan," which was made for a "hypothetical
site." Id. at 83-85. In fact, Ms. McKay never reviewed the
contractors' bids prior to the time that they were accepted in.
this instance.
Q: As project manager at the Verona' Well
Field, did you review the contractors'
bids prior to the time that they were
accepted?
A: No, I did not.
Q: So, you had no —
A: The bids f^r the level of effoi
' contract I did not.
Q: Who selected these contractors for the
..Verona Weil Field then?
A: It is through our department of
management and budget, and there are a
number of staff members on a committee
and it's — a committee basically makes
• decisions of the final assignment coming
through our office or the department of
management and budget.
Q: Were you ever involved or consulted to
say, here are'six contractors -putting a
'z I "* i" on this? rrc^-~T ':~ .- i"*" ? i0***?
-_:.= iruccet that they propose?
A: I was not involved in the hiring of the
level of effort contractors.
Q: How did the people who are involved in
the hiring of the level of effort
contractors evaluate these contractors
as far as.their ability to complete the
work and stay within their proposed
budget if you knowledge as to how that
takes place?
A: Well I don't know exactly, but I know
that they consider their ability to
respond to a hypothetical problem.
-------
Id. at 85-86. More disconcerting is the fact that although Ms.
McKciv n£u tae respo .•"'••>.'• . . x-t a-.ji r.^rising initiation of .
paymcjr.. o/. approval o.. L'..^. ;. *. leer., slie simply reviewed the
•
invoice to verify that services were performed. Id. at 88.
Thus, by the project manager's own admission, there, is no
consideration as to the quality of work performed at the site and
the cost effectiveness of the work as it proceeds.
What the government proposes is directly analogous to
permitting the fox to guard the chicken coop. The government
protests that the challenges to its cost practices only can be
clone through review of the administrative record and then only
may be found to be inconsistent with the National Contingency..
Plan, if this Court finds that the remedy selected was not
arbitrary and capricious. Not only is this argument logically
flawed, but it also has no basis in fact or in law. It is
Defendants' position that even if the Superfund Amendments and
selection of the remedy to the administrative record, Defendants
are entitled to de novo review of whether the costs claimed by
the federal and state governments were inconsistent with-the
National Contingency Plan. Alternatively, if this court . .
concludes that review is limited to the administrative record,
Defendants contend that the record in this case is incomplete,
replete with errors and omissions, and therefore should be
remanded to the agency for completion and amplification.
10
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II- THE LEGISLATIVE HISTORY OF CERCLA IS SKETCHY AND UNRELIABLE
Most of the arguments contained in the government's
brief are based upon the "legislative history" of CERCLA, and it
attempts to extrapolate excerpts to apply to this situation.
Contrary to the federal government's assertions., CERCLA
is "not a model of legislative draftsmanship." Exxon Corp. v.
Hunt, 475 U.S. 355 (1986). Indeed, because Congress enacted
CERCLA in December 1980 at the er.-i of a "lame duck" session,
there is a paucity of comprehen. • '. - - ! »tive history.
CERCLA or Superfund, wdi . ._. - ' '.he
closing months of the 96th Congres ~~ a
legislative response to the growing problem
cf toxic industrial wastes, many of which,
having been disposed of before their toxic'ity
was widely known, had contaminated the land
and water resources of American towns and
cities. CERCLA was a legislative attempt to
create a coherent response to the dual
problem of emergency response to releases of
toxic chemicals into the environment, and
short- and long-term response to the presence
of toxic waste in existing dump sites, many
of which had been abandoned by any party who
could be held legally or financially
- ' - - - '-• - " • -' - - -'-.-; - ' c. x •» •; £ 7* h ci ." '"*.', 7 •; 35
it was iinaij.y enactea was tne prcauct o£ a
long and tortuous process of legislative
compromise, and is far from being a model of
statutory or syntactic clarity. (footnotes
omitted). •
Cltv cf New York v. Exxon Corp.. 633 F. Supp. 609, 613-614
(S.D.N.Y. 1986).
No fewer than three major hazardous substance response
bills* reached the Senate . for consideration in addition to the
* ' /
Carter administration's bill, which died in committee. 1
Environmental Law Institute, Superfund: A Legislative History
11
-------
xiii, (1983). Of these, one was challenged &s too comprehensive,
and the other two., ss v.(,.=- v".--.-9.k.. • A s.ihstitote Till was n-\?sed as
an amendment- to HR '/'.: . • .1 •: h orient : , ' ed , .^uud,
financed from a tax ox , .! . and c hen i:. ale an<" Crom general
revenues, to support government response to releases of haza -Jous
substances from inactive hazardous waste sites. Id . See, also,
Exxon Corp. v. Hunt. 475 U.S. 355, 365, n.8. This bill was
enacted by both houses and became effective as soon as it was
signed into law on December 11, 1980. Unfortunately, these
actions dictate that "the Committee Reports and other legislative
materials regarding CEr.CLA are duiicus sources fcr interpretation
cf- -_he statute, which in its final form reflected legislative
judgments which differed substantially from those incorporated in
the earlier House and Senate bills." City of New York v. Exxon
Corp. . 633 F. Supp at 613, n.2.
The inexactitude of the government's own analysis of
the legislative histrrv i= illustrated bv th? Supreme Court's
_vrr2 . Althouch not a artv to
the action, the United States appeared as amicus curiae, offering
the government's interpretation cf a CERCLA provision. The Court
rejected the Solicitor General's arguments, noting that the
Solicitor's explanation of the legislative history of all of the
proposed hazardous substance response bills was inaccurate. 475
U.S. at 367, n. 10. Defendants contend that the United States'
arguments in this action are similarly misplaced. Consequently,
12
-------
the reliance on legislative history so heavily argued by the
United States in its brief 'should be disregarded.
i ?J . .THF GOVERNMENT'S STATUTORY ANALYSIS IS FATALLY FLAWED
In its Brief, the government correctly states that the
Hazardous Substances Response Trust Fund (Superfund) was
established by CERCLA and reauthorized by SARA. There its
accuracy concludes.
United States asserts that Superfund was established
"to provide a prol --kir- -apital that would enable EPA to
addr expeditious!/ the nazards at problem waste sites" and
relies :pon 42 U.S.C. § 9511 in support of its assertion. This,
hcwever, is the government's characterization of the fund, for
nowhere in '§ 9511 is it stated that the fund is for "working
capital" to "expeditiously" address "problem" waste sites. In
fact, Superfund is available for remedial actions when used
"consistent with the National Contingency Plan." 42 U.S.C.
§§ 9504 (a), 9511(a)"( 1} . There is ho-requirement that the fund be
ucc- i;. «n.--i' -•-.". ;Y si~ __;;:._, without pl&.".r.^..-, •;._ i-~ waste
sites considered by someone to be a "problem." Although CERCLA
authorized the use of the fund in the event .of an emergency, that
obligation discontinues after $1,0.00,000 is obligated or six
months has elapsed from the initial response. SARA increased
this limitation to $2,000,000 and 12 months from the initial
response. 42 U.S.C.. S 9504fc)(l).
Additionally, the government contends that Congress
"sought to 'insure that those responsible for any damage,
1-3
-------
environmental harm or injury from chemical poisons bear the cost
of their actions.'" From the assertion ri.«ir. respons '.ble part;es
be held responsible for the cost ox J.. .. - .;,,-txons, ..",•' .;.-,...
States then concludes that the Attorney General is tc recovei
"a11 of the monies expended by EPA from the Superfund for si t«
investigation, studies, cleanup and the cost of enforcing the
provisions of CERCLA." Not only is this bootstrapping one's
argument, it is directly.contrary to law.
CERCLA provides that liability shall attach for all
costs of removal or remedial action incurred by the United States
Government or a State net inconsistent with the National
Cent ir7="-"'•' "Ian ("NC?") 'and any other necessary ccsts of
response incurred by any other person consistent with the
National Contingency Plan. 42 U.S.C. SS 9607(a), 9611(a.). The
fund is also authorized to be used for certain peripheral
matters, including the costs of assessing injury to natural
resources, the cost cf restoration or replacement of natural
resources, "he costs cf epidemioJ.ogj.cal or other heaitn studies
and certain other limited expenses. 42 U.S.C. S 9611(a), (c).
Both CERCLA and SARA specifically preclude use of the fund for
payment of administrative costs or expenses unless-they are
reasonably necessary for and incidental to the implementation of
the Act. 42 U.S.C. S 96ll(a).
.Consistency with the National Contingency Plan is not a
i
simple matter. The government implicitly assumes that if money
was expended from the Superfund for actions undertaken at a site
14
-------
on the National Priorities List, then ipso facto the costs were
.incurred consistent, with the National Contingency Plan.
EPA's owr. regulations, however, require more. .Although
the National Contingency Plan has evolved since the
f
implementation of Superfund, the Plan from its early inception
has required some form of cost benefit analysis.
For example, the National Contingency Plan presently
requires EPA, in cooperation with the State of Michigan, to
develop an analysis of certain data during the remedial
investigation (RI) in order to develop the "scope" or type of
resczr.se to remedy the release. 40 C.F.R. S 300.68(e). Certain
a 1 ~ err.21 ives are also rec'jired ts te developed and considered,
» *
including alternatives that meet or exceed all applicable federal
and state public health and environmental requirements, those
that do not, and a "no action" alternative. 40 C.F.R.
