* UNITED STATES ENVIRONMENTAL PROTECTION AGENCY y 9834. 9 October 20,1987 MEMORANDUM SUBJECTS Evaluating Mijted Funding Settlements Under CERCLA FROM i J. Assistant Administrator Office of Solid Wast* and Emergency Response Thomas L. Adams, Jr. Assistant Administrator Office of Enforcement and:'Compliance Monitoring TOs Regional Administrators, Regions I-X I. Introduction This document provides guidance for use when a party proposes, as part of a settlement negotiation, that both private and Fund resources be used at a site. This type of arrangement is generally referred to as a "mixed funding1 settlement. Section 122(b) of the Comprehensive Environ- mental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorisation Act of 1986 (hereinafter cited as 'CERCLA") provides explicit authority for the Government to enter into these types of arrangements. The primary goals of this guidance are tot jtv 1) Encourage the Regions to consider mixed funding settlements, based on the statutory approval of these settlements in $122(b) of CERCLAf 2) Present a method for Regional enforcement person- nel to analyse mixed funding in the context of a settlement offer, and 3) Indicate broad Agency preferences by specifying acceptable and poor candidates for mixed funding in general. ------- -2- 9834*9 Hiotorically, tho term °mixod funding0 hao boon uood to doocribo throo typoo of arrangements. Section 122(b)(l) of CERCLA doocriboo ono mixed funding arrangement, in which ono or core of tho potentially rooponoiblo portico (PRPo) agroo to por£om o rooponoo activity and tho Agoncy agrooo to roftoburoo thooc PRPo for a portion of thoir roopono® cooto. In oiich case tho otatuto providoo that tho coot incurred by tho Fund bo r- ovorod from non-oottloro when poooiblo. Sottlomont agreements involving cloonupo by PRPo and reimbursement of thoir rooponoo cooto require the Agoncy to "proauthorizo" tho claim againot tho Fund prior to tho initiation of tho rooponoo action. Tho torn "proouthorisation" roforo to tho approval that muot bo granted by tho Agoncy prior to cleanup actiono if a claim for rooponoo cooto io to bo conoidorod againot tho Fund. If proauthorization io granted, it oorvoo ao an Agoncy coonitmont that, if rooponoo cooto ore conducted purouont to tho settlement agreement and tho cooto ore roooonablo and nocooocry, roimburooraont will bo available fron tho Fund ao dictated by tho agreement, oubjoct to tho availability of appropriated oonioo. Two othor kinds of settlement ogroononto aloo conotituto forma of mined funding, but do not roquiro proouthorisation. Section 122(b)(3) doocriboo ono typo of orrongonont, in which tho Agoncy conducts tho rooponoo action and the PRPo pay tho Agoncy for a portion of tho cooto. Thio typo o£ oottlooont io known ao a oottloraont for caoh, or °caoh-out.° A, third typo of mixed funding, known ao °niaod worfc," involvoo an agrooroont which addrooooo tho ontiro rooponoo action, but tho PRPs and tho Agoncy agroo to conduct and pay for diocroto portiono or oogmontc of tho rooponoo action. Tho tore "mixed funding0, ao uood in thio document, applioo to any of tho aforementioned typoo of oottlooonto. It ohould bo notod, however, that $122(b)(4), concerning futuro obligation of tho Fund for remedy failure, only applioo to mixed funding in tho form of proauthorization, ao doocribod in S122(b)(l). Ao notod above, tho 1906 Anondnonto to CERCLA included an explicit otatutory authorisation of aisod funding oottlo- monto. Prior to thooo Amendments, tho prieary document which nado reference to nixed funding wao tho Interim CERCLA Sottlo- mont Policy (30 FR 5034). Thio policy oot out ton criteria to uoo tthon evaluating a oottlonont offer for looo than 100$ of tho coot or cloanup at a oito. In nixed funding oottlo- montc, tho PRPo agroo to pay for a portion of tho rooponoo coot, and may conduct some or all of tho rooponoo action. A major portion of this guidance addrooooo tho application of tho Interim Sottlomont Policy to mixed funding settlements. Section II outlines tho key principles underlying tho Agency's Interim Settlement Policy, and tho role of mixed funding within these general principles. Section III then provides an approach for applying the ter. settlement criteria to mixed funding settle- ment offers in general (e.g., without regard to any specific ------- -3- 9834.9 funding arrangement.) This ••ction first highlights factors of ksy importance to mixed funding settlements, and then suggests the Agency's preferences among various combinations of