'Interim CERCLA Settlement Policy                                           http://es.epa.gov/oeca/osre/841205 .html
      Interim CERCLA Settlement Policy
              ****************  DISCLAIMER  ****************
      The following electronic file contains the  text of a policy
      issued by the U.S. Environmental Protection Agency  (EPA).
      This file has been reformatted to make it available to you
      in electronic form.  Formatting (margins, page numbering,
      etc.)  may be  different than the original hard copy to make
      the document  more easily readable on your computer screen.
      Where graphics have been removed,  the editor has noted it
      in the text.   This electronic file is a courtesy copy of
      the official  policy.  If any discrepancies  are found, the
      file copy (hard copy original) which resides at the U.S.
      EPA provides  the official policy.
            ***************************

      December 5, 1984                              OSWER Directive # 9835.0

                    UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                              WASHINGTON, D.C. 20460


      MEMORANDUM

      SUBJECT:   Interim CERCLA Settlement Policy

      From:      Bee M. Thomas, Assistant Assistant Administrator
                Office of Solid Waste and Emergency Response

                Courtney M. Price, Assistant Administrator
                Office of Enforcement and Compliance Monitoring

                F.  Henry Habicht, II, Assistant Attorney General
                Land and Natural Resources Division
                Department of Justice

      To:       Regional Administrators, Regions  I-X

           This memorandum sets forth the general principles governing private
      party settlements under CERCLA, and specific procedures for the Regions
      and Headquarters to use in assessing private party settlement proposals.
      It addresses  the following topics:

      1.   general  principles for EPA review of private-party cleanup
           proposals;

      2.   management guidelines for negotiation;

      3.   factors  governing release of information to potentially responsible
           parties;

      4.   criteria for evaluating settlement offers;
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       5.    partial  cleanup proposals;

       6.    contribution among responsible parties;

       7.    releases and covenants  not  to sue,-

       8.    targets  for litigation:

       9.    timing for negotiations;

       10.   management and review of  settlement negotiations.


       APPLICABILITY

            This memorandum incorporates  the draft Hazardous Waste Case
       Settlement Policy,  published in  draft in December of 1983.   It is
       applicable not only to multiple  party cases but  to all  civil hazardous
       waste inforcement cases under  Supperfund.   It is generally  applicable to
       imminent hazard enforcement  actions under section 7003  of RCRA.

            This policy establishes criteria for evaluating private party
       settlement proposals to conduct  or contribute to the funding of response
       actions, including removal and remedial  actions.   It also addresses
       settlement proposals to contribute to funding after a response action
       has been completed.   It does not address private-party  proposals to
       conduct remedial investigations  and feasibility  studies.  These
       proposals are to be evaluated  under criteria  established in the policy
       guidance from Lee M.  Thomas, Assistant Administrator, Office of Solid
       Waste and Emergency Response,  and  Courtney Prince,  Assistant
       Administrator,  Office of Enforcement and Compliance Monitoring entitled
       "Participation of Potentially  Responsible Parties in Development of
       Remedial Investigations and  Feasibility  Studies  under CERCLA".   (March
       20, 1984)

       I.    GENERAL  PRINCIPLES

            The Governments's goal  in implementing CERCLA is to achieve
       effective and expedited cleanup  at as many uncontrolled hazard waste
       facilities as possible.   To  achieve this goal, the Agency is committed
       to a  strong and vigorous enforcement program.  The Agency has made major
       advances in securing cleanup at  some of  the nations's worst hazardous
       waste sites because of its demonstrated  willingness to  use  the Fund and
       to pursue administrative and judicial enforcement actions.   In addition,
       the Agency has  obtained key decisions, on such issues as joint and
       several liability,  which have  further advanced its enforcement efforts.

            The Agency recognizes, however,  that Fund-Financed cleanups,
       administrative  action and litigation will not be sufficient to
       accomplish CERCLA1s goals, and that voluntary cleanups  are  essential to
       a successful  program for cleanup of the  nations's hazardous waste sites.
       The Agency is therefore re-evaluating its settlement policy,  in light of
       three years experience with negotiation  and litigation  of hazardous
       waste cases,  to remove or minimize if possible the impediments to
       voluntary cleanup.

            As a result of this reassessment, the Agency has identified the
       following general principles that  govern its  Superfund  enforcement
       program.
                                     ATTACHMENT
      DEC 5 1984
      MEMORANDUM
                    UNITED STATES  ENVIRONMENTAL PROTECTION AGENCY
                                WASHINGTON,  D.C.  20460
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 Interim CERCLA Settlement Policy                                             http://es.epa.gov/oeca/osre/841205 .html
       SUBJECT:   Interim CERCLA Settlement  Policy

       FROM:      Lee M.  Thomas,  Assistant Administrator  /s/
                 Office  of  Solid Waste  and  Emergency Response

                 Courtney M Price, Assistant Administrator /s/
                 Office  of  Enforcement  and  Compliance Monitoring

                 F. Henry Habicht, II,  Assistant  Attorney General  /s/
                 Land and Natural Resources Division
                 Department of  Justice

       TO:        Regional Administrators, Regions I-X

           This  memorandum sets forth  the  general principles governing  private
       party settlements  under  CERCLA,  and  specific procedures  for the Regions
       and Headquarters  to  use  in assessing private party settlement proposals.
       It addresses the  following topics:

       1.   general principles  for EPA  review of  private-party  cleanup
           proposals;

       2.   management guidelines for negotiation;

       3.   factors governing release of information to  potentially responsible
           parties;

       4.   criteria for  evaluating settlement  offers;

       5.   partial cleanup proposals;

       6.   contribution  among  responsible  parties;

       7.   releases and  covenants not  to sue;

       8.   targets for litigations;

       9.   timing for negotiations;

       10.  management and  review of settlement negotiations.

      APPLICABILITY

           This memorandum incorporates the draft Hazardous Waste Case
      Settlement Policy, published in  draft in December of 1983.   It is
      applicable not only  to multiple  party cases but to all civil hazardous
      waste enforcement  cases  under Superfund.   It is generally applicable  to
      imminent hazard enforcement actions  under  section 7003 of RCRA.

           This plicy establishes criteria for evaluating private party
      settlement proposals to  conduct  or contribute to  the funding of response
      actions, including removal and remedial  actions.  It also addresses
      settlement proposals to  contribute to funding after a response action
      has been completed.   It  does not address private-party proposals  to
      conduct remedial investigations  and  feasibility studies.  These
      proposals are to be  evaluated under  criteria established in the policy
      guidance from Lee  M.  Thomas, Assistant Administrator, Office of Solid
      Waste and Emergency  Response, and Courtney Price, Assistant
      Administrator, Office of  Enforcement and Compliance Monitoring entitled
       "Participation of  Potentially Responsible  Parties in Development  of
      Remedial Investigations  and Feasibility  Studies under CERCLA".   (March
      20, 1984)

      I. GENERAL PRINCIPLES

           The Government's goal in implementing CERCLA is to  achieve
      effective and expedited  cleanup  at as many uncontrolled  hazardous waste
      facilities as possible.   To achieve  this goal, the Agency is committed



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       to a strong and vigorous enforcement program.   The Agency has made major
       advances in securing cleanup at some of the nation's worst hazardous
       waste  sites because of its demonstrate willingness to use the Fund and
       to pursue administrative and judicial enforcement actions.  In addition,
       the Agency has obtained key decisions,  on such issues as joint and
       several  liability,  which have further advanced its enforcement efforts.

