United States     Office of Solid Waste
           Environmental Protection and Emergency Response
           Agency       Office of Waste Programs (OS-510)
&EPA     CERCLA Enforcement
           Policy Compendium

           Volume 1

-------
             UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                        WASHINGTON, D.C. 20460
                        MAR - ?  |on->
                                                      OFFICE OF
MEMORANDUM                                   SOLID WASTE AND EMERGENCY RESPONSE


SUBJECT:       Update of the CERCLA Enforcement Policy Compendium
FROM:          Arthur B. Weissman, Chief
               Guidance and Evaluation Branch

TO:            Addressees

     You should have recently received the  newest update to the
CERCLA Enforcement Policy Compendium.  This update includes all
significant policies and guidances related  to  CERCLA enforcement
issued between August, 1990 and April, 1992.   Earlier volumes of
the Compendium contain documents  issued prior  to 1990.  While not
exhaustive, this Compendium is intended to  serve as a useful desk
reference of enforcement guidance and policy.

     Please replace the old index and table of contents from the
Compendium with the updated index, which  includes a complete
listing of documents issued from  1983 to  1992.

     Additional copies of the Compendium  (Pub. No. PB-92-963623)
are available to EPA employees from  the Super fund Document Center
at  (202) 260-9760. The public may obtain  the document by calling
the National Technical Information Service, (703) 487-4650; the
charge is $98/paper or $32/microfiche.

     If you have any comments or  questions  on the Compendium,
please call Nicole Veilleux of my staff at  (703) 603-8939.

Addressees :
Guidance and Evaluation Branch, OWPE/CED
Director, Super fund Enforcement Division, OE
EPA Libraries: HQ, Regions I-X
Director, Waste Management Division,
     Regions I, IV, V, VII
Director, Emergency & Remedial Response Division,
     Region II
Director, Hazardous Waste Management Division,
     Region III, VI, VIII, &  IX
Director, Hazardous Waste Division,
     Region X
Regional Counsel Waste Branch Chiefs,  Regions I-X
CERCLA Enforcement Branch Chiefs, Regions I-X
CERCLA Enforcement Section Chiefs, Regions  I-X
                                                          Printed on Recycled Paper

-------
                   CERCLA Enforcement Policy Compendium Topical Index
                     POLICY

 I. PRP Search

   A. Timing and Procedures

         Interim Guidance:  Streamlining the CERCLA
         Settlement Decision Process (Porter/Adams)

         PRP Search Supplemental Guidance for Sites in
         the Superfund Remedial Program (Diamond)

         Accelerating Potentially Responsible Party
         Remedial Design Starts: Implementing the 30-
         Day Study

   IL PRP Search Management

         Releasing Identities of Potentially Responsible
         Parties in Response to FOIA Requests
         (Lucero/Sniff)

         Timely Initiation of Responsible Party Searches,
         Issuance of Notice Letters, and Release of
         Information (Lucero)

   C. Information Requests

         Guidance on Use and Enforcement of CERCLA
         Information Requests and Administrative
         Subpoenas (Adams)

         Transmirtal of Model Consent Decree for
         CERCLA Section 104(e) Information Request
         Enforcement Actions

II. Negotiations, Settlements, and Oversight

   A. General and Special Notice

         Interim Guidance on Notice Letters,
         Negotiations, and Information Exchange (Porter)
         53 FR 5298 February 23, 1988

         Waiver of Headquarters Approval for Issuance
         of RD/RA Special  Notice Letters at the Time of
         ROD  Signature (Longest/Diamond)

         Model Notice Letters (Diamond)

         Releasing Information to PRPs at CERCLA Sites
         (Diamond/Unterberger)

         Model Information Notice Letter to Local
         Governments

         Guidance on Preparing and Releasing Waste-in
         Lists and Volumetric Rankings for Information
         Release Under CERCLA  Section 122 (e)
DATE
OSWER
NUMBER
02/12/87


06/29/89


04/02/92
01/26/84
10/09/85
08/25/88
08/29/90
10/19/87



09/26/88



02/07/89

03/01/90


05/07/91


02/22/91
9835.4


9834.3-2a


9835.4-2b*
9834.0
9834.2
9834.4-A
9834.14*
9834.1



9834.10-la



9834.10

9835.12


9834.16*


9835.16*
   *  = Policies dated after 8/14/90
  :* = Policies that have been superseded by later policies

-------
                  CERCLA Enforcement Policy Compendium Topical Index
                    POLICY
  B. RI/FS Issues
       Interim Guidance on Potentially Responsible
       Parties Participation in RemediaHnvestigations
       and Feasibility Studies (Porter)
       Revisions to the Interim Guidance on PRP
       Participation in Remedial Investigations and
       Feasibility Studies (Porter/Diamond)

       Model Statement of Work for a Remedial
       Investigation and Feasibility Study Conducted by
       PRPs

       Guidance on Oversight of Potentially
       Responsible Party Remedial Investigations and
       Feasibility Studies, Vol. 1

       Guidance on Oversight of Potentially
       Responsible Party Remedial Investigations and
       Feasibility Studies, Vol. 2

       Performance of Risk Assessments in Remedial
       Investigation/Feasibility Studies (RI/FSs)
       Conducted by PRPs

       Supplemental Guidance on Performing Risk
       Assessments in Remedial Investigation
       Feasibility Studies (RI/FSs) Conducted by
       Potentially Responsible Parties (PRPs)

       Model Statement of Work for a Remedial
       Investigation and Feasibility Study Conducted by
       Potentially Responsible Parties

       Model Statement of Work for a Remedial
       Investigation and Feasibility Study Conducted by
       Potentially Responsible Parties (Annotated Copy)

  C. Settlement Policy

       Interim CERCLA Settlement Policy
       (Thomas/Price/Habicht, 50 FR 5034 2/5/85)

       Guidance on Premium Payments in CERCLA
       Settlements (Adams and Porter)

       Initiation of PRP-financed Remedial  Design in
       Advance of Consent Decree Entry (Adams and
       Porter)

       Guidance on Landowner Liability Under Section
       107(a)(l) of CERCLA, De Minimis Settlements
       under Section 122(g)(l)(b) of CERCLA, and
       Settlements with Prospective Purchasers of
       Contaminated Property (Reich/Cannon)
DATE
05/16/88
02/07/89
06/02/89
07/01/91
07/01/91
08/28/90
07/02/91
07/02/91
07/02/91
12/05/84


11/17/88


11/18/88



06/06/89
OSWER
NUMBER
9835. la
9835.2a
9835.8
9835. lc'
9835. Id*
9835.15'
9835.15a*
9835.8A
9835.8A
9835.0


9835.6


9835.4-2A



9835.9
* = Policies dated after 8/14/90
* = Policies that have been superseded by later policies

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                  CERCLA Enforcement Policy Compendium Topical Index
                    POLICY

        Interim Municipal Settlement Policy (54 FR
        51071, 12/12/89)

        Multi-Media Settlements of Enforcement Claims
        (Strock)

        Procedures for Transmittal of CERCLA and
        RCRA Civil Judicial Enforcement Case Packages
        to Headquarters (Unterberger/Diamond)

        Model Litigation Report for CERCLA Sections
        106 and 107 and RCRA Section 7003

        Final Model Litigation Report and Complaint for
        CERCLA Section 104(e) Enforcement Initiative

        Interim Agency Policy on Contribution
        Protection Clauses in CERCLA Settlements

  D. Liability

        Liability of Corporate Shareholders and
        Successor Corporations for Abandoned Sites
        Under CERCLA (Price)

        Policy for Enforcement Actions Against
        Transporters Under CERCLA (Lucero/Stiehl)

        Scope of the CERCLA Petroleum Exclusion
        Under Sections 101(14) and 104(a)(2) (Blake)

        Statement of James Stroch before the House
        Subcommittee on Policy, Research & Insurance:
        Insurer Liability for Cleanup Costs of Hazardous
        Waste Sites

  IL Consent Decree Procedures

        Guidance on Drafting Consent Decrees in
        Hazardous Waste Cases (Price/McGraw)

        Guidance on the Use of Stipulated Penalties in
        Hazardous Waste Consent Decrees  (Adams)

        Covenants Not to Sue Under SARA
        (Adams/Porter/Habicht) (52 FR 28038, 7/27/87)

        Submittal of Ten-Point Settlement Analyses for
        CERCLA Consent Decrees
        (Diamond/Unterberger)

        Superfund  Program, Model  CERCLA RD/RA
        Consent Decree

  L. Mixed Funding

        Evaluating Mixed Funding Settlements
        (Porter/Adams) (53 FR 8279, 3/14/88)
DATE

12/06/89


02/06/90


06/12/89



06/21/89


01/31/90


04/10/91




06/13/84
05/01/85


09/21/87


07/10/87


08/11/89



07/08/91




10/20/87
OSWER
NUMBER

9834.13


9891.6


9891.1-la



9835.11-1
9832.10
12/23/85
07/31/87
09/27/90
9829.0
9838.1
*
9835.2


9835.2b


9834.8


9835.14
9834.9
 * = Policies dated after 8/14/90
** = Policies that have been superseded by later policies

-------
                     CERCLA Enforcement Policy Compendium Topical Index
                       POLICY

          Interim Policy on Mixed Funding Settlements
          Involving the pre-Authorization of States or
          Political Subdivisions (Porter/Adams)

     G. De Minimis

          Interim Guidance on Settlements with De
          Minimis Waste Contributors (Adams/Porter) (52
          FR 24333, 6/30/87)

          Interim Model CERCLA Sec.l22(g)(4) De
          Minimis Waste Contributor Consent Decree and
          Administrative Order Guidance (Reich/Lucero)
          (52 FR 43393, 11/12/87)

          Methodologies for Implementation of CERCLA
          Section 122(g)(l)(a) De Minimis Waste
          Contributor Settlements (Diamond/Unterberger)

     H. Guidelines on Preparing NBARs

          Interim Guidelines on Preparing Nonbinding
          Preliminary Allocations of Responsibility
          (Thomas) 52 FR 19919 May 28, 1987

III.  Section 106

     A. Administrative Orders

          Model Administrative Order on Consent for
          Remedial Investigation/Feasibility Study

          FY 90 "UAO Strategy" (Clay/Strock)

          Guidance on CERCLA Section 106(a) Unilateral
          Administrative Orders for Remedial
          Design/Remedial Action (Clay/Strock)

          Model Unilateral Administrative Order for
          Remedial Design and Remedial Action under
          Section 106 of CERCLA

          Issuance of Administrative Orders for Immediate
          Removal Actions (Thomas)

          Guidance on CERCLA Section 106 Judicial
          Actions

          Guidance on the Use and Issuance of
          Administrative Orders Under Section 106
          (Price/Thomas)

          Evaluation of, and Additional Guidance on,
          Issuance of Unilateral Administrative Orders
          (UAOs) for RD/RA

          Administrative Order on Consent for Remedial
          Investigation/Feasibility Study
DATE

05/27/88
OSWER
NUMBER

9834.9a
06/19/87
10/19/87
12/20/89
05/16/87
01/30/90


02/14/90

03/07/90



03/30/90



02/21/84


02/24/89


09/08/83



06/20/91



07/02/91
9834.7
9834.7-la
9834.7-lb
9839.1
9835.3-1A


9870.1 A

9833.0-la



9833.0-2(b)



9833.1


9835.7


9833.0**



9833.2c*



9835.3-2A
   * = Policies dated after 8/14/90
  ** = Policies that have been superseded by later policies

-------
                    CERCLA Enforcement Policy Compendium Topical Index
                      POLICY
          Administrative Order on Consent for Remedial
          Investigation/Feasibility Study (Annotated Copy)
    IL 106(b) Reimbursement
          Consent Orders and the Reimbursement
          Provision Under Section 106(b) of CERCLA
          (Lucero/Leifer)
IV. Cost Recovery
    A. Cost Recovery Guidance
          Cost Recovery Actions under CERCLA
          (Price/Thomas)
    IL Procedures for Documenting Cost
          Preparation of Hazardous Waste Referrals
          (Stiehl)
          Written Demand for Recovery of Costs Incurred
          Under CERCLA
    C. Cost Recovery Strategy
          Superfund Cost Recovery Strategy (Porter)
          Model Cost Recovery CD
    D. General Cost Recovery
          Cost Recovery Referrals (Sniff)
          Expansion of Direct Referral of Cases to the
          Department of Justice (Adams)
          Coordination of EPA and State Actions in Cost
          Recovery Negotiations and Litigation
          (Price/Thomas)
          Guidance Regarding CERCLA Enforcement
          Against Bankrupt Parties (Price)
          Small Cost Recovery Referrals (Stiehl/Lucero)
          Arbitration Procedures for Small Superfund Cost
          Recovery Claims; Final Rule (53 FR 23174,
          5/30/89)
          Revised Hazardous Waste Bankruptcy Guidance
          (Hays)
          Policy on Recovering Indirect Costs in CERCLA
          Section 107 Cost Recovery Actions
          (Stiehl/Stanton)
          Cost Recovery Actions/Statute of Limitations
          (Lucero)
DATE
07/02/91
06/12/87
OSWER
NUMBER
9835.3-2A
9833.2
08/26/83


07/30/85

03/21/91


07/29/88
03/31/91

08/03/83
01/14/88

08/29/83

05/24/84

07/12/85
08/28/89

05/23/86

06/27/86

06/12/87
9832.1


9837.1

9832.18*


9832.13
*

9832.0
9891.5A

9832.2

9832.7

9832.6
9832.17

9832.8

9832.5

9832.9
    * = Policies dated after 8/14/90
  ** = Policies that have been superseded by later policies

-------
                    CERCLA Enforcement Policy Compendium Topical Index
                      POLICY

          Guidance on Drafting Decisions not to Take
          Cost Recovery Actions (Cannon)

 V. State Issues

    A. Funding State Enforcement Actions

          Interim Final Guidance Package on Funding
          CERCLA State Enforcement Actions at NPL
          Sites (Porter)

    JL Counting State-lead Enforcement

          Counting State-lead Enforcement NPL Sites
          Toward the CERCLA  Section 116(e) Remedial
          Action Start Mandate (Porter)

          Questions and Answers About the State Role in
          Remedy Selection at Non-Funded-Financed
          State-Lead Enforcement Sites

    C. General State Guidance

          Interim Final Guidance on Preparation of
          Superfund Memoranda of Agreement (SMOAs)
          (Diamond/Longest)

          Reporting and Exchange of Information on State
          Enforcement Actions at National Priorities List
          Sites (Porter)

          Supporting State Attorneys General CERCLA
          Remedial and Enforcement Response Activities
          at NPL Sites (Longest/Cannon)

    C. General State Guidance

          EPA/State/Relationship in Enforcement Actions
          for Sites on the National Priorities List

VI. Other Guidance

    A. Administrative Record

          Interim Guidance on Administrative Records for
          Selection of CERCLA Response Actions

          Administrative Records for Decisions on
          Selection of CERCLA Response Actions
          (Lucero/Longest)

          Final Guidance on Administrative Records for
          Selection of CERCLA Response Actions

    IL Community Relations

          CERCLA Community Relations Mailing List
          (Diamond/Longest)
DATE

06/07/88
04/07/88
10/21/88
04/18/91
05/08/89
03/14/86
06/21/88
10/02/84
03/01/89


05/29/87



12/03/90




02/06/89
OSWER
NUMBER

9832.11
9831.6a-6d
9831.8
9831.9'
9375.0-01
9831.2
9831.7
9831.3
                         **
9833.3A**


9833.3**



9833.3A-1*




9836.2
   * = Policies dated after 8/14/90
  ** = Policies that have been superseded by later policies

-------
                  CERCLA Enforcement Policy Compendium Topical Index
                    POLICY
        Community Relations during Enforcement
        Activities and Development of the
        Administrative Record (Porter)
        Policy Towards Owners of Residential Property
        at Superfund Sites
  C. Entry and Access
        Entry and Continued Access Under CERCLA
        (Adams)
  D. Insurance and Indemnification
        Procedural Guidance on Treatment of Insurers
        under CERCLA (Price)
        EPA Interim Guidance on Indemnification of
        Superfund Response Action Contractors
        (Porter/Kinghorn)
  IL. Program Management Guidance
        Integrated Timeline for Superfund Site
        Management (Clay/Strock)
  Fj. Federal Liens
        Guidance on Federal Superfund Liens (Adams)
  G. Off-Site Policy
        Revised Procedures for Implementing Off-site
        Response Actions (Porter)
        Notification of Out-of-State Shipments of
        Superfund Site Wastes (Canon)
  H. Penalty Policies
        Administrative Penalty  Procedures Interim Final
        Rule (54 FR 21174, 5/16/89)
        EPCRA/CERCLA Penalty Policy
        Revised EPA Guidance for Parallel Proceedings
        Interim Guidance on Use of Administrative
        Penalty Provisions of Section 109 of CERCLA
        and Section 325 of SARA (Adams)
  L Title III
        Interim Strategy for Enforcement of Title III and
        CERCLA Section 103 Notification Requirements
DATE
11/03/88

07/03/91


06/05/87


11/21/85

10/06/87
06/11/90


09/22/87

11/13/87

09/14/89


05/16/89

06/13/90
06/21/89
07/16/87
OSWER
NUMBER
9836.0-1 A
9834.6*


9829.2


9834.5

9835.5
9851.3


9832.12

9834.11

9330.2-07


9841.1A

9841.2
9843.0
9841.1**
12/14/88
9841.0
 * = Policies dated after 8/14/90
** = Policies that have been superseded by later policies

-------
                   CERCLA Enforcement Policy Compendium Topical Index
                    POLICY
  L. Releases
        Reporting Exemptions for Federally Permitted
        Releases of Hazardous Substances (Thomas) (53
        FR 27268, 7/19/88)

   K. Delegations

        CERCLA Enforcement Delegations

        Clarification of Delegations of Authority 14-14-
        A, 14-14-B, and 14-14-C under CERCLA

   L, Remedial Actions

        Guidance on Remedial Actions for Superfund
        Sites with PCB Contamination - SMR Rec. #23

   M.Enforcement Strategy

        Superfund Enforcement Strategy and
        Implementation Plan

        Pre-referral Negotiation Procedures for
        Superfund Enforcement Cases

   N. Inspector Training Requirements

        CERCLA Implementation of Inspector Training
        Requirements for OSCs/RPMs at the
        Intermediate Level in STEP and First Line
        Supervisors

        Guidance on Applicability of  EPA Order 3500.1
        to CERCLA Staff

        CERCLA Implementation of the Training
        Requirements of EPA Order 3500.1 - Inspector
        Training

   0. Risk Assessment

        Endangerment Assessment Guidance (Porter)
DATE
07/11/88
09/13/87

04/04/90




08/15/90




11/03/90


10/12/90




04/03/91




11/28/88


10/19/89
OSWER
NUMBER
Exempt
9836.2

9012.10-1




9835.4-01*




9800.0*
9842.211




9842.0


9842.1
11/22/85
9850.0-1'
 * = Policies dated after 8/14/90
**  = Policies that have been superseded by later policies
                                                 8

-------
                            CERCLA Enforcement Policy Compendium Index By Date
    DATE

    08/03/83


    08/26/83


    08/29/83
POLICY

Cost Recovery Referrals (Sniff)


Cost Recovery Actions under CERCLA (Price/Thomas)


Coordination of EPA and State Actions in Cost Recovery
Negotiations and Litigation (Price/Thomas)
OSWER
NUMBER

9832.0


9832.1


9832.2
    09/08/83
Guidance on the Use and Issuance of Administrative Orders
Under Section 106 (Price/Thomas)
9833.0*
    01/26/84
Releasing Identities of Potentially Responsible Parties in
Response to FOIA Requests (Lucero/Sniff)
9834.0
    02/21/84
    05/24/84
Issuance of Administrative Orders for Immediate Removal
Actions (Thomas)


Guidance Regarding CERCLA Enforcement Against Bankrupt
Parties (Price)
9833.1



9832.7
    06/13/84
Liability of Corporate Shareholders and Successor
Corporations for Abandoned Sites Under CERCLA (Price)
9832.10
    10/02/84
EPA/State/Relationship in Enforcement Actions for Sites on
the National Priorities List
9831.3'
    12/05/84
Interim CERCLA Settlement Policy (Thomas/Price/Habicht, 50
FR 5034 2/5/85)
9835.0
    05/01/85
Guidance on Drafting Consent Decrees in Hazardous Waste
Cases (Price/McGraw)
9835.2
    07/12/85
    07/30/85
    10/09/85
Small Cost Recovery Referrals (Stiehl/Lucero)


Preparation of Hazardous Waste Referrals (Stiehl)
Timely Initiation of Responsible Party Searches, Issuance of
Notice Letters, and Release of Information (Lucero)
9832.6


9837.1


9834.2
    11/21/85
Procedural Guidance on Treatment of Insurers under CERCLA
(Price)
9834.5
    11/22/85
    12/23/85
Endangerment Assessment Guidance (Porter)


Policy for Enforcement Actions Against Transporters Under
CERCLA (Lucero/Stiehl)
* = Policies dated after 8/14/90
** = Policies that are superceded
9850.0-1**


9829.0

-------
    DATE

    03/14/86



    05/23/86


    06/27/86



    02/12/87



    05/16/87




    05/29/87



    06/05/87


    06/12/87



    06/12/87


    06/19/87



    07/10/87



    07/16/87



    07/31/87



    09/13/87


    09/21/87



    09/22/87


    10/06/87
POLICY

Reporting and Exchange of Information on State Enforcement
Actions at National Priorities List Sites (Porter)


Revised Hazardous Waste Bankruptcy Guidance (Hays)


Policy on Recovering Indirect Costs in CERCLA Section 107
Cost Recovery Actions (Stiehl/Stanton)


Interim Guidance:  Streamlining the CERCLA Settlement
Decision Process (Porter/Adams)


Interim Guidelines on Preparing Nonbinding Preliminary
Allocations of Responsibility (Thomas) 52 FR 19919 May 28,
1987


Administrative Records for Decisions on Selection of CERCLA
Response Actions (Lucero/Longest)


Entry and Continued Access Under CERCLA (Adams)


Consent Orders and the Reimbursement Provision Under
Section  106(b) of CERCLA (Lucero/Leifer)


Cost Recovery Actions/Statute of Limitations (Lucero)


Interim Guidance on Settlements with De Minimis Waste
Contributors (Adams/Porter) (52 FR 24333, 6/30/87)


Covenants Not to Sue Under SARA (Adams/Porter/Habicht)
(52 FR 28038, 7/27/87)


Interim Guidance on Use of Administrative Penalty Provisions
of Section 109 of CERCLA and Section 325 of SARA (Adams)


Scope of the CERCLA  Petroleum Exclusion Under Sections
101 (14) and 104(a)(2) (Blake)


CERCLA Enforcement Delegations


Guidance on the Use of Stipulated Penalties in Hazardous
Waste Consent Decrees (Adams)


Guidance on Federal Superfund Liens  (Adams)


EPA Interim Guidance  on Indemnification of Superfund
Response Action  Contractors (Porter/Kinghorn)
OSWER
NUMBER

9831.2
9832.8


9832.5



9835.4



9839.1




9833.3**



9829.2


9833.2



9832.9


9834.7



9834.8



9841.1**



9838.1



9836.2


9835.2b



9832.12


9835.5
* = Policies dated after 8/14/90
** = Policies that are superceded

-------
                   United States
                   Environmental Protection
                   Agency
    Office of
    Solid Waste and
    Emergency Response
9380.0-17FS
August 1991
                   Furthering the  Use  of Innovative
                   Treatment Technologies  in
                   OSWER  Programs
Introduction

The Office of Solid Waste and Emergency Response
(OSWER) is seeking to further the use of innovative
treatment technologies to permanently clean-up contami-
nated sites in the Superfund, RCRA, and Underground
Storage Tank (UST) programs. According to a directive
from OSWER's Assistant Administrator Don Clay, "...we
must invest the necessary resources and take the risks
now to develop the technologies necessary to fulfill the
long-term needs of our hazardous waste clean-up pro-
grams." The directive, which was signed on June 10,
1991, includes a forwarding memorandum to EPA re-
gions that calls for technological leadership and a sense of
responsible urgency to prevent expenditures in pursuing
less effective or more costly remedies.  This fact sheet is
tased on OSWER Directive 9380.0-17.

Reasonable risk-taking is encouraged in selecting innova-
tive treatment technologies that are capable of treating
contaminated soils, sludges, and ground water more effec-
tively, less expensively, and in a manner more acceptable
to the public than existing conventional methods.

"Innovative treatment technologies" are newly-developed
technologies that lack sufficient full-scale application data to
ensure their routine consideration for site remediation. They
may be new technologies, or may already be in use for various
industrial applications other than hazardous waste remedia-
tion.  As such, innovative technologies are not part of stan-
dard engineering practice or the competitive market process
where available alternatives are routinely presented to the
government and private sector. In functional terms, OSWER
labels as "innovative" those treatment technologies other
than incineration and solidification/stabilization for source con-
trol, and other than pumping with conventional treatment for
ground water.

Inherent risks associated with early technology use serve
as very serious impediments. The directive calls on po-
tentially responsible parties, facility owners/operators,
and consulting engineers to constructively work with un-
   Etainty to further the application of technologies that
    truly innovative. The directive also calls on EPA re-
   nal and headquarters managers to support Remedial
Project Managers and On-Scene Coordinators in their ef-
forts to use new technologies.

Innovative treatment technologies should be routinely con-
sidered as an option in engineering studies where treat-
ment is appropriate.  They should not be eliminated from
consideration solely because of uncertainties in their per-
formance and cost. These technologies may be found to be
cost-effective, despite the fact that their costs are greater
than conventional options, after consideration of potential
benefits including increased protection, superior perfor-
mance, and greater community acceptance. In addition,
future sites will benefit by information gained from the
field experience.

The directive sets forth several initiatives and new proce-
dures that will provide incentives for broader use of inno-
vative technology.  Some of these initiatives are directed
toward potentially responsible parties and owner/opera-
tors, since these groups will be assuming a larger share of
the remedial projects in the future. Other new initiatives
are intended to remove impediments to the first-time use
of new equipment. The directive also encourages wider
application of available resources and tools and highlights
some important on-going program efforts.


New Initiatives

1. Superfund  Innovative Technology Start-Up Initiative

OERR will be revising its procedures for setting Remedial
Action funding priorities to give more consideration to in-
novative technologies. Expedited funding of Fund-lead re-
medial design and construction projects that involve
innovative treatment technologies will move the agency to-
ward the Superfund program's goals for technology devel-
opment and will provide data to support future Records of
Decision (RODs).

This initiative  also provides contract flexibility in the
start-up phase of selected remedial and removal actions to
assist vendors  in establishing operations that satisfy per-
formance  standards. In an effort to remove some of the
impediments to the use of new full-scale equipment, this
                                                                         Printed on Recycled Paper

-------
initiative will provide financial support for initial start-up
and shake-down prior to beginning actual remediation.
Funds are not targeted at making the technology "work
at any cost", but in establishing performance adequacy of
the technology prior to the onset of the contracted clean-
up. Contracting strategies are being considered to com-
pensate vendors regardless of whether or not they are
able to meet performance requirements for a portion of
the site remediation.

2. Dual Track RI/FS Initiative (Superfund)

EPA regions may fund additional treatability studies and
engineering analyses for promising treatment technolo-
gies that would otherwise be considered unproven or too
early in the development process. For PRP-lead sites ear-
ly in the planning process, this initiative encourages the
use of treatability studies to ensure that  alternative rem-
edies are thoroughly evaluated and considered in the
ROD. Even if, in a particular case, there may be some
doubt as to EPA's ability to recover the costs for these ad-
ditional studies, they should nonetheless be pursued be-
cause of their value to the overall program.

3. Tandem ROD Evaluation Initiative (Superfund)

Primarily applicable to PRP-lead sites (though also to
some Fund-lead sites), this program will  enable regional
staff to rapidly evaluate the efficacy of a PRP-proposed in-
novative remedy that is offered in tandem with the pri-
mary one approved in the  ROD. Both remedies would be
part of the proposed  plan.  The alternate solution would
be approved in the ROD on a contingent basis but would
undergo further development and pilot testing during the
design period of the primary technology.  Tandem RODs
move the process of cleanup toward closure while leaving
room for PRPs with an interest in innovative technologies
to pursue additional pilot tests to demonstrate an alter-
nate approach that is both innovative and potentially
cost-effective. The OSWER/ORD Technical Support Cen-
ters and the SITE Demonstration Program will provide
RPMs with technical support for evaluation of PRP work.
When considering a tandem ROD, the region should con-
sult with ORD concerning the scope of effort required for
the evaluation.

If, after testing and evaluation, the innovative technology
is chosen for implementation but the process has caused
significant delays to  the schedule, the region may consid-
er the engineering problems of making the full-scale unit
operational when assessing stipulated penalties. That is,
in limited cases, stipulated penalties should not be im-
posed if the delays are the unavoidable result of the use of
an innovative process.

4. Removal Program Initiative (Superfund)

It is OSWER policy to further the use of innovative tech-
nologies through the removal program. The relatively
small waste volumes and streamlined contracting proce-
dures of the removal program provide an opportunity to
complete clean-up projects and provide documentation on/
"lessons learned".

The potential of the removal program for these applica-
tions has not been realized because time constraints often
favor excavation and off-site disposal or treatment and
also because of the absence of clear legislated goals re-
garding the use of new technology. This directive is
meant to clarify EPA's position on this issue and to en-
courage the use of innovative technologies for all actions,
including time-critical actions, where feasible. These
projects are expected to fulfill an important role in adding
to our knowledge on promising new technologies.

5.  RCRA Corrective Action and Closure
    Innovative Technology Initiative

This initiative encourages the regions to conduct treatabili-
ty or technology demonstration studies at corrective action
and closure sites to gain additional information on the use
of innovative treatment for contaminated soil and debris.

EPA is developing best demonstrated available technology
(BDAT) treatment standards for contaminated soil and de-
bris at CERCLA and RCRA corrective action and closure
sites.  These sites present unique treatment problems
that were not considered when developing the current
BDAT standards which were based on data from the
treatment of industrial process wastes.  There is general
agreement that wide scale use of incineration is not ap-
propriate for soil and debris and there is a need to explore
alternative approaches.

The current schedule is to promulgate a rule for the treat-
ment of debris in May 1992 and for soil in April 1993.
Prior to publication of these final rules, a site-specific
treatability variance process (40 CFR 268.44 (h)) is avail-
able for contaminated soil and debris to establish an al-
ternative standard for specified waste  at individual
sites.  The variance process, along with applicable treat-
ment guidance levels, is described in Superfund LDR
Guide #6A (OSWER Directive 9347.3-06FS, July 1989),
and is intended to be used as an interim approach until
final standards are established.

The regions should work with owner/operators to select
pilot-scale projects that can provide data on the capability
of technologies and the treatability of different wastes.
Projects should be carefully selected to maximize the util-
ity of data and likelihood of success.

Authority for issuing site-specific variances for contaminated
soil and debris has been delegated to the regions.  The faciljl
and EPA, in collaboration with the state, can implement val
ances for on-site demonstrations through two mechanisms:
temporary authorization under the Permit Modification Rule,
or 3008(h) orders for interim-status facilities.

-------
6. Demonstration Projects at Federal Facilities
   (Superfund, RCRA, and UST)

(PA is exploring the use of Federal Facilities for both
site-specific technology demonstrations and as test loca-
tions for evaluation of more widely applicable technolo-
gies.  Regions are encouraged to suggest innovative
approaches and to be receptive to proposals for innovation
from Federal Facility managers, e.g., by building timing
and performance flexibility into compliance agreements
in acknowledgment of the uncertainties associated with
innovation. Federal Facilities often have characteristics
that make them desirable for applying innovative ap-
proaches: large area, isolated locations, controlled access,
numerous contamination problems, and increasingly ac-
tive environmental restoration programs.

The Office of Federal Facilities Enforcement (OFFE) and
the Technology Innovation Office (TIO) will work with
the regions to identify locations for test and evaluation
activities and to  develop policies and guidance to ensure
that support for  innovation is congruent with other pro-
gram and environmental objectives.

7. Federal Technology Transfer Act

During the clean-up planning and implementation pro-
   Es, PRPs or owner/operators should be reminded of
   opportunity to engage EPA in evaluation studies or
   er arrangements (at their expense) to determine
whether an innovative technology would be operative in
the situation they are facing or other similar situations.
Under the Federal Technology Transfer Act (FTTA) of
1986, cooperative agreements related to research, de-
velopment, and  technology transfer will allow the PRP
to reimburse EPA for facilities, support services, and
staff time spent in joint evaluation  of early technology
treatability or pilot studies.

Since this program is conducted in the research and de-
velopment arena, it offers an opportunity for non-adver-
sarial interaction outside the regulatory context. This
opportunity should be especially advantageous to
(1) PRPs and owner/operators capable of early planning
for technology options at a few sites and desirous of early
EPA input, as well as (2) PRPs and owner/operators that
will be faced with a number of similar waste sites in the
future—under Superfund, RCRA Corrective Action, and
the UST program—who want to develop more uniform,
cost-effective technology proposals for such sites.
Implementation
  ,e first six initiatives involve field testing new technolo-
    that may benefit from technical assistance from
     . ORD represents an objective third party that can
easily be accessed through the existing OSWER/ORD
support structure. This structure consists of five labora-
tories that constitute the Technical Support Centers (both
for Superfund and newly established for RCRA), the Su-
perfund Technical Assistance Response Team (START)
Program, the Bioremediation Field Initiative, and the Su-
perfund Innovative Technology Evaluation (SITE) Pro-
gram. OSWER has asked ORD to give priority to
requests for technical assistance under this directive.

Broader Application of  Existing

Policies, Available Resources,

and Tools

Furthering Innovative Remediation at Leaking
UST Sites

State and local UST programs have identified 100,000
confirmed leaks, and this number may triple in the next
several years. Most site remediation involves pumping
and treating ground water and excavation and off-site
treatment of contaminated soils. Regional offices should
increase their efforts to make state and local managers
and staff, as well as clean-up consultants and contractors,
more familiar with non-traditional but proven technolo-
gies. Headquarters will continue fostering the develop-
ment of new tools and techniques and should increase its
support of regional efforts to achieve broader use of im-
proved technologies.

Further Enabling State Innovative Technology
Leadership

The CERCLA core funding program provides an opportu-
nity to assist states in establishing innovative technology
advocates. Cooperative agreements with state response
programs may be a vehicle to support and promote  the
use of innovative technologies in state CERCLA pro-
grams, with spinoff benefits for their RCRA and UST  pro-
grams as well.

In addition, regions should be open to assisting states in-
terested in furthering technology development and  en-
courage state applications for authority for RCRA R&D
permitting, permit modification, treatability exclusion,
and Subpart X permitting. States may also want to work
directly with Federal Facilities in developing pilot sites
for innovative technologies.  For the reasons discussed in
the section on Federal Facilities above, these sites are of-
ten good candidates for such development projects.

Model RI/FS Work Plan and PRP Notice Letter
Demand for Innovative Options

Some regions have issued special notices containing a
Statement of Work and administrative order language re-
quiring the responsible party to evaluate the use of inno-
vative technologies at a particular site. This procedure

-------
should receive broader use at Superfund sites where al-
ternatives for remediation are being considered for analy-
sis in the RI/FS and where prerequisite treatability
studies are required. This requirement in the special or
general notice letters will help facilitate the development
and use of innovative treatment technologies by the pri-
vate sector.  Specific language for this approach can be
developed from OWPE's guidance document entitled
"Model Statement of Work for RI/FSs Conducted by
PRPs" (OSWER Directive 9835.8).

Advocacy and Funding of Treatability Studies

Superfund program policy requires that treatability
studies be conducted to generate data to support the
implementation of treatment technologies. Funds are
budgeted annually in the SCAP based on expected
need.  Data and reports should be sent to Glen Shaul at
RREL for inclusion in the ATTIC database. The correct
protocol and format for these reports is in EPA's "Guide
for Conducting Treatability Studies Under CERCLA"
(EPA/540/2-89/058).  Oversight funding for evaluating a
PRP-lead treatability study should also be requested
through the SCAP budget process. Oversight of PRP-
lead treatability studies may be funded through the en-
forcement budget. If a PRP recommends use of an
innovative treatment at a site, but current treatability
study data on the technology are insufficient, EPA poli-
cy allows the Agency to conduct and fund technology-
specific treatability studies.  Cost  of these studies are
recoverable under Section 107 of CERCLA.

Tracking and Expediting SITE  Demonstrations

OSWER is encouraging greater participation in the SITE
program in response to  a recent Inspector General audit
of the  program that focused on delays in matching Super-
fund sites with technologies.  ORD  management has also
agreed that SITE demonstration projects must be more
responsive to regional needs for treatability data.

The SITE program will make the design of technology eval-
uation sufficiently flexible to meet the regional offices'
needs  for treatability studies before remedy selection is
made. Based on an ORD internal management review of
the SITE program, changes are underway to make the
program a more integral component of regional Super-
fund site activities.


Existing Program Efforts

OSWER has several other ongoing efforts directed toward
furthering the application of innovative alternatives. These
represent important resources that should continue to be
used by the  UST, RCRA, and Superfund Programs.

Technical  Support and Information Management

EPA maintains several computer database that may be
accessed for information on treatment technologies.
These databases include the Alternative Treatment Tech-
nology Information Center (ATTIC), the Cleanup Infor-
mation (CLU-IN) Bulletin Board, the ROD Database, the
Hazardous Waste Collection Database, and the Comput-^
erized On-Line Information System (COLIS). These sys
terns include information on the application of innovativ
technologies and may be used to aid networking among
OSCs and RPMs.

Technical assistance is available to Superfund and RCRA
staff through ORD's Technical Support Centers and the
Environmental Response Branch of OERR. Part of this
effort involves networking among project managers
through the Engineering and Ground Water Forums. In
addition, as part of an initiative to provide direct techni-
cal support to OSCs and RPMs, the Superfund Technical
Assistance Response Team (START) has been established
to help evaluate the potential use of technologies.

Bloremedlatlon Field Initiative

Begun in the fourth quarter of FY 1990, this program is
intended to provide more real-time information on the
field application of biotechnology for treating hazardous
waste. The major focus of this initiative is to furnish
direct support in evaluating full-scale cleanup
operations and technical assistance for conducting
treatability and pilot-scale studies.

Eliminating Contract Impediments

Under the Federal Acquisition Regulations, firms are(
restricted from performing both the design and
construction of a project. EPA has determined that this
applies only to the prime contractor responsible for the
overall design, and not to the subcontractors
performing treatability studies.

Innovative technology is considered a special exception
from general conflict of interest guidelines. EPA will
permit contractors and/or subcontractors who perform
evaluation of innovative technologies for the Agency to
later work for the PRPs in as many instances as
possible.


Additional Information

Copies of the policy (OSWER Directive 9380.0-17) and ad-
ditional  copies of this fact sheet are available from:

     National Technical Information Service (NTIS)
                Springfield, VA 22161
                Phone (703) 487-4650

Agency and State employees may obtain copies of the di-
rective or this fact sheet from the Superfund Document
Center,  U. S. Environmental Protection Agency, Room,
2514, 401M Street S.W., Washington, DC 20460. Th((
telephone number is FTS or 202/382-5628.

-------
    DATE

    10/19/87



    10/19/87
POLICY

Interim Guidance on Notice Letters, Negotiations, and
Information Exchange (Porter) 53 FR 5298 February 23, 1988


Interim Model CERCLA Sec.l22(g)(4) De Minimis Waste
Contributor Consent Decree and Administrative Order
Guidance (Reich/Lucero) (52 FR 43393, 11/12/87)
OSWER
NUMBER

9834.1



9834.7-la
    10/20/87
Evaluating Mixed Funding Settlements (Porter/Adams) (53 FR
8279, 3/14/88)
9834.9
    11/13/87
Revised Procedures for Implementing Off-site Response
Actions (Porter)
9834.11
    01/14/88
Expansion of Direct Referral of Cases to the Department of
Justice (Adams)
9891.5A
    04/07/88
Interim Final Guidance Package on Funding CERCLA State
Enforcement Actions at NPL Sites (Porter)
9831.6a-6d
    05/16/88
Interim Guidance on Potentially Responsible Parties
Participation in Remedial Investigations and Feasibility Studies
(Porter) [Revised]
9835.1a
    05/27/88
Interim Policy on Mixed Funding Settlements Involving the
pre-Authorization of States or Political Subdivisions
(Porter/Adams)
9834.9a
    06/07/88
Guidance on Drafting Decisions not to Take Cost Recovery
Actions (Cannon)
9832.11
    06/21/88
Supporting State Attorneys General CERCLA Remedial and
Enforcement Response Activities at NPL Sites
(Longest/Cannon)
9831.7
    07/11/88
Reporting Exemptions for Federally Permitted Releases of
Hazardous Substances (Thomas) (53 FR 27268, 7/19/88)
Exempt
    07/29/88


    08/25/88
Superfund Cost Recovery Strategy (Porter)


Guidance on Use and Enforcement of CERCLA Information
Requests and Administrative Subpoenas (Adams)
9832.13


9834.4-A
    09/26/88
Waiver of Headquarters Approval for Issuance of RD/RA
Special Notice Letters at the Time of ROD Signature
(Longest/Diamond)
9834.10-la
    10/21/88
Counting State-lead Enforcement NPL Sites Toward the
CERCLA Section 116(e) Remedial Action Start Mandate
(Porter)
* = Policies dated after 8/14/90
** = Policies that are superceded
9831.8

-------
    DATE

    11/03/88



    11/17/88
POLICY

Community Relations during Enforcement Activities and
Development of the Administrative Record (Porter)


Guidance on Premium Payments in CERCLA Settlements
(Adams and Porter)
OSWER
NUMBER

9836.0-1A



9835.6
    11/18/88
    11/28/88
    12/14/88
    02/06/89
Initiation of PRP-financed Remedial Design in Advance of
Consent Decree Entry (Adams and Porter)


Guidance on Applicability of EPA Order 3500.1 to CERCLA
Staff
Interim Strategy for Enforcement of Title in and CERCLA
Section 103 Notification Requirements


CERCLA Community Relations Mailing List
(Diamond/Longest)
9835.4-2A



9842.0



9841.0



9836.2
    02/07/89


    02/07/89
Model Notice Letters (Diamond)


Revisions to the Interim Guidance on PRP Participation in
Remedial Investigations and Feasibility Studies
(Porter/Diamond)
9834.10


9835.2a
    02/24/89


    03/01/89
Guidance on CERCLA Section 106 Judicial Actions


Interim Guidance on Administrative Records for Selection of
CERCLA Response Actions
9835.7


9833.3A**
    05/08/89
Interim Final Guidance on Preparation of Superfund
Memoranda of Agreement (SMOAs) (Diamond/Longest)
9375.0-01
    05/16/89
Administrative Penalty Procedures Interim Final Rule (54 FR
21174,5/16/89)
9841.1 A
    06/02/89
Model Statement of Work for a Remedial Investigation and
Feasibility Study Conducted by PRPs
9835.8
    06/06/89
Guidance on Landowner Liability Under Section 107(a)(l) of
CERCLA, De Mim'mis Settlements under Section 122(g)(l)(b)
of CERCLA, and Settlements with Prospective Purchasers of
Contaminated Property (Reich/Cannon)
9835.9
    06/12/89
Procedures for Transmittal of CERCLA and RCRA Civil
Judicial Enforcement Case Packages to Headquarters
(U nterberger/Diamond)
9891.1-la
* = Policies dated after 8/14/90
** = Policies that are super-ceded

-------
    DATE

    06/21/89
POLICY

Model Litigation Report for CERCLA Sections 106 and 107
and RCRA Section 7003
OSWER
NUMBER

9835.11-1
    06/21/89


    06/29/89
Revised EPA Guidance for Parallel Proceedings


PRP Search Supplemental Guidance for Sites in the Superfund
Remedial Program (Diamond)
9843.0


9834.3-2a
    08/11/89
Submittal of Ten-Point Settlement Analyses for CERCLA
Consent Decrees (Diamond/Unterberger)
9835.14
    08/28/89
Arbitration Procedures for Small Superfund Cost Recovery
Claims
 Final Rule (53 FR 23174, 5/30/89)
9832.17
    09/14/89
Notification of Out-of-State Shipments of Superfund Site
Wastes (Canon)
9330.2-07
    10/19/89
CERCLA Implementation of the Training Requirements of
EPA Order 3500.1 - Inspector Training
9842.1
    12/06/89


    12/20/89
Interim Municipal Settlement Policy (54 FR 51071,  12/12/89)


Methodologies for Implementation of CERCLA Section
122(g)(l)(a) De Minimis Waste Contributor Settlements
(Diamond/Unterberger)
9834.13


9834.7-lb
    01/30/90
Model Administrative Order on Consent for Remedial
Investigation/Feasibility Study
9835.3-1A
    01/31/90
Final Model Litigation Report and Complaint for CERCLA
Section 104(e) Enforcement Initiative
    02/06/90


    02/14/90


    03/01/90
Multi-Media Settlements of Enforcement Claims (Strock)


FY 90 "UAO Strategy" (Clay/Strock)
Releasing Information to PRPs at CERCLA Sites
(Diamond/Unterberger)
9891.6


9870.1 A


9835.12
    03/07/90
Guidance on CERCLA Section 106(a) Unilateral
Administrative Orders for Remedial Design/Remedial Action
(Clay/Strock)
9833.0-la
    03/30/90
Model Unilateral Administrative Order for Remedial Design
and Remedial Action under Section 106 of CERCLA
9833.0-2(b)
* = Policies dated after 8/14/90
** = Policies that are superceded

-------
    DATE

    04/04/90
POLICY

Clarification of Delegations of Authority 14-14-A, 14-14-B,
and 14-14-C under CERCLA
OSWER
NUMBER

9012.10-1
    06/11/90
Integrated Timeline for Superfund Site Management
(Clay/Strock)
9851.3
    06/13/90


    08/15/90
EPCRA/CERCLA Penalty Policy
Guidance on Remedial Actions for Superfund Sites with PCB
Contamination - SMR Rec. #23
9841.2


9835.4-01*
    08/28/90
Performance of Risk Assessments in Remedial
Investigation/Feasibility Studies (RI/FSs) Conducted by PRPs
9835.15'
    08/29/90
Transmittal of Model Consent Decree for CERCLA Section
104(e) Information Request Enforcement Actions
9834.14*
    09/27/90
Statement of James Stroch before the House Subcommittee on
Policy, Research & Insurance:  Insurer Liability for Cleanup
Costs of Hazardous Waste Sites
    10/12/90
Pre-referral Negotiation Procedures for Superfund Enforcement
Cases
    11/03/90


    12/03/90
Superfund Enforcement Strategy and Implementation Plan


Final Guidance on Administrative Records for Selection of
CERCLA Response Actions
9800.0*


9833.3A-1*
    02/22/91
Guidance on Preparing and Releasing Waste-in Lists and
Volumetric Rankings for Information Release Under CERCLA
Section 122 (e)
9835.16*
    03/21/91
Written Demand for Recovery of Costs Incurred Under
CERCLA
9832.18'
    03/31/91


    04/03/91
Model Cost Recovery CD


CERCLA Implementation of Inspector Training Requirements
for OSCs/RPMs at the Intermediate Level in STEP and First
Line Supervisors
9842.2'
    04/10/91
Interim Agency Policy on Contribution Protection Clauses in
CERCLA Settlements
    04/18/91
Questions and Answers About the State Role in Remedy
Selection at Non-Funded-Financed State-Lead Enforcement
Sites
9831.9'
* = Policies dated after 8/14/90
** = Policies that are superceded

-------
    DATE

    05/07/91


    06/20/91
POLICY

Model Information Notice Letter to Local Governments
Evaluation of, and Additional Guidance on, Issuance of
Unilateral Administrative Orders (UAOs) for RD/RA
OSWER
NUMBER

9834.16*


9833.2c*
    07/01/91
Guidance on Oversight of Potentially Responsible Party
Remedial Investigations and Feasibility Studies, Vol. 1
9835.Ic*
    07/01/91
Guidance on Oversight of Potentially Responsible Party
Remedial Investigations and Feasibility Studies, Vol. 2
9835.Id*
    07/02/91
Supplemental Guidance on Performing Risk Assessments in
Remedial Investigation Feasibility Studies (RI/FSs) Conducted
by Potentially Responsible Parties (PRPs)
9835.15a*
    07/02/91
Administrative Order on Consent for Remedial
Investigation/Feasibility Study
9835.3-2 A
    07/02/91
Administrative Order on Consent for Remedial
Investigation/Feasibility Study (Annotated Copy)
9835.3-2A
    07/02/91
    07/02/91
Model Statement of Work for a Remedial Investigation and
Feasibility Study Conducted by Potentially Responsible Parties


Model Statement of Work for a Remedial Investigation and
Feasibility Study Conducted by Potentially Responsible Parties
(Annotated Copy)
9835.8A



9835.8A
    07/03/91
Policy Towards Owners of Residential Property at Superfund
Sites
9834.6*
    07/08/91


    04/02/92
Superfund Program, Model CERCLA RD/RA Consent Decree


Accelerating Potentially Responsible Party Remedial Design
Starts: Implementing the 30-Day Study
9835.4-2b*
* = Policies dated after 8/14/90
** = Policies that are superceded

-------

       i        UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
\ AAp^ ?                   WASHINGTON, D.C. 20460

      *
                            MAR 2 4  1989                      :<-• -.= -
                                                    50 I'D '.'.-13" -NO :M:= -•• '
 MEMORANDUM

 SUBJECT:  Updates for the Enforcement Policy Compendium

 FROM:     John Cross, Chief               /             - - ~
           Guidance and Oversight Branch "• • • '  •* :'^
           Office of Waste Programs Enforcement

 TO:        Addressees

      Please find enclosed the most recent updated material  for
 the  Enforcement Policy Compendium.

