UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
\ * ' WASHINGTON, D.C. 20460
^ff.
OFFICE OF
JUL ?Q l°" SOLID WASTE AND EMERGENCY RESPONSE
OSWER Directive No. 9832.13
MEMORANDUM
SUBJECT: Transmittal of the Sucerfund Cost Recovery Strategy
FROM: / J. Winston Porter
JoT^ Assistant Administrator
u
TO: Regional Administrators, Regions I-X
Attached is the final Superfund Cost Recovery Strategy. The
Strategy sets forth the Agency's priorities and case selection
guidelines, emphasizes the advance planning necessary to initiate
cost recovery actions within the Agency's preferred time frames,
and describes the cost recovery process for removal and remedial
actions.
Cost recovery is one of the highest priorities of the
Superfund program. This document should assist you in advancing
the Agency's objectives.
Attachment
cc: Directors, Waste Management Divisions
Regions I, IV, V, VII, VIII
Director, Emergency and Remedial Response Division
Region II
Directors, Hazardous Waste Managenent Divisions
Regions III, VI
Director, Toxics and Haste Management Division
Region IX
Director, Hazardous Waste Division
Region X
Directors, Environmental Services Divisions
Regions I, VI, VII
Regional Counsel, Regions I-X
Thomas L. Adams, Assistant Administrator for Enforcement and
Compliance Monitoring
Charles Grizzle, Assistant Administrator for Administration
and Resources Management
Roger J. Marzulla, Assistant Attorney General, Land and
Natural Resources Division, Department of Justice
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Table of Contents
Purpose of this Guidance 1
I. Program Priorities and Management 2
II. Case Selection Guidelines 7
III. The Cost Recovery Process for Removal Actions 12
A. Pre-Removal Cost Recovery Activities 12
1. The Potentially Responsible Party Search
2. Development of the Administrative Record
3. Notice, Negotiation and the Issuance of
Administrative Orders
B. Cost Recovery Activities during the Removal Action.... 17
1. Documentation of Activities and Cost Accounting
2. Supplemental PRP Search
c. Post-Removal Cost Recovery Activities 19
1. Evaluation and Completion of the Potentially
Responsible Party Search
2. Cost Documentation
3. Demand Letters
4. Negotiation
5. Settlements
6. Consideration of Referral in the Event of No
Settlement
IV. Cost Recovery Process for Remedial Sites 30
A. Pre-Remedial Cost Recovery Activities 31
1. The Potentially Responsible Party Search
2. General and Special Notice Letters and
Negotiations for a PRP Remedial Investigation
and Feasibility Study
3. Settlement for PRP Remedial Investigation/
Feasibility Study
B. Cost Recovery Activities during the Remedial
Investigation/Feasibility Study 35
1. Documentation of Activities and Cost Accounting
2 . Supplemental PRP Search
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3. Development of the Administrative Record
4. Special Notice Letters and Negotiation for PRP
Remedial Design and Remedial Action
C. Settlement for PRP Remedial Design and Remedial
Action < 38
1. Full Settlement
2. Partial Settlement
3. No Settlement
D. Cost Recovery Activities during the Remedial Design
and Remedial Action 41
1. PRP RD/RA
2. Fund-Financed RD/RA
a) Cost Documentation
b) Demand Letters
c) Consideration of a Referral in the Event of
No Settlement
V. Existing Cost Recovery Guidance 47
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OSWZR Directive No. 9832.13
Purpose of 'this* Guidance
This guidance document is intended to provide a framework
for planning and initiating actions to recover Federal funds
expended by EPA or a State1 in CERCLA response actions. Part I
discusses general cost recovery program priorities. Part II
identifies case selection guidelines to aid managers in setting
priorities for case referrals for the most efficient use of cost
recovery resources. Parts III and IV identify activities
required to support the development of cost recovery actions for
each site where the Agency spends Fund monies in response
actions: Part III sets out the cost recovery process for removal
actions; Part IV sets out the cost recovery process for remedial
actions. Part V is a bibliography of guidance documents related
to cost recovery.
1/ While a State may be the lead agency for response actions
taken at a site, EPA retains responsibility for pursuing recovery
of Federal funds expended.
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OSWER Directive No. 9832.13
Part I. Program Priorities and Management
The policy of the CERCLA Enforcement program is to obtain
response actions in the first instance by responsible parties,
rather than by the Environmental Protection Agency (EPA) or a
State. However, there have been and will continue to be cases in
which the Agency will respond to releases using funds from the
Hazardous Substances Superfund (the Fund) for site response
actions. The recovery of Fund expenditures through the cost
recovery program is one of the highest priorities of the
Superfund program. The costs associated with such Fund-financed
response actions are recoverable from the party or parties who
are liable under section 107 of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended
(CERCLA, or the Act).2 CERCLA provides for the recovery of costs
through judicial actions under section 107 of the Act, as
components of settlements for prospective work under section 106,
or 122, and in administrative settlements under section 122.
The priorities and objectives of the cost recovery program
are to: 1) maximize return of revenue to the Fund; 2) initiate
2/ Section 107 provides generally that past and present
owners and operators of a site, and persons (e.g., generators)
who arranged for disposal or treatment of, and transporters who
contributed, hazardous substances to a site, shall be liable for
all costs incurred in response to a release or threat of release
undertaken by the United States government, a State, an Indian
tribe, or any other person, for damages to or loss of natural
resources and the costs of assessing such damages or loss, and
for costs of any health assessment or health effects study
carried out under §104(i).
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OSWER Directive No. 9832.13
necessary litigation or resolve ripe cases for cost recovery
within strategic time frames but no later than the time provided
under the statute of limitations; 3) encourage PRP settlement by
implementing an effective cost recovery program against non-
settlers (i.e., recalcitrants); and, 4) use administrative
authorities and dispute resolution procedures effectively to
resolve cases without unnecessary recourse to litigation.
In managing the program and achieving these objectives, EPA
must ensure that each response action (and supporting case
development activities) undertaken using Fund monies proceeds in
a manner that will optimize its cost recovery potential. (See
Part III, Cost Recovery Process for Removal Actions, and Part IV,
Cost Recovery Process for Remedial Sites.) In addition, EPA must
evaluate each ripe response action in a manner consistent with
this strategy to determine when, whether and how to proceed with
cost recovery.
The stage at which a case becomes ripe for cost recovery is
an important concept. A conventional removal is ripe when it is
completed.3 A remedial is ripe concurrent with the initiation of
on-site construction of the remedial action. (See footnote 5,
page 5.)
3/ Although a RI/FS may be considered to be a removal, cost
recovery generally is pursued as part of remedial action cost
recovery.
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OSWER Directive No. 9832.13
Since resources available to the cost recovery program are
limited, EPA must set priorities and select and plan actions in a
manner and at a time which will provide for the maximum return to
the Fund. A major factor in setting priorities is the amount of
funds involved. However, statute of limitations may warrant the
pursuit of a case of lower dollar value before one of higher
value. Priorities are discussed in Part II, Case Selection
Guidelines.
