Office of Inspector General Ag.ncy Washington, O.C. 20460 Report of Audit CONSOLIDATED REPORT ON ERA'S COST RECOVERY ACTIONS AGAINST POTENTIAL RESPONSIBLE PARTIES E5EH4-11-0066-61534 September Z4, 1986 ------- AUDIT REPORT E5EH4-11-0066-615.34 CONSOLIDATED REPORT ON EPA'S COST RECOVERY ACTIONS AGAINST POTENTIAL RESPONSIBLE PARTIES TABLE OF CONTENTS PAGE j SCOPE AND OBJECTIVES 1 SUMMARY OF FINDINGS 2 ACTION REQUIRED 4 BACKGROUND 5 FINDINGS AND RECOMMENDATIONS 6 1. EPA NEEDS TO ACTIVELY PURSUE SITES UNDER $200,000 6 2. BANKRUPT POTENTIAL RESPONSIBLE PARTIES IMPACT ON EPA'S ABILITY TO RECOVER CLEANUP COSTS UNDER CERCLA 13 3. EPA NEEDS TO COMPLETE NEGOTIATIONS WITH RESPONSIBLE PARTIES IN A MORE TIMELY MANNER 19 4. EPA NEEDS TO IDENTIFY AND TRACK STATUTE OF LIMITATIONS (SOL) DATES 25 5. EPA NEEDS TO IMPLEMENT A COMPREHENSIVE MANAGEMENT INFORMATION SYSTEM (MIS) TO TRACK ENFORCEMENT ACTIVITIES , 31 EXHIBITS EXHIBIT A - COMPLETED NON-NATIONAL PRIORITY LIST REMOVAL SITES WITH CLEANUP COSTS UNDER $200,000 35 EXHIBIT B - SCHEDULE OF COMPLETED REMOVAL ACTIONS ON CLEAN- UP COSTS UNDER $200,000 THROUGH SEPTEMBER 30, 1985 36 EXHIBIT C - COMPLETED NON-NATIONAL PRIORITY LIST REMOVAL SITES WITH CLEANUP COSTS BETWEEN $200,000 AND UNDER $500,000 IN VALUE THAT MAY NOT BE RECOVERED 42 EXHIBIT D - SCHEDULE OF SUPERFUND SITES THAT THERE IS A BANKRUPTCY CASE AGAINST POTENTIAL RESPONSIBLE PARTIES 43 EXHIBIT E - NEGOTIATIONS AS OF SEPTEMBER 30, 1985 45 ------- TABLE OF CONTENTS PAGE (CONT'D) APPENDIX 1 SEPTEMBER 10, 1986 RESPONSE TO DRAFT AUDIT REPORT FROM THE ASSISTANT ADMINISTRATOR, OFFICE OF SOLID WASTE AND EMERGENCY RESPONSE 56 APPENDIX 2 -- ADDITIONAL OIG COMMENTS TO OSWER's RESPONSE DATED SEPTEMBER 10, 1986 61 APPENDIX 3 -- DISTRIBUTION OF AUDIT REPORT 64 ------- 8 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY f WASHINGTON, O.C. 20460 OFFICE OP THE .NSPECTOR GENERAL MEMORANDUM SUBJECT: Audit Report No. E5EH4-11-0066-61534 Consolidated Report On EPA's Cost Recovery Actions Against Potential Responsible Parties FROM: Ernest E. Bradley III _ Assistant Inspector General for Audit (A-f09) TO: J. Winston Porter Assistant Administrator for Solid Waste and Emergency Response (WH-562A) SCOPE AND OBJECTIVES We have completed a review of the Environmental Protection Agency's (EPA) efforts to have potential responsible parties clean up hazardous waste sites or pay for the cleanup performed by the Federal government under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) of 1980. CERCLA provides that the parties responsible for the hazardous waste conditions at disposal sites should either perform cleanups themselves or reimburse the Government for cleaning up the sites. The objectives of our review were to: (1) identify the problems associated with obtaining reimbursement for removal actions that were funded by the Hazardous Substance Response Trust Fund (Trust Fund); and (2) determine whether internal controls were adequate to ensure that EPA was pursuing all enforcement actions necessary to achieve cost recovery. We conducted our review at EPA Headquarters and EPA Regions 3 and 4. Our review covered EPA's cost recovery actions from December 11, 1980 (inception of CERCLA) through September 30, 1985; and Agency policies, procedures and new initiatives through May 30, 1986. Our scope included: 1. Reviewing CERCLA policies, procedures, guidance documents and other Information related to the enforcement of CERCLA; 2. Interviewing senior EPA Headquarters and Regional officials, key contractor officials, and attorneys from the Department of Justice to obtain their views on EPA's hazardous waste site cleanup programs; ------- 3. Reviewing monthly financial management reports, quarterly manage- ment accountability reports, the legal enforcement docket system, and quarterly enforcement accomplishments to determine how effec- tive EPA efforts were in having potential responsible parties clean up hazardous waste sites or recover cleanup costs; and 4. Examining selected case files to determine delays affecting sites from progressing towards settlement or cost recovery. Our review was performed in accordance with the Standards for Audit of Governmental Organizations, Programs. Activities, and Functions (1981 Revision), as promulgated by the Comptroller General of the United States. Accordingly, our examination included tests of accounting records and other auditing procedures we considered necessary in the circumstances. Deficiencies disclosed as a result of our review are included in the Findings and Recommendations section of this report. We have no indica- tion that items not tested would disclose further weaknesses beyond those described in the Findings and Recommendations section. This report consolidates the results of our reviews at EPA Headquarters, Region 3, and Region 4 conducted by the Internal, Mid-Atlantic and Southern Audit Divisions of the Office of Inspector General. We issued individual reports to each of the two Regional Administrators. The findings and recommendations developed during our audits of Regions 3 and 4 were previously discussed with and provided to the appropriate Regional Administrator for comment. In addition, the findings and recommendations developed in our Regional reports and at Headquarters were discussed with appropriate Head- quarters officials. Also, we issued a flash report, on September 5, 1984, alerting the Agency to problems with its enforcement activities. SUMMARY OF FINDINGS As of September 30, 1985, EPA had obligated $1.3 billion in Trust Fund monies. During this same time period, the Agency had negotiated 84 cost recovery cases, totaling $26 million, which resulted in the Trust Fund being reimbursed $14 million from 72 cases. This represents a cost recovery ratio of 1.1 percent of total Trust Fund obligations. This does not include the Agency efforts in negotiating clean up actions to be performed by responsible parties, or responsible parties who were not technically capable of performing a cleanup who paid Into the Trust Fund to finance the work ("cash out"). Unless EPA becomes more aggressive in pursuing cost recovery actions, Its ability to clean up the nation's worst hazardous waste sites could be Impeded because the Trust Fund will not be sufficiently replenished. Cost recovery activities are becoming Increasingly more Important 1n the cleanup process. According to a General Accounting Office (GAO) report dated May 6, 1986, EPA may need to spend as much 'as $80 billion to clean up 4,000 of the worst hazardous waste sites over the next 30 years. EPA estimates that about half of these sites will be cleaned up or financed by responsible parties, while the remaining sites will be cleaned up by using Trust Fund monies. EPA can replenish the Trust Fund by obtaining reimbursement for work it has completed at hazardous waste sites. The ------- funds recovered will allow EPA to increase the number of sites that will receive attention. By increasing the number of sites to be cleaned up, EPA will alleviate the ever increasing hazardous waste threats to the public and environment. We found EPA had encountered various problems 'in replenishing the Trust Fund, because it was not taking aggressive cost recovery actions. However, some of the problems encountered were outside EPA's immediate control. The issues outside of EPA's control may eventually need to be resolved by Congress and the courts. We also found EPA's recovery activities were hampered because it did not have a coordinated comprehensive systematic structure for overseeing cost recovery actions. We found EPA was not aggressively pursuing cost recovery actions against potential responsible parties where funds expended for cleanup were under $200,000. Based on Agency records, we identified 182 completed removal actions under $200,000, totaling $6,130,209, where cost recovery actions were not being pursued by EPA. In addition, we calculated that EPA could potentially lose over $60 million in the next 20 years if cost recoveries for removal actions are not pursued. EPA officials attributed the overall lack of cost recovery action primarily on resource constraints, and the fact that the expenditures required to recover costs may approach the costs of the cleanup itself. The expenditures incurred by the Agency in preparing and pursuing a cost recovery action are potentially recoverable from the responsible parties. We recognize resource constraints may limit the number of cost recovery actions. However, failure to undertake minimal cost recovery activities or explore alternative methods for recover- ing costs on sites under $200,000 would adversely affect the Congressional goal of cleaning up hazardous waste sites. An issue which was somewhat outside the control of the Agency was potential responsible parties filing for bankruptcy. As of September 30, 1985, bank- ruptcy claims totaled over $65 million. Of the $65 million, EPA actually recovered $27,165. We found that the Agency was not taking aggressive and timely action in filing for cost recovery when the potential reponsible party filed for bankruptcy. This could jeopardize the Agency's ability to preserve its right as a creditor. Also, it is especially Important for EPA to establish itself as a creditor, since the courts have been leaning towards giving Government units first priority after secured creditors. EPA, by increasing Us efforts, may stand in a better position to recover funds and be recognized as a first priority creditor. Even though the Agency had a policy prescribing a 60-day cut-off period for negotiations, we found 67 percent (276 of 411) of the negotiations lasted an average of 279 days. Fifteen of the site negotiations over 60 days, amounting to $3,598,700 in clean-up costs, were concluded without a settlement or cost recovery reached with potential responsible parties. Agency officials Informed us that the 60-day cut-off period was not realistic and negotiations are usually lengthy when several responsible parties were Involved. EPA can improve its monitoring of negotiations with responsible parties by requiring regional' offices to maintain documentation supporting the continuation of a negotiation and tracking ------- milestone dates In an information system. Also, to ensure that established milestones are met, EPA needs to inform the responsible parties of the negotiation timeframes. Thus, if a reasonable settlement did not appear feasible, negotiations can be broken off and cost recovery pursued through civil action after EPA cleans up the site. Historically, there has been considerable confusion over whether a statute of limitations (SOL) will apply to CERCLA cases. The Congress may resolve this issue in the CERCLA reauthorization bill. However, until this issue is resolved by Congress or the Federal courts, EPA is at risk. We identified 65 completed removal actions, totaling $2,917,200, which may violate "tort law" if not filed on or before December 31, 1986. EPA officials believe that this area presents a low risk to the Agency. Overall, EPA could have a better managed CERCLA enforcement program if it had a comprehensive management information system (MIS) which would consoli- date the data now contained in other Agency MISs. In addition, the new system should include information on SOL dates, and negotiation milestone dates which currently are not being collected. As the number of enforce- ment actions increase in the future, this system will be crucial to monitor enforcement activities and ensure all significant milestones are being met. EPA will not have the resources or time to manually search through individual regional project site files or review various MIS reports to determine the status of enforcement activities. Realizing the need for a comprehensive MIS to improve monitoring of CERCLA enforcement activities, EPA is in the process of developing such a system. The above audit results are discussed in detail in the "Findings and Recommendations" section of the report. The Assistant Administrator (AA) for Solid Waste and Emergency Response provided formal written comments on our draft audit report in a memorandum dated September 10, 1986. The AA generally agreed with our recommendations and indicated that over the next several months the Agency will be reviewing and revising its Superfund policies and procedures. We have summarized the AA's position to appropriate locations in the report and included the complete response as Appendix 1. We also discussed the results of our audit with senior officials of the Office of Solid Waste and Emergency Response and the Office of Enforcement and Compliance Monitoring on July 10, 1986. We realize that the proposed Superfund bill will bring about some changes regarding the issues discussed in the report. However, EPA would continue to have responsibility to clean up hazardous waste sites. Therefore, we believe that EPA will continue to need a sound enforcement program. We made this review to determine how the Agency could more effectively manage its CERCLA enforcement program. ACTION REQUIRED In accordance with EPA Directive 2750, the action official is required to provide this office a written response to the audit report within 90 days of the audit report date. The Action Official's response should Include an action plan with specific milestone dates for each corrective action that was not fully implemented. ------- BACKGROUND On December 11, 1980, Congress enacted the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (Public Law 96-510). This Act, commonly known as Superfund, provides for liability, compensation, cleanup, and emergency response for hazardous substances released into the environment and uncontrolled and abandoned hazardous waste sites. Superfund broadly defines two types of response actions: removal and remedial. The former term represents relatively short-term responses, while the latter represents actions of longer duration leading to permanent resolution. To fund removal and remedial actions, title II, subtitle B, established a $1.6 billion Trust Fund to help clean up these sites. The Trust Fund was to be collected over a 5-year period from taxes on petroleum and certain chemicals and from Federal appropriations. Further, CERCLA requires that parties responsible for the hazardous conditions at the sites either perform the cleanups themselves or reimburse the Government for cleaning up the sites. EPA's enforcement authority to recover the costs of cleanup activities performed by the Government comes from sections 106 and 107 of CERCLA. Section 106(a) of CERCLA authorizes the issuance of ". . . such orders as may be necessary to protect public health and welfare and the environment." Section 107 provides that, "past and present owners and operators of a site, and generators and transporters who contributed hazardous substance to a site, shall be liable for all costs incurred by the U.S. Government, a state, or any other person, and for damages to or loss of natural resources." The Office of Waste Programs Enforcement (OWPE) and the Office of Enforcement and Compliance Monitoring (OECM) are the Headquarters offices responsible for overall management of the CERCLA enforcement programs. OWPE provides policy direction to the regions for waste enforcement activities. In addition, OWPE develops objectives, strategy, programs, and evaluation criteria for regional enforcement programs. OECM is responsible for: (1) developing national policies and procedures for uniform, fair and appropriate enforcement of the environmental statutes and regulations; (2) monitoring implementation of national policy by the regional offices; and (3) reviewing for quality the legal and factual development of those cases which, because of national or precedential significance, are referred to Headquarters from the regions prior to referral to the Department of Justice. Because EPA is decentralized, the majority of EPA CERCLA actions are the responsibility of the regions. Thus, Headquarters plays more of an oversight role while the regions actually carry out the program objectives. CERCLA enforcement actions can occur at different points in the cleanup process and involve both regional and Headquarters program offices. This creates difficulty in identifying and tracking milestones of CERCLA enforce- ment activities. In general, the following actions occur once a responsible party is identified: (1) EPA attempts to negotiate with the responsible party(1es) in order to reach a settlement for cleaning up the site; and (2) 1f a settlement was not reached, EPA can cleanup the site with Federal funds funds and seek to recover the cost of cleanup later. ------- FINDINGS AND RECOMMENDATIONS 1. EPA NEEDS TO ACTIVELY PURSUE SITES UNDER $200,000 The Agency was not aggressively pursuing cost'recovery actions against potential responsible parties where funds expended for cleanup were under $200,000. Despite a recent policy authorizing the regions to negotiate with potential responsible parties for settlements, the extent of EPA's pursuing these cases was questionable due to the higher priority given to large dollar sites. As of September 30, 1985, we identified 182 non-National Priority List (NPL) completed removal actions, totaling $6,130,209, where funds may never be recovered if cost recovery actions are not pursued. EPA officials believe that the costs associated with these site costs may never be recovered because the Agency resources needed to recover the expenditures may outweigh the actual costs recovered. We understand that resource con- straints may limit EPA's pursuit of all hazardous waste sites. However, EPA's failure to pursue sites under $200,000 would ultimately impact on EPA's replenishing the Trust Fund and would send a signal to potential responsible parties that the Agency was not serious about recovering site cleanup costs. We calculated that EPA could potentially lose over $60 million in the next 20 years if cost recoveries for removal actions are not pursued. In addition, projected increases in hazardous waste sites may only increase the likelihood of cost recovery efforts not being taken on sites under $200,000. EPA's policy could