 Title                                   Pate      QSWER  Dir. No.

 Guidance on CERCLA Section 106          2/24/89   9835.7
 Judical Actions
 (Reich/Porter)

 Interim Guidance on Administrative      3/1/89    9833.3A
 Records for Selection of CERCLA
 Reponse Actions (Porter)

      If you have any questions contact Gloria Bobo  on  my staff  at
 (FTS) 475-6770.

 Addressees:

 Regional Counsels, Regions I-X
 CERCLA Enforcement Branch Chiefs, Regions I-X
 CERCLA Enforcement Section Chiefs, Regions  I-X
 Director, Waste Management Division,
   Regions I, IV, V, VII, VIII
 Director, Emergency and Remedial Response Division,  Region II
 Director, Hazardous Waste Management  Division,  Regions III, VI
 Director, Toxic and Waste Management  Division,  Region  IX
 Director, Hazardous Waste Division, Region  X

-------
   CERCLA
ENFORCEMENT
   POLICY
 COMPENDIUM
  VOLUME 1

-------
to
s

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                                                    OSVER « 9832.0
         UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                                . oe io«»e
                         3AUG1S83
                                                       • met o»
SUBJECT:  Cott Recovery Referrals
FROM:     Kirk F. Sniff *£e            .
          Acting Associate Enforcement Counsel

TO:       Regional Counsels,
          Regions I-X


      Recently, you provided my office with projections of
hazardous waste civil referrals to Headquarters through the
recainder of FY 1983.  Included in the projected total of 21
referrals were 19 cost recovery referrals.  Nearly all of
these actions would involve recovery of costs associated
with immediate removals.

     On July 27, 1983, we net with the Department of Justice to
discuss the most appropriate means for managing these expected
referrals.  In light of our continuing difficulties with cost
documentation for existing referrals and actions, we agreed to
two basic rules for handling the anticipated |107
referrals:

     1.   OEC-Vaste will only accept referrals which include
          appropriate cost documentation.  If documentation is
          inadequate, the referrals will be returned to the
          Regions for further development.  To assist you in
          assessing the adequacy of your referral, I refer you
          to the draft guidance, "Coat Recovery Actions Under  .
          CTRCLA," which was distributed to the Regional Division
          Directors at their national meeting on May 11 and 12,
          1983, and to the Attached document entitled "Partial
          List of Document* Heeded to Support Cott Recovery." I
          strongly recommend that you include copies of the sup*
          porting documents in tht referral package.  If for
          some reason this is not possible, the referral package
          should clearly identify tht sptcific documents which
          support your claims.  Ultimately, this documentation
          will have to be provided to DOJ.  If you have questions
          regarding documentation in your specific cases, please
          contact the appropriate Regional coordinator in ay
          office.

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                                                   CSVE?, t 9832.0
    *     UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

                       WASHINGTON. DC »0««0

                                                       C'»'Ct
SUSJZCT:   Cost  Recovery  Referrals


FROM:      Kirk'  F.ftsr.iff
           f — ~ t «• gl ^£^^^ *• ^ • a ~ 0  7»*^i^^
           A *• • .1. . l .-. 55**~*&~C  • ••—w.
~u •       0P'"-W  C -a--
*<^.       W«M  *»»»&••

     On August 2,  1953,  I  issued  a  memorandum  siatir.g several
general policies  regarding  the  processing  p^f  referrals ur.cer
5107 of CIRC1A.   Since  that  time, a number of  yjau have raised
questions regarding ay  memorandum.   This  is intended to provide
further clarification.

        '  1.  The  memorandum states that  if,  for some reason,
the Regions have-not included copies of  supporting documentation
in the referral  pacn/.^e, the-referral should  clearly identify
the specific documents  which support the  claims.  This
identification should be in  the fora of  a  specific inventory
of the supporting  documents,  indicating  the identity,  Iccatirr.
and custodian of  the documents.   A  general averment that
documentation  is  "available"  will not-suffice.

          2.   The memorandum states that  DCJ  will only file
those cost recovery claims  for  which thera—is  adequate docu-
mentation.  However, there may  be cases where  those claims
which can be prosecuted immediately are not substantial when
compared with the  total potential action.   For example, if  the
Region refers a  case seeking recovery of $200,000 but can only
document $8,000,  the Beadauarters attorney should seriously
consider declining the  referral until further  documentation
is provided.  This decision  is  case-specific.   However, as  a
general guide, you should  consider  whether the documented case
is sufficient to  stand  on  its own.   Of course,  in making your
recommendation you should  also  consider  other  important factors
such as the Statute of  Limitations, or the need to make a
                             iroof «f «•
     I hope this answers  some  of your  questions.   If you have
other questions please  feel  free to  raise  then.

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                                                  OSWE?. s 9632.C
 PARTIAL LIST OF DOCUMENTS NEEDE3 TO SUPPORT COST RECOVERY
 1.  Total Payroll expenditures for attorneys, with supporting
 time cards and tine sheets

 2.  Total payroll expenditures for technical personnel,
 with supporting time cards and time sheets

 3.  Total expenditures for travel for attorneys, with
 supporting authorizations and vouchers.

 4.  Total expenditures for travel ,for technical personnel,
 with supporting authorizations and vouchers.

 5.  For FIT contract expenditures:  affidavit by contractor
 describing work done, hours spent, hourly cost, overhead
 calculations and total cost; vouchers from contractor to
 EPA requesting payment; Agency records showing authorization
 for Treasury to pay contractor

 6.  For National Lab Contract expenditures:  contractor
 summary of samples taken at site and distributed to labs
 for analysis, individual and total cost of sample analyses,
 contractor overhead costs, name of lab conducting analyses,
 sample numbers* invoice numbers, total costs, copies of
 all invoices (types Z and XI), copies of bills from lab
 to contractor and from contractor to EPA if  "SAS" camples;
affidavit from EPA official verifying contents of contractor
 summary: copy of Agency's authorization for Treasury to
pay contractor; vouchers from contractor to Agency
 requesting payment.

1.  For expenditures by Regional Lab or ORO  (e.g., aerial
photography):  affidavit showing nature of work and total
 cost* invoice*, record of payment.

 f.  Per immediate removals:  contractor invoices certified
 by OSC; record of authorization for Treasury to pay
 contractor; daily contractor cost reports (rough and final);
daily verification of work and costs by OSC.

 9.  Documentation of expenditures by TAT and any other
 contractors used, expenditures by other agencies,
 expenditures by State under Superfund contract or
 cooperative agreement. •

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                                            OSWER « 9832.1
         COST RECOVERY ACTIONS

               UNDER THE

 COMPREHENSIVE ENVIRONMENTAL RESPONSE,
COMPENSATION, AND LIABILITY ACT OF 1980
                 CERCLA)

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                                                        OSWER I 9832.1
                 COST RECOVERY ACTIONS UNDER CERCLA
                         TABLE OF CONTENTS
 I.      Introduction  	  1
 II.     Assembling A  Cost Recovery Action   	  3
 III.    Cltments of a Cost Recovery Action	4
        A.    evidence of Release or Substantial Threat
             of Release of a Hazardous Substance   	  6
        B.    Evidence of Responsibility of Defendant(s) ...  9
        C.    Evidence that Removal or Reaedial Action
             Taken by U.S. or State in Not Inconsistent
             With the National Contingency Plan	11
        D.    Proof of Costs of Removal or Remedial
             Action  by the U.S. or a State	13
 IV.     Procedural Issues  	  16
       A.    Timing  of the Cost Recovery Action	16
       B.    Statute of Limitations	17
       C.    Extent  of Liability of Responsible Action  ...  18
       0.-.   The Demand Letter  ....-;	  20
       E.    Procedure in Event of Response
             To Demand Letter	22
             1. Negotiating Teams and Procedures   	  23
             2. Form of Settlement Agreement	26
       F.    Procedure Zn Event of
             No Response to Demand Letter	  27
       C.    Maintenance and Coordination ef
             Evidence Zn Ev«nt of Referral  	  29
V.     Note on Purposes and Use of This Memorandum  .....  31

Appendix A  (Costs Recoverable Under CERCLA)
                                                                  *
Appendix B  (Model Demand Letter)

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Appendix C  (List of Documents)
Appendix D  (Model Cost Recovery Plan)
Appendix E  (Regional Superfund File Structure)

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                                                                 t 9832.1
* -&L V      UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
• \^^^^^/ • r                    ........ 	_^ .  _ _  _
V"
  ''                     WASHINGTON 0 C 204tO
                           AUG 26Q83
MEMORANDUM
SUBJECT:  Guidance on Pursuing Cost Recovery
          Actions Onder CERCLA
FROM:     Courtney M. Price
          /Spec^lCounsel for Enforcenent
           .ee H. Thomas
          Assistant Administrator for
            Solid Waste and Emergency Response
TO:       Enforcement Counsel
          Regional Administrators
          Regional Counsels
          Associate Enforcement Counsel-Waste Division
          Regional Superfund Coordinators
          Air and Hazardous Substance Division Directors.
          Environmental Services Directors
I. INTRODUCTION
   _______~_^__                          •          x
     Section 107 of the Comprehensive Environmental Response.
Compensation and Liability Act  (CERCLA) provides generally that
past and present owners and operators of a site, and generators
and transporters who contributed hazardous substances to a Kite,
•hall be liable (with certain limitations to be discussed herein) •
for all costs of removal or remedial action undertaken by the U.S.
government, a State, or any other person, and for damages to or
loss of natural resources.
     While it is highly desirable to obtain removal and remedial
action in the first instance by responsible parties; rather
than by the Environmental Protection Agency (EPA) or a State,
there are and will continue to be many cases in which the Agency
will authorize the use of CFRCLA funds from the Hazardous Substance

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                                                       OSS* I 9832.1
                               -2-

Response Trust Fund  (tht Fund) established by CERCLA for thtse
actions, and thereafter attempt to recover those costs from the
party or parties who are liable under Section 107 of the Act and
other authorities.
     Due to th* possibility of cost recovery efforts in any case
in which CERCLA funds are expended* the observation, documentation
and preservation of critical facts and response costs is important
to assure that:
     •  potential evidence concerning the site I/ and responsible
        parties is noted and documented before response activity
        or the passage of. time obscures or eliminates it;
     •  physical evidence essential at trial is collected and
        preserved appropriately; and.
     •  sufficient evidence of total costs and claims paid from the
        Fund has been maintained and is available to support recovery
        by the government.
     This memorandum describes essential elements which the
                                      «
government will probably be called upon to prove _in a cost
recovery action; the assembly.and maintenance of a file; some
examples of appropriate documentation for each element of the
cause of action; procedures for processing and negotiating cost
recovery claims; and the mechanics of repayment of any recovery to
the Fund.  This guidance must be observed by EPA employees, con-
tractors, and, where appropriate, employees of State agencies
working on a site on which CERCLA funds are expended under an
T7The word 'site' as used herein applies to any location where a
release or spill has occurred, and mayhe used interchangeably witn
•facility- as defined in CERCLA $101(9).

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                              "3"                       OSWEB » 9832.1
 EPA-State cooperative agrrement, in every situation in which CERC1A
 funds are expended for site clean up, since each of these sites  is
 the subject of a potential cost recovery action.  The Office of
 Waste Programs Enforcement is preparing an additional cost docu-
 Mntation guidance;  please contact Lib by Scopino (382-4482)  for
 assistance.               v

 II.   ASSEMBLING A COST RECOVERY ACTION
      The  assembly of evidence for a cost recovery action  begins
 with  the  first response action taken under Section 104 of CERCLA.
 The filing of  a cost recovery action should be  presumed;  accordingly
 the collection of relevant documentation is important. Generally,
 the government will  pursue a  cost recovery action when there is  a
 solvent responsible  party.2/   Wher.e other government  action  against
 the responsible*party is  contemplated.or pending, such as a   judi-
                                            •      •        •
 cial  action  under Section 7003 of RCRA or Section 106 of  CERCLA  to
 compel remedial  measures  at a site, a cost recovery count under
 Section 107  of  CERCLA for removal or remedial costs can be added
 to the ongoing  litigation.
      The Regional  Program office has the  responsibility of
 collecting and  maintaining  the documents  used as  evidence in
 cost  recovery  actions!  In matters which  require  legal opinions
 (such as the legal right  of the Agency to enter a facility)  or the
 preparation  of  legal  documents,  the program office should consult
 with  and obtain  the  assistance of the Regional attorney or the
 appropriate Headquarters  attorney.
2/   For a discussion of the factors to be considered  in determining
whether to file a cost recovery action, see Part IV.F.

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                                                        QSWER I 9832.1
                              -4-

 III. ELEMENTS OF A COST RECOVERY ACTION
     Under Section 104 of CERCLA, the U.S. or its authorized
 representative nay taJce removal or remedial action at a site
 when, inter alia, ary hazardous substance is released or there
 is a substantial threat of such a release into the environment,
 unless EPA determines that such action will be done properly
 by the owner or operator or by any other responsible party.
 The government may pursue an  action under J»107(a) for  (1)
 costs of removal or remedial  action incurred by the U.S. not
 inconsistent with the National Contingency Plan (NCP). or
 (2) claims paid by the Fund for costs of response incurred
by a state not inconsistent with the NCP, or by other parties
not inconsistent with the NCP.V  Section 104(5) also authorizes
the recovery of costs of sampling, analysis, monitoring and
surveying programs, and certain other costs, including those
3/   There may also be a claim made by trustees under Section
T07 (a )(-1)(c) of CERCLA for damage to or loss of natural resources.
Howevtr, until regulations for assessment of natural resource
damages or destruction are promulgated pursuant to Section  301(c)
of the Act, claims for such damages will be assessed on a case-by-case
basis.  The best records available' on those damages should  be
maintained until specific guidance is developed on that subject.

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                               -5-                     OSWER I 9832.1


 for planning,  legal  and engineering services.4/

      Therefore,  to successfully pursue  a  cost  recovery action, EPA

 should be  prepared to introduce evidence  demonstrating:

    1.      release  of a hazardous substance  or  the  substantial  threat

 of  such a  release; and                 v

    2.      the  responsibility  of the defendantfs);  and

    3(a).   removal  or remedial actions taJcen by the U.S. or  the

 State  which were not inconsistent with  the  NCP £/; and/or

    4.     .the  costs of action taken by the U.S.,  a State,  or

 any other  person.


     The financial condition  of a -responsible  party is not  an

 essential  element  of proof  of the cause of  action.£/  Even  so, the

 financial  condition  of the  responsible  parties may be  considered

 in  determining tJve feasibility of a cost  recovery  action.
*/For a'list of costs which  are  recoverable  under  CERCLA,  see
Appendix A.
5/  Although Agency policy  is  to-maintain evidence that  its
Fesponse activities are not  inconsistent with  the NCP, the Agency takes
the position that the defendant has  the burden of proof  on this  issue.
£/  While we do not believe  that it  is necessary to  introduce
evidence that removal and remedial action would not  have been
done properly by the owner or  operator of a  facility or  by any
other responsible party, it  would  be prudent to have available
evidence of efforts by the Agency  to obtain  private  party response
action at the site.  The notice letters forwarded by the Agency
to potentially responsible parties and their responses are
examples of aueh evidence.

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                                 -«-                    OSCR I 9832.1
              *

    'The chief elements of a cost recovery action and the

 nature of evidence required to sustain them are discussed below.

 A.   Evidence of Release or Substantial Threat of Release
      of a Hazardous Substance 	
      A release of a hazardous substance or the substantial threat

 of such release from a facility must be shown.  The tern 'hazardous

 substance* includes inter alia, any material designated as hazardous

 or toxic under the Clean Water Act, Toxic Substance Control Act,

 or the Clean Air Act or designated as a hazardous waste under RCRA

 dee 40 CFR 302).  The definition should be consulted since it '

 does not include every pollutant or contaminant.2/

      Appropriate documentation of evidence of a release or sub-

 stantial threat of release includes field notes,  photographs of

 the scene, statements from witnesses, statements from owners or

 operators, follow-up narrative reports or memoranda describing .the

 scene or observations first hand, samples of air, soil, water or

 leachate discharge and laboratory analyses of the samples.  Evidence
 7/   Section 104(a)  of the Act authorizes the President (or his
 Hesigne*}  tb take response action whenever there is a release or
 threat thereof of a  hazardous substance,  or whenever there is a
 release or substantial threat of a release of 'any pollutant or
 contaminant which may present an Imminent and substantial endanger-
 ment to the public health or welfare...".  However* Section 107
•refers only to liability of owners, operators, transporters and
 generators for costs incurred in responding to releases or threats
 of releases of "hazardous substances'.   It is not clear whether
 those persons may also be liable under  5107 for costs incurred in
 responding to releases or threats of releases of any pollutant or
 contaminant which is not a defined hazardous substance, but which
 may present an imminent and substantial endangernent.  The government
 intends to hold such persons liable for those costs under both section
 107 of CERCLA and the common law theory of restitution.

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                              -7-                        OSWEB « 9832.1

  collected must be sufficient to demonstrate this aspect of the
  case.
       There are three important considerations here.
       First, samples, records of the owner/operator, or other
  evidence sufficient to establish the identity of hazardous sub-'
  stances involved should be collected.
    Procedures similar or identical to those used by the National
  Enforcement Investigations Center (NEIC)  £/ should be followed, as
  should the requirements of Section 104(e ) (1)(B),  which provides
  for furnishing a receipt to the owner/operator for any samples
  taken ranrt a split sample, if  requested).  Observance of  ehair.-of-
  custody procedures is  necessary to demonstrate at trial that
^samples analyzed as hazardous  substances  did.  in fact, -originate
  at  the  site.
       Collecting more data and  documentation about, sites than  is
  reasonably necessary may increase total response  costs to an
                    •
  unduly  high  level and  delay clean-up activities and cost  recovery.
  The  number of  samples  collected is primarily a matter within  the
  judgment  of  the Regional and Headquarters Superfund Offices,  and
  will  necessarily depend to a great extent on the  site and the
  affected  areas of the  environment.   These Offices should  consult
  with  the  Regional Counsel prior to collecting  samples. However,
•
  the Agency should generally collect only  enough samples to determine
  (1)  that  a hazardous substanc*  is present on the  site; (2) that a
 8/  NEIC Policies and  Procedures  Manual,  Kay,  1978  (rev.,  Dec.
 1981), EPA Document No.  330-9-78-001-R.

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                                 -8-
        . ,         '                                       OSWER t 9832.1
 release of the hazardous substance is substantially threatened or
' has occurred: and (3) what response is appropriate.  Only unusual
 circumstances (e.g.. to satisfy doubts over validity o-f previous
 samples, to determine whether concentrations of hazardous substances
 are increasing, etc.) would justify incurring significant additional
 costs for any additional sampling and analysis.
      Samples should be tahen in accordance with EPA-approved
 protocols and procedures developed by NCXC and contained in its
 Policies and Procedures Manual referred to above or similar
 procedures.
      Second, collection of this evidence should begin immediately
 upon the start of any investigation into whether some response
 activity (including sampling and surveying) say be needed at the
 site in response to a release or threat of release.  Passage of
 time or deliberate interference by other parties nay literally
 destroy the evidence.  Similarly, a long delay between the initial
 observation and the trial, or the initial observation and the  .
 recordation of that observation; will make testimony by witnesses
 about the site more difficult.  Photographs of the scene before,
 during and after the response action are frequently helpful in
 preparing witnesses to testify, and in providing a visual record
 to the Court-of conditions that prompted the response activity.
      Pitld notebooks and the results of laboratory analysis are
 critical in showing the conditions that existed at the site and
•establishing a potential link to the defendant.  Sampling and
 analysis should be conducted with particular concern for accuracy,

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                                 _9_                   OSCR 19832.1
                                       •
 detail, completeness and quality, since these documents are likely
 to be subject to close scrutiny by responsible parties and the
 court.  The NEIC has developed inspection and analysis procedures
 to assure high quality evidence and documentation for trial.
 Observance of NEZC procedures assures a consistently high quality
 of evidence, and should be followed by EPA employees, other federal
 agencies, contractors, and State agencies which have entered into
 an EPA cooperative agreement for response using CERCLA funds.
      Third, for ease of assembling the case and presenting it for
 trial, the following people should be identified hy name, relevant
 qualifications or connection to the case, and information about
 how to contact them in the future:  1) persons who participated
 in the site inspection, sampling, analysis or photography; 2)
 persons who may have historic or current information from personal
 observation, 3) people whb gave or refused to give, statements.
 B.   Evidence of Responsibility of Defendant(s)
      In most cases, the liability of defendants will be demonstrated
                                         *
 by establishing the elements in subsections (l)-(4) of C107(*).
 EPA personnel have a variety of techniques to gather evidence
 connecting the hazardous substance with the potentially responsible
 party or parties.  Fpr example, a deed or lease evidences the
 responsibility of owner or operator of the site.  Less formal
"evidence can also be helpful in tracing rcsponsiblity.  The operator's
 presence at the site over a period of tiae will usually t* noted
 by'employees, neighbors, law enforcement officers, competitors or
 others close to or interested in such activities.  Those observations
 should be recorded in signed statements or affidavits.  In addition.

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                                .10-                    OSHER * 9832.1
 the  activities  of  operators  of  a  site  may  require  a  license  or
 permit  under  State or  local  laws  and regulations.  The  appropriate
 agencies  should be consulted  to determine  whether  they  ha-/e  any
 record  of activities by  an operator of  the site.
      The  problem of linking  a transporter  or generator  of a  hazardous
 substance to  a  site is frequently  a more difficult undertaking.
 The  following detection  sources may prove  fruitful.  Often,  operators,
 generators, and transporters have  records  of business transactions.
 Drums located on-site may bear  labels or markings with  the name of
 a generator; -these drums or  labels should  b« preserved,  if possible,
 or photographed, and the photographs ladled for identification
 and  future use  as  possible evidence.  Under certain  circumstances
 the  case  development team may decide to perform a chemical analysis
 of the waste  to assist in establishing  the similarity between.the  '.
wastes and a particular company's process.9/  (Information regarding
parties and sites may also be obtained by  use of  letters issued
under authority of RCRA Section 3007 and CERCLA Section 104fe)).
     Again, local residents, law enforcement officials or compe-
titors may be sources of information on transporters of material
to the site or in the general vicinity.'  Employees or former
employees of a generator or transporter nay he willing to discuss
the disposal practices of their employers, and if so, signed
statements or affidavits, if possible, should be obtained from,
them.
 9/ Information on the composition ot waste streams associated
with various industrial processes may be obtained from the Hazardous
and Industrial Waste Division (WR-565), Office of Solid Waste, U.S.
Environmental Protection Agency, 401 M Street, S.W., Washington, D.C.
20460.         .   .

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                               "~                      OS** f 9832.1
  .-C.  Evidence That  Removal  or Remedial  Action Taken  By the  D S  or
       State  Is Not  Inconsistent With  The National  Continoenev'pian
                      » .                            ~~  ~~ ^^^™^^™^^™^^™^^»
      Pursuant to Section  104  of CERCLA,  after information  is
 gathered  that a release has occurred  or  is  threatened,  a variety
 of  actions nay be taken by EPA or a State.  Among  those actions
 are:
      (i)  Investigations, monitoring, surveys, .testing  and other
 information  gathering as  may  b« necessary and appropriate to identify
 the existence and extent  of  the release  or  threat  thereof, the
 amount, source and nature of  the hazardous  substances,  and the
 extent of danger to  public health, welfare  or the  environment.  In
 addition, such planning,  legal,  fiscal,  economic,  engineering.
 architectural and other studies or investigations  may be undertaken
 as necessary and appropriate  to plan  and direct response action;
      (ii) "Removal actions',  as the tenc is defined in  Section.
 101(23) of CERCLA,' and which'includes, without limitation, security
 fencing, provision of alternative temporary water  supplies,  anc*
 temporary evacuation and housing of threatened individuals.  In
 addition, EPA may take such other action as may be necessary
                                           m
 to prevent,  minimize or mitigate damage  to public  health, welfare
 or the environment,  such as removal of materials,  temporary  diking
and other easily accomplished  actions; and
      (iii)   'Remedial actions',  as the term is defined  in Section
 101(24) of CERCLA, including  installation of « clay cover, dredging
or txcavations, collection of  leachate and  runoff, on-site storage,
 treatment or incineration, provision  of  alternative water supply
 and clean-up of released hazardous substances.  Subject to some
 restrictions, it may also include permanent relocation  of residents
 and business and community facilities, and  off-site transportation,

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                                                         OSWER 4 9832.1
 storage, treatment or disposal of hazardoua substances.
      In a cost recovery action,  two  factors art  important  in the
 development and preservation of  evidence  regarding  the  appropriate-
 ness of the action taken by EPA  or the state.  'These  factors are:
      A.   The action was not outside what CERCLA allows.
      B.   The action taken aust  be "not inconsistent" with the NCP.
 Therefore, the NCP should be referred to and all persons involved in
 the decision-making process should be faailiar with its requirements
 and limitations before decisions regarding actions are made 1_0/.
 Those decisions should be documented by notes, memoranda,  letters
 and other written records maintained in the appropriate files.
      Under the NCP, remedial actions must also be shown to provide
 a cost-effective response.  A cost-effective remedy is one wt-.ich,
 among the alternatives examined, is  least costly but  technologically
. feasible, reliable and adequately protects public health anc* the
 environment.   In addition, under the Section 104 (c)(4) balancing
 test, the Agency should document remedial actions to  refute any
 claims that the remedy was not cost-effective.  Measures of cost-
 effectiveness includes the protection afforded public health,
 welfare and the environment by the remedy.  In "immediate  removal*
 actions it will be especially important to document the circumstances
 which justify the need for immediate action.  As provided  in. section
 300.65 of the National Contingency Plan, an immediate removal is
 appropriate when the lead Agency determines tfiat the  initiation
 of immediate removal action will prevent or mitigate  immediate
 risk of harm to human life or health.
 10/   The* National Contingency Plan  is published  in 40 CFR Part  300,
 '7 Fed. Reg. 31180 (July 16, 1982).

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                                 -13-
                                                       OS-ER 19832.1
 Immediate removals are appropriate  in  such situations as:  1)
 human, animal, or food chain  exposure  to  acutely  toxic substances;
 2) contamination of a drinXing water supply;  3) fire ant«/or
 explosion; or 4) similarly acute situations.
     Evidence of the cost-effectiveness of a particular remedial
 action may be demonstrated by t.-_  .ollowing evidence which is
 contained in summary form in  the record of decision:

     •  studies showing the 'technical  feasibility and probable
        cost of alternative remedial actions on the particular
        site;
     •  information that shows the  degree of risk to public health,
        welfare and environment  presented by the particular site
        (i.e.* population threatened,  media affected, toxicity of
        the hazardous substance  involved, etc.);
     •  other documentation generated  in  consideration of the
        various factors required by Section 300.68 of the NCP.
      *.
     All such evidence should be documented by written studies,
reports, letters, memoranda,  notes, minutes of meetings and any
other record of the relevant  bases  for taking a particular remedial
action.
                                                               •
D.   Proof of Costs of Removal or Remedial Action by the U.S.
     or a State                                           , .
     Collecting evidence of coats of removal or remedial action
taken on a site is likely to  be  a time consuming task.  Documents
must be obtained from a variety  of  participants in the cleanup
activity:  agencies, contractors, and  others.  The success of

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                                -H-                      OSWEB I 9832.1
   government cost recovery actions depends upon the use of  good
   bookkeeping and record collection techniques.
        Certain costs expended on removal and remedial action are  not
   recoverable.  For example,  no recovery under CERCLA is permitted
   where response costs resulted from application of a FXFRA-registered
.   product (see Section 107(i)), or from a Federally-permitted release
   (see Section 107(j)).   In borderline cases,  it should be  assumed
   that removal and remedial action costs are recoverable and records
   developed and maintained with this expectation.
        A variety of mechanisms are available fof tracking costs.
   while EPA prefers the  uniformity of a single accounting system,
   the particular method  of accounting may vary if it ensures accurate
   record keeping and preservation of all costs attributable to a
   particular site.   To further this objective, cooperative  agree"
—Bents between EPA and  a State, or contracts  between. EPA and. a   '   ._
   contractor for performance  of response activity on a site, should
   specifically require that accounting procedures used by the State
   or  contractor be  approved by EPA.
        An accounting and expense-tracking system is already in
   place at EPA, and should be followed closely by all EPA personnel,
   contractors and State  agency personnel working on CERCLA-funrted
   sites.  This system generally involves the .assignment of  a unique
   accounting number to each specific site, and the charging of time.
                                                     •
   material and ether expenditures to that account number.  The site
   number is assigned by  Headquarters based on a request from the
   Regional Office and confirmation of an approved Federal response.

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                              ~15"                       OSJCR I 9832.1
 In  addition,  activity  codes  have been  devised  under  which  different
 activities  and phases  of  site  clean-up and  remedial  action may be
 described.  Questions  regarding the  specifics  of  these  accounting
 procedures  should  be directed  to the Financial Management  Center
 in  the Office of Emergency and Remedial Response  (FTS 382-2208).
     Evidence of the cleanup costs should be preserved  and avail-
 able for  introduction  into evidence.   This  could  include such
 documentation as receipts for  money  paid for goods or services;
 cancelled checks;  contracts  and any  amendments thereof; purchase
 orders; invoices;  records of time spent, where the claim includes
 the value of such  time; travel records and  vouchers; and records
                                                                  •
 of all correspondence  or other communication regarding  the actual
 costs, as well as  progress reports on  the work performed.  The
 names* addresses and telephone numbers of all  persons maintaining
 the regular business records of contractors', agencies or persons
 outside EPA should also be maintained  for ready reference. 11/
LI/  The Emergency Response Division of the Office of Solid Waste
and Emergency Response of EPA is developing a  field manual entitled
•Colt Control Management for Superfund Removal* for immediate and  •
planned removal actions.  This manual presents a management system
for On-Seene Coordinators for controlling* verifying, and documenting
all costs incurred in a removal action.

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                                                              * 9832.1
 IV.  PROCEDCKAL  ISSUES
 A.   Timing ef  the Coit Recovery  Proceeding
     Whilt the  Office ef Waste  Programs Enforcem«nt will work with
 the  Region*! Program Office  in  setting priorities  for  cost  recovery,
 the  following basic timing guidelines arc offered.  Cost recovery
 actions for expenses incurred in  immediate or planned  removals
 will normally not be initiated  until after such response activity
 has  been completed, since the time required for those  activities
 is relatively short.  However;,  a  cost recovery action  need  not be
 delayed where the Agency establishes a multiphase  response  action
 (e.g., surface  clean up, groundwater clean up).  A cost recovery
 action can begin before completion of the last phase of response
activity for costs expended  to  date and also for calculable  future
costs.          •           . .       •
     Where one stage of cleanup  follows another  in  fairly rapid suc-
cession, cost recovery actions should be  initiated  after the cleanup
is fully completed.  Zn situations where  there are  substantial delays
between phases, however, the Agency may decide to'commence a recovery
action at an intermediate stage.  In these  instances, negotiations
regarding recovery of expenditures may be combined  with discussions
                                                            ^*
with responsibile parties over prospective  cleanup  activities.
Generally, an action will not be filed for  recovery of a remedial
investigation/feasibility study or the cost of design prior to the
filing of an action for recovery of construction costs.

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                                                              f 9832.1
 B.   Statute of Limitations
      CERCLA does not contain a tin* limitation provision within
 which a cost recovery action Bust be brought.  Zn the absence of
• a specific statutory provision, the Federal statute of limitation
 would apply.  There is some doubt at this time as to precisely
 which limitation period will be applied to a cost recovery action.
 Limitations for actions brought by the United States for money
 damages are contained in 28 DSC Section 2415, which distinguishes
 between actions based in tort or in contract.  Because cost
 recovery actions are essentially quasi-contractual .actions in
 the nature of restitution,'a six year statute of limitations if
 any, should apply.   However, 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  after the right of.action accrues.
     The date the  cause of action accrues is also subject
 to debate.   In United States v. The Barge Shamrock et'al, 635
 F.2d 1108,  1110 (4th Cir., 1980), cert,  den. 102 S.Ct. 125 (198D,
 the Fourth  Circuit  held that a cost recovery action under the
 Federal  Water Pollution Control Act arising out of an oil spill
 first  accrued when  the government completed the cleanup operation.
 On the other hand,  a defendant.sight well be expected to argue
 that the cause of action' accrues at the time funds are first
 expended on the site.  Zn order to avoid argument on this point.

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                                                        OS-ER ft 9832.1
                               -18-  -

 «nd  to  eliminate  a  potential  bar  to rtcovery,  the Agency  should
• attempt to  commence all  cost  recovery 'action within  three years of
 the  date  dollars  arc  first expended.

 C.    Extent of  Liability of Responsible Parties
      While  CERCLA Section 107(a)  identifies parties who are
 responsible for the costs of  response actions at a site,  the
 statute does not  expressly set forth the the nature of that
 liability. / Language  which imposed 'strict, joint and several*
 liability on the  responsible  parties was dropped from earlier
drafts  in the final,  compromise bill, and replaced with a definition.
in Section  101  of "liable" or "liability" which refers to the standard
of liability which  obtains under  Section 311 of the  Federal Water
Pollution Control Act.  Section 34-1 • is a strict liability statute.
City of Philadelphia  v. Stepan Chem. Co., 5*4 F. Supp. 1135, 1140.
n.4  (E.D. Pa. 1982).  Moreover, section 311 imposes  joint an*
several liability,  U.S. v. H/V Big Sam. 681 F.2d 432.4.19  (5th Cir.),
on pet. for reh., €93 F.2d 451 (5th Cir. 1982).
     The  position of  EPA is that  in appropriate circumstances, joint
and several liability is applicable under MRCLA.  This position is;
supported by reference to section 311, by the legislative history of
CCRCLA ±2/, and by  Section 107(e)(2) of CCRCLA, which provides that
                •
nothing in CCRCLA "shall bar  a cause of action that an owner or
operator  or any ether person  subject to liability under this section...
has or would have by  reason of subrogation or otherwise against any
person."
127126 Cong. Rec., S.19964  (daily ed. Nov. 24, 1380);
TI6 Cong. Rec., H.11707  (daily ed. Dec. 3, 1980).

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                                                              9832.1
 The Department of Justice has interpreted this  section  as  confirm-
 ing a defendant's right of contribution against other responsible
 partiesr  which is only of value to a  defendant  who has  been
 held jointly and severally liable 13/.
      Joint  and several liability is traditionally  imposed  when
 the actions of two or more defendants cause  a single,  indivisible
 result,  (Prosser, Law of Torts, (4th  ed.  1971),  See.  52.)  That
 determination may involve factual issues.  Therefore, where
 two or more parties  in the categories of  responsible  parties  listed
 in  Section  107{a) contribute  hazardous  substances  to  a  facility
                  »
 which are being. released,  threaten to be  released,  or are  contributing
.to  the release or threat,  the Agency  nay  argue  that those  parties
 are  jointly and' severally liable  for  the  costs  of  responding  to
 that release  or threat.         '    .          ....
                     »
     This of  course  does not  foreclose  the Agency  from  entering
 into consent  decrees  or  other .appropriate agreements  with  multiple
 responsible parties  in which  they agree tp allocate the Agency's
 response costs  among  themselves.   The Agency is  primarily  con-
 cerned with achieving cleanup of  hazardous sites,  preferably  by
private action,  and  there  are many reasons why  responsible parties
may wish to share the costs.   However,  this  is  primarily a matter
 for  the responsible parties,  and  if they  cannot agree among
      i •
 themselves  on an appropriate  allocation of responsibility, EPA
 should proceed  with  legal  action  on a theory of joint and  several
 liability.
13/  Letter datecr"5e"cember  1,  1980,  from Alan A.  Parher,
Attorney General, Office of Legislative Affairs,  to Ron.
James J. Florio, 126 Cong.  Rec.  H11788  (daily ed.  Dec.  3,  1980).

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                                                          OSWE31 « 9832.1
                                 -20-

 D.    The Demand Letter
      The first formal step in the commencement of  a cost recovery
 proceeding will be  the issuance  of • letter  of demand  from EPA to
.the potentially responsible party or parties for payment of
 costs expended on the site.  A demand letter should be  sent to
 all parties in a case who have been identified as  potentially
 responsible (i.e.*  past  and present owners/operators of a site
 and generators and  transporters  who contributed hazardous sub-
 stances  to a  site),  and  should be issued  after all response
 activity has  been completed,  or  at the completion  of one chase
 of  a multi-phase response where  the entire Process will reauire
 an  extended period  of time.
      Before a  demand letter is sent, the  potential case should
 be  analyzed for the  elements  in  part ZZI  above, including ident-
 ification  of  all potentially  responsible  parties (including
 responsible individuals  in corporations where appropriate)  and
 assembly of cost information.  At the time the demand  letter is
 sent,  the  Agency should  he able  to answer reasonable questions
 posed by a recipient of  th^ letter.   Regional personnel should
 have referred  the ease to Headquarters (or recommended  against
 an  action) and Headquarters staff should  have resolved  their
 position on a  referral so that the Government is prepared to
 file a complaint if  the  response to the demand letter  is unsat-
 isfactory.
      The letter should be issued where response costs  have  been
 incurred under CERCLA, regardless of whether a decision has been

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                               -21-                      OS*CR I 9832.1

 made  to  initiate  a  judicial  proceeding for  cost  recovery.

 The demand  letter should  contain the  following points:

      •   reference to  EPA's authority  to administer  CERCLA  and

      .   the Fund  established thereunder (or reference to

         authority to  recover costs where the response activities

         for which reimbursement  is sought occurred  prior to

         CERCLA);

      •   the location  of the  site;

      •   the presence  of a hazardous substance which was re-

         leased or threatened to  be released;

      •   in  general  terns, the  dates and types of  response  activity

         undertaken  by EPA at the site;

      •   any notice  given  to  the  recipient prior  to  or during the

         response  activity, allowing the recipient the opportunity

         to  undertake  the work  or pay  the expense  'of response;

      •   the  total cost of the  response  activity  1_4/ broken down into

        general categories;
14/  The amount stated in the demand letter should be the total
obligated by .the Agency to be expended on the site* rather than
the amount shown by Agency records to have been expended on the
site at the time the letter is prepared.  This is to avoid problems
caused by delays in payment of response costs after a demand letter
has been forwarded to the responsible party.  Even so, available
records should be assembled as soon as possible.  Where it
is expected that future costs will be paid (e.g., in the
next phase of response activity), the letter should also
clearly state that in addition to the suns already obligated
and spent, the Agency expects to expend additional sums on >
the site for which claim will be made against the responsible
party.  Of course, in a judicial proceeding in the cost
recovery action, the Agency will be required to prove the
actual amounts spent from the Fund.

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                                -22-                     OS*** * 9832.1

      •  a general statement  that  the Agency  believes  that  the
        recipient is a  responsible party and-liable for  the  sum
        •et forth;
      •  a demand for payment;
      •  a statement that the recipient of the letter  should  contact
        EPA within a specified  period  (normally thirty days) to
        discuss the account  and the recipient's liability  therefor;
      •  a warning that  if recipient fails to contact  the Agency
        within the specified time, a suit may be filed in  the
        appropriate U.S. District Court for  recovery  of  the
        claim; and
      •  the name, address and telephone number of a representative
       •of the Agency who the recipient should contact.  A sample
        •demand letter is- attached to this memorandum  as Appendix B^

     The primary responsibility for preparation of the demand
letter will be in the Regional  Program Office.  The Regional
Program Office should consult with the representatives from
OWPE-, Regional Counsel* and Office of Enforcement Counsel-Waste.
The demand letter will-be sent  through the Office of  Waste Programs
       ^*
Enforcement for the signature of  the Director of OWPE unless
that requirement is specifically waived.  Xf a ease is referred
to DOJ, the DOJ ease attorney should sign the demand  letter.

E.   Procedure In Event of Response From Potential Defendant
     In many cases, the recipients of demand letters  will  contact
the- Agency and express  interest in discussing.their status as a
responsible party.  The Agency  encourages such negotiations.  .

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                                -23-
                                                       OSWB i 9832.1
 CERCLA  money  is  limittd;  Agency cleanup activities deplete  the
 fund  and  aoney must  be  recovered from the  parties  responsible
 for the release  or threat of  release.   Therefore cost  recovery
 through negotiation  or  litigation is  necessary  to  clean  up  the
 greatest  number  of sites.   Cost recovery should involve  the
 coordinated efforts  of  knowledgeable  legal and  technical personnel
                                                                  * •
 at  both the Regional and  Headquarters  offices as explained below.
 1.    Negotiating Teams  and  Procedures
      Upon  receipt of a  response to  the  demand letter from a
 potentially responsible party,  the  contact person  named  in the
 demand  letter will notify  the Associate Enforcement Counsel for
 Waste,  the Regional  Counsel,  the Director of OWPE  and  the Regional
 Superfund office.  Each of  those offices will,  upon notification,
 identify the person  who will  represent  it on the negotiating
              •
 team.    (The Department of Justice nay. participate  in .cases which
are likely to result in consent decrees or litigation.)
     The formulation of the Agency's position results  from the
 collaboration of the Team.  Zn  some policy decisions the entire
Team has relevant background  to participate in the decision making
process.  However the specialised legal or technical talent on
 the Team should be efficiently  used.
     The Team has the responsibility for developing a  proposed
negotiating schedule.  The proposed schedule should have the
 concurrence of the Associate  enforcement Counsel for Waste and
 the Director, OWPE in cases of  national significance.