Where possible, an attempt should be made to settle cost
recovery cases administratively under the authority provided in
CERCLA §122(h). Use of this authority should result in cost
recovery case resolution for some cases in a shorter time frame
and with fewer resources than traditional litigation or
settlement through judicial means. Use of the administrative
settlement authority for smaller cost recovery cases, especially
those with total costs of response less than five hundred
thousand dollars, should reduce case resolution time since these
may be directly settled by Regional offices without the prior
concurrence of either EPA headquarters or the Department of
Justice.4
Where judicial actions are warranted, referral of cases
selected consistent with the guidelines set forth in Part II,
4/ Authority to settle cost recovery cases administratively
(CERCLA §122(h) authority) was delegated to Regional
Administrators on September 21, 1987, (Delegation 14-14-D).
Novel issues should be discussed with EPA Headquarters.
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OSWER Directive No. 9832.13
below, within the Agency's preferred time frames5 will ensure
that the best cases will be filed well within the required
statute of limitations.
Finally, the realization of the program's objectives depends
on the effective management of all aspects of the cost recovery
program. Each Region must have a well-defined process in place
to ensure coordination among the Superfund program/enforcement
office, the financial management office, and the Office of
Regional Counsel (and Headquarters, where appropriate). The
process should'also foster the efficient management of the
elements of the cost recovery program including systems to cover
the following:
a) the on-going review, selection, and referral of ripe
cases;
b) the assembly of cost documentation and the issuance
of demand letters;
c) tracking and collection of oversight cost recovery
in settlements;
d) the review and documentation to close-out cases for
5/ Cost recovery actions for removals should be referred to
the Department of Justice as soon as possible after the action
has been completed but in most cases, not later than one year
after the completion date. Cost recovery actions for remedials
should be referred to the Department of Justice at the time of
initiation of physical on-site construction of the remedial
action. See the June 12, 1987, Memorandum entitled Cost Recovery
Actions/Statute of Limitations. OSWER L.rective No. 9832.3-1A.
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OSWER Directive No. 9832.13
which cost'recovery will not be pursued;
e) the effective use of administrative settlement
authority;
f) the tracking and follow-through of active cases
(those in litigation); and,
g) the establishment and collection of accounts
receivable.
Effective information management on the status of each ripe case,
coupled with forward planning, is essential. Timely and accurate
reporting in information management systems, especially CERCLIS,
is essential for management of the above processes and the entire
cost recovery program.
The Agency must continue to utilize cost recovery
enforcement authorities to create an incentive for settlement and
disincentive for refusal to settle. An atmosphere of risk of
cost recovery litigation will promote settlement for PRP response
actions as well as settlements for cost recovery.
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OSWZR Directive No. 9832.13
Part II. Case Selection Guidelines
As the Superfund program matures, an increasing number of
sites are moving beyond the early stages of the Superfund process
and into the remedial design and action phases, where greater
amounts of money are spent. The vast majority of potential
reimbursement to the Fund in future years depend on recovery of
funds associated with these sites.
Regions must make management decisions regarding which sites
to refer for judicial action under 107. The following case
selection guidelines, when applied to candidates for referral,
help ensure that resources are mainly directed towards those
cases which have the highest potential for replenishing the
Fund. The guidelines are generally based on the amount of money
expended at a site and take into account its recoverability
(i.e., strength of the case, financial viability of PRP(s)).
Generally, the sites that will generate the largest returns
to the Fund are ripe remedials, defined as those where the
remedial action has been initiated. These sites should be
considered high priority for referral. A cost recovery referral
should b«r scheduled for every site where a federally funded
remedial action is planned and there are viable PRPs. The action
should be filed no later than the initiation of physical on-site
construction of the remedial action. (Note that in order to meet
this timing requirement, case preparation activities should begin
early. See Part IV, Cost Recovery Process for Remedial Portions
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OSWER Directive No. 9832.13
of NPL Sites, for further information.) The Agency will defer
the filing of a remedial action beyond this date only in limited
circumstances for technical or strategic reasons.6
The second category of sites to which resources should be
directed are those NPL or non-NPL sites where EPA has completed a
removal action (including an expanded removal action or ERA),
remedial investigation/feasibility study (RI/FS), or an initial
remedial measure (IRM), where the total costs of response are two
hundred thousand dollars or greater, and the possible statute of
limitations deadline is approaching. Although the Agency's
position is that the SARA statute of limitations applies only to
those response actions initiated after the effective date of SARA
(October 17, 1986), the Regions should refer all cases well
within the SARA statute of limitations time frames, whether or
not the action was initiated prior to the effective date of SARA.
where a conflict exists between referring a case in the first
category and referring a case in the second category, the
referral of cases with approaching statute of limitations
deadlines and costs greater than two hundred thousand dollars
should normally take precedence over the referral of ripe
remedial sitas. Pre-SARA cases in the second category that are
6/ For example, a Region may desire to delay the initiation
of a cost recovery case until after evaluation of the success of
implementation of an unproven remedial technology.
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OSWER Directive No. 9832.13
beyond the time frame of the SARA statute of limitations should
be referred as soon as possible.
A related category of sites to which resources should be
directed are those NPL or non-NPL sites where EPA has completed a
removal action and the total costs of response are two hundred
thousand dollars or greater. Sites in this category are
distinguished from the above category because they are not
nearing a potential statute of limitations deadline. These cost
recovery referrals should be made no later than twelve months
after completion of the removal action. In some instances,
strategic reasons may warrant that EPA defer filing for cost
recovery of a removal action until the remedial action is
initiated.
The fourth category of sites are those where there has been
a partial settlement providing the government less than full
relief and there are viable non-settlers. These actions should
be pursued promptly as a disincentive to non-settlers.
The fifth category of sites are those where total costs of
response are less than two hundred thousand dollars. Consistent
with available resources, cost recovery referrals should be
considered for these sites where evidence linking the PRPs to the
site is good, and PRPs are recalcitrant, or the case may be used
to create good precedent or an example that EPA is willing to
pursue costs when the merits of the case warrant it. Each Region
should plan to bring some small cost recovery actions each year
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OSWER Directive No. 9832.13
primarily to maintain an atmosphere of risk to PRPs associated
with sites with total costs of response less than two hundred
thousand dollars.
Within each category above, decisions should generally be
made on the basis of an evaluation of the factors identified on
pages 26 and 43, below, which will provide an indication of the
strength of the case. This recognizes that cost recovery may not
be pursued for PRP viability and evidentiary reasons as well as
the lack of Agency resources for some small cases and
bankruptcies.
The guidelines above do not relate directly to bankruptcy
referrals because they often present particularly difficult case
selection and management issues. The Agency is frequently
operating under time constraints with imperfect information.
Nonetheless, it is important in bankruptcy cases to make reasoned
and informed judgments on whether a bankruptcy action is worth
pursuing, given other demands on Agency resources. This
requires, at a minimum, an evaluation of the following factors:
the amount of funds to be recovered; the case against the PRP and
the possibility of full recovery from other PRPs; the likelihood
of significant recovery given the assets and liabilities of the
PRP (e.g., bankruptcies at multi-generator sites where viable
PRPs remain as compared to bankruptcy cases at sites where the
owner/operator is bankrupt and no other viable PRPs exist); the
claims of secured and unsecured creditors; and, the likely Agency
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OSWER Directive No. 9832.13
resources involved. When the likelihood of significant recovery
compared to resource utilization in pursuit of the recovery is
high, bankruptcy referrals should be prioritized in accordance
with the categories above. The Revised Hazardous Waste
Bankruptcy Guidance. May 23, 1986, OECM, contains additional
information regarding the pursuit of bankrupt parties in
hazardous waste cases.
