United States
Environmental Protection
Office of -
Solid Waste and
Efl)ergancy Response
&EPA
DIRECTIVE NUMBER: 9834.7-i£
TITLE: Methodologies for Implementation of CERCLA Section
122(g)(l)(A) De Minimis Waste Contributor settlement
proposals and agreements. ,
APPROVAL DATE:- December 20, 1989
EFFECTIVE DATE: December 20, 1989
ORIGINATING OFFICE: OWPE/OECM
H FINAL
D DRAFT
LEVEL OF DRAFT
— Signed by AA or DAA
SB — Signed by Office Director
DC — Review & Comment
REFERENCE (Other documents): 9834.7 Interim Guidance
on Settlements with De Minimis Waste Contributors under
Section 122 (g) of SAlS
S WER OS WER OS WER
DIRECTIVE DIRECTIVE Dl
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united states i
Washington. DC 204«0
Directive Initiation Request
1. Directive Number
9834.7-1B
2. Originator Information
Nam* of Contact Person
Tai-tning Chang
Mail Coda
OS-510
Office
OWPE/CED
Telepnona Code
(202) 382-4839
Methodologies for Implementation of CERCLA Section 122(g)(l)(A)
De Minimis Waste Contributor Settlements
4. Summary of Directive (include brief statement of purpose)
This document is designed to provide practical assistance in the evaluation
and development of de minimis contributor settlement proposals and agreements.
5. Keywords
De Minimis, CERCLA Section 122(g)(l)(A). Waste Contributor
oa. uoes i his Directive supersede rrevious uirective(S).'
b. Does II Supplement Previous Oirectrve(s)?
Interim Guidance on Settlements with
No
e
Yes What directive (number, trtfe)
Yea What(flrective(number.t«a) 9834.7
No
^iniminJaste Contributors under
122(g)
7. Draft Laval
A-SignedbyAA/DAA X B - Signed by Office Director
C - For Review 4 Comment | [ D - Hi Devatepmen
8. Document to be distributed to States by Headquarters?
Ye»
X
No
Tnla Request Meets OSWER Directives System Format Standards.
9. Signature of Lead Office Directives Coordinator
(D°~&-^ v^&L-^
10. Name and Title of Approving Official
Data
liLlll^
Date
EPA Form 1315-17 (Rev. S-«7) Previous editions art obsolete.
OSWER OSWER OSWER O
VE DIRECTIVE DIRECTIVE DIRECTIVE
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
DEC 2 0 I989
OSWER Directive 9834.7-1B
MEMORANDUM
SUBJECT: Methodologies for Implementation of CERCLA Section
122(g)(l)(A) De Minimis Waste Contributor Settlements
FROM:
TO:
Bruce M. Diamond, Directol
Office of Waste Programs Enforcement
Glenn L. Unterberger
Associate Enforcement Counsel for Waste
Office of Enforcement and Compliance Monitoring
Waste Management Division Directors, Regions I-X
Regional Counsels,, Regions I-X
We are attaching the "Methodologies for Implementation of
CERCLA Section 122(g)(l)(A) fis Minimis Waste Contributor
Settlements," which is designed to provide practical assistance in
the evaluation and development of de roinimis contributor settlement
proposals and agreements.
One of the issues identified in the "Administrator's
Management Review of Superfund," was increased usage of settlement
tools. We encourage you to develop de minimis settlements and we
are looking into ways to provide incentives for the Regions to
utilize this settlement tool. As we gain experience in the use of
de minimis settlement tools, we would like to hear from the Regions
regarding what barriers they encounter in achieving de minimis
settlements. This will help us understand and develop effective
ways of supporting the Regions in their use of this settlement
tool.
Therfct* a separate document entitled "Guidance on Landowner
LiabilityiiBBder Section 107 (a) (1) of CERCLA, De Minimis Settlements
under Section 122(g)(l)(B) of CERCLA, and Settlements with
Prospective Purchasers of Contaminated Property," (issued on June
6, 1989, OSWER Directive 9835.9, published on August 18, 1989 at
54FR34235) that focuses on de minimis landowner settlements.
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- 2 -
The June 17, 1988 "Revision of CERCLA Civil Judicial
Settlement Authorities Under Delegations 14-13-B and 14-14-E,"
OSWER Directive 9012.10-a, provides for delegation of Section
122(g)(l)(A) settlements with generators. However, the first
generator de minimis administrative order or consent decree
negotiated by each Region must receive the concurrence of the
Assistant Administrator for Enforcement and Compliance Monitoring
or his designee ("AA-OECM") and the Assistant Administrator for
Solid Waste and Emergency Response or his designee ("AA-OSWER").
After the Region has concluded one de minimis settlement with a
generator, other such settlement may be entered into by the Regions
on behalf of the Agency upon prior consultation with the AA-OECM
and AA-OSWER or their designees.