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                                .24_                     O&SX. I 9832.1
                4
      Some  factors which  should  be  considered  in  the  development
 of  this  schedule are  the number of potentially responsible  parties
 who will take part  in the negotiations;  the nature of  the potential
 defenses;  the amount  of  available  data linking particular parties
                                                     •
 to  the site; the amount  of the  claim, and other  related Batters.
 Sufficient time should be allowed  for the negotiation  process to
 take  place, but it  is  important that a deadline  be established as
 a goal for achieving  a settlement, and beyond which  the negotia-
 tions will not continue, absent clear indications that a settlement
 is  imminent.  A reasonable period  of time for most negotiations is
 60-90 days; negotiations should not be extended  without Headquarters
 approval.  A referral should be submitted by  the Region and  approved
 by Headquarters, and  a complaint should  be prepared  and approved
 by the Department of  Justice, prior to the conclusion  of negotiations
so that an action may be filed  if  negotiations are not' resolved by
 the deadline.
     a. Case Team Leader.  Contemporaneous with  the  formation of
 t^e Negotiating Team, Regional  and Headquarters  program managers,
 in consultation with  OLEC, will select a program official to serve
 as the Case Team Leader.  The Case Team  Leader's function will be
 to:
     • focus efforts  to  develop, in advance of negotiations, the
       Agency's negotiating strategy and position on issues  that
       «ay Arise during  the course of the ease;
     • ensure the coordination  of  legal  and technical .staff  par-
       ticipation on  the team by scheduling and  chairing regular
       case review sessions; and
     • define the Agency's objectives in accordance with applicable
       Agency guidances  and policies.

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                                 -25-                   QSWER t 9832.1
     On occasion,  the Team may  be  unable  to  develop  a  consensus
 on  a cost  recovery  issue.  When this occurs,  the  Case  Team Leader
 will prepare  a written  explanation of  the  issue for  resolution
 by  the appropriate  supervisory  staff.
     b. Lead  Negotiator.  Regional Counsel aad Headquarters Enforce-
 ment Counsel  managers,  in consultation with  the Director of owps,
 will select the  lead Agency attorney for  the  case.
     Although a  Regional Counsel attorney will usually be designated
 as  the lead Agency  attorney,  in cases of  national significance or
 which may  be  precedent-setting  an  attorney from OEC-Waste may be
 selected.  The extent of Headquarters  involvement will be decided
 on a case-by-case basis by the  Assistant Administrator for Enforce-
ment, (or  the Special Counsel for  Enforcement until  the Assistant
                                   •
Administrator position  is established).'  The  Department of Justice
should also be consulted and  invited to participate  in negotiations.
of cases which are  likely to  result in a consent decree or litigatio
particularly  in multiparty and  complex cases.
     The Team's lead attorney will be responsible for conducting
cost recovery negotiations.  Although the attorney is primarily
responsible for explaining and  defending the Team's position during
negotiations, he or she may request other Team members' assistance
in articulating the Team's position eo opposing parties.
     At the initial negotiation cession, the  lead attorney should
inform opposing .parties that while the Team has authority to negotiate
any agreements are  subject to the  approval of Enforcement Counsel and
                      4
OSWER.  The opposing parties  should also be advised  that the Agency
has established a deadline for  settlement.  The deadline should be
 •
disclosed  tc  tie responsible  parties.  After  the deadline, the
                       •
Agency will t&k* judicial action.

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                               ~26~                      OSHER » 9832.1
2.   Torn of Settlement Agreement
     CERCLA allows the Agency several ways the Agency could
settle a cost  recovery action:
     •  a consent decree
     •  an adainistrative order
     •  a memorandum of agreement.
     However,  as a natter of policy, the Agency has decided that a
consent decree is required in most cases.  A forthcoming policy
will set out the requirements for using consent decrees and another
one will address administrative orders.
     Again, it should be pointed out that the negotiating Team
is not authorized to enter into a binding agreement of any type
with the responsible parties in the absence of specific authori-
zation from the Enforcement Counsel and OSWER.  Consent decrees
must also be approved by the Department of Justice and the reviewing.
court (after a thirty day public comment period).  A draft of any
            •
document which is to be the subject of negotiation should, of
course, be reviewed before commencement of negotiations by appropriate
supervisors of the negotiating Team at the Region and Headquarters,
and any document which the negotiating Team and their supervisors
believe to be  acceptable for settlement should be forwarded to  the.
Assistant Administrator for Enforcement, the Director of OWPE and
the Department of Justice at the earliest possible time to allow for
adequate review.
     The Agency may allow some settlements in which the responsible
party agrees to pay the claim in periodic payments where the party
is unable to pay in a lump sum, or where there is other legitimate
reason for delayed payment.  Before considering installment payments,

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                                -27-
                                                        OSWER * 9832.1
 however,  the  Economic Analysis Division of the Office of Policy
 and Resource  Management (F7S 382-2764)  and the Financial Management
 Division  of the  Office of  Administration (ITS 382-5135) should  be
 consulted in  order  to obtain a review of the financial condition
 of  the  responsible  party and to determine any applicable interest
 charges.      '                                                ,
      Payment  of  cost  recovery claims  should  be made  payable  to  the
 U.  S. Environmental Protection Agency and should  be  mailed to:

               U.S. Environmental  Protection Agency
               Accounting  Operations  Office
               P.O. Box 2971
               Washington.  D.C.  20013
               Attn:   Collection Officer for Superfund
The check or  other  form of  payment should specify the name of
the site  at which the  activity took place.   The lead attorney is
responsible for  furnishing  copies  of  judgments, decrees or agreements
for payment of cost recovery claims as  early as'possible to  Financial
Reports and Analysis,  Room  3617M,  U.S.  EPA,  401 M Street, Washingto  -
D.C. 20460, for  establishment of a proper account. -
     e
F.   Procedure in Event of  No Response  to Demand  Letter
     If no response is received  to the  demand letter,  a final
determination .must  be-  Bade  of whether the facts of the case  justify
the Agency taking further  steps  to pursue the cost recovery  claim.
A decision whether  the case should be referred to DOJ should be
Mde by the Region  as  well  as staff at  Headquarters  at the time
      i
the demand letter is drafted.  This decision will initially  be
nade by the Regional Administrator* based on the  recommendation of
the Regional  Superfund Office and  the Regional Counsel.

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                                                        OSWER t 9832.1
                               -28-
 Reievant  factors  to  consider  include:
      (a)   the  strength  of evidence  connecting  the  potential Jefen-
           dant(s);
      (b)   the  availablility and aerit of  any defense.   Possible
           defenses* under Section 107 of CERC1A are generally that
           the  release and consequent response  action was  the result
           of:
           (1)  an  act of God;
           (2)  an  act of war;  or
           (3)  an  act or omission by an unrelated third  party as
               to  whom the owner/operator  had no contractual relations
               and did not fail to exercise appropriate  care against
               the foreseeable  acts and omissions of that  third party.
      (c)   the  quality of release, remedy  and expenditure  documentation
           by the Agency, a state or third party;
      (d)   the  financial ability of  the potential defendant(s) to
           satisfy a  judgment  for the amount of the claim  or to pay
           a .substantial portion of the claim in settlement; and
               t
    .  (e)   the  statute of limitations.
      Zn considering  the ability of the potentially responsible
party or parties to  pay, the Regional Offices  should make use of
the -Financial  Assessment System, developed by  the  Economic Analysis
Division of the Office  of Policy and Resource  Management  and
managed by NEIC, to  assess the financial  condition of most
potentially responsible parties*
     The determination  of the Regional Administrator to initiate
a cost recovery action  shall be forwarded by a memorandum from
 •                                          •
the Regional Administrator to  the Assistant Administrator for
Enforcement for concurrence in the same manner as  the referral of
other matters  for litigation.  A decision not  to initiate a cost
recovery action must be reflected in a memorandum  to OWPE.  An

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                              *29'                      OSKER f 9832.1
 affirmative decision must  be  made  by  the  Regional  Administrator in
 each ease  in which  CERCLA  funds  are expended,  whether  that decisio
 be  to proceed or not to proceed.   This  is necessary  because of the
 Agency's accountability for management  of the  Fund.
     After OEC concurs on  pursuing the  cost  recovery action,
 OCC refers the case to the Department of  Justice,  together with
 the names of the appropriate  Headquarters and  Regional personnel
 who will be involved in the case.  If the Department of Justice
 fails to concur, the originating Regional office is  advised of such
 non-concurrence, together  with the reasons therefor, and recommend-
 ations as to whether additional  information  should be provided for
 DOJ's reconsideration.  Even  though a Region may recommend against
 pursuing a cost recovery action, the  Assistant Administrator  for
OSWER may decide on his own initiative  that  such an  action is
warranted.  This recommendation  would then be  sent to OEC for
consideration.
C.   Maintenance and Coordination  of  Evidence  in Event of Referral
     There will inevitably bt logistical  difficulties in maintaining
 and coordinating the production  of the  mass  of data, contracts,
 cost records, and other evidence generated in  a response, activity.
 It is very iaportant to provide  for an  orderly method of expeditiously
providing that information during  the course of a  cost recovery
action for use during ease development, discovery, and trial.

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                                .30.                     OS€R I 9832.1
      Each Agency,  office,  contractor  or  other  person  participating
 in  a  CERCLA  response  activity  should  maintain  documents  related to
 the activity for a period  of not  less than  six t€) years  after
 all response activities are finished  (consult  Appendix C  for a
 list  of  these necessary documents).IS/
      The Agency's  Financial Management Division will  maintain
 and periodically update the cost expenditure tracking system for
 each  site referred  to above, so that  an  itemization of all costs
 attributable  to a  particular site  can be quickly obtained.  When
 a determination is  made that a case should  be  referred to the
 Department of  '-stice for  filing  (or,  if necessary, during the
 time  that the demand letter is being  prepared  or the  case is being
 considered for referral),  a request can  be  made of the persons,
 firms or agencies  involved in a response activity for copies of
 its records.  At that time, a complete file of all records involved
 in  the particular  case can be compiled and  delivered.to DOJ, witr.
 copies of the complete file made available  to  appropriate Regional
 and Headquarters legal and technical  personnel.
^S/  The period of six years is necessary because of the pos-
sibility that the claim may not accrue upon the first expenditure,
Additionally the litigation may be protracted: documents must
be kept for the tern of the litigation.                     t

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                                                      OSTCR « 9832.1
                             -31-
V.   Note on Purposes  and  Dse of This Memorandum
     The policy and proctdurts set  forth herein, and  internal
office procedures adopted  pursuant  hereto, are intended solely
for the guidance of attorneys and other employees of  the O.S.
Environmental Protection Agency.  They are not intended to nor
do they constitute rule-making by the Agency, and nay not be
relied upon to create  a right or benefit, substantive or pro-
cedural, enforceable at law or in equity, by any person.  The
Agency may take any action at variance with the policies or
procedures contained in this nemorandur., or which are not in
compliance with internal office procedures that nay be adopted
pursuant to these materials.
   .  We trust that this memorandum  generally covers -the subject
of procedures to be involved in cost recovery actions under
CERCLA, but if you have any questions or problems involving this
subject matter, please call Russell B. Selman, Office of -Legal
                            «
and Enforcement Policy, at FTS 426-7503.

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                                                      QS-ER I 9832.1

                            Appendix  A
                                                             v
                  Costs  Recoverable Undtr  CERCLA

      In  order  to  identify" records  which  must  be developed and

maintained  for a  cost recovery action, it  is  essential  to know

those  costs which may be  recovered from  a  responsible party.

Various  sections  of CCKCLA provide for recovery of certain elements

of  costs expended for site clean-up.  We have attempted below to

compile  a list of those  costs which are  recoverable, and the

sections of CERCLA which  authorize recovery of those costs.

This list is very general and not  exclusive.

     The listed costs a're  in general  categories, using  language

directly from CERCLA, and a determination  will necessarily have

to  be made  in each case whether a  particular  expenditure is

within the categories of  recoverable  costs.   In this regard, EPA's

position is. thfet  the intent of Congress  was to authorize recovery
                •                           •
of all costs directly related to clean-up  of  a site, and therefore

the costs should  be broadly construed to fall within these cate-

gories.

     Cost
  CERCLA Section
1.  Investigations, monitoring, surveys,
    testing, and other information-gathering
    necessary or appropriate to identify the
    existence'and extent of the release or
    threat thereof, the source and nature
    of the hazardous substances, pollutants
    or contaminants involved, and the extent
    of danger to the public health, welfare
    or tht environment.

2.  Planning, legal, fiscal, economic
    engineering, architectural, and
    other studies or investigations
SSl04(b),
(providing for recovery
of costs for removal.
actions, which, as
defined in $101(23)
include actions taken
under *104(b)).
Same

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                            Appendix A
                                                       QSWER * 9832.1
    necessary or appropriate to plan
    and direct response actions.


3.  Planning, legal, fiscal, economic,         same
    engineering, architectural and
    other services necessary to recover
    the cost of response actions.
          i
4.  Planning, legal, fiscal, economic,         same
    engineering, architectural and
    other services necessary to enforce
    the provisions of the Act (CERCLA).
    (This could include costs incurred
    in prosecuting an immiment endanger-
    ment action under 5106).

5.  All costs of (A) removal and (B)           S10">(a) (4) (A)
    remedial action 'incurred by the O.S.
    Government or a State not inconsis-
    tent with the NCP.   Actions for which
    such costs may be incurred are

    (A)  Removal Actions (5101(23)):

         (1)  the clear-up or removal of
              released  hazardous substances •.  '     .
              •from the  environment;

         (2)  such actions as may be
              necessary taken in the event
              of the threat of release of
              hazardous substances -into the
              environment;                           _

         (3)  such actions as may be necessary
              to monitor, assess or evaluate
              the release or threat of release;
                                       •

         (4)  the disposal of removed material;

         (5)  such other actions as may be
              necessary to prevent, ninimixe or
              mitigate  damage to public .health*
            .  welfare or the environment which
              may otherwise- result from a
              release;
             •
         (6)  any monitoring to assure actions performed
              hy other  parties adquately protect  public
              health, welfare and the environment,  and
              meet EPA  criteria;
                         At

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                       Appendix A                 OSWER ( 9832.1

                         -iii-
  •_ (7) specific examples contained  in
         <101(23) (without limitation):

         a.   security fencing or other
             measures to limit access;

         b.   provision of alternative
             water supplies;

         c.   temporary evacuation and housing
             of threatened individuals

         d.   action taken under $104(b) of
             CERCLA;

         e.   any emergency assistance provided
             under the Disaster Relief Act  of
             1974.

(B)   Remedial Actions ($101(24)):

     (1)  actions consistent  with permanent
          remedy taken instead of or  in
          addition to removal actions, to
          prevent or  minimize the release
       -  of  hazardous substances into the
       '  environment so that they do not
          migrate to  cause substantial danger
          to  present  or future public health,
          welfare or  the environment.

     (2)  Specific examples contained in C10K24)  (without
          limitation)s

          (a)  storage;

          (b)  confinement

          •(c)  perimeter protection using
               dikes, trenches or ditches;

          (d)  clay cover;

          (t)  neutralization;

          (f)  cleanup of released hazardous
               substances or  contaminated
               materials; .

          (g)  recycling or reuse?

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                                              OS-CK * 9832.1

                  Appendix A

                     -iv-


     (h)  diversion;

     (i)  destruction;

     (j)  segregation of reactive wastes

     (k)  dredging or excavation;

     (1)  repair or replacement of
          leaking containers;


     (n)  collection of leachate and runoff;

     (n)  on-site treatment or incineration;

     (o)  provision of alternative water
          supplies;

     (p)  any monitoring reasonably required
          to assure that such actions protect
          public health, welfare and the
          environment;

     (q)  costs of permanent relocation of
          residents, businesses and community
          facilities (where relocation, alone
          or in combination with other factors,
          is more cost-effective than and
          environmentally preferably to trans-
          portation, storage, treatment or
          disposal off-site of the hazardous
          substances).

(3)   Remedial actions do not include:
            ?
     (a)  off-site transportation of hazardous
          substancesi

     (b)  off-site storage, treatment or
          disposal of hazardous substances;

     unless it is determined that such actions are
     (A) more cost-effective than other remedial
     actions; (B) will create new capacity to manage
     (in compliance with Subtitle C of RCRA) hazardous
     substances in addition to those at the affected
     site; or (C) are necessary to protect public
     health, welfare or the environment f-rom a present
     or potential*risk which may be created by further
     exposure to the continued presence of the
     hazardous substances.

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Appendix A

   -v-
                                                         OS&ER | 9832.1
                   S107(a) (4)(B)
                   5107(4)(4)(C)
 6.    Any  other  necessary  costs  of  response
      incurred by  any  other  person  consis-
      tent with  the  NCP.   'Response'  actions
      include both "removal* and 'remedial'
      actions  (<101(25).   (Se-'liet of
      removal and  remedial actions  above.)

  7.   Damages for  injury to.  destruction of,
      or loss of natural resources, including
      the  reasonable cost of assessing such
      injury destruction or  loss.   (See note,
      below)

      •Natural resources'  include ($101(16)):

                (a)  land;

                (b)  fish;

                (c)  wildlife;

                (d)  biota;

                (e)  air;

                (fi  water;         .        '      ~

                (g)  groundwater;

                (h)  drinhing water supplies;

                (i)  other such  resources belonging
                    to, managed by, held in trust'
                    by, appertaining to, or otherwise
                    controlled  by  the United States,
                    any state or local government, or
                    any foreign government (includes
                    resources of the Fishery Conser-
                    vation  and  Management Act of 1976).

NOTE;  CERCLA $301(c) provides  for the promulgation of regulations
not later than two years after  enactment of the Act for the
assessment of damages for injury to destruction of or loss of
natural resources resulting  from a release of a hazardous
substance.  See footnote 3  in the Memorandum for further
explanation on recovery of  these damages.

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                                                          I 9832.1

                            Appendix B

                      (Modtl Demand Letter)


XY2 Corp.
Someplace, State  00000

          Re:   Name,  location of  site

Dear Sir or Madam:

          On or about	, 198  , there were
releases and threatened  releases  into the environment of
hazardous substances  [and pollutants and contaminants) from
the _             facility located at or about
[In addition,  there were releases and threatened releases of
pollutants and  contaminants that may present an imminent and
substantial danger to the public health or  welfare.]

          [On or  about          . 19	, EPA gave [oralI notice
to you                    (wnich was confirmed] by letter of
                •  19   » advising you regarding the referenced
facility and that you are a party who may be liable for money
expended by the government  to take corrective action at the
facility.  CPA  offered you  the opportunity  to discuss with EPA
your voluntarily  taking action necessary to abate any releases
or threats of  releases of'.hazardous substances  [and polluants
and contaminants] from the  facility.~You did- not .undertake
the necessary actions.]

          Zn accordance wicl the Comprehensive Environmental
Response, Compensation and  Liability Act (CERCLA), 42 U.S.C.
$9601 et seq.,  (and other authorities (insert where pre CEPCLA
or non CERCLA expenditures)] the  [State of           , pursuant
to an agreement with and funding by the (insert if State lead)]
United States Environmental Protection Agency (EPA undertook
response action using funds provided for such actions.  The
action began on or about  '                  and continued to on
or about                           EPA's response action entailed
the (describe generally what was done).

          The cost of the response action [performed] [caused
to be performed by EPA at the facility] [was] [is currently]
approximately f               .   (Insert the amount obligated
by the Agency to be expended on the site, not-the amount
actually expended according, to Agency records.)  (The Agency
anticipates expending additional funds in the future under
authority of CERCLA for additional response activity which the
Agency deems appropriate to be performed at the site.]  Enclosed
is a statement  summarizing  the expenditures to date.

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                                                           * 9832.1
          Information available to EPA  indicates anonc,
tnin;s that you ( choase on« or more. of the bracketed clauses
as appropriate: )   fare/were at the time of the response
action the owner/operator of the facility] [were the owner/
operator of the facility at the time of disposal of hazardous
substances at the  facility] [did, by contract, agreement or
otherwise/ arrange for disposal or treatment, or arranged for
transport for disposal or treatment of hazardous substances
(and pollutants and contaminants J at the facility {accepted
hazardous substances  [and pollutants and contaminants! for
transport to the facility which was selected by you].  Pursuant
to the provisions  of Section 107(a) of CERCLA {and other author-
ities  (insert where pollutants or contaminants involved and
where other law involved)], we believe that you are liable for
the payment of all costs expended on the site to tn* Hazardous
Substance Response Trust Fund established pursuant to Section
221 of CERCLA, which is administered by EPA.

          we hereby request that you (or a group of parties
potentially responsible for the site] make restitution by pay-
ment of the herein stated amount plus interest (together with
any sums hereafter expended by the Agency on the site pursuant
to authority of CERCLA].   (The names of other potentially
responsible parties receiving this request for payment are
enclosed with this letter to facilitate organization among
the identified parties concerning payment.)  Xf you  [or an
organized group of potentially responsible parties] desire to
discuss your liability with LEA, -please contact the person
named below in writing not later than thirty' (30} days after
the date of this letter,  we will otherwise assume that you
have declined to reimburse the Fund for th* site expenditures
and will subsequently pursue civil litigation against you.

                                   Sincerely*
Contact Person:

(Name)
(Title]
(Address]

ec::  Enforcement Counsel
      Regional Counsel
      State Agency

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                                                                     QSKER « 9832.1
 Appendix C
                                         »
      The following pages constitute • search  guide  that My be used by the
                                                                     •
 le^ional enforcement progran in gathering  documentation to support a cost
-recovery action.   In* search guide  format  !•  • chart with four columns, headed
 M  follows:   "Document", *»iginator",  'EPA Contact* and "Regional rile
 Location'.•   All of the  documents listed win probably not be available in all
 caaea,  nor will aach one neceaamzily enhance  the body of evidence in every case.
 Xt  tuat be decided en a  cm by-caae baaia exactly which pieces of doonentation
 should  be used as  supporting evidence.  The aaarch guide was meant to be an
exhaustive list of documents that should be considered.  It is suggested that
 the persons conducting the  file aaarch  for supporting documentation pull out
each document on the  list if it is  available.  It can be decided at a later time
which of  the  documents are  useful as evidence given the facts of the particular
     Please note that the search guide covers only documents that would be
useful in supporting the first three elements of proof discussed in this
guidance: proof of the release, link between the party and the site and
consistency with the NO>.  Cost documentation will be the subject of another
guidance document that is currently under development.
• The fourth column, "Regional Pile location*, has meaning only if the Region
uses the filing systen described  in Appendix E.

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I. Evidence of • Itol
or the Ihieat of A- Release
   Document

 • Notification Reootd
   putsuant to Sec.
   I03(a| of CCMCIA
 • Notification R»ootd
   putsuant to Gee. lOJfc)
   of CERCtA
 • Recotd of notification
   of EPA-fQ-Bwigency
   Raaponse Division,
   EPA Regional
   Administrator or
   other EPA official
 • CtmpllJ
   Investigation
   Repott puteuant to
   Section I04(e) of
   CERCLA
 • other Ocmpllf
   Investigation or
   InspectIon/Audit
   Repotta puteuant.
   to etatutoty
   authority (e.g.,
   sec. 101J of ROM)
      Originator

    • Owner/Operator
      of facility
    • Oov't. officials
      leapondlng to the
      ptoblaa (Local,
      State or ftedaial)

    • Ounei/opeiatot of
      facility
    • Apptoptlat*
      officiate
      fodetal/State
      InvestIgatot
      ftedetal/State
      InvestIgatot
 iPA Oontact

• National Rasponae
  Center (NIC>
                           Piobable Pile Location*
                           • NCH (eee page 21,
                             tail let ffl)
  EPA-Rag I one
  EVA-HO-Hazaidous
  Site Gontiol Division
  EPA-Reglan, OBC
  EPA-R.A.
  CPA-HO*EleBtgency
  Responsible Division
• EPA-Raglon, CERCLA
  Enf ./Coif>l lance
  Ptoject Manager
• State Enfotcement/
  Otmpl lanoe Agency

• EPA-Rsglon, Apptop.
                           • Remedial Responeet
                             Dl sooveiy/Hasaid
                             Ranking Plle/Raglone/
                             HO
                           • NRC
                           • EPA-HO-EJwiyency Response
                             Division Removal Response
                             Pile
                             Section
                           • State fftfotoenent/
                             Onifillanoe Agency
                                 Hal  Reaponeei
                             Dl ecovety/Haxard
                             Ranking Pile
                           • Remedial  Roeponaei
                            Dl scoveiy/Matatd
                                    Pile
 •Unices othetwlse noted, thle asaiMes the documnte ate located In the Regional files
  and assumes the Raglans ate using the file etiuctuie outlined In Append I • E.

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                                                           -2-
I. Evidence of •
tha Itweat of • Release (continued)
   Docunent
   Originator
D'A Contact
Ptobable File location
   Note* ftoi
   calla^ cotreapondence,
   photogtaphs, or other
   fatm of tandm or
   Incidental obsetvatlon
   Odv*t. Officials
   I local. State,
   Fedetal)

   Public
   Signed wltnem atate-
   vents (deactlblng tha
   conditions leading
   up to the telease
   and the teleasa)
 • Ownet^Dpetator
   Facility
 • Ekv>loyees or
   Oontractois aaaoc.
   w/ facility
 • Pedeial/State
   InvestIgatoca
 • local officials
 • Public
          ( Enf./
Oxipl lance Project
Nanager

State Enf./
Oompl lance Agency

Nmlclpal Onwettinent
Offece (e.g., public
Health or Police Dept.)

EPA-teglon. Haste Mjt.
Division PtoJ. Manager
State Agency
 IteMedial Keapanaei
 Dlsoowety/ Hazatd
 Ranking Pile
 Renedlal Responset
 IMscoveiy/ Haxatd
 Ranking Pile

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     >
      'i
      .3     UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
•^    .
-------
                              -2-


are  legally responsible 2/.  In those cases, the question arises

whether  the separate negotiations or judicial actions of EPA or

the  State to recover their respective funds might, in some way,

prejudice the other's right to recoup its monies, and if so,

what actions might be taken to avoid such prejudicial effect.

      It may initially appear unreasonable to conceive that eit.^ie:

EPA  or a State could take action which would interfere with the

other's  right to recover monies expended for site clean-up.

However, the following points should be considered:

c    State as Agent -   EPA will frequently transfer  its share

     of clean-up funds to the State which will,  in turn, spend

     it on the site under the cooperative agreement with EPA.

     The cooperative agreement contains numerous protocols,

     procedures, and other standards with which  the State must

     comply to assure the quality of the site investigation and

     clean-up.   Because of EPA's control over these matters,

     adverse parties may argue that the State is EPA's agent or

     representative for the expenditure of the funds.  This

     misunderstanding.might be asserted as a defense  to recovery

     of remedial costs by a potentially responsible party.
2/    Further guidance on cost recovery procedures  and  responsible
parties is contained in a forthcoming policy entitled,  "Cost
Recovery Actions under CERCLA."

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                                                             OSWER * 9832..


                             -3-

 0     Collateral  Estoppel - An  adverse  judgment  by a  court  in an

      action  by either  EPA or a State on  the  issue of  recovery of

      funds expended on  the site might  be held to collaterally

      estop the other governmental agency from successfully bringing

      a subsequent action against that  same party _3/-

 0     Insolvency  of Responsible Party(s)  - A  settlement or

      judgment by EPA or the State might  exhaust the  available

      resources of the  responsible party(s),  leaving  the  other

      governmental agency without possibility of a recovery.

      Regardless  of the  merits  of ar-uments which may  be  made on

the foregoing considerations,  in the interest of promoting

Federal-State relations, there are  certain rights and obligations

which should be  clearly defined at  the outset of the  relationship.

The Regions, in  cooperation with OERR, have  recognized the benefits

of identifying these interests by reflecting them  in  the cooperative  '"*

agreements.  Accordingly, this memorandum does  not  require the

Regions to adopt any new procedures or change any existing coopera-

tive  agreements.  Instead this document .presents the  rationale

for drafting cooperative agreements in the manner prescribed  by

OERR.
2/   See United  States  v.  I.T.T.  Rayonier,  Inc.,  627 F.2d 996,
T9th Cir., 1980).

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                             -4-





THE COOPERATIVE AGREEMENT



1.   Negation of Agency in Cooperative Agreement



     The cooperative agreement should negate the principle that



the State is an agent for EPA.  This is important for both govern-



mental agencies for a number of reasons.  In the cooperative



agreement, EPA will necessarily require that the State ooserve



certain standards, procedures and protocols, such as in the



taking of samples, their chain-of-custody, analysis protocols,



and perhaps accounting procedures.  The need to specify sucn



procedures could be argued to constitute a right to control the



actions of the State, an indicia of an agency relationship.



Neither EPA nor the State should wish to encourage such an



argument because of the potential exposure to tort liability



as well as the possibility 'of complicating a cost-recovery effort.



Therefore, the imputation of an agency relationship between EPA



and the State should be negated by appropriate language in the



cooperative agreement.  Suggested language for such a provision



appears in the Appendix to this memorandum.





2.  Requirement for Notice of Settlement or Action



     The cooperative agreement between EPA and the State should



contain a provision that neither will initiate a cost recovery



proceeding or enter into a settlement with the responsible party



except after ample written .notice in advance of the execution of



a settlement agreement or the filing of a suit.  The provision



prevents rushing by EPA and  the State to obtain a judgment against

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                                                          OS*ER | 9832
                             -5-

or settlement with the responsible party, thereby gaining
a position of preference with respect to the assets of the
responsible party.
     Inclusion of such a provision in the cooperative agreement
is fair to both EPA and the State, in that neither may gain an
unexpected advantage to the assets of the responsible party by
separate negotiations of which the other may be unaware.
     Such a provision also provides a means whereby each party to
the cooperative agreement may take separate independent action
to protect its interests, after having given the necessary notice,
if there are reasons to not engage in joint EPA-State negotiations
or file suits in coordination with each other against the
responsible parties.  Suggested language for such a provision
appears in the Appendix to this memorandum, and provides  for
written notice not less than 30 days in advance of settlement or
initiation of a cost recovery action.

3.   Requirement for Cooperation and Coordination of
     Cost Recovery Efforts
     The cooperative agreement should also provide that EPA and
the State will cooperate with each other in efforts to recover     r
their respective shares of the costs of response activities at the
facility, and will coordinate their respective activities  and
resources in such efforts* including the filing and coordination
of litigation for the recovery of costs and the use of evidence
and witnesses in such suits.  This provision is desirable  because

-------
                              -6-
               
-------
                               _7_                              f 9832.



 from  a Decree or Judgment) which could affect EPA's rights against

 the responsible party, other than to drain off that party's

 assets which might be  available for payment of a cos_t-recovery

 claim.   In  the case of a responsible party with substantial assets,

 a separate  settlement  by the State or EPA may not present a

 serious  problem to the other party.  However, assuming EPA becomes

 aware of an impending  settlement between the State and the

 responsible party(s) 4/, the Agency should, before the settlement

 is finalized, determine the probable extent of the responsible

 party's  financial ability to satisfy EPA's claim in addition to

 payment  of  the settlement with the State _5/.

     In most cases, the responsible party will probably wish

 to simultaneously settle its liability with both the State and EPA.

Collective  negotiation and settlement procedures involving the
4/   EPA should become aware of any  impending settlement by the
S~tate with a responsible party assuming there is a provision in
the cooperative agreement which requires  the State to notify
EPA in writing thirty days  in advance of  any proposed settlement,  =
and the State complies with that agreement.

S/   A determination of the financial ability of a potentially
responsible party can be made by the Financial Management Division
of the Agency, or by use of a Financial Assessment System which
has been developed by the Economic Analysis Division of the
Office of Policy Analysis of EPA.  This system will provide case-
by-case, inexpensive and defensible  estimates of ability-to-pay
which will be useful for settlement  consideration.  This system
requires a minimum of financial .::ita which will usually be available
from a Dun and Bradstreet report, a  Moody's listing, or an audited
financial statement.  When  that information is not available, the
system will enable enforcement personnel  to focus data requests
to that information necessary to perform  a minimum financial assess-
ment.  Any questions about  this system and its uses should be
directed to Kathy Summerlee, FTS 382-3077, or David Erickson,
FTS 382-2764.

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                                                         OSWER « 9832.

                             -8-
.State, EPA, and the responsible parties should be encouraged
to avoid misunderstandings 'and to resolve all issues at the
same time.  However, there will undoubtedly be circumstances
under which the responsible party may believe that it would
be advantageous to settle with one claimant (either EPA or
the State) and not the other.  It is those cases where the
assets of the potentially responsible party would be sub-
stantially depleted by the. settlement which could present
significant problems for each claimant.
     It snould be recognized at the outset that, absent the
proposed notice and coordination agreements discussed above,
there is nothing to prevent the State or EPA from settling
its claim in the absence and without the concurrence cf the
other.   Where such a settlement would place either the State
or EPA in a more advantageous position with regard to the.
asse:s of the responsible party, problems could  arise which
could affect intergovernmental relations.  In those cases,
the following options are available to EPA:
1.   Should EPA determine that the State has independently
entered into settlement negotiations with the responsible          •
party, EPA should contact the appropriate State  agency in an
effort to establish a joint settlement effort and strategy.
Simultaneously, EPA should notify the responsible party by
letter (if that has not already been done as part of the Agency's
cost recovery procedure), advising it of the Agency's claim, and
that no other person or entity is authorized to  negotiate  for  or

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                                                           OSWER * 9832.



                              -9-



otherwise represent the Agency  in respect  to  that claim.



At  the same time, the Agency  should  initiate  an  investigation



into the financial resources  of the  responsible  party to



determine whether there will  be sufficient assets remaining



after the proposed State settlement  to satisfy EPA's claim.



That investigation can be carried out in the  manner described



in  footnote 5.



2.   If it is determined that the assets of the  responsible



party will likely be depleted or substantially impaired by a



separate settlement with the  State without provision being



made for EPA's claim, and if  efforts to establish a joint



settlement effort with the State are not successful, then



cor.s iderat ion should be given to EPA's applying  to  the appro-



priate U..S.  District Court for  the appointment of a receiver



to operate or manage the assets of the. responsible  party  for



the benefit of all creditors  of that party.   This action,  if



taken in a timely manner, would prevent the responsible



party from distributing its assets in a preferential manner.



     However, the decision to att -mpt to forestall  a State



settlement with a responsible party  should be made  only after
                                                                     T


serious consideration of all  factors involved, including:



•    the amount of CPA's claim which might be prejudiced;



•    the past relations between EPA  and the State agency



     involved in the negotiations;



•    the circumstances under  which the State  and the



     responsible party entered  into  the negotiations



     without the presence of  EPA;

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                                                          USWER * 9832.

                             -10-


 0    the existence of any agreement between EPA and

     the State prohibiting such negotiations;

 0    and any other factors which might bear upon the

     decision.

     While this action should be taken only as a last resort, ••

 the Agency's responsibility to preserve and restore the Fund may

 require such action.  As in other such actions, a decision to

 seek the appointment of a receiver for the assets of a responsible

 party will require the concurrence of the Special Counsel to  the

 Administrator for Enforcement.


 PENDING CASES

     There are a number of cases in which States have already

 initiated a suit against responsible parties,  and-EPA has

 contributed or intends to contribute a portion of the clean-up

cpsts.   In such cases, what is the proper forum and the best

method in which to proceed?

     In the absence of an agreement with EPA to the contrary,

 a State may, of course/ proceed with an action in State court for

 cost recovery claim's bas.ed upon any applicable State law  6/.
6/   CERCLA S107(i) provides:   "Nothing  in  this paragraph  shall
affect or modify in any way the obligations or  liability of  any
person under any provision of State or Federal  law,  including
common law, for damages,  injury or loss  resulting  from a release
of any hazardous substance or for removal or  remedial  action or
the costs of removal or remedial action  of  such hazardous
substance."

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                                                         OSWER I 9832.1
                             -11-


     States are also authorized to make claims under CERCLA for '

the cost of response activities which they incurred at a site.

Section 107(a) of CERCLA, for example, provides for the liability

of past and present owners and operators of a facility, generators,

transporters and others for "all costs of removal or remedial

action incurred by the United States or a_ State not inconsistent

with the National Contingency Plan."  Many other sections of

CERCLA refer to the right of the States to recover for their own

costs.


     However, §113(b) of CERCLA provides:

     "...  the United States district courts shall have exclusive
     original jurisdiction over all controversies arising unaer
    .this Act, without regard to the citizenship of the parties
     or the amount in controversy.  Venue shall lie in any district
     in wnich the release or carnages occurred, or in which the
     defendant resides, may "be found, or has his principal office

     We interpret this provision to mean that any claim made

by EPA, the State or any other person for recovery of  response

costs,  which is based upon the-, provisions of CERCLA, must be

brought In the appropriate U.S. District Court, and may not

be asserted on behalf of EPA by a .State in a State court

action 7/.  Obviously, any claim asserted by EPA will  be based
                                                                   f
upon CERCLA and will be in U.S. District Court.  Likewise,  if
7/   In addition to  the restriction of  §113(b), there  are  additional
reasons why the State could not attempt collection  of  the  Federal
share of response costs.  Under CERCLA  S112(c)(3) and  28 USC  S516,
the U.S. Attorney General is required to  represent  EPA in  these
proceedings.  This may not be delegated to  the  States,  and therefore
it is not possible to authorize the States  to attempt  collection
of the Federal share of response  costs  in a State court proceeding,
even should it be otherwise appropriate.

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                             -12-


the State's claim against a third person for its share of the

costs relies in whole or in part upon CERCLA, then it too must

be brought in U.S. District Court.  A State may, therefore,

attempt recovery of its share of response costs in State

court only under some law or theory other than CERCLA.

    We also believe it highly important that EPA and the State

attempt to coordinate their respective claims because:

0    such actions will involve a substantial amount of technical

     data, documents and witnesses from both EPA and the State,

     and each party could derive the benefit of the other's

     evidence and witnesses;

0    coordination would avoid the necessity of maintaining two

     separate proceedings which would duplicate much of  the sa^e

     effort and resources'-; and

0    coordination of the claifns would avoid the issue of collateral
    «
     estoppel discussed earlier in this memorandum.  .

We believe the States will be receptive to joint or cooperative

cost recovery actions with EPA for these rea.sons, and for the

additional reason that the legal authority for  the States to

recover is probably much clearer under CERCLA than it may be

under the laws of most States.

     The following options, or some variance thereof, should

therefore be followed in those cases where EPA  provides  CERCLA

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                                                         OSWER ft 9832.

                             -13-

 funds  under a cooperative agreement  to a State which has a suit

 pending  in State  court  against  the responsible party:

 Option I:   EPA should  require, as a condition of'payment cf

 the CERCLA funds  to  the State,  that  the State will, within a

 certain  period of time  (i.e., 30 days) after receipt of the

 funds, dismiss without  prejudice all claims for recovery or

 reimbursement of  any response costs  at the site £/  from any

 action then pending  in  State court.  The provisions recommended

 earlier  in this Memorandum  for  inclusion in all cooperative

 agreements should also  be used  £/.

     It  is not necessary to require  that a sing.le suit for cost

 recovery be filed jointly by EPA and the State.   It may be a

 more simple procedure,  and  avoid potential logistical proDlems,

 for each party to file  its  own  suit  separately, and then request
8/   Note that this does not  necessarily require  a  complete
dismissal of the pending State court action.  This  recognizes
that there may be other claims of  the State  involved  in  the
case, with which the State'may wish  to continue in  the State
court proceedings, and that  the  existence  of  counterclaims, by
the defendant on other issues may  prevent  the State from
effecting a complete dismissal of  the case.   The  important
point is to eliminate all cost recovery claims  from the
State court proceedings.  Of  course, if those are the only
claims involved in the State  case/ a complete dismissal  of
the case would be the desired result.

_9/   The Attorney General of  the State should agree to or
Concur in this provision of  the  cooperative  agreement, since
it affects pending litigation in which the Attorney General
is representing the State.   Such agreement or concurrence may
be limited to the particular provision requiring  dismissal of
the case, and may be evidenced by  an endorsement  to the
cooperative agreement or by  separate letter  signed  by the
Attorney General or .his representative.

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                                                         OSWER *  9832.2
              4

                             -14-



the U.S. District Court before which they are pending to consoli-

date proceedings on the suits pursuant to Rule 42 of the Federal

Rules of Civil Procedure.

     Note also that this option does not affirmatively require

that the State refile its claim in Federal court, but only

that if the claim is refiled, it will be in Federal court.  The

requirement for cooperation and coordination between EPA and

the State will also apply to and encourage joint negotiations

with the responsible parties before filing of a. suit i n Federal

court,  as well as to subsequent litigation in Federal court.

Option II;    It is conceivable that a State may wish to continue

to pursue its cost recovery claim  in State court, or may not

wish to coordinate its efforts with EPA.  In such event, EPA
   ,                  •  o                     •                 •
should not, even if it could, attempt to require it to do other-

wise.   However,  because collateral estoppel could be raised
                                                               •

against EPA by the responsible party(s) in event of an unfavorable

result in State court proceedings, EPA should, as a condition

of payment of the CERCLA funds, require that the State,

within a specified timer dismiss without prejudice or omit

from any action then pending or which it may subsequently

file in State court any claim for  recovery of response costs

which in the opinion of EPA, are or may be based upon CERCLA,

or any law, regulation or authority other than that which

may exist under the laws of that State LO/.
10/  See comment at footnote  9.

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                                                              « 9832.
                             -15-
     EPA should strongly urge the States with which it enters  '
into cooperate agreements to accept Option I, since it win
result in much greater effectiveness and cost-efficiency in
recovery actions.  Option II should be adopted only after
all efforts to persuade the j:aze have failed.

Note on Purpose and Use of this Memorandum
     The policy and procedures set forth herein, and internal
office procedures adopted pursuant hereto, are intended solely
for the guidance of attorneys and other employees of the U.S.
Environmental Protection Agency.  They are not intended to nor
do they constitute rule-making by the Agency, and may not be
relied upon to create a right or benefit, substantive or pro-
cedural, enforceable at law or in equity, by any person.  The
Agency -may take any action at varience with  the policies or
procedures contained in this memorandum, or  which are not in
compliance with internal office procedures that may be adopted
pursuant to these materials.
     We recognize that this memorandum contains subject
matter which relates to sensitive areas of the Federal-State
relationship.  Nothing contained herein is intended to  imply      "
bad faith or improper motive on the part of  any State or
agency thereof, and no such interpretation or construction of
any provision herein should be made.  This memorandum attempts to
recognize that in the normal course of EPA-State relations,
occasions arise in which the interests of EPA and the State  may
not be identical, and it'.is our intent to anticipate  and

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                             -16-




prcpare for such occasions so that they can be approached in



a rational, planned manner to minimize further potential


impact on the relationship.



     If you have any questions or problems concerning any matter



contained herein, please call Russell B. Selman at FTS 426-7503.
                                  *



Attachment

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                                                         OSfrER t 9832.2
                            APPENDIX


      Under  CERCLA,  both  EPA and  affected  States  can  institute
 enforcement actions against and/or negotiations  with parties
 responsible for  priority waste sites.   When  this occurs,  a
 settlement  or  legal action  by either party could potentially
 impede  or even negate  «:he claims of  the other  ftr  recc"«»r-- ~*
 funds expended at  the  site. Obligations, rights,  and  pro-
 cedures for litigation must be defined  as early  as possible
 in  the  working relationship between  EPA and  the  State  to  avoid
 this  eventuality.   Therefore, provisions  concerning  cost  recovery
 should  be in the Cooperative Agreement  application.  Specific
 provisions  that  address  different enforcement  conditions  are
 presented below.   These  provisions should be reviewed, discussed
 with  the RSPO, and  included in the application,  as appropriate.
 Please  refer to  the text of the  Memorandum for guidance on
 the use of  these provisions.

 1.    Disclaimer  of  Agency Relationship

      Nothing contained in this Agreement  shall be  construed to
 create, either expressly or by implicaation, the relationship
 of agency between  EPA  and the State.  Any standards,  procedures
 or protocols prescribed  in  this  Agreement to be  followed  by
 the State during the performance of  its obligations  under this
 Agreement are  for.assurance of the quality of  the  final product
 of'the  actions contemplated by this  Agreement, and do  not
 constitute  a right  to  control the actions of the State.   EPA
 (including  its employees and contractors) is not authorized to
 represent or act on behalf  of the State in any matter  relating
 to the  subject matter  of this Agreement,  and the State (including
 its employees  and contractors) is not authorized to  represent or
 act on  behalf  of EPA in  any matter related to  the  subject matter
 of this Agreement.   Neither EPA  nor  the State  shall  be liable
 for the contracts,  acts,  errors  or omissions of  the  agents,
 employees or contractors of the  other party  entered  into,
 committed or performed with respect  to  or in the performance
of this Agreement.

 2.    Notice  of Intent  to Settle  or Initiate  Proceedings

      EPA and the State agree that, with respect  to the claims
 that  each may  be entitled to assert  against  any  third  person
 (herein referred to as the  "responsible party",  whether one or
more) for reimbursement  of  any services, materials,  monies or
other thing  of value expended by EPA or the  State  for  response
 activity at  site described  herein, neither EPA nor the State
will  enter  into  a settlement with or initiate  a  judicial  or
 administrative proceeding against a  responsible  party  for the

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                                                   OSCR f 9832.2
                           Appendix
                              i i
 recovery of such sums except after having given notice in
 writing to  the other party to this Agreement not less thai
 thirty  (30) days in advance of the dace of the proposed
 settlement  or commencement of the proposed judicial or
 administrative proceedings.  Neither party to this Agreement
 shall attempt to negotiate for nor collect reimbursement of
 any  response costs on behalf of the other party, and
 authority to do so is hereby expressly negated and denied.

 3.   Cooperation and Coordination in Cost Recovery Efforts

     EPA and the State agree that they will cooperate and
 coordinate  in efforts to recover their respective costs of
 response actions taken at the site described herein, including
 the  negotiation of settlement and the filing and management
 of any  judicial actions against potential .third parties.  This
 shall include coordination in the use of evidence and witnesses
 available to each  in the preparation and presentation of any
 cost recovery action, excepting any documents or information
 which may be confidential under the provisions of any applicable
 State or Federal law or regulation.