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OSWER Directive No. 9832.13
Part III. THE COST RECOVERY PROCESS FOR REMOVAL ACTIONS
Before, during, and following a removal action there are
specific steps that the Agency7 must take to facilitate
settlement or maximize the potential for recovery of funds in any
future cost recovery action. The extent of each of the steps may
vary depending upon the cost, size and duration of the removal
action. The timing may vary depending upon the exigencies of the
situation. This section identifies and explains each of the
steps taken in the removal process to facilitate cost recovery.8
A. pre-Removal Cost Recovery Activities
Pre-removal activities that may be carried out in
preparation for future cost recovery actions include the
initiation of the potentially responsible party search, the
development of the administrative record, notice to identified
PRPS and negotiations with those PRPs who are interested, and the
issuance of administrative orders. While each of these
7/Throughout Parts III and IV, the terms "Agency" and
"Regions" are used frequently in discussions of activities to be
conducted. When a State has entered or will enter into a
cooperative* agreement with EPA to conduct any activities on a
site, the Region must ensure that activities identified in Parts
III and IV are conducted by either EPA or the State, as
appropriate. Refer to the Interim Final Guidance Package on
Funding CERCLA State Enforcement Actions at NPL Sites. OSWER
Directive No. 9831.6 for additional information on activities
that can be undertaken by States.
8/ See, also, Chapter 5 of the Superfund Removal Procedures
Revision Number Three. OSWER Directive No. 9360.0-03B.
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OSWER Directive No. 9832.13
activities is an integral part of the broader Superfund program,
each has a special significance in light of potential cost
recovery actions.
A.I. The Potentially Responsible Party Search. The
identification of potentially responsible parties (PRPs) in the
potentially responsible party search is central to all cost
recovery actions. The search should uncover potentially liable
parties with whom EPA may negotiate and from whom EPA may seek
recovery of costs in the future, as well as develop the evidence
of liability that may be used in a judicial action. While the
PRP search initiated following site discovery may continue
throughout the Superfund process certain PRP search activities
should be conducted prior to the initiation of a removal action.
The extent of further activities may depend on the expected costs
of the removal.
At the time of discovery of a problem site, a preliminary
PRP search is conducted by the Agency to identify the
owner/operator of a site and other readily identifiable PRPs.
The completed PRP search for a removal action should include the
following tasks, as appropriate: history of operations at the
site; a title search of the site property; Agency record
collection and file review; interviews with government officials;
PRP status/PRP history; records compilation; issuance of CERCLA
104(e) letters/RCRA 3007 letters; financial status; PRP name and
address updates; appropriate identification of generators and
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OSWER Directive No. 9832.13
transporters; and, report preparation. Any or all of these tasks
may and should be initiated prior to the initiation of a removal
action where time permits. However, since many removals are of
an emergency nature, and there is often little time prior to
initiation of the action, all PRP search activities will not
commonly be initiated prior to the removal. Each PRP search task
should be initiated at the earliest possible time during or
shortly after completion of the removal action.
Program, enforcement and legal staff, and the Region's civil
investigator should work closely together in the development of
the PRP search from the initial planning stages through the
production of the PRP search report. Regions should rely on the
expertise of the Office of Regional Counsel and the civil
investigator as well as outside contractors where necessary to
conduct the PRP search and prepare and review the PRP search
report. More information on the tasks listed above is provided
in detail in Chapter 3.1 of the Potentially Responsible Party
Search Manual. August 27, 1987, (OSWER Directive No. 9834.6).
If total response costs are not expected to exceed two
hundred thousand dollars, the Region may defer implementation of
many of th« tasks of the PRP search listed above until completion
of the removal action. If total costs of the completed removal
do not exceed two hundred thousand dollars, the Region should
evaluate available resources and competing priorities, and in
light of the evaluation, decide whether or not to conduct
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OSWER Directive No. 9832.13
additional PRP search activities. At a minimum, a title search
of the property should be conducted. If total costs of the
completed removal exceed two hundred thousand dollars, additional
PRP search tasks should be conducted in anticipation of further
enforcement activities.9
A.2. Development of the Administrative Record. The development
of the administrative record supporting the selection of a
response action is central to the Agency's ability to recover
costs. If after completion of a removal action, a decision is
made to file a §107 judicial action, the administrative record
will serve as the basis for judicial review of issues concerning
the selection of the response action. See section 113(j) of
CERCLA. Prior to the initiation of a removal action, Regions
should develop the administrative record consistent with the
applicable procedures set forth in the May 29, 1987 memorandum
entitled Administrative Records for Decisions on Selection of
CERCLA Response Actions (OSWER Directive No. 9833.3).
A.3. Notice. Negotiations and the Issuance of Administrative
Orders. Notice, negotiations, and the issuance of administrative
orders are activities that should be conducted to obtain an
9/ Where the removal exceeds two hundred thousand dollars,
the property is marketable and of value and it may be sold, the
Agency should evaluate, during the PRP Search, the value of
filing notice of a lien on the property affected by the removal
action. OECM's Guidance on Federal Superfund Liens.
September 22, 1987, (OSWER Directive No. 9832.12), provides
guidance on the use of Federal liens.
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OSWER Directive No. 9832.13
agreement from the PRP(s) to implement a response action, thus
eliminating the need for cost recovery of response action costs.
There are important cost recovery aspects to each of these
activities.
The Interim Guidance on Notice Letters. Negotiations, and
Information Exchange. October 19, 1987 (OSWER Directive
No. 9834.10) provides information on the content and timing of
notice letters for removal actions.
If notice to PRPs leads to negotiations for a PRP removal
action, Regions should obtain an agreement from the PRPs for the
reimbursement of EPA's oversight costs.^° This is particularly
important for large removals that will involve extensive
contractor oversight costs. The administrative order on consent
should contain a provision which describes the manner of
determining the amount, the documentation to be furnished by EPA,
the schedule for billing by EPA, and payment by the PRP of the
oversight costs incurred by EPA. Where a consent order for a
removal action contains a provision for the reimbursement of
EPA's oversight costs, the Regional program office should provide
a copy of the order to the Regional Financial Management Officer
with a request to establish an account receivable and track
receipt of the oversight costs. The Office of Waste Programs
10/ CERCLA §104(a), as amended, requires reimbursement for
oversight costs for the RI/FS. See Part IV, page 30.
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OSWER Directive No. 9832.13
Enforcement is developing further guidance on collection of
oversight reimbursement from PRPs.
Where negotiations for a PRP response action are .
unsuccessful, or the exigencies of the situation at the, site do
not allow for extended negotiations, there is a presumption,
rebuttable for documented good cause, that Regions should issue a
§106 unilateral administrative order to viable PRPs.11 A
unilateral order may encourage PRP response and has the added:
advantage of setting up treble damages12 and penalties13.
B. Cost Recovery Activities During the Removal Action
Cost recovery activities that occur during a removal action
depend upon whether the removal is conducted by the Agency (or
11/ See the Issuance of Administrative Orders for Immediate
Removal Actions. (OSWER Directive No. 9833.1).
12/ Section 107(c)(3) of CERCLA establishes the authority
of the United States to collect treble damages for non-compliance
with an administrative order: "If any person who is liable for a
release or threat of release of a hazardous substance fails
without sufficient cause to properly provide removal or remedial
action upon order of the President pursuant to section 104;or 106
of this Act, such person may be liable to the United States for
punitive damages in an amount at least equal to, and not more
than three times, the amount of any costs incurred by the Fund as
a result of such failure to take proper action."