           The Agency recognizes,  however,  that Fund-financed cleanups,
       administrative action and litigation will not  be sufficient to
       accomplish CERCLA's goals,  and that voluntary  cleanups are essential to
       a successful program for cleanup of the nations's hazardous waste  sites.
       The Agency is therefore re-evaluating its settlement policy,  in light of
       three  years experience with negotiation and litigation of hazardous
       waste  cases,  to remove or minimize if possible the impediments to
       voluntary cleanup.

           As  a result of this reassessment,  the Agency has identified the
       following general principles that govern its Superfund enforcement
       program:

           The goal of the Agency in negotiating private party cleanup and in
           settlement of  hazardous waste cases has been and will continue to
           be  to obtain complete cleanup by the responsible parties,  or
           collect 100% of the costs of the cleanup  action.

           Negotiated private party actions are essential to an effective
           program for cleanup of  the nations's hazardous waste sites.   An
           effective program depends on a balanced approach relying on a mix
           of  Fund-financed cleanup,  voluntary agreements reached through
           negotiations,  and litagation.   Fund-financed cleanup and litigation
           under CERCLA will not in themselves be sufficient to assure the
           success of this cleanup effort.   In addition,  expeditious cleanup
           reached through negotiated settlemeents is preferable to protracted
           litigation.

           A strong enforcement program is  essential to encourage voluntary
           action by PRPs.   Section 106 actions are  particularly valuable
           mechanisms for compelling cleanups.   The  effectiveness of
           negotiation is integrally related to the  effectiveness of
           enforcement and Fund-financed cleanup.  The demonstrated
           willingness of the Agency to use the Fund to clean up sites and to
           take  enforcement action is bur most important tool for achieving
           negotiated settlements.

           The  liability  of potentially responsible  parties is strict, joint
           and several, unless they can clearly demonstrate that the harm at
           the  site is divisible.   The recognition on the part of responsible
           parties  that they may be jointly and severally liable is a valuable
           impetus  for these parties to reach the agreements that are
           necessary for  successful negotiations.  Without such an impetus,
           negotiations run a risk of delay because  of disagreements over the
           particulars of each responsible  party's contribution to the
           problems at the site.

           The Agency recognizes  that the factual strengths and weaknesses of
           a particular case are  relevant in evaluating settlement proposals.
           The Agency also recognizes that  courts may consider differences
           among defendants in allocating payments among parties held jointly
           and  severally  liable under CERCLA.   While these are primarily the
           concerns of PRPs,  the Agency will also consider a PRP's
           contribution to problems at the  site,  including contribution  of
           waste,  in assessing proposals for settlement and in identifying
           targets  for litigation.

           Section 106 of CERCLA provides courts with jurisdiction to grant
           such  relief as the public interest and the equities of the case may
           require.   In assessing  proposals for settlement and identifying
           targets  for litigation,  the Agency will consider aggravating  and
           mitigating factors and  appropriate equitable factors.



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            In many circumstances,  cleanups  can be  started more quickly when
            private parties  do  the  work  themselves,  rather than provide money
            to the  Fund.   It is therefore preferable for private parties to
            conduct cleanups themselves, rather than simply provide  funds  for
            the  States  or  Federal Government to conduct the cleanup.

            The  Agency  will  create  a  climate that is receptive to private  party
            cleanup proposals.   To  facilitate negotiations, the Agency will
            make certain information  available to private parties.   PRPs will
            normally have  an opportunity to  be involved in the studies used to
            determine the  appropriate extent of remedy.  The Agency  will
            consider settlement proposals for cleanup of less than 100% of
            cleanup activities  or cleanup costs.  Finally, upon settling with
            cooperative parties, the  government will vigorously seek all
            remaining relief, including  costs, penalties and treble  damages
            where appropriate,  from parties  whose recalcitrance made a complete
            settlement  impossible.

            The  Agency  anticipates  that  both the Fund and private resources may
            be used at  the same site  in  some circumstances.  When the Agency
            settles for less than 100% of cleanup costs, it can use  the Fund to
            assure  that site cleanup  will proceed expeditiously, and then  sue
            to recover  these costs  from  nonsettling responsible parties.   Where
            the  Federal government  accepts less than 100% of cleanup costs and
            no financially viable responsible parties remain, Superfund monies
            may  be  used to make up  the difference.

            The  Agency  recognizes the value  of some measure of finality in
            determinations of liability  and  in settlements generally.  PRPs
            frequently  want  some certainty in return for assuming the costs of
            cleanup, and we  recognize that this will be a valuable incentive
            for  private party cleanup.   PRPs frequently seek a final
            determination  of liability through contribution protection,
            releases or covenants not to sue.  The  Agency will consider
            releases from  liability in appropriate  situations, and will also
            consider contribution protection in limited circumstances.  The
           Agency  will also take aggressive enforcement action against those
           parties whose  recalcitrance  prevents settlements.  In bringing cost
            recovery actions, the Agency will also  attempt to raise  any
            remaining claims under  CERCLA section 106, to the extent
           practicable.

           The  remainder  of this memorandum sets forth specific policies  for
      implementing these  general principles.

           Section II  sets  forth the mangement guidelines for negotiating with
      less than all responsible parties for partial settlements.  This section
      reflects  the Agency's willingness to  be flexible by considering offers
      for cleanup  of less than 100%  of  cleanup activities or costs.

           Section II  sets  forth guidelines on the release of information. The
      Agency recognizes that adequate information  facilitates more  successful
      negotiations.  Thus,  the Agency will  combine a vigorous program for
      obtaining the data  and information necessary to facilitate settlements
      with a program for  releasing information to  facilitate communications
      among responsible parties.

           Sections IV and  V discuss the criteria  for evaluating partial
      settlements.  As noted above,  in  certain circumstances the Agency will
      entertain settlement  offers  from  PRPs which  extend only to part of  the
      site or part of  the costs of cleanup  at a site.  Section IV of this memo
      sets forth criteria to be used in evaluating such offers.  These
      criteria  apply to all cases.   Section V sets forth the Agency's policy
      concerning offers to  perform or pay for discrete phases of an approved
      cleanup.

           Sections VI and  VII relate to contribution protection and releases
      from liability.  Where appropriate, the Agency may consider contribution



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      protection and  limited releases  from liability  to help provide  some
      finality to settlements.