these factor*. Section IV identifies criteria-, to be used to determine if a particular type of mixed funding is appropriate for a site, and then lists secondary considerations related to all mixed funding settlements. Section V outlines the general procedure for review and approval of mixed funding. II. The Role of Mixed Funding in the CERCLA Cleanup Program The Interim CERCLA Settlement Policy identified nego- tiated private response actions as an essential component of the Agency's overall program for obtaining cleanup of the nation's hasardous waste sites. This program, to be effec- tive, depends upon a balanced approach, which includes a mi* of Pund-financtJ cleanups, enforceable settlement agreements reached-through negotiations, and litigation. Expeditious cleanups reachsd through negotiated settlements are preferable to protracted litigation. Section 122 of the 1986 Amendments, which is devoted entirely to settlement issues, indicates Congressional affirmation of the emphasis in the Interim Settlement Policy toward increased flexibility in settling CERCLA cases in order to expedite cleanups. Like the Interim Settlement Policy, SI22 covers a wide range of mechanisms designed to promote settlements. In particular, in S122(b), Congress acknowledged the need to consider settlements for less than 100% of the costs of cleanups"...by using monies from the Fund on behalf of parties who are unknown, insolvent, similarly unavailable, or refuse to settle.* (See the Conference Report on Superfund Amendments and Reauthorisation Act of 1986, 99 Cong., 2d Sess. Report 99-962 pp. 183, 252 (1986).) The Agency encourages the use of mixed funding to promote settlement and hasardous site cleanup. For example, preauthori- zation offers the* advantage of PRP performance of the response activity and funding of a substantial portion of the response costs, thus conserving Agency resources for use at other sites. In addition, S122(b)(l) requires the Agency to make all reasonable efforts to recover these costs. The Agency will therefore pursue nonsettlors to make the Fund whole, unless it would be unwarranted to undertake such efforts. To the extent that mixed funding reduces the number of PRPs to be sued in such cost recovery cases, it will also reduce the Agency's costs for litigation. ------- -4- 9834.9 Support of mixed funding as a settlement tool, however, does not imply that the standard and scope of liability under CERCLA has changed. As established by court decisions prior to the 1986 Amendment*f PRP liability under CERCLA remains strict, joint and several, unless the PRPs can clearly . demonstrate that the harm at the site is divisible. Thus, the Agency will assess mixed funding settlements in a manner consistent with the Interim Settlement Policy, where complete cleanup or collection of 100% of costs remains a primary goal. Por example, the Agency will not approve mixed funding simply on the basis that a share of wastes at a site may be attributable to an unknown or financially non-viable party. The Agency may conduct an allocation of liability among PRPs at a site, or may evaluate the PRP's allocation and allow volume to be considered as one factor used to assess the reasonableness of the PRPs' offer. However, the availability or the amount of any Fund-financing for a particular site will not be dependent solely on consistency with any volume- tric or 'fair-share* allocation. The Agency may, mm a policy decision, determine that, mixed funding is the best method to promote cleanup at a particular site, based on the total- ity Of the circumstances. Nixed funding should be viewed as one tool, approved by Congress, to be used to promote settlements in the context of the existing Interim Settle- ment Policy. Section 122 also contains settlement provisions related tot a) de minimis settlements (S122(g)], in which parties who are liable for only a minor portion of the hazard or cost of cleanup at a site may resolve their liability to the Government in an expedited processi b) non-binding allocations of responsibility (NBARs), (S122(e)(3)1, which involve a discretionary EPA allocation of the total res- ponse costs among PRPs at a site; and c) covenants not to sue, (S122(f)], in which the Government agrees to certain releases from liability at a site. These settlement mechanisms may influence the decision as to whether a settlement should include mixed funding. Thus, the use) of mixed funding at a site should be evaluated both in the context of SI22 as a whole, which