13/ Section 106(b) provides that "any person who, without
sufficient cause, willfully violates, or fails or refuses to
comply with, any order of the President under subsection (a) may,
in an action brought in the appropriate United States district
court to enforce such order, be fined not more than $25,000 for
each day in which such violation occurs or such failure to comply
continues."
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OSWER Directive No. 9832.13
its contractors) or a potentially responsible party, or both.14
During a fund-financed removal action, all EPA and contractor
activities and costs must be carefully recorded and the PRP
search should be reviewed and supplemented, as necessary. During
a PRP removal action, the Agency must keep track of its oversight
costs.
B.I. Documentation of Activities and Cost Accounting. During a
removal conducted by EPA or PRPs, the Agency must maintain an
accounting of activities and costs associated with the response
action. These costs may include: EPA in-house expenditures;
contracts; money paid to other federal agencies through
interagency agreements (lAG's); and, money paid to States through
cooperative agreements. EPA personnel must take care to charge
all time and travel associated with a removal action using the
site-specific account number (site/spill identifier number,
SSID). Contracts, TAG'S and cooperative agreements should
provide that charges are made site-specifically, also.
B.2. Supplemental PRP Search. During the removal action, the
search for potentially responsible parties should continue.
Newly identified PRPs should be issued notice letters and
administrative orders as appropriate. The Region should consider
14/ In some instances, the EPA conducts initial site
stabilization work and then negotiates with PRPs for them to
conduct the remainder of the removal action under a consent
order. Activities conducted in preparation for potential cost
recovery actions would necessarily include those for both fund-
financed removal actions and PRP removal actions.
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the total expected response costs at a site when conducting a
supplemental PRP search. Generally, the higher the total cost of
removal, the greater the effort the Agency should make to
identify PRPs and develop the information that links them to the
site. For all removal actions over two hundred thousand dollars,
the tasks identified in Section A.I must be completed in advance
of a final decision to proceed or not with litigation for cost
recovery.
C. Post-Removal Cost Recovery Activities
After the completion of a fund-financed removal action, the
major components of the potential cost recovery case are
collected (administrative record, the PRP search, total costs of
response at the site, the demand letter and response to it, and
other pertinent information) and the likely success of cost
recovery efforts is evaluated. Based on the evaluation, the
Region must make a final decision to proceed or not to proceed
with further efforts at cost recovery.
C.I. Evaluation and Completion of the Potentially Responsible
Party Search. After the removal has been completed, the PRP
search should be evaluated for completeness. The Regional
Counsel assigned to the case should review the PRP search for
evidentiary sufficiency. The decision to conduct any additional
PRP search activities not yet initiated should be made on the
basis of the sufficiency of the evidence and consistent with the
total costs of response and the likelihood of identifying
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additional PRPs. The higher the costs of response, the stronger
the effort should be to locate PRPs and link them to the site.
Some cases with total costs of response less than two hundred
thousand dollars will not be litigated. Extensive PRP searches
should not be conducted for such smaller cases without prior
evaluation of the site expenditures, costs of additional PRP
search activities, likelihood of identifying viable PRPs, and
likelihood of litigation if PRPs fail to respond satisfactorily
to a demand letter.
If the PRP Search has not identified any PRP, the case
should be closed out by way of a cost recovery close-out
memorandum.15 This will provide documentation that the cost
recovery potential has been evaluated and remove the case from
further consideration. The execution of a Cost Recovery Close-
out Memorandum on a site must be reported in the CERCLIS system.
C.2. Cost Documentation. Following the conclusion of the
removal, and sometimes earlier, the Region should begin gathering
the records which serve to support a demand letter. The
threshold of two hundred thousand dollars should be used to
determine th« initial extent of cost documentation. Initially,
documentation for cases less than two hundred, thousand dollars
should include the total costs of the response activity broken
15/ See the "Guidance of Documenting Decisions not to Take
Cost Recovery Actions", (OSWER Directive No. 9832.11).
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down by general categories. These categories include EPA in-
house expenditures, contracts, other federal agency costs
(through interagency agreements) and Fund monies expended by
States through cooperative agreements. Additional documentation
may be required later to respond to a Freedom of Information Act
request, to respond to PRPs in negotiation, or to prepare for
litigation.
For those viable cases with costs greater than two hundred
thousand dollars, full cost documentation, including the
submittal of the Cost Recovery Checklist to Headquarters should
proceed prior to issuance of the demand letter. The checklist,
once completed, must be sent to OWPE allowing adequate time
(typically twelve weeks or more) for document collection. EPA
Headquarters, the Region, the Department of Justice, other
federal agencies, and States, each have certain responsibilities
in the collection and packaging of cost documentation. The
Procedures for Documenting Costs for CERCLA S107 Actions. January
30, 1985 (OSWER Directive No. 9832.0-la) describes roles and
responsibilities of each office in preparing cost documentation
for litigation.
C.3. Demand Letters. As soon as the Region has documented costs
consistent with the level of expenditures and likelihood of
litigation, the Region should issue a demand for payment of all
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past costs to PRPs.16 The demand letter should be sent to all
PRPs as soon as practicable after the completion of the removal.
A demand letter should be issued in all cases where response
costs have been incurred under CERCLA regardless of whether a
decision has been made to initiate a judicial proceeding for cost
recovery.
Guidance on the content of a demand letter, and a model
demand letter can be found in the Cost Recovery Actions under the
Comprehensive Environmental Response. Compensation, and
Liability Act of 1980. August 26, 1983 (OSWER Directive No.
9832.1). In addition to the items listed in the 1983 Cost
Recovery Guidance to be included in a demand letter, all demand
letters shall reflect the revisions of the SARA amendments to
section 107(a) which provides that the "amounts recoverable in an
action under this section shall include interest on all [costs
incurred by EPA not inconsistent with the national contingency
plan]. Such interest shall accrue from the later of (i) the date
payment of a specified amount is demanded in writing, or (ii) the
date of the expenditure concerned."
C.4. Negotiation. When the PRP(s) responds to a demand letter
expressing interest in meeting with the Agency to discuss the
16/ The authority to issue demand letters under SARA has
been delegated to Regional Administrators. Program and legal
personnel should consult with their supervisors to determine who
has redelegated responsibility for preparing and issuing demand
letters in their Region.
22
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OSWER Directive No. 9832.13
Agency's claim, negotiations should be initiated and carried out
within a limited period of time. The time period should be
determined by the Region on the basis of factors affecting the
complexity of the negotiations (e.g., the number of potentially
responsible parties that will participate, the amount of the
claim). Further information on the development of a negotiating
team and related issues can be found in 1983 Cost Recovery
Guidance.
The Region may also decide to utilize alternative dispute
resolution techniques to achieve settlement. Arbitration, for
example, is specifically addressed in section 122(h)(2) of
CERCLA. Arbitration may be utilized for cases where total
response costs (excluding interest) do not exceed $500,000. (At
the time of issuance of this guidance, the Office of Enforcement
and Compliance Monitoring is drafting a regulation on procedures
for resolving small cases through arbitration.) Additional
information may be found in Guidance on the Use of Alternative
Dispute Resolution in EPA Enforcement Cases. August 14, 1987,
issued by the Office of the Administrator.