            Section VIII  sets forth criteria for  selecting  enforcement cases
      and  identifying targets for  litigaion.  As discussed above,  effective
      enforcement depends  on careful case  selection and the careful selection
      of targets for  litigation.   The  Agency will apply criteria  for  selection
      of cases to focus  sufficient resources on  cases that provide the
      broadest possible  enforcement impact.   In  addition,  targets for
      litigation will be identified in light of  the willingness of parties to
      perform  voluntary  cleanup, as well as conventional litigation management
      concerns.

            Section IX sets forth the requirements governing the timing of
      negotiations and section X the provisions  for Headquarters  review.
      These sections  address the need  to provide the  Regions with increased
      flexibility in  negotiations  and  to change  Headquarters review in order
      to expedite site cleanup.

      II.  MANAGEMENT  GUIDELINES FOR NEGOTIATION

            As  a  guideline,  the Agency  will negotiate  only  if the  initial offer
      from PRPs  constitutes a substantial  proporation of the costs of cleanup
      at the site, or a  substantial portion of the needed  remedial action.
      Entering into discussions for less than a  substantial proportion of
      cleanup  costs or remedial action needed at the  site, would  not  be an
      effective  use of government  resources.  No specific  numerical threshold
      for  initiating  negotiations  has  been established.

            In  deciding whether to  start negotiations,  the  Regions should weigh
      the  potential resource demands for conducting negotiations  against the
      likelihood of getting 100% of costs  or complete remedy.

            Where the  Region proposes to negotiate for a partial settlement
      involving  less  than  the total costs  of cleanup,  of a complete remedy,
      the  Region should  prepare as part of its Case Negotiations  Strategy a
      draft evaluation of  the case using the settlement criteria  identified in
      section  IV.  The draft should discuss how  each  of the factors in section
      IV applies to the  site in question,  and explain why  negotiations for
      less  than  all of the cleanup costs,  or a partial remedy, are
      appropriate.  A copy of the  draft whould be forwarded to Headquarters.
      The  Headquarters review will be  used to identify major issues of
      national significance or issues  that may involve significant legal
      precedents.

            In  certain other categories of  cases,  it may be appropriate for the
      Regions  to enter into negotiations with PRPs, even though the offers
      from PRPs  do not represent a substantial portion of  the costs of
      cleanup.   These categories of cases  include:

                 adminstrative settlements  of cost recovery actions where total
                 cleanup  costs were less tha $200,000;

               .  claims in  bankruptcy;

                 administrative settlements with  de minimis contributors of
                 wastes.

           Actions subject to this exception are administrative settlements of
      cost  recovery cases  where all the work at  the site has been completed
      and  all  costs have been incurred.  The figure of $200,000 refers to all
      of the costs of cleanup.  The Agency is preparing more detailed guidance
      on the appropriate form of such  settlement agreements, and  the  types of
      conditions  that must be included.

           Negotiation of  claims in bankruptcy may involve both present
      owners,  where the  United States  may  have an administrative  costs claim,
      and  other  parties  such as past owners or generators, where  the  United
      States may be an unsecured potential creditor.   The  Regions should avoid



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       becoming  involved in bankruptcy proceedings  if  there  is  little
       likelihood of recovery,  and should recognize the  risks involved in
       negotiating without  creditor status.   It  may be appropriate  to  request
       DOJ  filing of a proof of claim.   Further  guidance is  provided in the
       Memorandum from Courtney Price  entitled "Information  Regarding  CERCLA
       Enforcement Against  Bankrupt Parties,"  dated May  24,  1984.

            In negotiating  with de minimis parties,  the  Regions should limit
       their efforts to low volume,  low toxicity disposers who  would not
       normally  make a significant contribution  to  the costs of cleanup in any
       case.

            In considering  settlement  offers  from de minimis contributors, the
       Region should normally focus on achieving cash  settlements.  Regions
       should generally not enter into negotiations for  full administrative  or
       judicial  settlements with releases, contribution  protection, or other
       protective clauses.   Substantial resources should not be invested in
       negotiations with de minimis contributors, in light of the limited costs
       that  may  be recovered,  the time needed to prepare the necessary legal
       documents,  the  need  for Headquarters review,  potential res judicata
       effects,  and other effects that de minimis settlements may have on the
       nature of the case remaining to the Government.

            Partial settlements may also be considered in situations where the
       unwillingness of a relatively small group of parties  to  settle  prevents
       the development of a proposal for a substantial portion  of costs or the
       remedy.   Proposals for settlement in these circumstances should be
       assessed  under  the criteria set forth  in  section  IV.

            Earlier versions of this policy included a threshold for
       negotiations, which  provided that negotiations  should not be commenced
       unless an offer was  made to settle for at least 80% of the costs of
       cleanup,  or of  the remedial action.  This threshold has  been eliminated
       from  the  final  version of this  policy.  It must be emphasized that
       elimination of  this  threshold does not mean  that  the  Agency  is  therefore
       more  willing to accept offers for partial settlement.  The objective  of
       the Agency is still  to obtain complete cleanup  by PRPs,  or 100% of the
       costs of  cleanup.

       III.  RELEASE OF INFORMATION

            The  Agency will release information  concerning the  site to PRPs  to
       faciltate discussions for settlement among PRPs.   This information will
       include:

                 identity of notice letter recipients;

                 volume and nature of  wastes  to  the extent indentified as sent
                 to the site;

                 ranking by volume of  material sent to the site, if available.

            In determining  the  type of information  to  be released,  the Region
       should consider the  possible impacts on any  potential litigation.  The
       Regions should  take  steps to assure protection  of confidential  and
       deliberative materials.   The Agency will  generally not release  actual
       evidentiary material.   The Region should  state  on each released summary
       that  it is  preliminary,  that it was furnished in  the  course  of
       compromise  negotiations  (Fed. Rules of Evidence 408), and that  it is  not
       binding on the  Federal Government.

            This information release should be preceded  by and  combined with a
       vigorous  program for collecting information  from  responsible parties. It
       remains standard practice for the Agency  to  use the information
       gathering authorities of RCRA and CERCLA  with respect to all PRPs at  a
       site.  This information release should generally  be conditioned on a
       reciprocal  release of information by PRPs.   The information  request need
       not be simultaneous,  but EPA should receive  the information  within
       reasonable  time.



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       IV.  SETTLEMENT  CRITERIA

           The objective of negotiations  is  to  collect  100% of cleanup costs
       or complete cleanup  from  responsible parties.  The Agency recognizes
       that, in narrowly limited circumstances,  exceptions to this goal may be
       appropriate, and has established criteria for determining where such
       exceptions are allowed.   Although the  Agency will consider offers of
       less than 100% in accordance with this policy, it will do so in light of
       the Agency's position, reinforced by recent court decisions, that PRP
       liability is strict, joint and several unless it  can be shown by the
       PRPs that injury at  a site is clearly  divisible.