 4.   Judicial Action jn L7.S. District Court

     EPA and the State 'agree 'that judicial action taken by
either party'against a potentially responsible party pursuant
 to CERCLA for recovery of any suras expended in response
 actions at  the site described herein shall be filed in the
United States District Court for the judicial district in
which the site described in this Agreement is located, or in
 such other  judicial district of the United States District
Courts as may be authorized by section 113 of CERCLA, and
 agreed to in writing by the parties of this Agreement.

 5*   Litigation Under CERCLA Sections 306 and 10?

     The award of this Agreement does .not constitute a waiver
 of EPA's right to bring an action against any person or persons
 for  liability under sections 106 or 107 of the Comprehensive
 Environmental Response, Compensation, and Liability Act  (CEflCLA),
 or any other statutory provision or common law*

 6.   Sharing Recovered Funds with EPA

     Any' recovery achieved by the State pursuant to settlement,
 judgment or consent decree or any action against any of  the
responsible parties will be shared with EPA in proportion to EPA'
contribution to the site cleanup under CERCLA.

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                                                         OSTCR I 9832.:
                           APPES'LIX
                              ill


 7.   Dismissal By State of Pending Cost Recovery Action - Option- '

     The State does hereby agree that it will, not later than
 thirty  (30) days after the date of this Agreement,"cause to se
 dismissed, without prejudice to any subsequent refiling, any
 and  all claims of the State  (or any Agency thereof) in the
 case of "(State or Agency) v. (defendant), now pending in the
 (Circuit, Chancery, etc.) Court of ___i	,
 Docket No. 	, for recovery of any services, materials.
 monies or other thing of v.ai^e expended or to be expended on
 the  site described in this Agreement.  Any subsequent refiling
 of said claims by the State  or any agency thereof will be in
 accordance with the provisions of this Agreement.

 (See comment at footnote 9 of Memorandum regarding State
 Attorney General concurrence with this provision. )

 8.   Dismissal By State of Pending Cost Recovery Action - Option II

     The State does hereby agree that it will, not later than
 thirty (30) days after the date of this Agreement, cause to be
 dismissed, without prejudice to any subsequent refiling, any and
 all claims of the State (or  any Agency thereof)  in the case of
 "(State or Agency) v. (defendant), now pending in  the Docket No.
	, for recovery of any services, materials, monies  or
 other thing of value expended or to be expended  on the site
described in'this Agreement  which are based or rely,  in whole
or in part, upon the provisions of the Comprehensive  Environmenta.
Response, Compensation, and  Liability Act of  1980.  Any subsequent
 refiling of said claims by the State will be  in  accordance  with
 the provisions of this Agreement.

 (See comment at footnote 9 of Memorandum regarding State
Attorney General concurrence with this provision.) .

 9.   Emergency Response Action

     It may in the course of conducting the remedial  activities
covered by the Cooperative Agreement, become  necessary to
 initiate emergency response  actions at the site.  The Cooperative
Agreement application should contain a provision acknowledging
 this eventuality and dealing with the effect  any such emergency
actions will have upon the remedial project.  The  provision
below, or its equivalent, may be used in the  application for  this
purpose:

          Any emergency response activities conducted
          pursuant to the National Contingency Plan,
          40 CFR section 300.65, shall not be restricted
          by the terms of this Agreement.  EPA and the
          State may jointly  suspend or modify the  remedial
          activities in the  SOW of this Agreement  during
          and subsequent  to  necessary emergency  response
          actions.

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                                                OSWES * 9833.0
3 v r r A .V c r  yr v * -1 * * * *
            •^ ^*

-------
        Requirements  for  Issuance and Scope
        c:  §lC£i'a'-  .-.--ir isti'st: ve Orders	4

        ;..   weces.'ity  for "~etermination"	5

        = .   Necessity  frr Arfjal  CT ?.ur«?jte-«^
            Release o*  Hazardous  Sufcstar.ee	6

        C.   Necessity'that  Release or Threat
            of Pelesse  ie Frcrr.  a  Facility	7

        T.   Necessity  fcr Exister.ee of Ifvinent
            »r.z  Surstar.t:a;  Er.dar.cerrerr	j
       E.  Notice  tc  Aff-frted  States	'.....<}

III.   Persons  to  Whc:r,  ar.  Order- "ay  Ee  Issued	1C

IV.    Criteria  for. Issuance of 5106  Orders	11

       A.  P.espcr.sirle  Parties' Financial  Status	12

       E.  Kur.rer  of  Responsible Parties  Subject  to
           the Order  .	13

       C.  Specificity  of  the  Nece'ssary Response  Action.  . 14

       D.  Arency's Readiness  to Litigate  the Merits
           of tr.e  Order	 16

       E.  Competing  Considerations.  ...'..	'.16

v.     Orders Relating  to  Removals and  Remedial Actions.  . 17

       A.  Immediate  Removals	1?

       B.  Planned Removals and Remedial Actions  	 19

VI ^    Procedures  for Issuance of  $106  Orders	20

       A.  Planned Removals and .Remedial Actions	21

       B.  Immediate  Removals	21
        %

v:i.   Opportunity to Confer	22

       A.  Planned Removals and Remedial Actions  	 22

       B.  Emergency  Situations.	23

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            the Crier .	".	.24

VIII.  Proofed.Te  ii  Order \ot Obeyed ..."	25

IX.    Note  cr. Purpose  ani Use- of 7.*.is Memorandum	26
Apper.Jix A:  N'rt if icat :o~.  Letter
Ap^~;x 5:  S=-;le  S^f.s'  Air.: - ; s trs : :v

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                           WASHINGTON DC 20««0
S'JfaJECT:  Guidance  Me.-.crcr.iur on Use ar.d Issuance of
          Administrative  Crders-'Under $106(a} of CERCLA
KPO.V:      L?"-  •"•! . T'r. eras
           Art:-.; Ass;st£-.t  Adr.l r.?.s trstrr t'cr Sri id
            ivsste  a.-.;  Erertjej-cy  Response
          Special  Csunsel  for  Enf orcewenr'-  •' ^

          Recicnal Atr;r. istratcrs ,  Re'ji^r.s I-X
          ^e;;cr.a: Cc.-ns*ls, Pecicrs :-X
          A;r and  w=3:e .Vanage-.er r  Div^sicr, Directors
            Recicr.s  I-X
          Reji^nci £>perfjnd Cc-crdi natcrs
          Director,  Office  of' Waste Programs Enforcement
          Director,  Office  cf  Er.erce-.cy and Rerredial Response
          Associate  Enforcement  Counsel, Waste Division
I.
     The administrative  order authority whic.1*.. the Environmental

Protection Agency  (E?A)  exercises under 5l06(e) of the Compre-

hensive Environmental Response,  Compensation, and Liability Act

of 1980 (CERCLA) an_d Executive Order 12316 is one of the most

potent administrative remedies available to the Agency under any

existing environmental statute.

     Section  106(a) of CERCLA authorizes the issuance of "such
        \                                                    :
orders as nay be necessary  to protect public health and welfare

and the environment/" after notice to the affected state, upon

a determination  t.-.at "there r.ay be en ir;r.:nent and substantial

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          -t  tc  the p-i-ic health or  welfare  cr  the  er.vircr.T.e.-.t
 CcCou.se  of  an actual c-r  threatened  re.ease  of  a  hazardous
 substance frorr. a facility."  A fir.? net exceeding  S5,090 per
 day may  be  imposed for willful violation, failure  or refusal
 to comply with a S106(a) Order (Order)/ and punitive damages
 of up  to three tiroes the cost of clean-up of  the site may be
 imposed  under S10"7(c)(3) for failure, without  sufficient cause,
 to properly provide removal or remedial action pursuant to  such
 an Order.   In view of the magnitude of these  penalties, the
 Agency expects that the  regulated community will conply with
 administrative Orders.  At the same time, the  Agency's obliga-
 tion is  tc ensure that Orders are properly  issued.
     It  is the current policy of EPA  that, whenever  possible,
 parties who have caused or contributed to a release  or a threat
 of a release  of hazardous substances  at & site should.
 rectify the problems at the site.  This action is  necessary
 to ensure that the Agency efficiently manages  the  limited funds
 available under CERCLA and to ensure  that the  maximum number of
sites are addressed.
     Accordingly, after the Agency discovers  a site  and in  advance
 of completing a Remedial Investigation and Feasibility Study (RI/FS),
 (and has conducted an endangennent assessment, or  their equiva-
 lent), responsible parties normally will be sent a notice letter
 requesting them to clean up the site.  Following completion of the
 feasibility study, the Agency normally engages in  discussions with

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responsible parties  in  an  attempt  to  ecteir  promptly  the  scree-  •

mert  cf  such partirS  to vc !•.:.!•• tar il°"  under tar.?  the  necessarv
                        •
respcr.se actizr.s.  If t.-.e  discuss icr.s  are suc'ceasf L! ,  the terras

of  tne agreement wall be embodied  in  a judicial  consent decree

or  a  5106 ecministrat ive consent Order.

      In  circumstances where  the Agency wishes  tc compel a responsible

party tc undertake the  response actions,  including instances where

no  settlement can be  reached,  the  Agency  will  consider issuing &

unilateral §1C5 Order in accordance with  this  guidance.

     The adr.ir.istrative  enforcement authority  .is an ir.pcrt?r.t

ccr.pcnent of the Agency's enforcement  program  authorized  ur.der

CERCLA.   This guidance  is being  issued to assist the  regional

offices in developing sr.c maintaining  an  effective CCKCLA admini-

strative enfzrcement  program. ' The effectiveness cf the program

will be enhanced as site remedies  are  implemented  by  Bespcndsnts

in compliance with administrative  orders,  end  as enforcement of

Orders with whicr. Respondents  are  not  in  conipliance is success-

fully and expeditiously  pursued by EPA. '-The Agency will

aggressively defend judicial  challenges to Orders  and  enforce

instances of non-compliance.to validate the  CERCLA administrative

enforcement program.  Regional offices should  issue Orders consistent

with  the criteria and procedures contained in  this guidance  to ensure

the legal sufficiency cf the program.

     CThe 5106 administrative  order authority provides  strong incen-

tives for Respondents to undertake expeditiously response actions

deemed necessary by EPA to ensure  protection of public health or

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                                -4-
 weifare  or  the environment.   Therefore,  Regional offices are '.-rr?
 to  ccrsicsr ths  use  cf  ur-ilstsrsl  CiRCLA 2crr.i~i£tr;tive ~~ja-5
 ir.  every case '-here  ccspeliir.g  c.-.fsrcer.e.-it  authority is neces-
 sary.  Criteria  are  provided  herein  to  assist  regional  offices     '
 in  determining whether  Orders are  appropriate  in any case.   It
 is  essential that  a  balanced  CERCLA  enforcement  program is
 iop 1 ewer,ted by EPA,  combining administrative and judicial enforce-
 ment anthorites, to  ensure protecticr. cf health  sr.d  the er.virsr-
 ment from tre hazards cf  releases  or threats of  releases cf
 hazardous substsr.ces.

 II.  Requirements  for Issuar.ce  ar.d Scope cf Sectior.  106 CEPCLA
     Orders
     A comparison  of 5106 (a)  ar,d S'003  of . the  Resource  Cor.se r-
 vazior. ar.d  Recovery Act (KCRA)  reveals  similarities  In  tee  t^o
 sections, and therefore many  of  the  criteria for issuance cf e
 STOOJ Order also apply  to §106  Orders._!/  In many situations,
 either Order would be appropriate.   Where the  hazardous sub-
 stances  are also "hazardous waste" under RCRA,  the Order should
 cite the  authority of both sections.
     Section 106(a)  of  CERCLA provides  as follows:
     In  addition to  any other action taken  by  a  State
     or  local government, when  the President determines
     that there may  be  an imminent and  substantial
     endangerment  to the public  health  or welfare or
     the environment because  of  an actual or threatened
y  Guidance on  the  use  of  RCRA  57003  administrative  orders
may be found in  a memorandum entitled,  "Issuance  of Admini-
strative Orders  under Section  7003  of  the  Resource.Conser-
vation and Recovery  Act"  dated Septetnber.il,  1981.

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      release cr s. r.ezzrzz-s  sccsia.-.ce  fror e  facility,
      he r ?y rec.i re the Attorney General  cf the Unit*?^
      to a?at» sue.-. cancer cr  threat...   The President
      nay alsc, after r.otire to  the  affected State,  take
                           £  specie-  inc.«w..?~/  itt r.ct
      limited to, iss-ir.i' S'jch cr-ers  as  rr.av bt  "^^C'p
      ts pr:*.5ct ?.tl:r h-iilth er.i welfar?  £nd  the envircn-
      r.e^t._2 '

      In croer for an OrJer  to be  issued, the following

 legal pre-req-jisites m-jst be met:

      A .   Necessity fcr a D^terrir. at icr; Sasec Upsr. E v i c ^ r; c s

      A ceterr.ir.st ior. rjst be rr.ade that,  because cf .a release

 cr threat cf a release, a"  ir.r.iner.t ar.c  S'jbs t2:-.t isl er.^ar.cerrr.e-. t

 may exist.   This dr terr.inat icr will depend upcr. cccunent ary , test,

 T.cr.ial,  ar.c physical eviier.ce cbtair.ed through  investi^at : crs

 arc inspect icr.s.  Cther ir.f crr.at icr. concerning  the nature cf the

 threat posed by a site -ay  already be contained in Aoer.cy files,

 such as  data generated pursuant  to  S1C3  of CERCLA or the perr.it

 and notification sections cf RCP.A.  The  Order,  therefore, must

'include  a finding that an imr.inent and substantial endangerment

 may exist,  in order to ensure that  this  statutory requirement is

 met.  (See  sa-ple order, Appendix E,  Finding No.  7).
^/  The President has delegated his  authority  under this Section
 to the Administrator of EPA and the  U.S.  Coast Guard by Executive
Order No.  12316 dated August 24,  1961.   EPA  and the Coast Guard
have entered into a Memorandum of Agreement  dated  October 9,
 1981, that all site-related releases in  the  Coast  Guard's juris-
 dictional  areas (coastal zones,- Great  Lakes, ports and harbors)
shall be the responsibility of EPA.

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o:  =  r.3Z2 T~ : . =  ?.•--. »r::- •' fro- s facility.  A "-azar-T'js

SLSstanc?"  :s  iefi.ned  in  Section 101 (J4i of CERCLA, ar.rj  is

generally any  substance,  waste or pollutant designated pur- -

c L £ "" •  t ** 5 'r- C * } ~ ** H1.  ? " ~ ' ' 5 '  ?. r "j ; 1 1 ' ~ ' ' '/. ^ f A ) if * '". P C' "' ** 2 "" •'•" 5 " a ""

ncr,  Sec- : rr.  3-.:Jl  cf RCS-.,  Secricn 112  of the Clean Air  Act.

SrCtirr. " i: TSCA ,  cr  S-r-.-t : ;.-. 112 of CE=CLA.  iC'r-j.-le oil,
are exe-.oter:  frcr  ststjr.cry coverage.)

     ;>net.-er  a  release  fro-rr a facility is ''actual " or  " tr-resten-r- "

primarily cepencs  uccr.  ter.poral cons iterations.  Actual  releases

s.no^lc te ciscrvaile  in sc.-r.e fcrr.,  either visually or  thrcu^

analysis sr.o-'i r\-- contaminants present in samples of soil,  *atsr

or air.  A  "tnreat" of  a release,  on the other hand, involves

releases which  have yet to occur or have yet to fine their way  ir.t;

the environment.   A oulging tank containing a hazardous  substance

in which pressure  has  built up, and a surface impoundment
2/   A "Release"  is  defined  in CERCLA 5101(22) as "any spilling,
leaking, pumping,  pouring,  emitting, emptying, discharging,
ejecting, escaping,  leaching,  dumping or disposing into  the
environment," with certain  specific exemptions:(e.g. release
solely in work  placer  engine exhaust; release of certain  nuclear
material; and normal  application of fertilizer).

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wnicr.  is abcut  ts  overflew  because  of heavy rainfall, rrese-.t

cbvic'js  threats  cf i  rclcoSc.   A t/.i'cai.' is also prescncc-J iv

crrrcd:-- cr  leaking  drurr.s  ccr.t2ir.ing ir.cc.T.ratible wastes rincls?'

ir. a ccr-Tor ar<*a.   Accordingly,  the deterr.inaticn of whether K

"threat" cf a release warrsr.ts  iss-.-ar.ce  cf an Crier is » j-jrtrrer.t

decision, to be made on a  case-fcy-case basis.

     The nature  of both the hazardous substances present at the

site and the  release  cr threat  cf release  should be set forth es

findings in the  crder,  together with the  beses for such findings.

     C.  Necessi tv Ths t r.eleas?  cr  Threat  cf  fte 1 ease re
         Frcr. e  Facility1

     The release cr threat  of release nust.be frcn e "facility,"

which is defi-her ir. CSSC1A  §101(9)  as:

     (A) any iuilding, structure, installation, equiprent,
     pipe cr pipeline  (including any pipe  into a sewer or
     publically owned .treatment  works),  well, pit, pond,
     lagoon,  inpound.tsent, dit-cn, landfill, storage container,
     motor vehicle, rolling stock,  or aircraft, or (B) any
     site or area  where a hazardous substance has oeen
     deposited,  stored, disposed of or placed, or otherwise
  ..  come to be  located; but does not include any consumer
     product  in  consumer use or  any vessel (a watercraft or
     other contrivance used, cr  capable  of being used, as a
     means of transportation on  water).

     This definition  of "facility"  includes on-shore or off-shore

sites,  including land  transportation facilities,  from which

releases or threats might originate.   The  Order must specify
 •n>
the physical  location  that  is the source of the release.

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                                                          OSWER I 9833.C
                               -d-
     D.  Necessity fcr Existence ;rf  Irrir?-.*  er.d  Substartial
     Ivide.-vce presented to s-ppcrt  the  iss-ance  of  a  5126(a;
order must show "that there may be  an  inr.inent and  substantial
endangenner.t" to pusiic healtn or welfare  or  the  envircr.ff.ent.
     The words "may 20" indicate tr.at Congress established  a
standard of proof that does not require  a  certainty.   The evidence
need net demonstrate that an  Iraniner.t end  substantial endar.gerrr.er.t
to public health or the environment definitely exists.   Ir-.stesd,
an Order may be issuer! if there is  sound reason  tz  believe  that
such an endanjerrr.ent r.ay exist.
     Evidence cf actual harn  is r.ot required.  As the Court stated
in Ethyl Ccrr. v. r?A, cons truing an %ndenge:-ment provision in  the
Clean Ai'r Act:-
          The meaning of "'endanger" is  not disputed.  . Case
          law and dictionary  definition agree that  endarrger
          means something less than actual ham.   When one
          is endangered, harm is threatened;  no  actual injury .  .
          need over occur.   {541 F.2d  i at 13, footnotes omitted,
          original emphasis,  D.C. Cir.,  cert.  den.  426 U.S.  541
          (1976).)
     It should also, be noted  while  the  risk of harm must be
imminent in order for the Agency to act under $106, the harai
itself need not be.   (See the legislative  history to the
"imminent and substantial endangeraent" provision of $1431  of the
Safe Drinking Water Act, H.  Rpt. 93-1185 at 35-36.)  For «xample,
EPA could act if there exists a  likelihood that  contaminants
might be  introduced  into a water supply which could cause
damage after a period of latency.   One must judge the risk  or

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                                                             OSWER ft 9833.0
lir.elihccc  -f  c.-.e r.c~ by 'sxs-i-ir.:  th-:?  factual circurstar.ces,
ir.clwiir.c,  Swt "rt :::r:tei to: 1)  r-ature  a.id  ar.our.t cf the
." 5 z2 T ~ ?'- s  ?'.. cs t "5 ~ Tr i i'-"rI '-'^ ~'  2 • t!'. •=  ""^*- ™*.'. ? ^  f CT exrT^'jre T s
hur.sr.s  or  the  erv.-i roarer t to  the substance,  ar.i i) the known
cr S'.sprctc-c  effect c: the s-.".stance  cr.  h-r.ans  or that pert
of the  ervircr.re.it s-jr;ect to exposure  to the  substance.
     Legs:  analyses cf the concept cf  imminent  and suh-stsntial
enia.-.-'rrr.t-r.t  csn  else  be- fc-.ni in  Peserve  Viiir: Co.  v. £?r..
£i;  ?.2d -551  ,'eth Cir. 19~5);  I'. £. v. yertac  Cher.: eel Cc. et  el,
4?=  F.Su-r.  c~C  .'I.;.  ArK.  1?ED);  U.S.  v.   gel vents P.ecoverv
Service, 496 >.'   Supp. 112"1 (D. Ccnn.  196:);  U.S. v.  y.itiwest
Sclver.-.  F.ercvrry,  
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                                                        OSWER # 9833.0

                               -10-
may arise* however,  where  rapid  response at  a site is neeessarv.
!r sue-  esses,  ir=--2-=2  ef  ;-  Crdsr -ay fcllov a.-, aiirevig:*^
notice period or  ever,  a  telephone  eill  r.ade  by EPA to the
Director of  the agency responsible  for  environmental  protection
in the affected state.   Written .confirmation nust fellow  such
telephone notice.
     As  indicated above, the notification should be  directed tr
the Director cf the  state  seercy havinr ;ur; s-iicticr.  ever
haz.arccus waste -atters.  A suggested fcrrr fcr a r.ct if iratirr.
letter is attached to  this -srcrar.c-j~ as Appe-di.r A.   This
forr, also provides the format  for or?l  notice.
     A.-,  "affected state" is interpreted to be the stats •here
the facility is located  fror. which  the  discharge :s  teir.-
releasec cc threatens  to be released, and in whicr. the response
activity required by -the proposed "arter will be taken.  1st sew
cases/ this may involve  more than one state,  such as  where the
facility is located  near the border of  a state and the
hazardous substances have migrated  from the  facility  located
in one state into ar._ther state(s).  In those cases,  all  of
the states in which  the  hazardous substances  are found and in
which response activity  may be perforaed pursuant to  the  order
should be notified.

III.^Persons To Whom an  Order May Be Issued
     Section 106 does  not specify any person  or persons to whom
an Order may be issued,  but peraii-ts the issuance of  "such orders

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                                                            OSWER * 9833.0
ii -.i.-.- re r.eceiiir.-. . ."   Sertirr.  IC-ils),  however,  refers to the
"owner cr operator"  cr  "ether  responsible party"  as the persons
fj whc!n  the AJency  coultj  look  io  Jctcrrr.i.*ic whether clc'sri-wp cf
a site will be dcr.e  properly before  expending  CERC1A funds.
Serticr.  ICTja), cesicr.atir.c those who shall be liable for
response costs, s?eoir:er vreser.t owners  ar.o operators  cf a
facility, persons who were owners and operators at the  tine
of disposal of a hazardous substance, and generators and certain
trar.spor-: r: vr.r, iocorcir.c to available  evider.ee, contributes
hazardous sjDstar.ces  to the facility.  It follows  that  those
same persons could  be recipients  of  an Order issued under
Section 10£!«), (see  'j.£. v. Outboaro Msrir.e Corp., 536 F. Sup?.
54, 57 (N.D. 111. 1952).  In addition, in appropriate cases,
it T.ay be possiole  to issue orders to parties  other than
those listed in Section 107{e), if actions by  such parties are
necessary to protect  the public or the environment.

IV.  Criteria for Issuance of  §106 Orders
     Other parts of  this guidance document examine the  legal
requirements for issuing an Order.  This  section's purpose is
to list specific factors which favor the  use of Orders
over other possible  enforcement responses.  These  factors include:
     •  Responsible  parties' financial status
     •  Number of potentially  responsible parties
     •  Certainty .of  the necessary response action
      \
     •  Agency's readiness to  litigate the merits
        of the Order

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                                                            OSIER * 9833.0
                               -12-

      The  thrme  corrsor. to tnese factors  :s  tnst Orders  should
 £*  :ss_e-  :r.  this* s:t'J2t:rr.s ir w-ich  rcT~li2r.ee  •vith  v-.e
 terrs  cf the  O^cer is f=£sirle,  i.e., •..•hsre ths Respe-r.der.ts
 fire  ir. a p;s i.c.i.c.1 to peri.rr-. tr»«r oroertc* response  actions
 • ithir. specific-  tir.e periods.  T.-.is cse-  not =vsar El-.-.  -MIST.
 r.a>.e  a pre-issuar.re deterr.i:.;ticr. tr^at  Rcspcncerts will  cc-n-
 ply with an Order,  but rather that compliance is practicaole.
 If the  Ager.cy does not anticipate compliance with  ar. Order  it
 is considering,  issuir.;,  the use  cf the  Order nay serve  or.ly  to
delay  direct  injunctive action under $105  or the initiation  cf
F>r.i-f ir.ance-j response.   On the  other hand, the Agency  nay  wis;:
to issue an Order ir. any situation where the neede* response act:-:r.
and the liability r.nerefcr are clear and straic;ht-forwarc",  so
that refusal  to conply with the  terr.s-cf 'the Order would -.->•.,  irr
all probability,  be with ^sufficient cause" (CERCLA §lC?(c){3!).
Such refusal  would render tJrs Respondent liable for civil penalties
or punitive damages in the event of federal cleanup.
     A.  Responsible Parties' Financial Status
     Before an  administrative order requiring remedial  work
is issued, the Agency should assess, to the extent possible,
whether the responsible party has sufficient financial  resources
to comply with  the Order.   Financial information is available
from*several  sources:
     •  Agency  files -contain financial  information
        collected as part of the identification of
        parties responsible for  the hatards posed

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                                                        'OSWER « 9833.0
        oy sites en  trie  National  Priorities  List.
      0  The Securities  ar.t  Ixcr.a-ge  Ccrr.issirr  'SIC/  requires
        publicly trsiei  ccr-jinies  ts sutr.it  istrilei  fi.-.ar.cial
        statements.  This  information is  puoliciy  available.
        '.Consult NEIC'S  manual entitled  "Identifying  Responsible
        Parties" for additional  information  on  obtaining  SEC  files,
      *  Responsible  parties may submit financial information
        to the Agency during discussions  or  negotiations  held
        prior to the issuance cf an  Order.
      In addition, NEIC car. provide further information  on
Respondents' financial status.
      B.  Number of Responsible Parties Subject  to  the Order
      For two prir^ry reasons, the  success of Orders  for
remedial action is enhanced where  there are  relatively  few
responsible parties.
    '•1) Coordination of  Response' Action
      An Order issued to  multiple Respondents who are  jointly
and severally liable generally will  not allocate individual
clean up responsibilities._4/  Instead, the-Order will require
the same response action to be conducted  by each responsible
party.  Multiple parties must organize and coordinate their
response to ensure compliance with the Order's  requirements.
Thus, compliance with Orders .may depend upon group agreement
£/  However, the Agency may  issue an Order  to a Respondent
"requiring a response to a discrete, separable aspect  of  the
hazard at a site, notwithstanding the existence of other
responsible parties or other  less divisible problem areas.

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                                                           OSWEH * 9833.0
 or.  eac;:  r.cTier's -share  c:  the response cost.  In a large grour;
 c;  responsive  parties.  ;t may ce cifficulc for tne group to
 develop  a consensus  on  individual liability and perform response
 activities  
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                                -15-

 identified.   Orders  are  normally setter suited to nendetirr
 ciscr?~£  '£3\s  sue.".  s£ c.r'^."1 Tfr^cvsls rstr.^r th?.r. less  sx»c~
 £C* * ~"" -----  ^ -  ••"=-•""".   C tu S""»" 13* "*" ~r" ic- ('•'*J-'-''k  «--  'ufi
.Age'ncy  to  supervise  ccrclier.ce  activities, arc rcr respcnsihle
 parties to rencr. a-reener.t  on a conpj.iar.ts plan.   In west cases,
 information  sufficient to  describe the required response  actions
 wili  De generated  by the RI/FS.
     An Order should contain the following elsnents (see
 Appendix s}:
      •  The  steps  the Respondent nust take to cor.piy with
        the  Order;
      *  The  effective oate  of the Order;
      0  A  r-.ancatcr.'  tir.e-table  f^:1 completion
        of  renedici  work;  and,  where •appropriate,
      0  A  statement  tc the  effect that other actions or orders
        .may  follow.
     Specific  remedial action Orders benefit toth the Agency  and
 responsible  parties.   Responsible parties are provided clearly
 defined compliance standards which will facilitate agreement
 among the  responsible parties on a remedial plan.  If the
 responsible  parties  Then determine that the remedial work is
 best accomplished  by a third party contractor, the Order  provides
 a basis for  their  contract  negotiations.

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      S;ec:::r  Criers  ter.*fit the A-ency &y reducing the cif: ic'.lv
of'swpervisicr.  and  ;ucicial  enforcement.  In noncorr.pl iance sif.-a-
!;;•.«,  :."•.•= r.^er.c..  -sy »> = .-.  C2 er.fcrcs dr. Cri=r ir. cc.r:.  A
s~eci*ic C~d°r  crtviies  t..u.r  ccjrt »it!". A~er7"-i.r* iculits ~ rti."-
cares ry •••••:;:.  to  "-i~e  ~~£  respcnsirl? -.Arty's r:--.-cc-i. 1 iance
w:»h  its terns.  7r.«*r*ior*,  £?A should make every effort  to
clearly crt ic'jlate  c.-.e  response activities required by en Orier.
     3.  Agency's  Heaviness  to Litigate t?-.e Herlts of the Or^<>r
     After the  A-er.cy iss-es an Order, the respondent nay sees
judicial review  tr  stay  the  Order.   Pespcnder.ts may challenge-
their liciility  or  the  appropriateness cf the remedy specified
in t.-.fc C-rser.  Or:  the other  hand, the Agency may promptly seek
tc enforce tr.e Order  in  court.  In light of these possibilities,
the Agency must  be  ready  to  defend the Order in court at  the time
it is issuad.  This means  that the site problem, the reasonaitle--
ness of the required  response, evidence of liability, and the
Agency's response  to  issues  raised by the recipient must  be.
thoroughly documented,  and  that the documentation be organized
and easily retrievable.  The documentation will constitute the
administrative  record for any litigation.
     E.  Competing  Considerations
     The absence of the  factors listed above may argue in favor
of pursuing a  judicial  or  Fund-financed, rather than an adminis-
trative, remedy.   For example, EPA should not normally issue an

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                                                         GSWLR *  5833.G
 crcer i: the necessary respcr.se  actions  have not been clearly

 icertifiec.   I" sccit:c~, A.rs.-.cy er.fcrcs-e-.t rersc-.r
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                                                       OSWEn f 9833.0
                           -18-
ircr.-.-s.-t ,  ar.i Swcr. acticr. w;ii not  otherwise  se  provided

  C T ~° e r s TT 2 " i1? used t c c err. ~ 2 1 v 2 r i c u 2  ° ~ T 5 J ° a ~ = ~ e — — ••=*
       1.   Sjspensicr. cf activi;;es whicr.  e^grsvate  ar.
            existin^ release or substantial, threat  of a
            release (e.g., active use of  a  storage  tank
            judged by tne OSC to be in  imminent  danger pf
            failure).
       2.   Suspension cf activities wr.icr.  interfere  wit-
            Federal removal actions (e.g.,  plart  traffic  ir.
            area cf cleanup).
       2.   Movement or ncn-mcver-ent cf a transport vehicle
            (railway tar.< car, tank truck,  tank  vessel}"
            which is the source of a release  or  subs tar rial.
            threat cf a release.
       4.   Measures to limit access, such  as  fencing.
       5.   Use cf readily available equipment,  owned ty the
            responsible party, to contain or  remove a release
            during the initial stages of a  response before
            the OSC is able to obtain comparable  equipment
            from other sources.
       6.   Dikings; construction, of benns; or removal of
          .  the hazardous substance to an approved  facility.

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                                                           OSWER ft 9833.0

                               -19-

 (Tf.is  list  illustrates  various uses for an Order;  it is not an
 • v *» 1 **C * *'O *»^«» ^o •***•••"  \
     Section 105(a) Orders,  both  in iirjnediace and  non-immediate
 sit^at:c.-.s, r.ust  contain  a  statement notifying the party cf
 EFA's  ajt:.cr:ty ar.c tr.e liability that  may be incurred by
 failure  to  comply.  As  specifically as  possible the Order
 prescribes  the response activity  and sets  the date for its
 completion.  To ensure  enforceacility of the Order, EPA should
 not  undertake its own CEECLA-funaed response activity curing
 the  period  of time given  to  the party to respond,  unless (i)
 such C£".riA-fjncei response  activity beco-r.es necessary cue to
 the  irjwrediacy cf the release  or  threat of release or (ii) the
 Respondent  f;rr..ally and unequivocally staves an unwillingness
 to comply wit- tr.e Order.   In  the event the party  undertakes
 response activity, the OSC should remain on-site to ensure
 that the work is being  conducted  in accordance with the Order.
     B.  Planned Ren-.ovals and  Remedial  Actions
     Planned removal situations are those  that allow several
days or weeks to execute  the response.   Remedial actions, on
 the other hand, are generally  those intended to provide a
permanent resolution to the  release and require a  longer time
and more expensive efforts to  implement.
     As in  the case of  immediate  removals,  an Order is available
 to compel response measures  routinely taken during planned removal
and remedial actions. "Removal activity*  includes  assessment
programs to evaluate the  nature of the  problem, and removal of

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                                                               L« * 9633.0
nateriai  fro?  tf".e  site.   "r.ereiial  actions" are these ccns is*9"t
                  . - — :>._••  u . . „  - •. - . «._ r 3 — C .. --J.
area,  rrer. cr. ; r.g
ZrA's  pos.t;;n  is -that  any  activit/ that ci:e Govsrn^-r. t -i^r.t

jnderta't.e at  a  site  -  fror.  pianr.j.nc a.-.d Enudies to corplete

cleanup-could Us ordered  pursuant  to §106(a).   Of course,  the

issuance of more than one Order  may be  necessary if the cleanup

is performed  in stacos. or  if  additional responsible parties.

fceccme known  to T?A  who siculd participate  in  the cleanup.


.' I . F-rcce cores  for Issuer.ee  cf §106 'a)  Orders.

     CERCi-A designates  the  President as the  prixary official

responsible for taking  response  and enforcement action ur^er

the Act.  The authority to  issue adr.in istrat i v*» orders under  .

$106
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                                                              OSCR « 9833.0
                              -21-
 reCeiegfiie-  t.it  cc.is-.:5-.rr. authority to tr.e Associate E^rarce-
 nen: Counsel -Waste  art  tne  Regional C-vjrsels.  The .AA OS>.-E? .*•.-?
Of fire  c: Ksste  Prsgrir.s  L'r.f rrcer.s.'t (D>.'?i).   TrJe Office cf
waste Proira^.s tr.;orc€.T.eni  will  develop anri issue criteria in
Scpara:r --+ts.~:-=  •••;-.;;.-.  »:il bs  usei to evaluate circumstances
cr.ier v.-.ic.-.  tr.ii azvar.ce  ccnc-rrer.ce req-:rer.er. t -ill re w^ivec
on a Regies  fcy ^ejior.  ^as:s.   Regional  offices are expected to
develop strc.v^ acmir.istrat ive enforcement procrams, on an expedi-
tious srnei-le,  wMch  will  perr.it ther.  to ir:itie*.e ani issue
legally and  technically  adequate administrative orders with
only prior notice  to Headquarters.
     A. Planned  P.errvals  ar.d Remedial Actions
   For planned removals  and remedial actions, Orciftrs ar«
grafted by tne Regional  prograr  office  witn tne cooperatior cf
the Regional Counsel's office.   The draft Order is forwarded
to the Office of Waste Programs  Enforcement for review and con-
currence.  The Regional  Administrators  will usually issue the
Order and provide  prior  notice of the action to the state.
     B .  Immediate Removals
     For those Orders  which require emergency or quick handling,
usually in response to situations warranting an immediate
removal, the following approval  sequence will be used:
     The Regional  Administrator  first must determine whether
to issue an  Order  based  on  communication with the OSC and
        V                                     .             •
consultation with  Regional  Counsel.  The Region then prepares
an order with any  supporting information end electronically

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                                                                    n  >>..,-.-
r.c.-.t  -^; re.'ie-  a.'.; concurrence.  Nwti: icatior,  cc  tr,«-  StatP
of  our  inter.",  to issue the Order shoyM be  ecc-orplisr.ed  crslly.
£-i £-.:icv.-ei  up  -y fsrr-1 writ tar. r.ctics.


     Ajency yslicy is to offer parties to whom.  EPA  has issued a
unilateral Slu-6  Drier an opportunity to confer  with  the  Agency con-
cer:.ir-  the a; tr-pr iste-.-3sc- cf its terr.s anii  its applicability tc the
recipient.  The  cor.ferer.ee will help E?A ensure that  it  has
basei  its Crier  or ccr'plete ar.i accurate i-.frr-r.a t ior.  c~.'l help
EPA and  Respcr.ier.ts re».c.-. & co-r.on' ur.ierstanii nc of  ho--  the
Order shculi  is  ir.ple--s~.tei cr moiifiei.  T.-.e procej-res for
exercisir.- this  cptic- -are cor.r-.yr,icated to  respondents through
the text cf the  Orier itself.   (See sar.ple  Order, page A of
Appendix E. )
     A.  Planned Bencvals and.Rereiiel Actions
     Each Order  will specify a date when the Order  becomes
effective.  For  actions  other than immediate removals,  the
effective date should ordinarily be twenty  calendar  days fron
the day  the Order is received by the Respondent.  Certain Orders,
such as  those  requiring  that long term remedial actions  be  taken,
may warrant a more extensive examination of the facts.   In  such
cases, the Order may specify an effective date more  than twenty
days removed  to  permit the Respondent an opportunity  to  discuss  the
Order with the Agency beyond that accorded  by the procedures set
forth in Subpart C below.

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                                                               °SWER * 9833.0
                               -23-

 t.-.e  Crrer,  tr.t  =es;--.rc- -t -_•«: rrcvije vritter.  r.ct if :r = : ;r-
 tc t r. s  £ r A.  ciricisl  1 1 E t e i i r. the Order v i • h. i r.  ten  calendar
end  held  «s  S.?TT.  :-.-: •.-•?sf ter as rrertiratle. but y-ri'j.-  tc
•fiys  frr— t."'.?  dit* t.v.e-.0rd?r -as receive.  t'.f the Ses~cncer.t.
      B .   £rer-e-rv Sifjetlt-s
      The  applicatie ti.r.e periods for the effective  date  end
f:r  rer-es:: r.-  a  corfr re-re r.sy re sr.crtened ,  (r.-.,  tr-  "I
and  •; r hs^rs respectively:, cr t.^.e conference  procec'-jres  rev
ce eliTirstcd e r. t i r e 1 v ,  ; f *". e iTTeiiccy cf the hacard -'csej
Cy e  site a-.c c'l.-ier s.r rc-.-.d: r.r circur.stances.se warrant.
*r the frrrer situatiir. ,  the Order shc_-ld  permit the  Respcr.de-.t
tc req^es.t a ccr.ferer.ee  crally, later followed by written
not if icat :cr..
      C .   Conference Procedures
      The  conference will normally oe held  at the appropriate
EPA Regional cff ice and  will be presided over  by the  Regional
Administrator's designee.   However, other  arrangements may be
agreed to for the  sake  of  convenience to the parties.  At the
conference, EPA should  be  prepared to provide  the Respondent
with  information  sufficient to explain the basis for  the  Order
and to promote  constructive discussions.   The  Respondent  will
have  the  opportunity  to  ask questions and  present its  views
through legal .counsel  or technical advisors.   The schedule and
agenda for the  conference  will be left tc  the  discretion  of
the EPA official  leading the conference, as long as the  Respondent

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                                                              OSWER # 9833.0
r*.s:  be  rrsrsrec,  s:g-.ei ry v.= Are.-.ry official w
              A  description ci' the majcr ir.q-jiries marte ani
              views  offerer hy t.u.e Respondent contesting
Ir ace:::;",  tr.e  r-"e£---"5 official must prepare a state-e-.t
• •.:;• ar'iresS1?;  t.". e  sir~ifiC2~t a r~-'~tf r. ts raissi iv  t.u. e  Peszc"-
 e~t a~.  wh ii^.  rec~. T***.   «'.u. t.^e  an  .**. ^»'  -w.  De    :u.
      .  MCC: f i ?a tier. .  revocstisr,  or Stay of the Orc'er
     Based upon a  review of _tfte file upon which the Order
initially was based,  any probative ir.f orr.ation or  argument
proffered by t.-.e Respondent following receipt of the Order,
and the' recommendation  of the presiding official,  the  issuing
official may modify  or  revoke the Order.  Any modification  to  the
Order must be comrr.ynicated to the Respondent as part of  a copy of
a written statement  containing the elements listed in  Subpart  C
above.  The original  should be kept in the Agency  files  along
with the evidence  supporting the order, copies of written
documents offered  in  rebuttal by the Respondent during the
        \
conference, and a  copy  of the request for a conference.
     The issuing official may also 'stay the effective  date  of
the Order if the conference process could not be completed

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                                                             OSWER * 9833.0

                                -25-
 -::.-.;.-  :.-.=  sprc:::5:  tir.e  per:rc.   3efcre s-ostartially mccifyin:
 cr  r*vcf.;.-.;  a-  Irtrr,  the  :ss.:'.7  o*::r:*l r..-st ccrs.lt w;t.-.
 the cp;rorria:r  Heacc-erters cr Periors;  cour.sei er.rl ?w:a:r. the
v:::.  rrctrd.re  If  Crder  Is  S;t Cteye:
       In  the  evert  t.^e  party to whoir t^e Order is issyed does
not  corrply with its  terms,  the Agency nust quickly riecide
whether  to atte-pt to  enforce tne Crier DV referri-.r. the cas«
to the Sepsrt.^e": cf J_s:ice  for filing of a scit to force
compliance, cr whether tr  •jr.certar.e clean-jp cf the s:tc ty
Lisr  cf ri.~:iA  f>ncs, an: then file sjit ageirst the party fnr
re i.T:i.urse.-er.:  of  the costs  expended plus statutory penalties
for  failure to co-ply  with  t.-e Order.
     The ce tern i.-.at ion of  which action to pursue depends
on the type of response  action to fce taken.  Ooviously,. if an
ir.r.ediate  rercval action is required ry the hazard at the
site-, EPA  will clean up  the site and attempt recovery of costs
and penalties  in  a suosec,uent recovery action.  The same, course
of action  applies to a planned removal where the removal actic-.
must be  quickly undertaken  and cannot await the filing of a
suit.  However, planned  removal or remedial responses which
require  an extended period  of time to perform, and in which
initiation of  action may be .delayed for a brief period without
jeopardising human health  and the environment, may allow sufficient
time for the filing  of a suit to enforce the Order, or at least
that portion of the Order  which calls for the planned removal or .

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                                                             OSWER * 9833.0
           cticr  tr r»
      <-.. I. - ..  * .
p;r:y  ts  pcrrc-r^  '.•'.  TcSired r:spr~sc- activity.  T.-.e drc;sion c:
w.-iich  opt:or.  :c pjrs'-e if.  initially tc be- T.ace by tne Pecional
Ad.nir.istretcr,  in t.^.e sarte r.anner sr.d using the sa-e procedures
as previously  prescribed for any other enforcement action.  The
Regional  Administrator's recr-\~end?. t ior. is then forwarder tc
Headquarters  fcr  action.

IX.  Net? CT. P^rrss1?  a-.c 'Jse cf
     T.-.e priicy and  procedures set fcrth herein, ar-: internal
office prcced-res  adopter  pursuant heretc, are intended solely
fcr t.ie'guidance .of  attorneys  and other erplcyees of the'L'.S."
Environnental Protection Arency.   They are not intended to ncr
do they constitute rule-making Dy the Agency, and may not be
relied upon tc create  a  right  or  benefit, substantive or pro-
cedural,  enforceable at  law or in equity, by any person.  The
Ajency may take any  action which  is at variance with the •
policies or procedures contained  in this memorandum, or which
is not in compliance with  internal office procedures that may
be adopted pursuant  to these materials.
     Attached to this  memorandum  as Appendices A and B are
     •  A sarr.ple letter  to a state providing notification
       »
        of the Agency's  intent to issue a $106 Order; and
     e  A sar.ple Order.

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                                                                OSWER * 9833.0
     I: you r.sve  ar.y quest :or.s  cr -rc-le-r.s  concer~:"7 a-;;-
                          ._1«..,  _. I 1
                        f  ^ *•••»—  WWKB
•:3si-i-J:: r:  r-e Office zi  ^-L'.

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                                                         OSWER.* 9833.0
                           Append;:-: A
                   STATE serif:cAr:c.'.- _;??£?.
Scare Aje.'cy
       -      ----
Dear *r. Jones:

     Enclosed  for  your irforr.aticr. is a cc?y of  an  order
fstanped "D:-.AF7" and  "COST IDENTIAl" •  that t^.e Agency inte-.-s
to :sswe en  cr afrer   t' : & ~. e .' _ ,  to tr.e Xi'2 Ccr.par.y, purs-ar.t
to Section IGofa^  cf  tr.e Ccmpre.^eriS i ve cnvironrertal Sespcr.s?,
Compensacicn,  and  liatiiity Act of 1960,  (42 USC 56C6).   The
crder re-uires  certain act;vities cc ;;« t£Ker. at :r.e ccr.pary's
s:te located at  .'I sea tier.] .   Please refer  to tne enclosed
espy cf the.  prcpcssc  crc'cr for the specific acticns reruircd
cf tr.e ccr.par.y  a.-.J the tir.e within wr. icn  such actions r.;:st
ce ta.
Enclosure

cc:  Honorable  J.  Smith, Governor

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                                                          OSWER # 9833.0
                              Appendix 3
 In The Matter Of                        )
 •I.N'ane of  Perscr. ,                        )
 Finn or  Corporation)                   )
                                        )    Docket No. _
 Proceeding Under Socticr:  106 (a)  cf  the 1
 Cerrrer.ens ive E::vircr.T.e.-.tal Response,   ;
 Compensation and Liaoil'ity Act  cf  1980 )
 (42 U£C Se:t:cr. ?£C5- a ) ) _ )                  •


                                cars?.


