* UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
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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.
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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
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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.
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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.
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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:
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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.
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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.
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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