           Based on a  full evaluation of  the facts and  a comprehensive
       analysis of all  of the listed criteria, the Agency may consider
       accepting offers of  less  than 100 percent.  Rapid and effective
       settlement depends on a thorough evaluation, and  an aggressive
       information collection program is necessary to prepare effictive
       evaluations.  Proposals for less than  total settlement should be
       assessed using the criteria identified below.

       1.   Volume of wastes contributed to site by each PRP

           Information concerning the volume of wastes  contributed to the site
       by PRPs should be collected, if available, and evaluated in each case.
       The volume of wastes is not the only criterion to be considered, nor may
       it be the most important.  A small  quantity of waste may cost
       proportionately  more to contain or  remove than a  larger quantity of a
       different waste.  However, the volume  of  waste may contribute
       significantly and directly to the distribution of contamination on the
       surface and subsurface  (including groundwater), and to the complexity of
       removal of the contamination.  In addition, if the properties of all
       wastes at the site are relatively equal,  the volume of wastes
       contributed by the PRPs provides a  convenient, easily applied criterion
       for measuring whether a PRP's settlement  offer may be reasonable.

           This does not mean,  however, that PRPs will be required to pay only
       their proportionate share based on  volume of contribution of wastes to
       the site.  At many sites,  there will be wastes for which PRPs cannot be
       identified.  If  identified, PRPs may be unable to provide funds for
       cleanup.  Private party funding for cleanup of those wastes would,
       therefore, not be available if volumetric contribution were the only
       criteria.

           Therefore,  to achieve the Agency's goal of obtaining 100 percent of
       cleanup or the cost of cleanup, it  will be necessary in many cases to
       require a settlement contribution greater than the percentage of wastes
       contributed by each PRP to the site.   These costs can be obtained
       through the application of the theory  of  joint and several liability
      where the harm is indivisible, and  through application of these criteria
       in evaluating settlement  proposals.

       2.   Nature of the wastes contributed

           The human,  animal and environmental  toxicity of the hazardous
       substances contributed by the PRPs, its mobility, persistence and other
      properties are important  factors to consider.  As noted above, a small
      amount of wastes, ora highly mobile waste, may cost more to clean up,
      dispose, or treat than less toxic or relatively immobile wastes.  In
      addition, any disproportionate adverse effects on the environment by the
      presence of wastes contributed by those PRPs should be considered.

           If a waste  contributed by one  or  more of the parties offering a
      settlement disproportionately increases the costs of cleanup at the
      site, it may be  appropriate for parties contributing such waste to bear
      a larger percentage of cleanup costs than would be the case by using
      solely a volumetric basis.

      3.   Strength of evidence tracing the  wastes at the site to the settling



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           parties

           The  quality and quantity of-the  Government's  evidence  connecting
       PRPs to the wastes at the  site obviously affects the  settlement value  of
       the Government's case.   The  Government must  show,  by  a preponderunce of
       the evidence, that the PRPs  are connected with  the wastes in  one  or more
       of the ways provided in Section 107 of CERCLA.  Therefore,  if the
       Government's  evidence against a particular PRP  is  weak, we  should weigh
       that weakness in evaluating  a settlement offer  from that PRP.

           On the other hand,  where indivisible harm  is  shown to  exist,  under
       the theory of joint and several liability the Government is in a
       position  to collect 100% of  the cost  of  cleanup from  all parties  who
       have contributed to a site.   Therefore,  where the  quality and quantity
       of the Government's evidence appears  to  be strong  for establishing the
       PRP's liability,  the Government should rely  on  the strength of its
       evidence  and  not decrease  the settlement value  of  its case.   Discharging
       such PRPs from  liability in  a partial settlement without obtaining a
       substantial contribution may leave the Government  with non-settling
       parties whose involvement  at the  site may be more  tenuous.

           In any evaluation of  a  settlement offer, the  Agency should weigh
       the amount of information  exchange that  has  occurred  before the
       settlement offer.   The more  the Government knows about the  evidence it
       has to connect  the settling  parties to the site, the  better this
       evaluation will  be.   The information  collection provisions  of RCRA
       and/or CERCLA should be used to develop  evidence prior to preparation  of
       the evaluation.

       4.   Ability  of  the settling parties  to  pay

           Ability  to  pay is not a defense  to  an action  by  the Government.
       Nevertheless, the evaluation of a settlement proposal should  discuss the
       financial condition of that  party, and the practical  results  of pursuing
       a party for more than the  Government  can hope to actually recover.  In
       cost recovery actions it will be  difficult to negotiate a settlement for
       more than a party's assets.   The  Region  should  also consider  allowing
       the party to  reimburse the Fund in reasonable installments  over a period
       of time,  if the  party is unable to pay in a  lump sum, and installment
       payments  would benfit the  government.  A structured settlement providing
       for payments  over time should be  at a payment level that takes into
       account the party's cash flow.  An excessive amount could force a party
       into bankruptcy,  which will  of course make collection very  difficult.
       See the memorandum dated August 26, 1983, entitled "Cost Recovery
       Actions under Section 107  of CERCLA"  for additional guidance  on this
       subject.

       5.   Litigative  risks in proceeding to trial

           Litigative  risks which  might be  encountered at trial and which
       should weigh  in  consideration of  any  settlement offer include
       traditional factors such as:

           a.   Admissibility of the Government's  evidence

           If necessary Government evidence is unlikely  to  be admitted  in a
       trial because of procedural  or substantive problems in the  acquisition
       or creation of the evidence,  this infirmity  should be considered  as
       reducing  the  Governments's chance of  success and,  therefore,  reducing
       the amount the Government  should  expect  to receive in a settlement.

           b.   Adequacy of the  Government's evidence

           Certain  aspects  of this point have  already been  discussed above.
       However,  it deserves  mention again because the  government's case  depends
       on substantial quantities  of sampling, analytical  and other technical
       data and  expert  testimony.   If the evidence  in  support of the
       Government's  case is  incomplete or based upon controversial science, or
       if the Government's evidence is otherwise unlikely to withstand the



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       scrutiny of a trial,  the amount that the Government might expect to
       receive in a settlement will be reduced.

           c.    Availability of defenses

           In the unlikely event that one or more of the settling parties
       appears to have a defense to the Government's action under section
       107(b)  of CERCLA,  the Government should expect to receive less in a
       settlement from that PRP.   Availability of one or more defenses to one
       PRP  which are not common to all PRPs in the case should not,  however,
       lower  the expectation of what an entire offering group should pay.

       6.   Public interest considerations

           The purpose of site cleanup is to protect public health and the
       environment.   Therefore,  in analyzing a settlement proposal the timing
       of the cleanup and the ability of the Government to clean up the site
       should be considered.   For example,  if the State cannot fund its portion
       of a Fund-financed cleanup,  a private-party cleanup proposal may be
       given  more favorable consideration than one received in a case where the
       State  can fund its portion of cleanup costs,  if necessary.