     The  fc Hewing' Crier  is issued  on  this date to (insert r.g-"?
 ane. address of person,  firr. cr  corporation, along wit.", facility
 na.Tie cr pi'ace c: ousiness if  tne- Respondent is not the owner
or operator) (""Respondent (s )"),  pursuant  to 5106 (a) cf the
Comprehensive Environmental Response,  Compensation and Liasilitv
Act cf 1960 -(CESCLAJ  .{42 USC  9606(a)), by authority delegated tc
 the undersigned ty the  Administrator of the United States Envi-
 ronmental Protection Agency (E?A).   Notice of the issuance of
 this Order has heretofore Seen  given to the State of    m       .

     There is an imminent and substantial endangerment to the
 public health and welfare and the  environment due to a (threat
 of a release) (release )  of (a) hazardous substance (s) as defined
 in $101(14) of CERCLA  (42 USC 9601(14)),  from the following
 location  (the "Facility"):

                (insert legal description,  if known;
              otherwise, use  street or route address)

.This order directs you  to undertake action to protect  the public
 and the environment  from  this endangerment.

                     FINDINGS  AND CONCLUSIONS

 1.   (Choose one or  more  of 1A  through IE,  as appropriate under
      the factual situation of  the  case.   Do -not include headings.)

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      t \'.r r e s c r. > C«».". e r i - .-.espor. c=n t  is  no-,  a DC  has been since
 Cd terr.ir.e.3 :ro~, tsc-rce c: inionr.ation i i .

 1 9 •  ' ( FCTT*? T rv"? r /T~ 9 T? * cr ) — P-eSw'^r'iei^ w»s,  *—«••">
 :;   ',  •.--.:.                  1"  '.    :-    ---"''-

c:  t.-.c  Facility.  as cr-£rr.;r.ci frcr.  (source  «*  ;nf erection '•.
D «T i T! ~  t ^ * ~  1 1."~°   'ir.srcc'jE r v hs t ** *t cs s /  j««»» •.•••»*••• . ^ -,c c.  ^af^
r.ereir. ,  WTr2 c:sp;ssrc c: fci tr.e :sc;^:ty.   P.espcr.cer.t  srlc cr
c*r.6r«'iss  trs.'.cfsrrsi 3~z rcr.vsysi ths Taciiitv  to
cr. _ , 15 _ , acccriir.j tc (prcperty  recprcs/T^
1C.  ' I (Generator )  - Respondent (disposed of)  (arrangedr  by con-
tract  or  agreement, for the disposal or transport  tor  disposal)
of hazardous  substances ac the Facility as determined  frorr
(source )'.
1Z .   [ : Transporter )  - Respcr.c'er.t c.w.cse to accept
substances  for  transport 'tc, and disposal at,  the  Facility  as
ce:e~ ;-.ec  frcr (scarce;].

IE.   [(C'ther  Party)  flrsert reasons why crderei ecr:c~.s  are
necessary  to  facilitate the abatement of the hazard,  prevent  the
a;;ravst;rr: of  tne hararc,  or otherwise protect th
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                                                          OSWER « 9833.0
                               --
           observed  flowing approximately forty '40) yards
           i-.tc  Crystal  Crrrx.   Ve-et5t:rr; ha-Tb^e- kille-J
           • "  •• •* o  ^"Ci»i*'f/  * ^ S  » C 1 ^ C "**" ^ ** ** £ 3 * ^ ^ C'«i £ £*j^c*»*»*»Ae


                     .'list  hazardous  substances-


     At  the  tir.e  cf  the  inspecticr.,  	 sar.pies cf the drur.necf
waste, samples  of  the  leachate  from  the Landfill area,  and	
sar.pies  of  (soil,  surface  weter,  eroundwater, air, etc. )  were
obtained  by  the  inspector(st.

4.   An  analysis  c*  the  sar.?]es taken at the'tir* cf the ir.spec-
ticr. disclose:  cne pres-er.ce  at  the  Facility cf the fcllr-vir.-
substances  in  the  concentrations  set forth:

            (list  hazardous substances and concentrations
           confirmee" by  analysis  -  men continue with
            following sentence)

     Th»so substances  are  "hazardous substances" as defined in
§101 (i 4)  of C~!RCLA, and  are  sut.;-ect  to  the terr.s and provisions
of tnat Act.            •                                   ...

5.   The  hazardous subs-tances described above are treated  or
disposed  of at the Facility  in  such  manner that they (are  being!1
(threaten  to be  )  released and  discharged from the Facility into
the (soil, groundwater,  surface water,  air,  etc.) and other
parts of  the environment.

6.   (Describe population  or environment at risk and route of
exposure).  Exposure to  said hazardous  substances may cause
illness,  disease,  death  or other  harmful effects to plant  and
animal life and humans.                                 .

7.   The  (release) (and/or)  (threat  of  release) of said hazardous'
substances may-present an  imminent and  substantial endangerment
to public health  and welfare and  the environment.

8.   In order to  protect human  health and welfare and the  environ-
ment, it  is necessary  that action be taken to contain and  terminate
the (release)  (and/or) (threat  of release) of hazardous substances
from the  Facility  into the environment.

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                                                           OSWER * 9833.0
fact,  it  :s nerery  urcarec  anc iirectea tnat:

      ;::;?£ -  the  resscnze-.t r.ay if  ~--'-:r?c to u-'Oertak*
      » «»V  rSET**""c
-------
                                                                 OSWER t 9833.0
      .-.esz~".r-3"•. is  sl'-'iso^  t.u.*t willful  violation cr  failcrs  ^r
v - c . . . •  . ,»  _.__•.. ._,_..• • L.  *L:C  -- _ j _-, _   ...  .... —-_»:«- 4. u . _ ^_ . c  _ . . .
3 . '. Z . 0 . £ '• '• C r '.• S-s i  ~ 5 y  i - C J T C t  ';'*'•* '•* "' Z* s *  «> *•<••"/• J »  OT  '- C. .*• s- 1. - /
(•ii I'.S.C. ?56C 7 f c ) ' 3 ) ) , to  liability  for punitive  danag»s in  ar
a.-^ounc up  to  tnrj  ry r.ar.c  '.- th*  City of
                   , a 3  ft: tie  cf  cut.1*..;:-; zee £.= A. :55_:-.;  r:'f :;:.el :
or  tr. :s        t!iv o*                    ,  19
                      INIT£^ JsTATir. E.V.'IRONMEN'TAL PROTiCTirN

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to
00

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                                                             OSVER * 9834.0
           UNITED STATES ENVIRONMENTAL PROTECTION AGE'
                         WASHINGTON-  DC  2046C
                             JAN 26 ISc4
 KEMP P. AND'.'?.

 SUBJECT:


 FROM:
 PURPOSE
          Releasing Identities of Potentially Responsible
          Parties in Response to FOIA Requests
                                    /        s\
          Gene A. Lucero, Director  (^>tyfJL r\.
          Office of waste Programs Enforcement
           Kir* F. Sniff
           Associate Enforcement Counsel
           Office of Enforcement ani Compl^nc'e Monitor in.:
                     Waste .M.a.-.age.i>ent Division, Regio-.s  I, v
                    Office of Emergency & Remedial Response, Re;ior. i:
                                                         Region III
           Directors
           Director,
           Director, Hazardous Waste Management  Division,
           Directors, Air & Waste Management Division,
            Regions IV, VI , VII ,' VIII
           Director, Toxics & Waste Management  Division,  Region  IX
           Director, Air & Waste Division, Region x
           Regional Counsels - Regions 'I - X
      THIS mervorandur. states tne policy of EPA  for  responding  to
 requests under the Freedom of Information Act  (FOIA)  for  the
 names of potentially responsible .part ies  (PRPs)  at CERCLA sites
II
      BACKGROUND
      On March 30, 1983, EPA  issued guidance on  releasing  the
 identities -of potentially responsible  parties under  CERCLA.
•-This guidance provided for case-by-case  review  and discretionary
 disclosure of the identities of PRPs  in  certain limited circum-
 stances. In general, before  the March  30 guidance, EPA did  not
 release the names of PRPs in response  to FOIA requests.

      On June 28, 1983, the Federal District Court  for the
 District of Columbia decided in Cohen  v. EPA that  EPA had not
 met its burden of establishing that disclosing  the  identities
 of PRPs would harm the Agency's enforcement efforts. The case
 involved EPA's decision to withhold the  identities of potentially
 responsible parties as provided by FOIA  exemptions under  5
 U.S.C. SS552(b)7(A) , 7{C), and 5.

      The court granted the p.laintiff's motion  for  summary
 judgment on finding that:

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                                                            OSXL.-. « 96 3-;. G


                               -2-

      1.  ~:r  Ixerpticr  ''A.  -- retire letters are investigatory
 records  compiled  for  law enforcement purposes,  but EFA did net
 establish  trat  disclosure cf  t.-.e  retire letters  -o-_l^ har- the
 investigation;

      2.  For  Exemption  "MO  -- the identities cf  t.-.e PP.Ps
 whc  received  retire  letters does  ret fall  into  the caterer:1 ef
 a protected  privacy  interest; and

      3.  For  Exemption  5  --  notice letters  are net  predecis ional
 documents .

 III.  POLICY

      As  a  res-it  cf  tne  Cohen decision  and the  Administrator's
 policy cf  conducting  business in  a more open atmosphere, and
 in lijht cf  the resource cera.rcs  involved  in casc-r:y-c2s =
 r?v;ew ef  the nar.es cf notice letter recipients, the Varer 3-",
 1 ~-i 8 3 , guidance  r.a = beer  reevaluatei.  Tne  new g -: .: a r ro :=  se :
     1.   Ir response  tc  a  "CIA  request,  EPA will  release the
names c:  ?R?s  wr.c  have  received  notice letters ao~;;t a CE.-.:iA site

     2.   An exception tc the  policy cf disclosing tre nar-es ef
???s WTO  received  notice letters may be made only when E?A
deter-:-.es tr.at disclosure c:  a  particular name w.ll cause such
interference . w: th  an  ongoing  enforcement proceeding that
discretionary  disclosure is clearly unwarranted .   If I:?A deci-es
to withnold the na~e  cf  a  P'F.?  wr.o received a notice letter, EPA
must sup-pert the conclus icn • tha t disclosure will  cause substantial
hsrr. to t.-,c- l^w erf erce.-.ent proceeding in writing w;tn concurrence
by the Regional Counsel.  The  written documentation .-.ay not
conrsist of general  statements;  it must include the particular
facts relating to  the specific  PRP and site that  led to the
conclusion to  -•ii.-.h
     3.  The names  cf  parties  who have not yet received 'notice
letters may be prececisional  and therefore exempt from disclosure
under Exemption.  5 of  the  FOIA.  These names also may be exempt as
investigatory records  under  Exemption 7(A).  However, in its
discretion EPA may  release  this material.

     4.  Although EPA  usually  will release the names of PRPs
only i-n response to FOIA  requests, the Agency may elect to
release the information on  its own initiative in appropriate
circumstances .

     5.  Disclosure of the  names of PRPs and the names of sites
does not constitute a  waiver  of EPA's right to withhold other
information developed  for an  enforcement action that EPA determines
is exempt frcn disclosure.   Even if information is exempt from
disclosure under Exemption  2,  5, or 7 of FOIA, EPA has discretion

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                                                         OSVCR e 9634.0
                              -3-


to release the inf ormat ion; however, EPA may exercise  its discretion
to release the inforr.ation only after the appropriate  Regional Counsel
reviews the information to ensure that disclosure will not interfere
with an enforcement action.

IV. PROCEDURES.TO IMPLEMENT POLICY

     EPA Headquarters or a Regional Office should follow the
procedure below to respond to a FOIA request for the names of
FR?s or otr.= r  i r.f orr.at icn  ar-out a CERCLA site.

     1.  Quality assure the list of PRPs regularly and particularly
before sending notice letters to PRPs for a site.  Perform an
in depth quality assurance of PR? lists every 6 months.  Headquarters
will hold Regional Offices accountaole for inadequate  qjalitv
assurance c: PR? information.

     2.  Immediately notify Headquarters whenever a Regional
Office decides, in accordance witr.  tne gjidance  in Item ITT.I
aocve, tnat disclosing  the p. a Tie of  a PR? will cause substantial
ham to an enforcement  effort.  Regional Offices also  snould
notify Headquarters if  withholding  a name is no  longer required.

     3.  If additional  information  is- requested  aoout  a PR? or
a site, consult witn the Regional Counsel for a decision on
whetner disclosure will interfere with enforcement at  the site.

     4.  Suomit the list of names,  or nanes and  information, to
the requester with a brief explanation of now EPA iefinc-s PR?
for -purposes of sending notice  letters.

     5.  Include with the  list  of names trie following  disclaimer':

         This list represents EPA's preliminary  findings on
         the identities of potentially responsiole parties.
         EPA makes no assertions that parties on this  list
         are liaole for any hazard  or contamination at any
       "  CERCLA site.'

     6.  Use the term "-potentially  responsible party"  in
responses to FOIA requests if none  of the parties named in  a
notice letter has been  found liable by a court.

V. FIRST RESPONSE TO FOIA  REQUESTS

     Ten working days after the date of this policy, Headquarters
will respond to the current backlog of requests  for all PRP  names
with the quality assured list.

     Any Regional Office that intends to withhold any  PRP names,
as provided by Item III.2  above, must have completed  the  required
documentation and notified Headquarters before  the  FOIA response
date. If you have any questions about this policy,  contact
Susan Cary Watkins (FTS 382-2032).

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   \         UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                       WASHINGTON. O.C 20460
                                                           OSWERt 9833.1
                           F£B 2 I 1984
                                                        O»»iCI 0*
                                               • OLIO WASTI AMD IMtMOINC* MS»O«SE
MEMORANDUM                                         •  .

SUBJECT:  Issuance  of Administrative Orders  for Immediate Removal
              i ons
       T-Or^^-:;=rV\>c
FROM:  ^ALee M. ThdW&s
          Assistant Administrator

TO:       Regional Administrators, Regions I-x
          Air & Waste Management Division Directors
          Regions  III,  IV, VI, VII, VIII, X
          Waste Management Division Directors, Regions  I, V
          Director, Office of Emergency and Remedial Response, Re;;on II
          Toxics and Waste Management  Division Director, Region ix
          Environmental Services Division Directors, Regions  I - x
          Regional Counsel, Regions I-X


     This memorandum sets forth guidance on issuing Administrative
Orders for immediate removal actions under CERCLA.  This guidance
should be.used in conjunction with the recently  issued  Guidance .
Memorandum on Use and Issuance of Administrative Orders under         '
Section 106(a) of CERCLA dated September 6, 1983.

     Since becoming the Assistant Administrator, OSWER, I have
sought to implement a "balanced" CERCLA program which uses both
the administrative and  civil judicial  enforcement provisions  of
the Act—as well as the Fund—to secure clean up of hazardous
waste sites.  One of my primary enforcement goals is to increase
the use of Administrative Orders for immediate removals.  Orders
are particularly useful in immediate removal situations, since
they can be issued quickly, can require discrete segments of  work
(e.g., surface cleanup) and carry the  threat of additional damages
and penalties in the event of non-compliance.

     We estimate that Administrative Orders may be appropriate for
a significant percentage of immediate  removal situations.  Increased
resources will be provided to the Regions, and I expect the Regions
to devote resources to  accomplishing this goal of increased
Administrative orders for removals.

     In addition, the Regions must develop a satisfactory
organizational structure if the Administrative Order program  is to
succeed.  The organization of enforcement personnel varies among
the Regions.  The'majority of the Regions keep their "remedial"
and "removal" personnel in different divisions.  Since  CERCLA
enforcement has (until  now) concentrated heavily on remedial
sites, most regional technical enforcement personnel have been
assigned to the remedial response units  (generally,' the Air and

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                                                          OSWER « 9833.1
                                -2-


 Hazardous Material  Divisions).   Personnel  responsible  for  immediate
 and planned removals have  usually  been  assigned to the Environmental
 Services Division which, as  a general rule,  has not been assigned
 enforcement personnel.

      Obviously,  the ability  of  a Region to implement this  new
 policy requires  both close coordination among the immediate
 response staff and  their colleagues  in  the technical enforcement
 and regional  counsel offices and an  organizational structure
 capable of  developing and  issuing  quality  orders.  Regions that
 do not currently dedicate  technical  enforcement staff  to their
 immediate removal program  should assure that appropriate personnel
 are in place  in  the technical enforcement  office to implement tnis
 policy and  to handle the workload.

 I.    BACKGROUND

      CERCLA identifies  two types of  response actions for which the
 Fund  can  be used: removal  actions  and remedial actions. The
 National  Contingency Plan  (NCP)  further refines the former category
 into  "immediate"  and "planned"  removals and  describes  the  process
 and procedures for  proceeding witn these forms of response.  (See
 Federa*  Register  31180; July 16, 1982). Please refer  to the attached
 appendix  for  an  outline of the  relevant CERCLA and NCP provisions
 regarding removal activity,  Administrative Orders and  enforcement.

      Because  of  the  large  number of  sites  which pose a health hazard,
 the Office  of Emergency and  Remedial Response (OERR) defines the
 category  of immediate removals  according to  the immediacy and
 severity  of the  hazard  to  the public health  or environment.  These
 categories  establish a guide for the purpose of assessing the
 length  of time within which  the  Agency  must  respond to the event.
Agency  response  to  situations which  require  immediate response
 (e.g.,  threats of fire, explosion or spills) normally takes place
 in a natter of hours or one  or  two days at the most; Agency response
to other  situations  (e.g., rusting barrels that have not yet
begun to  leak, holding ponds that may overflow with the advent of
the rainy season) normally takes place  during a period which may
range from  a  week to a month.

     This guidance  is most applicable to the latter situation; i.e.,
the Regions should  consider  issuing Administrative Orders  in situations
when there  is at least one week  between the time the On-Scene
Coordinator (OSC) determines that an immediate removal is warranted
and the time  that actual on»site response  must begin*

     Administrative  Orders are  a useful enforcement tool in these
types of  immediate  removals  situations,  for  the following  reasons.
First,  they encourage private party  response, particularly since it

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                                -3-


 is  OSWER  policy  to meet,  if at all possible, with responsible parties
 after the Order  is issued if a meeting is requested.  The results
 of  an OWPE  analysis of 49 completed immediate removals indicate
 that the elapsed time between the request for funds and the start
 of  site response ranged  from eight days to more than three weeks
 for 24 of the sites.  This clearly indicates that there is time to
 issue Administrative Orders in appropriate situations, and the
 process described in this memorandum can be implemented in as
 little time  as a week, if necessary.  Second, removals require
 discrete units of work (e.g., barrel or contaminated coil removal)
 which makes  responsible  party compliance and Agency compliance
 monitoring easier.  Third, the costs of immediate removals are
 generally moderate; this  increases the probability of private
 party compliance.

     In the  event of non-compliance with an Administrative Order,
 the Agency is prepared to quickly initiate a Fund-financed response
 and seek fines/treble damages from the responsible parties.  Since
 the treble damages will  be based on the Fund dollars expended, these
 situations are particularly amenable to establishing treble damage
 claims, which the Agency will seek to recover in its $107
 cost recovery actions.   (The average obligation for 110 prior
 immediate removals undertaken by the Agency was approximately
 $275,000).   Issuance of  Administrative Orders for these situations
 also may improve the equitable position of the Agency in subsequent
 cost recovery cases.

 II.    CRITERIA FOR ISSUING ADMINISTRATIVE ORDERS

     First,  of course, the Agency must meet the legal threshold
that an imminent and substantial endangerment to public health or the
environment  may exist.1   Information which can be used and evaluated
by the OSC or his supervisor to make this determination include:

       1. Notification in accordance with CERCLA $103 (a), (b) or (c)
       2. Investigations by government authorities conducted
          pursuant to CERCLA $104 (•) or other statutory authority.
     Agency must be able to properly document and justify both its
assertion that an immediate and significant risk of harm to human
life or health or to the environment exists and its choice of the
ultimate response action at a site in order to be able to oppose a
challenge to the Order and to successfully litigate any subsequent
cost recovery action.  Adequate documentation consists of photographs
samples, monitoring or other documented site analysis.  The Agency
should follow chain of custody procedures to maintain the integrity
of samples taken at the site.  Please refer to the Cost Recovery
Guidance, issued August 26, 1983  for more detailed guidance.  The
Revised Superfund Removal Guidance to be  issued in late February
1984 will also provide additional guidance on immediate removal
assessments.

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                                -4-

        3.  Notification  of  a  release  by  a  federal or state permit
           holder  when  required  by the permit.
        4.  Inventory  efforts  or  random/incidental observation by
           government agencies or the public.

      If the  facts reach the  legal thresholds of CERCLA 5106,
 several policy  criteria for  deciding whether to issue an Order
 for  an  immediate  removal should be considered.  The first of
 these is the amount  of  time  available before site response must
 begin.   This determination will usually be made by the OSC.  An
 Order may  be appropriate if  there is a minimum of one week available
 for  issuing  the Order and meeting with  the recipients (see
 further below)  between  the time of the  decision to seek funds
 for  the immediate removal and the initiation of on-site response.
 (Of  course if an  order  can be issued-in less than a week the
 Regions are  not bound by the 'one week minimum". However, the
 Regions should  always attempt to have 48  - 72 hours available
 for  the recipients to request and conduct a conference.)

         A  second  policy criterion is the  number of potential reci-
 pients  of the Order and their financial viability.  There should
 be a  'manageable'  number of  responsible parties and they should
 be collectively capable of undertaking  site response.  The Regions
 will  use their best judgement to decide what constitutes a
 •manageable' number of  responsible parties and assess the capability
 of the  parties to undertake  the response  for any individual
 immediate removal  situation.  (For a more lengthy discussion of
 criteria to  consider when issuing an Administrative Order, please
 refer to the Administrative  Order guidance.)  When there is a
 large number of potentially  responsible parties, Orders need not
 be issued to all  of the parties.  In this type of situation the
 Region  should issue the Orders only  to  those parties most likely
 to comply.   The Region,  however/ is  not precluded from issuing
 Orders  to all the  parties if it so desires.

      These cr'iteria are to be used as general guidelines for deter-
mining  whether an  Administrative Order should be issued for an
 immediate removal.  The varying factual circumstances presented
 in any  potential  removal action mandate that each Region conduct
 this  necessary factual  analysis to decide the appropriateness of
 an Order.

   III.  PROCESS FOR ISSUING ADMINISTRATIVE ORDERS

     The timely development  and issuance  of Administrative Orders
 for  immediate removals  will  require  effective coordination among
 the OSC, technical enforcement personnel  and the legal counsel
 in both  the  Regions and Headquarters.  OSWER will not dictate how
 the Regions  must  organize or adjust  personnel in order to
 accomplish this task, but it will expect  the Regions to have a
 system  in place which is capable of  implementing an administrative
order program for  immediate  removals.

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                                                          OSWER « 9833.1
                                -5-

      The  procedures  for developing and  issuing orders follow;

      The  decision by the OSC or his superior to request funds for
 •n  inaediate  removal also triggers the  process for deciding whether
 to  issue  an Administrative Order.

      The  OSC  will inform the technical  enforcement branch (or other
 appropriate enforcement personnel if no separate branch exists)
 and the Regional Counsel that a request for a Fund-financed immedi-
 ate removal is  being developed.  Appropriate personnel in OERft and
 OWPE  should also be  informed of this action.  While the OSC and his
 staff  prepare the 10-point document,2 technical enforcement personnel
 and the Regional Counsel should begin to identify responsible
 parties and assess their financial ability to conduct site cleanup.

      The  OSC  or the Regional Counsel will attempt to orally contact
 (with  written follow-up) potentially responsible parties in order
 to secure private-party response in lieu of the Fund.  While previous
 Agency policy was to proceed with Fund-financed response if the
 responsible parties refused to act, the Agency will now issue
 administrative orders in appropriate circumstances before initiating
 Fund action,  so long as the site does not pose an unreasonable
zisk of harm  to the public health, welfare or the environment.

     Regardless of whether a responsible party agrees or not to
 undertake the removal, development of the 10-point document should
 proceed as usual.  However, the OSC and technical enforcement staff
 (in consultation with the Regional Counsel) shall apply the criteria
 outlined  in Part A (above) to' recommend to the Regional Administrator
 whether to issue an Administrative Order.  The decision to issue
 the order rests with the Regional Administrator, subject to the
 current delegations.

       If  the  Regional Administrator decides to issue an Administra-
 tive Order, the Order will be drafted by technical enforcement    ' .
 personnel 'with the advice of the Regional Counsel.  The technical
 information contained in the 10-point document will normally
 provide the basis for the Order's "Findings of Fact* while the
 Agency's  intended response actions will serve as the remedy the
 recipient is  required to implement.
'Requests for less than $250,000 can be approved by the Regional
 Administrator while requests for more than $250,000 require the
 approval of OERR.  (It is anticipated that within the month, the
 Regional Administrators will be delegated the authority to obligate
 up to $1 million for removal actions.) The ten point document
 itself must justify its cost estimates and be consistent with the
 NCP.  With the  issuance of  the Revised Superfund Removal Guidance,
 the 10 point document will  become  an Action Memorandum.

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                                -6-

     Since Administrative Orders will normally be issued in situa-
tions  In which site response is not required for at least one
week,  OSWER policy is to provide recipients when possible an
opportunity to meet with Agency personnel to discuss the terms of
the Order and the means for compliance.  Therefore, the Order
should include the following provisions:^

          1. A statement of the imminent and substantial danger
             pursuant to $106 of CERCLA and the risk of harm under
             S300.65 of the NCP.
          2. A statement of the authority of the issuing official
             (normally the Regional Administrator)  to issue the
             Order and why the recipient is liable  under 5107.
          3. The steps the recipient must take to comply with the
             order, (following the provisions of the
             ten-point document in order to be as specific as
             possible).
          4. A mandatory timetable for performing and completing
             the response.  (The timetable should include at least
             one short term interim deadline so the Agency will have
             the ability if necessary, to demonstrate non-compliance
             before the project completion date.)
          5.-A provision informing the recipient that his duty to obey
             the terms of the order takes-effect 72 hours after he
             receives the order.
          6. A provision informing the recipient that he may orally
             contact the Agency to request a conference on the
             Order. The recipient must follow up his oral request
             i n wr it ing .
          7. A provision specifying a date certain  by which responses
             (either oral or written) to the Order  must be received.
          8. A provision which states that EPA reserves the right
             to undertake the action if emergency circumstances
             dictate such action 'and that such action in no way
             relieves the parties of responsibility for the costs
             of such actions.
          9. A provision which requires: proper chain of custody
             procedures to be followed for any testing and sampling,
             adequate recordkeeping of activities (to records may be
             used as evidence in any future enforcement case),
             cooperation from employees of any contractor who engages
           .  in site activity, and availability of  such employees
             to the U.S. in preparation and trial of a subsequent
             enforcement case.
3Refer to the general Administrative Order Guidance for examples
 of model orders and conference procedures.

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                                                           OSWER « 9833.1
                                -7-                           . .

      Under  •  separate  delegations memorandum to the Regions, the
 concurrence requirement will  be waived  for all Administrative
 Orders  for  immediate removals with obligations of $1,000,000 or
 less.   Within two  weeks of  issuance of  the Order, the Regions are
 to send a copy of  the  final Order to OWPE.

      As a matter of policy, in order to increase the likelihood of
 compliance, the Agency encourages the convening of a conference
 with  the recipients of an Administrative Order.  Since
 Administrative Orders  will  generally be issued for immediate removal
 situations  which do not require response in less than one week,
 the Agency  will normally attempt to hold a meeting with the recipient,
 if  requested  by the recipient.  The conference should be
 convened on an expedited basis (e.g., within 72 hours after the
 Order is issued) if the recipient orally requests the conference.
 However, the  Agency retains the right to "waive" a conference
 if  immediate  response  is warranted because of deteriorating conditions
 at the  site.   The  Regional  Administrator shall have the authority
 to decide whether  to eliminate the conference prior to or following
 the issuance.of the Administrative Order.  If the Regional Administrator
 waives  the opportunity for  a  personal conference, a regional
 representative, must at least give the  parties an opportunity to
 be heard by telephone  before  the effective date of the Order.  In
 .•;eneral , conferences concerning removal actions should be used to
 clarify the requirements of the Order rather than as an opportunity
 to negotiate  the requirements.

     The Agency must create a good administrative record of its
meetings with  the  recipient of an Order for either enforcement of
 the Order or  cost  recovery  after a Fund-financed cleanup.  The
 Agency  participants should prepare a written summary of the
 conference containing:

         1. The' date and participants.
         2. A summary  of the  significant issues raised and arguments/
            data used  by the  recipient  to contest the Order.
         3. The result of the conference (e.g. agreements reached
            with the recipient, indication from the recipient of
            an  unwillingness  to comply  with the Order)

     The presiding official,  (designated by the Regional
 Administrator)  must also prepare a statement which addresses any
 significant arguments  raised  by the recipient and recommends whether
 any modifications  to the Order are warranted.  (See the September
 8, 1963 Administrative Order  Guidance for a complete discussion of
 the procedures  and "ground  rules" for conducting the conference
 and the time  frames for holding them.)

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                                -8-

      If  the  recipient  agrees to undertake the stipulated response
measures,  the agreement may be in the form of a Consent Order.  The
OSC  will monitor  compliance with the Order and recommend additional
enforcement  action  if  the terms of the Consent Order are breached.
If the recipient  does  not agree to undertake the measures contained
in the Order, the Agency will generally not refer a case to the
Department of Justice  to force compliance because of the time
constraints  presented  by the emergency.  Rather, the Fund will be
used  for site response and the recipient(s) will be sued for cost
recovery—including punitive damages in appropriate cases.

IV.   USE OF  THE FUND WHILE THE ADMINISTRATIVE ORDER IS BEING ISSUED

      Normally, once an Order has been deemed appropriate for an
immediate  removal situation, the CERCLA Fund shall not be.used to
undertake a  federally-funded immediate removal during the time
period in which the Agency develops the Order, issues it to the
responsible  party,  and conducts the conference.

      However, if  site  conditions deteriorate— presenting a corre-
sponding increase in the threat that the site presents— the Fund can
be used for  response while the Administrative Order process continues
In such instances,  the Regional Administrator can approve the use
of Funds below S250K and request the Assistant Administrator, OSWER,
to release funds  if the response work will be greater than  S250K.4
The Administrative  Order process should continue since the  parties
may undertake site  response at the next convenient break in activity.

     Thus, if there are deteriorating .conditions at the site, the
OSC should continue all steps necessary for undertaking a Fund-
financed response while the Order is being developed.  The  10-point
document should be  prepared and receive the concurrence of  all
officials up through the Regional Administrator or the Director,
OERR.

     However, no  actual obligation of Funds for site response will
normally occur until after the Order has been issued and the con-
ference has  been  held. Since the Order will only be issued in
situations where  an immediate response can be delayed, there will
normally be  time  to see the Administrative Order process through
to conclusion.  The conference must be held within the time period
specified in the  Order (which will correspond to the time the
Agency has before the  response activity needs to begin),  since



^If deteriorating conditions require the Fund to respond while
 the Order is still being issued, OSWER assumes that the Fund will
 take all  response  actions necessary at the site  (e.g., remove all
 barrels, not merely those that may be about to leak).

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                                                           OSWER « 9833.1
                               -9-

 the timing  of  the  obligation will vary according to the estimated
 tine  needed to mobilize equipment and personnel, the "OSC should
 vork  closely with  the technical enforcement and Regional Counsel
 staff during the drafting of the Order to assure that the time
 period established  for issuing the Order is synchronised with the
 tiae  requirements  for site response.

      If the conference does not result in private party response—or
 if changing conditions at the site require accelerated response—the
 Fund-financed  immediate removal will take place.  If Fund-financed
 activity does  begin, the Order may be written to require the potentially
 responsible parties to undertake site activity at the next convenient
 break point in activity.  If the parties still fail to undertake
 the site response activity, enforcement efforts will emphasize cost
 recovery with  the additional imposition of fines/penalties as
 appropri ate.

 V.   COST RECOVERY

     The Agency will normally not initiate a civil action in the
event of non-compliance with an Order but instead will seek to
 recover costs  and damages after a Fund-financed response.  Therefore,
while enforcement personnel are carrying out the Administrative
Order process,  they should also be aware of the requirements for a
 successful cost recovery action.  They must be able to document
the following  factors (some of which are the same ones necessary
 for the issuance of the Administrative Order itself).

      1. The need for the immediate removal (evidence of an imminent
         and substantial endangerment or threat of endangerment
         to public health, welfare or the environment)
      2. Liability of the responsible parties (evidence to support
         the contention that the parties meet the liability standard
         of $107)
     3.  Proof that the Fund-financed response activity was "not
         inconsistent" with the requirements of the NCP.
     4.  Documentation of all eligible costs for site-specific Fund
         expenditures.

     Enforcement personnel must assure sufficient documentation of
these factors  from the period in which the 10-point document is
developed and  Funds are obligated through the actual clean up of
the site.  These cost recovery requirements must be »et regardless
of whether there will be a simple cost recovery action (if no
Administrative Order is issued) or an action for response costs plus
damages (if the Order is not complied with).  The Agency Bust
assure that evidence is preserved for any subsequent enforcement
action.  Proper chain of custody procedures must be used for any

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                                                          OSVER «  9833.1
                             -10-

•ampling or testing, and adequate records of site activity must be
kept.  Employees of any contractor used for site activity must
cooperate with and be made available to the U.S. in preparation
and trial of any subsequent enforcement action.  Enforcement,
program and legal offices should work together throughout, the
ca.se development.


VI.  FOLLOW-UP

     This guidance represents a substantial departure from prior
practice, and I expect that it will take some time to implement.
For these reasons, I will be reviewing all immediate removals
referred to Headquarters for compliance with this guidance.  In
addition, for immediate removals under $250,000, I will ask  the
Directors, OWPE and OERR to review the compliance with this  guidance
quarterly, and to advise me accordingly.
Appendix

CC: Gene Lucero, OWPE
    William Hedeman, OERR
    Kirk Sniff, OECM
    Dan Berry, OGC

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 APPENDIX

 Authority/Requirements/Enforcement of Administrative Orders
 for Removal  Actions  under  CERCLA

 Dnder  $106(a)  of  CERCLA:

    If,  EPA,  acting on behalf of the President:
                              • •
    determines  that there may be an imminent and substantial
    endangerment to the public health or welfare or the
    environment because of

    an  actual or threatened release of a hazardous substance
    from  a  facility

    may,  after notice to the affected state,

    issue such orders as may be necessary to protect
    public  health  and welfare and the environment.

Under $'l06(b) of  CERCLA:

    EPA may take action in the appropriate U.S. district
    court,  against any person who willfully violates or
    fails or refuses to comply with any Order issued under  •
   S106(a), to enforce such order and

   may fine such person not more than $5,000 for each day
   such violations occur or such failure to comply continues.

Under §107(0(3)  of CERCLA:

   Any person who is liable for a release or threat of release
   of a hazardous substance that:

   fails without  sufficient cause to properly provide
   removal action upon order of the President pursuant to
   §106

   nay be liable  to the United States for punitive damages in
   an amount at least equal to and not more than three times,
   the amount of  any costs incurred by the Fund as a result
   of such failure to take proper action.

   Civil action may be commenced against any such person to
   recover the punitive damages.  These punitive damages shall
   be in addition to any costs recovered from such person
   pursuant to §112(c).

   Any monies received in punitive damages shalL be deposited
   in the Fund.

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                                                         OSWER « 9833.1

                                            APPENDIX  PAGE 2


National Contingency Plan Requirements for Immediate  Removals

Under $300.65 of the NCP:

Immediate Removal action is appropriate when the  lead agency
determines that:

  • the initiation of the removal action will prevent  or
   mitigate immediate and significant  risk of harm  to
   human life or health or to the environment from  such
   situations as:

          1. Human, animal, or food chain exposure  to
             acutely toxic substances

          2. Contamination of drinking water supply

          3. Fire and/cr explosion

          4. Similarly acute situations

   Immediate removal action may include but are not limited  to:

          1. Collecting and analyzing  samples to determine
             the source and dispersion of the hazardous
             substance

          2. Providing alternative water supplies

          3. Installing security fencing or other measures
             to limit access

          4. Controlling the source of the release

          5. Measuring and sampling

          6. Moving hazardous substances off-site for storage,
             destruction, treatment or disposal

          7. Placing physical barriers to deter the spread
             of the release

          8. Controlling the water discharge from an upstream
             impoundment

          9. Recommending to the appropriate authorities
             the evacuation of threatened individuals

         10. Using chemicals and other materials in accordance
             with Supart H to restrain the spread of the
             substance and mitigate its effects

         11. Executing damage control or salvage operations

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                                      9832.7
    INFORMATION.REGARDING CERCLA
ENFORCEMENT AGAINST BANKRUPT  PARTIES

-------
                                                     9832.7
     } UNITED STATES ENVIRONMENTAL PROTECTION A'JENCY
     ./             .   WASHINGTON. D C. 20460
                          MAY 24 1914
MEMORANDUM

SUBJECT:  Guidance Regarding CERCLA Enforcement-Against
          Bankrupt Farcies
FROM:     Courtney M. Price
          Assistant Administrator for Enforctaent
            and Compliance Monitoring

TO:       Regional Adainistrators ,  I-X
          Regional Counsels, I-X
          Lee M. Thomas,  Assistant-Administrator for
          .  Solid Waste and Emergency Response


     The attached guidance has been developed to assist the
Regions in developing CERCLA enforcement actions against bankrupt
parties.  The guidance is intended to encourage aggressive
enforcement against insolvent parties and insure national
consistency in current *nd future bankruptcy cases brought by
the Agency.

     The guidance provides:  1) an overview and tunmary of the  •
Bankruptcy Refora Act and existing bankruptcy case law; 2) *
discussion of enforcement theories available co the Agency co
pursue insolvent partita under CERCLA;  and 3) references co
current bankruptcy pleadings and appeale.filed by che Agency.

     Pages 24 and 25 of eh* attached guidance describe referral
procedures for a proof of claim in bankruptcy.  A bankruptcy
referral will ordinarily be processed in the same way as other
hazardous waste referrals. ' However, axpedited^ Headquarters and
DOJ concurrence and abbreviated referral packages may be neces-
aary and acceptable if required to meet deadlines in bankruptcy
cases.

     If you or your staff have any further questions regarding
CERCLA enforcement against bankrupt parties, please contact
Kirk Sniff at (FTS) 382-3050 or Heidi Hughes.at (FTS) 382-3109.


Attachment

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                                                     9832,7
                       TABLE OF CONTENTS

                                                      PACE


I. -INTRODUCTION	  1 .

     A. Scope and Duration of the  Problem	  1
     B. When co Procted Against a  Bankrupt
          Party	  2

        1.  Probability of Recovering  the Cost
            Litigation	  2

        2.  Dcterrcnct of Frivolous  or Fraudulent
            Bankruptcy Filings	  3

II. THE BANKRUPTCY CODE:  An Overview	  4

     A. Organization of the Code	  4
     B. Voluntary vs. Involuntary  Bankruptcy	  5

III. CERCLA AND BANKRUPTCY ACTIONS	  6

     A. Proceedings in District Court  or
          Bankruptcy Court.	  6

     B. Cost Recovery Under Section  107 of  CERCLA	  11
             •
          1. Distribution of Assets	  12

          (a) Secured Creditors	  12
          fb) Priority Structure	....  13

          2. Theories of Recovery  Beneficial  co
               cht United States	   15

          (a) Adalhiscrative Coses	   IS
          (b) Recovery Under Section 506(c)
                of the Code	  17
          (b) Equitable Liens	   18
          (d) Restitution	'	   18

     C. Other Matters in Bankruptcy  and
          Insolvency Cases	   19

          1. Abandonment of Property	   19

          2. Scate-Involvency Lavs	   23

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                             - 2 -                 9832*7
IV. PROCEDURES..	  24
     A. Rules of Bankruptcy Procedure	  24
     B. Filing Proof of Claim	  25
     C. Pleadings	  27
     D. Appeals	  27
     E. Federal Bankruptcy Court
          Jurisdiction	  28
V. THEORIES OF INDIVIDUAL LIABILITY	  30
     A. Personal Involv«aent in Aces
          and Onissions	  31
     B. Piercing the Corporate Veil	  33
     C. Personal Jurisdiction in Casts Involving
          Corporate Officers or Shareholders	  35
VI. INDEX OF RESOURCES	  36
     PLEADINGS	'..  36
          Proofs of Clain	  36
          Other Britfs and Motions	  36
                         •
     ORDERS	  37
     RESOURCES		  38
     RULES	  38

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                                                       9832,7

                         I.  INTRODUCTION
 *     ?«-nr»» and Duration of che Problea
      Tht U.S. E.P.A. is charged with cht duty of managing and
 rtplcnishing tht Halted Superfund co cht greatest txccnc possible.
 Vhilt our cnforecatnc activities under cht Comprehensive Environ-
 aental Response, Coapensation, and Liability Act (CERCLA) vill
 generally bt directed against solvent parties, there have been
 and will, continue co be tines when a rtsponsible party declares
 bankruptcy.
      This aeaoranduo sets forth enforceoent options for dtaling
      t
 with  bankrupt partits.  It includes guidanct on when to procttd
 against bankrupc partits.  It also discussts cht chtorits and
 proetdurts for rtcovtring cleanup coses from bankrupc parcits
 under both federal bankruptcy law and coaaon law chtorits or
 rtcovtry.  Finally, ic is inttndtd co strvt as a bankrupccy infer-
aation clearinghouse, listing materials availablt froa OECM-Vasp*
 on bankrupccy and rtlactd subjects.
      In tht long run, tht requirements of the Resource Conservation
 and Recovery Act (RCRA), particularly the closure and financial
 requirements, should, insure the orderly closure of storage or
                                                »•
 disposal facilities.  Nonetheless, this vill not always occur.
 Thus, while the purpose of this memorandum is to aid the EPA official
*                                                              «
 enforcing CERCLA, much of it vill be relevant to future efforts by
 EPA to require bankrupt owner-operators of. storage or disposal
 facilities, gtntracors, and transporters co concribuce as auch as

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                                -2-
                                                         9832.7
possible co Che cleanup of the hazardous conditions  they  have
created.
B.   When to Proceed againsC • Bankrupt Party
          In making tht determination of when co procttd  against
bankrupt parties cht Regions should balance Che likelihood  of
recovering assecs from che escace of che insolvenc party  against
the extent of Agency resources required co prosecute bankrupt
parties.  The Regions should also evaluate che effect that  pursuing
parties who .have filed bankruptcy will have in deterring  future
frivolous or fraudulent bankruptcy claims.
          1 .  Probability of Recovering che Cost Litigation
          Two questions should bt answered by che Regions co determine
che efficient use of enforcement resources and cht txctnc co which
che Agency should pursue bankrupc parties in CERCLA accions.
          The firsc question co answer in determining whether to
proceed against a bankrupt party it related co che scope  of che
r«*e:  Are there ocher solvenc parties in che ease?   If so. CERCLA's
purposes may bt strvtd by procttding against them alone.   In general,
accions againsc bankrupc parties such as gtntracors lacking asstcs
•hould net bt undtrtaktn vhtn chtrt art ecbtr solvtnc parcits.
     Tht second question that »ust bt answered by^cht Regions
relates to cht value of cht case:  Art chtrt asstcs in cht tscace
of cht bankrupc party?  Tht Assistant United States Attorney in
cht District whtrt cht Bankrupey Court sics «ay bt ablt co send

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              .  ..  .                                      9832,7

                                -3-


 copies  of  cht case docket co an EPA attorney.]/ Dtpcnding on the

 atage of proctcdingt,  chc docket aay include an iceaizacion of

 assets.  It aay  bt pointltsa to proceed if chare are few assets.

 The  poaition of  the other creditors should also be considered.

           In general,  EPA and the Departaent of Justice should aaxiaize

 its  use of attorney resources by pursuing bankrupt responsible

 parties when there appear to be assets in the estate, and there

 are  cither few secured creditors with relatively liaited claims or

 sooe basis exists for  recovering funds froa the estate despite the

 presence of secured creditors.£/

          2.  Deterrence of Frivolous or Fraudulent Bankruptcy Filings

          On occasion, EPA Bay elect co pursue a bankrupt responsible

 party even when  it appears unlikely that we will recover sizeable

 amounts froa the Bankruptcy Court.  The Regions should pursue bankruptcy

 actions where che ease aay serve as a deterrent co ocher parties

 who would otherwise consider escaping liability through a declaration
I/   The aost eoaaon fora .of bankruptcy is liquidation under
~    Chapter 7 of the Bankruptcy Before Act of 1978 (11 U.S.C.
1101 et seq.) (hereinafter eiced as "the Bankruptcy Code").
However, ecveral CERCLA cases have involved responsible parties
In Chapter 11 reorganization (see United States, et al. v. Johns
Manvilie Sales Corporation. ec"al.. civil MO. Bi-399-pj.  The
diatinctiona between a Chapter 7 liquidation and a Chapetr 11
reorganization are discussed Infra.  Unless otherwise stated the
discussion in this •raorandua concerns Chapter 7 liquidation
proceedings.