encourages settlement in general* as well as individual $122 settlement provisions and their relevance to the proposed mixed funding settlement. Por further guidance on these settlement provisions, see •Interim Guidelines for Preparing Non-Binding Preliminary Allocations of Responsibility (NBAR),* 52 PR 19919* 'Interim Guidelines on Settlements with De Mininis Waste Contributors under Section 122(g) of SARA,* Adams/Porter, June 19, 1987; •Covenants Not to Sue Under SARA,* Adams/Porter July 10, 1*87. ------- -s- 9834.9 III. Assessment of Mixed Funding Settlement Proposals Using the Interim Settlement Policy Criteria In the •valuation of a proposed mixed funding settlement, Agency enforcement personnel should first focus on the quality of the overall settlement offer. .Thus, the initial determin- ation in each case will not be whether a» particular type of mixed funding should be> used, but whether the underlying offer for a mixed funding settlement is a good one. This determination should be made by applying the ten settlement criteria set out in the Interim Settlement Policy. The factors and hypothetical examples set forth below provide guidance as to how to apply the ten settlement cri- teria to settlement offers in which PRPs have requested some form of mixed funding. The Agency does not intend to limit the availability of mixed funding to the fact patterns described below, but recommends the following approach as a means of focusing the analysis of the settlement. Regions must continue to consider the totality of the circumstances for each mixed funding settlement offer. In settlement offers in which any form of mixed funding is proposed, factors of primary importance includes • Strength of the liability cas* against settlors and any non-settlors. This factor includes! - litigative risks in proceeding to trial against settlors, and - the nature of the case remaining against non- settlors after the settlement; • Government's options in the event settlement nego- tiations fail (e.g., if a state cost-share will be available for a Fund-lead action); • Sixe of the portion or operable unit for which the Fund will be responsible (or the amount of the PRP's offer)i • Good-faith negotiations and cooperation of settlors and other mitigating and equitable factors. The following examples indicate the combinations of the above factors which may be considered acceptable candidates for any type of mixed funding, and those cases considered poor candidates for mixed funding: ------- 983409 Acceptable Candidates for Mixod Funding Tho boot candidates for nixod funding aro caooo in which tho following features aro procontt 0 Tho potential portion or oporablo unit to bo covorod by tho Fund io omoll, or tho oottling PRPo offor .a oubotantial portion of tho total coot or cleanup, In thio content, aubotantial portion nay bo defined ao a eoiDmitnont by tho PRPo to undortatio or finance a predominant portion of tho total rooodiol action.6 0 Tho Government hao a otrong caoo agoinot- financially viable non-oottling PRPo, frco which tho Fund por- tion nay bo recovered. While thio combination of factoro roprooonto tho optinun conditiono undor which mixed funding nay bo approved, caooo will more typically involve ono or aoro voriotiono of thio oconario. Thuo, tho Agency anticipatoo that a rongo o£ caooo will bo conoidorod accoptablo Candidatoo for ninod funding. Tho following oxomploo indicate tho circuootancoo under which a mined funding settlement nay roprooont tho Government'o proforrod altornotivoi Example onot A otrong caoo againot potential oottloro nay initially weigh in favor of litigation, oopocially if tho caoo againot non-oottloro io wood. However, a mixed funding oottlomont may otill bo accoptablo upon evaluation of additional faetoro, ouch aoi 0 Tho oottling PRPo offer to conduct or pay for a subotantial portion of tho rooponoo; 0 Public intoroot conoidorationo (e.g., if oottlomont would expedite cleanup and/or a SI04 Fund-fin-need notion io not foooiblo); 0 Whether oottloro havo nogotiatod in good-faith; 0 Tho Govomnont's time and rooourcoo oavod by oiraplification or avoidanco of litigation. * Ac notod lator, tho Agency'o proforonco io for tho PRPo to perform tho rooponoo action, rathor than finance a Governmental rooponoo action. ------- -7- 9834.9 Example two: Zf a substantial portion of the vast* at a sit* cannot be attributed to known and financially-viable parties, as d«t«rmin«d, for example, by a preliminary nonbinding allocation of responsibility by the Govern- ment), the