           Public interest considerations also include the availability of
       Federal  funds for necessary cleanup,  and whether privately financed
       action can begin more quickly than Federally-financed activity.  Public
       interest concerns may be used to justify a settlement of less than 100%
       only when there is a demonstrated need for a quick remedy to protect
       public health or the environment.

       7.   Precedential value

           In some  cases,  the factual situation may be conducive to
       establishing  a favorable precedent for future Government actions.   For
       example,  strong case law can be developed in cases of first impression.
       In addition,  settlements in such cases tend to become precedents in
       themselves, and are examined extensively by PRPs in other cases.
       Settlement of such cases should always be on terms most favorable to the
       Government.   Where PRPs will not settle on such terms,  arid the quality
       and  quantity  of evidence is strong,  it may be in the overall interest  of
       the  Government to try the case.

       8.   Value of obtaining a present sum certain

           If  money can be obtained now and turned over to the Fund,  where it
       can  earn interest until the time it is spent to clean up a site, the net
       present  value of obtaining the sum offered in settlement now can be
       computed against the possibility of obtaining a larger sum in the
       future.   This calculation may show that the net present value of the sum
       offered  in settlement is,  in reality,  higher than the amount the
       Government can expect to obtain at trial.   EPA has developed an economic
       model  to assess these and other related economic factors.   More
       information on this model  can be obtained from the Director,  Office of
       Waste  Programs Enforcement.

       9.   Inequities and aggravating factors

           All analyses  of  settlement proposals should flag for the decision
       makers any apparent inequities to the settling parties inherent in the
       Government's  case,  any apparent inequities to others if the settlement
       proposal is accepted,  and any aggravating factors.  However,  it must be
       understood that the statute operates on the underlying principle of
       strict liability,  and that equitable matters are not defenses.

       10.  Nature of the case that remains after settlement

           All settlement evaluations should address the nature of the case
       that remains  if the settlement is accepted.   For example,  if there are
       no financially viable parties left to proceed against for the balance of
       the  cleanup after the settlement,  the settlement offer should constitute



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      everything  the Government expects to obtain at that site.  The  questions
      are:  What  does  the Government gain by settling this portion of the
      case?  Does the  settlement or its terms harm the remaining portion of
      the case?   Will  the Government have to expend the same amount of
      resources to  try the  remaining portion of the case?  If so, why should
      the settlement offer  be accepted?

           This analysis is extremely  important and should come at the
      conclusion  of the evaluation.

      V.   PARTIAL  CLEANUPS

           On occasion,  PRPs may offer to perform or pay for one phase of a
      site cleanup  (such as a surface  removal action) but not commit  to any
      other phase of the cleanup  (such as ground water treatment).  In some
      circumstances, it may be appropriate to enter into settlements  for such
      partial cleanups,  rather than to resolve all issues in one settlement.
      For example,  in  some  cases it is necessary to conduct initial phases of
      site cleanup  in  order to gather  sufficient data to evaluate the need for
      and type of work to be done on subsequent phases.  In such cases, offers
      from PRPs tp  conduct  or pay for  less than all phases of site cleanup
      should be evaluated in the same  manner and by the same criteria as set
      forth above.  Settlements must be limited to the phase or phases of work
      actually to be performed at the  site.  This provision does not  cover
      preparation of an RI/FS, which is covered by a separate guidance
      document:   Lee Thomas and Courtney Price's "Participation of Potentially
      Responsible Parties in RI/FS Development" (March 20, 1984).

      VI.  CONTRIBUTION PROTECTION

           Contribution among responsible parties is based on the principle
      that a jointly and severally liable party who has paid all or a portion
      of a judgment or settlement may  be entitled to reimbursement from other
      jointly or  severally  liable parties.  When the Agency reaches a partial
      settlement  with  some  parties, it will frequently pursue an enforcement
      action against non-settling responsible parties to recover the  remaining
      costs of cleanup.  If such an action is undertaken, there is a
      possibility that  those non-settlors would in turn sue settling  parties.
      If this action by nonsettling parties is successful, then the settling
      parties would end up  paying a larger share of cleanup costs than was
      determined  in the Agency's settlement.  This is obviously a disincentive
      to settlement.

           Contribution protection in  a consent decree can prevent this
      outcome.   In a contribution protection clause, the United States would
      agree to reduce  its judgment against the non-settling parties,  to the
      extent necessary to extinguish the settling party's liability to the
      nonsettling third party.

           The Agency  recognizes the value of contribution protection in
      limited situations in order to provide some measure of finality to
      settlements.  Fundamentally, we  believe that settling parties are
      protected from contribution actions as a matter of law, based on the
      Uniform Contribution  Among Tortfeasors Act.   That Act provides  that,
      where settlements  are  entered into in "good faith", the settlors are
      discharged  from  "all  liability for contribution to any other joint
      tortfeasors."  To the  extent that this law is adopted as the Federal
      rule of decision,  there will be  no need for specific clauses in consent
      agreements  to provide  contribution protection.

           There has not yet been any  ruling on the issue.  Thus, the Agency
      may still be asked to  provide contribution protection in the form of
      offsets and reductions in judgment.  In determining whether explicit
      contribution protection clauses  are appropriate, the Region should
      consider the following factors:

           Explicit contribution protection clauses are generally not
           appropriate  unless liability can be clearly allocated, so  that the
           risk of reapportionment by  a judge in any future action would be



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           minimal.

           Inclusion  should  depend on case-by-case consideration of the law
           which  is likely to be applied.

           The Agency will be more willing to consider contribution protection
           in settlements that provide substantially all the costs of cleanup.

           If a proposed settlement includes a contribution protection clause,
      the Region  should  prepare a detailed justification indicating why this
      clause is essential to attaining an adequate settlement.  The
      justification should include an assessment of the prospects of
      litigation  regarding the clause.  Any proposed settlement that contains
      a contribution  protection clause with a potential ambiguity will be
      returned for further negotiation.

           Any subsequent claims by settling parties against non-settlor must
      be subordinated to Agency claims against these non-settling parties.  In
      no event will the  Agency agree to defend on behalf of a settlor, or to
      provide direct  indemnification.  The Government will not enter into any
      form of contribution protection agreement that could require the
      Government  to pay  money to anyone.

           If litigation is  commenced by non-settlors against settlors, and
      the Agency  became  involved in such litigation, the Government would
      argue to the court that in adjusting equities among responsible parties,
      positive consideration should be given to those who came forward
      voluntarily and were a part of a group of settling PRPs.

      VII. RELEASES FROM LIABILITY

           Potentially responsible parties who offer to wholly or partially
      clean up a  site or pay the costs of cleanup normally wish to negotiate a
      release from liability or a covenant not to sue as a part of the
      consideration for  that cleanup or payment.  Such releases are
      appropriate in  some circumstances.  The need for finality in settlements
      must be balanced against the need to insure that PRPs remain responsible
      for recurring endangerments and unknown conditions.

