,322.
JUL 3 0
OSWER Directive #9834.7-10
MEMORANDUM
SUBJECT: Streamlined Approach for Settlements With De Minimis
Waste Contributors under CERCLA Section 122(g)(l)(A)
FROM:
TO:
Bruce M. Diamond, Director
Office of Waste Programs En
William A. White, Enforcement Counsel for SuperfUnd
Office of Enforcement
Waste Management Division Directors, Regions I-X
Regional Counsel, Regions I-X
This memorandum transmits to you the Agency's "Streamlined
Approach for Settlements With De Minimis Waste Contributors under
CERCLA Section 122(g)(1)(A)." The guidance supplements existing
guidance for de minimis waste contributor settlements and to the
extent applicable, supersedes existing guidance.
The guidance establishes the minimum level of information
necessary before a Region can consider a de minimis settlement,
provides a methodology to construct payment matrices in
appropriate circumstances, and encourages .Regions to take a more
active role in facilitating the de minimis settlement.
The guidance reflects input from the Regions, Headquarters
and the Department of Justice. We thank you for your assistance.
Attachment
cc: Superfund Branch Chiefs, Waste Management Division,
Regions I-X
Superfund Branch Chiefs, Office of Regional Counsel,
Regions I-X
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STREAMLINED APPROACH FOR SETTLEMENTS WITH
DE MINIMIS WASTE CONTRIBUTORS UNDER
CERCLA SECTION 122(g)(l)(A)
This guidance sets forth the Agency's new approach to
completing de minimis settlements. This memorandum expands
upon the information provided in the "Superfund Administrative
Improvements - Final Report (June 23, 1993)."
Under Section 122(g) of CERCLA the Agency may settle with
persons who contributed to a facility hazardous substances which
are minimal, both in terms of volume and toxicity or other
hazardous effects, relative to other hazardous substances at a
site. De minimis settlements may only address a minor amount of
response costs at a site.
To encourage more, early, and expedited settlements, and
reduce the transaction costs of all parties, the Agency
identified several actions to improve the de minimis program
during our review of administrative improvements to Superfund.
We are changing our existing guidance to simplify the
administrative determinations for finding a PRP eligible for a de
minimis settlement, and provide opportunities for streamlining
the de minimis settlement process.
Eligibility Determinations
The Agency's previous guidance recommended that a de minimis
waste contributor settlement should not be considered until a
waste-in list and volumetric ranking is available. It is no
longer necessary to prepare a waste-in list or volumetric ranking
before considering a party's eligibility for a de minimis
settlement. To determine whether a PRP is eligible for a waste
contributor de minimis settlement, a Region need only, assess the
individual PRP's waste contribution relative to the volume of
waste at the site. Comparing these two pierces of information
allows the Region to determine whether that party's contribution
was minor compared to other hazardous substances at the facility.
Regions should use available documentary evidence to identify the
individual amount of contribution. Regions nay estimate the
volume of waste present at the site using several methods,
including review of site volumetric records, process engineering
information, or site sampling results. The volumetric estimate
To the extent this memorandum changes past Agency
procedures or policies this memorandum supersedes those
documents, and Regions should follow the directives set forth
herein. Otherwise, past guidance on de minimis waste contributor
settlements remains in effect.
2 Generally, the Region should then divide the individual
contribution by the volume of waste at the site; this establishes
the PRPs volumetric percentage of waste contribution.
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should reflect the Region's understanding of the waste present at
the site; the amount does not need to be a precise figure. In
circumstances where it is particularly difficult to quantify the
waste amount (especially early in the response process) a Region
may identify the volumetric estimate as a range (e.g., between
50,000 and 100,000 gallons, or batteries, etc.).
While it is not necessary to prepare a waste-in list or
volumetric ranking for determining de minimis eligibility, when
this information is available it should be considered in making
the de minimis eligibility determination. Consistent with the
Agency's information release policy, Regions should release any
waste-in list and volumetric ranking to all PRPs.
It is important to reemphasize the Agency's approach to the
toxicity component of the de minimis determination. In both our
1987 and 1989 de minimis guidances the toxicity finding is met
when the hazardous substances are not "significantly more toxic
and not of significantly greater hazardous effect" than other
hazardous substances at the facility. For example, if the
hazardous substances at a site are of similar toxicity and
hazardous nature, a Region does not have to engage in further
evaluation to make the toxicity determination.
Once the above information is available, a Region needs to
determine the appropriate cutoff for de minimis and non-de
minimis parties at the site. This guidance does not establish a
set percentage for eligibility for a de minimis waste contributor
settlemen^; we believe that decision is primarily site-
specific.
Where a Region identifies the volume of the waste at the
site as a range, they should use the lower estimate for
establishing the eligibility of the PRP for a de minimis
settlement. This ensures that the party is truly de minimis.