Agency may initially consider pursuing the recovery of all costs under joint and several liability. However, if the litigative risks appear substantial, a mixed funding settlement may represent more than the Government would recover in litigation, especially when the cost and time required for litigation is considered. Litigative risks which may weigh in favor of settle- ment includet • Weak evidence against financially viable potential settlors; • Equitable considerations which weigh against the imposition of joint and several liability. ID addition, if the -hasard at the site is serious and no Fund-financed response is possible, a delay in the response action pending the conclusion of litigation might represent an unacceptable risk to the public and the environment. Poor Candidates for Mixed Funding Cases considered poor candidates for mixed funding have the following featuresi • The case against settling parties is strong, and thus the potential for successful litigation is high; • The potential Fund portion is large (e.g., the potentially settlors1' offer is insufficient.) These factors do not automatically preclude mixed funding for a case. However, for mixed funding to be seriously considered in such instances, other compensating factors must be present, such as the ability o2 the settlors to initiate the response action more quickly than the Government in a Fund-financed action. ------- IV. Selection of tho ttiaod Funding Tochniouo Ao notod in tho Introduction, tho torn mixed funding hao boon uood to rofor to throo difforont typoo of oottlomont arrongocontoi 1) Proauthorization, in which tho PRPo conduct tho .roo- ponoo action and tho Agoncy agrooo to allots a clain agcinat tho Fund for a portion o£ tho rooponoo cootoi 2) Caoh-outo, in which tho PUPS pay for a portion o£ tho rooponoo cooto up front, and tho Agoncy conducto tho rooponoo action; 3) Hlsod work, in which tho PRPo and tho Agoncy ooch agroo to conduct diocroto portiono of tho rooponoo activity. Onco Regional enforcement poroonnol hovo dotorninod that a mixed funding oottlonont io appropriato, boood on tho oottlooont criteria ao doocribod in Soetion III and tho IntorID Settlement Policy, thon tho Agoncy nuot doeido which typo of mixed funding boot ouito tho oituotion at hand. Anong tho throo oajor typoo of ninod funding, tho Agoncy generally proforo proauthorisction, oineo tho PRPo conduct tho rooponoo action. However, ao notod bolov, caoh- outo and ninod work nay bo appropriato undor certain cir- cunotancoo. PREAUTHORIZATION Tho aooosoraorvt and approval of proauthorization, onco a mixed funding oottlonont io approved, io a two-part procooo. Tho firot otago, ao doocribod below, io tho det- ermination by tho Agoncy enforcement poroonnol that pro- authorization io appropriato in tho context of tho settlement ao a wholo. Tho oocond otago roprooonto tho actual procooo of proauthorization of tho clain ogainot tho Fund by tho Office of Cnorgoncy and Rooodial Rooponoo (02RR) (ooo Soetion V.) Tho Rooponoo Claino rogulationo, which aro prooontly in draft form, will provide guidance on tho proauthorisation procooo itoolf. a) Technical and timing concorno rolatod to proauthorization For tho firot otago of tho review, tho nature of tho propoood rooody and tho PRPo1 ability to perform it in a timely oonnor aro major factoro to conoidor whon aoooooing a settlement offer which contoraplatoo proauthorization. In addition, tho size of tho PRPo1 portion io important. Whon PRPs are responsible for a sufficiently high porcontago, they will have a strong economic incentive to keep the actual response costs within or closo to estimates. Tho nature and ------- 9834o9 tho oovority ofi tho throat poood by tho olto may oloo woigh In favor o£ oottloraont, If proauthorisation would inecoooo tho opood at which tho haoord could bo oddrooood. For onanplo, prompt initiation of tho remedial action would bo of particular inportanco Cor oitoo which aro not currently ochodulod for full Pund-finaneing. On tho othor hand, Regional negotiators muot aloo conoidor tho tino required for tho proauthorisation procooo itoolf when determining i£ proauthorisation id appropriate for particular typoa of rooponoo actiono. While tho Agency hao oot a goal of completing review of individual proauthorisation applicc- tiono within a 45-day period, thio ticing limitation will vary on a caoo-by-caoo baoio* Tho Agency ia unlikely to havo tino to conoidor proauthorisation requests whon action ia required to avort an iooodiato throat to tho