adversely affect the Congressional goal of cleaning up hazardous waste sites. EPA Needs To Take Aggressive Action To Recover Over $6.1 Million In Trust Fund Expenditures" We identified the total number of completed Superfund sites with expendi- tures under $200,000, from the inception of CERCLA through September 30, 1985. Also, we reviewed EPA's efforts to pursue cost recovery actions for these sites. We limited our analysis to removal sites since these sites are generally intended for shorter-term responses to releases of hazardous substances and are generally limited by CERCLA section 104 to six months in duration and $1 million. We requested and received from the Emergency Response Division (ERD) and the Office of Program Management (0PM) the names of all sites with completed removal actions on or before September 30, 1985. We found that EPA had completed 376 non-NPL removal actions, totaling $76,534,439 in obligations, through September 30, 1985. Of the 376 removal actions, we found 248 removal actions (66 percent), totaling $11,474,856, which were under $200,000 in cleanup costs (refer to Exhibit A). Our review further disclosed that 182 of the 248 sites were not being pursued by EPA for cost recovery. Section 107 of CERCLA provides that past and present owners and operators of a site, and generators and transporters who contributed hazardous substances to a site, may be held liable for all costs of removal and remedial actions undertaken by the United States, a state or any other person. The Federal government can attempt to recover cleanup costs 1n a lawsuit or, 1f the circumstances favor 1t, can agree to a settlement with the responsible parties. The settlement would normally require the responsible parties to voluntarily reimburse the Trust Fund (and possibly others) for cleanup costs Incurred. ------- Based on the data reflected in the Agency's information systems, we reviewed the extent of EPA's pursuit of cost recovery on sites under $200,000. During our review of Region 3, we identified 63 sites (as of September 30, 1984), totaling $2,240,134, where cleanup costs were under $200,000. In determining whether EPA was actively pursuing cost recovery for these sites, we found that 18 of the 63 sites were completed non-NPL removal actions costing under $200,000. t Our review of the 18 completed removal actions disclosed that Region 3 had taken action to recover cleanup costs from responsible parties in four instances. For two of these four actions, Agency expenditures totaled $71,340 while the settlements resulted in recoveries of $58,504. The Region referred to Headquarters for action the remaining two removal sites, totaling $255,756. Regional personnel informed us that no actions were currently planned to recover any costs from responsible parties for the remaining 14 completed sites, totaling $728,822. Region 3, in its response to our Regional report, indicated that the remaining removals were not referred for cost recovery because there were no viable responsible parties associated with the removals. We requested Region 3 to provide us with documentation that no viable responsible parties existed. On July 28, 1986, the Regional Administrator (RA) responded to our Region 3 report with a follow-up memorandum. In his response the RA indicated that action is still ongoing at approximately half of the sites which originally had no viable parties. In Region 4, we identified 37 removal sites (as of September 30, 1984), totaling $1,726,888, where site expenditures would not exceed $200,000. We reviewed the Agency's records and found that 24 of 37 sites, totaling $958,288, were completed removal actions under $200,000. Cleanup activity at the 24 sites had been completed for several months. However, negotia- tions with the responsible parties for cost recovery were not scheduled. For example, removal activity was completed at J4L Drum, TN in October 1982 at a cost of $44,015. Removal work at Caldwell County, NC was completed in July 1983 at a cost of $39,990. However, cost recovery action had not been initiated or planned at these sites at the time our fieldwork was completed. Regional officials attributed the overall lack of cost recovery action on sites under $200,000 primarily to resource constraints and existing policy guidance which discouraged cost recovery action on sites under $200,000. Regional officials further explained that other factors such as strength of evidence, financial viability of the responsible party, risk of litigation and amount of funds involved also influenced their decisions regarding pursuit of cost recovery actions. We reviewed the Office of Waste Programs Enforcement (OWPE) and the Office of Enforcement and Compliance Monitoring (OECM) management reports to determine whether the Agency was pursuing cost recovery actions on the 248 removal actions we identified as of September 30, 1985. Our review of the OECM's Docket System, OWPE's Case Management System, Superfund Comprehensive Accomplishment Plan (SCAP) and the Removal Tracking System disclosed that the Agency was not pursuing cost recovery actions on 182 removal sites EPA-wide, amounting to $6,130,209. (Refer to Exhibit B.) 7 ------- Confusion Exists Over How to Handle Small Cost Recovery Cleanup Actions To provide more cost effective methods of settling cost recovery claims, EPA issued a policy entitled "Interim CERCLA Settlement Policy," dated December 5, 1984, which stated, in part that: "The Regions are authorized to conclude settlements in certain types of hazardous waste cases on their own, without prior review by Headquarters or DOJ. Cases selected for this treatment would normally have lower priority for litigation. Categories of cases not subject to Headquarters review include negotiation for cost recovery cases under $200,000, and negotiation of claims filed in bankruptcy. In cost recovery cases, the Regions should pay particular attention to weighing the resources necessary to conduct negotiations and litigation against the amounts that may be recovered, and the prospects for recovery. . ." "Specific details concerning these authorizations will be addressed in delegations that will be forwarded to the Regions under separate cover. Headquarters is conducting an evaluation of the effectiveness of existing delegations and is assessing the possibility of additional delegations." Prior to issuing the Settlement Policy, the Agency generally pursued cost recovery actions only on sites where total cleanup costs exceeded $200,000. While the December 5, 1984, Settlement Policy authorized the regions to negotiate settlements with potential responsible parties where total cleanup costs did not exceed $200,000, Headquarters never delegated authority to the regions to actually approve and sign settlement agreements. We also noted that the Settlement Policy stated that priority should be given to sites where cleanup costs exceed $200,000. In our review of Region 3, CERCLA Removal Enforcement Section personnel stated there was a target on case referrals sent to Headquarters annually for cost recovery, and these referrals were limited to sites over $200,000. This target was established in the Agency's Strategic Planning and Manage- ment System (SPMS). As a result, the Enforcement Section's priority was to refer sites over $200,000 to Regional Counsel for review and subsequent referral to Headquarters. Furthermore, Region 3 personnel stated that sites under $200,000 were not referred to Regional Counsel because the OECM and the Department of Justice (DOJ) normally will not pursue cost recovery actions on any site under that amount. However, OECM personnel told us that SPMS does not limit case referrals to sites over $200,000 and they had never refused to pursue a case for cost recovery, although they admitted that higher priority is placed on sites over $200,000. The EPA Administrator, in a February 13, 1985, speech indicated that EPA must pursue cost recovery actions. The following indicated the direction he planned: ------- "Let's remember that EPA's mission is progress in achieving environmental improvement. We achieve that progress by setting sound standards and enforcing them. The regulated community must know that we are committed to assuring this progress. We encourage them to help us move forward on a voluntary basis. But where they are unwilling, we will vigorously enforce our laws and our standards. ... It will be our policy to take action to recover all costs incurred by government in-Superfund response actions." On July 12, 1985, OECM and the Office of Solid Waste and Emergency Response (OSWER) jointly issued a memo to the regions addressing small cost recovery referrals. The memo stated: "Based on discussions among our staff and Regional enforcement personnel, it appears that confusion exists regarding Agency policy on referring CERCLA cost recovery cases valued at less than $200,000. . . . Although the Agency has placed a higher priority on referring cost recovery cases with expenditures in excess of $200,000, there are situations where referring small cost recovery actions is entirely appropriate. For example, where we have initiated settlement discus- sions which have failed to produce a settlement because of the recalcitrance of the responsible parties, referral would generally be appropriate to demonstrate the Agency's commitment toward enforce- ment as a vehicle to compel private party response at CERCLA sites. In addition, where a region has no case for more than $200,000, where an enforcement presence would serve a deterrent effect, where a Region's other enforcement priorities allow for the expenditure of resources to support a small cost recovery case, or where the circum- stances are ripe for testing some important aspect of law, referral of such as case would be appropriate." While this memo showed that Headquarters intended the regions to pursue small cost recovery cases under $200,000, at the time of our review the regions had not received formal delegation from Headquarters to implement this guidance. In addition, Region 4 stated in its response to our April 18, 1986 audit report: "As, OIG is aware, the Headquarters policy has been and continues to be that, generally cost recovery referrals are a low priority at sites where "minor" costs have been incurred (previously $200,000, now proposed as $500,000 under the October 4, 1985 draft CERCLA settlement policy). The basis for this policy, Including resource constraints and cost-effectiveness has been articulated in several Headquarters policy documents." Apparently, from these comments confusion still exists as to how to handle sites under $200,000. EPA plans to raise the dollar limit to $500,000 for small case recovery cleanups. In our opinion, this would further compound the problem since the number of completed sites and the resulting dollar values would increase. For example, as of September 30, 1985, the number of completed removals between $200,000 and $500,000 totaled 19, with a dollar value of $5,761,002, that may not be recovered (Refer to Exhibit C.) ------- A major obstacle faced by EPA was that it could not compromise Section 107 cost recovery actions if they exceed $20,000 or if the settlement resulted in the Agency recovering less than 100 percent of incurred costs. CERCLA does not authorize EPA to compromise cost recovery claims. The only other statutory authority under which EPA may compromise claims of the United States is the Federal Claims Collection Act of 1966. According to the law, if EPA wants to settle a claim for less than 100 percent, or that is over $20,000, the settlement must be referred to DOJ for final approval. For this type of recovery action the regions must refer the settlement package to EPA Headquarters for concurrence and then Headquarters will refer the package to the DOJ. In discussions with an OECM official he stated that this procedure was causing an added burden to the Headquarters staff. As previously mentioned, EPA was not actively pursuing sites where costs expended from the Trust Fund were under $200,000. We discussed this issue with both Regional and Headquarters senior management. Region 3 officials emphasized that OSWER personnel had verbally instructed them not to pursue sites under $200,000. OWPE informed us that some sites either do not have a viable responsible party or a potential responsible party can not always be found. In addition, senior Headquarters representatives from both OWPE and OECM informed us that these costs were not actively pursued since resource constraints often limited EPA's cleanup efforts to higher priority or large dollar (over $200,000) sites. In the early years of the Superfund program, EPA was faced with a huge number of existing and threatening hazardous substance releases and the need to conserve and use Trust Fund resources most efficiently. As a result, EPA targeted its enforcement resources on those sites where there was a greater likelihood of successful action. We recognize that EPA's pursuit of all hazardous waste sites may not be a prudent decision in light of limited resources. However, in our opinion, failure to even undertake minimal cost recovery activities in pursuing cost recovery for these sites increases the potential of responsible parties avoiding their liability and this will consequently impact on the amount of funds available for cleanup of hazardous waste sites. Future Impact On The Trust Fund In December 1984, as required by Section 301 (a)(b)(c) of CERCLA, EPA submitted a report to Congress projecting the size and focus of the Superfund program and future funding needs. According to the study, EPA assumed that: (1) there were about 25,000 hazardous waste sites; (2) 2,500 of these 25,000 would be NPL sites; and (3) cost recovery from responsible parties would be at a rate of 47 percent for removals. We estimated the future dollar impact of the Agency's policy on the Trust Fund by identifying the Agency's projections for the future number of removals and the average dollar amount Involved for removals under $200,000. The following informa- tion and assumptions used in the calculation came from EPA's Section 301 study. EPA's Section 301 study predicted that 190 removals will be performed each year. One hundred and fifteen of these removals will be at non-NPL sites and will average less than $200,000 per site. Based on historical data 10 ------- we calculated that potentially over $60 million will be lost to the Trust Fund in the next 20 years if cost recoveries for removal actions under $200,000 continue to be ignored. Presented below is our calculation. 0 190 removals per year - 30 NPL removals = 160 non-NPL removals f 0 160 non-NPL removals x 72 percent (removals under $200,000) = 115 removals under $200,000 i 0 115 removals per year under $200,000 x $49,532 average cost of a removal = $5,696,180 per year 0 $5,696,180 per year x 20 years of removal activities = $113,923,600 0 $113,923,600 x 53 percent nonrecovery rate = $60,379,508 This calculation did not take into account any increased cost for inflation over the 20 year period. Further, the recovery rate of 47 percent assumed by EPA may be too high. For example, GAO in a March 29, 1985, report stated that the figure of 47 percent for cost recovery for removals was an optimistic assumption based on what EPA hopes to accomplish rather than the actual 21 percent rate experienced for removals to date. We discussed this calculation with OERR's Chief, Office of Program Management and he stated that the calcula- tion was reasonable. Alternative Methods of Pursuing For Cost Recovery Would Permit Recovery While Saving Resources Given the number of incidents or sites at which EPA had spent Trust Fund monies, cost recovery cases have the potential to severely drain Agency and DOJ enforcement resources. While the Agency is authorized to seek recovery of all Trust Fund monies, the costs associated with case referral, case preparation and litigation for cases involving removal or small remedial actions in some cases may approach the cost of the cleanup itself. In order to use Agency resources effectively the Agency needs to explore alternative methods for pursuing cost recovery actions. In a March 1986 article entitled: The Need for Innovative Environmental Enforcement, the Acting Assistant Administrator for OECM indicated that alternative approaches are available for EPA to pursue cost recovery claims. In the article he stated the following: "EPA can make more effective and efficient use of Its existing resources by exploring other means of bringing and resolving enforcement actions, and making the present system more efficient. . . . Some of these cases could be handled by arbitration. An example of this type of case, 1n which the need for arbitration is more apparent, are cost recovery cases under Section 107 of the CERCLA .... EPA and the regulated community must be willing to depart from the traditional judicial and administrative enforcement procedures in some cases - especially those under CERCLA - in favor of generally - accepted alternative procedures which promise economies of time, money and other resources. Arbitration, both binding and non-binding, and mediation would seem to be highly suitable alternatives." 