For further information or follow-up questions, please ask
your staff to contact Tai-ming Chang of OWPE/CED at (FTS) 382-4839,
(mail code OS-510) or Alice Crowe of OECM-Waste at (FTS) 382-2845
(mail code LE-134S).
Attachments
cc: Lisa Friedman, OGC
David Buente, DOJ
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December 20, 1989
OSWER Directive 9834.7-1B
Methodologies for implementation of CERCLA
Section 122(g)(l)(A) Qe Minimis
Waste Contributor Settlements
United States Environmental Protection Agency
401 M Street, S.W.
Washington, D.C. 20460
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(i)
INDEX
Methodologies for Implementation of CERCLA
Section 122(g)(1)(A) De Minimia
Waste Contributor Settlements
I. PURPOSE AND INTRODUCTION 1
II. DEFINITION 2
III. OBJECTIVES OF D£ MINIMIS SETTLEMENTS 2
IV. BACKGROUND: CRITERIA FOR ELIGIBILITY 3
V. CHARACTERISTICS OF POTENTIAL DE, MINIMIS CANDIDATES 4
VI. EVALUATION OF A fig MINIMIS PROPOSAL 5
A. Site Management Plan 6
B. Communication 6
C. Timing 7
D. Determination of Eligibility 10
E. NEAR Preparation 11
F. Costs 11
G. Premiums 12
H. Calculation of PRP Share 12
I. Reopeners 13
J. Settlement Options 14
VII. NEGOTIATIONS AND SETTLEMENT 16
A. Distribution of De Mi,nimis Monies Collected 16
VIII. PURPOSE AND USE OF THIS GUIDANCE 17
IX. GUIDANCE DOCUMENTS 18
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ENFORCEMENT CONFIDENTIAL Final December 20. 1989
METHODOLOGIES FOR IMPLEMENTATION
OF CERCLA SECTION 122 fa) (1) (A) DE MINIMI8 WASTE CONTRIBUTOR SETTLEMENTS
I. PURPOSE AND INTRODUCTION
This document has been prepared to provide assistance to the
Regional case staff (OSC, RPM, assistant Regional Counsel) in the
evaluation and development of de minimis contributor settlement
proposals and agreements. The methodologies presented are general
suggestions only, as each site is unique and the terms of any de
minimis settlement will depend on the individual facts of the case.
The Superfund Amendments and Reauthorization Act of 1986 (SARA)
codified the concept of de minimis settlements which was originally
introduced in the "Interim CERCLA Settlement Policy" (December,
1984). Sections 122(g)(l)(A) (generators and transporters) and
122(g)(1)(B) (landowners) were designed by Congress as enforcement
tools for the Superfund process. The focus of this guidance is
solely on de minimis contributor settlements.1
Section II discusses the definition of a de minimis waste
contributor. Section III summarizes the objectives in pursuing a
de minimis settlement and Section IV outlines the criteria required
for eligibility for any de roinimis settlement proposal.
Characteristics of potential de minimis candidates are covered in
Section V. Section VI is an in depth discussion of the development
of a de minimis proposal (site management plan, communication,
timing, determination of eligibility, NEAR preparation, costs,
premiums, calculations of PRP share, reopeners and settlement
options). A summary on settlement issues and distribution of de
minimis monies collected is covered in Section VII, negotiations
A separate document entitled "Guidance on Landowner Liability
under Section 107(a)(1) of CERCLA, De Minimis Settlements under
Section 122(g)(l)(B) of CERCLA, and Settlements with Prospective
Purchasers of Contaminated Property" (issued on June 6, 1989, OSWER
Dir. #9835*4, published on August 18, 1989 at 54FR34235) discusses
de. m in inly landowner settlements. Two other guidance documents
provide additional information on de minimis generator and
transporter settlements: "Interim Guidance on Settlements with De
Minimis Waste Contributors under Section 122(g) of SARA" (issued
June 19, 1987, OSWER Dir. #9834.7, published on June 30, 1987 at
52FR24333); and "Interim Model CERCLA Section 122(g)(4) De Minimis
Waste Contributor Consent Decree and Administrative Order on
Consent" (issued October 19, 1987, OSWER Dir. #9834.7-1A, published
on November 12, 1987 at 52FR43393).
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and settlement. A list of guidance documents is provided at the
end of this methodology.
II. DEFINITION
The June 19, 1987 "Interim Guidance on Settlements with De Minimis
Waste Contributors under Section 122(g) of SARA" defines a de
minimis party as a "potentially responsible party (PRP) who
satisfies the requirements for liability under §107(a) of CERCLA
and who does not have a valid §107 (b) defense, but who has made
only a minimal contribution (by amount and toxicity) in comparison
to other hazardous substances at the site."