"Releasing Information to Potentially Responsible Parties
at CERCLA Sites," OSWER Directive 9835.12 (March 1, 1990);
"Revised Policy on Discretionary Information Release Under
CERCLA," OSWER Directive 9835.12-Ola (March 31, 1993).
"Interim Guidance on Settlements with De Minimis Waste
Contributors under Section 122(g) of SARA," OSWER Directive
9834.7 (June 19, 1987); "Methodologies for Implementation of
CERCLA Section 122 (g) (1) (A) De Minimis Waste Contributor
Settlements," OSWER Directive 9834.7-1B (December 20, 1989).
Please note that statistically (of the de minimis
settlements entered to date), the de minimis cutoff has ranged
from .07% to 10.0%, the mean was 1.059%, and the median was 1.0%.
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For example, if a PRP contributed 500 batteries to a site where
the Region estimates that between 50,000 and 100,000 batteries
are present, the PRP's assigned volumetric percentage should be
1.0% (500/50,000).
In determining the cutoff point, the Region needs to make a
reasoned judgment regarding the effect of a possible settlement
on non-de minimis parties. We recognize that there may be a
certain amount of imprecision, particularly in light of the
limited amount of volumetric information available at many sites.
Detailed information and extensive supporting documentation are
not necessary for this determination, although the Region will
need to explain the basis for the identified cutoff (i.e., what
factors they considered). If information available at the time
of settlement indicates that there is or is likely to be a large
or very large orphan share, the Region should take this into
consideration in formulating the de minimis settlement (e.g., by
adjusting the premium upward). In addition, a de minimis
settlement should not foreclose the Region's ability to pursue an
enforcement action against the non-de minimis parties to perform
or finance the remedy.
Streamlining the Payment Calculation
A. Baseline Payment
Consistent with past guidance we suggest establishing the
baseline payment amount by applying several factors: the
individual's percentage of waste contribution to the site, the
total past costs expended and an estimate of future costs. To
establish the future cost estimate, Regions are encouraged to use
the "Methodology for Early De Minimis Waste Contributor Set-
tlements under CERCLA Section 122(g)(1)(A)," OSWER Directive
9834.7-1C (June 2, 1992). This guidance reaffirms the
methodology contained therein for estimating future costs, as
well as the Agency's commitment to developing early estimates of
future costs.
If a Region can establish an individual's percentage,
identify past costs and estimate future costs with relative ease,
based on the available information (i.e., without expending
substantial resources or time to collect the relevant data), that
is the preferred approach for establishing the baseline payment
amount. There may be situations where there is uncertainty in
To identify the past and future cost baseline payment a
Region would first multiply the individual volumetric percentage
by the total past cost amount; this provides a PRP's pro-rata
share of past costs. A similar multiplication would be made to
establish the pro-rata share of future costs. The pro-rata share
of the past and future cost components are added together to form
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the overall volume of waste at the site (used to establish the
individual percentage) or where the future estimate of site costs
is particularly difficult to establish other than to estimate the
amount within a range (e.g., the remedy cost estimate is between
10-20 million dollars). In such situations, a Region may
construct a payment matrix to assist in establishing a PRP's
baseline payment amount. See Attachment 1 for an example payment
matrix.
B. Premium
A Region should assign an appropriate premium to the
baseline future payment amount. The amount of the premium will
often bear close relation to the scope of the covenant not to sue
provided to the de minimis settlors. Of the de minimis
settlements reached to date, the premium assigned has generally
ranged from 50 - 100%. In an effort to streamline the process,
Regions may assign a 50% premium where PRPs agree to a covenant
not to sue which contains a remedy cost re-opener. Where the
Region offers a covenant not to sue without a remedy cost re-
opener (and thus provides the settlors with more finality), the
premium may be closer to 100%. Regions should consider offering
both options in the same settlement document (i.e., a menu
approach). A Region should adjust these numbers to reflect other
uncertainties or concerns. For example, a Region should increase
the premium if the settling parties decline a previous settlement
offer. On the other hand, site conditions may justify a lower
premium.
Facilitating the De Minimis Agreement
To facilitate the de minimis settlement process, Regions may
settle with individual de minimis parties, settle after a de
minimis group forms, or settle with individual de minimis parties
and combine the signature pages into one settlement document.
Although the Agency prefers settling with de minimis parties as a
group because it conserves government resources, Regions should
consider offering individual de minimis settlements without
waiting for a de minimis group to form, as this will reduce the
de minimis parties' transaction costs incurred while waiting for
the group to form. To reduce resource implications for de
minimis parties, Regions should actively assist in forming the de
minimis group once there is a potential for a de minimis
the baseline payment amount.
See "Guidance on Premium Payments in CERCLA Settlements,"
OSWER Directive 9835.6 (November 17, 1988).
8 Of the 47 de minimis settlements with available premium
data, 29 settlements used a premium between 50 and 100%.