11 ------- We discussed with EPA officials the use of arbitration as one alternative to pursuing cost recovery actions in court. Regional Counsel in Region 3 informed us that filing a cost recovery action in court is a more viable option, since arbitration has no precedential value. Furthermore, they would not like to see the resolution of cases'put into the hands of an arbitration board. Region 4 officials, while reacting favorably to the concept of an arbitration board, expressed reservations about the ability of an arbitration board to negotiate settlements if there were several responsible parties involved or if the responsible parties deny liability. Some Headquarters legal officials believe that, while arbitration eliminates the need to go to court and reduces litigation costs, the process is still time consuming for the region and settlements are generally reduced. However, we believe that arbitration should be pursued in the absence of any other action being taken. In addition, we discussed the possibility of giving these cases to private attorneys outside the Agency on a contingency basis for fees. OECM officials told us this may be a viable solution to reducing the impact on EPA attorney resources. Conclusion We recognize that all hazardous waste sites may not be actively pursued where cost recovery from responsible parties is required. While resource constraints and pursuit of high dollar sites may be conserving the Trust Fund, we believe that the Agency should take a more active role in pursuing sites under $200,000. EPA should make every effort to negotiate with responsible parties to recover cleanup costs. We believe that a reasonable effort should be made to recover costs on all sites. Agency management needs to evaluate the cost of pursuing cost recovery actions 1n court against the prospect of actually recovering costs. Agency management also needs to include in its evaluations the fact that costs incurred for cost recovery actions are potentially recoverable. As the number of hazardous waste sites increases, EPA must aggressively pursue cost recovery to ensure replenishment of the Trust Fund. OSWER Comments And PIG Evaluation The Assistant Administrator for OSWER will take our recommendations into consideration when updating Agency policies and procedures. The Assistant Administrator further stated that the new Superfund bill expressly allows for alternative dispute resolution procedures. In addition, the AA stated that the new bill would give EPA administrative authority to pursue cost recovery actions under $500,000, and 1t should not be necessary to hire outside attorneys. We believe if the proposed new law gives Superfund the authority to handle cases under $500,000 through administrative means, the Agency will be in a better position to pursue cost recovery actions. However, since the Agency has limited personnel resources and priority may still be given to high dollar cases, we still believe that outside attorneys on a contingent basis will be of benefit to the Agency. 12 ------- Recommendations We recommend that the Assistant Administrator for the Office of Solid Waste and Emergency Response: 1. Require that minimal cost recovery actions (e.g., notification, demand letters) be pursued for sites where funds expended are under $200,000. Also, Headquarters should weigh the costs to be incurred for litigation versus the costs to be recovered before pursuing a cost recovery action. 2. Develop and issue specific policies, procedures and negotiating strategies for settling cases under $200,000 ($500,000) to the regions to ensure a consistent Agency approach. 3. Examine the possibility of using an arbitration board or some similar mechanism as an alternative to filing cost recovery actions in court. 4. Pursue the possibility of giving cost recovery actions under $200,000 to outside attorneys on a contingency basis for fees. 2. BANKRUPT POTENTIAL RESPONSIBLE PARTIES IMPACT ON EPA'S ABILITY TO RECOVER CLEANUP COSTS UNDER CERtU EPA may not recover millions of dollars spent for cleanup activities at hazardous waste sites because some potential responsible parties (PRPs) file for bankruptcy. During our review, we identified 22 ongoing sites with cleanup costs in excess of $65.2 million, from the inception of CERCLA through September 30, 1985, where costs may not be recovered because of potential responsible parties filing for bankruptcy. Of the $65 million, EPA had actually filed claims against bankrupt parties for over $57 million. Of this, EPA was awarded $47,859, of which $27,165 was received on 2 of the 22 bankruptcy cases. The Agency needs to make improvements in two areas: filing for cost recovery actions against bankrupt parties and establishing a system to identify bankrupt parties. Improvements in these two areas would enhance EPA's cost recovery efforts. Due to the uncertainty which surrounds the bankruptcy issue, as well as the potential of PRPs to avoid their responsibilities, the Agency must take aggressive action during the early stages of the bankruptcy proceedings. This will place the Agency in a better position since Its claims conceivably could be classified as a first priority claim (i.e., administrative expenses) under bankruptcy rules. The OECM is responsible for pursuing legal enforcement actions against bankrupt parties. EPA regional offices are responsible for developing and referring bankruptcy cases to OECM. To assist the regions in developing CERCLA enforcement actions against bankrupt parties, OECM Issued, "Guidance Regarding CERCLA Enforcement Against Bankrupt Parties," on May 24, 1984. This policy encourages consistency 1n current and future bankruptcy cases brought by EPA. The guidance provides, 1n part: (1) a discussion of enforcement theories available to the Agency to pursue bankrupt parties under CERCLA; and (2) an overview of the relationship between cost recovery under CERCLA and bankruptcy law. Currently, a new procedure is being circulated for review. 13 ------- The Bankruptcy Reform Act of 1978, commonly referred to as the Bankruptcy Code, states that a claim may be based on a right to payment as a result of work completed and cost incurred. There are two types of bankruptcies, (Chapter 7 and Chapter 11) that a corporation can seek. Chapter 7 bank- ruptcy is when a corporation actually "walks out" and quits its business. This usually happens because liabilities outweigh the assets and the corporation does not plan to reorganize. The corporation can accomplish this by placing itself in a Chapter 7 bankruptcy with the approval of the court, or it can be forced into it by its creditors with court approval. Thus, the assets are used to pay off creditors. In a Chapter 11 bankruptcy the corporation plans to continue its business and have debts previous to its bankruptcy request worked out with its creditors during the reorganiza- tion phase. The corporation will actually be paying current business costs during the period as an ongoing business while it is in negotiation for payment of previous debts. In both types of bankruptcies the court is involved as well as the creditors. Under section 507 of the Bankruptcy Code, the claims of secured creditors (i.e., repayment of loans) are satisfied fully before assets are distributed to any unsecured creditors. Section 507 also sets up the priority structure for the satisfaction of unsecured claims. The priority order for such claims are: 1. Administrative expenses . . . and any fees and charges assessed against the estate . . . ; 2. Unsecured claims allowed under section 502(b) of the Bankruptcy Code (certain claims arising in involuntary cases); 3. Allowed unsecured claims for wages, salaries, or commissions, including vacations, severance and sick leave pay; 4. Allowed unsecured claims for contributions to employee benefit plans; 5. Allowed unsecured claims of individuals, to the extent of $900 . . . ; and 6. Allowed (certain) unsecured (tax or penalty fee) claims of Governmental units. Under the Bankruptcy Code it appears that an EPA claim would be classified as a sixth priority claim. However, in a recent bankruptcy case, T.P. Long Chemical, Inc. (Case No. 581-906), the Ohio Federal District Court classified cleanup costs as administrative expenses or a first priority claim under the bankruptcy rules. Thus, this ruling has placed the Agency in a better position to recover cleanup costs. Region 5 Regional Counsel's response to this opinion states that: 14 ------- "This ruling is significant in that it is the first time to my knowledge that a Bankruptcy Court has held that expenses of an environmental cleanup under CERCLA are administrative expenses of the bankruptcy's estate. While the court did not allow the Agency to stand ahead of perfected secured interest holder, the classifi- cation of Government cleanup costs as administrative expenses places the claim of the Agency well ahead of most creditors." Current Status Of Agency Bankrupt Actions We requested from the Acting Associate Enforcement Counsel for Hazardous Waste Enforcement at Headquarters, a status report on CERCLA bankruptcy actions. We wanted to determine (1) the number and dollar value of bankruptcy cases being pursued by the regions, and (2) the amount of funds that had been recovered from bankrupt parties. OECM provided us with a status report of CERCLA bankruptcy actions as of September 30, 1985. We also used a Financial Management System report to determine the recovered amount (refer to Exhibit D). These reports disclosed the following: 1. The Agency identified 22 bankruptcy cases, totaling $65,150,841; 2. The Agency had actually filed claims against the above bankrupt parties for $57,245,705; and 3. The Agency, while awarded $47,859, had actually recovered $27,165 in cleanup costs from 2 of the 22 bankrupt cases, as of September 30, 1985. As shown above, the Agency had filed 22 bankrupt cases; yet, the Agency had not been very successful in recovering costs. We discussed the results with OECM personnel who told us that the Agency would rather use its resources against a PRP with adequate resources. However, we believe that the Agency must be able to balance its actions against PRPs among viable and less viable parties so that industry will note that EPA will pursue all cost recovery actions to the fullest extent possible. Management Of Bankruptcy Cases The Agency was not taking aggressive and timely action in filing for cost recovery when the PRP had filed for bankruptcy. This can result in the Agency not being able to preserve its right as a creditor. In addition, EPA did not have an effective monitoring system to determine if and when a PRP goes bankrupt. This is critical since EPA would only have a limited time in which to present its claim. Filing For Cost Recovery The primary objective of cost recovery 1s to provide reimbursement of expenditures to the Trust Fund. A second objective 1s to encourage voluntary actions by responsible parties. EPA's cost recovery strategy generally calls for the initiation of cost recovery efforts as soon as total costs are known. 15 ------- The Agency must establish itself as a creditor. If this is done, the Agency will legally put the responsible party on notice that it expects payment and if the PRP goes bankrupt, EPA would be on file as a creditor. Thus, EPA would receive notice of bankruptcy (order of relief) and other creditor's notices which are important so that it will know the status of the proceedings. In a January 30, 1985, memorandum entitled " Procedures for Documenting Costs for CERCLA Section 107 Actions" the Director, OWPE stated that, "It is the Agency's intention that some type of action be taken to recover expenses for every site where Federal money was expended. The Agency plans to have all cases dealt with in a timely and efficient manner." To accomplish this Headquarters should refer the bankruptcy claim to the Department of Justice for filing by a specific due date or a special exception must be requested. Prompt referral of bankruptcy cases is necessary to preserve the Agency's claim as a creditor. The Agency has to file a "proof of claim" to be assured of preserving its rights as a creditor. The proof of claim under a bankruptcy may be the only remedy left for the Agency to recover funds from a bankrupt PRP. An April 7, 1986, article in the Legal Times entitled "DOJ Gets More Aggressive in Chapter 11 Cases" contained a comment made by Associate Deputy Attorney General Jay B. Stephens. He stated: "... that the Justice Department finally has awakened to the realization that "there are great potential dollars our there: for the government to collect. Previously, he said, "competing interests" and priorities have kept the department and its prosecuters from focusing on bankruptcy matters." With this in mind, EPA should be aggressive in seeking reimbursement for cleaning up sites, especially in the early stages when the PRP is filing for bankruptcy. We believe that if the case is pursued early, a more favorable outcome may result since the Agency would have established the priority of its claim in relation to other creditors. EPA recognizes the need to pursue judicial actions against bankrupt parties However, even if EPA finds a responsible party to be financially sound at the time identified, there is no guarantee that the PRP will not file for bankruptcy at a later date. Consequently, an OECM attorney believes that while a cost recovery action can be initiated before completion of a remedial investigation/feasibility study, this would not preclude a responsible party from declaring bankruptcy to avoid liability. The Need For Aggressive Action Against Bankrupt Parties EPA needs to file claims against PRPs as soon as possible in order for the Agency to reserve its right to recover claims on costs associated with site cleanup of bankrupt parties. If EPA does not file a claim and the bankrupt party does not place EPA on its creditors 11st, the Agency may lose its creditor status. This would occur because the court would not know that EPA is a creditor. Thus, no distribution of any available 16 ------- funds could be made to EPA. Also, if EPA does not file or files in later stages of bankruptcy, there is the possibility of: (1) abandonment of the site; (2) other administration costs "eating up" the assets; (3) and the sale of assets at "fire sale" prices, or other methods to dilute the assets prior to and during the bankruptcy. This coul'd be done without EPA having a say in the matter. In addition, an aggressive stand against bankrupt parties may bring out more PRPs that will absorb the cost of cleanups or catch fraudulent schemes. For-example, in a recent bankruptcy declaration, (Thomas Solvent Co. (TSC)), the U.S. has filed a CERCLA section 107 complaint to recover cost associated with site cleanup. Part of the new case will be against Richard Thomas, individually, and four corporations which were "spun-off" from TSC prior to TSC's bankruptcy. A major obstacle faced by EPA was when does it become a creditor. We discussed this issue of EPA's rights to claim as a creditor with an attorney from OECM. We asked when is EPA "officially" a creditor so that it will be necessary for the bankrupt party to list the Agency as a creditor. The OECM attorney stated that some PRPs interpret it to be at the time of a demand letter, while others do not. Further, when EPA sends out a demand letter, the letter should state that EPA is an official creditor. The attorney also stated that EPA is supposed to be notified when a PRP goes bankrupt. However, if a responsible party does not "interpret" EPA to be a creditor, EPA may not be notified. If EPA is not notified of a PRP's bankruptcy filing, it will not be able to file a claim in sufficient time to preserve its right of claim. Further, a PRP could go bankrupt and EPA could have no knowledge of this. We were also told that to develop a system that EPA would know if PRP goes bankrupt would be difficult since a party could be bankrupt in many different states and districts. Under a Chapter 7 bankruptcy, as explained in the June 30, 1985, memorandum entitled, "Procedures for Documenting Costs for CERCLA § 107 Actions," a claim must be filed within 90 days from the first meeting of the creditors unless an extension is moved for or granted. Under Chapter 11 a claim must be filed by the date set by the court. However, to file a claim timely, EPA must know the date that a proof of claim has to be filed. It 1s important that EPA becomes aware of any PRP bankruptcies and acts in a timely manner. As previously stated, EPA needs to be aware of a bankruptcy at the earliest stage so that it can attend creditors meeting and thus be able to support its position effectively. If the Agency does not become aware of bankruptcies early or does not act 1n a timely manner, the poten- tial for recovering costs lessens. EPA Does Not Have An Adequate System To Determine When A PRP Goes Bankrupt We found that there was no list of all PRPs. Thus, when EPA is notified of a PRP filing for bankruptcy, 1t had no listing to refer to. It 1s important that the Agency place more emphasis on these bankrupt parties since it may be the last chance 1n which the Agency can preserve Us rights. This is the only way the Agency can establish Its priority on the distribution of the debtor's estate. 17 ------- EPA did not have a system in place to determine if a PRP files for bankruptcy. The court will only notify EPA when a PRP files for bank- ruptcy if EPA is listed as a creditor by the bankrupt party. In those cases where the court notified EPA that the PRP was filing for bankruptcy, EPA did not have adequate policies and procedures to take the necessary action to establish the priority of its claim in relation to other creditors. As a result, when a notice came in, EPA did not know to who it should go. OGC is developing new procedures to ensure that the Agency can respond in a timely manner. It is necessary that the Agency's attorneys: (1) receive notification of all PRP bankruptcy claims, and (2) be notified when a PRP sends bankruptcy notices to creditors. The Agency needs to be on record as a creditor in sufficient time so that it can attend the meeting of creditors (usually not less than 20 or more than 40 days after the order of relief). Also, the Agency's attorney handling a bankruptcy case must be able to receive any notices sent to a creditor on a timely basis so that he/she can respond within the time stated on the notice. CONCLUSION The intent of the enforcement program is to compel responsible party clean- up of hazardous waste sites or to have them pay for cleanups performed by the Government. In our opinion, responsible parties declaring bankruptcy impacts on funds available for cleanup of other sites. We believe that EPA should be more aggressive in filing early claims against responsible parties. By increasing its effort, EPA may stand in a better position to recover funds earlier, and potentially prevent the PRP from declaring fraudulent bankruptcy. In addition, failure to aggressively recover cost expended from the Trust Fund will not only reduce the number of hazardous waste sites that EPA could clean up, but also demonstrate to PRPs that they can avoid reponsibilities by filing for bankruptcy. QSWER Comments And PIG Evaluation In response to the draft audit report, the Assistant Administrator indicated that OSWER will review and revise the Bankruptcy guidance regarding timeliness of actions and procedures for establishing EPA claims. In addition, OSWER will consider revising the demand letters to include appropriate official creditor language. OSWER did not comment on our recommendation concerning priority of claims. RECOMMENDATIONS We recommend that the Assistant Administrator for Solid Waste and Emergency Response: 1. Use more explicit language in the demand letter Identifying EPA as an "official creditor", thus no Interpretation of the demand letter will be required by the PRP; 2. Establish procedures on how to take the necessary act1on(s) to establish EPA's priority claim in relation to other creditors; 18 ------- 3. Coordinate with the Office of General Counsel on developing new procedures and a system that will permit EPA to take timely action, once it is notified of a PRP's bankruptcy filing; and 4. Coordinate with OECM to try and balance Agency actions against both viable and nonviable PRPs especially in light of the courts' recent leaning towards giving Governmental units first priority on hazardous waste cases after secured credftors. 