           The Agency recognizes the current state of scientific uncertainty
      concerning  the  impacts of hazardous substances, our ability to detect
      them,  and the effectiveness of remedies at hazardous waste sites.  It is
      possible that remedial measures will prove inadequate and lead to
      imminent and substantial endangerments, because of unknown conditions or
      because of  failures in design, construction or effectiveness of the
      remedy.

           Although the  Agency approves all remedial actions for sites on the
      National Priorities List, releases from liability will not automatically
      be granted merely  because the Agency has approved the remedy.  The
      willingness of the Agency to give expansive releases from liability is
      directly related to the confidence the Agency has that the remedy will
      ultimately prove effective and reliable.  In general, the Regions will
      have the flexibility to negotiate releases that are relatively expansive
      or relatively stringent, depending on the degree of confidence that the
      Agency has  in the  remedy.

           Releases or covenants must also include certain reopeners which
      preserve the right of  the Government to seek additional cleanup action
      and recover additional costs from responsible parties in a number of
      circumstances.  They are also subject to a variety of other limitations.
      These reopener clauses and limitations are described below.

           In addition,   the Agency can address future problems at a site by
      enforcement of the decree or order, rather than by action under a
      particular  reopener clause.  Settlements will normally specify a
      particular  type of remedial action to be undertaken.  That remedial
      action will normally be selected to achieve a certain specified level of
      protection of public health and the environment.  When settlements are



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      incorporated  into  consent  decrees or orders, the decrees or orders
      should wherever possible include performance standards that set out
      these specified levels  of  protection.  Thus, the Agency will retain its
      ability to assure  cleanup  by  taking action to enforce these decrees or
      orders when remedies  fail  to  meet the  specified standards.

           It is not possible to specify a precise hierarchy of preferred
      remedies.  The degree of confidence in a particular remedy must be
      determined on an individual basis, taking site-specific conditions into
      account.  In  general, however,  the more effective and reliable  the
      remedy, the more likely it is that the Agency can negotiate a more
      expansive releases.   For example, if a consent decree or order  commits a
      private party to meeting and/or continuing to attain health based
      performance standards,  there  can be great certainty on the part of the
      Agency that an adequate level of public health protection will  be met
      and maintained, as long as the  terms of the agreement are met.  In this
      type of case, it may  be appropriate to negotiate a more expansive
      release than, for  example, cases involving remedies that are solely
      technology-based.

           Expansive releases may be  more appropriate where the private party
      remedy is a demonstrated effective alternative to land disposal, such as
      incineration.  Such releases  are possible whether the hazardous material
      is transported offsite  for treatment,  or the treatment takes place on
      site.  In either instance, the  use of  treatment can result in greater
      certainty that future problems  will not occur.

           Other remedies may be less appropriate for expansive releases,
      particularly  if the consent order or agreement does not include
      performance standards.  It may  be appropriate in such circumstances to
      negotiate releases that become  effective several years after completion
      of the remedial action, so that the effectiveness and reliability of the
      technology can be  clearly  demonstrated.  The Agency anticipates that
      responsible parties may be able to achieve a greater degree of  certainty
      in settlements when the state of scientific understanding concerning
      these technical issues  has advanced.

           Regardless of the  relative expansiveness or stringency of  the •
      release in other respects, at a minimum settlement documents must
      include reopeners allowing the  Government to modify terms and conditions
      of the agreement for  the following types of circumstances:

                where previously unknown or  undetected conditions that arise
                or  are discovered at  the site after the time of the agreement
                may present an imminent and  substantial endangerment  to public
                health,  welfare  or  the environment;

                where the Agency receives additional information, which was
                not available at the  time of the agreement, concerning the
                scientific  determinations on which the settlement was
                premised (for example,  health effects associated with levels
                of  exposure,  toxicity of hazardous substances, and the
                appropriateness  of  the remedial technologies for conditions at
                the site) and this  additional information indicates that site
                conditions  may present an imminent and substantial
                endangerment  to  the public health or welfare or the
                environment.

           In addition,  release  clauses must not preclude the Government from
      recovering costs incurred  in  responding to the types of imminent and
      substantial endangerments  identified above.

           In extraordinary circumstances, it may be clear after application
      of the settlement criteria set  out in  section IV that it is in  the
      public interest to agree to a more limited or more expansive release not
      subject to the conditions  outlined above.  Concurrence of the Assistant
      Administrators for OSWER and  OECM (and the Assistant Attorney General
      when the release is given  on  behalf of the United States) must  be
      obtained before the Government's negotiating team is authorized to



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      negotiate  regarding such a release  or covenant.

           The extent  of releases should  be the  same,  whether  the  private
      parties conduct  the cleanup themselves or  pay for  Federal  Government
      cleanup.   When responsible parties  pay for Federal Government  cleanup,
      the release will ordinarily not  become effective until cleanup is
      completed  and the actual costs of the cleanup are  ascertained.
      Responsible parties will thereby bear the  risk of  uncertainties arising
      during execution of the  cleanup.  In limited circumstances,  the release
      may become effective upon payment for Federal Government cleanup,  if  the
      payment includes a carefully calculated premium  or other financial
      instrument that  adequately insures  the Federal government  against  these
      uncertainties.   Finally,  the Agency may be more  willing  to settle  for
      less than  the total costs of cleanup when  it is  not precluded  by a
      release clause from eventually recovering  any additional costs that
      might ultimately be incurred at  a site.

           Release clauses are also subject to the following limitations:

           A release or covenant may be given only to  the PRP  providing  the
           consideration for the release.

           The release or covenant must not cover any  claims other than  those
           involved in the case.

           The release must not address any criminal matter.

           Releases for partial cleanups  that do not extend to the entire site
           must  be limited to  the work actually  completed.

           Federal claims for  natural  resource damages should  not  be released
           without the approval of Federal trustees.

           Responsible parties must release any  related  claims against the
           United States,  including the Hazardous Substances Response Fund.

           Where the cleanup is t'o be  performed  by the PRPs, the release or
           covenant should normally become effective only upon the completion
           of the cleanup (or  phase of cleanup)  in a manner satisfactory to
           EPA.

           Release clauses  should be drafted as  covenants not  to sue,  rather
           than  releases  from  liability,  where this form may be  necessary to
           protect the legal rights of the Federal Government.

           A release or covenant  not to sue terminates or seriously  impairs
      the Government's  rights  of  action against  PRPs.  Therefore,  the document
      should be  carefully worded so that  the intent of the parties and extent
      of the matters covered by the release or covenant  are clearly  stated.
      Any proposed settlement  containing  a release with  a possible ambiguity
      will be returned for  further negotiation.

      VIII.  TARGETS FOR LITIGATION

           The Regions  should  identify particular cases  for referral in  light
      of the following  factors:

                 substantial environmental  problems exist;

                 the Agency's case has  legal merit;

                 the amount  of  money or cleanup involved  is significant;

                good legal  precedent is possible (cases  should be  rejected
                where  the potential for adverse  precedent is substantial);

                the evidence is strong, well developed,  or capable of
                development;
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                 statute of  limitations  problems  exist;

                 responsible parties  are financially viable.