public health or tho environment, therefore, no reimbursement would bo poooiblo. Rogiono ohould anticipato tho procoooing tino in oanaging negotiations. b) Availability of proauthorisatipn for variouo rooponoo actiono For ogrooraonto involving activitioo ouch ao an HZ/PS or a removal, proauthorisation in gonoral will not bo warranted, bocauoo tho procooo of proauthorisation will uoually prove too burdonooiao for tho small anounto or ohort time-franco often oncountorod in thooo caooo. Limited oncoptiono nay be conoidorod in unuoual circumstances, ao whoro proauthori- sation will facilitate a brooder agroonont (e.g., an area-wide RX/FS) which will bo looo rooourco intonoivo than oovoral agreements of smaller scope. A largo, ontonoivo removal (e.g., groator than $2 million) racy aloo qualify ao an extraordinary circuraotanco juotifying proauthorisation. However, Boadquartoro Approval muot bo obtained before proauthorisation cay bo offered during negotiations for ouch activitioo. c) Covonanto not to ouo for proauthorisation oottlononto For proauthorisation of remedial design and ronodial action (RD/RA) activitioo, tho otatuto containo a opocific provioion related to ronody failure. Section 122(b)(4) of CERCLA otatoo that for caooo involving proauthorisation, aa doocribod in 8122(b)(l), tho Fund will bo rooponoiblo for cooto o£ rooody failure, up to a proportion equal to that contributed for tho original roaodial action. Thio ooction aloo otatoo that tho Fund portion nay bo mot oithor through Fund onpondituroo or by recovering ouch cooto firoa parties who woro not oignatorioo to tho original agreement. However, it should bo notod that remedy failure duo to nogligonco of tho PRP will not trigger any Fund obligation. In any case, a covenant not to sue granted in proauthorization settlements muot comport with Agoncy guidance on covenants not to suo, ao citod above. ------- -ID- 9834oc d) Settlement provisions noodod to procooo claimo Settlement agreements involving proauthorization ohould contain the following restrictions to facilitate the procooooing of claimsi 0 Sottlomont agreements ohould opocify a percentage of tho total ootiraatod coot to bo included in the pro- authorization claio for PUP roinburoonont, oubjoct to a maximum dollar licit* 0 Claioo agoinot tho Fund aro not oubjoet to tho $104(c)(3) roquirooont that Statoo contribute 100 of tho coot of tho roaodial action. However, prospective claiaanto aro encouraged to file a letter of cooperation froa tho Stato along with their roquoot for proauthorization. Thio letter ohould doocribo any agrooaonto rooulting frco tho claimanto1 conoultation with tho State* including any State aoouranco of cooperation with tho roco- dial action. Further, all actions conducted pur- suant to a proauthorizod claiia amot bo conoiotont with tho NCP and tho propoood draft Rooponoo Claim rogulationo, when promulgated. 0 Cleimo may bo filed only for coots incurred aftor tho dato of proauthorization. Portion will not bo eligible to make a clain againot the Fund until tho entire cleanup or agreed-upon proauthorisod phaoo (e.g., an operable unit) io completed according to opocificationo oot out in tho oottlo- raont agreement and tho Proauthorization Docioion Document. 0 Applicanto must demonstrate that their propoood rooponoo cooto aro roaoonablo. Tho applicant ohould juotify any propooal to perform an activity in-houao, or to contract it out. Applicanto nay look to Federal and State procurement practices for guidance on how to moot EPA'o objoctivoo in tho area of contracting and oubeontracting. 0 PRPo jnuot bo financially and technically capable o£ ioplooonting all of tho agreed upon rooponoo action. Partioo may bo required to oubnit finan- cial aoourancoo or performance bondo to oubatan- tiato their financial capability for completing tho rooponoo action. ------- 9834.9 CASH-OUTS Por settlement proposals involving a cash-out by some of the PRPs, the nature of the remedy and the public interest factor* are generally not decisive, since the Government will be conducting the response action. Thus, of the criteria in the Interim Settlement Policy noted in Section III, the "key issues in these agreements includes • The percentage of the total costs to be paid by settlors (i.e., a substantial portion should be offered)} * The Agency's level of confidence in information related to liability and cost estimates at the time of settlement! • Equitable considerations for both the settling and non-settling parties, including the nature of any covenants not to sue in thercash-out settlement. In genera.1, cash-out - settlements may occur at any stage of the. remedial process. 