3. EPA NEEDS TO COMPLETE NEGOTIATIONS WITH RESPONSIBLE PARTIES IN A MORE TIMELY MANNER Negotiations with responsible parties were not always fully successful and often extend well beyond established Agency timeframes for conducting nego- tiations. Even though the Agency has a policy prescribing a 60-day cut-off period for negotiations, we found that EPA did not have a coordinated or systematic structure for tracking negotiations to ensure timely completion. We estimated that 276 (67 percent) of 411 negotiations were either (1) ongoing from fiscal 1984 or (2) initiated in fiscal 1985 and had exceeded 60 days, with negotiations, lasting an average of 279 days. Fifteen of the site negotiations over 60 days, amounting to $3,598,700 in clean-up costs, were concluded without a settlement or cost recovery reached with responsible parties. In addition, even though they did not exceed 60 days in length, we found 31 negotiations in the amount of $6,733,000 which were considered unsuccessful since they did not result in a settlement. Also, we found 43 additional negotiations that had outcomes that were fund financed actions for which we were unable to obtain dollar amounts from either SCAP or CMS. EPA officials informed us that cutting off negotiations is a judgment call based on the progress made and usually negotiations were not concluded by the 60-day cut off period. Even though various systems were supposed to track enforcement progress, we were unable to determine the current status or results of all negotiations. Untimely negotiations delay sites from progressing toward cost recovery through litigation and ultimately may weaken the Agency's position to reach a settlement with responsible parties to clean up sites. Superfund enforcement actions can occur at different points 1n the cleanup process and can involve both regional and Headquarters personnel. In general, these actions Include: (1) Identification of the responsible parties; (2) notification of the responsible parties by letters showing their potential liability for cleaning up the site; and (3) negotiations between EPA and the responsible parties to determine whether a mutually agreeable settlement is possible. EPA may also negotiate with responsible parties to determine whether they will perform various phases of site cleanup, such as the remedial Investigation/feasibility study (RI/FS), cleanup of surface problems at the site, or cleanup of groundwater contaminated at the site. EPA may negotiate for one phase at a time or for several phases at once. 19 ------- If negotiations are successful, the terms of the agreement between EPA and the responsible parties are Incorporated into an administrative consent order or consent decree. The financial settlement alternative is similar to costs recovered for the Trust Fund, because the responsible parties contribute money while EPA arranges for the cleanup. If negotia- tions prove unsuccessful, EPA can (1) clean up the site itself with Trust Fund money or (2) issue a unilateral administrative order or obtain a court order forcing the responsible parties to clean up the site. When EPA cleans up the site, it attempts to recover the cleanup costs from the responsible parties at a later date. In issuing a unilateral admini- strative order or obtaining a court order, the reponsible party must comply with the terms of the.order or pay fines or treble damages. Since the beginning of the Superfund program, the goal of negotiations was to secure privately managed or financed cleanup of hazardous substance releases. The timeframes for completing negotiations have generally remained the same throughout the history of CERCLA. For example, on February 23, 1982, a memorandum entitled, "Hazardous Waste Compliance and Enforcement Program Guidance" was issued by the Office of Solid Waste and Emergency Response. The memorandum mentioned that if substantive negotiations, which are believed to lead to a satisfactory resolution within a short period of time (normally 60 days or less), have not been entered into within 30 days of the date of response required by the notice letters, Regional program offices should proceed with administrative action or litigation. In addition, on August 26, 1983, EPA Issued a policy docu- ment entitled, "Guidance on Pursuing Cost Recovery Actions Under CERCLA," which indicates that a reasonable period of time for most negotiations is 60 to 90 days. This policy also maintains that the negotiation timeframes be disclosed to the responsible parties as a deadline to reach an agreement, The most recent EPA policy which discusses the timing of negotiations 1s contained in the "Interim CERCLA Settlement Policy," dated December 5, 1984. This guidance mentions that a Negotiations Decision Document (NDD), which follows completion of the RI/FS, makes the preliminary identification of the appropriate remedy for the site. Prel1t1gation negotiations between the government and the responsible parties should normally not extend for more than 60 days after approval of the NDD. If significant progress is not made within a reasonable amount of time, the Agency will not hesitate to abandon negotiations and proceed immediately with administrative action to litigation. While the type of negotiation undertaken by the Agency may vary, the general timeframe for conducting negotiations with respon- sible parties was 60 days. The basic working document used by EPA to plan and manage CERCLA enforce- ment activities 1s the Superfund Comprehensive Accomplishment Plan (SCAP). The SCAP provides information on each region's plans for enforcement activities on a quarterly basis and records whether those activities were accomplished within the expected quarter. One Item which SCA? tracks 1s negotiations with responsible parties. We reviewed SCAP to determine the results of negotiations that were ongoing in fiscal 1985. Also, we wanted to determine the length of negotiations. By reviewing the SCAP we found that 411 negotiations were ongoing with responsible parties. However, 20 ------- the SCAP was updated every fiscal quarter to only include any additional negotiations which were started. There was no detailed information provided on the status of the ongoing negotiations or how long they were in progress. Furthermore, we were unable to identify exact start dates for the 411 negotia- tions. Headquarters officials from the Office of Waste Programs Enforcement (OWPE) informed us that the SCAP is a Superfund management tool to monitor regional progress of various site activities. The SCAP does not provide detailed information on these activities. For monitoring purposes, OWPE officials believe that tracking progress by fiscal quarters is adequate, and that reporting details, such as specific dates for each site was not warranted. However, OWPE referred us to the Case Management System (CMS) which contains specific dates on various enforcement actions. We obtained a copy of a CMS report to determine whether the negotiations were completed, what the results were, and the length of time that EPA spent negotiating with responsible parties. We found that the CMS, in general, provides critical milestone dates for such enforcement actions as administrative/unilateral orders, case referrals to the Department of Justice, cases filed, and settlements with responsible parties. The CMS does not monitor or track negotiations per se but only the end result, (e.g., if the case was referred to Headquarters). In addition, EPA did not have a system that pointed out that a negotiation was taking longer than 60 days and may need to be cut off. Using the SCAP and CMS reports, we extracted pertinent information to estimate the length of the 276 negotiations we reviewed. Also, we found another 16 actions for which we could not determine the length of negotia- tions (refer to Exhibit E). Our review of SCAP and CMS results for the 292 negotiations disclosed the following: 0 104 sites did not appear to have been completed by September 30, 1985. Based on the Agency's records, these negotiations are still ongoing. 0 100 sites appear to have concluded with settlements with responsible parties. We believe these negotiations were successful. 0 43 sites appear to have been transferred to the Trust Fund (fund financed action) for potential EPA cleanup. Since these negotia- tions did not result in a private party clean up, we consider these negotiations to be unsuccessful. 0 11 sites appear to have concluded with EPA Issuing unilateral administrative orders. We believe these negotiations were unsuccessful. 0 6 sites were either (1) transferred to another EPA program for action, (2) transferred to a state for action, (3) Involved bank- rupt parties, or (4) had no action listed. 21 ------- 0 4 sites appear to have concluded with referrals to the Department of Justice. We consider these site negotiations unsuccessful since they did not result in a settlement with responsible parties. 0 2 sites appear to have concluded with cost recovery actions. We consider these negotiations successful. 0 22 sites had outcomes that could not be determined from the system. We concentrated on identifying negotiations which lasted over the 60-day cut-off period as stated in Agency guidance. Our review of the 411 site negotiations disclosed that 276 (67 percent) exceeded the 60-day Agency policy, with the average negotiation taking 279 days. Of these 276 negotia- tions, it appeared 15, totaling $3,598,700, concluded with no settlement being reached with the responsible parties (i.e., fund financed, issuance of unilateral administrative order or subsequent referral/filing to the Department of Justice). We were not able to determine the dollar amounts for the 43 fund financed actions. The Superfund program is generally implemented in the regions. Headquarters officials informed us that detailed site negotiation documentation should be available in the regional offices. However, in Region 3 our review was hampered because many of these pertinent documents (notice and demand letters, responsible party correspondence, minutes of negotiations, etc.) could not be located. For example, in 5 of 25 site files (20 percent) reviewed, we could not determine the duration of the negotiations which took place between the Region and the responsible parties. This was due to the fact that the Regional site files were generally not organized. Furthermore, our review of Superfund enforcement information maintained by Region 3 dis- closed that there was no system that provided comprehensive information on all enforcement actions. Region 3 could provide information on dates such as when (1) notice letters were sent to responsible parties; (2) administrative orders and consent decrees were issued; and (3) judicial enforcement actions were referred to EPA Headquarters and the Department of Justice. However, at the time of our review, the Region did not have any report or system that showed the dates when (1) responsible party searches began and ended; (2) response to notice letters and subsequent correspondence were received; (3) negotiations with responsible parties began and ended; (4) settlements with responsible parties were reached; and (5) responsible parties performed cleanup actions at a site in compliance with administrative orders and consent decrees. Our review of the Superfund enforcement action information maintained by Region 3 disclosed that most of this information was maintained in individual site files. In Region 4, we could not review and evaluate the status of negotiations of the Region's 151 Superfund sites because the information could not be obtained without a detailed review of the individual project files. The status of negotiations was not monitored and controlled on an ongoing basis at all sites. While the Region had been moderately successful in negotiating settlements for certain phases of site cleanup, the Agency 22 ------- guidelines for conducting negotiations within 60 days had not been con- sistently met. In addition from information available, it was sometimes difficult to determine precisely when negotiations were initiated and concluded. Of the 29 sites reviewed, 9 different negotiations lasted from 6 months to 30 months. In response to our Region 4 report, the Region had taken steps to limit negotiations following the completion of a workplan to 60 days or less. Also, the Region had earlier implemented procedures for tracking the milestones of remedial and enforcement processes of each site which should help. While many of the above regional and Headquarters systems and reports track and monitor various enforcement actions, they did not record critical mile- stone dates for enforcement activities occurring at all sites. Consequently, EPA did not have a mechanism to track all critical enforcement milestone dates (i.e., length of negotiations) in any systematic manner from initia- tion through completion. The General Accounting Office (GAO) in a May 1986 report "Responsible Party Clean Up Efforts Required Improved Oversight" stated that, "Experience with EPA's settlement process has shown that it may take 2 years or more to complete a remedial investigation and feasibility study. Subsequent negotiations and settlements to establish remedy selection, design, and implementation may add yet another year, even before cleanup begins." In addition, an EPA contractor in a March 14, 1986, study showed the following on negotiations: -- Pre-RI/FS negotiations should not last for more than 60-90 days actually lasted for an average period of 195 days. -- Study findings for both elapsed time and workdays required indicate that more effort is being expended on (Pre-RI/FS) negotiations than had been assumed by Headquarters. -- Remedial design/remedial action (RD/RA) negotiations which should last about 60-90 days based on current policy, actually lasted about 250 days. Although data is limited, the study results indicate that the elapsed time required for (RD/RA) negotiations 1s significantly longer than either prior budget assumptions or the OWPE policy on the conduct of settlement discussions anticipated. We discussed with both legal and Superfund officials at Headquarters and the Regions the reasons why negotiations with responsible parties are so time consuming. For example, negotiations were lengthy at the Delaware City PVC Plant (15 months) in Region 3 because the 106 administrative orders for the feasibility study and remedial cleanup was the first of its kind, and there were disagreements over the consent order's wording. Also, Headquarters policy changes had to be reflected in the consent order and this delayed Us Issuance. 23 ------- At Headquarters, in a discussion with a senior attorney from OECM, we were told that the 60-day cut off period for negotiations is not realistic and that negotiations are usually lengthy when they involve several responsible parties. In addition, if an agreement cannot be reached with all RPs involved, then the negotiations tend to drag on. Furthermore, in Region 3, we found only a few instances where the Region had informed the responsible parties that the negotiation period would be only 60 days. In our opinion, if the responsible parties were told there was a time limit on negotiations, site cleanup and fund reimbursement may be expedited. However, EPA officials argue that negotiations have resulted in favorable settlements to compel responsible party cleanup of hazardous waste sites. Senior OWPE management believe that the success of the negotiation process should be measured against the settlement reached with responsible parties. Furthermore, Superfund and legal enforcement representatives stated that they may negotiate at length because, in their opinion, the likelihood of reaching a settlement with responsible parties is greater than pursuing the case through litigation. CONCLUSION While we recognize EPA's recent success to compel responsible party clean- ups through negotiations, we believe the negotiation process needs to be made more timely. While we agree with EPA that the current 60-day cut-off to complete negotiations may be unrealistic in some instances, we believe that some cut-off period must be established in conducting negotiations with responsible parties. As we stated earlier, 276 of the 411 negotia- tions exceeded the 60-day Agency policy. These 276 negotiations averaged 279 days. EPA must re-evaluate its December 5, 1984, guidance and establish a more realistic timeframe to complete negotiations with responsible parties. Furthermore, EPA should improve its monitoring of all negotiations by requiring regional offices to maintain information on meeting this goal in any enforcement management system. To ensure that these timeframes are met, EPA should inform all responsible parties prior to beginning negotiations of the cut-off period. If negotiations approach the cut-off period without a reasonable settlement, then they should be broken off by EPA, and cost recovery pursued through civil action. Negotiations with responsible parties are an essential part of the enforcement process. Failure to conduct timely negotiations would, in our opinion, Increase the likelihood of responsible parties delaying or potentially avoiding their liability (I.e., declaring bankruptcy) which may ultimately weaken EPA's efforts to recover cleanup costs on future hazardous sites. OSWER Comments And PIG Evaluation The Assistant Administrator for OSWER Indicated that OSWER will re-evaluate their present policy, procedures and negotiation timeframes under the new Superfund bill and will take our recommendations Into consideration. We agree with this action. However, to evaluate how OSWER has acted on our recommendations, we need to be advised on the new revised policy and procedures. 