II   This evaluation should be docuaented in che case referral
     package prepared by the Region.  The Oepartaenc of Justice
has requested that all bankruptcy referral* include a "quick look
financial assessaent of che potential defendant's assets  (i.e. a
•uBoary of assets listed in che bankrupccy papers, a Dunn and
Bradscreec report, ecc.)

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                                                       9832.7
                                -4-

 of  insolvency.  For instance, through the prosecution of bankrupt
 parties'the Agency could provide an effective deterrent tp under-
 financed "fly-by-night" companies who tee bankruptcy as a way to
 avoid  their liabilties to the federal governaent.  Similarly, it
 is  important that responsible parties are treated equitably.   For
 example, in a case involving a bankrupt site owner/operator
 whose  actions contributed significantly to the waste condition.
 EPA could pursue the bankrupt site owner to further the enforcement
 policy goal of treating responsible parties tvcn-handedly and
 equitably.
             II.   THE BANKRUPTCY CODE:  An Overview
A.   Organization of the Code
         The Bankruptcy Reform Act of 1978 (11 U.S.C. f 101 et seq.
 (1978)) replaced and liberalized the Act of 1898 (11 U.S.C. I 1 et
 *«q.. (1898)).  The new act. commonly called the Bankruptcy-Code,
 consists of eight chapters.  Those relevant to EPA claims are:
 Chapters 1, General Provisions: 3. Case Administration; 5, Creditors.
 and Debtor, and the Estate; 7, Liquidation: and 11, Reorganisation.
                                     «
     Chapters 1. 3, and 5 set forth definitions and procedures
 common ce all bankruptcies.  The provisions of Chapters 7 and 11
 •tt forth the specific procedures for liquidations and reorganiza-
 tions.  Under a Chapter 7 "straight bankruptcy" or "liquidation,"
 a debtor is granted a discharge of all debts but must liquidate
 all assets.  A Chapter 7 bankruptcy is administered by a trustee
 appointed by the Bankruptcy.Court.  Under Chapter  11, there  is no
 liquidation of assets.  Rather the goal of this  chapter  is to

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                                                        9832.7
                                 -5-

 reorganize  the  obligations  of  the  debtor in order to give the
 debtor  a  "fresh start"  in carrying out his business.  The debtor
 and  his creditors oust  arrive  at a reorganization plan whereby a
 share of  the  debts  is paid  to  the  different classes of creditors
 on a schedule.   The debtor  normally administers the reorganization.
 B.   Voluntary  vs.  Involuntary Bankruptcy
          Under  either Chapter  7  or 11, the debtor himself may
 initiate  a  voluntary action.^J  The debtor does not have to be
 insolvent^/ and no  formal adjudication of bankruptcy is. required
 i- "rlur.tary  cases.  An order  for  relief is automatically entered
 by the  Bankruptcy Court in  a voluntary case.
     An involuntary petition under Chapter 7 or 11 may.be filed
 against most  debtors by certain  creditors.  The debtor may contest
 the  petition, however,  and  the issue of whether the debtor is or is
 not.insolvent will  then be  adjudicated.  The Bankruptcy Court will
 only enter  an order for relief if  the debtor is not generally paying
 h*.  j.w.. ..  ,-K.y become due,  or if a custodian, within chc last 120
 days before the filing  of the  petition, has taken possession of or
 has  been appointed  by the Court  to take charge of substantially all
 of the  debtor's property.5/
U   11 U.S.C. I 109(b).
4/   insolvency in bankruptcy'law  it  a  term of art derived from
~"    eoaaon law.  If a corporation or individual claims insolvency
under the common law of a State  (as opposed to filing under the
federal .Bankruptcy Code), he is  generally only deeaed insolvent if
he is not paying his debts  as  they become due and if a receiver or
other custodian has been appointed by the Court to take charge oz
his property.
£/   11 U.S.C. I303(h)

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                               .6-                       9832.7

               III. . CERCLA ABD BANKRUPTCY ACTIONS
Station 101 of the Bankruptcy Code dcfints "creditor"  as:
           (A)    [an] tncity that has a clato againsc
           the debtor chac arose at the txae of or before
           the order for relief [dismissal decision -of
           Bankruptcy Courc which follows che approval  of
           che cruscee's Final Rcporc] concerning che
           debcor ...
Under seccion 101 of che 1978 Ace, a "claim" is a:
           (A) right co payment whether or noc such
           right  is reduced co Judgmenc, liquidated,
           unliquidated, fixed, concingenc, matured,
           unoatured. disputed, undisputed, legal,
           equicable, secured, or
           (B) righc Co an equicable remedy for breach
           of performance if such breach gives rise co
           a righc co payment, whecher or noc such
           righc  ... is reduced co judgmenc, fixed,
           concingenc, matured, unmacured, disputed,
           secured, or unsecured.
     The scacuce clearly scaces chac a claim need noc  be  preaisea
on a civil accion or a final judgment; ic is sufxicienc if che
claim is based on a simple righc co payment as a result of work
completed  and cose incurred.  Thus, the Uniced Scaces  need noc
have received a Judgmenc under CERCLA before making  a  claim againsc
a bankrupt party.  It it enough that the United Stacts has a righc
to payment or an injunctive claim.  The United States' righc co
payment can be based upon CERCLA Section* 107 and/or 104, or ocher
authorities.  Thus, che United States can proceed to file a claim
in Bankruptcy Court. '
                    «
A.   Proceedings in District Court or Bankruptcy Courc.
     An important question that must be resolved  in each case is
whecher co iniciace proceedings in District Courc or Bankruptcy

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              .   .                                      9832,7
                               -7-


 Cuurt.  An ordinary creditor must proceed in Bankruptcy Court

 because under the automatic stay provision (Section 362 of the

 Bankruptcy Code, 11 U.S.C. $362(a)), the filing of a Chapter 7  or

 Chapttr 11 petition operates as an automatic stay of any proceedings

 against the debtor.  The stay halts the following:

          (1)   the commencement or continuation ... of a
                judicial, administrative, or other proceeding
                against the debtor that was or could have been
                commenced before the cooaenceaent of the case
                under this title;

          (2)   the enforcement, against the debtor or against
                property of the estate, of a judgaenc obtained
                before the coaoencenent of the case ...

          (3)   any act to obtain possession of property oi
                the estate or of property froa the estate;

          (4)   any act to create, or enforce any lien
                against property of che estate;

          (5)   any ace to create, perfect, or enforce against
                property of che debtor any lien to the extent
                that such lien secure! a claia that arose
                before the coamenceaent of Che caae ...;  .

          (6)   any act to collect, assets, or recover a claia
                against cbt debtor that arose before che
                commencement of che ease ...; and,

          (70   the setoff of any debt owing co che debtor ...

     In a number of situations, however, the filing of a petition

does not operate as a stay, including (Section 363(b)):
                                                  f
          (4) ... cht commencement or continuation of
              an aecien ... by a governmental unit co
              tnforce such governmental unit's policy or
              regulatory power;

          (5) ... che enforcement of a judgment other than
              a money judgment, obtained in an aecion or
              proceeding by a governmental unit co enforce
              such governmental unit's police or regulatory
              power.

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                                                       9832.7
               ...              -8-


      The  purpose of these exceptions, AS articulated in the House

 Report accompanying che Bankruptcy Cooe, is to permit governmental

 authorities  to pursue actions co protect public health and safety6/

 and  to allow governmental units to sue or continue suit against a

 debtor to abate violations of environmental protection lavs.7/

      The  exception in Section 36X(b)(4), as interpreted by the

 government,  is broad.  It matters not what is sought:  The government

 may  commence or continue any police or regulatory action.  This

 includes  actions for money (CERCLA $107) and actions for injunctive

 relief (CERCLA I106).£/  At the stage of seeking to execute any
6/   H.R. Rep. No. 95-595 95th Cong.. 2d scss. 343 (1978); 95
     Cong. Rec. H 11092 (Sept. 28, 1978)

7/   H.R. Rep. No. 95-595. at 343.  See also-. In re Bay Bridge
~"    Inn..Inc. v. New York State Liquor Authority. 94 F.20 555
(2d Cir.  1938); In re colonial Tavern v. Charles"!. Byrne. 420 F.
Supp. 44  (D. Mass. 1976) and In re Dolly Madison. 304 F.2d. 499
(3d. Cir. 1974) [held; A* bankruptcy court should not interfere with
governmental regulatory programs]; Aaron, Bankruptcy Stays tor
Environmental Regulation:  Harvest of ComaerTcal Timber as an
Introduction to a Clash ot Policies. 12 Envt'i. Law i. 5-8 (l9bl)
           Law - Whan Is a Governmental Unit's Action to Enforce
its Policy or Regulatory Power Exempt from the Automatic Sta
rv Power Exempt from che Automatic stay
362?. 9 Fia. Univ. L. Rev. 369. 380 (19{
Provisions ot Section 3627. 9 Fia. Univ. L. Rev. 369. 360 (1961).
See; 11 U.S.C. I362(c;*(g) for the conditions under which che
automatic stay remains in affect and other rules applicable to
obtaining relief from the atay.

8/   A action to overcome the stay should generally be filed in
~    Bankruptcy Court before proceeding in District Court.  (See
Pleadints section, infra.)  A recent opinion in which a Bankruptcy
Judge discussed •» and rejected •• holding a citizens' group in
contempt for failing to overcome -the itty ie In Re Revere Copper
and Brass. Inc.. 29 B.R. 584 (Bkrtcy.N.W., 19BT7.When the govern-
ment proceeds in District Court, a timely proof of claim should
also be filed in Bankruptcy Court (see page 24 infra)  When a
Regional attorney wishes to pursue in District Court a cost recovery
judgment sgaint a~bankrupt party, it is particularly important that
this strategy be discussed with appropriate EPA H/Q and DOJ attorneys
before referral of a case.     '

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                                                      9832,7
                                -9-

 Judgment  that Bay  be obtained, the government should be prepared
 to  argue  that enforcement of the judgment is a continuation of the
 governmental unit's enforcement of its regulatory power.  Thus the
                                                    *
 Bankruptcy  Code  read in conjunction with CERCLA and other authorities
 allows  che  United  States eo seek an order froa Federal District
 Court requiring  the Bankruptcy Court to order the debtor in posses-
 sion or trustee  to use assets of the bankrupt to abate a hazardous
 condition or to  reimburse the government for its expenditures.
     In two recent cases, the courts rejected the government's
 view of the exceptions-.  In United States' v. Johns Manville £/,
 the District Court in New Hampshire denied EPA's motion to vacate
 an Order issued  by the Bankruptcy Court in New York staying all
proceedings in an  EPA enforcement action against hanvilie.  The
opinion characterized the government's action for injunctive relief
 as tantamount to an action for a money judgment.  Since Section
362(b)(5) of the Code prohibits enforcement of a money judgment,
 the Court held that the injunctive relief sought by the government
did not fall within the parameters of cht bankruptcy atay exemption.
The Court nottd  that if the government had insttad sought an
 injunction to prevent active, on-going disposal rather than cleanup
of an existing hatard, such an action would not have been stayed
by the bankruptcy  filing.  In our view, cht District Court
9/   No. 81-229-D (D.N.H. dtcidtd Nov. 15, 19B2).

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                                                       9832.7
                                -10-

 erred.J_£/  The  Agency  has  proceeded with CERCLA response activities
 •t the  Johns  Manville  sices.
      In In  Re Kovacs.1'/   Ohio  vac stayed from proceeding in
 Stact Court In  its  efforts to enforce an injunction requiring
 Kovaca  to clean up  a hazardous  waste site.  Kovacs, a corporate
 officer and operator of the Chea-Dyne aite, had declared bankruptcy.
 The  Sixth Circuit,  affining the  District Court and Bankruptcy
 Court decisions, held  that Ohio,  in proceeding to enforce the
 injunction  in State Court  was actually seeking a aoney judgment.
 The  Supreme Court granted  the State of Ohio's petition for a
 writ  of  certiorari  on  January 24, 1983.  The Supreae Court vacated
 the judgacnt  and rcaanded  the case to the Sixth Circuit to consider
 the  issue of  mootness.  The Supreae Court has accepted eertioran
 for a aecond  tiae in the Kovaes II case.J^  The issue presented
 in "Kovacs II  it whether a  bankrupt defendants Bay rely on the
 discharge provisions of the Bankruptcy code to void an injunction
which requires  hia  to  cleanup a hazardous waste facility*.  In
January  1984, the United States filed an aaieus euriae ffrief in
107  The govertnent took the poaition that the Johns Manville
     District Court erred, in a action to diaaia»in AM Inter-
national v. United States. Case No. 82-B04922 .(N.D. Hi. Bfcrtcy
ct.; (CERCLA floe Action;..
1L/  681 F.2d 454 (6th Cir. 1982).
12.1  State of Ohio v. Kovaca (Kovacs IX), 717 F.2d 984 (6th Cir. ,
     1983; (cert, granted, Sp. Ct. No. 83-1020).

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                                                     9832.7
                                -ii-

 cht Kovacs  II  case  stating  chat the ease has national implication
 for environmental enforcement under chc Clean U«ctr, RCRA, and
 CERCLA and  further  eht  tcacti that tht 6ch Circuit decision
 "obviously  encourages polluters eo abuse the Bankruptcy Code
 and defy  state and  federal  environaental protection." ]j/
 B.    Cost Recovery  under Section 107 of CERCLA
      The  United States  should be prepared at the tiae ox filing
 of  a proof  of claio in  Bankruptcy Court to prove that its claim
 should  be allowed by the court.  That is, if the agency- has spent
 tor win  spend) \^t money at a  site under the provisions of CERCLA
 104,  and  wishes to  recoup such  expenditures under CERCLA Section
 107,  the  United States  will have to demonstrate to the,Bankruptcy
 Court that  the estate is in fact liable for such expenses under
 Section. 107 .]27
      Therefore, when the United States files a proof of claim
 with  the  Bankruptcy Court,  Department of Justice and EPA attorneys
13/  Id.. Menorandun for cht United States as aaicus euriae
     supporting petitioner  (January, 1984).
U/  In  the case where tbt  Agency hat not spent Superfund money
     at  the site but where  we  intend to conduct a fund-tinanced
response action, the United States can file a proof ot claim for
an ''open account."  The proof  of claim would indicate that the
claim it founded on an open account which will become due upon
the completion of the abatement actions by EPA.
IS/  A usual commercial claim  of a creditor is established by the
~"   existence of a receipt or invoice indicating that the debtor
received goods or services  which he contracted to receive.  When
EPA has  performed work on a site, however, there- has been no agree-
ment to  perform such work between EPA and the bankrupt party.
Therefore, we must be prepared to prove Section 107 liability in
order to prove our claim.

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                               -12-

 should be prepared to prove all elements of a Section 107 cost
 recovery action.  The case must be referred to the Department
 of Justice in the normal way, although there may be situations
 when.a referral by telephone may be necessary.  See Procedures.
 infra.
              1.   Distribution of Assets
                   (a)   Secured Creditors
                   The claims of secured creditors are satisfied
 fully before assets are distributed to any unsecured creoitors,
 including creditors claiming administrative expenses.  The
justification for this treatment of secured creditors is statutory
 (11 U.S.C. U507. 726).  A valid lien .is a right to repayment,
created by agreement, which exists independently of bankruptcy
laws.  As such, it is a charge against assets which must be met
before distribution to unsecured creditors.]^/  For example, a
bank that has made a loan to the owner of a facility that is
secured by a lien on the heavy equipment will receive "off the
top" the amount representing the value of the heavy equipment or  .
the equipment itself before distribution of assets to unsecured   •
creditors in order of their priority under Section 507 of the
Code.                                            '
^6/  3 Collier on Bankruptcy. Para 507.02 507-12.6 (15th Ed.
     1981).

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                                                      9832*7
              -  •'      .         -13-  ^

      In Chapter 7  proceedings,  secured creditor* will recover
 before unsecured creditors,  including  EPA, unless Che Bankruptcy
 Court is persuaded by our  arguments  co Jump our claims ahead of
 all others.^/   In Chapcer 11 proceedings, Che government should
 be prepared co  play an accive role in  working out che terms of a
 reorganization  plan vich che various classes of creditors which
 provides for eventual repayment of our cleanup expenditures.
 The classes  of  creditors that have secured interests will have
 the greatest leverage in negotiation of a plan.
           (b) Priority Structure
              Section 507  of the Code  sets up the priority
structure  for satisfaction of unsecured claims.Jj*/  Payments to
the unsecured creditors are  generally  made on a pro rata basis.
Ten,  fifteen or  twenty cents to che  dollar is common, depending
on  the assets remaining in che  estate.  The following expenses
                    \
and claims have  priority in  che following order under Seccion
507(a):
              1.    First,  administrative expenses ... and any fees
                    and charges  assessed against che estate  ...
177  I50?(b) establishes a "Super  Priority" which'would require
tKe Agency co have prioricy over every ocher claim allowable.
Under I507(b) EPA would have co prove (1) chat EPA baa a claim
(for administrative expenses) and  (2) that this claim la protected
by a lien on che debtor's propercy (mechanics lien or prejudgment
lien) and (3) chac che stay has prevented use of che propercy
(clean up).  See Motion for Allowance of Administrative Expenses,
In Re TriangleThemicals Inc.. Case No. 80-00993-HS-7.
.187  11 U.S.C. 507(a)

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                               .14.                    9832,7
              .  - *   *         *-
              2.   Second, unsecured claims allowed under
                  ' Section 502(f) of this title,  [regarding
                   certain claims arising in involuntary .cases]
              3.   Third, allowed unsecured claims for wages,
                   salaries, or commissions, including vacation,
                   severance and sick leave pay.
              A.   Fourth, allowed unsecured claims for contributions
                   to employee benefit plans.
              5.   Fifth, allowed unsecured claims of individuals.
                   to the extent of $900...
              6.   Sixth, allowed [certain] unsecured [tax or
                   penalty fee] claims of governmental units ...
     Claims by the United States are classified as sixth priority
claims 'or general unsecured creditors.  Because government claims
are so low in the priority line, attorneys for the government should
be prepared to argue that our claims should be given greater
           *
preference, based on one of the theories described below.
     Congress is currently considering * bill ]_£/ intended to
give claimants under ftCRA or Superfund a priority in bankruptcy
proceedings superior to All other creditors, whether their claims
are secured or unsecured.  Four states have already enacted
197  H.R. 2767 sponsored by Rep. Florio.

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              . ..   .                                   9832-7
                               -15-


 siailar  provisions  in  chcir own environmental lavs.2£/

           2.   Theories of Recovery Beneficial to the United Scares

               (*)  Administrative Costs
    •                                              *
      The proof of claim filed         y che Uniced States have

 asserted chac cleanup  expenditures should be considered adainis-

 trative  expenses of preserving che estate of the bankrupt, thus

 deserving  to  be satisfied as top priority claim.  While there

 is  little  caselav on point, one case provides support for this

 theory.   In Ottenheiner v. Whitaker 2W, the Court upheld the

 decision of the Bankruptcy Court which required the trustee to

 expend suss of ooney AS administrative costs in order to remove  a

hazardous nuisance.  The conditic-  ts created when the bankrupt

party abandoned several barges in Ba*ciaore Harbor.   The Court
20/  Massachusetts oil and Hazardous Materials Release Prevention
     and Response Act, Mass. Gen. Laws. Ch. 21E; New Haapshire
Solid and Hazardous Waste Management Ace, N.H. Rev. Star. Ann.
Ch. 147-8: 10; Mew Jersey Spill Compensation and Control Act, 58
N.J. Stat. Ann. 110-23.11f (1981).  Colorado has also enacted
•uperlien legislation.  For a disaissal of these statutes and the
pending federal legislation see "Superlien 'Solutions' to Hazardous
Vast*: Bankruptcy Conflicts"~A"SA Environaental Law Newsletter.
winter 83/84.

2V  Ottenheiaer v. Whi taker. 198 F. 2d 289 (3ro Cir. 1952) was
     decided under the Bankruptcy Act of 1898, 30,Stat. 544, which
has been replaced by the current '   -ruptcy Reform Act of 1978,
92 Stat. 2549 (codified at 11 U.S.C.).  See also. In re Lewis
Jones. Inc. 1 Bankr. Ct. Dec. 277 (Bk. Ct. E.D. Pa. 1974) tor
the proposition that the bankruptcy court is under a duty to
protect the public interest and aay order a Trustee to take
action to protect such interest.  Various aeaoranda supporting
filed proofs of claia contain further casclaw and arguments.
These are available troa OECM-Waste.

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                                                       9832.7
               •  •'             -16-

 reasoned  chat  obstruction of the Harbor would conflict with the
 purposes  of  the  Rivers and Harbor Act.
      In its  opinion the court stated, "The judge-aade rule
 (allowing abandonment] Bust give way whtn it cones into conflict
 with  a statute enacted in order to ensure the safety ot navigation;
 for we are not dealing with a burden iaposed upon the bankrupt or
 his property by  contract, but a duty and a burden iaposeo upon an
 owner of  vessels  by an Act of Congress in the public interest."££/
     The  United  States has argued, by analogy, that expenditures
made by EPA  in the public interest under the authority of CERCLA
 should be reinbursed as administrative expenses.  This public
 interest  argument should stress the importance of recovering
aoney to  replenish the fund to clean up additional sites.  There-
fore, in  a CERCLA case, as in Ottenheiaer. an Act of Congress
enacted for the public health and welfare should take priority
over the usual bankruptcy distribution order.
     In a rteent ruling froa the bench in a case entitled In re
T.P. Long, in the U.S. Bankruptcy Court for the Northern District
of Ohio, held chat the trustee it liable co EPA for cleanup
costs at  ft hazardous watte tite.£3/  While the Judge did not
specifically state that the Cevernaent't cleanup expenses were
"administrative  expenses" for bankruptcy purposes, the written
order it  expected to elaborate on the ruling froa the bench.
227  Id. «t 290.    .
     In Re T.P. Long Cheaical Co..  Inc.. Case No. 581-906  (N.D.
     Ohio, Bkrtcy. Eastern District, April 5, 1984).

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                               -17-
                                                      9832,7
 The  Unictd States  if txpectd to file britfs on chc question of
 priority  for  rciaburscatnc AS between the secured interest holder
 * «. J  * V • * • ••*^««*^*
 «••*»  «•** • w •«• *•• *• • • » •
          (b) Recovery Under Section 506(c) of the Code
              This subsection states: "The trustee «ay recover
 froa property securing an allowed secured claia the reasonable,
 necessary coses and  expenses of preserving, or disposing of, such
 property  to the extent of any benefit to the holder of such dale."
 (11  U.S.C. J 506(c)).  In a situation involving real property
 securing a loan Bade by a bank or savings and loan, cleanup cost)
 that preserved the property would presumably benefit the lender
and would be .recoverable.  This would allow the Agency to object
to any liquidation of the real property.
     The language of Section 506(c) states, however, that the
trustee rather than  the government can recover.  The governaenc
 cuuid deal with this by specifically requesting the trustee's
 ratification of EPA  cleanup plans or obtaining froo the trustee an
agreement to seek reiaburseaent under 506(b).£*/
247  Ste Kobinson v. Dickey. 36 F. 2d 147 (lienholders did not
     oTJejct ee water being puaped out of Bines for safety reasons
and were liable for txptnditures).  First Western Savings 4 Loan
Association v, Anderson, 232 F. 2d 544; Miners savxnts flank of
Pittston. Pa. v. Joyce. 97 F.2d 973.

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                                 •18-
98SJ .7
           (c) Equitable Liens
               Ic has also been suggested by cht Civil Diviiion of
 Cht Departaent of Justice that, depending on the fact* of the
 •ituatlon, the United State* could argue chat expenditures of
 funds for cleanup create an equitable lien on the property.   Such
 a lien would create an iaplied contract for reioburseaent of EPA
 as a secured creditor.  Scate law on equitable liens should be
 researched if this •   -ory is atteapted.  It aay be of limited
 use since State lav  ay only allow for iaposition of ah equitaoie
 lien in situations involving a fraudulent conveyance of real
 property.  State law aay also require the trustee to have re-
 quested cleanup of the property, or at least agreed to.ic.2_5/
           (d)  Restitution
                Equitable restitution of the United States has been
 approved by  the court in cases in which the United States acted to
 alleviate a  potential healch hazard.  In Vyandocte Transportation.
 Co.  v.  United States 3671 the Coast GUATO unloaded a barge loaoeo
 with liquid  chlorine gas that the defendant had refused to unload
 proaptly. The Suprtae Court required reiaburseaent of costa
.incurred by  tht United States.  The Court nottd that denial of
 reiaburseaent would have financially penalized the United States
 25/  For a discussion of State Lav on "Mechanics Lien Statutes as
      an Enforcement Tool in CERCLA Coat Recovery Actions."  See aess
 froa R. Schaefer to A.J. Barnes and C.H. Price dated January 11,  196-.
 26/  Vyandotte T-ansportation Co.. v. United States. 389 U.S. 191
      (1967).

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                                                        9832.7
                                -19-

 for  acting expeditiously to protect public health and safety,
 while unjustly enriching the defendant.
     The Vyandotte case has been invoked in proof of claims  filed
 by the United States as a basis for recovery of CERCLA costs that
 che  government has incurred.  In a recent order issued in  United
 States v. Northeastern Pharmaceutical and Chemical Co.. Inc..  ec al.
 (NEPACCO) 277( the court stated that restitution was available under
 $7003 of RCRA because the bankruptcy action was an action  in equity.
 United States v. Reserve Mining 287 also lends support to  a  clain
 oaseo on restitution.  In that case, che Court held that when  the
 United States is seeking reimbursement for alleviating a potential
 public health hazard caused by one vho it in violation-of  a  federal
 statute,  reinburseaent may be granted under che Court's equitable
powers.
 C.   Other Matters In Bankruptcy and Insolvency Cases
     1.    Abandonment of Property
          *4. «ny bankruptcy ease, the trustee say choose to  petition
the Court to allow abandonment of some or all of the assets  of che
•scat* on the grounds that care of the assets by the trustee would
be excessively burdensome to the estate. 29/  The rationale  for
277  United States v. Northeastern Pharmaceutical and Chemical Co..
     TnTi. ec al. (NEPACCO) (September 30. 1983. W. Disc. Missouri
S.V. Div.).
28.7  United States v. Reserve Mining. 408 F. Supp. 1212, CD. Minn.
     1976;.
297  11 U.S.C. S

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                                                      9832.7
              - "                .20-

 permitting abandonment was articulated in In re Ira Haupt & Cc.:
           ...[TJhe courts have always rtcognittd chac
          a Truscct is under no duty co rtcain the Tide
          to  a piece of property or a cause of action
          that is so heavily encunbered, or so costly,
          in  preserving or securing, that it docs not
          promise any benefit to the funds available
          for distribution.30 /
     The United States will oppose abandonaent in certain circuc-
 stances because the procedure say allow the estate to avoid
 liability for on-going environmental obligations and may allow the
 trustee to rid the estate of an asset in which the United States
nay ultimately have an interest, (based on equitable lien, resti-
 tution or administrative expenses).  For example, if contaminated
property is abandoned by the trustee, the property reverts back to
the secured creditor and the Agency may have no claim against the
nonbankrupt party after clean up.  Accordingly, the United States
should normally take the position that abandonment is only permis-
sible vhen public health and safety obligations (statutory or
-•wrrvise) are act, and when a third party will not recover a
windfall from EPA's clean up actions.  Abandonment may be prczerred
prior to clean up if tht property will rtvtrt to a viable party
whom EPA say  pursue for contribution to tht clean up.
     The position of the United States ia supported by the reasoning
of the Ottenheimer v. Whitaker ease, 3V and by In Re Lewis Jones.
30/  In re Ira Haupt & Co., 398 F.2d 607 (2d Cir. 1968).
21/  Supra, note 13. .'

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                                                     9832.?
                                 -21-

 Inc.  327   in the  Ottenheimer  cue, the Court refuted to allow the
 trustee  to. abandon  assets  that  created a hazardous condition.
 Rather,  the Court required  the  trustee to use assets of the estate
 to  remove  from  Baltimore Harbor  several barges belonging to the
 debtor that Bight have otherwise obstructed the Harbor.
      In  In Re Lewis Jones.  Inc.. the Court reiterated the Qtten-
 heiaer position and held that the bankruptcy trustee could not
 simply abandon  the  property.  Instead, the trustee was required to
 repair various  steao pipes  and.manhole covers to protect public
 health and safety.  The Court in Ottenheiaer had held that abandon-
ment of the  debtor's barges by  the trustee would conflict with the
Ri 'ers and  Harbors Act.  The Court in In Re Lewis Jones went a
step further, stating that  "even absent the violation of a state
or federal  act, the public  interest must be protected by the Bank-
ruptcy .Court." 337
     The law on abandonment under the Code is unsettled.  In the
recent bankruptcy case, In Re Quanta Resources.3*7 the New Jersey
District Court affirmed cht Bankruptcy Court's ruling allowing
abandonment  of a haxardoua watte site over the objection of the
City of New York and the State of Hew York.  The Court allowed the
company to  abandon a hazardous wast* site on grounds that the
327  Id.
337  In Re Lewis Jones. supra at 280.
367  In Re Quanta Resources Corp..         F. Supp. __
     No. 82-3524 (D.N.J. Jan 24, 19B3J Appeal Pending
No. 83-5142 (3d dr.).

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                                                        9832*7
              -   •               -22-  •

property vis burdensoae to the estate.   AC the sice,  there were
500,000 gallons of waste oil, sludge and hazardous waste.stored  in
52 tanks and about 70,000 gallons of waste oil contaainated by
PCBs.'^l/  While Quanta had previously signed a consent order
with the N.Y. Departaent of Environmental Conservation to  clean up
the site, the Bankruptcy Court's favorable ruling on abandonaent
effectively nullified the order.
     New York City and State had asserted that the holdings in
Ottenheiaer and Lewis Jones required that the Court deny the
trustee's petition to abandon and allocate assets in the estate  to
be used for site cleanup rather than distribution to creditors.
The Court rejected this arguaent, pointing out that the two cases
were decided before passage of the 1978 Bankruptcy Act.  Before  the
Act, the Court noted, abandonaent was allowable under judge-aade
rule.  Section 554 of the Bankruptcy Code, however, provided specific
statutory authority for the abandonaent of burdensoae property.
This authority,  the Court stated, vaa not conditioned by Congress
upon A finding chat abandonaent does not hara the public interest.367
     The Court WAI aiailarly wnpersuAded by New York's arguaent
that I959(b) of tht United States Judicial Code. (28 U.S.C. Section
£57  Hazardous Waste Litigation Reporter, (July 6, 1982) at 2,6<*6
367  Id. at 3,671 and 3.672.

-------
 959(b)) prohibited abandonaent.  Section 959(b) provide*  that the
 trustee shall "manage and operate" property in  his  possession
 •fetowtwi.** ;u »*lid lavs.  The Court found that  this provision die
 not apply to the trustee in a Chapter 7  context,  but only  to
 receivers and trustees involved in business operations rather than
 in distribution of an estate.
      2.    State Insolvency Lavs
           States can enact insolvency lavs that affect bankrupt
 parties  as long as the substance of those lavs  docs not overlap
 vith the Ftderal Bankruptcy Reform Act's Jurisdiction.  The United
 States Constitution gives Congress the povcr to establish  uniform
 lavs on  bankruptcy 21'  out docs not prevent states  froa passing
valid lavs on insolvency.  To the extent there  is no conflict
between  a  state's  insolvency lav and the federal .bankruptcy lav,
 the  state  lav reaains  in operation.££/ .
     The United States  nay benefit froa  being a creditor  in state
insolvency proceedings  in appropriate situations.   Under  31 U.S.C.
1191 (1979),  debts to  the United States  are given top priority in
state insolvency proceedings.  The top priority for governaent
debts does not create  a lien on the debtor's property in  favor of
the  federal governaent.   At a miniaua, however.,  it  gives  the
                                                  f
goveraaent a  right of  priority over all  unsecured creditors to
37/  U.S. CONST art  1,  18  cl 4.
2i/  In re Wisconsin  Builders  Supply  Co..  M9  F.2d 649  (7th Cir.
          , Cert, domed 3iJ U.S.  965 (.1958).

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                                • 24-
                                                       9832.7
 payment out of che proptrcy in che hands of cht debtor's assignees
 or  other  representatives under che conditions specified in the
 statute.^/
                          IV.   PROCEDURES
 A.   Rules of Bankruptcy Procedure
     The  Supreme Court, advised by the Judicial Conference of  the
 United States, has the authority to promulgate rules governing
 cases under the new Bankruptcy Code.f^/  The Advisory Committee  on
 Bankruptcy Rules was duly appointed by Chief Justice Burger to
 draft rules.  The Committee was nearing completion of work on the
 Proposed Rules when the decision in Northern Pipeline Construction
Co. v. Marathon Pipeline Co. cast doubt on tht Code and ..the Proposed
Rules.  Thus, no new rules have yet been promulgated.
     The existing rules were suamed up in a Bankruptcy Monograph
drafted by the Office of che Attorney General:
           "Until ... rules of practice and procedure arc
           approved, ac least two different sets of rules
           must be consulted. • First, there are che "Suggested
           Interia Bankruptcy ftules" prepared by che Advisory
           Committee on Bankruptcy Rules of che Judicial
           Conference of che United States which were published
3£/  Braavell v. United States Fidelity 4 Co.. 269 U.S. 483
     (1926).  The United States could also argue tjuc aacisfaction
of CERCLA-based claims precedes consensual liens, such as mortgagee.
The question appears co be open.  Collier, ac any race, expresses
che view that whether consensual liens coae ahead of che Government's
1191 priority has noc been finally and authoritatively determined.
Vol. 6A Collier. 1913(2] p. 246.
407  Under Public Law 95-598 1248. Congress conferred chis power
     on che Supreae Courc, amending che grant of rule-Baking power
s«t forth in 28 U.S.C. 12075 to include the new Title 11 Bankruptcy
Code.

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                                                     9.832,7
              ...                 -25-


            in August*1979  as  'guidelines' that could be Adopted
           .AS local  rules.  The  interin  rules have been adopted
            in many districts,  albeit with occasional variations....
            Local  district  court  rules  apply in soae Jurisdictions.
            Some bankruptcy  courts  have adopted nutterous local
            rules  in  addition  to,  or in lieu of. these interia
            rules.  Second,  if  a  point  of procedure 'is not covered
            by the applicable  local rules, consult the Bankruptcy
            Rules  in  effect  under  the Bankruptcy Act of 1889. ^

     Covernaent attorneys involved  in bankruptcy cases will find

 rules  and  all foras  (such as proof of  claia feras) in Collier on

 Bankruptcy (15th ed.  1981).

 B.   Filing  Proofs of  Claim

     To have  standing  as a  creditor, the United States aust file' a

 proof  of claia fore  which states  the naae of the  claioant; the anount

 of the debt or claia;  the grouno  of liability; the date the claic
                                                      «•
 became due or will become due  under an open account theory-Tie*

 footnote 10 supra: and, the nature of  the claia (secured or general,

 unsecured).^/

     The filing of proofs of claias or interests  is explained in

 Section SOI of the Bankruptcy  Codt.f^/   In a liquidation ease under

 Chapter 7, •  claia ordinarily  Bust bt  filed within six aonths alter

 the first  date stt for the  first meeting of creditors.^/  Claims baae
4l/  Bankruptcy Monograph dated Noveaoer 22, 1982. prepared oy the
     Off let of the Assistant Attorney General, CUil Division, tor
use of U.S. Attorneys, at pp. 6, 7.

62/  Set, Bankruptcy Rules, Proof of Claia official forms.  Proof
     oT~claias filed so far have included brief affidavits froa
the On-Scene Coordinator stating aaounts spent and describing the
nature of the vork done as well as copies of bills subaitted to
EPA by contractors.
     H  U.S.C. 1 , 501.

££/  3 Collier on Bankruptcy  Para. -501.02(2]  (15th ed.  1979).

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                                26
                               •26-
on administrative expenses can be filed any else before the Court
has granted the debtor a discharge, of debts.  It is sore difficult
Co determine when to file a proof of da in in a Chapter ll reorgan-
itatlon because while the filing is required prior to the Court's
acceptance of the reorganization plan, there is no mechanise zor
determining when that acceptance will take place.  A proof of
claim should be filed immediately, with telephone concurrence by
                    .'
EPA HQ (DECK and OWPE) and DOJ, if there is any reason to believe
that a reorganization may be about to be concluded.
     Section 502 of the Code governs the allowance of claims or .
interests; a claim  is deemed allowed "unless a party in interest
... objects."^/  In most cases, the proof of claim should be
included in the litigation referral package sent~to OECM which
will then be sent to the Department of Justice and signed by the
Assistant Attorney General for Land and Natural Resources or his
delegate.  The Department of Justice muse be involved in the
filing of a proof of claim in Bankruptcy Court.fjj/  As stated
above, special procedures nay be available in emergency situations
in which cht government would otherwise miss filing"deadlines.
Headquarters and DOJ should be contacted.
457  11 U.S.C. I 506(a).See also (b)-(J)  [Procedure after objection]
46/  See, fn 1, page 3 supra for referral documentation that the
     department of Justice has requested regarding the.r financial
status of responsible parties.

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                                -27-                    9832,7
 C.    Pleadings
      See the attached Index of Resource* for a lifting of proofs of
 claim and other pleadings that EPA has filed so far.
     One problem area Involves the issue of whether, or not the
 United States should file a notion to overcome the stay in Bankruptcy
 Court before proceeding to seek injunctive relief in District Court.
 Arguably, the statute is clear on its face and no special notion
 is necessary for continued exercise of our regulatory powers.
 Nonetheless, Bankruptcy Courts have held attorneys in conteapt
 for failing to overcome the stay.  It is recommended, therefore,
 that a motion to overcome the stay be filed with Bankruptcy Court
when the government seeks injunctive relief from a bankrupt party
 in District Court.                  .                   •
 D.   Appeals
     Bankruptcy appeals are heard by appellate panels of three
bankruptcy judges appointed to the circuit counsel, on election or
 the circuit.f^/  If this procedure is not available, appeals are
to the District Courts.*£/  EPA and the Land and Natural Resources
Division of DOJ will involve the Appellate Staff of the Land and
Natural Resources-Division in Appeals from decisions of a Bankruptcy
Court and in filing of aaicus briefs on bankruptcy issues related
           •
to hazardous waste site cleanup.                 r.
£7/  28 U.S.C. I 160
£87  28 U.S.C. I 1334

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              •  •                 ,   '                   9832.7
                                -28-
£.   Federal Bankruptcy Court Jurisdiction
     The Jurisdiction of Bankruptcy Courts has been In a confused
state since the Supreme Court's decision in Northern Pipeline
Construction Co. v. Marathon Pipe Line  Co. *9/  The Court held
unconstitutional the grant of power in  the Bankruptcy Reform Act
(28 U.S.C. 1471(b)(c)) that gave Bankruptcy Courts jurisdiction
over all "civil proceedings arising under title 11 [of the U.S.
Code, Bankruptcy]  or arising in or related to cases under title
11."£07  xhis broad jurisdictional grant to the Bankruptcy Courts
vas deemed unconstitutional because bankruptcy judges do not have
the" protection conferred by Article XIX of the U.S. Constitution
(i.e. lifetime tenure subject to reaoval only by inpeac'hscnt and
irreducible compensation).  Xt is unclear what effect the decision
in Northern Pipeline will have on the type of cases that can be
brought in Bankruptcy Court until Congress legislates a solution.
At the least, however, it is clear chat the traditional state
coanon-law actions (comonly-called "Marathon claims" by bankruptcy
practitioners) may no longer be litigated in Bankruptcy Court absent
the consent of the litigants.JJ/
497  	U.S.	. 102 S. Ct. 2858 (1982).
507  28 U.S.C. U71(b)(c).
5V  Cook, New Bankruptcy Quandary Could Be Easily Solved.
     Legal Times, Sept. 6, 1982 at 10 Col. 1."

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               .  .                -»-                             .


      In reaction co Congress1  failure  co  enact  legislation that

 would rectify the  constitutional infinity  of the Code, the Adminis-

 tratlve office of  the United States  Courts, Washington, D.C., fore*

 ulated aodel rules to be used as interia  aeasures by the United

.States Circuit Courts.££/  The cover explanation circulated with

 the rules suaaarised the sain points as follows:

           Under the nodel rule,  all  bankruptcy  natters are
           initially referred to a bankruptcy judge.   [Section b(l)
           of the Rule].   In proceedings not involving a final
           judgment on a  Marathon clain, the bankruptcy judge aay
           enter orders and judgments that become effective immed-
           iately,  subject to district  court review  if requested by
           t party.  [Section (c)(2).J  With respect to final judg-
           ments in Marathon claims,  the bankruptcy  judge prepares
           recommended findings and conclusions  and  a proposed judg-
           ment.  [Section (c)(3.)J  A  district  judge then reviews
           the recommendation and enters a judgment.  [Section (c)t5)]
           Where circumstances require, an order or  judgment
           entered  by-a—bankruptcy judge will be confined by a ois-
           trict judge even if no objection  is filed.53/

      Because the United  States clains  are based.on  federal rather

 than state law,  the provisions are not directly relevant to our

 claims.  Nonetheless, the Rules do appear  to .allow the government

 	.. —j-erioent  with options for  seeking relief in the Bank-

 ruptcy Court.  For example, the United States can nove the District
                          ^                              .  .
 Court to "withdraw the reference to  the bankruptcy  judge."£*/  If
 52/   See:  Memorandum froa William E.  Foley (Dir. fcdnin Officer
      oT~U.S.  Courts) to Judges,  Clerks U.S.  Court  Systea Regarding
 .Continued  Operation of the Bankruptcy Court  Systea after Dec. 24,
 1982  in the Absence of Congressional  Action.

 53/   Id.

 54/ ' 11471(d) grants Bankruptcy  Judges the authority to refuse-
      jurisdiction.  '

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                                                         9832.7
                                -30-


 •uch  a  notion  were  granted,  Che District Court could retain the

 entire  Batter,  refer  pare of  it back to the bankruptcy judge or

 refer the  entire matter back  t- ...; bankruptcy judge.  The govern-

 ment  should  also make a simultaneous motion to overcome the stay.

 If, however, an action in Bankruptcy Court has already been initiatec,

 the government may  file a motion co scay che bankruptcy macter in

 order co proceed in District  Court.S5/


                V.  THEORIES  OF INDIVIDUAL LIABILITY

      The government anticipates situations in which individuals

 responsible  for the creation  of hazardous waste site conditions are

 financially  solvent even chough the corporate owners and operators

 are bankrupY.IrT'such a case, che United States may choose to

 ignore  che escace in  bankruptcy and pursue che responsible  individ-

 uals  -• as individuals -- direccly, or che Uniced States could

 pursue -both  che assecs of che bankrupc corporation and che appro-

 priate  Individuals.S6/
557  These procedural  recommendations were made informally in
     conversations with  staff members of  cht U.S. Administrative
.Court*.   Perhaps  rtfleccing  the  current confusion in the bankruptcy
court  ayseem,  one staff  attorney stated that CERCLA actions appeared
to present unusual subject »av    -hat a  District,Court would wish
to hear Itself in light  of He -       Pipeline;  the other staff
attorney  discouraged EPA from ;-.,apting  to be heard by District
Court, stating that business was proceeding as usual in bankruptcy
courts.

567  For  a general discussion of individual liability, see Guidance
     Memo "Liability of  Corporace Shareholders »nd  Successor Corpo-
racions for  Abandoned  Sices  Under the Comprehensive Environmental
Response  Compensation, and Liability Act  (CERCLA)11  from Courtney >..
Price  to  Regional Counsels due  co be issued June-1984.

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                                -31-
                                                        9832,7
A.    Personal  Involvement in Acts and Omissions
      The scope of personal lUbilicy of corporate officers is  broac.
A corporate officer, director, or agent if liable for cores he
ccwDics regardless of whether he acted on his own b'ehalf or to
benefit the corporation, regardless of whether he personally bene-
fited from the commission of the tort and regardless  or  whether
the corporation is also liable.  He is also liable tor the torts
of the corporation and of other directors, ofricers or agents  if
he failed to exercise reasonable care.SJ/
      The liability of corporate officers is generally li:i:*c  to.
situations in which the corporate defendant has knowledge or
responsibility for tortious acts being committed within his area
of responsibility.  A general duty of supervision nay be an insuf-
ficient basis for liability.587
     The United States plans to aake use of this theory of liability
in pursuing, in certain cases, the assets of individuals involved
with  coroorations that have declared bankruptcy.  The fact patterns
of these particular cases seta well-suited to the law.  They involve
situations in which hazardous waste treataent or disposal operations
577  See:  19 C.J.S. Corporations 11845, 850 (194p).  Accord;
     ITS, v. Hess. 41 F. Supp. 197. (S.D. N.Y. 19*3).  See also:
MilleFTT Muacarelle. 1970 A. 2d (N.J. Super.. 1961); Donsco Inc.
v. Casper Corp.. 567 F. 2d. 609 (3d Cir. 1978); Patyaan v. Howev,
340 Ho. 11. IfiO S.H. 2d. 851. 856 (1963).  Singleton v. Araor
Velvet Corp.. 4 P. 2d 223 (cal. App).  See also Brief in U.S. v.
Mahler lh.5.  Pa.) drafted by Michael Steinberg, AetoraeyTTnviron
aental Defense Section. OOJ. (April 1. 1983) for a discussion oz
personal liability.
51/  Martin v. Wood. 400 F. 2d 310 (3d. Cir. 1968).