In those cases where the Region receives no response or an
unsatisfactory response to a demand letter, the Region must
decide whether to pursue cost recovery efforts further. See
section C.6, Consideration of Referral in the Event of No
Settlement, below.
23
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OSWER Directive No. 9832.13
C.5. Settlements. If negotiations are successful, agreements
will be formalized in an administrative document or a judicial
consent decree. The Region may enter a partial settlement with
some PRPs and seek to recover unreimbursed costs from non-
settlors. Where the Agency does enter into a partial settlement,
viable recalcitrant PRPs should be pursued as soon as practicable
for the remainder of the costs.
Administrative settlements17 may be entered into by the
Agency for cost recovery pursuant to Section 122(h) of SARA18.
Administrative settlements in cases where total costs of response
at a facility, excluding interest but including all future costs,
do not exceed five hundred thousand dollars may be signed by the
Regional Administrator without Department of Justice concurrence.
Pursuant to §l22(i), the Agency must solicit public comment on
proposed 122(h) administrative settlements by placing a notice of
the settlement in the Federal Register. The comment period is
thirty days. Administrative settlements for cost recovery for
cases where the total cost of response on a site are expected to
exceed five hundred thousand dollars may only be entered into
17/ Th« Office of Enforcement and Compliance Monitoring is
drafting guidance on the procedures to be followed for
administrative cost recovery settlements.
18/ Section 122(h) of CERCLA gives the Agency the authority
to settle cost claims administratively. Such settlements require
the prior written approval of the Department of Justice if total
costs of response at a facility exceed five hundred thousand
dollars (excluding interest).
24
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OSWER Directive No. 9832.13
with the advance concurrence of EPA Headquarters and the
Department of Justice. Administrative settlements are fully
enforceable pursuant to CERCLA §122(h)(3).19
Judicial consent decrees may require consultation or
concurrence with EPA's Office of Waste Programs Enforcement and
Office of Enforcement and Compliance Monitoring in addition to
the approval of the Department of Justice. See the Revision of
CERCLA Civil Judicial Settlement Authorities Under Delegations
14-13-B and 14-14-E. June 17, 1988, (OSWER Directive No. 9012.10-
a), for information on settlement authorities and their
requirements.
C.7. Consideration of Referral in the Event of No Settlement.
In each case where the Agency has conducted a response action
under the authority of section 104 of CERCLA, the Agency must
make an affirmative decision to proceed or not to proceed with a
judicial cost recovery action. This applies to those sites where
no response or an unsatisfactory response to a demand letter was
received as well as to those sites for which negotiations
occurred but were unsuccessful. The Region should have gathered
all the information necessary to decide the final disposition of
19/ CERCLA section 122(h)(3), Recovery of Claims, states
"If any person fails to pay a claim that has been settled under
this subsection, the department or agency head shall request the
Attorney General to bring a civil action in an appropriate
district court to recover the amount of such claim, plus costs,
attorneys' fees, and interest from the date of settlement. In
such actions, the terms of the settlement shall not be subject to
review."
25
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OSWIR Directive No. 9832.13
the case. The relevant factors to be considered include:
(a) the amount of costs at issue;
(b) the strength of evidence connecting the potential
defendant(s) to the site;
(c) the availability and merit of any defense, (See
CERCLA §107);
(d) the quality of release, remedy, and expenditure
documentation by the Agency, a State or third
party;
(e) the financial ability of the potential
defendant(s) to satisfy a judgment for the amount
of" the claim or to pay a substantial portion of
the claim in settlement;
(f) the statute of limitations; and
(g) other cases competing for resources.
If upon review of the case on the basis of the above
factors, the Region decides not to pursue a cost recovery action,
the decision must be documented in a cost recovery close-out
memorandum.20 A close-out memorandum will provide documentation
for why EPA has not pursued cost recovery in a particular case,
and provide the Agency with information necessary for selecting
referrals and predicting revenues to the Fund in future years.
20/ See the Guidance on Documenting Decisions not to Take
Cost Recovery Actions. (OSWER Directive No. 9832.11).
26
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OSWER Directive No. 9832.13
Generally, the Regions should anticipate developing cases
for litigation for all sites where total costs of response exceed
two hundred thousand dollars and negotiations for settlement were
unsuccessful. Sites where total costs of response do not exceed
two hundred thousand dollars, and negotiations were unsuccessful,
are also candidates for referral consistent with the case
selection criteria discussed in Part II, above. The cases
selected for litigation involving sites where total costs of
response are less than two hundred thousand dollars should be
those where PRPs are recalcitrant, evidence linking PRPs to the
site is good, the case may be used to create good precedent (such
as a site where EPA issued a unilateral order, PRPs did not
comply, and EPA is likely to obtain a favorable ruling for treble
damages or penalties), or the case is otherwise meritorious.
A decision to proceed with a judicial action for cost
recovery requires the assembly of all documents associated with
the case including those necessary to substantiate that:
1) there is a release or the threat of a release of a
hazardous substance;
2) th* release or threat of release is from a
facility;
3) the release or threat of release caused the United
States to incur response costs;
4) the Defendant is in one or more of those categories
of liable parties in CERCLA section 107(a).
27
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OSWER Directive No. 9832.13
These elements are discussed in Cost Recovery Actions under
f
the Comprehensive Environmental Response. Compensation, and
Liability Act of 1980. (OSWER Directive No. 9832.1) and
Procedures for Documenting Costs for CERCLA S1Q7 Actions. (OSWER
Directive No. 9832.0-la). In addition, the referral should
anticipate the defense that the response was inconsistent with
the national contingency plan. The referral should comport with
the applicable guidance and include or reference the
administrative record, PRP search, and activity and cost
documentation. Evidence substantiating each element of proof
must be discussed in a referral package submitted to the
Department of Justice when proceeding with a judicial action.
Generally, referrals seeking the recovery of costs expended
in a removal action should occur no later than twelve months
after completion of the removal, whether or not the site is on
the National Priorities List21 and regardless of whether further
response action is to be taken. Exceptions to this policy may be
possible in certain instances for legitimate litigation strategy
reasons. For instance, where a remedial action is to be
initiated within three years of the completion of the removal, it
21/ Although sites'on the National Priorities List will
have further costs, e.g.. costs of a remedial investigation and
feasibility study, the action for the recovery of removal costs
should be brought within a year of completion of the removal to
assure that we litigate the case while the evidence is most
readily available. See Cost Recovery Actions/Statute of
Limitations. June 12, 1987 (OSWER Directive No. 9832.3-1A).
28
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OSWER Directive No. 9832.13
may be appropriate to combine an action for the recovery of the
removal costs with the action for the recovery of RD/RA costs.22
However, in no event should filing be delayed beyond the statute
of limitations.
22/ Where further response action is contemplated, the
Agency ordinarily seeks a declaratory judgment for future
response costs. See CERCLA section 113 (g)(2).
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OSWER Directive No. 9832.13
Part IV. COST RECOVERY PROCESS FOR REMEDIAL SITES
The remedial process in the Superfund program includes the
remedial investigation and feasibility study, remedial design,
and remedial action. Activities related to cost recovery must be
conducted in each phase of the remedial process in order to
maximize the potential for recovery of funds.