24 ------- Recommendations We recommend that the Assistant Administrator for Solid Waste and Emergency Response: 1. Re-evaluate the Agency's present policy and procedures to ensure that timeframes set for negotiations are reasonable. Also, timeframes should not be exceeded unless H can be documented in the files that significant progress is being made. 2. Require that specific steps in the negotiation and settlement process are planned, scheduled, and initiated in a systematic and orderly manner in order to minimize delays in the settlement process. 3. Require Agency negotiators to notify responsible parties that the negotiations must be concluded within the Agency's established timeframe. 4. Require the regional offices to maintain information on the length of negotiations and whether this conforms to the goal established by EPA. 4. EPA NEEDS TO IDENTIFY AND TRACK STATUTE OF LIMITATIONS (SOL) DATES EPA could potentially fail to recover millions of dollars in cleanup costs by not filing cost recovery actions within the "statute of limita- tions" (SOL) period. Although Agency policy states that court actions should be brought timely, there was no formal system to identify and track SOL dates. During our audit, we Identified 65 non-NPL completed removals sites, totaling $2,917,200, which may be lost if cost recovery actions are not filed on or before December 31, 1986. While some of these sites may ultimately be referred to the Department of Justice, EPA may eventually violate the SOL unless agreement can be reached on what is the SOL period. Consequently, responsible parties could completely avoid any financial liability for the cleanup of hazardous waste sites if appropriate cost recovery actions are not filed in court within the SOL period. Despite confusion as to when the SOL period should start, this issue will become more significant 1n the next few years as an Increasing number of sites progress toward cleanup. Although EPA 1s aware of the situation, formal procedures and a system need to be developed to ensure that: (1) all cost recovery actions are filed timely regardless of the SOL; and (2) SOL dates are identified for all cleanup sites on a current and ongoing basis. EPA Needs To Improve Its Timing of Cost Recovery Actions Historically, there has been considerable confusion over whether a SOL will apply to CERCLA cases and, if so, when it would start. Since CERCLA did not mention an SOL time period in which an enforcement action must be filed, EPA over the past years Issued conflicting guidance 1n order to ' minimize the risk in recovering expended funds. Both the August 1983 Agency policy (when dollars are first expended) and the February 1984 internal OWPE policy (upon completion of a response action) adopted a 3-year SOL period. OWPE believed it would be extremely cumbersome and make for "piecemeal litigation" to file cases when funds are first expended because 25 ------- expenditures for a site frequently extend over a period of several years. The House of Representatives CERCLA reauthorization bill proposes a 3-year SOL period from when a response action is completed. In our flash audit report, we recognized that the CERCLA reauthorization legislation may resolve this issue for future sites but may not "grandfather" cases prior to its passage. The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) did not mention a time period in which a cost recovery action must be filed to avoid violation of the SOL. EPA officials at Headquarters and in the regions told us that CERCLA cases could fall either under Federal law (six years), or tort law (three years). To help clarify the issue, EPA issued a document entitled "Guidance on Pursuing Cost Recovery Action Under CERCLA" on August 26, 1983. This guidance stated: "There is some doubt at this time as to precisely which limitation period will be applied to a cost recovery action . . . since it is possible that a court may see CERCLA actions arising out of the tortious conduct of others, cost recovery actions should be brought within three years. ... In order to avoid argument on this point and to eliminate a potential bar to recovery, the Agency should attempt to commence all cost recovery action within three years of the date dollars are first expended." The OUPE issued supplemental guidance in the form of a memorandum on February 15, 1984, stating that EPA should observe a three year SOL period that begins on the completion date of a response action. However, this guidance was never officially issued to the regional offices for implementation. On September 5, 1984, we issued a flash report expressing our concern that a number of potential cost recovery actions under CERCLA might be in jeopardy due to the uncertainty surrounding a CERCLA SOL. On March 26, 1985, the Agency issued a response to our flash report. In addressing our concern over the uncertainty surrounding the SOL for cost recovery actions, the Agency response stated, in part, that: "We need to differentiate between a legal definition of the SOL under CERCLA and the establishment of timeliness for referrals of CERCLA cost recovery actions. The Agency must strike an appropriate balance between the need to minimize any risks to the government's ability to recover expended funds and the operational realities of the CERCLA program and the cost recovery process." Legal Definition The position of the Government (EPA and Department of Justice) 1s that there is no SOL under CERCLA, but 1f there was, 1t would be six years from completion of a response action. There are cases now in the courts which may provide some case law on whether no SOL applies, a six-year SOL applies, or whether three years 1s the appropriate limitation period. 26 ------- On March 26, 1985, EPA issued a discussion paper on a New Hampshire court ruling concerning the SOL on CERCLA cases. The case involved a responsible party attempting to block a New Hampshire claim for cost recovery under CERCLA by Implying that the SOL had expired. The judicial decision was that the State claim should not be dismissed since the three-year SOL (under Section 112 of CERCLA) does not apply to judicial actions for cost recovery. EPA, in its discussion paper, concluded that: j "It is important to note that this is the first definitive ruling concerning the SOLs for cost recovery actions under CERCLA. Although the opinion concerns a claim brought by a state under Section 107 of CERCLA, we would expect a similar ruling on claims by the United States. The decision is strong support for the proposition that Congress intended to allow Federal and state governments to undertake judicial actions for reimbursement of removal, remedial, and response costs expended under CERCLA at any time." While we recognize the significance of the decision, we believe there still is uncertainty surrounding the SOL. For example, EPA mentions in its response to our flash report that there is a risk that the courts may take a contrary review, such as selecting the start date rather than the completion date as the SOL time period or holding to a three-year SOL. An OECM attorney re-emphasized that the above case is the first decision concerning the SOL, and that several other cases may have to be decided to clarify this issue. In addition, EPA in Its response indicated that the Congress and the courts will be making the definitive determination on the SOL. The CERCLA reauthorizatlon bills specifically address the SOL for cost recovery. The Senate version, dated September 26, 1985, provides that a claim must be presented or action commenced within six years after the date of completion of the response action (Statute of Limitations, SE142(a), Section 113). However, the House of Representatives version provides that an initial action for recovery of costs must be commenced within three years after completion of the removal action or within six years after initiation of physical on-site construction of a remedial action (Section 113, Litigation, Jurisdiction, and Venue, (g) Statute of Limitations, (2) Action for Recovery of Costs). If the House's version takes precedence, the SOL for removal actions will be three years from completion of the action. Until such time that this Issue is satisfactorily resolved by either the Congress or the Federal courts, we believe EPA should utilize a conserva- tive date for SOL: three years from the completion of the removal action. For long-term remedial projects the Agency also needs to take action to ensure that the necessary documentation will be available to support the Agency's cost recovery actions. The Chief, Superfund/RCRA Procurement Branch, Procurement and Contracts Division (PCMD) has already Initiated some action by requesting a class deviation from the Federal Acquisition Regulations (FAR). On March 21, 1986, the Chief requested a FAR deviation be processed that will require contractors to retain records for a period 27 ------- of 10 years in lieu of 3 years after final payment. This deviation would apply to all Superfund contracts. However, a recent audit by the U.S. Army Audit Agency, "Superfund Management U.S. Army Corps of Engineers, Washington, D.C.," dated 24 April 1986, revealed that the Army's current documentation requirements were not adequate, 'in that accounting documents are to be kept 6 years, 3 months from payment. As such, the required documentation from the Corps of Engineers may be destroyed before litiga- tion is begun. The Agency in its August 1, 1986, response indicated that it is currently negotiating with the Corps of Engineers to ensure that Corps contracts contain the same records retention requirements as EPA contracts. This would help minimize the likelihood of the Corps contractors destroying necessary documentation before EPA files a case for cost recovery. Timely Filing In their response to our flash report concerning the SOL, the Assistant Administrator for OSWER and Assistant Administrator for OECM stated that: "... for reasons of good management, it is appropriate to establish an earlier date for filing cost recovery actions regardless of the statute of limitations. Evidence is fresher, knowledgeable personnel are more likely to be available and the Fund can more likely be replenished if actions are brought as soon as possible." Subsequently, on October 7, 1985, the Assistant Administrator for OSWER and the Assistant Administrator for OECM issued a joint memorandum to the regions on the "Timing of CERCLA Cost Recovery Actions." The purpose of the memorandum was to provide guidance on when cost recovery actions should be initiated under § 107 of CERCLA. The memo also noted that the above policy guidance was not intended to limit any actions, but was intended to assist EPA regional offices in the management of cost recovery actions. Specifically: (1) Cost recovery action should be initiated within one year of completion of a removal action at a non-National Priorities List Site. (2) Cost Recovery action should be Initiated as soon as practicable after signing the Record of Decision, usually within 18 months of that time for remedial actions. However, cost recovery actions should not begin until the Remedial Design Phase is completed. The above policy was further included in the Agency's Operating Guidance FY 1987 (page 12). In order for EPA to have an effective and efficient cost recovery program, it must establish "early" tlmeframes and plans for initiating and filing cost recovery actions. Without such plans and tlmeframes, EPA will experience great difficulty in handling the hundreds of CERCLA cost recovery cases over the next several years. In addition, with an established plan EPA will be able to properly allocate resources to ensure timely settlements. Thus, EPA would be able to accomplish the ultimate goal, early replenishment of the Trust Fund, which would allow the Agency to clean up additional hazardous waste sites at an earlier time. 28 ------- EPA Needs To Track SOL Dates Despite confusion over the SOL time period, EPA needs to develop a manage- ment information system to identify and track SOL dates for initiating cost recovery actions against responsible parties. On September 5, 1984, we issued a flash audit report to bring this significant issue to the immediate attention of management. We reported that there was no formal system or procedures in place to provide management an overview of cost recovery actions in regard to the SOL. In addition, we found while Superfund personnel were generally aware of the status of their own individual cases, there was no comprehensive record of the status of all cases. We recommended that: (1) EPA develop a comprehensive listing of all cleanup actions to date; and (2) implement a system and procedures to identify and track cost recovery actions in regard to SOL dates. In November 1984, OWPE developed a process to review completed removal actions and completed units of remedial actions to assure that cost recovery cases were filed before the SOL expired. This process used three years from the completion of the removal/remedial action as the ending date for SOL purposes. OWPE informed the regions that this report was to be reviewed for accuracy and possible action on a quarterly basis. In our review of Region 3, we found that on November 27, 1984, Headquarters sent the first of these quarterly reports to the region. It showed the SOL period for actions that were completed for three years or were approaching three years from completion in fiscal 1985. This report identified four removal actions and Region 3 confirmed that cost recovery had been initiated on three of these sites. The fourth site had no financially viable respon- sible parties. Our review disclosed that there were an additional three removal actions that the OWPE report did not identify. Although these three cases were filed with the Department of Justice, the fact that neither Headquarters or Region 3 identified these sites indicates that the OWPE SOL review process alone was not sufficient to assure that cost recovery actions were filed before the SOL expires. In Region 4 our review disclosed that the Region could encounter signifi- cant problems with cost recovery actions that are ongoing at two major sites. On one site, the Regional Superfund Comprehensive Accomplishment Plan (SCAP) indicates negotiations were scheduled for the third quarter of fiscal 1985. However, under the most conservative assumption, the SOL would have expired in September 1984. The Regional SCAP also shows that for the second site a responsible party search was scheduled for the third quarter of fiscal 1985. However, the SOL would have potentially expired in the second quarter of fiscal 1985. Throughout the audit, we briefed senior OWPE and OECM management on the status of our review. When asked about their response to our September 5, 1984, flash audit report on the SOL, they provided us a memorandum from the Director, OWPE to the acting Assistant Administrator for OSWER on the status of that response. The memorandum states, in part, that: 29 ------- "We are presently compiling information, including completion dates on all removal actions. We are in the process of developing a computer tracking system for cost recovery to identify and track cost recovery actions. The current docket system in OECM allows us to track cost recovery referrals to Headquarters, referrals to the Department of Justice, and filings of complaints and certain additional information. Our new system will also be able to track the activities associated'with CERCLA 107 cases, which include dates of expenditures, SOL, issuance of demand letters, and actual expenditures associated with site response actions." On March 26, 1985, EPA issued a response to our flash report.^. EPA agreed with our recommendations to establish a system to identify and track response actions and key dates for cost recovery and is currently developing such a system. In the interim period, the Agency established a manual system to track significant dates on site specific basis. However, the OWPE did not address our recommendation of developing a comprehensive listing of potential SOL dates even after informing the Assistant Administrator for OSWER (in a February 1985 memorandum) that this was being compiled. OWPE did indicate that information on potential SOL dates were available. However, the dates were not monitored since the Agency had agreed on a 6-year SOL period and no sites were in danger of violating the SOL period. Subsequent to the Agency's response to our flash report, we wanted to identify at Headquarters all completed non-NPL removals which may violate the SOL if not filed on or before December 31, 1986. We requested a listing from OERR identifying all removal actions completed on or before December 31, 1983. This listing provided us information on sites that would reach the 3-year SOL period on or before December 31, 1986. We elected to use the more conservative timeframe of three years after completion for a removal action. We found that there were 106 removal actions, amounting to $14,609,558. Subsequently, we attempted to deter- mine whether these sites had been filed for cost recovery actions. Due to the lack of a centralized management information system to monitor site status, we were forced to rely on several Superfund and legal enforcement management documents to determine whether cost recovery action was initiated. Our review of the legal docket system and the case management system disclosed that 65 removal actions, totaling $2,917,200, may be lost if cost recovery actions are not filed by December 31, 1986. Discussions with Headquarters officials revealed they did not view the SOL as a serious problem. As discussed in EPA's response to the OIG flash audit report, Headquarters officials discussed their position that the 6-year statute of limitations applied as well as recent progress in developing a tracking system as steps taken to minimize a potential SOL violation. Consequently, EPA believes that this area 1s a low risk. While we recognize and commend the Agency's progress, we believe that inadequate identification and tracking of SOL dates is still a serious problem. 