'Such offers should generally be assessed in light of the criteria in Part IV of the Interim CERCLA Settlement Policy. It is important to note that, once a Fund-lead response action is ongoing, the potential benefit of mixed funding as a means of expediting cleanup is largely eliminated. In addition, a cash-out of some of the PRPs during the response action may serve to fragment the Government's enforcement proceedings, since cost recovery will generally be pursued once the remedial action is completed. Other issues related to cash-outs includes a) Information needs related to cash-out settlements One example of the use of cash-out settlements could involve PRPs which have contributed a low percentage of the waste to a site, and are not technically or financially capable of conducting the entire response action (e.g., preauthorisation is not an option.) In order for this type of settlement to be appropriate for both settling and non-settling responsible parties, the Agency should have sufficient information to determine a settlement amount for the settlors as a group. This amount should be based on the Settlement Policy, and should include their waste contribution and other relevant information. Thus, the Agency should have a fairly high level of confidence in the* information concerning the liability at the site and the expected cost of the remedy in order to determine an appropriate cash-out settlement. ------- 9834. 9 The settlement may include a risk premium which may partially offset the Government's risk due to uncertainties such as remedy failure or cost overruns, as well as uncertainties which may be present if the necessary information is less than complete. b) Covenants not to sue in cash-out settlements The sufficiency of the Agency's information related to PRP liability and the nature, stage of development and the cost of the potential remedy has particular bearing on the scope of any covenant not to sue in cash-out'settle- ments. In general, if the Agency has only limited infor- mation in these areas (e.g., if the cash-out settlement entered into early in the remedial process), then covenants not to sue should contain appropriate reopeners to reflect this uncertainty. In reference to these reopeners, It is important to note that the obligation of the Fund to pay for a portion of any costs incurred due to remedy failure, under S122(b)(4), is limited to mixed funding in the font of preauthoritation under S122(b)(l). Thus, for cash-outs, the statute does not limit the potential PRP liability for costs resulting from remedy failure. Any future obligations will be specified in the cash-out agreement, including the covenants not to sue. Further guidance concerning covenants not to sue is provided in the Agency guidance 'Covenants Not to Sue Under SARA* cited above. In addition, although cash-out settlements need not involve de minimis parties, as defined by S122(g), similar analyticaT factors are important in both instances. Thus, Agency guidance entitled "Interim-Guidelines on Settlements with De Minimis Waste Contributors under Section 122(g) of SARA", cited above, may also be helpful for cash-out settlements. c) State cost-share requirements for cash-out settlements When the Federal government uses its response authority to conduct a remedial action, S104(c)(3) of CBRCLA requires that the State "pay(s) or will assure payment* of 10% of the remedial action, including all future maintenance, or 50% or greater for sites involving a state operated fac- ility. Since cash-out settlements involve PRP payment toward a federally-conducted remedial action, the appli- cable cost share is required for these settlements. The cost-share will be calculated using the total remedial costs, rather than a percentage of the Fund share alone. ------- 9834. There are • variety of ways that the State can "pay or assure payment* of the appropriate cost-share. For example* the State, the Federal government and the PRP» nay enter into an agreement under State law end CERCLA in which the PRPs pay 101 to the State, and the State obligates the money for use at the site in question. The State may also use its own funds to pay for any portion of its share that cannot be paid for by PRPs. In general* cash-out settle* meats should only be considered when the litigation teas is reasonably certain that the State is willing and able to pay for its 