III. OBJECTIVES OF DE MINIMIS SETTLEMENTS
The objectives in pursuing a de minimis settlement are as follows:
o To resolve de minimis parties' CERCLA civil liability to EPA
in a final manner for all past and future response activities
at a site.2
o To resolve de minimis parties' CERCLA civil liability to EPA
relatively early in the remedial process to reduce transaction
costs for the settling de minimis parties and the government.
o To obtain a sum certain with, in most instances, a relatively
modest effort on the part of the government. This replenishes
the Superfund and may (if appropriate and if part of a
comprehensive settlement under which response action will be
performed by other site PRPs) provide upfront monies for the
parties implementing the work at a site.
o To provide an incentive to non-de minimis parties to settle
simultaneously by offsetting the contributions of de minimis
parties from the total cost of the response action.
Nonetheless, under appropriate circumstances, de minimis
settlementfeshould contain a reopener that reserves the right of
the Unite<^tates to proceed against the de minimis party if it is
later discovered that the party's contribution to the site exceeded
that previously stated. The settlement may also contain reopeners
to reserve the United States' right to proceed against the de
minimis party if there are cost overruns or further response action
is necessary in addition to the work specified in the ROD. For a
more detailed discussion, including discussion of other standard
reopeners, see "Reopeners," pp. 13-14 below.
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o To simplify negotiations and litigation by reducing the total
number of parties involved.
Several of the government's objectives in "pursuing de minimis
settlements also affect the non-de minimis parties at a site. In
addition, the non-cje. minimis parties benefit in the following ways.
o The non-djg minimis parties may not be burdened with third
party suits against settling de minimis parties.
o The non-de. minimis parties' transaction costs may be reduced.
o A de minimis settlement may, where appropriate, provide a
source of start-up funds for a RD/RA.
IV. BACKGROUND: CRITERIA FOR ELIGIBILITY
The following criteria are specified in §122(g)(l) and in the de
minimis guidance. In the evaluation of any de minimis settlement
proposal, all of these criteria must be met.
o The settlement involves only a minor portion of the response
costs at the site. This criterion is applied to the
individual de minimis party's settlement payment (as required
by §122(g)). The Agency also considers the collective de
minimis parties' settlement payment (as a matter of policy).
To date, collective de minimis settlement payments have ranged
up to 33% of the site response costs.
o The amount of the hazardous substances contributed by the
individual is minimal in comparison to other hazardous
substances at the site. To date, settlement proposals have
used between 0.2% and 2.0% of total waste at the site.
o The toxic or other hazardous effects of the substances
contributed by the individual are minimal in comparison to
other hazardous substances at the site. The June 19, 1987
guidance interprets "minimal in comparison" in the context of
toxicity as "not significantly more toxic than...."
o The settlement is practicable and in the public interest.
This Jit determined through an evaluation of the strength of
the afiorall case including that against viable non-de minimis
parti** and the impact a de minimis settlement would have on
the major party settlement and litigation.
This element also includes an understanding of the
government's interests in settling out with de minimis
parties. The settlement should initially be based upon
adequate information regarding project costs, PRP waste-in
contributions, and PRP viability. In addition, the settlement
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base payment should be based upon the PRPs' volumetric share
augmented by their volumetric share of the orphan share.
The total dj| minimis PRP settlement should include, in addition,
a premium payment0and/or reopeners for cost overruns during
implementation of the remedy and for supplemental remedies or
additional work to be performed in the event the implemented remedy
is not protective of public health and the environment. Premiums
are based on engineering and legal judgement in relation to the
certainty of the government's remedy and the litigation risks of
the case.
V. CHARACTERISTICS OF POTENTIAL fig MINIMIS CANDIDATES
The characteristics of potential candidates are described below.
o The PRP must qualify for settlement under §122(g)(l)(A) as
quoted above.
o The vaste contributions (volume and toxicity) of each party
generally are adequately documented (i.e., good waste-in
list). In addition, the liability and viability of the non-
de minimis parties are established. The PRP search is the
source of this information. If insufficient data exist,
generally the site should not be considered a candidate for
de minimis treatment. The burden should be on the PRPs to
provide information on volume and toxicity to back up any
claims of de minimis eligibility.
Guidance on premium payments is provided in the "Guidance on
Premium Payments in CERCLA Settlements" (issued on November 17,
1988, OSWER Dir. #9835.6).
4In general, the earlier a de minimis settlement is negotiated
in the overall settlement/litigation process, or the greater the
site-specific uncertainty regarding remedial costs, the larger the
premium should be. Reopeners vary depending on the stage at which
the settlement is reached and the estimated accuracy of the site
cost estimates. In addition to the reopeners described above, at
a minimuar^£Iiere will be a reopener for additional PRP information
gathered fplt may indicate that a party is not de minimis and a
reservation of rights and criminal liability for natural resources
damages, unless the Federal Natural Resource Trustee has agreed in
writing to a covenant under §122(j) of CERCLA. Reopeners and
premiums are used to insure that the government will minimize any
unrecovered costs. Where the remedy involves off-site disposal,
off-site redisposal liability may be a factor in determining risk
premiums. More information on premiums and reopeners is presented
in the following sections.