1$ 300.58(f). When evaluating the alternatives for'implementation
as part of the feasibility'study, one of the three broad criteria
i. t-i used ~r; i.re-ar.ir.g is the cost:
For each alternative, the cost of
implementing .the remedial action must be
considered, inclucir.g operation and
maintenance costs. An alternative that far
exceeds the costs cf other alternatives
evaluated and that does not provide
substantially greater public health or
environmental protection or technical
reliability shall usually be excluded from
consideration.
40 C.F.R. § 300.68(g)(l). .
15
-------
The other two criteria are contribution to the
protection of the public health and welfare and env; ro.u..- - , and
conformity with acceptable engineering practices. <•:„ ... .r-'.K. §
3Q0.63(g). After the alternatives are narrowed,' a more detailed
analysis is required, including "detailed cost estimation,
including operation and maintenance costs, and distribution of
costs over time." 40 C.F.R. § 300.68(h)(2)(i). The appropriate
extent of a remedy is determined to be the cost-effective
remedial alternative that effectively, mitigates and minimizes
threats £.0 and provides, adequate protection of the public health
and welfare and the environment. 40 C.F.R. 5 300.68(i){ 1 ) .
The regulations further mandate the accumulation of
documentation "to support all actions taken under this plan." 40
C.F.R. § 300.69. This includes an "adequate accounting" of
federal costs incurred. Id. EPA is authorized to make
interagenc-y—agreements and to use its existing authority to
expend funds. "The ultimate decision as to the apprcrrii:.^-.?^:
of spending funds rests with the agency that is 'held accountable
for such-expenditures." 40 C.F.R. S 300.69(d).
Requirements to maintain a detailed record of
expenditures and to hold an agency responsible therefore are
contrary to the Government's assertion that judicial review of
costs expended at a Superfund site is limited to the
administrative record. Additionally, the Government's assertion
that the debits against the fund preclude the Court from specific
review of the claimed costs is belied by the requirements of the
National Continaencv Plan that the remedv be cost-effective.
16
-------
The United States lastly asserts that because SARA
specifically states that judicial review of the adequacy of a
responsive :';tlon shall b?. -i.r.ito'." to tha record, Congress also
intended to limit judicial review cf the costs claimed in the
jT
I
implementation or enforcement of that response to the
administrative record. This assertion flies in the face of every
principle of statutory interpretation. Congress, in the
amendments, expanded significantly and specifically the section
of CERCLA relating to civil proceedings. It chose to include
provisions allowing for nationwide service of process, specific
limitations of actions, and provisions defining the need for and
extent of an administrative record "on which the President will
base..the selection.of removal actions and on which judicial
review of removal actions will be based." 42 U.S.C. S 9613(k)(2)
Neither in the provision regarding judicial review, nor in that
pertaining to the preparation of an administrative record is any
mention made of cost recovery actions brought pursuant to 42
U.S.C. § 9607. Had Congress chosen to lir.-it the review of the
costs claimed for implementation of a response, it certainly
cculd have specifically done so. 'Legislation should be left to
the legislature, and it is net the province of the judiciary to
rewrite the law. U.S..Const, art I, $1; U.S. Const, art III, §2.
See. e ,o^, Travelers' Insurance Co. v. Connecticut, 185 US 364,
371 (1902), {"The courts are not authorized to substitute their
views for those of the legislature.")
17
-------
-Moreover, it is disingenuous for the government to
assert :!ir-t review of the cost issues is limited to the
cd-' L '..rai.iv*e record where an administrative record was not
required before October 17, 1986. At that time, almost 70% of
the costs presently claimed by the United States had been paid..
Consequently, review of the costs on the limited administrative
record would be a meaningless exercise.
IV. DEFENDANTS ARE ENTITLED TO DE NOVQ REVIEW OF THE COST
ISSUES IN THIS ACTION
The United States asks this Court to believe that
review of the cost issues is circumscribed by statute and
supported by case law. Contrary to :..~9 government.' 5 asoer-L-o;.,
the legislative history is silent as to the review to be accorded
cost claims by governmental and private parties undertaking
remedial actions. As the court in Art es1an Water Company v.
Government of New Castle'County, 851 F.2d 643 {3rd Cir. 1988),
observed:
CERCLA is not a paradigm of clarity or
precision. It has been criticized frequently
for inartful drafting and numerous
ambiguities attributable to its precipitous
passage. Problems of interpretation have
arisen from the Act's use of inadequately
defined terms,
-------
Carter Administration. That bill, however,
did not. receive careful study by a committee,
and voting on tho floor was controlled by a
procedure that permittee, no amendn-ui-ts., ether
than one previo"-1^; cleared. The legic,:i a.:-.ive
history, therefor-c :- furnishes at. best a
sparse and unreliable guide to the statute's
'meaning. (citation omitted).
851 F.2d at 648. Accord, BCW Associates. Ltd.. v. Occidental
Chemical Corp.. 1988 U.S. Dist. Lexis il275 (E.D. Pa. 1988).
As discussed, supra, the government argues that because
SARA limits the judicial review of the selection of a remedy, it
c
also limits judicial review of the costs claimed by the United
States in implementing the remedy." Defendants have already
~e:r". .".31 r2~ec : :.•= fl£.ws xr. tr.is arrurr.er.t 35 this statute is also
notably silent.
The government also states that "cost-effectiveness.is
a term of art in both CERCLA and the NCP . . . [and] is not a
measure of whether items of"cost were incurred in an economic or
efficient manner." This assertion, without a scintilla of legal
support, is simply incredulous: There is no reason for.anyone to
seriously believe that Congress intended "cost-effectiveness" to
have any meaning other than the commonly understood meaning,
particularly where no care was taken by Congress to define the
term. 2 The American Heritage Dictionary, Second Col.le_qe
2CERCLA defines 32 different terms used in this statute. 42
U.S.C..S 9501. SARA provides definitions for 38 terms. 42
U.S.C. § 9601, as amended. The National Contingency Plan,
promulgated as .regulations by EPA, defines 45 terms. 40
C.F.R. § 300.6. In none of these provisions is '•cost-
effectiveness" defined.
19
-------
Edition, (1985), provides only one definition for the term "cost-
ef f «c t \ ve " :
; ' -.
-------
be nonexistent. This constitutes denial of due process^at i'ts
most basic level for, if the United States were to prevail, it
could undertake remedial actions-, at a site. o--.?yare the
"administrative record" years later, exercisa i..s discretion in
s
determining what to include in the record, incur millions of
dollars in costs, and present the bill to someone else without
any opportunity for questions to be raised at any level by the .
billed party. Any one who contracts for services is entitled to
an accounting and to obtain information regarding questionable
expenses. If tr.e expenses were ill advised, they are either
withdrawn, from the bill, or the amount to be paid is negotiated.
In this case, the government refuses to submit to this
eminently reasonable procedure. The reasons are obvious. For
example, the government does not want the public, much less this
Court, to know the indirect costs assessed against an employee's
time in some cases exceed the dollar amount paid to that employee,
For example, during the life of this project, Gerald F. Regan, a
'. *"i cl £ *- t; ** -.«*,» V N— I\ €
Verona Well Field. The government not only now seeks to recover
his payroll amount of 525.28 for that hour but also S6i of
indirect costs! £-;•_ X -'.---. ^':.L:\ rr. r :. i .-_i : - .":•:'-. i r : ~ : r . -.;--•-•-r:-•: ;-
Exhibit B. This is not an isolated instance. Another example is
provided by Jack Kratzmeyer's time, claimed to be TSRR site
specific. See McGeehin Deposition 80, appended as Exhibit C.
The federal government claims that it is entitled to $15,347.59
in payroll and.an additional $43,297.23 in indirect costs.
21
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Indirect cost claims therefore approximate 2.8 times the direct
costs! So*-- also, e.g., pay vol.I period "• cf 1986, 'where the
Uni'•.%•-: '. : ;.-s olair.-is . ." '= • v>nc '•. <-3'-Sn paid to Mr.
Kratzaio:'-ki in payroll aiic' SO" ?0 in indirect costs.
The government alsu does not want the public to
know that the indirect costs charged by the government to
Defendants (on the average, approximately 250%) are more than ten
times those to be permitted to be charged by the State of
Michigan (18.75%) and far in excess of those assessed by some of
*
their own contractors which are in and of themselves excessive.
Dekar Depositicr., April 15, 1538, p. 1 = 3.
As an illustration, CH2.M Hill billed its indirect costs
at 41% of all direct costs, including subcontractor time and
assessed an additional 121* of this total for general and
administrative expenses. The profit was calculated based on this
amount. Dekar Deposition Exhibit 5, excerpt appended hereto as
Exhibit D. Pedco applied a rate of 2?* to direct labor. The
architectural and engineering services industry, in comparison,
generally calculates indirect costs as a multiple of 1.5 to 2
times the direct costs cf rrofessier.al employees. Dekar
Deposition, April 25, i&8b, pp. 1S4-195. The engineering
industry standard ranges from 4 to 9%.