10% share, although the cost-share need not be part of the consent decree between the Federal government and the PRPS. MIXED WORK Mixed funding in the form of mixed work may be appropriate for cases in which the Agency can identify discrete phases or operable units of the response action. One common example involves a settlement with the PRPs to conduct the RD/RA once the Agency has conducted the RI/FS. A second* more complicated mixed work arrangement could involve an agreement in which the Agency and the PRPs agree to conduct separate portions of an area-wide RX. In this example* the Agency might agree to conduct soil testing if the PRPs conduct ground-water monitoring. Regional enforce- ment personnel should be reasonably 'assured of PRP cooper- ation and the ability to identify in detail the individual activities for which each party will be responsible before entering into any mixed work settlement. In addition* any covenants not to sue in mixed work settlements should be clearly limited to the operable units addressed in the agree- ment. Mixed work should be avoided where there is a significant potential for delays in response actions as a result of inadequate coordination or potential conflicts. Thus* due to the high potential for technical and legal complications* mixed work in the form of mixed construction should generally not be considered. Additional Considerations Regarding Mixed Funding Operation and Maintenance For preauthorized settlements* full responsibility for payment of operation and maintenance (O * M) activities remains with the PRPs. In some circumstances, a State may agree* as a party to the settlement* to manage O 6 M activities which are financed by PRPs. The Agency will generally resort to enforcement actions rather than committing Fund money for cleanup at the site when both the PRPs and the State refuse to be responsible for O & M. ------- , 4 , 9834-9 Actions Against Non-settlors It is the policy of the Department of Justice that the Federal government will not commit in a consent decree or other agreement to sue other non-settling parties. Consistent with this policy, mixed funding settlement agreements should not contain provisions which commit the Federal government to sue non-settling parties at a particular site. At most, the agreement may indicate that the Government has a "present intention* to sue non-settlors, subject to the exercise of the Government's enforcement discretion. Such provisions,, however, must be approved by Headquarters and the Department of Justice (DOJ) on a case-by-case basis, and may not be offered in negotiations until such approval is obtained. Reservation of Rights Potential settlors occasionally will agree to allow the Government to reserve the right to bring an enforce- ment action against-them, contingent up^n a certain eve_nt, such as an unsuccessful enforcement action against non-settlors. Such an arrangement is not desirable, although it may be acceptable in limited circumstances. Such an offer should not be used by settlors as a means of reducing the amount offered up front. In addition, the negotiation team should consider the practical problems that might arise in implementing such an arrangement, including statute of limitation issues and fragmented enforcement actions involving successive suits covering similar issues. The Government generally prefers to settle for a substantial portion up front, rather than being required to bring a second enforcement action against settlors for an additional amount. Documentation For preauthorlzation and mixed work cases in which the Agency will take enforcement actions against non-settling parties, the Agency must assure that the settling PRPs agree to provide the necessary documentation and any other assistance required for support of the cost recovery cases. This assistance may include an agreement to provide witnesses to substantiate response costs. Government oversight will also be required, not only to assure that reimbursement by the Government is appropriate, but also that PRP documentation constitutes sufficient and admissible evidence for the cost recovery cases. ------- ~15~ 9834, V. Procedural Considerations for Review of Settlements Involving Mixed Funding " —— As noted in Section I, consideration of a site for any type of mixed funding involves a two-stage process. The site first should be evaluated to determine if an offer for a mixed funding settlcaent in general (e.g., without regard to the particular funding arrangement) should be accepted. This analysis includes the settlement criteria, with the hypothetical examples in Section III Indicating the Agency's preferences among various combinations of factors. 