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o Past coats have been well documented.
o Future remedial response costs are, or can be estimateu and
appropriate premiums can be developed. Reasonable, reliable
and recent estimates for future costs should be available
before the settlement is negotiated. Where very small
contributors are involved and the site has reached the mid to
late RI/FS stage, this criterion may be relaxed.
o One or more viable non-de minimis (major) PRPs exist against
whom the government has a strong liability case. For
instance, if all PRPs would qualify for de minimis treatment
or if no viable major PRPS exist who would be financially able
to undertake RD/RA, the site should not be considered a
candidate for a de minimis settlement.
o De minimis PRPs have expressed interest in a settlement.
o The de minimis parties are well organized or can organize with
limited governmental assistance. The de minimis parties, or
the non-de minimis parties, should be willing to do the work
necessary to develop and evaluate settlement proposals.
Ultimately, however, the government must make the statutory
findings that such a settlement is appropriate.
VI. EVALUATION OF A DE MINIMIS PROPOSAL
As indicated by the criteria for eligibility and characteristics
of potential candidates described above, to enter into a de minimis
settlement, EPA needs information on costs (past and future),
wastes (volume, toxicity) and the universe of PRPs.5
This section discusses the major aspects of de minimis settlements,
including the determinations that need to be made to define the
limits of the de minimis settlement and the parties eligible for
participation in it. A discussion of timing issues relevant to
settlement at various stages of the remedial process, including
RI/FS and RD/RA, is provided. Cost recovery (post-RD/RA)
settlements and potential settlements at non-NPL removal sites will
also be discussed.
Currently,^ resources for de minimis settlements are contained
within th**overall budget allowance of RD/RA negotiations.
',-:
As with any negotiation process, adequate planning should provide
Parties that do not qualify as de minimis are not
disqualified from the use of other types of settlement tools or
settlement options.
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maximum flexibility in the review and/or development of a de
minimis proposal.6
SITE MANAGEMENT PLAN
The following are suggestions to be incorporated into any site
management planning process.
o A timeline for development of the de minimis case strategy.
o Details of PRP search activities required to provide
information on candidate PRPs, if necessary, and a description
of the resources needed to carry out these additional
activities.
o Allocation of shares, including NEAR, if appropriate.
o Any available information on past and future costs relevant
to determination of de minimis shares and premiums.
o Communications and information exchange, including information
on communications with non-de. minimis parties related to
potential de minimis settlements.
o A plan for collection of the settlement backup documentation.
Additional information on the documentation required for this
purpose is under development.
It should be noted that a particular candidate site or individual
PRP may change de minirois status at any time during the remedial
process with the development of new information for the site.
COMMUNICATION
During general discussions and when the determination is made that
a particular site may be a candidate for a de minimis settlement,
it is advantageous to communicate to all PRPs the existence of this
settlement tool. Any initial contacts with the PRPs, such as a
"kick off" informational meeting following the general notice
letters, may be used to educate them as to the availability of the
different settlement tools, including de minimis.
This opportunity should be used to provide the PRPs with the
informatiotnecessary to develop an adequate de minimis proposal,
including the model settlement documents and de minimis guidance,
and a clear understanding of their role in the process.
6As a matter of practicality, the PRPs should be encouraged
to take on the burden of the organizational and administrative
aspects of the de minimis settlement process.
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o De minimis settlement negotiations are expedited when the PRPS
organize themselves into steering committees.
o Settlement proposals may be developed by the de minimis and/or
the non-de. minimis parties. A single proposal representing
the de minimis parties' agreement should be developed by the
de minimis steering committee. The same holds true when more
than one de minimis steering committee exists. In unique
circumstances, e.g., varied generator types/information,
separate proposals may be accepted by EPA; however, this
should be the exception rather than the rule.
o Non-de minimis parties should be informed about any potential
de minimis settlement and, in the case of a settlement
occurring at the RD/RA negotiation stage of the remedial
process, the Region should consider whether the non-de minimis
parties should be given the opportunity to incorporate the de
minimis settlement into a global remedial settlement.
This communication process will aid the case team in assessing non-
de minimis party concerns related to the potential settlement.
TIMING
The determination as to whether or not to pursue a de minimis
settlement at a particular point in the Superfund process is
dependent upon the case team's knowledge of the site costs.
o In limited circumstances, a removal de minimis settlement may
be appropriate for non-time critical removal actions at non-
NPL sites. This option would provide parties meeting the
characteristics and criteria the opportunity to cashout in the
same manner as with a remedial action, except that the
covenant would not release the settling parties for any post-
removal costs or injunctive relief.
o At the early or mid-RI/FS stage, it is often difficult or
impossible to determine with any certainty the remedy for a
particular site. These sites are not good candidates for
early de minimis settlements.