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                                                          9832-7
               •   •               -22-

 were directed  by  eaployees  of  corporations that later declared
 corporate  bankruptcy  and  abandoned  the  facilities, leaving public
 nuisance conditions essentially  of  their own creation.
      In  fact,  EPA and the Departaent of Justice have already used
 this legal theory successfully.   In one RCRA Section 7003 case,  the
 United States  argued  that this Section  iaposes personal liability
 on  corporate officers.  The  Court denied defendant's notion to
 dismiss, seating:
           "In  Missouri, a corporate officer who participates
           in the  commission  of a  tort aay be held personally
           liable  for  any  resulting  damage.  Patyean v. Howev
           100  S.W. 2d  851, 856 (Mo. 1936).  'A contrary~ru7e"'
           would enable a  director or officer of a corporation
           to perpetrate flagrant  injuries and escape liability
           behind  the  shield  of his  representative character,
           even though  the corporation Bight be insolvent or
           irresponsible.' 19 Ao. Jur. 2d i 1382 «t 77.££/
     In addition  to theories of  individual tort liability, CERCLA
explicitly allows  individuals to be held liable for cleaning up
hazardous waste sites.  Section  107 of CERCLA clearly pennies impo-
sition of  strict  liability upon  broad classes of persons including
an individual owner or operator, any person vho at the time of
disposal of any hazardous substance owned or operated any facility.
persons who arranged  for disposal and persons who accepted for
transport  hazardous substances.££/  The Act defines "person"
                               ™"                 »•_
as.  Inter  alia, "an Individual."^/  One purpose of the corporate
59/  U.S. v. North Eastern Pharmaceutical fc Cheaical Co.. Inc.
     et al. . (NEFACCO) No. 8U-5066-CV-SW (Western Disc. Ho. 19BO.
A later NEPACCO decision based a determination of liability on Si 07
of CERCLATTsee discussion infra)
60/  CERCLA I107(a)(l)(2). (3)(O
il/  CERCLA I 101(21).

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                                                        9832,7
                                 •33-

 structure is  to insulate  shareholders  from liability.  There is.
 however,  no insulation  from  liability  -• no corporate veil to
                                                      •  •
 pierce •• when  officers or agents of a corporation comait tortious
 acts  or participate  personally  in the  commission of torts.
 B.    Piercing the  Corporate  Veil
      By piercing the corporate  veil, the United States aay be
 able  to establish  the individual liability of shareholders for
 torts coaaitted by the corporation.  The case law tends to upheld
 protection  of the  corporate  fora.  Courts will, however, Bake
 exceptions  to this rule when shareholders have coamingled individual
 and corporate affairs so  that the corporation appears to be no
aorc  than the "alter ego" of the individual shareholder.
      Federal courts  have  relied on the.tollowing factual tests in
determining when to  pierce Che  corporate veil: 1) Is the corporation
undercapitalized for its  purposes?  2) Does the corporation observe
corporate formalities?  3) Dots the corporation pay dividends?
4) Is che corporation solvent?  5) Have the dominant shareholders
siphoned corporate funds?  6) Dots che situation present an element
of "fundamental unfairness"?££/  courts have refused co pierce che
veil  absent a showing of  fundaaencal unfairness.^/  However,
62/  United States v. Pisani. 646 F.2d. 83, 88 (3d. Cir. 1981),
63y  DeUltt Trucking Brokers v. U. Ray Fleming Fruit Coapany.
     540 F. 2d 681, 667 (4th Cir. 19~

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                                 .34-.                   9832.7

 fraud need  not  be  sh'own  if  federal  law governs a case.*^/  The
 general  rule  applied  by  federal  courts to cases involving federal
 statutes is that the  individuals may be held liable in the interest
 of public convenience, fairness  and equity.  The specific statutory
 directives  of CERCLA  support a federal law.  In addition, the
 language of CERCLA establishes liability for individuals who owneo.
 operated or otherwise controlled activities at hazardous waste
 sites, j^/
      Fact situations  faced  by the United States involving -hazardous
waste disposal  or  treatment operations should prove appropriate
 for piercing  the veil.   In many  cases, the United States is finoing
that CERCLA problems have been created by corporations that have
been mismanaged and undercapitalized for the purpose of handling
hazardous waste.   Moreover, in soae cases, the sane individual
shareholder/directors have  dissolved and reformed essentially the
same hazardous waste operations  several times, an indication that
the corporate form is being used as a shield and "alter ego" for
individuals.
64/  United States v. Normandy House Nursint Home. 428 F.Supp.421,
     424 (D. Mass. 1977). The government will want to argue that
federal law applies co piercing the veil.  U.S. v. Kiabell Foods.
440 U.S. 713 (1979), holds that application~ol~State law should
not frustrate the objectives of federal statutes. ' In the Pisani
case, supra, at 87. the Third Circuit seated, "We believe xt is
undesirable to let the rights of the United States change whenever
State courts issue new decisions on piercing the corporate veil."
£5/  See, pages 7-9, Guidance Memo "Liability of Corporate Officers"
     fn 49 supra.  -      •

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                                                        9832.7
              •  '•               -35-
 C.    Personal Jurisdiction in Cases Involving Corporate
      Officers or Shareholders
      If  chc United States proceeds to initiate action against
 individual corporate officers or shareholders, the -government should
 anticipate that defendants say raise the defense of improper juris-
 diction  or service of process if they reside outside the state
 where the CERCLA site is.  For example, in U.S. v. North Eastern
 Pharmaceutical & Chemical Co.. Inc.. e't al. (NEPACCO)*^/,  defendants
 alleged  that, as Connecticut residents, they were not subject to
                                                                  t
 extraterritorial service of process under Missouri rules or civil
 procedure.  They argued that since their acts in directing the
 disposal of hazardous waste in Missouri occurred not as their
                                                       •
 individual acts but as the corporate acts of NEPACCO, they could
not be subject to extraterritorial service of process as defined in
the Missouri rules.
  %
     The Court rejected this argument as overly technical and
affirmed that it had valid personal jurisdiction over the defendants
 		...... uuwever, point* to the need for attorneys to research
state law regarding personal jurisdiction and service" of process.
Referrals to the Department of Justice should include anticipated
d«fenses related to personal jurisdiction.
667  Order No. 5066-CV-SU, (June 11, 1961. V. Disc. Missouri.
~~   SW Div.)                  '

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                                -36-                  9832-7


                     ' VI.   INDEX OF RESOURCES


     These materials can be tenc to EPA Regional attorneys on

request.  Because OECM- Waste does not  have' the  resource capability

to reproduce and send numerous  copies,  mailings will be limited to

one copy per region of each document  listed.


PLEADINGS

   Proofs ef Claia

     In the Matter of Aidex Corp.. Case No.  79-0-1 11, APPLICATION
     FOR PAYMENT OF FUNDS  HELD  IN TRUST BY THE  CLERK OK THE  COURT
     FOR CLEAN UP OF HAZARDOUS  WASTE  SITE CONDITION.

     U.S. v. Jack L. Neal  and Ceraldine Fave Neal  (Globe), Case No.
     FJ^0198, COMPLAINT FOR DECLARATORY JUDGMENT  AND APPLICATION
     FOR ORDER FOR REIMBURSEMENT OF COSTS INCURRED BY THE  U.S.
     IN RESPONSE TO. A HAZARDOUS SITE  CONDITION.

     In re Liquid Disposal Inc.. Case No 82-018^6,  APPLICATION FOR
     ORDER FOR REIMBURSEMENT OF COSTS INCURRED  BY  THE UNITED STATES
     TO CLEAN UP A HAZARDOUS SITE CONDITION and accompanying
     affidavit and invoices. (Eastern Dist.,  MI)
     x" rc TLiatlg** P""*6***!1"6"  CAtt No< -80-00993-HS-7,
     plus APPLICATION FOR ORDER FOR REIMBURSEMENT etc.  and  affidavit.
     (Southern Dist., TX)

     In re Crystal Chemical Company.  Case No. 81-02901 -HB-4,  plus
     UNITED STATES MEMORANDUM IN SUPPORT OF PROOF OF CLAIM.
     (Southern Dist., TX)
                                                 •
   Other Briefs and Motions                  :
                                                  •
     In the Matter of Aidex Corp.. Case No. 79-0-ill. MOTION  TO
     VACATE AUTOMATIC STAY. and accompanying MEMORANDUM IN  SUPPORT
     OF MOTION TO VACATE AUTOMATIC STAY and accompanying court
     ordtr granting motion. (West Dist., HE)

     In re Crystal Chemical Company.  Debtor, Case-No. 81-02901-HB-*..
     OBJECTION TO PROPOSED (HAN'T &F REPLACEMENT LIEN AND TO PROPOSED
     DISCHARGE OF LIEN and accompanying court order granting motion.
     (Southern Dist. , TX)

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                                                  9832.7
                           -37-


 State  of  Ohio.  Petitioner v. Willlaa Lee Kovacs. ON PETITION'
 FOR A  WRIT  OF  CERIlORAiU TO THE UNITED STATES COURT OF APPEALS
 FOR THE SIXTH  CIRCUIT,  Brief for the United Statea 4* Aalcus
 Curiae. (Brief supporting appeal of Ohio to the Supreae Court).

 In  re  Triangle Cheaicals.Inc.. Cast No. 80-00993 HS-7 MOTION
 FOR ALLOWANCE  OF ADMINISTRATIVE EXPENSES AND PROPOSED ORDER
 REQUIRING TRUSTEE TO  PAY EPA1a EXPENSES.  Filed Aug. 22, 1983.

 In  the Matter  of Quanta Resources Corp.. Debtor.  State
 of  New York and City  of New Yog*. Appellants, v.  Thoaaa
 J.  O'Neill, as  Trustee. Appellee. CQUANTA hereafter) ADD«*I
 from the  District Court for the District of New Jeraey,
 Brief  of  Appelianta.  (U.S. Court of Appeala for .the Third
 Circuit,  No. 83-5142).

 QUANTA. Brief  of the  Comaonwealth of Pennsylvania and
 State  of  New Jeraey,  Aaici Curiae. (U.S. Court of Appeals
 for the Third  Circuit, No. 83-5142).

 In Re  A.M.  International. Inc.. Case No. 82-B-04922, Defendant's
 (United.States') Reply Memorandun in Support of Defendant's
Motion to Disniss.

State  of  Ohio v. Kovacs (Kovaca II), 717 F.2d 984 (6th Cir..
 1983)
United States of America, et al. v. Johns Manville Sales
Corporation, et al.. Civil No. 81*299"^D~IOrder of the
District Court denying United States 4nd New Hampshire
..w.twu to vacate the autoaatic at ay. (Nov. 15, 1982;
U.S. District Ct., N.H)

State of Ohio v. Williaa Lee Kovaca. Mo. 81*3220. Decision
attiraed District Court and Bankruptcy Court dec la ions chat  .
Kovacs was entitled to protection of automatic stay. (June 16.
1982, U.S. Court of Appeals. Sixth Circuit)

United States ot Aaerica v. North Eastern Pha.raaceutical
and Chemical Co.. Inc.. et al.. No. »OOQ6»-CV-SM.  Deciaion
denying defendants' »ocion to oiraiss for lack of personal
jurisdiction. (Junt 11, 19»1; Western District of Missouri.
S. Western Division)

Universal Metal Staapint. Inc. v. Pennco Machinery. Inc..
Bankruptcy No. 81-0126ZK.  Bankruptcy court held that autoaatic
stay doea not stay a separate suit against the bankrupt's
"sister" corporation.  (December 7, 1981; Eastern District.
Pennsylvania)

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            f •
                                                     9832.7
                                -36-
RESOURCES
     Bankruptcy Monograph convtyta to U.S.  Attorneys Offiets
     Novcobcr 22, 1982.  Sunoiry of bankruptcy lav  and  procedure.

     EPA Guidance Manual: Pun u ing RCRA Subpart  H Interest*
     ICF. (February,
     Brief in U.S. v. Mahler (M.D. Pa.) drafted  by Michael Steinberg.
     Attorney, Environmental Defense Section,  DOJ  (April  1,  1983).
     Discusses personal liability of corporate officers.
RULES
     Men or an dun front William E, Foley, Director of the  Administrative
     Office of the United States Courts on CONTINUED OPERATION OF
     THE BANKRUPTCY COURT SYSTEM AFTER DECEMBER 24,  19*2,  IN  THE
     ABSENCE OF CONGRESSIONAL ACTION (the "Efficiency Rules" or  '
     "Interim Rules"), (December 3, 1982).

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    't
     I UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
     f                 WASHINGTON. DC 20460
                        JUN 13 1984
                                       OSWER ft 9832.10
                                                        0- .-, -,.
Liability of Corporate Shareholders and Successor
Corporations For Abandoned Sites Under the Compre-
hensive Environmental Response,  Compensation,  and
Liability Act (CERCLA)               /
 gEMORANDUM

 SUBJECT:
 FROM:       Courtney  M.  Price	
            Assistant Administrator  for Enforcement
              and  Compliance Monitoring

 TO:         Assistant Administrator  for
              Solid Waste and 'Emergency Response
            Associate Enforcement Counsel for Waste
            Regional  Administrators
            Regional  Counsels
Introduction

     The  following enforcement memorandum, which was prepared
in cooperation with  the Office of General Counsel,  identifies
legal principles  bearing on  the extent  to which corporate
"shareholders and  successor corporations may be held liable
for response costs that arise as a  result of a release of a
hazardous substance  from an  abandoned hazardous waste facility.
In the discussion section pertaining to each part,  the memorandum
reviews the law on the subject from established traditional
jurisprudence to  current evolving standards.  Although general
rules of  liability are delineated,  these principles must be
carefully applied to the unique fact pattern of any given
case.

I.   THE  LIABILITY OF CORPORATE SHAREHOLDERS UNDER  CERCLA

Background

     Normally, it is the corporate  entity that will be held
accountable for cleanup costs under CERCLA.  In certain

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                               -2-


 instances,  however,  EPA may want to extend liability to include
 corporate shareholders.  This  may arise, for example, where a
 corporation, which had owned or operated a waste disposal site
 at  the  time of  the contamination, is no longer in business.
 TJie situation may also occur if a corporation is still in
 existence,  but  does  not have sufficient assets to reimburse
 the fund for cleanup costs.  There are two additional policy
 reasons for extending liability to corporate shareholders.
 First,  this type of  action would promote corporate responsibil-
 ity for those shareholders who in fact control the corporate
 decision-making process; it would also deter other shareholders
 in  similar  situations from acting irresponsibly.  Second, the
 establishment of shareholder liability would aid the negotiation
 process and motivate responsible parties toward settlement.

     Traditional corporation law favors preserving the corporate
 entity, thereby insulating shareholders from corporate liability.
 Nevertheless, as will be discussed below, there are exceptions
 to  this general principle that would allow a court to disregard
 corporate form  and impose liability under CERCLA on individual
 shareholders.

 Issue

     What is the extent of liability for a corporate share-
holder under CERCLA  for response costs that arise as a result
of a release of a hazardous substance from an abandoned hazardous
waste facility?

Summary

     The question of whether EPA can hold a shareholder of a
corporation liable under CERCLA is a decision that must turn
on the unique facts  specific to given situation.  Generally,
however, in the interests of public convenience, fairness, and
equity, EPA may disregard the  corporate entity when the shareholder
controlled  or directed the activities of a corporate hazardous
waste generator, transporter,  or facility.

Discussion

     Section 107(a)(2) of CERCLA provides that any owner or
operator of a facility which releases a hazardous substance
shall be liable for  all necessary response costs resulting
 from  such  a release.  Section 101(20) (A)(iii) of CERCLA clearly
states that the term 'owner or operator" as applied to abandoned
 facilities  includes  "any person who owned, operated, or otherwise

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                               -3-
 controlled  activities  at  such  facility  immediately  prior to
 such  abandonment"  (emphasis added).

      In  addition,  Sections 107(a)(3) and  107(a)(4)  of CERCLA
 impose liability for response  costs on  any person who arranged
 for the  disposal or treatment  of a hazardous substance (the
 generator), as well as any person who accepted a hazardous
 fubstance for transport to the disposal or treatment facility
 \the  transporter).

      The term 'person' is def.    .n CERCLA Section 101(21)
 as, inter alia, an individual, Iirm, corporation, association,
 partnership, or commercial entity.  A shareholder may exist
 as any of the forms mentioned  in Section  101(21).  Therefore, a
 shareholder may be considered  a person under CERCLA and,  conse-
 quently, held liable for  response costs incurred as a result
 of a  release of a hazardous substance from a CERCLA facility
 if the shareholder:

         0  Owned, operated, or otherwise  controlled activities
           at such facility immediately prior to abandonment
            [CERCLA Section 107(a)(2); Section 101(20) (A) (iii)];

         0  Arranged for the disposal or treatment (or
           arranged with  a transporter  for the disposal or
           treatment) of  the hazardous substance (CERCLA
           Section 107(a) (3)] ; or

         •  Accepted the hazardous substance for transport to
           the disposal or treatment facility selected by such
           person  [CERCLA Section 107(a)(4».

     Notwithstanding CERCLA's statutory language, courts
normally seek to preserve the corporate form and thus maintain
the principle of limited  liability for its shareholders.  £/
In fact,  fundamental "to  the theory of corporation law is
the concept that a corporation is a legal separate -entity, a
legal being having an existence separate and distinct from
    See Pardo v. Wilson Line of Washington, Inc., 414 F.2d
    1145, 1149 (D.C. Cir. 1969); Krivo Industrial Supply Co.
    v. National Distillers t Chem. Corp., 483 F.2d 1098,
    1102 (5th Cir. 1973), modified per curiam, 490.F.2d 916
    (5th Cir. 1974)» Homan and Crimen, Inc. v. Harris, 626
    F.2d 1201, 1208 (5th Cir. 1980).

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                              -4-


that of its owners." £/- This concept permits corporate
shareholders "to limi£ their personal liability to the extent
of their investment." 2/  Thus, although a shareholder may
be considered a "person" under CERCLA (and therefore subject
to the Act's liability provisions), the application of corporate
law would tend to shield the shareholder from such liability.
 »
 ;    Nevertheless, a court may find that the statutory language
i'tself is sufficient to impose shareholder liability notwith-
standing corporation law. V  Alternatively, to establish
shareholder liability, a court may find that the general prin-
ciples of corporation law apply but, nonetheless, set aside
the lirited liability principle through the application of
the equitable doctrine of "piercing the corporate veil."

     Simply stated, the doctrine of piercing the corporate
veil refers to the process of disregarding the corporate
£/  Krivo Industrial Supply Co. v. National Distillers & Chem.
    Corp. , 483 F.2d  1098,  1102  (5th Cir. 1973), modified per
    curiam, 490 F.2d 916  (5th Cir. 1974).
j_/  See United States v. Northeastern Pharmaceutical and
    Chemical Company, Inc., et al., 80-5066-CV-S-4, memorandum
    op. (W.D. Mo., 1984).   In Northeastern Pharmaceutical the
    district court noted that a  literal reading of Section
    101 (20) (A) "provides that a  person who owns interest in a
    facility and is actively participating in its management
    can be  held liable for  the disposal of hazardous waste."
    (Memorandum op. at 36.)-  The court went on to find that
    there was sufficient evidence to impose liability on one
    of the  defendants pursuant to this statutory definition
    of "owner and operator," and the Section 107(a)(l) liability
    provision of the Act.   The fact that the defendant was a
    major stockholder did not necessitate the application of
    corporate law, and thus the  principle of limited liability:
    "To hold otherwise and  allow  [the defendant] to be shielded
    by the  corporate veil  'would frustrate congressional purpose
    by exempting from the operation of the Act a large class
    of persons who are uniquely  qualified to assume the burden
    imposed by  ICERCLA].1"   (Memorandum op. at 37, citation
    omitted. )

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                               -5-
 entity  to  hold  either  corporate  shareholders or specific
 individuals  liable  for corporate activities. 5/

      In order to  determine whether  to disregard corporate form
 and  thereby  pierce  the corporate veil, courts generally have
 •ought  to  establish two primary  elements. £/  First, that the
 Corporation  and the shareholder  share such a unity of interest
 and  ownership between  them that  the two no longer exist as
 distinct entities.  "/   Second, that a failure to disregard the
 corporate  form  would create an inequitable result. 8/

      The first  element may be established by demonstrating
 that  the corporation was controlled by an "alter ego."  This
 would not  include "mere majority or complete stock control,
 but  complete domination, not only of finances, but of policy
 and  business practice  in respect to the transaction attacked
•V  See Henn, LAW OF CORPORATIONS $5143, 146  (1961).  This
    doctrine applies with equal force to parent-subsidiary
    relationships (i.e., where one corporation owns the
    controlling stock of another corporation).

£/  Generally, courts have sought to establish these elements
    in the context of various theories, such  as the "identity,
    "instrumentality," "alter ego," and "agency" theories.
    Although these terms actually suggest different concepts,
    each employs similiar criteria for deciding whether to
    pierce the corporate veil.

7/  See United States v. Standard Beauty Supply Stores,
    Inc., 561 F.2d 774, 777  (9th Cir. 1977);  FMC Fin. Corp.
    v. Murphree, 632 F.2d 413, 422 (5th Cir.  1980).

8/  See Automotrit Del Golfo de Cal. S.A. v.  Resnick, 47 Cal.
    2d 792, 796, 306 P.2d 1  (1957); DeWitt Truck Broker, Inc.
    v. W. Ray Flemming Fruit Co., 540 F.2d 681, 689 (4th
    Cir. 1976).  Some jurisdictions require a third element
    for piercing the corporate veil: that the corporate
    structure must have worked an injustice on, or was the
    proximate cause of injury to, the party seeking relief.
    See e.g., Berger v. Columbia Broadcasting System, Inc.,
    453 F.2d 991, 995 (5th Cir. 1972), cert,  denied, 409
    U.S. 848, 93 S.Ct. 54, 34 L.Ed.2d 89 (1972): Lowendahl
    v. Baltimore t O.R.R., 247 A.D. 144, 287  N.Y.S. 62, 76
    (1936), aff'd 272 N.Y. 360, 6 N.E.2d 56 (Ct. App. 1936),
    but see, Brunswick Corp. v. Waxman, 599 F.2d 34, 35-36
    (2d Cir. 1979).

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                              -6-
so that the corporate entity as to this transaction had at the
time no separate mind, will or existence of its own." V

     In analyzing this first element, courts have generally
considered the degree to which corporate "formalities have
been followed  [so as] to maintain a separate corporate iden-
tity." 10/  For example, the corporate veil has been pierced
tn instances where there had been a failure to maintain adequate
Corporate records, or where corporate finances had not been
kept separate from personal accounts. *_V

     The second element of the test is satisfied when the
failure to disregard the corporate entity would result in
fraud or injustice. ££/  This would occur,  for example, in
cases where there has been a failure to adequately capital-
ize for the debts normally assocated with the business
undertaking, *3/ or where the corporate form has been employed
to misrepresent or defraud a creditor. **/
V  Berger v. Columbia Broadcasting System, Inc., 453 F.2d
    991, 995 (5th Cir. 1972), cert, denied, 409 U.S. 848,
    93 S.Ct. 54, 34 L.Ed.2d 89 (1972).

    Labadie Coal Co. v. Black, 672 F.2d 92, 96 (D.C. Cir.
    1982); See DeWitt Truck Broker, Inc. v. W. Ray Flemming
    Fruit Co., 540 F.2d 681, 686 n. 14  (collecting cases)
    (4th Cir. 1976).

    Lakota Girl Scout C., Inc. v. Havey Fund-Rais. Man.,  Inc.,
    519 F.2d 634, 638 (8th Cir. 1975); Dudley v.  Smith,  504
    F.2d 979, 982 (5th Cir. 1974).

    some courts require that there be actual fraud or injustice
    akin to fraud.  See Chengclis v. Ceneo Instruments Corp.,
    386 F. Supp 862 (W.D. Pa.) aff'd mem.. 523 F.2d 1050 (3d
    Cir. 1975).  Most jurisdictions do not require proof of
    actual fraud.  See- DeWitt Truck Brokers v. W. Ray Flemming
    Fruit Co., 540 F.2d 681, 684 (4th Cir. 1976).

    See Anderson v. Abbot, 321 U.S. 349, 362, 64 S.Ct. 531,
    88 L.Ed. 793 (1944); Machinery Rental, Inc. v. Herpel
    (In re Multiponics, Inc.), 622 F.2d 709, 717  (5th Cir.
    1940).

    See FMC Fin. Corp. v. Murphree, 632 F.2d 413, 423 (5th
    CTr. 1980).

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                                        -7-
I
               In applying the dual analysis, courts act under consider-
          ations of equity; therefore, the question of whether the
          corporate veil will be lifted is largely one of fact, unique
          to a given set of circumstances.  However, the substantive
          law applicable to a case may also have great importance.  For
          fxample, in applying state corporation law, state courts have
          been generally reluctant to pierce the corporate veil. 15/
          Federal courts, however, in sr-lying federal standards, "Have
          shown more willingness to dis.e;ard the corporate entity and
          hold individuals liable for corporate actions. ££/
               In many instances federal decisions do draw upon state
          law and state interpretations of common law for guidance. *
          However, federal courts that are involved with federal
          question litigation are not bound by state substantive law
          or rulings. ^°/  In such cases, either federal common law
          *5/  See discussion in Note, Piercing the Corporate Law veil;
               The Alter Ego Doctrine Under Federal Common Law, 95
               Harvard L.R. 653, 855  (1982).

         •*6/  It is well settled that a corporate entity must be dis-
               regarded whenever it was formed or used to circumvent
               the provisions of a statute.  See United States v. Lchigh
               Valley R.R., 220 U.S.  257, 259, 31 S.Ct. 387, 55 L.Ed.
               458 (1911); Schenley Distillers Corp. v. United States,
               326 U.S. 432, 437, 66  S.Ct. 247, 90 L.Ed. 181 (1945);
               Kavanaugh v. Ford Motor Co., 353 F.2d 710, 717 (7th
               Cir. 1965); Casanova Guns, Inc. v. Connally, 454 F.2d
               1320, 1322 (7th Cir. 1972).

          I?/  see Seymour v. Hull t  Moreland Eng'g, 605 F.2d 1105  (9th
               Cir. 1979); Rules of Decision Act, 28 U.S.C. $1652 (1976).
               Generally, federal courts will adopt state law when to
               do BO is reasonable and not contrary to existing federal
               policy.  United States v. Polizzi, 500 F.2d 856, 907  (1974
               See also discussion in note 19, infra.

          I8/  UNITED STATES CONSTITUTION art. VI, el. 2.

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                           -8-
or specific statutory directives may determine whether or not
to pierce the corporate veil. 19/
     See Anderson v. Abbot, 321 U.S. 349,  642 S.Ct.  531,  88
     L.Ed. 793 (1944); Town of Brookline v.  Gorsuch,  667  F.2d
     215, 221 (1981).  For a general discussion of  federal
     common law and piercing the corporate veil see,  note 15,
     supra.  The decision as to whether to apply state  law or
     a federal standard is dependent on many factors:

          "These factors include the extent  to which:  (1) a
          need exists for national uniformity; (2)  a  federal
          rule would disrupt commercial relationships  predicated
          on state law; (3) application of state law  would
          frustrate specific objectives of .the federal  program;
          (4) implementation of a particular rule would cause
          administrative hardships or would  aid in  administrative
          conveniences; (5) the regulations  lend weight to the
          application of a uniform rule; (6) the action in
          question has a direct effect on  financial  obligations
          of the United States; and (7) substantial  federal
          interest in the outcome of the litigation  exists.

          Even with the use of these factors,-however,  whether
          state law will be adopted as the federal  rule or
          a unique federal uniform rule of decision  will  be
          formulated remains unclear.  The courts have  failed
          to either mention the applicable law or to  state the
          underlying rationale for- their choice of  which  law to
          apply."  Note, Piercing the Corporate Veil  in Federal
          Courts; Is Circumvention of a Statute Enough?,13  Pac.
          L.J. 1245, 1249 (1982) (citations  omitted).

     In  discussions concerning CERCLA, the courts and  Congress
     have addressed several of the above mentioned  factors.
     CERCLA.  For example, the need for national uniformity  to
     carry out the federal superfund program has been  clearly
     stated in United States v. Chem-Dyne, C-l-82-840,  slip  op.
     (S.D. Ohio,  Oct. 11, 1983).In Cnem-Dyne, the  court stated
     that the purpose of CERCLA wa» to ensure the development
     of  a uniform rule of law, and the court pointed out  the
     dangers of a variable standard on hazardous waste disposal
     practices that are clearly interstate.   (Slip  op.  at
     11-13.)  See also, Ohio v. Georqeotf, 562 F. Supp. 1300,

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                              -9-
     The  general  rule  applied by  federal courts to cases in-
 volving federal statutes  is that  "a corporate entity may be
 disregarded  in the  interests of public convenience, fairness
 and equity." ££/  In applying this rule, "federal courts
 Vill look closely at the  purpose  of the federal statute to
 Determine whether that statute places importance on the
 corporate form."  31 / Furthermore, where a statute contains
 specific  directives on when the corporate entity may be
 disregarded  and indiviouals held  liable for the acts or debts
 of a valid corporation, courts must defer to the congressiona
 mandate.
     Thus, even under general principles of corporation law,
courts may consider the  language of statute in determining
whether to impose  liability on corporate shareholders.
Therefore, a court may use the statutory language of CERCLA
either as a rationale for piercing a corporate veil  (when
corporation law is applied) or as an independent statutory
basis for imposing liability  (notwithstanding the general
principles of corporation law). 23/
*9  (continued)/

     1312  (N.D. Ohio,  1983);  126 Cong. Rec.  H.  11,787  (Dec.
     3, 1983).
a
     The Chem-Dyne court stated that  "the  improper disposal
     or release of hazardous  substances  is an enormous  and
     complex problem of national magnitude involving uniquely
     federal interests." (Slip op.  at  11.)  The  court further
     noted that "a driving force toward  the development of
     CERCLA was the recognition that  a response  to this
     pervasive condition at the State  level was  generally
     inadequate: and that the United  States has  a unique
     federal financial interest in  the trust fund that  is
     funded by general and excise taxes."  (Slip op. at 11,
     citing, 5 U.S. Code Cong, fc Ad.  News  at 6,142.) See
     also, 126 Cong. Rec. at  H. 11,801.

20/ Capital Telephone Company, Inc.  v.  F.C.C.,  498 F.2d  734,
     738  (D.C. Cir. 1974).

     Town  of Brook line v. Gorsuch,  667 F.2d  215, 221  (1981).

     Anderson v. Abbot, 321 U.S.  349,  365, 64  S.Ct.  531,
     88 L.Ed 793  (1944).

     See  discussion, supra, note  4.

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                              -10-


Conclusion

     The Agency should rely upon the statutory language of the
Act as the basis for  imposing liability on any person who
controlled or directed the activities of a hazardous waste
facility immediately  prior to abandonment, or on any person
frho is a generator or transporter, notwithstanding the fact
that that individual  is a shareholder.  Additionally, and
alternatively, the Agency may rely on the general principles
of corporation law to pierce the corporate veil by applying
the current federal standard of public convenience, fairness,
and equity.  However, when seeking to pierce the corporate
veil, the Agency should be prepared to apply the traditional
dual test previously  discussed in order to provide additional
support for extending liability to corporate shareholders.
II.  THE LIABILITY OF SUCCESSOR CORPORATIONS UNDER CERCLA
Eiackground

     Section 107(a)(2) of CERCLA extends liability for response
costs to "any person who at the time of disposal of any hazardous
substance owned or operated any facility at which such hazardous
substances were disposed of."  Situations may arise, however,
where a corporation, which previously had owned or operated a
hazardous waste facility, now -transfers corporate ownership to
another corporation.  In such, cases, it is important to determine
whether the liability of the predecessor corporation's action
regarding the disposal of hazardous waste is also transferred
to the successor corporation. 2V

Issue

     What is the extent of liability for successor corporations
under CERCLA?
24/  The discussion that follows  is equally applicable to
     successor corporations of generators and transporters
     associated with hazardous substances released from CERCLA
     facility.

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                               -11-
 Summary
     When  corporate  ownership  is  transferred  from one cor-
 poration to another,  the  successor  corporation  is liable for
 the  acts of its  predecessor  if  the  new corporation acquired
 ^wnership  by merger  or  consolidation.  If, however, the
 Acquisition was  through the  sale  or transfer  of assets, the
 successor  corporation is  not liable unless:

        a)   The  purchasing corporation expressly or
             impliedly agre*s to assume such obligations;

        b)   The  transaction  amounts to a  'de  facto" consoli-
             dation or merger:

        c)   The  purchasing corporation is merely a continu-
             ation of  the  selling  corporation; or

        d)   The  transaction  was fraudulently  entered into
             in order  to escape  liability.

     Notwithstanding  the  above  criteria, a successor corpora-
tion may be  held liable for  the acts of the predecessor
corporation  if the new  corporation  continues  substantially
the same business operations as the selling corporation.

Discussion

     The liability of a successor corporation, according to
traditional  corporation law. is dependent on  the structure of
the corporate acquistion. £v   Corporate ownership may be
transferred  in one of three  ways:   1) through the sale of stock
to another  corporation; 2) by a merger or consolidation with
another corporation;  or 3)' by the sale of its assets to another
corporation.  2V  Where a corporation is acquired through -the
•purchase of aTl of  its outstanding stock, the corporate
entity remains intact and retains its liabilities, despite
     See N.J. Transp. Dep't v. PSC Resources, Inc., 175 N.J.
     Super. 447, 419 A.2d 1151 (Super. Ct. Law Div. 1980).

26/  Note, Torts - Product Liability - Successor Corporation
     Strictly Liable for Defective Products Manufactured by
     the Predecessor Corporation, 27 Villanova L.R. 411, 412
     (1980) (citations omitted)  [hereinafter cited as Note,
     Torts - Product Liability].

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                              -12-
                           27.
the change of ownership."  27/  By the same token, a purchasing
corporation retains liability for claims against the predecessor
company  if the transaction  is in the form of a merger or con-
solidation. 28/  Where, however, the acquisition is in the form
of a sale or other transference of all of a corporation's assets
to a successor corporation, the latter is not liable for the
debts and liabilities of the predecessor corporation. *9/

I     There are four exceptions to this general rule of non-
liability in asset acquisitions.  A successor corporation
is liable for the actions of its predecessor corporation if
one of the following is shown:

         1)  The purchaser expressly or impliedly
            agrees to assume such obligations;

         2)  The transaction amounts to a "de facto"
            consolidation or .merger;

         3)  The purchasing  corporation is merely a
            continuation of the selling corpor-
            ation; or

         4)  The transaction is entered into fraudulently
            in order to escape liability. 30/

     The application of the traditional corporate law approach
to successor liability has  in many instances led to particularly
27/  N.J. Transp. Dep't v. PSC Resources, Inc., 175 N.J.
     Super. 447, 419 A.2d 1157 (Super. Ct. Law Div. 1980).

     Id.  A merger occurs When one of the combining corpor-
     ations continues to exist; a consolidation exists when
     all of the combining corporations are dissolved and an
     entirely new corporation is formed.

     See N.J. Transp. Dep't v. PSC Resources, Inc., 175 N.J.
     Super. 447, 419 A.2d 1151 (Super. Ct. Law Div. 1980),
     citing, Jackson v. N.J. Manu. Ins. Co., 166 N.J. Super.
     4B8, 454 (Super. Ct. APP. Div. 1979), cert, denied, 81
     N.J. 330 (1979).

30/  Id., Note, Torts - Product Liability, supra note, 26 at
     413 n. 15-18.

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                              -13-
harsh and unjust results, especially with respect to product
liability cases. 31/  Therefore, in an effort to provide an
adequate remedy and to protect injured consumers, courts
have broadened the exemptions to the general rule by either
modifying or recasting the 'de facto' and "mere continuation'
exemptions to include an element of public policy. 32/

     More recently, however, the general rule has been aban-
doned altogether by several jurisdictions and, in essence,  a
new theory for establishing successor liability has evolved
based upon the similarity of business operations. 33/  The
new approach has been cast by one court in the following way

           "[w]here ... the successor corporation acquires
           all or substantially all of the assets of the
           predecessor corporation for cash and continues
31/  See McKee v. Harris-Seybold Co., 109 N.J. Super. 555,
     264 A.2d 98 (Super. Ct. Law Div. 1970), aff'd per curiam,
     118 N.J. Super. 480, 288 A.2d 585 (Super. Ct. App.  Div.
     1972); Kloberdanz v. Joy Mfg. Co., 288 F.Supp. 817  (D.
     Colo. 1968).

     See N.J. Transp. Dep't v. PSC Resources, Inc., 175  N.J.
     Super. 447, 419 A.2d 1151 (Super. Ct. Law Div. 1980):
     See also, Knapp v. North Am. Rockwell Corp.,  506 F.2d
     361 (3d Cir. 1974), cert, denied, 421 U.S. 965 (1975):
     Cyr v. B. Of fen t Co., 501 F.2d 1145 (1st Cir. 1975);
     Turner v. Bituminous Gas Co., 397 Mich. 406,  244 N.W.2d
     873 (1976).

     The theory has also been referred to as the "product-
     line" approach.  In adopting this new approach to
     successor liability, some courts have abandoned the
     traditional rule of non-liability in asset acquisitions.
     See e.g., Ray v. Alad Corp., 19 Cal. 3d 22, 560 P.2d
     3, 136 Cal. Rptr. 574  (1977).  Other courts have con-
     sidered the new approach as an exemption to the general
     rule.  Sec e.g., Daweko v. Jorqensen Steel Co., 290 Pa.
     Super. Ct. 15, 434 A.2d 106  (1961); Note, Torts - Product
     Liability, supra note, 26 at 418 n. 38.  And, a few
     jurisdictions have rejected the new approach.  See
     Travis v. Harris Corp., 565 F.2d 443 (7th Cir. 1977):
     Tucker v. Paxson Mach. Co., 645 F.2d 620  (8th Cir. 1981).

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                              -14-
           essentially  the  same manufacturing operation
           as  the predecessor corporation the successor
           remains  liable for the products liability claims
           of  its predecessor.' 34/

 £   This theory of establishing successor liability differs
from the "de facto" and  "mere continuation" exemptions in that
the new approach does not examine whether there is a continuity
of corporate structure  or ownership  (e.g., whether the predecessor
and successor  corporation share a common director or officer).
Instead, according  to the new theory, liability will be imposed
if the successor corporation continues essentially the same
manufacturing  or business operation  as its predecessor corporation,
even if no continuity of ownership exists between them. 35/

     Until recently, this new approach for establishing successor
liability was  confined mostly to product liability cases.
However, a recent New Jersey decision extended its application
to the area of environmental torts.  The Superior Court of New
Jersey, in N.J. Transportation Department v. PSC Resources,
Inc. 36/, rejected  the  traditional corporate approach to
successor liability where the defendant and its predecessor
corporation had allegedly discharged hazardous wastes.  The
court reasoned that the underlying policy rationale for
abandonment of the  traditional approach in defective product
cases is applicable to environmental torts.  Therefore, the
court held that a corporation which  purchased assets of another
corporation and engaged in  the practice of discharging hazar-
dous waste into a state-owned lake is strictly liable for
present and previous discharges made by itself and the prede-
cessor corporation  because  the successor continued the same
waste disposal practice as  its predecessor.
3V  Ramirez v. Amstead Indus., Inc., 171 N.J. Super. 261, 278
     408 A. 2d 818 (Super. Ct. App. Div. 1979), aff 'd, 86 N.J.
     332, 431 A.2d 811 (1981).
  /  See Ray v. Alad Corp., 19 Cal. 3d 22, 560 P.2d 3, 136 Cal.
     RptrT574  (1977); some form of acquisition, however, is
     •till required.  See Meisal v. Modern Press, 97 Wash.
     2d 403, 645 P.2d 693.

36/  175 N.J. Super. 447, 419 A.2d  1151  (Super, Ct. Law  Div.
     1980);

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                               -15-
     A similar  "continuity of business operation* approach has
 been used  in cases  involving statutory violations.  *'/  The
 Ninth Circuit,  for  example, held  in a case  involving the Federal
 Insecticide, Fungicide, and Rodenticide Act  (FIFRA] ££/, that
 "EPA's authority to extend liability to successor corporations
 stems from the  purpose of the  •• »*ute it administers, which is
 to regulate pesticides to pr      the national environment." 39/
 furthermore, the court noted i.-.dt "[t]he agency may pursue the"
 objectives of the Act by imposing successor liability where it
 will facilitate enforcement of  the Act." 40/  After establishing
 that there had  been violations  of FIFRA by the predecessor
 corporation, the court found that there was substantial continuity
 of business operation between the predecessor and successor
 corporations to warrant imposition of successor liability.

     Although CERCLA is not primarily a regulatory  statute,
 public policy considerations and  the legislative history of
 the Act clearly indicate that federal law would be  applicable
 to CERCLA  situations involving  successor liability. *V
 Therefore, it is reasonable to  assume that courts wouTd similarly
 adopt the  federal "continuity of  business operation approach"
 in cases involving  CERCLA.
Conclusion
     In establishing successor liability under CERCLA, the
£2/  See Golden State Bottling Co. v. NLRB, 414 U.S. 168, 94
     S.Ct. 414, 38 L.Ed2d 388  (1973); Slack v. Havens, 522
     F.2d 1091 (9th Cir. 1975).
  /  7 U.S.C. $136 et, scq.

39/  Oner II, Inc. v. United States Environ. Protection
     Agency, 597 F.2d 184, 1B6  (9th Cir.  1979).
  /
     See discussion, supra, n. 19;  One of Congress' primary
     concerns in enacting CERCLA was to alleviate the  vast
     national health hazard created by inactive and abandoned
     disposal sites.  See e.g. , Remarks of Rep. Florio,  126
     Cong. Rec. H. 9,154  (Sept. 19, 1980), 126 Cong. Rec.
     H. 11,773  (Dec. 3. 1980).

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                              -16-
Agency should initially utilize the "continuity of business
operation" approach of federal law.  However, to provide
additional support or an alternative basis for successor
Corporation liability, the Agency should be prepared to apply
the traditional exemptions to the general rule of non-liability
in asset acquisitions.

cc:  A. James Barnes, General Counsel

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                                                                          3
                                                               OSUKfc*
                            , ..n . in^NMtNTAL PROTECTION AGENCY
                            WASHINGTON. D.C. 20440
:/umo
OCT 2'384
       MEMORANDUM

       SUBJECT:  EPA/State Relationship in Enforcement Actions for
                Sites on the National Priorities  List

       TO:       EPA Regional Administrators
                Directors, State Solid Waste Programs


            The Comprehensive Environmental Response, Compensation,
       and  Liability Act of 1980 (CERCLA) empowers the Environmental
       Protection Agency to take certain enforcement actions  to obtain
       responsible party cleanup of sites on the National Priorities
       List  (NPL).  CERCLA does not, however, address the enforcement
       authority or role of States.  The result is that  EPA and States
       have,  to this point, proceeded essentially independently, despite
       common, purposes.  Needed site coordination has been lacking in
       many  instances, and there have been occasional conflicts regard-
       ing policies and specific site results.  The cause has not been
       disagreement over broad goals, but rather the absence  of a basic
       framework for the relationship.

            The attached EPA policy statement creates such a  framework.
       It has been developed over the past year in close consultation
       with  EPA's Regions, and with the States through the Association
       of State and Territorial Solid Waste Management Officials and
       the National Association of Attorneys General.  Based  on the
       recognition that EPA and the States chare common  interests, the
       policy stresses increased coordination and cooperation in en-
       forcement actions, beginning with site planning and continuing
       through to selection and implementation of sit* remedy.  It also
       resolve* several operational issues in the current relationship:
       criteria are established for determining lead responsibility for
       enforcement sites; EPA's intent to begin providing funding assist-
       ance  for remedial investigations and feasibility  studies at State-
       lead  enforcement sites is stated; the nature and  scope of EPA
       and  State involvement in the other's site activities are defined;

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                                2-
•nd provision is made for EPA/State site agreements through which
EPA and State roles and responsibilities at enforcement sites
can be agreed and documented to prevent later misunderstandings
or misapprehensions.

     Taken together, the actions described in the policy provide
a solid foundation for an effective EPA/State relationship in
pursuing enforcement actions at NPL sites.  The absence of a
statutory structure for the relationship has presented some
problems in the past, and issues will continue to arise, but a
mechanism has been created to allow EPA and States to deal with
those issues in a way that can minimize conflict and improve the
chances for acceptable solutions.
      Lee-M. Thorr.as
 Ass-.stant Administrator
   fcr Solid Waste and
   Emergency Response
 Environmental Protection
        Agency
   jonaid A. Laiarchik
 President, Association
of State and Territorial
 Solid Waste Management
       Officials

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           	. „.* j . « , e.3 cni vmUNMENTAL PROTECTION AGENCY '

                       WASHINGTON, D.C.   '«
                            OCT  2'984
                                                        O"ICI O*
                                               SOLID WASTI AND IMf HCINCT ftlt'ONSE
MEMORANDUM

SUBJECT:  EPA/State  Relationship  in  Enforcement  Actions  for
           "ites<
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                                -2-
      •   States and  EPA  can maximize  the  number of enforcement
         actions by  operating  independently, conducting joint
         actions only where such action will best serve EPA and
         State  interests.

      e   EPA  and State enforcement policies and procedures need
         not  be identical, but  results of enforcement actions
         should be mutually acceptable.

      *   To the extent that State and EPA enforcement programs
         parallel each other in substantive respects, such as in
         the  process for determining  the appropriate extent of
         remedy, the need for  oversight of, and direct involvement
         in,  the other's activities will be minimized.

      •   Sharing of  information between EPA and the States is key
         to developing a more  effective relationship.

      0   State experience in hazardous waste enforcement must be
         recognized  and accommodated  in formulating agency policies.