           The goal of  the  Agency is to bring  enforcement action wherever
      needed  to  assure  private  party cleanup or  to  recover  costs.  The
      following  types of cases  are the  highest priorities for  referrals:

                 107 actions in  which all costs have been incurred;

                 combined 106/107  actions in which a significant phase has  been
                 completed,  additional injunctive relief is  needed and
                 identified,  and Fund will not  be used,-

                 106 actions which will  not be  the subject of Fund-financed
                 cleanup.

           Referrals for injunctive  relief may also be appropriate in cases
      when it is possible that  Fund-financed cleanup will be undertaken.   Such
      referrals may be  needed where  there are  potential statute of limitation
      concerns, or where the site has been identified as enforcement-lead, and
      prospects  for successful  litigation are  good.

           Regional offices should periodically  reevaluate  current targets for
      referral to determine if  they  meet the guidelines identified above.

           As indicated before, under the theory of joint and  several
      liability the Government  is not required to bring enforcement action
      against all of the potentially responsible parties involved at  a  site.
      The primary concern of the  Government in identifying  targets for
      litigation is to  bring a  meritorious case  against responsible parties
      who have the ability  to undertake or pay for  response action.   The
      Government will determine the  targets of litigation in order to reach
      the largest manageable number  of  parties,  based on toxicity and volume,
      and financial viability.  Owners  and operators will generally be  the
      target of litigation,  unless bankrupt or otherwise judgment proof.   In
      appropriate cases,  the Government will consider prosecuting claims in
      bankruptcy.  The  Government may also select targets for  litigation for
      limited purposes,  such as site access.

           Parties who  are  targeted  for litigation  are of course not  precluded
      from involving parties who  have not been targeted in  developing
      settlement offers  for consideration by the Government.

           In determining the appropriate targets for litigation, the
      Government will consider  the willingness of parties to settle,  as
      demonstrated in the negotiation stage.   In identifying a manageable
      number of parties  for litigation,  the Agency  will consider the
      recalcitrance or willingness to settle of  the parties who were  involved
      in the negotiations.   The Agency  will also consider other aggravating
      and mitigating factors concerning responsible party actions in
      identifying targets for litigation.

           In addition,  it  may  be appropriate, when the Agency is conducting
      phased cleanup and has reached a  settlement for one phase, to first  sue
      only non-settling  companies for the next phase, assuming that such
      financially viable parties  are available.  This approach would  not
      preclude suit against  settling parties,  but non-settlors would  be sued
      initially.

           The Agency recognizes  that Federal  agencies may  be  responsible  for
      cleanup costs at hazardous  waste  sites.  Accordingly, Federal facilities
      will be issued notice  letters  and administrative orders  where
      appropriate.  Instead of  litigation, the Agency will  use the procedures
      established by Executive  Orders 12088 and  12146 and all  applicable
      Memoranda of Understanding  to  resolve issues  concerning  such agency's
      liability.   The Agency will take  all steps necessary  to  encourage
      successful negotiations.
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       IX.   TIMING OF  NEGOTIATIONS

            Under our  revised policy on  responsible party participation  in
       RI/FS,  PRPs have  increased opportunities  for involvement  in the
       development of  the remedial  investigations and  feasibility studies which
       the Agency uses to identify  the appropriate remedy.   In light of  the
       fact  that PRPs  will have  received notice  letters and  the  information
       identified in section  III of this policy, prelitigation negotiations can
       be conducted in an expeditious fashion.

            The Negotiations  Decision Document  (NDD),  which  follows completion
       of the  RI/FS, makes the preliminary  identification of the appropriate
       remedy  for the  site.   Prelitigation  negotiations between  the Government
       and the PRPs should normally not  extend for more than 60  days after
       approval of the NDD.   If  significant progress is not  made within  a
       reasonable amount  of time, the Agency will not  hesitate to abandon
       negotiations and proceed  immediately with administrative  action or
       litigation.  It should be noted that these steps do not preclude  further
       negotiations.

            Extensions can be considered in complex cases where  there  is no
       threat  of seriously delaying cleanup action.  Any extension of  this
       period  must be  predicated on having  a good faith offer from the PRPs
       which,  if successfully negotiated, will save the Government substantial
       time  and resources in  attaining the  cleanup objectives.

       X.    MANAGEMENT AND REVIEW OF SETTLEMENT  NEGOTIATIONS

            All settlement documents must receive concurrence from OWPE  and
       OECM-Waste, and be approved  by the Assistant Administrator of OECM in
       accordance with delegations.   The management guideline discussed  in
       Section II allows  the  Regions to  commence negotiations if responsible
       parties make an initial offer for a  substantial proportion of the
       cleanup costs.  Before commencing negotiations  for partial settlements,
       the Regions should prepare a preliminary  draft  evaluation of the  case
       using the settlement criteria in  section  IV of  this policy.  A  copy of
       this  evaluation should be forwarded  to Headquarters.

           A  final detailed  evaluation  of  settlements is required when  the
       Regions request Headquarters approval of  these  settlements.  This
       written evaluation should be submitted to OECM-Waste  and  OWPE by  the
       legal and technical personnel on  the case.  These will normally be the
       Regional attorney  and  technical representative.

           The evaluation memorandum should indicate  whether the settlement is
       for 100% of the work or cleanup costs.  If this figure is less  than
       100%,  the memorandum should  include  a discussion of the advantages and
      disadvantages of the proposed settlement  as measured  by the criteria in
       section IV.   The Agency expects full evaluations of each  of the criteria
       specified in the policy and  will  return inadequate evaluations.

           The Regions are authorized to conclude settlements in certain types
      of hazardous waste  cases  on  their own, without  prior  review by
      Headquarters or DOJ.   Cases  selected for  this treatment would normally
      have lower priority for litigation.  Categories of cases  not subject to
      Headquarters review include  negotiation for cost recovery cases under
      $200,000,  and negotiation of  claims  filed in bankruptcy.  In cost
      recovery cases,  the Regions  should pay particular attention to weighing
      the resources necessary to conduct negotiations and litigation  against
      the amounts that may be recovered, and prospects for  recovery.

           Authority  to  appear  and try  cases before the Bankruptcy Court would
      not be delegated to the Regions,   but would be retained by the Department
      of Justice.   The Department  will  file cases where an  acceptable
      negotiated settlement  cannot  be reached.  Copies of settlement  documents
      for such agreements should be provided to OWPE  and OECM.

           Specific details  concerning  these authorizations will be addressed
      in delegations  that will  be  forwarded to  the Regions  under separate



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       cover.   Headquarters is conducting an evaluation of  the effectiveness of
       existing delegations, and is assessing the possibility of additional
       delegations.