However, at a limited number of sites the basic remedy may be
relatively easily determined, and a reasonable cost estimate
based on past experience or industry estimates may be
calculated. These cases may be considered candidates for
early de minimis settlements if the other characteristics and
In general, however, de minimis settlements reached at this
point may be too speculative based upon lack of sufficient
information to characterize the site.
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criteria are met. An example of this type of case is a large
landfill where a cap with its components are likely the
dictated remedy.
Another exception to this guideline may be the very large
multi-generator case where hundreds or more parties with
extremely low volumes exist, the toxicities are relatively
similar, and a large number of other parties exist. If there
are varying toxicities, this factor should be considered in
the formulation of a modified volumetric ranking. Any
settlement would include a substantial premium for future
costs and litigative risks.
A de roinimis proposal is more easily developed at the ROD
stage. At this point in time/ cost estimates for the remedy
are available and realistic premiums may be calculated as
discussed below. This is the most common time for a de
minimis settlement.
A tiered approach to settlements has been used as an incentive
to de minimis parties to join a de minimis settlement at the
RD/RA negotiation stage. Under this approach subsequent de
minimis proposals include higher premiums.
Example: - Initial settlement proposal includes 100%
premium (i.e., multiplier of 2.0) and minimum
reopeners (to be discussed below.)
Second offering includes a 200% premium (i.e.,
multiplier of 3.0) with more stringent
reopeners (perhaps a reopener for cost
overruns.)
Third offering includes a 300% premium (i.e.,
multiplier of 4.0) with still more stringent
reopeners.
A phased approach may be used in the development of multiple
de minimis settlements proposed at different stages of the
remedial process where there are multiple PRPs. As multiple
negotiations would be required in this scenario, the decision
for Uflting this approach should be documented in the site
managgpent plan to provide for adequate resource allocation.
Exaapl«i - Early RI/FS de minimis settlement proposed to
cashout very low volume contributors
constituting 0.7% of the total volume. This
eliminates 250 generators from the PRP list
prior to the RD/RA negotiation phase and
8
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thereby eliminates the need for special notice
letters, meetings, correspondence,, etc. with
these parties.
Second de minimis settlement proposed at RD/RA
negotiation phase with all remaining eligible
parties. This provides settlement with the
bulk of the de minimis PRPs.8
Third de minimis settlement proposed at cost
recovery stage (post-RD/RA) prior to
litigation. This eliminates aspects of the
litigation such as discovery, depositions, etc.
against de minimis parties thereby reserving
resources for pursuit of major party
recalcitrants. (If the party declined to
participate in an earlier de minimis settlement
for which it was eligible, an additional
premium should be added to the party's
payment.)
o Cost recovery or post-RD/RA de minimis settlements are an
option at sites with fund-financed actions or where PRPs are
implementing the RO/RA and the government is pursuing
recalcitrants for unrecovered costs. This type of settlement
may resolve the liability of the parties to the government
prior to active litigation thereby allowing the government to
concentrate on the non-de minimis party litigation. If a de
roinimis settlement was offered at the RD/RA negotiation phase
of the remedial process, a premium for the cost recovery de
minimis settlement may be appropriate because of the parties'
earlier recalcitrance.
It is important to note that the primary goals of a de minimis
settlement, in most cases, are to get parties out of the case early
and eliminate the governmental resource drain of having to deal
with a large number of PRPs. Partial de minimis settlements, i.e. ,
those which only extinguish the PRP's liability for past costs or
for removal or RI/FS costs, and not for total response actions at
the site (e.g. past costs, future response action, etc.) may pose
an excessive resource burden on the Agency, and are not the favored
approach.
*The terms of early dfi minimis RI/FS settlements and de
minimis settlements reached during the RD/RA negotiation phase may
differ based on such factors as additional remedy cost information,
additional response costs, and the refusal of certain de minimis
parties to join the earlier settlement.
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DETERMINATION OF ELIGIBILITY
The following determinations should be made to aid in definition
of eligible de minimis parties for a particular site. These
determinations are interrelated. This information should be
clearly defined in a comprehensive de minimis proposal generally
provided by the PRPs.
o The determination of a volumetric or modified volumetric9 cut-
off including a determination that the individual waste
contributions of the parties constitute only a minor portion
of the total site response costs. This cut-off is established
by the waste-in list such that sufficient viable major parties
remain to negotiate or litigate for the response actions at
the site. Information pertaining to the development of a
waste-in list and generator ranking is available in the
"Potentially Responsible Party Search Manual," (issued August
28, 1987, OSWER Dir. #9834.3-1A), and in the document, "PRP
Search Supplemental Guidance for Sites in the Superfund
Remedial Program" (issued June 29, 1989, OSWER Dir. #9834.3-
2a) .
o A determination of the types of wastes disposed of such that
a finding of "minimal in comparison" for toxicity or other
hazardous effects can be made. Even if multiple waste types
exist at a site this should not be burdensome. As noted
above, "minimal in comparison" has been interpreted to mean
"not significantly more toxic than". However, where a
particular class of wastes drives response costs substantially
higher than others, the party that contributed that waste type
may be disqualified or a separate allocation formula may be
necessary. A decision as to whether or not this holds true
of a particular waste should be based on the engineering
judgement of the case team.
o A determination that the settlement is practicable and in the
public interest.