30 ------- As discussed above, we identified 65 non-NPL completed removal sites, totaling $2,917,200, which may violate the SOL if not filed on or before December 31, 1986. We believe the SOL is a potential risk to cost recovery since a final decision was not made on the issue by either Congress or the Federal courts. Until this issue is resolved, EPA is still at risk in recovering costs expended from CERCLA. The Agency can minimize the risk by aggressively pursuing cost recoveries in accordance with revised guidance. OSWER Comments and PIG Evaluation In the September 10, 1986 memorandum, the Assistant Administrator for OSWER indicated that work was initiated on a tracking system that will identify all removal actions and pinpoint significant enforcement-related dates, including the statute of limitations dates. In addition, OSWER and OECM have requested that the Regions review the universe of removal actions for purposes of potential cost recovery actions. The response states that the new Superfund bill directly addresses the issue of the statute of limitations. However, as we stated in our report, depending on which version of the Superfund bill may be passed, the SOL period can vary. RECOMMENDATIONS We recommend that the Assistant Administrator for Solid Waste and Emergency Response: 1. Proceed under the more conservative tort law tlmeframe (three years after completion of a removal) until such time the issue is resolved by Congress or the courts. 2. Include and track in the comprehensive listing of all removal actions the SOL date. 3. For those sites where the SOL is about to expire, take immediate action to initiate negotiations or referrals to DOJ. 4. Ensure that cost recovery actions are being Initiated within one year of completion of a removal action at non-NPL sites. 5. EPA NEEDS TO IMPLEMENT A COMPREHENSIVE MANAGEMENT INFORMATION SYSTEM (MIS) TO TRACK ENFORCEMENT ACTIVITIES EPA would have a better managed CERCLA enforcement operation with a comprehensive management Information system which would consolidate the information now contained in various Agency Information systems. At the time of our review, the Agency used several Information systems to collect and maintain site-specific enforcement Information. Each of these systems served a useful but particular management Information need. However, currently no one system provides all Agency managers with all the timely and consistent data needed to effectively manage and/or evaluate Us Superfund enforcement program. Even though EPA enforcement program managers have indicated that a system providing comprehensive Information for tracking enforcement actions is beneficial, EPA has not developed such a system. 31 ------- OSWER has recognized that its current information system needs improvement. In December 1984, an EPA contractor completed an internal study for OSWER which recommended that a comprehensive information system be developed. The Agency is now developing such a system. If properly developed and implemented, the new system could: (1) reduce or in some instances eliminate the conditions noted in this report on the problems with the Agency's cost recovery effort; and (2) improve the overall Agency manage- ment of CERCLA enforcement activities. We found that CERCLA enforcement information was contained in various management and financial information systems: Superfund Comprehensive Accomplishments Plan (SCAP); the Case Management System (CMS); Enforcement Docket System; CERCLA Information System (CERCLIS); and Financial Manage- ment System. While we noted that each of these systems served a particular useful management need, none of the systems was designed to serve as a integrated system which would contain specific milestones and financial information to adequately monitor CERCLA enforcement activities. Agency officials were required to use outputs from multi systems and manually search through individual regional project site files to determine the enforcement status of any given hazardous waste site. In our audits of Regions 3 and 4, we experienced difficulty in determining: (1) site status and (2) cost recovery activities from the various automated information systems. As a result, we had to manually generate pertinent site and program information such as: (1) information on bankruptcy cases; (2) the length of time taken for the negotiation process; (3) progress in pursuing enforcement actions against potential responsible parties; and (4) the statute of limitations dates. OWPE, which 1s the responsible office for managing the CERCLA enforcement program, was unable to provide us with detailed statistical Information in such areas as length of negotiation, and the number of sites where the statute of limitations was expiring or had expired. As a result, we were required to extract the information from several reports. In addition, our request for information on the number and amount of bankruptcy claims had to be referred to the regions. Regional personnel manually generated this data from the project files since the systems did not contain this information. In a February 6, 1985 memo, the Director, OWPE agreed that the information, we requested, would be of benefit and could assist in a better management of the CERCLA enforcement program. Additionally, both Regions 3 and 4 agreed that a comprehensive automated management Information system was needed. Region 4, in fact, had developed an automated regional site tracking system to Improve control over the status of Its enforcement actions. However, at the time of our review, we were unable to review the status of negotiations and the cost recovery actions at all of the Regions' Superfund sites due to the voluminous correspondence and data in the individual project files. This information could not be obtained without doing a detailed review of the Individual project files. Our audit findings Indicate a need to collect additional Information in a automated format. Our review of Region 3 showed that the Region did not have any reports or system that reported the dates when: (1) responsible ------- party searches began and ended; (2) responses to notice letters and sub- sequent correspondence were received; (3) negotiations with responsible parties began and ended; (4) settlement with responsible parties were reached; and (5) responsible parties performed cleanup at a site in compliance with administrative orders and consent decrees. In addition, our review of the regions were hampered because many of the pertinent documents (notice and demand letters, responsible party correspondence, minutes of negotiations) could not be located because the site files were generally not well organized. Even though Region 3 agreed with the findings and implemented a central filing system for enforcement data, the need and benefits of an automated MIS are still apparent and valid. As previously mentioned, enforcement actions may be taken by both regional and Headquarters offices and by both EPA and DOJ. As a result, we believe there is a need to be able to quickly determine the current status of a site and the responsible Agency office. Currently, the Agency has no system which would provide this type of information, and there is a potential for sites to be lost or for site activities not to be taken. CONCLUSION Despite these shortcomings, we recognize the Agency's efforts to improve its reporting capabilities for enforcement actions. However, we believe improvements are still needed in order for Agency officials to effectively manage the CERCLA enforcement program. In our opinion, as the number of enforcement actions increase in the future, 1t will become Increasingly necessary to maintain comprehensive Superfund enforcement.tracking information. We believe a comprehensive management information system offers many benefits. First, the information will allow managers to determine how long different steps in the enforcement process are taking so that reasonable time frames for completing these steps can be set. Second, it will provide an easy way to determine whether the time frames set for the enforcement process are being met. Third, the Information will help managers in workload planning by providing data on upcoming steps. Fourth, the Information will help management to more easily respond to information requests from Congress and other sources. OSWER Comments And PIG Evaluation The Assistant Administrator for OSWER in the September 10, 1986 memorandum made no specific comments with regard to our recommendations for this finding. As stated in our report, we believe Agency officials need to make improvements to effectively manage the CERCLA enforcement program. 33 ------- RECOMMENDATIONS We recommend that the Assistant Administrator for Solid Waste and Emergency Response: 1. Designate the development of the CERCLA enforcement system as a high priority item; and j 2. Require that pertinent site-specific enforcement information on bankrupt cases, statute of limitations, negotiation milestone dates, etc. be included as data elements in the new MIS. 34 ------- EXHIBIT A COMPLETED NON-NATIONAL PRIORITY LIST Region 1 2 3 4 5 6 7 8 9 10 Totals iL SITES WITH CLEANUP COSTS UNDER Total Number of Compl eted Removal Sites Under $200,000 as of 09/30/85 16 15 32 65 40 18 11 7 35 9 "215 SS3 $200,000 Total Obligations of Removal Sites Under $200,000 as of 09/30/85 $ 997,475 644,237 1,792,501 2,768,504 1,902,972 608,703 589,519 169,320 1,473,392 528,233 $11,474,856 S3S3=SS=S3 35 ------- EXHIBIT B Page 1 of 6 SCHEDULE OF COMPLETED REMOVAL ACTIONS ON CLEANUP COSTS UNDER $200,000 "THROUGH SEPTEMBER 30,' REGION NAME OF SITE 1 Bourdeaudhui 1 Bursey Asbestos 1 Castle Hill 1 Cyanide Incident 1 Dean Street 1 Gonic Sites 1 Great Diamond Island 1 Hougels Neck 1 Keswick Road 1 Lake Sunapee 1 Matarazzo 1 Pointer Asbestos 1 Total Sites - 12 2 Abandoned Drum 2 Abandoned Drums Erie Canal 2 Blue Poly Drum 2 Blue Spruce International 2 Fort Totten 2 Horseshoe Road Dump 2 Kearny Drum Dump II & #5 2 Kearny Drum Dump $2 2 Long Island Beach 2 Signo Trading 2 Wall kill Well 2 Total Sites - 11 COMPLETION DATE 6/14/1985 5/28/1985 5/9/1984 1/23/1983 8/3/1983 3/13/1985 4/18/1983 3/19/1985 11/10/1983 6/9/1984 5/28/1985 7/1/1985 2/19/1982 7/16/1982 2/24/1984 11/15/1983 4/21/1983 7/12/1985 5/3/1985 4/13/1985 8/13/1982 7/3/1984 3/16/1984 TOTAL OBLIGATIONS $145,120 22,000 190 1,528 180,000 150,000 829 5,000 194 31,732 10,000 25,000 $571,593" $ 1,146 675 777 3,291 O]./ 60,000 92,131 42,000 1,095 134,325 21 18,315 $353,755 36 ------- EXHIBIT B Page 2 of 6 REGION NAME OF SITE 3 Baltimore Iron & Metals 3 Biedler Road 3 Boyertown Scrap Metal 3 Caustic Midnight Dump 3 Columbia Park Drum 3 Coons Run 3 East Cumberland Street 3 Evans Trail 3 Eweing Road Drum Site 3 Fennel Road 3 Interstate 70 Acid Spill 3 Locomotive Junkyard 3 Mt. Pocono 3 Old Garage 3 Patrick Diehl 3 Piney Creek Drum 3 Pottstown Abandoned Trailer 3 Richardson Property 3 Security Boulevard 3 Semco PCB Site 3 Springer Septic Services 3 Stoneman Property 3 Tinicum Marsh 3 Vulcanized Rubber & Plastics 3 Wheeling Hill 3 Yokum Chlordane Contamination 3 Total Sites - 26 COMPLETION DATE 2/1/1984 6/8/1983 5/19/1983 3/24/1983 1/25/1985 9/6/1983 9/28/1984 8/8/1984 10/24/1984 7/11/1985 5/31/1984 3/15/1984 1/24/1984 2/8/1985 1/8/1985 7/6/1985 5/2/1985 2/5/1985 3/4/1985 10/31/1984 2/13/1984 6/19/1985 9/23/1983 7/6/1983 12/28/1983 3/20/1984 TOTAL OBLIGATIONS $ 73 4 35 1 151 109 169 25 11 16 1 45 6 50 15 180 43 115 142 55 5 154 42 4 18 ,656 ,707 ,181 ,409 ,238 ,279 797 ,372 ,000 ,163 ,657 ,228 ,729 ,699 ,678 ,452 ,583 2/ ,038 ,830 ,490 ,412 ,113 ,968 ,696 ,570 ,387 $1,481,332 4 4 4 4 4 4 4 4 4 4 4 4 4 4 Abandoned Drum 7/28/1984 Abandoned Drum 8/11/1983 Abandoned Drum/Hillsborough 9/17/1982 Abandoned Drum/Hillsborough 9/17/1982 Abandoned Drum/Marathon 1/1/1985 Ahoskle Midnight Dump 3/29/1985 Buckhorn Pesticide Fire 3/28/1985 Buford Highway 11/20/1984 Bush Brothers Plating 8/31/1985 C. D. Buff 3/21/1985 Caldwell County 7/15/1983 Callahan Drum 10/28/1983 Canton Plating & Bumper Works 12/19/1984 Cape Fear Wood Preserving 3/19/1985 $ 1,812 1,821 6,996 3,976 4,187 3,000 15,000 5,000 120,000 20,000 39,976 7,963 200,000 150,000 37 ------- EXHIBIT B Page 3 of 6 REGION NAME OF SITE 4 Catoosa County Labpack 4 Caustic Chemical 4 Coal Branch Hollow < 4 Creosote Tanks Release 4 Davenport Creosote Spill 4 Everhart Lumber Site 4 Ft Oglethorpe Drum 4 GA Highway 138 4 Gall Foster Property 4 Hadaway Road 4 Head PCB Spill 4 Horry Co. Fireworks 4 Ivy Road (Bessie Runner) 4 J & I Drum Site 4 Jimmy's Truck Stop 4 Johnson Property Site 4 Lake Kathy Road Spill 4 Lake Worth Inlet 4 Lumrnis Island 4 McAllister Drum Site 4 . Midnight Dump 4 Midnight Dumping (KY) 4 Midnight Dumping/Gull ford 4 One-Hour Koretizlng 4 Payco Pallet and Drum 4 PCB Midnight Dump 4 Pembroke Pines 4 Petro Chemical 4 Rock Bridge Park 4 Rome Coal Tar 4 Roosevelt Highway Spill 4 S. Electroformlng 4 Scotts Creek Battery 4 Simpson Road Drum 4 Snapper Lane 4 St. John River 4 Unknown Chemical Discharge 4 Villa R1ca-H1gh Point Rd 4 Western Carolina Smelting 4 Williams Pesticide Site 4 Total Sites - 54 COMPLETION DATE 4/30/1985 7/20/1983 6/24/1985 9/28/1984 8/19/1983 5/23/1984 2/28/1985 4/12/1984 7/13/1984 4/29/1985 2/7/1985 2/18/1985 10/30/1984 10/26/1982 5/1/1985 4/16/1984 1/18/1985 6/4/1985 4/10/1984 1/13/1984 8/24/1984 7/28/1984 7/17/1981 7/30/1984 4/10/1984 2/15/1983 12/19/1982 10/28/1983 1/25/1984 5/19/1985 12/15/1983 8/30/1984 1/25/1985 4/15/1985 10/14/1983 10/3/1984 12/3/1982 5/17/1984 12/5/1984 4/9/1983 TOTAL OBLIGATIONS $ 4,000 9,930 32,000 50,000 54,533 10,500 6,000 5,544 3,000 3,000 20,000 90,000 15,000 40,782 12.00U 50,000 13,000 2,158 25,000 87,025 50,000 9,529 1,954 14,000 25,464 36,019 19,765 175,858 25,000 100,000 34,937 28,000 87,000 27,000 3,225 11,284 4,289 16,612 81,000 10,616 $1,874,75? 38 ------- EXHIBIT B Page 4 of 6 5 Abandoned Chemicals 5 Abandoned Drum 5 Abandoned Drum 5 Abandoned Drums-Ecorse 5 Bloomington Capacitor Site 5 C-Way 5 Chemical Drum 5 Chicago Drum 5 Cyanide Incident 5 Drums on Beach 5 Elkhart Site 5 Floyd Hutter 5 Fort & Scotten Streets 5 GP & K, Inc. 5 1-69 5 Midnight Dump, W. 58th Street 5 Midnight Dumping 5 Millpoint (Spring Lake) 5 Miles Township 5 Oak Creek 5 R. J. Trucking 5 Seaway Warehouse 5 Sorrento Site 5 St. Louis River 5 Total Sites - 24 COMPLETION DATE 4/18/1983 7/3/1983 7/16/1982 6/27/1984 2/1/1985 11/26/1984 7/1/1982 7/22/1984 8/17/1984 7/2/1982 3/25/1985 6/10/1984 4/16/1984 6/10/1985 3/6/1985 4/28/1983 10/1/1981 7/6/1984 3/20/1985 1/31/1985 7/9/1985 7/17/1984 3/31/1984 8/27/1984 TOTAL OBLIGATIONS $ 46,402 1,569 1,142 6,095 53,559 21,749 3,487 22,317 494 2,628 93,122 1,424 8,713 9,428 16,049 456 23,970 2,501 16,236 5,000 18,695 28,443 3,239 1,103 $387,82T 6 6 6 6 6 6 6 6 6 6 6 6 6 Acrylonitril Spill 4/3/1984 Amoco Dock 31 3/8/1982 Chemical Drums-Padres Island 10/17/1984 Haddock Airport 2/5/1985 Houston Ship Channel 1/4/1984 Jack Dennis Pesticide Burnsite 3/18/1983 Near Wills Point 5/14/1983 Padre & Mustang Islands I 3/27/1985 Panther Creek 3/11/1982 South of Waco 5/5/1983 Stonewall Drug Dump 6/13/1985 Styrene Spill 2/22/1984 W. J. 011 2/3/1984 Total Sites - 13 $ 2,250 3,643 5,119 15,000 5,000 32,381 9,652 160,422 3,037 3,792 7,000 7,065 54.777 $309,138 39 ------- EXHIBIT B Page 5 of 6 REGION NAME OF SITE 7 Blue River Flood 7 Flood Damage 7 Frankl1n/61mb1in St.' 7 Holly Street Drum Site 7 Rockwood School District 7 Total Sites - 5 8 Gene Murren 8 Green River Cyanide 8 Montgomery Ward Store 8 Vaagan-Dahle Farm 8 Total Sites - 4 9 A. S. Power Plant 9 Abandoned Drum 9 Abandoned Drum 9 Angeles National Forest 9 Big Spring Ranch 9 Bloomfield Avenue 9 Cherokee Trucking 9 Crystal Cove Beach 9 Cyanide Spill 9 Drainage Ditch 9 Echo Bay Station 9 L. Fricker Co. 9 Laguna Beach II 9 Long Beach Drum 9 M/V Victoria II Keehi Lagoon 9 Mystery Dump 9 N Tulip St. - Escondido 9 Parkside Drive 9 PCB Transformers (includes 31 subsites) 9 Riverside Pesticide 9 Ro1c-Sun Valley COMPLETION DATE 6/30/1984 2/22/1983 5/2/1984 6/29/1984 7/23/1984 3/30/1984 1/23/1985 5/15/1984 7/20/1984 7/24/1984 5/27/1982 8/22/1984 7/23/1982 4/21/1983 7/13/1984 2/15/1985 8/22/1983 5/16/1985 1/4/1984 4/26/1983 7/19/1985 4/29/1984 8/20/1984 9/15/1985 12/14/1981 3/15/1985 3/21/1984 9/21/1984 6/10/1985 6/20/1985 TOTAL OBLIGATIONS 36,006 31,323 26,537 29,000 49,007 $171,873 $ 16,268 3,000 106,000 24,419 $149.687 $ 27,321 1,580 2,000 4,370 3,780 3,243 105,503 3,561 8,500 1.994 9,015 175,999 1,266 1,069 50,000 6,989 44,541 6,231 4,707 27,490 100,000 21 40 ------- 9 Sacramento River 9 Satala Power Plant 9 South Half Moon Bay 9 Tafuna Power Plant 9 Tuba City Acid Tank 9 Unknown Chemical Drums 9 Uasho Drum 9 Total Sites - 28 10 Abandoned Drum 10 Municipal Landfill 10 Ohlson Mountain PCB 10 PCB Contamination 10 Spokane Drum Fire Total Sites - 5 Total Completions - 182 COMPLETION DATE 2/16/1983 7/18/1984 8/14/1985 7/19/1984 9/10/1982 5/11/1983 8/28/1985 3/9/1984 5/20/1982 8/23/1985 6/17/1983 6/21/1985 EXHIBIT B Page 6 of 6 TOTAL OBLIGATIONS $ 2,363 20,214 20,000 40,276 34,140 1,394 2.500 $710,046' $ 1,058 6,181 101,399 8,571 3.000 $120,209" $6,130,209 333333333 If Financial Management Division's records shows an obligation through September 1985 of $675. 