       NOTE  ON PURPOSE AND USES OF THIS MEMORANDUM

            The policies and procedures set forth here,  and internal Government
       procedures adopted to implement these policies,  are  intended as guidance
       to Agency and other Government employees.  They  do not constitute
       rulemaking by the Agency, and may not be relied  on to create a
       substantive or procedural right or benefit enforceable by any other
       person.   The Government may take action that  is  at variance with the
       policies and procedures in this memorandum.

            If you have any questions or comments on this policy,  or problems
       that  need to be addressed in further guidance to implement this policy,
       please  contact Gene A.  Lucero, Director of the Office of Waste Programs
       Enforcement,  (FTS 382-4814), or Richard Mays, Senior Enforcement
       Counsel,  (FTS 382-4137).


       Return to the top of this document.



          Return to OSRE Home Page


         i
          Return to Envirosense Home Page Home Page

       Last Updated: June 26, 1996
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MEMORANDUM
SUBJECT:
FROM:
 Transmittal of Addendum to the "Interim CERCLA Settlement Policy" Issued o
 December 5, 1984
 Steven A. Herman, Assistant Administrator
 Office of Enforcement and Compliance Assurance
 U.S. Environmental Protection Agency
TO:
 Lois J. Schiffer, Assistant
Attorney General
 Environment and Natural
Resources Division
 U.S. Department of Justice

 Regional Administrators,
Regions I - X
 Regional Counsels, Regions I - X
                                            u


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cc:    Timothy Fields, Acting Assistant Administrator for Solid Waste and Emergency
             Response, EPA
      Barry Breen, Director, Office of Site Remediation Enforcement, EPA
      Steve Luftig, Director, Office of Emergency and Remedial Response, EPA
      Director, Office of Site Remediation and Restoration, Region I, EPA
      Director, Emergency and Remedial Response Division, Region n, EPA
      Director, Hazardous Waste Management Division, Regions in and DC, EPA
      Director, Waste Management Division, Region IV, EPA
      Director, Superfund Division, Regions V, VI, and VII, EPA
      Assistant Regional Administrator, Office of Ecosystems Protection and
             Remediation, Region VIE, EPA
      Director, Environmental Cleanup Office, Region X, EPA
      Superfund Branch Chiefs, Office of Regional Counsel, Regions I - X, EPA
      Regional Enforcement Coordinators, Regions I - X, EPA
      Lisa Friedman, Associate General Counsel, Office of General Counsel, EPA
      John Cruden, Deputy Assistant Attorney General, DOJ
      Joel Gross, Chief, Environmental Enforcement Section, DOJ
      Bruce Gelber, Principal Deputy Chief, Environmental Enforcement Section, DOJ

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    Addendum to the 'Interim CERCLA Settlement Policy" Issued on December 5.1984
Background

       Under the Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA), liability is strict, joint and several unless the harm is shown to be divisible.
Accordingly, viable potentially responsible parties (PRPs) sometimes have to absorb shares of
responsibility that might otherwise be equitably attributed to PRPs who are insolvent or defunct
and thus unable to contribute to the costs of cleanup. In order to reduce litigation, encourage
PRPs to perform cleanup, and enhance the overall fairness of the Superfund program, the U.S.
Environmental Protection Agency (EPA) announced in October 1995 its intention to compensate
for a portion of this  "orphan share" at sites where PRPs enter into settlements to perform
cleanup.

       To implement this reform, on June 3, 1996, EPA issued an "Interim Guidance on Orphan
Share Compensation for Settlors of Remedial Design/Remedial Action and Non-Time-Critical
Removals." Under that policy, EPA will "compensate" parties that agree to perform a remedial
action or non-time-critical removal for a portion of the share specifically attributable to insolvent
or defunct PRPs, up to 25% of the projected remedy or non-time-critical removal costs, or the
total past and future oversight costs, whichever is less. These limitations were included because
they moderate the impact on the Trust Fund and minimize the incurrence of additional
transaction costs, particularly with respect to calculation of the orphan share.

Policy Statement

       When assessing a proposed cost recovery settlement for less than 100% of response
costs, the Regions should continue to consider inequities and aggravating factors, litigative risks
in proceeding to trial, and the rest of the ten settlement criteria set forth in the "Interim CERCLA
Settlement Policy."  At sites involving potentially liable insolvent or defunct parties, the Regions
may consider the existence of a significant orphan share as an "inequity" or "aggravating factor"
within the meaning of the 1984 policy. Any exercise of the Government's discretion to accept a
cost recovery settlement offer containing a compromise on this basis will necessarily be a case-
by-case decision, to  be made after examination of a variety of factors. Among the factors to be
considered in determining whether and to what extent to compromise a claim based on the
existence of insolvent or defunct parties are the following: (1) the size of the orphan share;
(2) the settling PRP's cooperation with the government and other PRPs; and (3) fairness to other
parties.

       It is the intent of EPA and the Department of Justice that the United States should not
enter into settlements that provide incentives or precedents for parties to refuse to enter into
agreements for performance of work, believing they may get a better settlement at the time EPA
pursues a cost recovery claim. EPA should provide strong incentive for parties to conduct
cleanups rather than wait until EPA pursues cost recovery claims. Therefore, except in

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 extraordinary cases, EPA should not offer an orphan share compromise in a cost recovery
settlement to a party that refused a previous settlement offer that included a compromise based
on orphan share considerations.1  Moreover, except in extraordinary cases, a party that does not
perform work under a consent agreement should not receive a greater compromise of response
costs in a cost recovery settlement based on the existence of an orphan share than it would have
received  if (1) the party had signed a consent agreement to perform the work, and (2) the orphan
share policy had been applied.2

       In resolving cost recovery claims, recognition of equitable considerations, including the
existence of a  significant orphan share, is for settlement purposes  only. Where there is
indivisible harm, EPA will continue to pursue non-settling parties jointly and severally for all
response costs.

Use and Purpose of this Addendum

       This policy addendum and any internal procedures adopted for its implementation are
intended  exclusively as guidance for employees of the U.S. Environmental Protection Agency
and the U.S. Department of Justice. This addendum is not a rule and does not create any legal
obligations.  Whether and how EPA and the Department of Justice apply the guidance set forth in
this addendum in any particular case will depend on the facts of the case.

       For further information about this addendum, please contact Laura Bulatao (202-564-
6028) or  Deniz Ergener (202-564-4233) in EPA's Office of Site Remediation Enforcement, or
Bob Brook in the Environmental Enforcement Section of the Department of Justice at (202) 514-
2738.
       1 For purposes of this addendum and effective upon its issuance, the determination that a case is
extraordinary requires the prior written approval of OECA. EPA intends that this requirement will be
incorporated into the next set of revisions to the May 19, 1995 memorandum entitled "Office of
Enforcement and Compliance Assurance and Regional Roles in Civil Judicial and Administrative Site
Remediation Enforcement Cases" (commonly known as the "Roles Memo").

       2 See footnote 1.

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