Example: - Volumetric cut-off established at 0.8%/generator.
All parties contributed like substances (VOCs).
r The total volume of waste contributed by the parties
below the 0.8%/generator cut-off is 16.84%.
9A modified volumetric cut-off may incorporate differing
toxicities of hazardous substances contributed by the parties. A
non-binding allocation of responsibility, or NEAR, may be useful
in developing a modified ranking of PRPs.
10
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There are sufficient liable and viable parties above
the 0.8% cut-off with which to pursue settlement or
litigation for the remaining activities at the site.
This example assumes like toxicities for all waste contributions.
NEAR Preparation
When the Agency or PRP determines that they cannot allocate 100%
of the costs through other settlement tools, another option is the
use of a non-binding allocation of responsibility (NEAR). The
purpose of an NEAR is to establish a consistent measure for
attributing liability to the PRPs. This process requires
assembling and assessing the necessary technical and enforcement
information that can support allocation formulas based on
volumetric contribution, nature of the waste and response cost.
The development of an NEAR should provide for a fair and equitable
allocation of liability at the site among existing PRPs.
Allocation of non-viable parties and orphan shares should be
adjusted to disperse the liability among the viable PRPs.
Additional information on the preparation of an NEAR is available
in EPA's "Interim Guidelines for Preparing Nonbinding Preliminary
Allocations of Responsibility", (issued May 27, 1987, OSWER Dir.
#9839.1, published on May 28, 1987 at 52FR19919).
COSTS
EPA should provide cost information to the PRPs for use in the
proposal development. Estimated future remedial costs should be
calculated and accurate past cost information and documentation
should be available. This cost information is used to develop and
allocate shares, including a premium component.
These costs will include both direct and indirect costs (plus
interest for past costs) for:
o Pre-RI/FS costs (generally removals)
o RI/FS and ROD
o RD/RA
o Overflight costs
/.•£*-
o O&M costs
o Contingency for unknown future costs
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PREMIUMS
The purpose of premiums is to cover the risk of underestimating
response costs and of not recovering 100% of EPA's outstanding
costs tram parties not eligible for or not joining in the de
minimis settlement.10 There is no set formula for determining
premiums, however, and the case team must rely on sound engineering
and legal judgement. The November 17, 1988 "Guidance on Premium
Payments in CERCLA Settlements," (OSWER Dir. #9835.6), provides
general information on premiums. Premium payments may be
calculated on the parties' volumetric shares, as augmented by the
distribution of orphan shares to the volumetric shares.
One important consideration is a premium for future costs (this
includes all costs that have not been incurred, including cost
overruns during performance of RD/RA and costs relating to unknown
circumstances). -This premium should be based on whether or not a
remedy has been selected, the project manager's engineering
judgement of potential problems with a selected remedy, potential
cost overruns for the project, and where the remedy involves off-
site disposal and any risk of off-site disposal liability. This
analysis is conducted by the RPM or OSC with input from appropriate
technical support personnel. It must be documented. The
availability of the information required to determine this premium
is critical to the timing of a de minimis settlement.
CALCULATION OF PRP SHARE
o The actual dollar amount of each PRP's share is generally
calculated in the following manner. For each generator:
1. Multiply the generator's percentage (volumetric +•
redistributed orphan share, including non-viable parties)
by the total past costs.
2. Multiply the generator's percentage (as above with
redistributed orphan share added) by total estimated
future costs.
3. Multiply '2' above by the premium. (A percentage premium
is equivalent to a multiplier premium, e.g., 40% equals
0.4. A premium of 40% would provide a multiplier of 0.4,
1OO% would equal 1.0.)
10Th« future costs include the costs of remediating known
conditions, the risk that costs will exceed the expected costs of
the cleanup of known conditions, the costs of remediating
conditions not known when a remedy is selected, and, if the site
will require five year reviews, the uncertainty of changing
standards and technologies.
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4. Add 'I1, '2', and '3' above to arrive at individual
generator's cost share.
EXAMPLE
Past Costs = $1,000,000
(removal, RI, FS costs to date, other pre-remedial costs,
enforcement activities, indirect costs, and interest)
Future Estimated Costs = $30,000,000
(remaining FS, RD, RA, oversight, O&M, future contingencies)
Premium =75%
(based on uncertainties including remedy failure, etc.)