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settlement. It may be appropriate to offer the use of an
alternate dispute resolution (ADR) professional to assist in the
formation of the group and dissemination of information.
Before the Region tenders a de minimis settlement offer
there are several things the Region should consider doing to
improve the chances of the offer's acceptance as well as to avert
potential controversy. Frequently, de minimis parties are
unaware of the difference between a demand letter from a settling
PRP and an offer letter from the government. Moreover, some de
minimis parties are unfamiliar with the benefits that accrue from
settling with the government, such as the covenants not to sue,
contribution protection and reduced transaction costs. Members
of Congress and other elected officials are also frequently
concerned about the effect of Superfund on their constituents and
thus may be another important audience for information about
impending de minimis settlements. Therefore, a Region should
consider developing a communication strategy prior to initiating
settlement discussions. In addition, information concerning
proposed de minimis settlements should be provided to the non-de
minimis parties.
Elevating Issues
Under existing delegations Regions must consult with the
Office of Enforcement and Office of Waste Program^ Enforcement
for all de minimis waste contributor settlements. Under
Section 122(g)(4) of CERCLA, the approval of the Department of
Justice is necessary for administrative de minimis settlements
when site costs exceed $500,000; the Department must approve all
Consent Decrees regardless of site costs. To provide assistance
in evaluating potential de minimis settlements before they are
transmitted to the PRPs, Headquarters and the Department of
Justice have each established a taskforce. Senior managers
will also be available to discuss proposed settlements early in
the process. Finally, Headquarters and the Department of Justice
have agreed to provide rapid elevation of key decisions regarding
the implementation of the new de minimis orocedures.
g
A model communications strategy for use in de minimis
settlements is forthcoming that includes a model notice letter
for de minimis parties.
Current Agency guidance requires Headquarters
concurrence on the first de minimis waste contributor settlement
in each Region. Every Region has completed at least one de
minimis waste contributor settlement. Therefore, while only
consultation is necessary it is important to begin discussions
with Headquarters early to ensure a quick resolution of issues.
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Disclaimer
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
a rulemaking by the Agency and may not be relied upon to create a
specific right or a benefit, substantive or procedural,
enforceable at law, or in equity, by any person. The Agency may
take action at variance with this guidance or its internal
implementing procedures.
Further Information
For further information concerning this document, please
contact Gary Worthman in the Office of Waste Programs Enforcement
at (703) 603-8951 or Ken Patterson in the Office of Enforcement
at (202) 260-3091.
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ATTACHMENT 1
Set forth below is an example of a payment matrix a Region
might construct for determining a de minimis party's baseline
payment amount (i.e., the payment before a premium is assessed).
In this example, both the individual contribution and total site
costs are expressed in ranges. There may be situations where
only one of these factors will be uncertain, thus, a matrix would
only have one component expressed as a range while the other is
expressed as a set number.
Example De Minimis Payment Matrix
Total Site Costs
Individual
Contribution
CLASS IA:
.001% - .009%
CLASS IB:
.010% - .090%
CLASS 1C:
.100% - .200%
CLASS II:
.210% - .400%
CLASS III:
.410% - .600%
CLASS IV:
.610% - .800%
CLASS V:
.810% - 1.00%
$0-10 M
$250
$2,500
$7,500
$15,000
$25,000
$35,000
$45,000
$10-20M
$750
$7,500
$22,500
$45,000
$75,000
$105,000
$135,000 ,
$20-30M
$1,250
$12,500
$37,500
$75,000
$125,000
$175,000
$225,000
$30-40M
$1,750
$17,500
$52,500
$105,000
$175,000
$245,000
$315,000
In designing a matrix, it may be useful to present total
site costs as one figure, or set up separate matrices for past
and future costs. The example matrix provides payment amounts
for five classes of possible de minimis parties, ranging from
.001% to 1.00% contribution. Classes II through V represent
ranges of equivalent size. We subdivided Class I into three
parts in order to tailor payment amounts more closely to the
contribution for the smallest de minimis waste contributors.
Percentage contributions in four decimal places that end
in 5 or greater should be rounded up to the next thousandth
(e.g., .0205% becomes .021%).
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In our example, eligible de minimis parties contributed between
.001% and 1.0%.
The example payment amounts in matrix were calculated simply
by multiplying the individual contribution (expressed as a
percent of the overall waste at the site) by the estimated total
site costs. The payment amount was calculated using the average
total site cost in each range and the average percent
contribution in each Class. For example, the $250 payment for a
Class I settlor at sites that range from $0-10 million was
calculated as follows: $5 million x .00005 = $250.
2 The range of contributions provided in this example was
selected for two reasons. First, a separate draft guidance that
focuses on de micromis settlements may suggest that parties who
contributed less than .001% should be treated as de micromis
rather than de minimis parties. Second, the example range
extends only to 1.0% because the average cutoff for eligibility
in de minimis settlements to date has been 1.0%.
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