The cost recovery process for remedial sites23 includes the
following elements: the search for potentially responsible
parties (PRPs); the opportunity for PRPs to conduct the work; the
development of the administrative record; cost documentation; and
the timely issuance of demand letters. While the process for
remedial sites is similar to the previously described process for
removal sites, the level of effort of each element must be
increased over that for removal actions because of the greater
amount of money involved. Sites that proceed through a remedial
investigation and feasibility study and remedial design and
action will generally exceed the threshold level of two hundred
thousand dollars used in the removal cost recovery process.
Described below are the activities required for each of the
elements in the remedial cost recovery process and the timing of
each of th« activities.
23/ Where a site has more than one operable unit, cost
recovery activities described in the remedial process should be
conducted for each operable unit, where appropriate, since
operable units may be held to be separate actions for purposes of
cost recovery statute of limitations.
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OSWER Directive No. 9832.13
A. Pre—Reaedial Cost Recovery Activities
Activities that may be carried out in preparation for future
cost recovery actions prior to the initiation of a remedial
investigation and feasibility study (RI/FS) include the
potentially responsible party search, general notice, special
notice, negotiations, and the issuance of an administrative order
on consent for a PRP RI/FS. While each of these activities is an
integral part of the broader Superfund program, each has a
special significance in light of potential cost recovery actions.
A.I. The Potentially Responsible Party Search The
identification and location of potentially responsible parties is
central to all future enforcement activities, including cost
recovery actions. The PRP search will generate names of
potentially responsible parties as well as the information to
link the PRPs to the site. This information is likely to serve
as evidence in future judicial actions to prove the liability of
the defendants.
Concurrent with the NPL listing process, the Region should
initiate a PRP search in accordance with the guidelines set out
in the Potentially Responsible Party Search Manual.
August 27, 1987, (OSWER Directive No. 9834.6). Fund-lead,
enforcement, civil investigators, and Office of Regional Counsel
staff should work closely together in the development of the PRP
search from the initial planning stages through the production of
the PRP search report. Ideally, the following activities should
31
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OSWER Directive No. 9832.13
be conducted prior to the initiation of the RI/FS to ensure that
all PRPs may be given general notice of their potential liability
well before they are given special notice of the opportunity to
conduct the RI/FS: history of operations at the site; a title
search of the site property; Agency record collection and file
review; interviews with government officials; PRP status/PRP
history; records compilation; issuance of CERCLA 104(e)
letters/RCRA 3007(c) letters; financial status; PRP name and
address updates; identification of generators and transporters;
report preparation; and, an evaluation of the value of filing
notice of a lien on the site property. (The Guidance on Federal
Suoerfund Liens. September 22, 1987, (OSWER Directive No.
9832.12), provides guidance on the use of Federal liens to
enhance Superfund cost recovery.) The Region should rely on the
expertise of the civil investigator and the Office of Regional
Counsel and utilize available contract resources to conduct the
PRP search and prepare the PRP search report.
Sufficient information should be collected on all PRPs to
satisfy the special notice requirements of section 122 of
CERCLA.24 If possible, the PRP search should be completed prior
to the initiation of the RI/FS. In some instances, completion of
24/ CERCLA §122(e)(l) identifies information that should be
included, to the extent it is available, in a special notice
letter. This information includes the names and addresses of
other PRPs, the volume and nature of the hazardous substances
contributed by each PRP, and a ranking by volume of the
substances at the facility.
32
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OSWER Directive No. 9832.13
all PRP search activities prior to the initiation of the RI/FS
will not be possible. For example, it may be necessary to
undertake an RI to determine the source of contamination. In
other instances, the search for generators may be complicated or
"new" information may be discovered late in the process.
A.2. General and Special Notice Letters and Negotiations for a
PRP Remedial Investigation and Feasibility Study. Once PRPs have
been identified, the Region should issue General Notice Letters
to apprise PRPs of their potential liability. This should be
done as soon as possible after they have been identified. In
addition, information relating to names and addresses of other
PRPs, volumetric rankings and nature of substances should be
provided as soon as possible.
Special notice letters will provide PRPs with a specific
opportunity to negotiate terms of agreement concerning their
participation in the conduct of the RI/FS. Special notice
letters should also include a demand for payment of past costs if
a Fund-financed removal action was conducted at the site and a
demand letter has not already been sent. Information regarding
the content and timing of general notice letters, special notice
letters, and negotiations for PRP RI/FS can be found in the
Interim Guidance on Notice Letters. Negotiation, and Information
Exchange. October 19, 1987 (OSWER Directive No. 9834.10).
33
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OSWER Directive No. 9832.13
A.3. Settlement for PRP Remedial Investigation/Feasibility
Study. A settlement for PRP conduct of the RI/FS must include
the requirement that PRPs pay for cost incurred by EPA in
obtaining assistance from third parties in the oversight of the
RI/FS and may also involve the recovery of past costs incurred by
the Agency.
Where negotiations result in a settlement for a PRP RI/FS,
EPA will require the settling PRPs to commit in the settlement
agreement to pay the costs of oversight of the RI/FS including
extramural costs (contracts and interagency agreements) and
intramural costs (EPA payroll, travel, and other costs) on a
specified schedule. The Region should track reimbursement in
CERCLIS and contact the Regional Financial Management Officer to
set up an accounts receivable in the Financial Management System
(FMS) for the receipt of oversight costs.
In the case of those sites where removal actions have
occurred prior to the negotiation, and the cost recovery is not
being pursued on a separate track, additional provisions for
recovery of past costs or a reservation of EPA's rights to pursue
those costs should be included in the administrative order. If
some but not all past costs are recovered in the settlement, and
a reservation of the Agency's right to pursue all of the
remaining costs is included, the advance concurrence of the
Department of Justice under section 122(h)(l) of CERCLA will not
be necessary. Of course, if the settling PRPs agree to pay all
34
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OSWER Directive No. 9832.13
past costs, a claim is not being compromised and DOJ's prior
concurrence is not necessary.
Where negotiations do not result in settlement, the Agency
will proceed with a Fund-financed RI/FS.
B. Cost Recovery Activities During the Remedial Investigation/
Feasibility Study
The activities that occur during the remedial investigation
and feasibility study in support of future cost recovery actions
may include a supplemental PRP search, the development of the
administrative record, the documentation of activities and costs,
notice and demand letters, and negotiation for PRP remedial
design and action.
B.I. Documentation of Activities and Cost Accounting. The
documentation of activities and accounting of costs must occur
whether the remedial investigation and feasibility study are
being conducted by the Agency, a State, or the PRPs.
During a Fund-financed RI/FS, each organization involved
(e.g., EPA, a State, other Federal agencies, EPA's contractors)
is responsible for keeping an accounting of its activities and
the costs corresponding to those activities/items. Cooperative
agreements with States for State-lead, Fund-financed RI/FS's must
include requirements that States maintain documentation according
to standard EPA procedures for cost recovery. These records will
be assembled later during the RI/FS in preparation for
negotiations with PRPs for private-party remedial design and
35
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OSWER Directive No. 9832.13
action and nay serve as evidence of costs incurred in future
judicial actions to substantiate cost recovery claims.25
When the RI/FS is being conducted by the PRP(s), the lead
agency must carefully record the costs of all Fund-financed
activities associated with the oversight of that action. The
settlement agreement should specify the schedule for payment of
oversight costs throughout the RI/FS. Normally, the Agency will
issue a demand for payment at the end of a one year period
throughout the course of the PRP RI/FS for all costs incurred
during that year. Quality record keeping using CERCLIS is
essential since the Agency must be able to substantiate the
amount of money demanded and what activities were performed for
that amount. The Regional Financial Management Officer should
set up an accounts receivable in FMS for the receipt of oversight
costs.