The government also does not want the ine-fficiency and
excessive waste of its contractors, resulting in costs of almost
a million dollars, to be questioned. This includes-safety
measures. . Loughney. De'water ing, which was excavating and
22
-------
backfilling contaminated soil at the site, was reported to have
a "lack of control over personnel, equipment and materials or.
site." Exhibit E. CH2M Hill, another contractor, admitted that
it had a "poor information system with .respect to subcontractors '
and that it was unable to control direct and indirect labor costs.
Exhibit F. Neither does the United States want its technical
s *
measures and associated costs publicized for to do so would
r*v-:»l that approximately $1.75 million in improper technical
measures were undertax- it -:' • Fxhibit G.
It is clear that .JLA ^-icea ,10 restrictions on the
natur~ extent of judicial review of costs. This case was
initiated before the enactment of SARA, which only defined the
extent of judicial review of the selection of .the remedy. As
argued previously, SARA'S review provisions cannot and should not
e applied retroactively. United States v. Hardage, No.
CIV-86-1401-W, 17 E-L.R. 20242, 25 E.R..C. 1343 (W.D. Okla. 1986}
' - r.r-rT.cs:. *vre-.o as Exhibit T) , reh'g den, 663 F. Supp. 1280
(1987) ("EPA cannot cite authorities which involve judicial
review after administrative decision and action has first been
taken and' thereby attempt to limit this court's power- to decide
the issues in accordance with the judicial principles of equity
.jurisdiction".) . EPA selectively advocates the retroactivity
argument, a policy of questionable ethics. For example, in this
case and others, EPA asks the Court to apply.the provisions*
4
limiting judicial review and application of prejudgment interest
retroactively. However, EPA has contended that the notice
-------
requirements and statutes of limitations set forth in CERCLA and
SARA are prospect ivr-ly.-: nr) icable or, in the alternative, do not
apply to- judicial -.- •.•••,- !•'*>•; cost i-. -.. ••sit. Sfcr. €_._£,,
United States v. Mot.jc-i • *u.- vOS F. Supp. L^S (I'.N.H. 1985).
Nonetheless, as indicated earlier, de novo judicial
review of the cost issues is not precluded by either CERCLA or •
SARA. Even assuming, as the government argues, that SARA's
provision on judicial review is retroactive, the statute clearly
allows this Court to review the costs: • • .
In 'any judicial action under this chapter,
judicial review of any issues concerning the
adequacy of any response action taken or
ordered by the President shall be limited to
the administrative record. Otherwise
applicable principles of administrative law
shall govern whether any supplemental
materials may be considered by the court.
42 U.S.C. § 9613(j)(l). This statute, in fact, anticipates that
there will be challenges to the cost of implementation of the
remedy:
I rv T'0*.*i?v 1 **;^7 aileced Tr**T-'~r"^vir"2l er*"""""; > tr.e
.court may disallow costs or damages only if
the errors were so serious and related to
matters of such central relevance to the
action that the action would have been
significantly changed had such errors not
been made.
42 U.S.C. S 96L3(j)(4). This has been substantiated by the
decision in United States v. Rohm & Haas Co.. Inc., 669 F. Supp.
672 (D.N.J. 1987). Therein, the court concluded that while the
selection of the"remedy was limited to the administrative record,
24
-------
defendants'were .entitled to de. novo review of the cost issues.
Id. at 675-676.
Applicable principles of administrative law'allow
judicial review of an agency action except where statutes
/ ' . • .
preclude judicial review or agency action is committed to agency
discretion by law. 5 U.S.C. S 701(a). In this case, the only
action committed to agency discretion is the s_election of the
remedy. Where the .-rp.lv cr principal dispute relates to the
meaning of a statu —. e controversy presents issues on
which courts, and nc. -raters, are relatively more expert.
Bar low v. Collins. 397 U.o. 159 (1970)., citing with approval
Hard in v. Kentucky Utilities Co., 390 U.S. 1, 1-. (1969) (Harlan,
J., dissenting). Preclusion of judicial review of administrative
action is not lightly inferred. Barlow v. Collins. 397 U.S. at
, 166. Judicial review of administrative action is the rule, and
III
^^non-reviewability the exception that must be demonstrated. Id. ;
Abbott Laboratories v. Gardner, 387 U.S. 136 (1967).
The United States argues against permitting such
challenges, claiming that if a court were to allow PRPs to
challenge the ccst of the response, it would open the floodgates
of litigation. The government complains that the cleanup of
hazardous waste sites would be delayed by cost recovery
examinations such as sought here. Suffice ite to say that this
argument is frequently raised by governmental agencies whose
actions are challenged. As the court in Abbott Laboratories
observed, "(t]he short answer to this contention is that the -
25
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courts are well' equipped to deal with such eventualities." 387
U.S. at 154-155.3
The United States is also - • ..-i.--i.aken ••'•.-..:•• '-.
contends "that case law supports its esteci^ori that alj cost.---
regardless of how wisely spent, are recoverable from alleged FRPs.
Contrary to the United States' assertj.cn, this is basically a .
ca-se of first impression. Essentially, only five cases have
addressed any of the issues that have been raised by the
Defendants regarding the government's claimed costs. United
.States v. South Carolina Recycling & Disposal Inc. ("SCRDI"). 653
F. Supp. 984 (D.S.C. 1984); United States v. Northeastern
Pharmaceutical & Chemical Co.. Inc. ("NEPACCO"1. 579 F. Supp. 823
(W.D. Mo. 1964), af£'d 810 F.2d 725 (8th Cir. 1986); United
States v. Northerr.aire Plating Co.. 685 F. Supp. 1410 (W.D. Mich.
1988), appeal docketed sub nom. United States v. R.W. Meyer. No.
88-2074 fSth Cir. November 1., 1988); United States v. Ottati &
r:.->c-<; ( coj p. pur-. C~'"J 'D.N.H. 1999; Urited Statp«= v. y^nsarrt^
Co., 858 F.2d 160 (4th Cir. 1988).
In only one of these cases have the defendants
challenged the governments ' --.-rr.izici ace cunt, in-- ci response costs
*
3lt is noteworthy that the government in Abbott Laboratories was
advocating precisely the same type of issue that the government
raises in this case. "The Government relies on no explicit
statutory authority for its argument that pre-enforcement review
is unavailable, but insists instead that because the statute
includes a specific procedure for such review of certain
enumerated kinds of regulations, not encompassing those of the
kind involved here, other types were necessarily meant to be
excluded from any pre-enforcement review." 387 U.S. at 141-. The
Supreme Court rejected this argument.
-------
as the Thonas Defendants in this action do. The issues in SCRDI
£;-id' Monsan'.'-P soleJy address the award of prejudgment interest.
sCHOI. 653 F. Supp.-at K"'9; 'Monsanto. 858 F.2d at 175-176.
The court in Northern_a_i..re Plating found that Defendants
did not produce any evidence in most cases .to suggest that there
were more cost-effective alternatives available. Where such
evidence was produced regarding a title search, the court denied
the government's summary judgment motion. Northernaire Plating,
685 F. Supp. at 1416-1417.. This supports Defendants' argument
th'i 2 deta:. =d review is necessary and justified. Judge Hillman
al'5?- s^cressed the reccverv cf. indirect costs ar.d trre^udTment
' interest in the Northernaire Plating case but purely on legal
grounds. Id. at 1418-1421. Defendants in this case challenge
not only the legal' basis for the recovery of those costs but also
the methods of calculation and reasonableness of those costs,
particularly with respect to indirect costs.
" In the Nll-r.-,-.1 - -iZi'i »or.-, tne appfe-i
-------
costs by the government and that the sweeping language of the
opinions is dicta to the decision that .defendants bear the burden
of proving that the costs incurred were inconsistent • ' ' :•'-,,» NCP.
At the time of the District Court's decision in NEPACCO. the
*
government had failed to submit an itemization of the costs
incurred, and Defendants were allowed only 20 days to object to
*•
the costs.
Finally, in Qttati & Gos.s, the court examined the
individual cleanup costs claimed by the government. While most
of the Court's opinion was dedicated to the attribution of costs.
«
among the defendants, many costs were challenged by the
aeier.aa.-ts anci disallowed. For exa.ir.ple, the ccurt. disa-liDwed
approximately $2,000 paid by EPA to GCA for the services of
expert hydrogeologists and toxicologists, 694 F. Supp. at 989,
and reduced the E&E costs chargeable to both defendants by more
than $88,000. Id. at 990-992. Other specific costs were
decreased, including EPA payroll at the regional level. The
c~'-ir~ further disallowed the r^ccv&rv of indirect ccs^s ciii
prejudgrnent interest. Id. at 998.
These five cases also are instructive because the
vigor with which the defendants contested the costs appears . "
directly related to the- size of the claim. Defendants in
Northernairs Plating were presented with a bill totaling
$330,433, inclusive of prejudgment interest and attorney fees and
costs. In Monsanto, the government .claimed costs of $1,800,000.
T;he government in Ottati & Goss claimed costs in excess of
23.
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S5.8 million exclusive of prejudgment interest, state costs and
future costs. The court's review decreased r.his amount by
approxima-'-.l.y V, . 5 million. Altaaixrh review cf the claimed costs
may be more time-consuming, it is required by law and justified
as the gsverr-T.ent accrues increasingly larger bills. In this
case, these Defendants challenge about 50 percent of the
government's claimed costs. See Dekar Exhibit 17, appended
hereto ar "xhibit G.=-.