Generator A Generator B
volumetric share 0.5% 0.9%
orphan share
total percentage
past costs (% X cost)
future costs (% X cost)
premium (premium % X future)
total payment (past +
0.1%
0.6%
$ 6,000
$180,000
$135,000
$321,000
0.2%
1.1%
$ 11,000
$330,000
$247,500
$588,500
future + premium)
REOPENERS
In addition to premiums, a variety of reopeners have been used in
de minimifl Mttlements. Reopeners allow the government to revisit
the settlfl^ont according to the particular terms of the reopener.
The standard reopeners are briefly summarized as follows.
First, to protect the Agency against the possibility that a de
minimis party's full waste contribution to the site has not been
discovered, de minimis settlements should include a reservation of
rights which allows the government to seek further relief from any
settling party if information not known to the government at the
time of settlement is discovered which indicates that the volume
or toxicity criteria for the sites's de minimis parties is no
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longer satisfied with respect to that party.
Second, unless covered by a premium, a reopener should generally
be included which protects the Agency against the risk of cost
overruns during the completion of the remedial action specified in
the ROD. This reopener would generally be written as a cost
ceiling, which, if exceeded, would allow the government to seek
additional relief from the settling parties.
Third, unless covered by a premium, a reopener should generally be
included which protects the Agency from the risk that further
response action will be necessary in addition to the work specified
in the ROD. This reopener would state that the government may seek
further relief from the settling parties if EPA determines, based
upon conditions at the site, previously unknown to EPA, or
information received, in whole or in part, after [entry of the
consent decree/issuance of the AO], that the remedial action is not
protective of public health and the environment.
In addition to the de minimis-specific reopeners noted above, de
minimis settlements must also include reservations of rights for:
1) any liability as a result of the settling parties' failure to
comply with the terms of the settlement; 2) .any liability for
natural resource damages (unless the Federal natural resource
trustee has agreed to a covenant not to sue); 3) criminal
liability; 4) any liability for any claim or cause of action not
expressly included within the covered matters or within the
covenant not to sue; 5) any liability which any non-settling party
may have for any claim or cause of action.
SETTLEMENT OPTIONS
The following settlement options are also available when
considering a de minimis settlement proposal:
o Alternative settlement offers may be advantageous in providing
settlement options to a large variety of PRPs. This option
entails the use of 2 similar offerings with the only
difference being in the premium and reopener sections. Some
PRPs are more willing to cashout at a higher premium to
resolve all CERCLA liability, while other parties would rather
pay it lover premium and have broader reopeners. Such an
offeeing provides incentive to both "interests" while still
satisfying the government's risks. A single or separate
settlement documents may be used in this case.
Example: Offer 1 - premium of 200% with minimum reopeners
(i.e., new information on waste contributed to the
site, natural resource damages).
Offer 2 - same document (no premiums if there are
full reopeners), with minimum reopeners (i.e. new
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information on the waste contributed to the site,
natural resource damages) and standard reopeners
(i.e., cost overruns during Completion of remedial
action, and unknown conditions/new information
indicating that remedial action is not protective).
o A percentage-based settlement may be agreed upon. In this
case, the parties agree to pay a percentage of actual past and
future expenditures. This option has not been used to date;
however, it is an acceptable settlement tool. Before using
this settlement option, however, the Region should consider
the financial viability of the settling parties (i.e., will
they still exist at the time the delayed payments are due) and
the administrative cost to the Agency of sending out multiple
billings to many PRPs.
Example: Settling party agrees to pay their volumetric share
plus a 10% premium for future liability. The
parties will be billed at the conclusion of RD, and
at various stages during the RA. They would also
normally make an upfront payment toward past costs.
There are also options available for formalizing the agreement in
a settlement document.
o The de minimis settlement may be embodied in a global
settlement with the non-^e. minimis settling PRPs. This
agreement would be in a consent decree for the RD/RA. Many
times this also provides for the PRPs assumption of future
liability for the de minimis parties' share of the work in
exchange for receipt of a premium from the de minimis parties.
If there is a global settlement where the de minimis settlers
provide funds to the major generators, EPA must verify that
the de minimis parties satisfy the applicable requirements for
de minimis settlements in order to obtain a covenant not to
sue under Section 122(g).
Global settlements should be considered when settling a RD/RA
negotiation and a de roinimis negotiation simultaneously or
within a relatively short period of time. A global settlement
is advantageous for several reasons: 1) much of the
negotiations occur between the majors and the de minimis
partiiir, saving time and resources; 2) the agreement can, if
appropriate, be constructed so that the major PRPs receive a
portion of the settlement dollars from the de minimis parties
and th« money goes directly to the cost of the cleanup; 3) the
&£. minimis PRPs not only get a covenant not to sue, but may
also be able to negotiate an indemnification provision or may
otherwise be protected from liability by the major PRPs from
the governments "reopeners" such as the future liability
reopener.