B.2. Supplemental PRP Search. As the RI/FS proceeds, the Agency
should continue to develop the PRP search as necessary.
Additional PRPs found since the start of the RI/FS who did not
receive notice letters should be issued general notice letters as
soon as they are identified. This will give them an opportunity
to participate, to the extent feasible, in on-going work. The
evidence linking each PRP to the site should be fully reviewed by
the Office of Regional Counsel in anticipation of pursuing
25/ Cost documents are not part of the administrative
record for a site.
36
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OSWER Directive No. 9832.13
litigation against the PRP, and supplemented as necessary.
f
Again, the Region should ensure that all activities identified in
the Potentially Responsible Party Search Manual. (OSWER Directive
No. 9834.3) have been conducted or are planned. All sources of
information identified by the Region's civil investigator should
be thoroughly pursued.
If the PRP search indicates that there are no PRPs at the
site, the Region should prepare a close-out memorandum to
document the basis for a decision not to proceed with cost
recovery. If the PRPs are not financially viable, the Region
should review the merits of proceeding with cost recovery. See
the discussion of bankruptcy referrals in the Case Selection
Guidelines section for factors to consider in such cases.
B.3. Development of the Administrative Record. As in removal
actions, the development of an administrative record which will
support the selection of s of the remedial alternatives is
critical to the cost recovery potential of a case. Section
113 (j) of CERCLA limits judicial review of issues concerning the
adequacy of a response action to the administrative record. An
accurate and complete record, therefore, should simplify future
cost recovery actions. Section 113(k) requires that interested
persons be given the opportunity to participate in the
development of the administrative record. During the RI/FS,
whether conducted by a PRP, a State, or EPA, Regions should
develop the administrative record consistent with the applicable
37
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OSWER Directive No. 9832.13
procedures. (See Administrative Records for Decisions on
Selection of CERCLA Response Actions. May 29, 1987, OSWER
Directive #9833.3.)
B.4. Special Notice Letters and Negotiation for PRP Remedial
. Design and Remedial Action. As the proposed plan and draft RI/FS
are made available for public comment, the Regions should again
send special notice letters to all identified PRPs to provide
them with an opportunity to negotiate regarding conduct of the
remedial design and remedial action (RD/RA).
The special notice letters for RD/RA should include a demand
for payment of past costs not yet reimbursed, e.g., the costs of
a Fund-financed RI/FS. The Region should determine total past
costs (to the extent possible), and subtract from those costs any
costs already reimbursed. The Region must ensure that the amount
of past costs demanded is qualified to account for costs incurred
but not yet paid by the Agency. Interest which has accrued on
amounts previously demanded should be included in the demand as
appropriate (see page 22).
C. Settlement for PRP Remedial Design and Action.
As mentioned above, past costs will be one of the subjects
of negotiation for PRP remedial design and action. The
negotiations will result in one of three outcomes: full
settlement, partial settlement, or' no settlement. See the
Interim CERCLA Settlement Policy. OSWER Directive No. 9835.0. for
a complete discussion of the factors to consider when settling an
38
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OSWER Directive No. 9832.13
action under CERCLA. The cost recovery consequences of each of
these are discussed below.
C.I. Full Settlement. Where negotiations result in a full
settlement, the settling PRPs agree to conduct the work and
reimburse the Agency for past costs. In addition, the settling
PRPs will have agreed to reimburse EPA for future oversight
costs. The agreement will be formalized in a consent decree
which must specify the manner and timing of billings and payments
and be filed in the appropriate United States District Court.
For future oversight costs, EPA may be required to send demand
letters at regular intervals according to the schedule set forth
in the consent decree. The schedule for payment should be
recorded in the appropriate CERCLIS file. The Regional Financial
Management Officer must be advised that an account for receipt of
the recovered money should be established.
C.2. Partial Settlement. Where negotiations result in a partial
settlement, unrecovered costs should be sought from non-settlors
in a §107 judicial action. The referral of a case against non-
settlors should occur concurrent with referral of the consent
decree with settlors, or as soon as possible thereafter. This
will serve to highlight enforcement against the non-settling
PRPs.26 If the Region will not pursue the costs waived in the
settlement with the PRPs, the ten point analysis justifying the
26/ Of course, this should take into account accrual of a
cause of action.
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OSWER Directive No. 9832.13
settlement for less than one hundred per cent should document the
basis for not pursuing the unrecovered costs. If a decision not
to pursue the unrecovered costs is made after the settlement
analysis has been prepared in final form, a close-out memorandum
should be prepared to document the basis for that decision.27
C.3. No Settlement. Where negotiations do not result in any
settlement, the site classification will determine the next step.
For Fund-lead sites, unless a statute of limitations problem
is anticipated for the recovery of RI/FS costs, the Region should
proceed with Fund-financed remedial design and remedial action
before initiating an action for the recovery of RI/FS costs.
Consistent with applicable and relevant guidance, consideration
should be given to issuing unilateral §106(a) orders to
recalcitrant parties in order to encourage PRP response and set
up claims for treble damages and penalties.
For Federal enforcement-lead sites, where the remedial
action is not funded and the case is not settled, the Region
generally should issue a unilateral section 106 administrative
order and, where compliance is not forthcoming, immediately
thereafter (taking into account whether there is a funded RD)
refer the c««« for injunctive relief and past costs (combined
CERCLA §§106/107 judicial actions). The cost documentation must
be completed by the time of the referral to support the section
27/ See footnote 15, page 20.
40
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OSWER Directive No. 9832.13
107 claim. Again, see the 1983 Cost Recovery Guidance and the
r
1985 Cost Documentation Procedures Manual for details of
preparing the cost recovery portions of a case.
D. Cost Recovery Activities during the Remedial Design and
Remedial Action
By the time a site has reached the remedial design and
remedial action phases, much of the work for assembling a cost
recovery case has already been completed. Additional activities,
which will mainly consist of updating information collected
earlier, will depend upon the outcome of settlement negotiations,
and the viability of the remaining case. Where the Agency has
agreed to a partial settlement, cost recovery activities to be
conducted may include those necessary in overseeing the PRP work
as well as those necessary for pursuing a judicial action against
non-settlors.
D.I. PRP RD/RA. Cost recovery activities required during a PRP
RD/RA depend upon the type of settlement (i.e., full or partial)
and the specific provisions included in the settlement for
reimbursement of past costs and oversight costs. Any settlement
that includes reimbursement of EPA's oversight costs throughout
the course of the remedial design and action will require the
Agency to regularly document all costs associated with the
oversight function. Demand letters for oversight costs should be
sent according to the schedule set forth in the consent decree
and tracked in CERCLIS. The Regional Financial Management
41
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OSWER Directive No. 9832.13
Officer must be provided with a copy of the consent decree so
that an accounts receivable can be established in FMS and
payments tracked.
The Agency should continue to account separately for all
other EPA site-specific costs not attributable to oversight
(e.g.. costs associated with a separate operable unit which the
PRPs are not implementing) in the event that a judicial action
against non-settlors (or settlors) occurs.