The issue of proof of.costs is not unique to government
cost recovery issues. For example, in City of New York v. Exxon
CHIT.- ' -u ~ r_- > New' Vcrk City sought, recovery of costs incurred in
the removal of hazardous waste from the landfills, declaratory
relief for future costs and damages for injury caused-to natural
resources allegedly affected by toxic wastes by the landfills.
The Court observed that:
(T]he city must demonstrate that its present
and future cost of responses are "necessary,"
ar.d are "consistent with the National.
." ~.~ntir.r-'. :••/ Flan." But this is r.rt e, r?=ttrr
or pleaaing; it is a matter of proof. As
other courts construing this provision have
observed, consistency with the NCP is not a
matter which can be resolved on a motion to
dismiss; 11 is a question of fact to be
cetermnea at a trial u^on-the merits.
(footnote.omitted) (emphasis added).
633 F. Supp. at 616, referencing Dedham Water Co. v. Cumberland
Farms Dairy. 5-88 Fr Supp. 515, 517-518 (D. Mass. 1983); City cf
Philadelphia v. Stepan Chemical Co.. 544 F. Supp. 1135, 1144 & n.
16 (E.D. Pa. 19.82). Although the statute provides that the
federal and state governments may recover all costs incurred not
29
-------
inconsistent with the National Contingency Plan while others may
rec-'V . those consistent with the National Contingency Plan, this
,*
is - "distinction without a difference," and the requirements of
factual proof remain. 633 F. Supp. at 616.
In a recent amicus brief filed before the United States
Court of Appeals for the First Circuit, the government has
asserted a position directly contrary to that advanced here.
United States' Amicus Curiae Brief, O'Neil v. Picillo, 682 F.
Supp. 706 (D.R.I. 1988), Appeal No. 88-1551, {1st Cir. argued
Feb. 21, 1989), appended hereto as Exhibit H. In that case,
Rhode island brought a' CERCLA cost recovery action concerning the
Picilio site against Picillo, Rohm & Haas and America Cyanamid
Company. Although EPA also had expended cost recovery money at
the site, the federal government successfully opposed the
' -
Defendants' motion to compel their joinder. Nonetheless, the
:--. -ril g--.--=rr-•:.'- deemed it appropriate to argue on behalf of
C
the State in the appeal.
As an amicus, the United States advised the Court:
CEP.CLA itself prescribes the remedy for
erroneous actions. Section 107(a)(4)(A}, 42
U.S.C. S 9607(a)(4){A), allows the federal or
state government to recover sums expended
"net inconsistent with the national
contingency plan." Thus, the Congressional
remedy for what defendants can demonstrate to
be erroneous or mistaken response actions is
to deny recovery of the specific ctfsts
involved, and not to close the courthouse
door to the government's cost recovery action.
* * * ' .
In order to demonstrate that costs are
inconsistent with the NCP, the appellant
companies must show more than the State took
•30
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actions that can be deemed inconsistent with
the plan. They must demonstrate the" State's
inconsistent ac*_i--n \-iz an effect, .on the
costs sought to h2 recovered. When the
alleged incon&if-t .-.-.• is an erroneous
decision on what should to be done to re;jj:ond
to a site, i.e. ren.edy selection, this
demonstration is si.mple;and prescribed, by the
Act itself. Section" 113( j ), 42 U.S.C.
§ 9613(3), requires a court to uphold a
decision selecting a response action unless
it is demonstrated to be "arbitrary and
capricic'j- or otherwise not in accordance
with law.' 42 U.S.C. 9613fj)(2). . . .
Thus, if the government performs the .wrong
response action, such as building a slurry
wail tr contain the waste, rather than
removing the barrels, the additional costs
incurred in taking the erroneous action is
not recoverable under the act.
The appellant companies in the present case,
however, are not claiming tr.at the excavation
of .the drums in Phase I was an improper
response action in selection; instead they
assert that there were mistakes in execution
of that response action. In these
circumstances, the .companies have to
demonstrate the connection between the
alleged errors and the costs to be disallowed
For example, if a cleanup contractcr used
clearly defective overpacks that had .to be -
replaced, the costs of the defective
.
TMs is because additional, unnecessary cos.ts
were incurred by the clearly erroneous
implementation of the response action.
?.. at 1'214-1215.
It therefore is clear that the government has conceded,
contrary to its position in this case, that Defendants must show
inconsistency with the National Contingency Plan through a
factual exploration of the costs incurred and their relevance to
the implementation of the remedy selec'ted by EPA.
31
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ASSUMING, ARGUENDO. THAT JUDICIAL REVIEW IS LIMITED TO
THE ADhlK I STRATI VE RECORD. THIS ADMINISTRATIVE RECORD
i? -IMLLlll '-CIENT FOR APPROPRIATE REVIEW BY THE COURT
V .
:. r'tinc; ::-• the government , the National Contingency
Plan has prs-.c, ibed a three-step administrative process for
i
selecting a remedy for a site on the National Priorities List.
This administrative process includes the completion. of the
remedial investigation and feasibility, study, public notice, and
selection of a remedy. Indeed, the completed remedial
investigation and feasibility study must be made available to the
potentially responsible parties for comment and, prior to
selection of the remedy, EPA must evaluate the comments and
submissions from the potentially responsible parties and then
issue a decision based upon a written record which. includes the
completed remedial investigation/ feasibility study, EPA reports
and data, submissions from potentially responsible parties and
the public, EPA's response to such comments, and other relevant
material. See 42 U.S.C. § 96 13 ( k) ( 2 ) .. Not only has the remedial
investigation ana feasibility stuay not Deer» completed but also
information necessary to the evaluation of the costs and cost-
effectiveness of this project has not been included in the
administrative record.
A. Summary of Remedial Activities
As this Court is aware, the Calhoun County Health
Department discovered during routine testing in August 1981 that
a few of the wells in the Verona Well Field contained. volatile
organic compounds. In September of 1981, the Bureau of
32
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Environmental' and Occupational Health, Michigan Department of
Natural Resources (MDNR), transmitted the results of analyses for
volatile halogenated hydrocarbons from the vn.ijs and, aithcuuu . :•
increased number of cancer deaths later was calculated on data
collected in September, the risk was felt to be greatly reduced
or eliminated due to a change in pumping patterns. Exhibit I.
On December 3, 1981, Kellogg Company was advised that four of its
five wells were ' :nd tc rontain trie*1 -roethene (TCE), which was
unrelated to the contamination disc:; •. at the Verona Well
Field. (AR, IRM, pp. 163-164 }.4 Keli. immediately changed
its water supply to city water with the knowledge and implicit ,
•consent of not cniy the City of Battle Creek, but also the •
Calhoun County Health Department and MDNR. (AR, IRM, Vol. 1, pp.
150-151, 196-197, 201-202). Later that winter, General Foods and
alston Purina were added as users of the city water supply.
AR, IRM, Vol. 1, pp. 150-151; Vol. 2, p. 523). No apparent -.
consideration was given to the effect that these large users
mi-g.it r.cfve cr. the spread cf ccntirr.ination through the we.l iielr,
even though MDNR was concurrently applying for technical
assistance frcn the Surer fund rrcgrarr. to address the well field
contamination.
Assistance was not requested from the Technical
Assistance Team (TAT) until January 1982. (AR, IRM, Vol. 1, p.
•^Citations are to the Administrative Record, Initial Remedial
Measure (AR, IRK) and to the Administrative Record, Thomas
Solvent Operable Unit (AR, TSOU), filed by the.United States on
or about December 5, 1988.
33
-------
4). On March 29, 1982, FcoJogy & Envi; ufMisnt (E&E) completed a
groun.c.wc:'. r-T nrudy to •i.depti.fv .Vot.enr . '•• #.:• i.-^u.cces of contamination.
Id. : = .. ' ;.; the stuov. :,.> .-.r.ii .-..j.in v.'.re drilled, and
water samples were collected. Id. in a two page report, E&E
recommended further sampling uf the groundwater, sampling of
surface water, and sediments at Grand Trunk Western Railroad,
modeling to determine the ground water movement, and evaluation
of different methods of treatment to determine that which was
most cost-effective. Id. This report was completed at a cos't of
$46,369.09. See Pretrial Order, p. 391, TAT Contract costs
Contamination continued to spread throughout the well
field throughout the summer of 1982, but MDPH felt there was no
need to change the pumping patterns since plant tap samples
showed no presence of chemicals. Exhibit J. Even so, EPA
identified the Verona Well Field on its interim national
r-icrities list. (AR, !?_"., Vrl. 1, p. 522;.
On August 20, 1982, EPA Region V Administrator Valdus
A-iarr.k'js gave ThcT.as Solvent . Ccmpar.y 21 days to decide if it would
voluntarily undertake unspecified work to abate unspecified
contamination. {AR, TSOU, Vol. 2, pp. 319-320). If Defendants
did net respond within the required time, EPA indicated its
intent to ."initiate a full field investigation" including, but
not limited 'to, hydrogeological study, feasibility study, and
initial remedial action. Id.
34
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Thomas Solvent Company did not respond to EPA'-s demands.