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VII. NEGOTIATIONS AND SETTLEMENT
The negotiations required for a de minimis settlement should not
be resource intensive. The model consent decree and model order
provide useful language for the drafting of a site specific decree
or order. Negotiations should involve the entire case team, and
the appropriate Headquarters and DOJ personnel should be informed
about upcoming negotiations. The June 17, 1988 "Revision of CERCLA
Civil Judicial Settlement Authorities Under Delegations 14-13-B and
14-14-E" provides for delegation of Section 122(g)(l)(A)
settlements with generators with Headquarters concurrence required
for the first case in each Region unless otherwise exempted from
delegation by the June 17, 1988 revision (such as settlements which
are inconsistent with national policy). Headquarters consultation
will be retained for subsequent cases. DOJ approval is required
for all de minimis consent decrees and for de minimis
administrative consent orders concerning sites at which total past
and projected future response costs exceed $500,000, excluding
interest. (See §122(g)(4).) If DOJ approval is required, the DOJ
staff attorney should be contacted early in the development of the
case strategy to allow for DOJ participation in the development of
the settlement terms.
The most common document used when finalizing a de minimis
settlement separately from an RD/RA settlement is an administrative
order on consent.
The settlement may be embodied in a separate, de minimis only,
consent decree. This option is generally used when there is
ongoing litigation at the site.
In addition to these options, de minimis parties may, if
appropriate, be offered the option to join any non-de minimis
settlement in lieu of participating in a de minimis settlement.
?ION OF DE MINIM]
In most cases, a de minimis settlement is a "cashout". Therefore,
the case team must consider the disposition of "cashout" monies.
If the "cashout" is a dfi minimis settlement and is part of a global
Section 122 settlement, it may be appropriate to provide the future
cost component and its related premium to the parties implementing
the respond* action as provided for in Section 122(g)(5). However,
the settle** receiving "cashout" funds must assume the liability
of the 4fi ainimia parties contributing the monies.
If the non-d£ minimis parties are not expected to settle or are not
settling within a short timeframe, the total settlement dollars
will go to the Trust Fund or be divided between the Trust Fund and
the state, if the state is a party to the settlement and has a
response cost claim.
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If the "cashout" includes a past cost component, these monies are
to be counted as cost recovery and deposited for credit to the
invested portion of the Trust Fund. The future cost component and
the premlua component may be held in several ways which provide for
fund conservation and where possible the accrual of interest on the
settlement funds:
1) When immediate fund accessibility is not necessary, the
dollars should be deposited for credit to the invested
portion of the Trust Fund for later appropriation to the
Agency.
2) At State-lead sites, the dollars can be deposited to a
state managed escrow account or trust fund, where
safeguards exist that ensure that the money will be used
for the specific site response.
3) When EPA will be responsible for implementing the
response action or will be transferring funds to other
settlers and immediate fund accessibility is essential,
the dollars should be deposited for credit to the non-
invested portion of the Trust Fund. A site specific
"special account" will be established.
4) When a global settlement is expected, the dollars may be
temporarily deposited to a court managed escrow account
for future distribution to major settlers. Court managed
accounts should not be utilized for long term funds
management.
5) For global settlements reached between de minimis and
non-de minimis parties, the dollars can be deposited to
an EPA approved but PRP established and managed trust
fund or escrow account.
VIII. PURPOSE AMD USE OF THIS GUIDANCE
This guidance and any internal procedures adopted for its
implementation are intended solely as guidance for employees of the
U.S. Environmental Protection Agency. They do not constitute
rulemaking^by the Agency and may not be relied upon to create a
right or bjBMfit, substantive or procedural, enforceable by law or
in equity,7_By any person. The Agency may take action at variance
with this guidance or its internal implementing procedures.
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GUIDANCE DOCUMENTS
"Interim Guidelines for Preparing Nonbinding Preliminary
Allocation* of Responsibility" - (issued May 20, 1987, OSWER Dir.
19839.1 - published on May 28, 1987 at 52FR19919).
"Interim Guidance on Settlements with De Minimis Waste Contributors
under Section 122(g) of SARA" - (issued June 19, 1987, OSWER Dir.
#9834.7 - published on June 30, 1987 at 52FR24333).
"Interim Model CERCLA Section 122(g)(4) fig Minimis Waste
Contributor Consent Decree and Administrative Order on Consent" -
(issued on October 19, 1987, OSWER Dir. #9834.7-1A - published on
November 12, 1987 at 52FR43393).
"Guidance on Premium Payments in CERCLA Settlements" - (issued on
November 17, 1988, OSWER Dir. #9835.6 - Porter/Adams).
"Guidance on Landowner Liability under Section 107(a)(1) of CERCLA,
De Minimis Settlements under Section 122(g)(l)(B) of CERCLA, and
Settlements with Prospective Purchasers of Contaminated Property" -
(issued on June 6, 1989, OSWER Dir. #9835.9 - published on August
18, 1989 at 54FR34235).
"Compendium of CERCLA Response Selection Guidance Documents" -
OWPE
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