D.2. Fund-Financed RD/RA. Fund-financed remedial design and
action will normally account for the largest site-specific
expenditures attributable to a site. Therefore, remedial design
and action costs provide the largest potential for return of
site-specific expenditures. This fact makes it essential that
the Agency devote significant resources to the prompt development
of cost recovery actions for remedial design and action costs.
a)Cost Documentation. There is a presumption that absent
full resolution, the Agency will proceed with judicial cost
recovery actions for all Fund-financed remedial actions and/or
unreimbursed costs unless a decision has been made not to pursue
cost recovery. In preparation for a referral, the Agency must
continue maintaining an accounting of all costs incurred on the
site, including costs incurred by Agency personnel and
contractors, and costs incurred through cooperative agreements
with States and interagency agreements with other Federal
agencies. The Cost Documentation Procedures Manual (1985)
42
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OSWER Directive No. 9832.13
provides details on cost documentation preparation for section
t
107 actions.
b) Demand Letters. As soon as practicable after the
completion of the remedial design, the Region should send demand
letters to all identified PRPs. The amount of money demanded
should include total past costs not yet recovered, and applicable
interest, plus a projection of the costs expected to be spent in
remedial action. While the demand letter should include the
projected costs, it should also state that the amount is an
estimate and is subject to change. Demand letters at this point
should not invite discussion on any subject but costs, i.e..
negotiation on the selected remedial action will not be reopened
at this point.
c) Consideration of Referral in the Event of No Settlement.
Assuming that attempts at negotiation at this point are
fruitless, the Region must make a final determination of the
disposition of the case. The relevant factors to be considered
are the same as those for removal action cases:
(a) the strength of evidence connecting the potential
defendant(s) to the site;28
(b) th« availability and merit of any defense. (See
CERCLA §107);
28/ In the case of large remedial actions with PRP searches
done early in the program, the PRP search should be reviewed and,
as appropriate, upgraded, before a decision is made to close-out
the case.
43
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OSWER Directive No. 9832.13
(c) the quality of release, remedy, and expenditure
r
documentation by the Agency, a State or third
party;
(d) the financial ability of the potential
defendant(s) to satisfy a judgment for the amount
of the claim or to pay a substantial portion of
the claim in settlement; and
(e) the statute of limitations.
If upon review of the above factors, the Region believes
that a judicial cost recovery action will not be fruitful, a coat
recovery close-out memorandum should be prepared and its issuance
documented in the appropriate CERCLIS field.
A decision to proceed with a judicial action for cost
recovery requires the assembly of all documents associated with
the case including those necessary to substantiate that:
1) there is a release or the threat of a release of a
hazardous substance;
2) the release or threat of release is from a
facility;
3) th« release or threat of release caused the United
States to incur response costs.
4) the Defendant is in one of those categories of
liable parties in CERCLA section 107(a).
These elements are discussed in Cost Recovery Actions under
44
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OSWER Directive No. 9832.13
the Comprehensive Environmental Response. Compensation, and
»
Liability Act of 1980. (OSWER Directive No. 9832.1) and
Procedures for Documenting Costs for CERCLA S107 Actions. (OSWER
Directive No. 9832.0-la). In addition, the referral should
anticipate the defense that the response was inconsistent with
the national contingency plan. The referral should comport with
the applicable guidance and include or reference the
administrative record, PRP search, and activity and cost
documentation. Evidence substantiating each element of proof
must be discussed in a litigation report included in the referral-
package submitted to the Department of Justice when proceeding
with a judicial action. At this point, the assembly of evidence
should merely require updating information previously assembled,
e.g.. the administrative record, cost documentation, the PRP
search report.
Referrals seeking the recovery of costs expended in a
remedial design and remedial action should occur concurrently
with the initiation of on-site construction of the remedial
action. RD/RA referrals should not affect the schedule of design
or construction. Where remedial design and remedial action are
divided into operable units, referrals should occur concurrent
with the initiation of each remedial action operable unit.29 The
29/ Section 113(g) of CERCLA provides that in cost recovery
actions under section 107 "the court shall enter a declaratory
judgment on liability for response costs or damages that will be
binding on any subsequent action or actions to recover further
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OSWER Directive No. 9832.13
Agency will defer beyond this date the filing of a remedial case
only in limited circumstances for technical or strategic reasons.
Once a case for the recovery of remedial action costs has
been referred to the Department of Justice, the Region must
periodically document on-going costs incurred and submit these
costs to DOJ. The litigation team should discuss the frequency
and timing of the periodic cost up-dates.
response costs or damages."
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OSWER Directive No. 9832.13
Part V. Existing Cost Recovery Guidance
r
Administrative Records for Decisions on Selection of CERCIA
Response Actions. May 29, 1987, OSWER Directive No. 9833.3.
Coordination of EPA and State Actions in Cost Recovery.
August 29, 1983, OSWER Directive No. 9832.2.
Cost Recovery Actions/Statute of Limitations. June 12, 1987,
OSWER Directive No. 9832.3-1A.
Cost Recovery Actions under the Comprehensive Environmental
Response. Compensation, and Liability Act of 1980 fCERCIA).
August 26, 1983, OSWER Directive Mo. 9832.1. Also known as the
1983 Cost Recovery Guidance.
Cost Recovery Referrals. August 3, 1983, OSWER Directive No.
9832.0.
Guidance of Documenting Decisions not to Take Cost Recovery
Actions. June 7, 1988, OSWER Directive No. 9832.11.
Guidance on Federal Suoerfund Liens. September 22, 1987, OSWER
Directive No. 9832.12.
Interim CERCLA Settlement Policy. December 5, 1984, OSWER
Directive No. 9835.0.
Interim Final Guidance Package on Funding CERCLA State
Enforcement Actions at NPL Sites. April 7, 1988, OSWER Directive
No. 9831.6.
Interim Guidance on Notice Letters. Negotiations, and Information
Exchange. November 19, 1987, OSWER Directive No. 9834.10.
Interim Guidance on Settlements with de Minimis Waste
Contributor* under Section 122(a) of SARA. June 19, 1987, OSWER
Directive NO. 9834.7.
Interim Guidancet Streamlining the CERCLA Settlement Decision
Process. February 12, 1987, OSWER Directive No. 9835.4.
Policy on Recovering Indirect Costs in CERCIA 8107 Cost Recovery
Actions. June 27, 1986, OSWER Directive No. 9832.5.
Potentially Responsible Party Search Manual. August 27, 1987,
OSWER Directive No. 9834.3-1A.
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OSWER Directive No. 9832.13
Procedures for Documenting Costs for CERCIA 81,97 A/rtJ7nff.
January 30, 198'5, OSWER Directive No. 9832. O-IA. Also known as
the Cost Documentation Procedures Manual.
Revised Hazardous Waste Bankruptcy Guidancer May 23, 1986, OECM.
Small Cost Recovery Referrals. July 12, 1985, OSWER Directive
No. 9832.6.
;tate Superfund Financial Management and Recort^keepina Guidance.
fovember 1987, Office of the Comptroller, Financial Management
livision.
uoerfund Removal Procedures Revision Number Three.
ebruary 1988, OSWER Directive No. 9360.0-03B. See Chapter 5,
Potentially Responsible Parties".
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