Consequently, EPA issued a work assignment to CH2M Hill, Its zone
contractor, to prepare a Remedial Action Master Plan (RAMP), V-he
RAMP, also prepared in conjunction with E&E, was intended to be a
plan for undertaking remedial investigation and actions in '
response to a hazardous substance release. CH2M Hill defined the
purpose of the document as development of a scope of work for
practical remedial investiaation activities and feasibility
studies, as well *T*vltud^ -nions of cost for each
proposed activity cr. ac-.on. v. 2, p. 510). The
cost estimates are expected to be accurate within plus.50 percent
and minus 30 percent of the actual cost. (AR, IRM, Vol. 2, p.
516).
The RAMP stopped short of recommending specific
remedial actions because of the lack of information necessary to
conduct a feasibility-.s.tudy. (AR, IRM, Vol. 2, pp. 551-552, 568),
Hcwever, it estimated that a bettied water orcgram, as an interim
remedial measure, would cost $33,400. {AR, IRM, Vol. 2, p.' 550).
The remedial investigation was estimated at $524,000, and within
this budget, the ccst of drilling more monitoring wells (in
ad'dition to the 36 drilled by TAT and USGS) was proposed, as well
as more sampling costs. (AR, IRM, Vol. 2, pp. 552-569). A
feasibility study was estimated to cost up tc* $215,880. (AR,
IRM, Vol. 2, p. 580). These costs were not predicated on any
data contained in the report, such as sampling costs, drilling
costs, actual survey costs or epidemiological studies that had
35
-------
been completed elsewhere. They were not even "educated guesses,"
for the government is r,c"~- claiming $r07 ,713 . S'j for the remedial
investigation and. £•'"'; ""i:, •,...< for t! • •. ; •' " .'.ty s; uc
-------
On October 21, 1983, CH2M Hill submitted the final work"
plan for the rrr-nedial investigation, feasibility study, • community •
r?'-tionr vcrk plan, and interim treatment facility design. (AR,
TSOU, Vol. 3, p. 672-742). The .remedial investigation was
projected to cost 5517,325.89 and the feasibility study
$100,301.16. (AR, TSOU, Vol., 3, p. 704). Again, these numbers
are sic-• ficantly inaccurate when compared, to the government's
present *• i.*n.
-.hough ot ^ceived the focused feasibility study
resul^ ,er, it wai. - ntil April 2-4, 1984 that Thomas
Solvent wds advised by P. Jalbert, EPA Region V Assistant -
Counsel, that a remedia. .estigation 'and feasibility study had
been undertaken and that "based on preliminary data." an interim
remedial measure consisting of new water supply wells.and .
construction of a barrier system would be initiated in May of
19-84. (AR, IRM, Vol. 4, p. 1040-1041). Thomas Solvent was given
until close of business April 27, 1984, less than three days, to
decide if it wanted to undertake the $3.5 million project! Id.
On April.25, 1984, an action memo requesting an
exempticr. to the six mcr.th time requirement of 42 U.S.C 5 104
-------
continued to pump, and an additional 10 veils had less than 5 ppb
of total organic compounds, well within .,.•• .^-.ceptable ranae.
(AR, IRM, Vol. 4, p. 1035).
The exemption was granted, £.r..^ o>. hay 1, 19it?, only a
week after Thomas Solvent.was notified of the proposed interim
remedial measure, EPA decided to implement the measure increasing
the well field capacity to 6 million gallons per day,
installation of barrier wells, air'strippers, and a carbon
adsorption system at a cost projected at $7.3 million. (AR, IRM,
Vol. 4, pp. 1051-1052). At the time, then, that.this decision
was reached, the well field's contamination had been known for .
almost three years. The precipitous action by EPA was due to the
increased demand created by General Foods, Ralston Purina and
Kellogg Company, combined with meteorological projections for a
dry summer. See, April 13, 1982 letter from Richard Wirsing to
the City of Battle Creek, appended as Exhibit K and
Administrative Record, Initial Remedial Measure, Vol. 4 , • r*p .
1024-1028, 1051-1052, 1060.
<•
Numerous revisions to the remedial investigation/
feasibility study followed and, predictably, they all requested
increases. In fact, the July 3, 1984 work plan revision for the
feasibility study requested total increases of 133 percent over
the original and "final" work plan and budget. (AR, TSOU, Vol.
3, pp. 966-967, 972-973). In none of these documents is there
any documentation of the work completed to date, the invoiced
amount, the cost of sampling, the cost of drilling, daily field
38
-------
logs, or any other information to assure anyone reviewing the
T;ccrd that, the proposed work was progressing in a reasonable,
-ost-effect.;.y.fe ^ iii,-..,i»;--r. 5-rc-. e.g., AR, TSOU, Vol. 3, pp. 951-975).
.n fact, the remedial investigation/feasibility studies and their
revisions, and the records of decision all support the
Defendants' assertion that EPA was making "knee-jerk" decisions
with incomplete, inaccurate and misleading information. Although
the above-recited history is contained in the administrative
record rPA clearly has-failed to undertake any administrative.
ac ' isonably calculated to yield'an administrative record
that .-es any confidence in EPA's actions and decisions,
especially with respect to the ccsts cf the activities undertaken
or endorsed by the agency.
Thus, although EPA received mul-tiple page documents and
developed records of decision, its determination is flawed in
more than one respect. Initially, Defendants did not have an
adeauate opportunity to review the proposals by EPA and evaluate
thear alternatives and the selection of the alternatives.
Feasibility studies that outline alternative remedial measures
must be provided to the public for review and comment -for a
period of not less than 21 calendar days. 40 C.F.R. 300.67(d).
Such review and comment shall* precede selection of the remedial
response. Id. ' In this case, Thomas Solvent had only two days to
three weeks to review CH2M Hill's proposals and agree to
undertake or reject the proposed activity. Thus, by virtue of
the fact that EPA delayed any action whatsoever for two years,
39
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and the City of Battle Creek refused to restrict access tc a
known contaminated well field., Defendants found thenseiver .
without the opportunity to propose reasonable, and. p . .. i;s«
costly, alternatives to EPA's proposed remedial actions, which
would still be within the confines of the National Contingency
Plan.
Second, even had Defendants been able to timely review
the proposals put forth by EPA, no procedure had been established
to allow for input into the decision-making process prior to
1986, when the Superfund amendments were enacted. In fact, this
option was never even provided in any of the demands made upon
Thomas Solvent by EPA. Indeed, as discussed supra, there was no
requirement that an administrative record be developed until 1986
with the enactment of the amendments. Even at the present time,
SARA's procedures for public comment and review have not been
implemented as required.
3. The Adnini s t ra t ive Record is I p. s u f f icient
».". li'~ Yfe^Ti^S r CI 1 ; ^ 3 ^.T vi Lr.itSd i^^i^SS Z^irCCUC-rZ -.vlc
records of decision for implementation of the 'bottled water
program, new wells, and the implementation of the barrier well
system which they contend should be reviewed by the Court in
ascertaining whether the costs incurred in executing such
measures were consistent,with the National Contingency Plan.
However, these actions are not supported by the administrative
record, and any limitation of the Court's review of the remedial
activities and the costs incurred in their execution to date
40
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•without fur-iVvr ; r.: - r:\ - _icr. ----»:^ 'r-. irrrrrr--:-; ?"•- -r rr.r -;. r-:tr -.
denial of due* prncess.
-It '.-« Defendant's. po>.v:.',-!- .chat -O..t documents
available, or arguably available, to the agency should be a
portion of the administrative record and should be subject to the
judicial review suggested by Plaintiffs in this case. Calvert
Cliffs' Coordinating Committee, Inc. v. United States Atomic
Energy Commission. 449 F.2d 1109 (D.C. Cir. 1971). By analogy to
an envir-. :-• impact statement, required under the National
*
Environment.- Policy Act of 1969 ("NEPA"), 42 U.S.C. S 4321 et
seq., the record need not be exhaustive but it must contain
sufficient information to permit a reasonable choice of
alternatives. Natural Resources Defense Counsel. Inc. v. Morton,
458 F. 2d 827, 836 {D.C. Cir. 1972). An environmental impact
tatement must be "succinct and examine all reasonable and'
feasible ..alternatives, and provide enough information to make a
balanced, well reasoned decision as to the proposed project."
considerations are required.
"Environmental amenities" will often-be in
conflict with "economic and technical
considerations." To "consider" the former
"along with" the latter must involve a
balancing process. In some instances
environmental costs may outweigh economic and
technical benefits and in other instances
they may not. But NEPA mandates a finely
tuned and "systematic" balancing analysis.in
each instance. (footnote omitted).
To ensure that the balancing analysis is.
carried out .and given full effect, Section
41
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102(2).(C) requires .that responsible officials
of all agencies prepare a "detailed
statement" (the purpose of which] . . . is to
aid in the agencies-' own decision making
rrecess and to advise other interested
agencies and the public of the environmental
consequences of planned federal action. . . .
Only in that fashion is it likely that the
most, intelligent, optimally beneficial
decision will ultimately be made. . . . NEPA
provides evidence that the mandated decision
making process has in fact taken place and,
most importantly, allows those removed from
the initial process to evaluate and balance
the factors on their own.
Calvert Cliffs' Coordinating Committee v. AEC, 449 F.2d at
1113-1114.