2J OWPE states that these sites are targeted for action 1n the SCAP. 41 ------- EXHIBIT C COMPLETED NON-NATIONAL PRIORITY LIST REMOVAL SITES WITH CLEANUP COSTS BETWEEN $200TOOO AND UNDER $500.000 IN VALUE THAT -MAY NOT BE RECOVERED Total Number of Total Obligations Completed Removal of Removal Sites Sites Between Between $200,000 - $500,000 $200,000 - $500,000 Region 1 2 3 4 5 6 7 8 9 10 Totals as of 09/30/85 1 1 5 4 3 2 1 2 0 0 as of 09/30/85 $ 400,112 293,332 1,648,633 1,108,000 970,907 460,878 442,140 437,000 0 0 $5,761,002 42 ------- .p- U) SCHEDULE THERE IS OF SUPERFUND SITES THAT EXHIBIT D Page 1 of 2 A BANKRUPTCY CASE AGAINST POTENTIAL RESPONSIBLE PARTIES Reg1 on 1 2 2 3 3 3 4 5 5 5 5 5 5 Case/Site Nane Johns Manvllle, NH Syncon Resins, Inc. Combe Fill Landfills, NJ North South Bruin Lagoon, PA Drake Chemical , PA L.A. Clarke A Sons American Creosote, FL A&F Materials, IL Electric Utilities Corp, IL Isantl Solvent, MN Liquid Disposal, MI Long, T.P. OH Peerless Plating, MI Total EPA Claim Against Bankruptcy Responsible Party $1,100,000 1,867,596 228,530 88,879 1,222,446 1,200,000 65,492 7,000,000 100,000 176,575 777,727 321,505 37,859 139,339 (Note 1) Date of Bankruptcy 8/26/82 10/19/81 11/13/81 02/08/77 00/00/81 03/11/83 05/21/82 Not Known 09/19/83 07/00/83 04/00/82 05/29/81 08/22/83 Date of Claim 11/30/84 03/21/83 01/22/86 12/09/83 12/20/83 11/02/84 07/22/82 06/00/83 10/19/84 09/13/83 01/13/83 07/29/83 01/01/85 Total CERCLA Funds Spent Through Sept. 30, 1985 $1,100,000 2,809,732 228,530 88,879 3,578,356 1,630,341 Not Known 1,261,724 586,694 1,000,000 995,000 2,777,247 37,859 147,650 Total Funds Awarded Notes $ -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- 37,859 Note 2 -0- ------- 5 Thomas Solvent, MI 5 Crystal Chemical, TX 6 Hardage Disposal Site 6 Metcoa, TX ' 6 Triangle Chemical. TX 7 Aidex Corp, IA 7 Charter, MO 9 Metate Asbestos 4,335,006 814,879 979,550 332,669 148,653 12,000 34,000,000 2,297,000 $57,245,705 04/06/84 09/24/81 01/28/85 Not Known 06/00/81 02/05/79 04/20/84 02/25/83 08/21/84 07/15/82 06/03/85 01/24/84 09/23/82 06/22/81 11/18/84 08/10/83 EXHIBIT D Page 2 of 2 3,477,195 1,548,152 Not Known 336,798 332,669 2,214,015 34,000,000 7,000,000 $65,150,841 = = = = = = : = -0- -0- -0- -0- -0- 10,000 Note 3 -0- -0- $47,859 Note 4 Total Sites 22 Notes Note 1 Note 2 Note 3 Note 4 The above information is a result of OECM's generated data. The column "Total CERCLA Funds Spent Through September 30, 1985" does not represent the actual expenditures as of September 30, 1985. They may represent estimates, funds expended through the date of claim, and approximate amounts through this period. The current FMS does not show all site specific costs. Thus, it is difficult to obtain the exact expenditures per site. To obtain such amounts it would require Agency personnel to go to many different sources. EPA received $14,198 as payment for this case. EPA received $12,967 as payment for this case. EPA received $27,165 as payment for this amount. ------- NEGOTIATIONS AS OF SEPTEMBER 30, 1985 (Note 1) EXHIBIT E Page 1 of 11 REG NAME OF SITE Ui Beacon Heights Landfill Laurel Park. Inc. Charles George Grovel and Mel Is 1 & 2 Hocomonco Pond Norwood PCB/Grant Gear Plymouth Harbor Resolve Inc Salem Acres Silreslm Chemical HcK1n Co. O'Connor Site Ulnthrop Town Landfill Coakley Landfill Exxon Flmble Door Gonlc (Two Drum Sites) Keefe Environmental Services (KES) Rodgers Mobile Home Savage Central Landfill Landfill & Resource Recovery Peterson/Puritan Inc Pldllo Farm Stamina Mills Western Sand and Gravel QUARTER INITIATED 3rd Qtr 85 3rd Qtr 84 3rd Qtr 85 2nd Qtr 85 3rd Qtr 85 3rd Qtr 85 1st Qtr 85 3rd Qtr 85 2nd Qtr 85 3rd Qtr 84 2nd Qtr 85 2nd Qtr 85 3rd Qtr 85 2nd Qtr 85 3rd Qtr 85 3rd Qtr 85 4th Qtr 84 Not Known 3rd Qtr 85 4th Qtr 85 2nd Qtr 85 3rd Qtr 84 Not Known 3rd Qtr 85 3rd Qtr 85 2nd Qtr 84 QUARTER COMPLETED 3rd Qtr 85 4th Qtr 85 4th Qtr 85 4th Qtr 85 3rd Qtr 85 1st Qtr 86 1st Qtr 85 2nd Qtr 85 1st Qtr 85 1st Qtr 85 4th Qtr 85 ESTIMATED LENGTH OF NEGOTIATION THRU FY 86 2nd QTR. 315 days 360 days 315 days 405 days 315 days 31b days 495 days 315 days 405 days 450 days 225 days 405 days 90 days 90 days 180 days 315 days 90 days Not Known 315 days 225 days 405 days 180 days Not Known 315 days 315 days 540 days OUTCOME Settlement NOTES Settlement Settlement Settlement (2) Fund Fin. Action Unilateral Order Fund Fin. Action Cost Recovery Fund Fin. Action Fund Fin. Action Settlement (2) ------- EXHIBIT E Page 2 of 11 REG NAME OF SITE Abestos Dump Chemical Leaman Tank Lines, Inc. D'lmpeMo Property Fried Industries GENS GENS Johnson ft Towers Johnson ft Towers KIN-BUC Landfill King of Prussia Llparl Landfill LIpaM Landfill Lone Pine Landfill Lone P1ne Landfill N ft T Dellsa NKY Corporation Price Landfill Quanta Resources Quanta Resources Rlngwood Nines Scientific Chemical Processing (Carl) Scientific Chemical Processing (Carl) Scientific Chemical Processing (Newark) Syncon Resins Tabernacle Drum Dump Clothier Disposal Fulton Terminals G. N. Central Foundry Hudson River PCB's QUARTER INITIATED 3rd Qtr 84 2nd Qtr 85 2nd Qtr 85 3rd Qtr 85 3rd Qtr 85 4th Qtr 85 2nd Qtr 85 2nd Qtr 85 1st Qtr 85 1st Qtr 84 3rd Qtr 84 2nd Qtr 85 1st Qtr 84 1st Qtr 85 3rd Qtr 85 4th Qtr 85 2nd Qtr 85 3rd Qtr 85 2nd Qtr 85 2nd Qtr 85 3rd Qtr 85 3rd Qtr 85 3rd Qtr 85 3rd Qtr 85 2nd Qtr 84 2nd Qtr 85 2nd Qtr 85 2nd Qtr 84 1st Qtr 84 QUARTER COMPLETED 3rd Qtr 85 4th Qtr 85 3rd Qtr 85 3rd Qtr 85 3rd Qtr 85 1st Qtr 86 3rd Qtr 85 3rd Qtr 85 1st Qtr 86 2nd Qtr 85 3rd Qtr 85 3rd Qtr 85 ESTIMATED LENGTH OF NEGOTIATION THRU FY 86 2nd QTR. 360 days 180 days 90 days 315 days 315 days 225 days 405 days 405 days 180 days 540 days 675 days 405 days Not Known 495 days 315 days 90 days 90 days 315 days 90 days 405 days 180 days 315 days 315 days 315 days 360 days 405 days 405 days 450 days 540 days OUTCOME Settlement Settlement Not Known NOTES (2) Cost Recovery Settlement Fund Fin. Action Settlement Settlement Settlement Settlement (4) Unilateral Action Settlement Fund Fin. Action ------- EXHIBIT E Page 3 of 11 REG NAME OF SITE Olean Wellf1eld(McGraw-Ed1 son) Pollution Abatement Services (PAS) SAG Harbor/Nabisco Volney Landfill Wide Beach Fibers Public Supply Wells Frontera Creek Juncos Landfill Puerto R1co Chemical Upjohn Facility Dover AFB Harvey A Knott Drum Tybouts Corner Landfill Tybouts Corner Landfill Limestone Road Mid-Atlantic Wood Preservers Sand Gravel A Stone United Rigging Ambler Asbestos Site Amchem Dloxln Domino Salvage Yard Drake Chemical Fischer & Porter Havertown PCP Site Henderson Road Lackawanna Refuse Lavelle Borehole Letterkenny Army Depot McaDoo Associates Mill Creek QUARTER INITIATED 3rd Qtr 85 3rd Qtr 85 1st Qtr 85 2nd Qtr 85 3rd Qtr 85 4th Qtr 85 3rd Qtr 85 2nd Qtr 84 4th Qtr 84 1st Qtr 84 1st Qtr 85 3rd Qtr 85 4th Qtr 84 2nd Qtr 85 3rd Qtr 84 3rd Qtr 85 4th Qtr 84 3rd Qtr 85 1st Qtr 85 2nd Qtr 84 2nd Qtr 85 1st Qtr 85 1st Qtr 84 4th Qtr 84 3rd Qtr 85 4th Qtr 85 3rd Qtr 85 1st Qtr 85 3rd Qtr 84 3rd Qtr 84 QUARTER COMPLETED 3rd Qtr 85 1st Qtr 86 Not known 1st Qtr 85 1st Qtr 85 Not Known 2nd Qtr 86 4th Qtr 85 3rd Qtr 85 4th Qtr 85 4th Qtr 85 2nd Qtr 85 1st Qtr 85 1st Qtr 85 1st Qtr 86 1st Qtr 86 2nd Qtr 85 1st Qtr 85 ESTIMATED LENGTH OF NEGOTIATION THRU FY 86 2nd QTR. 315 days 315 days 180 days 405 days 315 days 90 days 315 days 270 days 585 days 855 days 315 days 90 days 405 days 675 days 315 days 540 days 90 days 180 days 540 days 180 days 90 days 360 days 90 days 180 days 225 days 180 days 90 days 180 days 675 days OUTCOME NOTES Fund Fin. Action (2) Settlement Fund Fin. Action Settlement Transferred to RCRA(2) Settlement Fund Fin. Action (2) Settlement Settlement Fund Fin. Action (3) Settlement (2) Fund Fin. Action Not Known Settlement Unilateral Order Settlement Fund Fin. Action Fund Fin. Action Not Known (2) ------- EXHIBIT E Page 4 of 11 REG NAME OF SITE 00 Moyers Landfill Palmerton 21nc Swissvale Auto Parts Taylor Borough Dump Tyson's Dump Tyson's Dump United Metal Traders Uestlnghouse 12 Avtex Fibers Site Culpepper Wood Preservers Defense General Supply FF East Kane Tar Pits Fort A. P. Hill Hampton Cylinders (Moor-F1ta) IBM Manassas Site B1g John's Gullet Pile Big John's Salvage-Holt Rd Georges Creek Helzer Creek Manila Creek Dloxln Mobay Chemical Monsanto (Plant Road) Monsanto Landfill Monsanto Plant N1tro Dump Ordnance Works Disposal Poca Mine Smith Douglas South Charleston QUARTER INITIATED 3rd Qtr 85 4th Qtr 84 3rd Qtr 84 3rd Qtr 85 1st Qtr 85 4th Qtr 85 Not Known 4th Qtr 84 2nd Qtr 85 3rd Qtr 85 1st Qtr 85 4th Qtr 85 1st Qtr 85 1st Qtr 85 3rd Qtr 85 4th Qtr 84 2nd Qtr 85 1st Qtr 85 1st Qtr 85 1st Qtr 85 3rd Qtr 85 1st Qtr 84 1st Qtr 85 4th Qtr 84 1st Qtr 85 4th Qtr 84 1st Qtr 85 4th Qtr 85 1st Qtr 85 QUARTER COMPLETED 4th Qtr 85 2nd Qtr 85 2nd Qtr 85 1st Qtr 85 2nd Qtr 85 1st Qtr 86 4th Qtr 85 1st Qtr 85 4th Qtr 85 4th Qtr 85 4th Qtr 85 3rd Qtr 85 4th Qtr 85 4th Qtr 85 1st Qtr 85 4th Qtr 85 4th Qtr 85 ESTIMATED LENGTH OF NEGOTIATION THRU FY 86 2nd QTR. 315 days 360 days 270 days 315 days 90 days 225 days Not Known 585 days 405 days 315 days 495 days 225 days 90 days 360 days 90 days 90 days 405 days 270 days 270 days 270 days 315 days 540 days 270 days 585 days 270 days 90 days 270 days 225 days 270 days OUTCOME NOTES Settlement Settlement Not Known Settlement Settlement Settlement C1v1l Action Ref. Unilateral Order Not Known Settlement Settlement Settlement Settlement Settlement Fund Fin. Action Settlement (1) Not Known ------- EXHIBIT E Page 5 of 11 REG NAME OF SITE SO Perch do Groundwater Contamination Sara)and Apartments City Industries Hlpps Road Landfill Holllngsworth Solderless Terminal Co. Miami Drum Services NU 58th Street P1ckettv1lle Road Landfill Ze11wood Ground Water Contamination Marzone/Chevron Co Powersvllle A1rco Harrison City Flowood Gautler 011(Seaboard) Chemtronlcs Inc Dockery Property Martin-Marletta/Sodyeco Potter Pits Independent Nail Medley Farms Palmetto Wood Preserving Palmetto Wood Preserving Galloway Pits Acme Solvent Reclaiming Alburn Incinerator/HAAS Crab Orchard/Sangamo Dump Cross Brothers Environmental Dynamics KERR-MCGEE QUARTER INITIATED 1st Qtr 85 3rd Qtr 85 4th Qtr 85 2nd Qtr 85 4th Qtr 85 2nd Qtr 85 2nd Qtr 85 4th Qtr 85 3rd Qtr 84 1st Qtr 85 1st Qtr 85 1st Qtr 85 4th Qtr 85 3rd Qtr 85 2nd Qtr 85 3rd Qtr 85 4th Qtr 85 3rd Qtr 84 4th Qtr 85 4th Qtr 85 4th Qtr 85 4th Qtr 85 2nd Qtr 85 4th Qtr 85 3rd Qtr 85 3rd Qtr 85 4th Qtr 84 2nd Qtr 85 2nd Qtr 84 3rd Qtr 84 QUARTER COMPLETED 1st Qtr 86 4th Qtr 85 2nd Qtr 85 3rd Qtr 85 1st Qtr 86 1st Qtr 86 2nd Qtr 86 3rd Qtr 85 4th Qtr 85 3rd Qtr 85 2nd Qtr 86 2nd Qtr 86 3rd Qtr 85 2nd Qtr 85 ESTIMATED LENGTH OF NEGOTIATION THRU FY 86 2nd QTR, 360 days 90 days 225 days 405 days 225 days 405 days 405 days 225 days 270 days 180 days 360 days 360 days 225 days 270 days 90 days 90 days 225 days 675 days 225 days 225 days 225 days 225 days 90 days 225 days 315 days 270 days 540 days 90 days 360 days 675 days OUTCOME Settlement Settlement NOTES Fund F1n. Action Settlement Fund Fin. Action Settlement Settlement Settlement Settlement Not Known Unilateral Order Civil Action Ref. Settlement Fund F1n. Action Settlement (2) ------- EXHIBIT E Page 6 of 11 REG NAME OF SITE in O KERR-MCGEE KERR-MCGEE (Kress Creek/West Branch) KERR-MCGEE(Reed-Keppler) KERR-MCGEE(Residential Areas) KERR-MCGEE(Sewage Treatment Plant Site) NL IndustMes/Taracorp Lead Smelter Pagel's Pit Rlverdale Chemical Co Sheffield (U. S. Ecology) Velslcol Chemical Corp Wauconda Sand A Gravel American Chemical Service Bennett Stone Quarry D1mar Corp Env1ro-Chem F1sher-Calo Fort Wayne Reduction Dump Lemon Lane Landfill Main Street Well Field Main Street Well Field Midco I Midco I Midco II Midco II Meal's Dump Meal's Landfill Seymour Recycling Wayne Waste 011 Wedzeb Enterprises Westlnghouse Sites American Steel Works Berlin & Farro Berlin & Farro Burrows Sanitation QUARTER INITIATED 1st Qtr 84 Not Known Not Known Not Known Not Known 1st Qtr 85 4th Qtr 85 4th Qtr 84 2nd Qtr 85 1st Qtr 85 4th Qtr 84 3rd Qtr 85 Not Known 3rd Qtr 85 3rd Qtr 84 3rd Qtr 85 3rd Qtr 85 Not Known 3rd Qtr 85 3rd Qtr 85 1st Qtr 84 2nd Qtr 85 1st Qtr 85 2nd Qtr 85 Not Known Not Known 1st Qtr 84 4th Qtr 85 2nd Qtr 84 1st Qtr 84 4th Qtr 85 1st Qtr 84 3rd Qtr 85 3rd Qtr 85 QUARTER COMPLETED 4th Qtr 85 4th Qtr 85 4th Qtr 85 4th Qtr 85 3rd Qtr 85 1st Qtr 86 2nd Qtr 85 4th Qtr 85 4th Qtr 85 1st Qtr 86 3rd Qtr 85 4th Qtr 85 1st Qtr 86 1st Qtr 86 4th Qtr 85 3rd Qtr 85 4th Qtr 85 4th Qtr 85 3rd Qtr 85 3rd Qtr 85 3rd Qtr 85 3rd Qtr 85 3rd Qtr 85 3rd Qtr 85 1st Qtr 86 1st Qtr 86 3rd Qtr 85 Not Known 2nd Qtr 86 4th Qtr 85 ESTIMATED LENGTH OF NEGOTIATION THRU FY 86 2nd QTR. 855 days Not Known Not Known Not Known Not Known 180 days 90 days 180 days 180 days 270 days 585 days 180 days Not Known 90 days 540 days 180 days 90 days Not Known 90 days 90 days 540 days 90 days 180 days 90 days Not Known Not Known 855 days 90 days 630 days 540 days Not Known 855 days 225 days 90 days OUTCOME NOTES Fund F1n. Action Fund F1n. Action Fund F1n. Action Fund F1n. Action Settlement Not Known Settlement , Settlement (2) Fund F1n. Action Not Known Settlement Settlement Not Known Not Known Fund Fin. Action Settlement Settlement Settlement Settlement Settlement Settlement Settlement Settlement Settlement Not Known Unilateral Settlement Settlement Settlement Fund Fin. Action ------- EXHIBIT E Page 7 of 11 REG NAME OF SITE Dow Chemical Co (Midland) Ionia City Landfill K. L. Avenue Landfill K. L. Avenue Landfill Kareckas Farm Kentwood Landfill Hason County Landfill NES Co/Joe Wilds Metamora Landfill OTT/Story/Cordova Chemical Packaging Corp of America Tar Lake U. S. Avlex ' Whitehall Municipal Wells Burlington Northern FMC-Northern Ordinance Isantl Joslyn Manufacturing A Supply New Brighton/Arden Hills NL/Taracorp Rellly Tar & Chemical Corp South Andover(Andover Sites) South Andover(Andover Sites) St. Louis River University of Minnesota Whlttaker Corp American Steel Drum Arcanum Iron & Metal QUARTER INITIATED 3rd Qtr 84 3rd Qtr 85 3rd Qtr 85 4th Qtr 85 1st Qtr 85 3rd Qtr 85 4th Qtr 85 2nd Qtr 85 3rd Qtr 85 1st Qtr 84 2nd Qtr 84 3rd Qtr 84 3rd Qtr 85 3rd Qtr 84 1st Qtr 84 2nd Qtr 85 2nd Qtr 85 1st Qtr 84 2nd Qtr 84 4th Qtr 84 1st Qtr 84 2nd Qtr 85 4th Qtr 85 2nd Qtr 85 3rd Qtr 85 2nd Qtr 85 1st Qtr 85 4th Qtr 85 QUARTER COMPLETED 2nd Qtr 85 4th Qtr 85 1st Qtr 86 2nd Qtr 86 2nd Qtr 85 1st Qtr 86 1st Qtr 86 3rd Qtr 85 4th Qtr 85 2nd Qtr 86 2nd Qtr 85 1st Qtr 86 4th Qtr 85 3rd Qtr 85 2nd Qtr 85 1st Qtr 86 1st Qtr 86 Not Known 2nd Qtr 85 3rd Qtr 85 4th Qtr 85 2nd Qtr 86 2nd Qtr 85 1st Qtr 86 ESTIMATED LENGTH OF NEGOTIATION THRU FY 86 2nd QTR. 270 days 90 days 180 days 180 days 90 days 180 days 90 days 90 days 90 days 810 days 360 days 540 days 90 days 360 days 450 days 270 days 270 days Not Known 720 days 180 days 540 days 180 days 225 days 360 days 315 days 405 days 90 days 90 days OUTCOME NOTES Settlement Settlement Not Known Fund Fin. Act1on(2)(3) Settlement Not Known Not Known Settlement Fund F1n. Action (2) Fund F1n. Action Settlement Not Known Settlement Settlement Settlement Not Known (4) Transferred to State(2) Settlement Settlement Fund Fin. Action Fund Fin. Action Unilateral Order Not Known (2) ------- EXHIBIT E Page 8 of 11 REG NAME OF SITE Oi K) Cecil Undsey Mid-South Bayou Bonfouca Bayou Sorrel 1 C1tgo Cleve Reber Cleve Reber Homestake Mining Lee Acres(DOI) South Valley South Valley Hardage/Crlner Okemah Drum Site Bailey Waste Disposal Bio-Ecology Systems Brio Refinery Brio Refinery Crystal Chemical Crystal City Dixie 011 Processors French Limited Harris-Farley Street Hastings Radio Chemical H111 Sand Co Industrial Transformers Koppers Motco Motco Odessa Chromium I Odessa Chromium II Petrochemical System Sheridan Disposal South Cavalcade QUARTER INITIATED 4th Qtr 85 4th Qtr 85 3rd Qtr 85 2nd Qtr 85 3rd Qtr 85 3rd Qtr 85 3rd Qtr 85 3rd Qtr 85 3rd Qtr 85 1st Qtr 84 3rd Qtr 84 2nd Qtr 85 3rd Qtr 85 2nd Qtr 85 1st Qtr 84 1st Qtr 85 1st Qtr 85 4th Qtr 84 3rd Qtr 85 4th Qtr 85 1st Qtr 85 3rd Qtr 84 4th Qtr 85 1st Qtr 85 3rd Qtr 85 1st Qtr 85 4th Qtr 84 4th Qtr 84 1st Qtr 85 1st Qtr 85 1st Qtr 85 3rd Qtr 85 1st Qtr 85 QUARTER COMPLETED 1st Qtr 86 4th Qtr 85 4th Qtr 85 1st Qtr 86 4th Qtr 85 4th Qtr 85 1st Qtr 85 2nd Qtr 85 4th Qtr 85 3rd Qtr 85 2nd Qtr 85 3rd Qtr 85 2nd Qtr 85 4th Qtr 85 3rd Qtr 85 4th Qtr 85 4th Qtr 85 2nd Qtr 85 2nd Qtr 85 2nd Qtr 85 3rd Qtr 85 3rd Qtr 85 2nd Qtr 85 2nd Qtr 85 ESTIMATED LENGTH OF NEGOTIATION THRU FY 86 2nd QTR. 90 days 225 days 90 days 405 days 90 days 180 days 90 days 315 days 90 days 360 days 270 days 405 days 90 days 90 days 450 days 180 days 90 days 585 days 90 days 225 days 180 days 450 days 225 days 495 days 90 days 90 days 180 days 180 days 180 days 180 days 90 days 315 days 90 days OUTCOME NOTES Not Known Fund F1n. Action Settlement Not Known Not Known No Action Settlement Fund F1n. Action Settlement Fund Fin. Action Fund F1n. Action Settlement Settlement Fund Fin. Action Settlement Settlement Fund Fin. Action Settlement Fund Fin. Action Civil Action Ref. Fund Fin. Action Fund Fin. Action Fund Fin. Action Settlement ------- EXHIBIT E Page 9 of 11 REG NAME OF SITE Cn 8 A1dex Chemplex Nason City Coal Cherokee County Cortland Container John's Sludge Pond Elliot Shooting Park Flndett FulbMght Landfill Riverfront Landfill Riverfront Landfill St. Joseph Landfill Union Carbide Agricultural Prod. Environmental Services Inc Hastings G. W. Contamination Anaconda Smelter Anaconda(Mill Creek) Burlington Northern RR California Gulch Denver Radium Denver Toluene Hill AFB Koppers Co Martin Marietta/Denver Aerospace HIcronutHents International Ogden Defense Depot PDC Spas Sharon Steel/M1dvale Smelter Smuggler Mt. Tooele Army Depot Wasash Chem QUARTER INITIATED 2nd Qtr 84 1st Qtr 85 4th Qtr 85 4th Qtr 85 3rd Qtr 84 1st Qtr 84 4th Qtr 85 2nd Qtr 85 3rd Qtr 85 2nd Qtr 85 3rd Qtr 85 4th Qtr 85 4th Qtr 85 4th Qtr 84 4th Qtr 85 3rd Qtr 84 4th Qtr 85 1st Qtr 85 4th Qtr 85 2nd Qtr 85 4th Qtr 85 3rd Qtr 85 1st Qtr 85 3rd Qtr 85 4th Qtr 85 3rd Qtr 85 1st Qtr 85 2nd Qtr 85 2nd Qtr 85 3rd Qtr 85 4th Qtr 85 QUARTER COMPLETED