'Once the Regional enforcement personnel determines that a mixed funding settlement will be acceptable, then the factors noted in Section IV should be used to evaluate whether a particular type of mixed funding is appropriate* The Agency has developed guidance on streamlining and improving the CBRCLA settlement decision process, which, in part, highlights the need for improved preparation for negotiations and fur a more systematic management review process. (See •Interim Guidances Streamlining the CBRCLA Settlement decision Process",. Porter/Adams, Feb. 12, 1987.) In keeping with the goals of this improved process. Regions should conduct both stages of the mixed funding analysis as early as possible (e.g., prior to the appropriate special notice.) Timely Headquarters and DOJ notification is particularly important for cases involving preauthorizatlon, since the use of preauthorixation in settlements requires both the approval of the settlement for preauthorization, as described above, and the review by OERR of the request for preauthor- ization itself. Early DOJ involvement is necessary in mixed funding negotiations, as it is for other types of negotiations. While the preauthorization process need not be completed at the time of settlement, the settlement document must describe the major parameters of the proposed preauthorization agreement. Therefore, OERR should be contacted once the mixed funding analysis has been completed and the Region supports further consideration of preauthorization. For further information on the draft Response' Claims regulations and the procedure for preauthorization with OERR, contact William O. Ross, Office of Emergency and Remedial Response (WH-548), (FTS) 382-4645. Issue* which cannot be resolved at the staff level may be raised to the Settlement Decision Committee (SDC), a Headquarters-based review panel. Like all consent decrees, mixed funding settlements will require final approval by the Assistant Administrator (AA) for the Office of Solid Waste and Emergency Response (OSWER), the AA-OECM, and the Assistant Attorney General for Lands and Natural Resources. ------- 9834.9 If the amount to bo paid by tho Fund exceeds $750,000 or 100 of tho total response cost (whichever is greater), approval by tho Deputy Attorney General at DOJ will aloo bo required. Regional enforcement personnel may, of couroo, doclino to conoidor niaod funding at a particular sito without prior Hoadquortoro consultation. VI. Conclusion Settlement 'agreements incorporating miaod funding provisions, as described in port under S122(b) of CERCLA, offer an alternative to either up front Fund financing of tho total coots of rooponoo actiono at o cito, or poooiblo delays in cleanup resulting from litigation required to force PRP action. Mixed funding roprooonto ono component of tho Agency's comprehensive approach totfard incrooood flexibility in settling CERCLA caooo. This approach originotoo fron tho CERCLA Interim Settlement Policy ao well no tho codification of much of this Policy in SI 22 of tho 1986 Aoondnonto. Tho assessment of mixed funding for a particular alto must always Begin with tho determination ao to whether any typo of mixed funding settlement is appropriate, baood on tho ton settlement criteria. At tho broadest level, thio evaluation will involve a determination ao to tho moot effective moans of promoting cleanup at a sito while insuring tho most efficient use of tho Agency's rosourcoo, including tho Fund itsolf. Rogiono aro oncouragod to conoidor a ninod funding sottlomont whon an assessment of tho oottlooont criteria, including tho strength of tho evidence, tho equities of tho sottlomont, and tho public interest, .indicate that mixed funding is in tho best interest of tho Government, tho public and tho onvironmont. For further information or quest iono concerning thio guidance, contact Rathy MacKinnon, OWPE (WH-527) at FTS« 475-6770. DISCLAIMER Tho policies and procedures established in this document aro intended oololy for tho guidance of Government personnel. They aro not intondod and can not bo relied upon to create any righto, oubotantivo or procedural, enforceable by any party in litigation with tho United States. Tho Agency reserves tho right to act at variance with those policies and pro- cedures and to change them at any time without public notice. ------- |