Even so, the review of the administrative record, as
suggested by plaintiffs, is not restricted to the four corners of
the administrative record. the court must review the entire
administrative record, including the external documents .
incorporated by reference into, the final document. Id. Indeed,
in applying the standards suggested by plaintiffs in an action
brought pursuant to NEPA, the court in National Cer.ter for
Preservation Law v. Lancrieu. 4.56 f. Su^p. 716, 724 (D.S.C.
1980), a f f ' d 635 F.2d 324 (4thiCir. 1980), defined the materials
necessary for review as follows:
The Fourth Circuit in Fayetteville Area
Chamber of Commerce v. VcIpe, 515 F.2d 1021
(4th Cir. 1975), stated that the focal point
for judicial review should be the
Administrative Record already in existence
and not some new record made initially in the
reviewing court. Id. at 1024, citing Camp v.
Pitts. 411 U.S. 138, 93 S. Ct. 1241, 36 L.
Ed. 2d 106 ( 1973) .
* * • *
42
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In the case of As.arc_s., Inc. v. EPA, 616 F.2d
v. 1153 (9.th Cir. L9GO), the Ninth CJ rcuit Court
of Appeals d.i..cCv.->-:s«d in detail ccn.'iidfrr-cion
of evidence oui.v;.•*> of the Adminictv.;:-j.-<
Record. in that case, the court ro:.ed thc.t
if .an Administrative Record does not contain
a satisfactory explanation of the federal
agency's action, the court may require
through affidavit or live testimony further
explanations from the agencies involved.
Accord, Crosby v. .Young, supra at 1371-1372.
The administrative record in this case does not include
c
any material necessary to evaluate the claimed costs. The only
cost information in the administrative record is the cost
estimate within the RAX? and the Interim Remedial Measure and
Focused Feasibility Studies. These estimates are
"order-of-magnitude;1 .cost estimates and are expected only to be
accurate within plus 50 percent and minus 30 percent of the
lactual cost. Hence, they are not very realistic and do not even
provide a good "ballpark" figure. -For example, the initial •
re~vii-.l - •=: = i •_ - -i • ~_-...T.3tei in the :_:.__ •-•:. r.'. rlir. *.c erst
5517,325.89. Verona Well Field Administrative Record, Initial
Remedial Measure, Volume 3, p 702. The federal government seeks
compensation fcr e.ctual costs expended cf 52 , 042,194 . £0 fc-r the
Interim Remedial Measure. See Pretrial Order, p 391-392. Thus,
the government exceeded its budget by 395%, not the 50% factored
originally. Defendants therefore contend that judicial review of
the "administrative record" is inappropriate and that this case
should be remanded under the standard proposed by plaintiffs.
43
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MVTTErtS 0.!' DISCRETION
•: r th- purposes of argument, one assumes that this
Court is limitvd in its determination of whether the costs
claimed, by the United States were incurred not inconsistent with
the National Contingency Plan, then such a review is limited to
those matters where an agency is exercising its discretion.
Review of an agency's action under the Administrative. Procedures
Act arguably may encompass every form of agency action or
inaction other than rulemaking. See, e.g., FTC v. StandardOil,
449 U.S. 232, 238, n. 7 (1980).
However, it would be incongruous to apply any notion of
judicial review limited to an administrative record to
ministerial, day-to-day decisions made by an agency's contractors
in the implementation of remedial actions undertaken at a site.
Thus, day-to-day ministerial steps are not themselves "agency
actions' for the purpose of review, if for no other reason that
they are not made "on'the record." United States v. Thompson.
concedes as much in a brief submitted in the Love Canal Superfund
litigation where the judicia^ review of federal response actions
at Love Canal was in dispute. As the government stated:
For example, the 1980 decision to relocate ,
additional Love Canal residents was an agency
action, and review must therefore be limited
to the administrative record. • However, the
mechanics of the .relocation plan, such as
day-to-day implementation and purchasing
decisions, are subject to de novo review. It
44
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is therefore open to [defendant] to pursue
discovery of such details of the relocation
process if it believes that would be fruitful.
For example, if [defendant] could show that
two motels were of equal quality anc equally
available for temporary shelter under the
circmstances [sic], and that the government
chose the more expensive of the two for no
reason, the incremental cost might be shown
.to be inconsistent with the NCP [National
Contingency Plan). The rationality of the
underlying relocation decision itself,
however, is 2 natter to be determined from
the administrative record alone.
United States' Supplemental .Reply Memorandum in Opposition to
Occidental Chemical Corporation's Motion to Compel Production of
Documents withheld by New York on the Basis of Deliberate
Privilege at 3, n.4, United States v. Occidental Chemical Corp..
No. 79-990 (JTC) (W.D.N.Y. memorandum filed December 20, 1985),
copy appended hereto as Exhibit L.
It is precisely these types of day-to-day decisions
Jffcthat Defendants challenge in the bill for costs presented by the
United States and the State of Michigan and the type of review '
is inconsistent for the government to argue that such review is
appropriate in one case and not in another.
Thus, even if one assumes that the ad.Tir.is*:rative
record before the Court is adequate and that the Court's review
of the agency's actions are limited to the administrative record,
in this case, the selection of the remedy may be reviewed upon
the record. However, the implementation of the remedy is subject
to de novo review and requires this Court to hear all evidence
45
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incurred in -he execution of
'•the NrV . ' Contingei
remedy ar«* inconsistent with
VII. FCDERJ t CONTRACTING AND P ^OCURTMENT REGULATIONS
ARE INSUFFICIENT TO ASSU H a A PROMPT. AD EQUATE AMD
COST-EFFECTIVE RESPONSE
The federal government lastly contends that Defendants
are assured that no excessive or abusive costs were incurred
because "the complex network of federal procurement/contracting
statutes and regulations closely regulates an agency's right to
expend resources from the public fisc." United States' Brief at
34. This bald assertion provides little consolation' to
Defendants, for the same regulations that govern expenditures of-
Superfund money also govern the Department of Defense. 48 C. F.R.
1501.000-1501.103.5 in truth, it is precisely because the
federal procurement/contracting statutes are so complex that a
coffeemaker is ordered and delivered for $7,600 and the Stealth
bomber, at a cost in excess of S500 million per plane, is
'".::•= Fevers.. Acquisition r.scuiatirr.s comprise seven volumes.
Those contained in Chapter I are government-wide acquisition
regulations jointly issued by the General Services
Administration, the Department of Defense, and the National
Aeronautics and Space Administration. The remaining chapters are
acquisition regulations issued by individual agencies. EPA's
regulations are contained in Chapter 15. Parts 150! through 1553
in Chapter 15 implement the general Federal Acquisition
"Regulations in Chapter 1. No supplemental regulations have been
issued by EPA.
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and their enforcement permit similar abuses to expenditures of
Superfund money, albeit on a somewhat smaller scale.
The government claims that it entered into a
"nationwide system"'of "large multi-site contracts" to enable the
contractors to allegedly "develop the expertise" necessary to
meet the goals of '.CERCLA. United States' Brief at 35, The
government then coi. -"t it incurred costs under 20
different contracts, incl1 . remedial and national
support contracts. T.v.-r .--:.=., ine* unite'-- States recites
regulations presumably in place to assure that the contracts are
managed in a cost-effective fashion. However, it is obvious that
r^g_ -i^io;.; dzi worthies without enforcement, arid the evidence
at trial will establish that EPA's contracts themselves are not
cost-effective and that the agency has failed'to use regulations
in place to ensure that the agency.is receiving a good return on-
I-
its monev.
^It is a-certainty that the United States will argue that each
site, due to the differences in geology-and alleged contaminants,
requires a unique approach resulting in increased ccsts. Such an
argument, in .fact, was raised by Air Force Systems Command
Lawrence Skantze in the defense of his coffeemaker, when he
asserted that the appliance was capable of withstanding 40 times
the force of gravity. The audacity of this justification was
noted by a journalist who observed, "If the $7,600 pot ever
endures 40 g's it will be useful mainly for brewing crash
investigators a hot cup of Java as they scrape the remains of the
rest of the airplane off the ground. Easterbrook, Sack
Weinberger, Bankrupt General Dynamics andiOther Procurement
Reforms, 18 Washington Monthly 33 (1987).
-------
through the -services of four engineering firms holding fivo large
cost-plus-award-fee =-c •' ••. total!:.c -. --tely -$0''! million
These were awarded bef*'.?s*s? 982 and 19fc5. Four of these
contracts are "zone" contracts covering either the eastern part
of the country (EPA Regions I-IV) or the western {EPA Regions
V-X). An additional nationwide contract in the approximate
amount of $167 million was awarded to accommodate program growth
and alleviate work capacity problems. The two initial
*
REM/FIT7 contracts were bid competitively. In this case, CH2M
Hill was awarded the Zone II contract covering Region V. The
other contracts were classified as contracts for architectural
and engineering services, and, pursuant to the federal
acquisition regulations, these contracts were not competitively
bid but were let on the basis of professional credentials and
abilities. Again, the REM IV contract was awarded to CH2M Hill
for Zone II.
' The REM contracts are cost-plus-award-fee contracts
which provide for reimbursement of all allowable costs incurred
plus a base fee plus an award fee. These contracts are
appropriate only when the uncertainties involved in contract
performance do not permit ccsts to be estimated with sufficient
certainty to allow any fixed price contract. 48 C.F.R.