Not Known 2nd Qtr 85 1st Qtr 85 1st Qtr 86 ESTIMATED LENGTH OF NEGOTIATION 1st Qtr 85 1st Qtr 86 1st Qtr 86 4th Qtr 85 1st Qtr 86 2nd Qtr 86 2nd Qtr 86 2nd Qtr 86 2nd Qtr 85 3rd Qtr 85 4th Qtr 85 THRU FY 86 2nd QTR. Not Known 90 days 225 days 22b days 180 days 855 days 90 days 405 days 315 days 405 days 315 days 225 days 225 days 585 days 225 days 180 days 90 days 360 days 225 days 180 days 90 days 270 days 495 days 270 days 180 days 315 days 90 days 90 days 180 days 315 days 225 days OUTCOME NOTES (4) Not Known Unilateral Order Settlement i (2) (3) fc Settlement Settlement Settlement Fund Fin. Action Unilateral Order Settlement Settlement Settlement Unilateral Order Fund Fin. Action Settlement ------- EXHIBIT E Page 10 of 11 REG NAME OF SITE NAME OF SITE 10 in NOTES «« (1) Indian Bend Wash Area L1tchf1eld Airport Area Aerojet General Del Norte City Pesticide Storage Area Falrchlld Camera A Instrument Mt. View Intel Mt. View Montrose Chemical NEC Electronics Norwalk Dump Raytheon Slltec Corp Bunker H111 Bonnevllle Power Adm Gould Inc Martin Marietta Aluminum Commencement Bay, S. Tacoma (12A) Commencement Bay/Tacoma Tar Pits Northslde Landfill Queen City Farms Inc Strandley Western Processing Co Williams & Son QUARTER INITIATED 3rd Qtr 84 3rd Qtr 84 4th Qtr 84 4th Qtr 85 3rd Qtr 85 3rd Qtr 65 2nd Qtr 84 3rd Qtr 85 3rd Qtr 85 3rd Qtr 85 3rd Qtr 85 2nd Qtr 85 1st Qtr 85 2nd Qtr 85 2nd Qtr 85 3rd Qtr 84 3rd Qtr 84 Not Known 4th Qtr 85 1st Qtr 85 3rd Qtr 85 2nd Qtr 85 QUARTER COMPLETED 2nd Qtr 85 2nd Qtr 85 2nd Qtr 86 4th Qtr 85 4th Qtr 85 2nd Qtr 85 4th Qtr 85 4th Qtr 85 4th Qtr 85 4th Qtr 85 2nd Qtr 85 4th Qtr 85 4th Qtr 85 1st Qtr 85 1st Qtr 85 1st Qtr 85 1st Qtr 86 3rd Qtr 85 4th Qtr 85 ESTIMATED LENGTH OF NEGOTIATION THRU FY 86 2nd QTR. 270 days 270 days 540 days 225 days 90 days 90 days 360 days 90 days 90 days 90 days 90 days 405 days 90 days 180 days 180 days 180 days 180 days Not Known 90 days 180 days 315 days 180 days OUTCOME NOTES Settlement Unilateral Ord Settlement Settlement Settlement Fund F1n. Action Settlement , Civil Action Ref. Settlement Settlement Settlement Settlement Settlement Settlement Settlement Fund Fin. Action Settlement Settlement Settlement The Information above was generated from OWPE's SCAP report on negotiations dated 10/25/85 and 5/16/86. These negotiations were ongoing prior to FY 85, Initiated 1n FY 85, completed 1n FY 86 (2nd quarter), or FY 85 negotiations ongoing thru FY 86 (2nd quarter). The estimated length of negotiation was obtained by giving a value of 90 days for each full quarter and giving a value of 45 days for each Initiated and completed quarter. ------- EXHIBIT E Page 11 of 11 (2) The Information was not shown on the FY 86 SCAP report as being transferred; thus we were unable to determine the status of negotiations. We requested the Information from the Office of Waste Program Enforcement, Compliance Branch (OWPE - CB) and they provided us with Information on a quarter completed basis, status(ongo1ng/transferred) and Initiated date If needed. We did not put 1n this chart negotiations which were 1n the FY 85 SCAP report, but were told that they were completed In FY84 in the review by the above mentioned office. We also did not Include Information on two sites which we were told were Federal facilities and should not be Included in SCAP. (3) The dates were changed since they were apparent mistakes and OWPE corrected them. (4) The outcome was found as a bankrupt case (See Exhibit D). 01 01 ------- APPENDIX 1 Page 1 of 5 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY WASHINGTON, D.C. 20460 A S8»IOB86 e/>->3' OFFICE OF SOLID WASTE AND EMERGENCY RESPONSE MEMORANDUM SUBJECT: Draft Consolidated Report on EPA's Cost Recovery wtions Agalns>t Potential Responsible Parties FROM: JVWiWitoh Pawh Assistant Adminli TO: Ernest E. Bradley III Assistant Inspector General for Audit Thank you for the opportunity to respond to the subject audit report. We are concerned that the findings as they are presented in the report do not reflect the total acope of the enforcement program. The enforcement program has three basic strategies. First, we negotiate with the responsible party or parties to undertake the cleanup or to pay EPA upfront for the coats of the cleanup (cashout). If the negotiations fail, EPA then has two remaining choices: Either to take the responsible party to court to compel a cleanup action or to uae the Fund and subsequently to recover the costs of cleanup from the responsible party. We feel that it would provide balance to the S*e APPendix - report to Include the number of settlements we have achieved that require responsible parties to clean up the alte. As on September 30, 1985, we had settlements worth approximately $477 million In cleanup, 175 cases filed worth $306 million in cleanup, and $137 million filed for cost recovery. Another concern we have about the report is the cost recovery ratio of 1.1 percent of Trust Fund expenditures. We feel that this is a very poor characterization of our coat recovery program for a number of reasons. First, the analysis compares total funds obligated with total cash received through See cost recovery as of September 30, 1985. Using the total funds obligated is Appendix 2 not indicative of the site work that is completed, the time it takes to Note 2 prepare a caae once work is complete, and the existence of a viable responsible party at those aites where work has been done. Additionally, the scope of your audit was limited to removals, yet your analysis takes into consideration all Superfund costs. Finally, all Superfund costs are not cost recoverable. For instance, it is Agency policy not to recover research and development coats. 56 ------- APPENDIX 1 Page 2 of 5 A better characterization would be to compare the amount of funds expended at a completed site that has a viable responsible party, to the amount of cost recovery achieved through cases filed and cases in negotiation. It should be mentioned that in FY. 1986, we expect to double the amount of cost recovery that we achieved in. the first five year of the fund. Our next concern is your statement on page 10 that,."potentially over $60 million will be lost to the fund In the next 20 years if cost recov- See Appendix 2 eries for removal actions under $200,000 continue to be ignored." Although Note 3 $60 million may not be recovered over the next 20 years, it will not be due to Ignoring cases under $200K. It will be due to not having a viable responsible party. The next concern is your statement about "the Congressional goal of establishing a self-sustaining Fund to clean up the hazardous waste sites". The Congressional goal is to clean up the nation's worst hazardous waste sites. Since we estimate that more than half of the sites are abandoned and have no viable responsible party against which to cost recover, your inter- See pretation of the Congressional goal would not appear to be reasonable. A Appendix 2 more accurate statement would be to say that it is Important that EPA maintain Note 4 an aggressive cost recovery program because EPA will be able to clean up additional sites with the recovered funds. It is also Important to note that Congress must appropriate these dollars to EPA, before they can be used. Our final concern is related to the 199 sites under $200,000, that are not being pursued by EPA. In reviewing the sites listed In exhibit A, we See have determined that almost 50 percent of the sites are under $10,000. In Appendix 2 weighing our staffing resources against the amount of recoverable dollars, Note 5 cases under $10,000 represent a low priority. Before addressing each of your specific recommendations, we want to point out that the new Superfund bill will bring some changes. Over the next several months, we will be reviewing our existing policies and procedures and will be revising them to incorporate the new provisions. During this process, we will also take your recommendations into consideration In updating our policies and procedures. . QIC RecnmmOTrtation'- Small Case Policies 1. Require that minimal coat recovery actions (e.g., notification, desttnd letters) be pursued for sites where funds expended are under $200,000. Also, Headquarters should weigh the costs to be incurred for litigation versus the costs to be recovered, before pursuing s cost recovery action. 2. Develop and issue specific policies, procedures, and negotiating strategies for settling cases under $200,000 ($500,000) to the Regions to ensure a consistent Agency approach. 57 ------- APPENDIX 1 Page 3 of 5 3. Examine the possibility of using an arbitration board or some similar mechanism as an alternative to filing cost recovery actions in court* 4. Pursue the possibility of giving cost recovery actions under $200,000 to outside attorneys on a contingency basis for fees. OSWER Response Under the new Superfund, cases under $500,000 now can be handled through admnlstratlve means. We will be reviewing existing policies and requirements of the new law, and we take into consideration your recommendations. The new Super- fund bill expressly allows for alternative dispute resolution procedures. Since the new law gives us administrative author- ity to pursue cost recovery actions under $500,000, it should not be necessary to use outside attorneys. PIG Recommendation - Bankruptcy Cases 1. Use more explicit language in the demand letter identifying EPA as an "official creditor," thus no Interpretation of the demand letter will be required by the PRP. 2. Establish procedures on how to take the necessary actlon(s) to establish EPA's priority claim in relation to other creditors. 3. Coordinate with the Office of General Counsel on developing new procedures and a system that will permit EPA to take timely action, once it is notified of a PRP's bankruptcy filing. 4. Coordinate with OECM to try to balance Agency actions against both financially viable and nonviable PRPs, especially in light of the courts''recent leaning towards giving governmental units first priority on hazardous waste cases after secured creditors. OSWER Responam We will consider revising our demand letters to Include the appropriate "official creditor" language. The Bankruptcy Guidance issued by OECM will be reviewed and revised as appropriate In light of the suggestions made re- garding timeliness of actions and procedures for establishing EPA's claims. 58 ------- APPENDIX 1 Page 4 of 5 QIC Recommendation - Negotiation Policy 1. Re-evaluate the Agency's present policy and procedures to ensure that tioefraoes .set for negotiations are reasonable. Also, timeframes should not be exceeded unless it can be documented in the files that significant progress is being made. 2. Require that specific steps in the negotiation and settlement process are planned, scheduled, and initiated in a systematic and orderly manner in order to minimize delays in the settle- ment process. 3. Require Agency negotiators to notify responsible parties that the negotiations must be concluded within the Agency's estab- lished timefn 4. Require the Regional offices to maintain Information on the length of negotiations and whether this conforms to the goal established by EPA. OSWER Comments We will re-evaluate our present policy and procedures and timeframes for negotiations under the new law, and take your recommendations into consideration. QIC Recommendation - Statute of Limitation (SOL) 1. Proceed under the more conservative tort law tlmeframe (three years after completion of a removal) until such time as the issue is resolved by Congress or the Courts. 2. Include and track the SOL date In the comprehensive listing of all removal actions. 3. For those sites where the SOL is about to expire, take immediate action to initiate negotiations or referrals to DOJ. OSWER Response- The new Superfund bill directly addresses the issue of the statute of limitations. OSWER has initiated work on s tracking system that will Identify all removal actions and pinpoint significant enforcement-related dates, including statute of limitations dates. OSWER and OECM have already asked the Regions to review the universe of removal actions for purposes of potential cost recovery actions. 59 ------- APPENDIX 1 Page 5 of 5 Current guidance ("Timing of CERCLA Cose Recovery Actions") requires that CERCLA actions be initiated in a manner that ensures compliance with any applicable statute of limitations and also ensures that the evidence does not become stale. We appreciate the opportunity to comment on the draft consolidated audit report. If you have any questions regarding our comments, please call Brad Campbell on 382-4478. cc: Jack McGraw Gene Lucero Brad Campbell 60 ------- APPENDIX 2 Page 1 of 3 ADDITIONAL 01G COMMENTS TO OSWER'S RESPONSE DATED SEPTEMBER 10, l98T" The following notes present the OIG's response to OSWER1s comments which were not addressed in the body of the report: Notes OSWER presented some dollar figures on settlements achieved with responsible parties (RPs). After receiving this response, we requested further clarification of these figures from OSWER. OSWER indicated that: (1) the $477 million was money received from RPs to actually clean up the sites and was not part of the $1.3 million Trust Fund obligations; (2) $225 million of the $306 million was also included in the $477 million figure mentioned above; and (3) the remaining $81 million of $306 million represents the value of cleanups EPA is pursuing through the court system. None of the above figures were part of the $1.3 billion Trust Fund obligations. In addition, the $137 million is money that EPA is trying to recover by requesting the Department of Justice to file for cost recovery. The $137 million is a part of the $1.3 billion Trust Fund obligations. We-believe that the 1.1 percent cost recovery ratio is not a poor characterization since 1t shows the actual percentage of total funds the Trust Fund received through cost recovery. We are pointing out that $14 million, or 1.1 percent, of the $1.3 billion obligated from the Trust Fund for cost recovery efforts as of September 30, 1985 have been returned to the Trust Fund by collections from responsible parties. Obligations are mainly a combination of two Important accounting transactions: (1) disbursed amounts and (2) estimates of future expenditures that may occur. Thus, obligations represent the expenditures and best estimate of expenditures the fund has or intends to incur. While it would be unrealistic to expect EPA to recover all Trust Fund expenditures, the Agency needs to be more aggressive in pursuing Its cost recovery actions. We agree that cost recovery actions are resource intensive and may not always be practical. However, we are concerned that the current practice of selective enforcement may deplete the Trust Fund and exempt numerous responsible parties from financial liability for cleanup costs. All funds recovered, regardless of the amount are considered Important since they replenish the ' Trust Fund and may be utilized for future cleanups. In addition, the scope of our audit was not limited to just removals. Three of the findings consisted of remedial as well as removal actions. 61 ------- APPENDIX 2 Page 2 of 3 Notes We believe that the Agency needs to strengthen its methods in pursuing cases under $200,000. In his response, the Assistant Administrator for Solid Waste and Emergency Response commented, "Although $60 million may not be recovered over the next 20 years, it will not be due to ignoring cases under $200,000. It will be due to not having a viable responsible party." The Agency stated that it uses a priority system in pursuing cases and that cases under $200,000 have a lower priority than larger dollar cases. We realize that some of the costs may not be recovered due to a lack of viable responsible parties. However, when there is a viable responsible party, the low priority given to these cases may still result in the funds not being recovered. In addition, we have serious reservations about establishing a threshold for initiating cost recovery actions. Should a threshold be established, it could encourage responsible parties to establish multiple hazardous waste sites 1n order to avoid financial liability for cleanup costs. While we agree with OSWER's statement that some sites may be abandoned and have no viable responsible party, we believe overall EPA must pursue an aggressive cost recovery program. We believe EPA should pursue cost recovery actions at all sites to the extent such actions can be pursued on a cost effective basis (e.g., negotiations, filing of lawsuit, etc.) Such a position will show that EPA will use strength in the process of recovering funds. We would like to provide clarification in 3 areas. First, OSWER's comment should refer to Exhibit B and not Exhibit A. Second, based on a special printout provided by OSWER that showed some of the sites were listed under entirely different names, the number of sites under $200,000 was subsequently changed from 199 to 182 sites. Third, while cases under $10,000 in value may not have the highest priority, we believe all sites need to be evaluated for potential cost recovery action. In his response to the Region 4 audit report, the Regional Administrator stated: "Since the established floor for cost recovery actions is $500,000, recovery actions costing less than $500,000 are a lower priority at both EPA-HQ and at the Department of Justice (DOJ). Therefore, cost recovery for sites under $200,000 1s practically nonexistent. In HQ, the Office of General Counsel (OGC) as well as Region IVs Office of 62 ------- APPENDIX 2 Page 3 of 3 Regional-Counsel (ORC) are not prepared to pursue or negotiate settlements at these low dollar sites. Until authority to settle these cases'administratively is delegated to the regions, very few of these cases will be pursued." In our opinion, all sites should be examined to determine the need for negotiations and possible filing of a case. Thus, the negotiation team would be able to show strength. In addition, we believe alternative methods such as the use of outside attorneys on a contingency basis for fees should still be explored. 63 ------- |