1516.404-272, 1516.404-273. The base fee is intended to
'Remedial Engineering Management/Field Investigation Teams.
48
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compensate a contractor for the risk assumed in the contract and,
is three percent, of the estimated cost of the contract, including
:o-f. ntrac- or coa^s.- 48 C.F.R. 1516.404-272 and 1516.404-274.
The award fee is intended to be based on the contractor's
performance, and its purpose is to "motivate performance
throughout the life of the contract where success breeds ,
additional income." 48 C.F.Ri 1516.404-272. In this instance, .
the award ae for Cr'M Hill is a percentage of the sum of 7% of
the dir" *bor, ov -U3ad, travel, ODC and G&A costs plus 2%- of
ail sub- cractor'costs. Dekar Exhibit 4, appended as Exhibit M.
The percentage is determined periodically by the EPA's
Peri'.r~ar.ce Evaluation Board.
When EPA is ready to conduct a remedial study at a
specific Superfund'site, it prepares a work assignment for the
REM contractor, specifying the level of effort needed and
providing a general statement of the work to be performed. The
contractor reviews the work assignment and provides a more
precise eatililcite Ol'Li
necessary and funds needed, after which the funds are obligated.
from "the general REM contract. Once the work plan has been
reviewed and approved by the project and contracting officers,
revisions can only be made with the approval of .these
individuals. .
Thus, in theory, the procurement and contracting
regulations should provide incentives for cost control while
prclessicndi anc. tfccr.riicc, 1
49
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neither of these .occur.
The concept of zone conti
-------
me same principles appiy co auperiuiiu contracts.aee."
' , EPA Response Action; Contracting and Cost RecoverY Under
r.CJLA, 4 T.:...f-,.:;. ,;>-.vC (Ju.lv 25, l?89) (copy appended as Exhibit
. CH2M Hill '.'as av;arded the zone contract covering the Verona
Well Field, with a .O'cal contract price of approximately S426
million from September of 1982 through September of 1990. As
such, CH2M Hill has little or no incentive to control costs,
schedules and increase quality controls in this eight-year time
peri
Where it becomes necessary to modify the study scope,
schedule or budget during a work assignment, the federal
regulations allow EPA to exercise control over contractor
requests for work as.sigr.ment changes by scrutinizing the requests
and negotiating possible reductions with the contractor or by
terminating a work assignment. These are, however, hollow
where no competitor is available to complete the project.
As important is the fact that EPA simply does not
review a proposed work plan for cost effectiveness and does not
exercise these enforcement alternatives to keep the costs of a
project down. In a GAO report to Congress, 43 sites with
substantially complete work assignments for remedial studies or
focused feasibility studies were reviewed in Region III
(Philadelphia) and Region V (Chicago), the same region that
controls the Verona Well Field. Suoerfund Contracts: EPA Needs
to Control Contractor Costs (GAO/RCED-88-182}. Of the remedial
project managers interviewed, 56 percent did not use cost ,
.51
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reported that EPA relied on the contractors to detenuine -er-edial
study budgets because the project managers "had no icij. i >'.- iv.ach
the studies should cost." Id. at 21. The report concluded that:
.Federal procurement regulations and EPA's
contract procurement and administration
guidance are silent with respect to what
information remedial project managers should
use to review contractor work plans other
than their best engineering judgment and
experience on similar projects. However,
sound management principles dictate that
remedial project managers use information on
acceptable cost ranges (in both dollars and
hours) for each remedial study task in order
to determine the reasonableness of such-
plans .
Id.
Additionally, there is evidence that EPA has not taken
sufficient action to control cost increases on work assignments
already in place. In the GAO study, inadequate contractor-or
subcontractor performance as determined by EPA increased costs on
51% of the sites in the sample. In 82% of these sites, EPA did
not challenoe the Questionable contractor cost and hour
increases..
Due to the lack of documentaticr. ~?A
files, (GAO] could quantify the
increases resulting from inadequate
performance for only 11 of the (22) sites.
These increases totaled $326,000 and ranged
from $9,800 to $55,000 per site. Total
remedial study costs for these 11 sites was
$6.3 million. . . Contractor performance
problems ranged from technical mistakes to
inadequately written remedial study reports.
For example, contractors placed groundwater
monitoring wells in inappropriate locations,
made errors in preparing groundwater samples,
52
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and inadequately supported remedial study
reports and submitted the reports iar.s.
at p. '.:* Th* report n\i-.'<,\ :ct to inaccqi^ate p ..riortt.t.nce of the contracts.
GAO found a prime contractor that subcontracted an entire
remedial study to another firm ..that .performed poorly and
delivered only part of the final study document. EPA.paid the
prime contractor an additional .5.40,000 to redo the
subcontractor's substandard work plus a base fee because of the
type of contract involved. Id. at 25. . It therefore is clear
that EPA does not use options available to it under the federal
acquisition regulations to limit the increases- associated with
inadequate contractor and subcontractor performance.
Similar illustrations abound in the Verona Well Field.
For example, in a memorandum dated October 3, 1985, Bill Byers,
he project manager for CH2M Hill, states: "It has taken me a lot
of hours to determine the causes of the budget problems using the
_..........- „ - — - •.- . \~ -» .f £. •- -,••_-, f.•• s: i -£' e . it she*- Id net s*jrrri?s
[anyone] that, in the final analysis, most of the. budget overrun
can fee attributed to subcontractors, or to our poor information
system with respect to subcontractors." Exhibit F. Byers
reports that Warzyn, a subcontractor, had invoiced $42,269 over
the task order authorization to date. Warzyn also went on to
complete a remedial investigation model against the instructions
of CH2M Hill, thus resulting in cost overruns. Exhibit F. Byers
also noted 4 difficulty with another contractor: "There is
53
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[Ecologv ?• ?."nvironment ] has billed to a project." Byers also
'-.•JTf. 1-har no work plan revision requests were submitted for
additional 'charges made by E&E. Exhibit F. .
Experts retained by the Thomas Defendants have reviewed
the Eyers memorandum and other cohtrac-t information with respect
to the performance issues. Mr. Dekar concluded that CH2M Hill's
information systems were weak and did-not allow it to adequately
control subcontractor costs and that CH2M Hill did not know the
amount of past progress, expenses incurred to date or the
anticipated project outcome. See Dekar Deposition Exhibit 5,
pertinent portions of which are appended as Exhibit 0.
Mr. Dekar also points to problems with Black & Veatcn,
another subcontractor, who was to complete some of the design and
construction management activities on the interim remedial
measures. In a memorandum dated June 29, 1984, another CH2M Hill
project manager on the Verona Well Field, Al Amoth, noted that
Black & Veatch was initially hired because it purportedly had •
exiiuing designs for r.ew -i^i* ~r.~ rr=v_:us ex^er.er.ce. wi^h local.
conditions and construction requirements. Exhibit P. When it
was discovered that Black & Veatch had to produce the design and
specification package from scratrh, CHIM Kill commented tr.at it.
could have completed the project within the same time frame and
produced a higher quality work product assuming all other
variables to be equal. Exhibit P. Additionally, Black & Veatch
originally.located new wells in a flood plain and failed to
54
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r/
•
consider permit requirements in locating the new wells.
Subcontracts were awarded by Black &-Veatch for surveying and
soil boring, but procedure '•"• ---- r,ot follow::! t :, .. c.--r,.poti.t i-re
,~
bids. Although CH2M Hill recommended that Black & Veatch not be
included as a subcontractor on any future Superfund work, the >
contract price was paid by EPA. Exhibit P.
Delays were also occasioned on this project due to the
need to relocate wells. CH2M Hill submitted a change order to
the contract for compensation for Adamo Construction remaining on
standby during relocation of project wells. Not only did EPA
approve the increase of approximately $2,000 for standby service
but also it paid CH2M Hill a base fee and an award fee or. this
amount. Exhibit Q.
This instance, in fact, highlights another problem with
the contracting regulation so heavily relied upon by the
government: For virtually all cost overruns, the increases were
approved after the fact. EPA. therefore, loses control over the
tracted r.£i3' c^rsc.—
Thus, the contractor, and not EPA, is deciding how the funds
should be spent.
j
' • There is absolutely nc evidence ar.vvp.ere in this
project that CH2M Hill offered to absorb the cost incurred due to
their subcontractors' errors. Nor is there «ny evidence that EPA
disallowed -these costs or negotiated with the contractor to
decrease the costs or -adjust the .fee accordingly. This is not
unusual. As GAO reported, "EPA contracting officers did not
55
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m.tracts. .at. 2". .'.• .
r prriolons with the federal procurement/
contracting-regulations is apparent upon examination of the
; : - '.
monthly invoices. See Exhibit D. Although contractors submit •
monthly "invoices" for reimbursement of incurred costs and
payment of the base fee and award fee, it is virtually impossible
**
to ascertain, what transpired at the site. Nonetheless, the
project^managers are required to review and certify each invoice
to verify that the invoiced costs are reasonable considering the
services rendered. It is clear tha.t a project manager would need
to be clairvoyant to appropriately certify CH2M Hill's invoices.
The GAO also reports another problem with invoice
certification. Apparently, project managers trained as
environmental specialists are reluctant to second guess
accounting information contained in the invoices. id. at 34.
This, combined with the emphasis on expeditious .technical
measures, suggests that the remedial activities, undertaken at a
site were largely under tne centre! cf tr.e ccr. tractor, who has
little incentive to contain costs due to the lax enforcement of
contracting regulations..
Complicating this is tr.e disarray in which most work
assignment files are kept. The government in this case asserts
that the Federal Managers' Financial Integrity Act of 1982
(FMFIA), as well as.other acts intended to control the letting of
federal contracts, assures potentially responsible parties .that
56
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cne contracts w*si«--w.uKif«t.Awivcx^ U.LU
However, in a 1985 report to the president on internal controls v--\
required by the FMFIA,"EPA identified "poor record keeping air*
^material weakness in its Superfund internal controls. Later that
year, procedures'were implemented to assemble files for'the .
purpose of cost recovery, but no actions were undertaken to
address the remedial project manager's'responsibilities for
adequate 'contract administration record keeping. Id. at 36.'
This is further complicated by a "high'turnover in EPA personnel,
which does not provide for continuity in contract administration.
Id. aV 39; See Dekar deposition Exhibit 5, wherein a high
turnover was also observed for CH2M Hill employees on the Verona
Well Field sites'. Exhibit R.'
The government also argues that the "cost-plus-award-""
fee' contract is permitted by regulation and, thus, should not be
.subject to question in this litigation. The criticisms rendered
l| -
of this fee award by defendants' expert have been corroborated by
GAO ir1 its report to Congress. See Suoerfund Contracts, at
Initially, it should be noted that the fee received by.
the zone- contractor, CH2M Hill, is twofold: base-fee and award
fee. The base fee is payable -without regard to performance and
is based on all costs of the contractor in addition to its
payments to subcontractors. The award fee is based upon the
performance of the contractor-but is still calculated as a
percentage of contractor and subcontractor cos.ts: Thus, if is ••
57
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subcontract. T costs wh-=re an l;.;.rease ii= thfjse costs results in
* • ' v - ., . .''-'"
ah i'li . . :"«?« to ti; <.r. '.. :.-e, c-.« here, the
subcontract: •-• costs act:.r-Ui\t fc:- ".'5% oL the invoiced costs, the
effect on the fees- is substantial. See Dekar Exhibit 5, relevant
portion appended as Exhibit S.
The government has also argued that since award fees
are based on performance, the contractor would not benefit from
encouraging subcontractor abuse. McGeehin deposition,
' •> „. '
February 16, 1989, pp. 149-150. The fallacy in this argument is
twofold. First, the performance evaluation criteria do not
require an evaluation of the zone contractors' management of the
subcontractors. Second, the award fee structure allows a
contractor with a less than satisfactory performance to earn
approximately 45% of the available fee.
The award fee itself is divided into two phases. The
phase I fee consists of about 3% of the contractor costs and 1% .
of the subcontractor costs." 'Fjjrerf und^ Contracts at 44. EPA
awards 'iCCi ci t."ij.s fe-5 if ir.e performance Lz at ieast
satisfactory. Assuming-, in this case, that progress was
satisfactory,.CH2M Kill.would have earned a phase I fee of
$86,j85.~7. This would' be in addition to its base fee of
$172,995! '
The phase II fee is awarded at the completion of the
remedial study and is based on a final evaluation of the
contractor's overall performance, which is not appealable.. In
58
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phase II, a contractor performing unsatisfactorily earns"no-aware
'fee, while those performing satisfactorily earn up to 30% of tne
i.T ance'of the award, fee. Contractors that exceed expectn1; .Loess
irn from 31. to 65%, while those giving'an outstanding
performance may receive a full award. • r
In this case, a full 'award fee would be $187,249.
Thus, even assuming that CH2M Hill's performance was deemed less
than satisfactory .^ing in' no phase II award fee, the
contractor would still earn 46% of'the total possible fee. Thus,
the argument that a per.irmance evaluation based award fee , - •
provides incentive for cost-effective, high quality products is
without merit.8 ' "' '/•
It is also doubtful that there is any justification for-
a cost-plus-award-fee contract. The purpose of these contracts
In its repor.-t, GAO. found a subcontractor that had .been hired to
do a remedial study" for '$481,000. Numerous revisions to produce*;
an acceptable product increased the costs by $37,000. However,
Lr ;•? fir.al rating, the contractor was rate'd as outstanding and
•~7£ iwariec £5% c: tr.« s-L^o:.'_i'=._',_r.9 ;-:-i. _ .-; - :' .'• '-""•• "•'
$518,000,)) or approximately $9,000. Tne performance evaluation
made no mention of subcontractor's problems in producing the
report. Suoerfund Contracts at 48. " -.-.-..
Similar calculations have beer, made for the Verona Well -Field and
it is this. iT.fcrri3t.ion which the government seeks to keep from • . •
this Court. For example, Mr. Dekar has-calculated that Warzyn's.
poor performance resulted-in cost overruns of approximately
$181,078. See Dekar Deposition, Exhibit 11] appended hereto as ..
Exhibit G. Assuming, then,.that the subcontractor payments on
which CH2M Hill's fees'are based is decreased by that amount,- "the
base 'fee would be reduced by $5,432 and the maximum -award fee by
$3,621 for a total deduction of $9,053: Even if one used Mr. •:..
Dekar's most conservative estimate 'of Warzyn's cost overruns,
$101,822, CH2M Hill's fee would be decreased by approximately
$5,100.
59
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,|ng the gpvernr.rn._ 1-0 evaluate it. Where there is nc
• | - •;•,":. • . • • -^ '^
gfulv evaluation., -r ^utracts. «v. . ' ,i ; •• more : hdui c
ial, .if not actual, boondoggle fox' the contractors.
\ • "' - .
Although the. government will argue that thes*e contracts are
negotiated to compensate for.a degree of risk involved in the
contract^ this .element is to be compensated by the base fee and-
practically. ..speaking, the contractor assumes little or no cost
risk. In,fact, a contractor may only be liable under Superfund
' *'"*.. * -•" ^
for negligence, gross negligence or intentional misconduct that
causes a release of a threatened release of hazardous substances
and, in some cases, may.be entitled to receive government
indemnification for itsnegligence. 42 U.S.C. S 9619. The award
fee does little but reward the contractor for high overhead and
mismanagement.. .Although, the United States is certain to contend
that ERA'S.,.decision, to negotiate a cost-plus-award-fee contract
was discretionary and not subject to judicial review, the abuse
ecu-.-•=• ir.cer rv t:,;.;: :;-.-- ••;: r-.niriCt .:hcv.c r.c". be Ear.ciirned by
this Court's • silence. .
VII. CONCLUSION • ., . . ...........
.The. .Ur.itsd State.2 ci=iriv is ir. errcr when it ccr.cludes
that this Court's review of government expenditures at the Verona
- •-
Well field is^circumscribed .by CERCLA and SARA and is limited to
•'• • ' '': r,i
the administrative record. The legislative history does not.
'support this position, and, indeed,, the government in other cases
.has argued .that_ the Court is, entitled to review the day-to-day.
60
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activities to determine that'/the* expenditures were indeed"'not'
•* - " -«•-.•».„ . • ' •- "* - ' «•' .* *• .r" 2 • • i
inconsistent vfi.t.-hi it he National Contingency Plan. The".''.'1 ~'"':
nment--.-: ors»«<»n,t. .position -illustrates'., the inconsistencies
* ~ "• - • * ~rn.;. .'? • _ -. . .
inherent in "selective enforcement .'•'•"
. DEven assuming for the''-purpose'of argument, that the
'*'•••• . . j:O5v;''T- ''-V'T~- -"i - . ' •
government's1 "position" is correct^-, then, ,'i.t is clear that, the
administrative record is insufficient in this case-. No cost
information is provided,"e"xceptri'or^;^6rder-6f-magnitude" estimates*
•" : - ' ' '-;:••• ••- -:. -- '?^ --.>-*". ~ ,„.. ... . ' _ . __.
in tn • °Av ' r--.d.'draft RI/FS . • ;In-jf act, if "one were to rely-solely
' *.
on the administrative r°-~r'* the government'.s recovery would be
limited to~$ji;,325 .-b. initial"remedial measure and ;
S'100, jQl. 39'-fcr the feasibility .study, reimbursements to which
the United States certainly would take exception. ^Thus, it is : "'
•-•'•» j
sensible to review the site activities and determine why the
remedial measures exceeded the''prrojec'ted costs by more than 350%.
Defendants have suggested", by example, several reasons
for the massive cost overruns, including excessive indirect 'cost
:*--^3t prefect, rr.ismanagemer-. ar.i ir.t-vrnc.1 ccr.troi ifruv:^. The
existence of procurement/contracting regulations have failed to
remedy thes-= abuses, in part because EPA has not enforced
.cc-irplianc*. Other aspects, such as using cost-plus-award-fee
,-.'j . -
contracts, are simply not justified.' ' '• : •
Simply because the federal'government- spent money from
.Superfund on remedial activities at the Verona Well Field does •'• *
i
not mean that it is entitled to full reimbursement.' This .
position is not only legally unjustified but, in this ca-se, is: :
61
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adi?.iSMITH, P.C..
Attorneys fpr- Defendants Thomas
Soly Barbieri (P3179'3)
Lynn K." Richardson (..P'31778)
62
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