      0   EPA will provide financial and technical support for
         State enforcement actions to the extent practicable and
         allowed by  law.

      e   EPA  remains ultimately responsible for cleanup at NPL
         sites, and  retains the authority to take enforcement or
         response' actions where needed.

BACKGROUND

     From the survey of EPA Regional and headouarters officials
conducted to assess the nature and extent of the current EPA/State
relationship, and as a  result of meetings for the same purpose with
State representatives under the auspices of the Association of
State and Territorial Solid Waste Management Officials (ASTSWMO)
and the  National Association  of Attorneys General (NAAG), it is
clear that EPA and  the States generally agree on broad goals in
hazardous waste enforcement activities.  It is clear also that
frequently there are differences between EPA and States, and among
States,  in capabilities and in legal and technical approaches
toward achieving these goals.  These differences — whether based
in provisions of law, policy  decisions, or resource constraints —
can lead to situations where  a responsible party cleanup or settle-
ment agreement obtained by EPA 'or a State does not satisfy the
requirements or needs of the  other.

     Problems created in such situations are particularly acute
when they arise in  connection with NPL sites.  First, EPA and the
State each may be called on to explain or justify site results,

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                                                          OSWE? I 9831.3
 regardless  of which  had  the  lead  enforcement  responsibility.
 Second, EPA potentially  could  be  put  in  the position of denying a
 State  request to  delete  from the  NPL  a State-lead site, or of seek-
 ing  to delete an  agency-lead site in  the  face of State objections.

     Uniformity of EPA and State  legal and technical approaches
 is not essential  to  prevent  these situations, nor is uniformity
 practicable.  CERCLA is  unusual among Federal environmental laws
 in that it  does not  create a mechanism for authorizing State
 enforcement programs on  the  basis of  certain minimum legal and
 resource  requirements that States must meet.  Accordingly, there
 is no  requirement that State legal provisions and technical pro-
 cedures be  consistent with Federal standards, nor are there the
 usual  mechanisms  for required  State reporting and Federal over-
 sight.  This means that  EPA  and the States must establish a
 cooperative relationship in  order to  prevent, or at least minimize,
 those  instances where differences in  capability or approach result
 in a responsible  party cleanup or settlement  which is not mutually
 acceptable.

     The purpose  of  this  policy,,  therefore, is  to seek to create
 an effective EPA/State relationship by taking certain actions  to
 increase cooperation and  coordination, and by establishing a
mechanism for ongoing EPA/State efforts  to address issues that
may later arise.

SPECIFIC ISS'JES IN THT CL'PFENT CFA/S7ATE  RELATIONSHIP

     To establish the context  for a discussion  of the specific
actions that EPA  and fhe  States can take  to build an effective
relationship, it  is  important  first to describe briefly the issues
in the current relationship  that  have been identified through  the
survey of EPA personnel  and  the meetings  with State representatives
These  issues are  divided  among Coordination,  State Enforcement
Authorities and Procedures,  and Resources.

     Coordination.   The  absence of a  comprehensive policy regard-
 ing EPA/State relations  has  left  the  Regional Offices and States
essentially in the position  of determining for  themselves the
nature and-  extent of their relationship.  As  a  result, the level
of coordination and  cooperation varies among  the Regions, and
even from State-to-State within the same  Region.

     Further, limited guidance from EPA  to the  States on specific
 issues has  contributed to the  differences in  policies and proce-
dures  that  often  exist among States and  between States and EPA.

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                                -4-

                4

      Problems created by the lack of a comprehensive EPA/State
 policy and by limited issue-specific guidance have been compounded
 by the absence of systematic information sharing between EPA  an-"
 the States on the status of enforcement actions.  Combined with"
 the lack of procedures for coordinating case management, EPA  and
 States therefore have had limited knowledge of the status of  the
 other's activities.  These factors have led to occasional delays
 and conflicts in administrative enforcement and litigation/ and to
 the discovery of problems — if discovered at all — often late in
 the enforcement process.

      State Enforcement Authorities and Procedures.  Most States
 must rely either on broad State environmental or general statutes,
 or on State hazardous waste legislation enacted prior to CERCLA.
 As a consequence, few States have the full range of authorities
 available to EPA.  While this has not prevented State enforcement
 actions against responsible parties, it has meant that in some
 instances actions have been limited in scope or coercive potential.
 For example, few States have provisions analogous either to
 Section 106 of the Act which provides for fines of up to 55,000
 per day against any responsible, party who willfully violates  or
 fails  or refuses  to comply with an administrative order issued
 under  the section, or to Section 107 of CERCLA which enables  EPA
 to seek treble damaaes from any responsible party who fails with-
 out sufficient cause to comply with a Section 106 administrative
 order.

     with regard  to enforcement procedures, two particular issues
 have arisen.  First, some States work informally with responsible
 parties,  which can lead to arrangements that are difficult to
 enforce successfully.  Second, State negotiations with responsible
 parties often are conducted without a time limit, and in some
 instances involve one round led by the administrative agency  and
 a  second  round led by the attorney general's office.  Zn either
 instance, negotiations easily can become protracted.*/ In these
 circumstances, it is often difficult to assess the eTfectiveness
 or the  likelihood of success of State enforcement efforts' or
•negotiations.  This uncertainty makes it difficult for EPA to
 define, or to plan for implementation of, its role at the site
 in a manner that  is sensitive both to State concerns and to public
 concerns  about achieving response objectives at the site.  Further,
 this type of situation can create EPA/State conflicts if site or
 programmatic concerns cause CPA to conclude that effective enforce-
 ment action is required on an expedited or more certain schedule.

 I/ EPA's  experience with negotiations without time limits resulted
 Tn the  agency developing a policy which targets negotiations  for
 completion within 60 to 120 days, unless more time is needed  to
 resolve complex issues with responsible parties who in the agency's
 view are negotiating in good faith.

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                               -5-


     Resources.  Funding for State hazardous waste enf orcemer.t
programs, whether from appropriations or in some instances from
fees and taxes,  ranges from negligible to substantial.  The norm,
however, is less than adequate.  A survey conducted by ASTSWMO in
mid-1983 showed  that anticipated FY  1984 increases in fundinc among
the responding 47 states still would leave these States, in the
aggregate, with  staffing levels some 40 percent short of optimur.
The survey did not categorize technical and administrative person-
nel resources  as either program- or enforcement-specific, but this
distinction is not significant, because enforcement activities
depend extensively on technical resources, and the survey indicates
overall conditions.

     Limited funding has had a particularly negative effect with
respect to the availability of certain necessary disciplines.  The
ASTSWMO survey indicates that the number of State-employed engi-
neers (civil,  sanitary, and environmental), chemists, geolocists/
hydroloc, ists,  and soil scientists is less than half the number
needed.   No similar data exist with  respect to legal resources
available to State administrative agencies and attorney general
offices, but discussions with State  officials indicate  that more
resources are  necessary, particularly with regard to para-legal
personnel, investigators, and administrative support.

     Limitations in State funding also have been felt with regard
to laboratory  and analytical capabilities, training opportunities,
and the  adequacy of case preparation and documentation.

     The net effect of these resource limitations is to constrain
the scope of State enforcement activities, particularly with
respect  to the number of actions that can be taken, but also  in
part with respect to the deta.il of field investigation  and site
analys is .

ACTIONS  TO BE  TAKEN

     As  is clear from the summary discussion of  issues  confrontino
EPA and the States in the current relationship,  some issues  cannot
be resolved through this statement of policy.  For example,  funding
assistance for additional personnel  resources needed by the  States
is beyond the  current ability of EPA to provide, and any  inade-
quacies that nay exist in State legal authorities is a  matter for
States to resolve on an individual basis.  However, most  of  the
issues can be  resolved by EPA and the States through the  actions
described in the remaining sections  of this document.

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                                -6-
      These actions are based not only on the  qeneral  cuiding
 principles stated earlier,  but also on a specific  operating con-
 sideration.   EPA is responsible for listing sites  on  the  National
 Priorities List and for deleting sites that have been cleaned UT>
 appropriately.   This means  that EPA has a responsibility  to assure
 to the extent possible that human and environmental  risks  at NPL
 sites are eliminated or at  least reduced to acceptable levels.
 Sites cannot be deleted without such assurances.

      The actions to be taken,  described in the  remainder  of this
 document, address:
      0   funding  assistance  to States,

      *   criteria for  determining  lead  responsibility  for enforce-
         ment  sites,

      *   enforcement planning  activities,

      e   extent cf  EPA and State  involvement  in  the  other's  activi-
         ties  where the other  has  the enforcement  lead,

      e   development of EPA/State  Enforcement  Site Agreements  to
         clearly  delineate the EPA/State  relationship  at each
         enforcement site,

      6  
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  .  .           •                 -7-


     However,  the Office  of General Counsel also concluded that
 CERCLA does  not authorize  funding of other State enforcement costs*.
 In  its opinion dated July  20,  1984, OGC stated that "the Superfund
 eligibility  of State enforcement costs is limited to those activi-
 ties authorized by section 104(b).  Section 104(b) authority does
 not extend to  litigation or other efforts to compel private party
 cleanups, or to monitoring or  community relations activities asso-
 ciated with  such cleanups.  Payment of these State enforoement-
 related costs  will require more explicit statutory authority than
 exists in section 104."

     Site Classification.  Current interim guidance for classify-
 ing sites as Fund- or enforcement-lead establishes criteria for
 making classification determinations.  It does not, however, pro-
 vide specifically for State involvement in the process.  While
 some Regions may consult with  States in making classification
 decisions, there has been  no consistent effort in this regard.
 The result is  that there have  been occasions where sites that have
 been classified as Fund-lead might properly have been classified
 instead as an enforcement  site, based on information and data
 available to the State, with the State assuming the lead responsi-
 bility.  Accordingly, Regions  should consult with States in classi-
 fying sites  to ensure that fuller information is considered before
 decisions are made.  The final site classification guidance will
 incorporate  appropriate provisions.

     The Recions ani States should jointly make determinations as
 to whether an enforcement  site.is to be EPA- or State-lead, or
 "shared-lead" where both the Region and the State will pursue site
enforcement.   A site should be classified as EPA-lead or State-
 lead where direct participation in enforcement actions on the part
 of the other is not anticipated or is expected to be minimal.  A
site should be classified  as shared-lead where the Region and State
determine that joint enforcement action can best achieve effective
site cleanup.  Regardless  of a site's classification, the Regions
and States should adhere to the provisions described later in this
document regarding -consultation and cooperation in the course of
enforcement activities.

     In determining lead  responsibility for enforcement sites, the
 Regions and States should  apply the following considerations:

     (1) past site history, i.e., whether there has been EPA or
         State enforcement activity at the site;

     (2) the effectiveness of  enforcement actions to date;

     (3) the strength of legal evidence to support EPA or State
         action;

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                                                         **-»•»_• w  .'w.,*...,

                               -8-
     (4) the severit- :f probiers at the site;

     (5) the national i :;-.if icance of legal or  technical issues
         presented by ".« site; and

     (6) the availability of EPA and State legal authorities  and
         personnel and funding resources adequate to enable
         effective action.

     A site initially classified as State-lead  on the basis of  the
above considerations will be classified finally as State-lead if
the State assures that it will:
     (1)
         prepare, or  have  the  responsible party prepare, an RI/FS
         (or equivalent  as agreed by  the Region and the State),2/
         and provide  for public  comment, in accordance with EPA~"
         guidance;

      (2) conduct negotiations  with  responsible parties formally
         (e.g., culminating  in the  issuance of an enforceable
         order, decree,  or equivalent)  and, to the extent practic-
         able, within agreed time limits;

      (3) provide ftr  public  comment on  settlements, voluntary and
         negotis-.Ti cleanups,  and consent orders and  decrees in
         accordance «ith EPA guidance;

      (4) pursue anc ensure implementation of  a remedy that  is at
         least as protective of  public  health, welfare and  the
         environment  as  a  cost-effective remedy as that term is
         defined in the  National Contingency  Plan; and

      (5) keep EPA informed of  its activities,  including consulting
         with the Regional Office when  issues  arise that do net
         have clear-cut  solutions.

     These assurances should be  incorporated  in the EPA/State
Enforcement Site Agreement (described later in this document).


£/ In accordance with agency guidance issued  on March 27,1984,
"regarding procedures  for deleting sites from  the NPL,  documenta-
tion  to support deleting a State-lead enforcement site "should
include the State feasibility  study (if one has been  prepared),
... or a copy of an EPA  or State  study, or  an EPA or State revie.
of a  responsible party study or  documents, used by the Region to
determine that . . .  no  further  cleanup is appropriate."  To the
extent that a State or responsible  party conducts an  RI/FS  in
accordance with agency guidance, the  deletion process for State-
lead  enforcement sites will  be simplified.

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                                -9-


      where a State is unable to provide the above assurances  in
 connection with a site that initially has been classified  as
 State-lead, the site cannot finally be designated as State-lead.
 In such instances, consideration should be given to classifying*
 the site as shared-lead so that State enforcement interests can
 b« directly represented in site actions.

      Finally, all current EPA- and State-lead enforcement  .site
 designations should be reviewed by the Regions and States  in
 light of these criteria and modified as necessary.

      Planning.  In accordance with recent agency guidance, site
 management plans are to be de'-'
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                                -10-


    • Where  a State does  not  -snt  EPA  assistance  in  its site acti-
 vities, particularly with  recard  to review of  technical and legal
 documents,  the Region  should  livise the Sts;e  that  it must accept
 the risk  that cleanup  may  later prove  to be  inappropriate.  In
 such an instance, the  site ct'jli  net  be removed  from the NPL, and
 subsequent  EPA enforcement action might be necessary.

     Regions should continually monitor State-lead  enforcement
 activities.  Where the Region determines that  the terms of the EPA/
 State  Enforcement Site Agreement  are  not, being followed or that the
 State  is  not making effective or  timely progress, the Region should
 consider  involving the agency in  site  activities to a greater degree
 than previously agreed.  Potential actions include  taking enforcenent
 action in lieu of State  action, and assuming lead responsibility
 for the site.

     Determnations regarding whether  greater  EPA involvement is
 necessary,  and the nature  of  response, will  be made jointly by the
 Region and  the Office  of v.'as te' Programs Enforcement in accordance
 with the following considerations:

     (1)  the State's willingness  and  ability to  correct'the
         problem;

     (2)  the availability  of  EPA  resources;

     (3)  the likely efficacy  of EPA action;  and

     (4)  the significance  of  agency inaction.

     Where  Federal enforcement action  is contemplated, the decision
 to pursue  such action  will be made also in conjunction with the
Office of  Enforcement  and  Compliance  Monitorina  - Waste.

     Extent of State Involvement  in EPA-lcad Enforcement
Actions.State interest in  the conduct and  outcome of EPA enforce-
ment actions must be recognized,  and  State experience and expertise
accommodated in EPA's  site activities  to the extent possible.
While mechanisms are created  in various sections of this policy for
coordinating the planning  and execution of enforcement actions, and
for keeping States informed  of the status of EPA actions, specific
provision also needs to  be made to consider  State interests, exper-
 ience, and  expertise in  the  course of  EPA enforcement activities.

     Accordingly, Regions  should  consult and,  wherever practicable,
seek agreement with the  States  in the  design and conclusions of
RI/FSs, in  the identification of  the  recommended remedy to be
pursued with responsible parties, and  in the determination of the
final remedy.  There may be  occasions  where  time or litigative
constraints preclude efforts  to consult or seek  agreement with a
State.  In  such cases, the Region should proceed with its actions,

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                                -11-


 but also should inform the  State  of  the  circumstances  as soon as
 possible.   Situations  also  may  arise where  a  State  is  unable to
 agree with a  particular action.   In  these  instances,  to the extent
 that time  and other  considerations permit,  the  Region  should seek
 to resolve the issues  which prevent  State  agreement.   However,
 absence of State agreement  initially,  or inability  subsequently
 to resolve any outstanding  issues, is  not  a bar to  necessary and
 timely action by the Region or  to determination by  EPA of appro-
 priate action to-be  taken.   EPA recoanizes  that a State may seek
 additional remedy through  its own'authorities if the State dis-
 agrees with an EPA action.

      EPA/State Enforcement  Site Agreements.   Once lead responsi-
 bility for an enforcement site  has been  finally determined, a
 site management plan has been prepared,  and the extent of antici-
 pated EPA  and State  involvement in the site determined, the Reaion
 and State  should develop an EPA/State  Enforcement Site Agreement.
 The Agreement will delineate the  roles and  responsibilities of
 EPA and  the State, lead officials or contacts,  mechanisms for
 coordination  and communication, and  any  other arrangements or
 understandings,  including the applicability of  State standards.4/

      The purpose of  the Agreement is to  ensure  that the extent of
 the  EPA/State relationship  at each site  is  fully thought out and
 documented to prevent  later misapprehensions  or misunderstandings.
 (Detailed  guidance for  preoarinc  the Agreements will  be developed
 in  consultation with ASTSWMO and  NAAG  and  issued separately.  In
 developing  the  guidance, consideration will be  given-to makino pro-
 vision for multiple  sites to be incorporated  in a single Agreement.)

      Sharinn  Enforcement Information.  As  stated previously in.
 this .policy,  the absence of a system for sharing enforcement status
 information often has  left  EPA  and the States with  little knowledge
 of  the actions  of  the  other.

     . Development of  site management  plans  can be an effective
 starting point.   Since  a site .management plan is to be prepared
 through consultation between the  Region  and the State, and since
 it must be  updated periodically,  a mechanism  has been  created for
 beginning  and continuing site-specific discussion and  information
 sharing.   This  applies  equally  to EPA-lead  and  State-lead enforce-
 ment  sites.
4/ EPA will endeavor  to  incorporate  State standards  in  the selected
Temedy where  the State standards  are consistent with a  cost-effective
remedy as defined  in  the  NCP.   Accordingly, Regions  and States should
explore the applicability of State standards  and  incorporate  the out-
come in the Site Agreement.  Where the  Region and State are unable
to agree, the State may  choose  to pursue  independent action under
its own authorities.

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                               -12-


     In addition to EPA contacts with States to keep site manage-
ment plans current, the Region and State officials, including
representatives of the State's attorney general, should meet
periodically  to review the status of EPA and State actions.  The
review should concentrate on  NPL sites, including the status of
enforcement and responsible party RI/PS activities, but potential
NPL sites may be addressed as well.  Frequency of these meetings
is a matter for Regional and  State discretion, but should be no
less often than twice a year.  Further, the Regions should contact
appropriate State agencies regularly to advise them of impending
actions and keep them abreast of developments, and States similarly
should inform the Region of impending actions and developments in
State enforcement activities.  Arrangements regarding these contacts
and meetings should be incorporated in EPA/State Enforcement Site
Agreements.

     Finally, agency guidance in two areas creates additional
mechanisms to keep States informed of EPA's enforcement activities
and to allow State comment.   The pending community relations gui-
dance provides for a public comment period both on administrative
orders on consent and on remedial investigations and feasibility
studies, including those prepared by EPA or responsible parties
for Federal enforcement-lead  sites.  (Both provisions are amona
changes to be proposed in the National Contingency Plan.)  Further,
guidance implementing agency  rules regarding intergovernmental
review of certain agency actions provides up to 60 days for States
to comment on the agency's intent to initiate RI/FS activities.
While responsible p-arty RI/FS activities are not included in the
intergovernmental review process because they do not constitute
Federal actions, they nonetheless will be subject to State review
in accordance with the impending community relations guidance.

     In implementing the community relations review procedures,
the Region should assure effective opportunity for State comment
on consent orders and decrees (the latter subject to public comment
by Department of Justice regulations), and agency and responsible
party RI/FSs, by providing copies of the documents directly to
interested State administrative agencies and to the State attorney
general's office.  These activities, however, should not be re-  •
garded as a substitute for. the extensive consultation and coordi-
nation with States 'described  earlier in this policy.  State
interests are to be considered, and accommodated to the extent
practicable, prior to public  comment periods for agency actions.

     Development of Policies  and Guidance.  The agency is pro-
ceed i7»g~T:odfirveTcirTn7cTcTm!einr^            guidance on a broad
range of NPL site issues, and will continue to do so for some
tine into the future.  The value of increased State involvement
is clear, as  is the need for  timely distribution of policy and
guidance documents to the States.

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                                                         OSVER « 9831.3
                               -13-


     Wherever practicable, EPA will provide opportunity to connent
on draft NPL site enforcement policies'and guidance documents that
are of  interest to States.  The opportunity will be made available
either  to all States through the Regions when time permits or, when
time constraints are particularly acute, to representative States
through the Association of State and Territorial Solid Waste
Management Officials and the National Association of Attorneys
General.  Further, for those issues which will require substantial
effort  to study and resolve, E?A will seek to increase State parti-
cipation through early consultation and, where appropriate, by
including State representatives on any study or work groups that
may be  fanned.

     Once policy and guidance documents have been made final, the
Regions should, upon receipt, provide copies to State administra-
tive agencies and attorney general offices, and make arrangements
for briefing State officials where appropriate.

     EPA has an interest also in State hazardous waste enforcement
policies and guidance, and encourages States to consult with  the
Regional Offices in their development and to provide to- the Regions
copies of final documents.

FUTURE EFFORTS

     EPA intends to continue to work directly with States, and
through the Association of State and Territorial Solid Waste
Management Officials and the National Association of Attorneys
General, to allow frequent and regular meetings of State represen-
tatives and agency officials.  Through these arrangements, EPA
and the States will be able to continue the dialogue, begun in.
the.-course of developing this policy document, t*o find solutions
to issues that arise in'the course of CERCLA and related State
enforcement programs.

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(O
00
en

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                                                                                             OSWER  #  9835.G
5034
                   Federal Rejutar / Vol.  50. No.  24 /-Tuttdiy. February  5. 1985 / Notices
ENVIRONMENTAL PROTECTION
AOENCY
                itrrtc
HaaroouaWt
-Agency.
       t Environmental Protection

        Request for public comment

        r. The Agency U publishing
today it* iatihffl CERCLA Mttltment
policy in order to tolidt public comatnt
on it. Tbt policy govern* private party
cleanup and contribution proposal!
under the Comprebeniive
Environmental Ratponaa. CompenMtion
tad Liability Act of 1900 (-CERCLT or
"Suparfund"). Tht Agency U alao
publishing a* an attachmtnt a more
datailtd discuttion of issue* raited by
thia policy.
OATC Comment! mu»t be provided on or
before April 6.1065.
MM PUWTMIM mrOMMATIOM CONTACT
Debbie Wood. U.S. Environmental
Protection Agency. Office of Waite
Programs Enforcement. WH-S27. 401 M
Si SW_ Wathington D.C »4«0. (202!
382-4629.
sumuMNTARY mrotiMATtoir Thit
interim policy datcnbet the approach
the Environmental Protection Agency it
now taking in evaluating private party
tettlamant propotaii for cleanup of
hazardous watte tiiat or contribution to
funding of rttponae action under tht
Comprehentive Environmental
Retponte. Compentanon. and Liability
Act (" CERCLA" or "Superfund").  It
reflect! our recent reevtlutnon of
Agency tenlament policies. The policy
it alao generally applicable to imminent
haurd enforcement action* under
lection 7003 of RCRA.
  Tht Agency'* hazardout watte
Mttltmtnt policiet have retailed in
numerout comprehentive pnvatt parry
cltanupt. and in ttrongtr tettlamantt
with private parties. Some potentially
responsible parties fPRP*). hewevei.
have argued that Agency tettlamant
policiet have tottered litigation, and
ditcouraged voluntary private parry
cleanup action*. They have suggested a
number of change*, eucfa at expanded
releatet from liability for PRPt and
routine provition to PRPt of protection
againit pottiblt contribution actiont by
non-tattling partial. Thete tuggettiant
have been made with the expectation
that tuch change* would tubstantislly
encourage voluntary retpontt.
  Tht Agtncy t intenm policy on
CERCLA cate Mttltmtnt hat therefore
been amended to:
"Include  additional incentive! for  .
  private parry cleanup:
—Articulate policy .decision* previouily
  made on a cate by eaaa buii in
  evaluating particular Mttltmtnt
  offers:
—Addreit additioaal policy concern*.
  inr.lrding relettet from liability and
  contribution protection: and,
—Ineludt a itatament of the general
  principle* governing EPA'* CERCLA
  enforcement program.
  Thit policy tat* forth the general
principle* governing private party
Mttlement under CERCLA, and tpedflc
proctduret for Regioaa and
Headquarter* to UM in aaietting private
party tettlammt proposals. It addrenti
negonation* concerning conduct of or
contribution to the remedy determined
by the Agency a* a result of the
remedial invettigan'ont and feasibility
ttudiet. The following topic* are
covered:
  1. CeneraJ principle! for EPA review
of private-parry cleanup propotals:
  2, Managemest guideline* for
negotiation:
  3. Facton governing reletM of
inform* non to potannally retponaiblt
parb t*:
  4. Cnteria for atteuing MtUeraent
offers:
  5. Partial cleanup propoaalr
  6. Contribution among reipontible
ptrti**:
  7. Ralaaie* and covenant* not to tur.
  6-Targeu for litigation:
  g. Timing for negotiation*:
  10. Management aad review of
tettlement negotiation*.
  The policy doet  not explicitly tddrett
PRP participation in tht Agency'!
Mlecnon of remediet for private party
cleanup*. That topic wet addmted in «
memorandum from Lee Thome* and
Courtney Price, entitled "Participation of
Potentially Reipoaiibl* Partiet in
Development of Remedial Investigation*
and Feetibility Srodie* under CERCLA"
(March 20.1984).
  The polici** and procedure* act forth
la the interim policy are guidance to
Agency aao other  government
employee*. The policy *et* forth
enforcement prtorttiai and  procedure*.
and internal procedure* which arc not
appropriate or Bcceiaary subjects for
rulemakiag. Thu*.  the policy doe* not
constitute rulemaJoag by the Agency.
tad may not be relied on to create •
•ubatantive or procedural right or
benefit enforceable by any other penon.
The government may. therefore, taka
action that it at variance with policiet
and procedure* contained m thi*
document.
  The Agency i* publishing and
•eliciting comment on thi*  intenm policy
for a number of reatont. The  Agency
recognize* that the public ii very
concerned with hasardoui watte
enforcement. We believe thtt thit policy
will tubttantially benefit the public by
encouraging retpouiblt partiet to
undertake appropriate and long term
remediet through Mttlement*. We alto
believe that the policy will yield better
result* if the public and potentially
responsible partiet undarttand the  '
policy and our reaton* for adopting IL
  ThU policy wu originally drafted in
December. IQtt. ha* been the tubject of
exteniive review aad evaluation by the
Agency aad the Department of luitica. It
I* therefore being published a* interim
policy. We will reevaluata thit policy in
light of our working experience with
Implementing it. and tht public
comment* that we receive.
  Tht Agency statement of policy
followi. A more detailed diecuinon of
ittuei for public comment i» included in
the Appendix.
  Dated: January 23. U69.   '
Itck W. McCrtw.
Xcftnt Auiiiatit Adminittnter. O#ict of
Solid Watt* and Cmerit/icv Rtiponu.
  Otitd: Jiniury a. 1981
CourBMy M. Phot.
Auiitant Adaiiniitnter. Offict of
EnfOKtmtm and Cainf liana Mon/wnnj

Memorandum
DeetmbefilfM.
Subject Intenm CERCLA Settlement
  Policy
From: Lee M. Thome*. Attittanr
  Adminnntor Offict of Solid Watte
  and Emergency Retponie. Courtney
  Si Pnca. Auiitant Admimttrator
  Office of Enforcement and
  Compliance Monitoring F. Henry
  HabichL JL Attittant Attorney
  General Land and Natural Resource*
  Diviiion. Department of luitica
To: Regional Admini*trator*. Region* \-
  X
  Thi* memorandum Mt* forth the
general principle* governing private
party Mttlament* under CERCLA. and
tpeciflc procedure* for the Region* and
Headquarter* to UM in aliening private
parry Mttlaaien: propoMl*. It address**
the following topic*.
  1. general principle* for EPA review of
private-party cleanup propotaii:
  2. management guideline* for
negotiation:
  X factor* governing rt'.eate of
information to potentially retponiiblc
parties:
  4. criteria for evaluating Mttlement
offers:
  5. partial cleanup propoMli:
  6. contribution among reiponsibl*
 ptrti**:

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   & nlease and convenanta not to mr
   8. targets for litigation:
   Q. tu&ini for negotiations:
   10. management and review of
 Mttliotni negotiations.

 Applicability

   This memorandum incorporate* the
 draft Hazardous Wa«t* CM*
 Settlement Policy, publiabtd in dn/t ia
 December of 1961 It ia applicable not
 only to multiple party case* but to til
 dril hazardous waste enforcement
 CAM* under Superfuad. It i* generally
 applicable to imminent hazard
 enforcement action* under Motion 7009
 ofRCRA.
   Thia policy establishes criteria for
 evaluating private party Mtiletnent
 prepeial* to conduct or contribute to the
 funding of rvtponM action*, including
 rtmoval and remedial actons. It alio
 addresses *ettlement proposals to
 contribute  to funding after a reiponie
 action baa  been completed. It doe* not
 addre*i private-party propocaJ* to
 conduct remedial investigation* and
 feaiibiJiry irudies. The*e propo*ai* an
 to b« evaluated under cntena
 established in the policy guidance from
 Lit M. Thomat. A*ti«tant
 Administrator. Office of Solid Watte
 and Emergency Response, and Courtney
 Price. Assistant Administrator. Office of
 Enforcement and Compliance
 Monitoring entitled "Participation of
 Potentially Reiponsible Panie* ia   •  .
 Development of Remedial Investigation*
 and Feasibility Studies undsr CESCLA".
 (March 20.1984)

 L General Principle*

  The Government'* goal in
 implementing CERCLA i* to achieve
 effective and expedited cleanup at a*
 many uncontrolled hazardous waste
 facilities a* possible. To achieve this
goal the Agency ia committed to a
 strong and vigorous enforcement
 program. The Agency ha* mad* major
 edvanca* in aacuring cleanup at soma of
 the nation'* wont baxardou* watte sita*
 because of it* demoaatrattd willingness
 to use the Fund and to pursue
 •dministrative and judicial enforcament
 actions. In addition, the Agency has
 obtained key decisions, on such iaaut*
 as joint and several liability, which have
 further advanced its enforcement
 efforts.
  The Agency recognize*, however, that
 Fund-financed cleanup*, adciniitrative
 acton and litigation  will not be sufficient
 to accomplish CERCLA's goals, and that
 voluntary cleanup* are essential to a
 successful program for cleanup of the
 nation's hazardous waste sites. The
                    Federal Regain-  /  Vol.  30. No. 24 /Tuesday. February 3.  1985 / NoUces
                                                                     503:
Agency is thenfon re-ev*luating its
settlement policy, in light of three yean
experience with negotiation and
litigation of hazordoua wail* cases, to
nfflov* or minimi** j/ possible the
impediment* to voluntary cleanup.
  As a result of this reassessment the
Agency ha* identified the following
genenl principle* that govern its
Superfund enforcement program;
  • The goal of th* Agency ia
negotiating private party cleanup and in
settlement of hazardous waste caaas ha*
been and will continue to be to obtain
complete cleanup by the responsible
parties, or collect 100% of the coit* of
the cleanup action.
  • Negotiated private party actions an
e**ential to an effective program for
cleanup of the nation'* hazardous waite
sites. An effective program depend* on a
balanced approach relying on a mix of
Fund-financed cleanup, voluntary
agreement* reached through
negotiations, and litigation. Fund-
financed cleanup and litigation under
CERCLA will  not in themselves be
sufficient to axun the success of this
cleanup effort. In addition, expeditiou*
cleanup reached through negotiated
settlements is preferable to protracted
litigation.
  • A strong enforcement program is
essential to encourage voluntary action
by PRP*. Section  106 actions an
particularly valuable mechanisms for
compelling cleanups. The effectiveness
of negotiation is integrally related to the
effectiveness of enforcement and Fund-
financed cleanup. The demonstrated
willingness of the Ajoncy.to use the
Fund to dean up  lite* and to take
enforcement action i* our most
important tool for achieving negotiated
settlements.
  • The liability of potentially
naponsibla partie* i* strict joint and
several unleu they can dearly
demonstrate that the barm at the sita t*
divisible. The recognition on the part of
responsible parties that they may be
jointly and severally liable ia a valuable
impetus for thaw parties to reach the
agreement* that an necessary for
successful negotiations. Without such an
impetus, negotiations run a risk of delay
because of disagreements over the
particulars of each responsible party's
contribution to the problems at the site.
  • The Agency recognizes that the
factual stnngth*  and weaknaases of a
particular case an nlevant ia
evaluating settlement proposals. The
Agency also recognize* that court* may
consider difference* among defendants
in allocating payments among parties
held jointly and severally liable under
CERCLA. While these an primarily the
concerns of PRPs. the Agency will aUo
consider a PRPs contribution to
problems at the lite, including
contribution of waste, in assessing
proposals for settlement and in
identifying target* for litigation.
  • Section 10B of CERCLA provide*
court* with jurisdiction to grant such
relief as the public interest and the
equities of the case may requin. In
assessing proposals for settlement and
identifying targets for litigation, the
Agency will consider aggravating and
mitigating factors and appropriate
equitable factor*.
  • In many circumstance*, deanup*
can be started men quickly when
privet* partie* do the  work themselves.
rather than provide money to the Fund.
It is therefore, preferable for private
parties to conduct cleanups themselves.
rather than simply provide funds for the
Slates or Federal Government to
conduct the deanup.
  • The Agency will create a climate
that is receptive to private party deanup
proposals. To facilitate negotiations  the
Agency will make certain information
available to private panes. PRPs will
normally have an opportunity to be
involved in the studies used to
determine the appropriate extent of
remedy. The Agency will consider
settlement proposals fcr deanup of less
than 100% of deanup activities or
deanup costs. Finally, upon settling with
cooperative parties, the government will
vigorously seek all remaining relief.
inlcuding coits. penalties and treble
damage* where ^ppropr.ate from
partie* whose recalcitrance made a.
complete settlement impossible.
  • The Agency anticipates that bath
the Fund and private resources may be
used at the tame site in tome
circumstance*. When the Agency settles
for laaa than 100% of deanup coat*, it
can use the Fund to assort that site
cleanup will proceed expeditiously. and
than use to recover these costs from
aon-eettliag responsible parties. Where
the Federal government accepts less
than 100% of deanup coats and no
financially viable responsible parties
remaia Superfund monies may be used
to make up the difference.
  • The Agency recognizes the value of
some meaiun of finality in
determinations of liability and in
settlements generally. PRPs frequently
want some certainty in return for
assuming the costs of deanup. and we
recognize that this will be a valuable
incentive for private parr/ cleanup. PRPs
frequently seek a final determination of
liability through contribution protection.
nleases or covenants not to sue. The
Agency will consider releases from
liability in appropriate i.iujtionj. and

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                   Fedanl Raster / Vol SO. No.  24 / Tmtday. February S. 1985 / Notiiet
 will also eonudti contribution
 protection IB limited drcufltstancn. The
 Agency will «l*o take eggmsiv*
 enforcement action against thoM parties
 whoee recalcitrance prevents
 settlements, la bringing co*t recovery
 actions, the Agency will also attempt to
 raiM aay remaining daiai under
 CERCLA Mcnoa Un. to  the extent
 practicable.
  The remainder of this  memorandum
 Mta forth specific policiM for
 Implementing thete general principle*.
  Section n MU fortfi the management
 guideline* for negotiating with lew thaa
 all responsible partie* for partial
 settlements. This section reflect* tht
 Agency's willingness to be flexible by
 eoaiidenni offer* for cleanup of let*
 than 100* of cleanup activities or costs.
  Section m teu forth fuidelinet on the
 release of information. The Agency
 recognize* that adequate information
 facilities more fucceiiful negotiation*.
 Thus, the Agency will combine a
 vigorous program for obtaining the data
 and  in/ormabon neceiiary to facilitate
 settlement* with « program for releasing
 information to facilitate communication*
 among reipontible pane*.
  Section* IV and V to diicus* the
 a 'en* for evaluating partial
 MiJamenu. As noted above, in certain
 circuflutaace* the Agency will entertain
 serueaaat offen from PRPi which
axtand only to part of the lite or part of
the coata of cleanup at a  lite. Section IV
of thi* memo  MU forth criteria to be
uaad in evaluating luch offers. These
criteria apply to all caws. Section V set*
 forth the Agency s policy concerning
of.:er* to perform or pay for diirrete
phaae* of an approved cleanup.
  Section* VI and VD relate to
contnbuboa protection and releates
from liability. Where appropnite. the
Agency may consider coatnbuuon
protection and limited releaae* from
Liability to help provide some finality to
settlements.
  Section VID aata forth  criteria  for
aelecnng enforcement caaea and
identifying targets for litigation,  Aa
 diacuaaed above, effective enforcemm
 daptnd* on careful caaa  aelaction and
 the careful (election of targets for
 litigation. The Agancy will apply criteria
 for selection of caaaa to focus sufficient
 resources on  cata* that provide  the
 broadest possible enforcemnt impact, (n
 addition, targets for litigation will be
 identified in light of the willingness of
 partin to perform voluntary cleanup, as
 wall as conventional litigation
 management concerns.
  Section IX sets forth the requirements
 governing the timing of negotiations and
 section X the provision for Headquarters
 review. These sections address the ntad
to provide the Regions with iaercaaed
flaJobilry in negotiation* aad to change
Headquarter* renew in order to
expedite site cleanup.

D. Maaagaoaai Cuidettnea for
Negotiation
  Aa a guideline, the Agency will
negotiate only if the initial offer from
PRPs constitutes a auhatanflal
proportion of the caata of cleanup at the
site, or a substantial portion of the
needed remedial action. Entering into
diacuasion for lasa than a rafrt'^pnaJ
proportion of cleanup ooats or remedial
action needed at the site, would not be
an affective uaa of government
resource*. No specific numerical
threshold for initiating negotiations has
been established.
  In deciding whether to start
negotiations, the Regions should weight
the potential resource demands for
conducting  negotiations against the
likelihood of getting 100% of costs or a
complete remedy.
  Where the Region propose* to
negotiate for a partial settlement
involving lea* than the total coats of a
cleanup, or a complete remedy, the
Region should prepare as pan of its
Case Negotiations Strategy a draaft
evaluation of the case using the
settlement criteria identified in section
IV. Tht draft should discuss how cadi of
lha factor* in section FV applies to the
site in question, and explain why
negotiations for lass than all of the
cleanup costs, or a  partial remedy, are
appropriate. A copy of the draft should
be forwarded to Headquarter*. The
Headquarter* review will be used to
identify major issues of national
significance or issues that may involve
significant Itgal precedents.
  In certain other categories of cases, it
may be appropriate for the Regions to
enter into negotiations with PRP*. even
though the offen from PRP* do not
represent a substantial portion of the
coati of cleanup. Thaaa categories of
caaaa inrludT*
  • administrative settlements of coat
recovery actions where total cleanup
coats were  less than SttO.000:
  • ciaima in bankruptcy;
  • administrative settlements with de
minima contributors of wastes.
  Actions subject to this exceptions are
•dminismtive settlements of cast
recovery cases where all the work at the
sita has been completed  and all coats
have been incurred. The figure of
SZOOOOO refer* to all of the coats of
cleanup. The Agency ia preparing more
detailed guidance on the appropriate
fora of such settlement agreement*, and
the type* of condition* that must be
included.
  Negotiation of claims in bankruptcy
may involve both present owner*, where
the United State* may have an
administrative coat* claim, and other
parties such as past owners or
generator*, where the United State* may .
be an unsecured potential creditor. The
Regions should avoid becoming
involved la bankruptcy proceedings If
then is little likelihood of recovery, aad
should recognize the risks involved ia
negotiating without creditor status. It
may be appropriate to request DOJ filing
of a proof of claim. Further guidance Is
provided m the Memorandum from
Courtney Price entitled "Information
Regarding CERCLA Enforcement
Against Bankrupt Parties." dated May
24.1914.
  In negotiating with d» minimi* partiea.
the Regions should limit their efforts to
low volume, low toxiary disposer* who
would not normally make a significant _
contribution to the costs of cleanup in  ~
any case.
  In considering settlement offer from
de minima contributor*, the Region
should normally focus on achieving cash
settlements. Regions should generally
not enter into negotiations for full
administrative or judicial settlements
with releases, contribution protection, or
other protective clauses. Substantial
resources ihould not be invested in
negotiations with de minima
contributor*, in light of the limited costa
that may be recovered, the tune needed
to prepare the necessary legal
document*, the need for Headquarters
review, potential rtt /udicoto effect*.
aad other effects that de minimi*
settlements may have on the nature of  .
the case remaining to the Government.
  Partial settlements may also be
considered in situations where the
uawUoagneas of a relatively small group
of partiea to settle prevents the
development of a proposal for a
lubatantlaJ portion of costs or the
remedy. Proposals for settlement in
these circumstance* should be assessed
under the criteria set forth in section IV.
  Earlier versions of this policy included
a threshold for negotiations, which
provided that negotiations should net  be
commenced unless an offer was made to
settle for at leest 80% of the costs of
cleanup, or of the remedial action. Thi*
threshold has bean eliminated from the
final version of this policy. It must be
emphasized that elimination of this
threshold doe* not mean thai lk»
Agency is therefore more willing to
accept offer* for partial settlement. The
objective of the Agency is still to obtain
complete cleanup by PRP*. or 100% of
the cast* of cleanup.

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                    Federal RatUtef /  Vol  50  No  2«  / Tueiday.  F'hniary 5. 1985  /  Notices
                                                                      503?
  IL. ..«fctaao «f Information
   The *wocy will •«i«ase information
  con<.«Tur.i -J)« ui< to PRp, to facilitate
  discussions .'or stttWeet among PRPs.
  This information will indudi:
  —Identity of notice Ittttr recipients:
  —Velum* end nature of wastes to the
   extent identified at sent to tha sue:
  —Ranking by voiuma of matarial sent to
   the site, if available.
   In datarminiuf tha typa of information
  to be released, tha Region should
  cansidar tha poaaibla impacts oa any
  potential litigation. Tha Region* ahould
_take stapa to aaaora protection of
  confidential and deu'veretive materials.
  Tha Agency will generally not ralaaM
  actual evidentiary mat anil Tha Regioa
  should stata pa aach released summary
  that it is preliminary, that it was
 furnished in tha couna of compromisa
 negotiations (Fad. Rulas of Evidanca
 406). and. that it is not binding oa tha
 Federal Government.
   This information release should be
 preceded by and combined with a
 vigorous program for collecting
 information from responsible parties. It
 remains standard prr;cnce for tha
 Agency to use tha information lathering
 authorities of RCRA and CERCLA with
 respect to all PRPs at a site. This
 in'- -uooa release should generally be
 c     onad oa> a reciprocal release of
 in.   >anon by PRPs. The information
 request need not be simultaneous, but
 EPA should receive the information
 withia a reasonable time.

 IV. Settlement Criteria
   The objective  of negotiations is to
 collect 100* of cleanup costs or
 complete cleanup from responsible
 parties. The Agency recognizes that ia
 narrowly limited circumstances.
 exceptions to this goal may be
 appropriata. aad bis estabUshedoiteria
 for determining where such exceptions
 are allowed. Although tha Agency will
 consider offers of laaa thaa 100*  In
 accordance with (hie policy, it will do ao
 in light of the Agency's position,
 reinforced by recent court deosiona.
 that PRP liability ia strict joint and
 several unless it can be shown by the)
 PRPs that injury at a site ia clearly
 divisible.
   Based oa a full evalution of the facts
 and~s comprehensive analysis of ail of
 the listed criteria, the Agency may
 consider accepting offer* of leu thaa
 100 percent Rapid aad effective
 settlement depends oa a thorough
 evaluation, and aa aggressive
 information collection program ia
 necessary to prepare effective
 evaluations. Proposals for less thaa total
settlement mould Se as«es««d using the
criteria idem-Jed beluw

1  Volume cf Waste* Contributed to Site
byEaaiPflP

  Information concerning the volume of
wastes contributed to the site by PRPs
should be collected, if available, aad
evaluated ia each case. The volume of
wastes ia aot the only criterion to be
considered, nor may it be the moat
important. A small quantity of waste
may cost proportionately more to
contain or remove than a larger quantity
of a different waste. However, this
volume of waste  may contribute
significantly and  directly to the
distribution of contamination on the
surface and subsurface (including
grouadwater). and to the complexity of
removal of the contamination,  la
addition, if the properties of all wastes
at the site an relatively equal the
volume of wastes contributed by the
PRPs provides a convenient easily
applied criterion  for measuring whether
a PHP's settlement offer may be
reasonable.
  This does not mean,  however, that
PRPs will be required to pay only their
proportionate share based on volume of
contribution of wastes to the site. At
maay sites, there will be wastes for
which PRPs cannot be  identified. If
identified. PRPs may be unable to
provide funds for cleanup. Private parry
funding for cleanup of those wastes
would, therefore, aot be available if
volumetric contribution were the only
criteria.
  Therefore, to achieve the the Agency's
goal of obtaining 100 percent of cleanup
or the cost of cleanup,  it will be
necessary in many cases to require a
settlement contribution greater than tha
percentage of wastes contributed by
each PRP to the site. These costs can bo
obtained through the application of tha
theory pf joint and several liability
whan tha harm ia indivisible. aad
through application of  these criteria m
evaluating settlement proposals.
I Nature of thf Waitet Contributed
            ,
        ental tondty of the hazardous
substances contributed by the PRPs. its
mobility, persistence aad other
properties are important factors to
consider. Aa noted above, a small
amount of wastes, or a highly mobile
waste, may coat more to deaa up.
dispose. or treat thaa leas toxic or
relatively immobile waste*. Ia addition.
any disproportionate adverse effects oa
the environment by the presence of
weates contributed by those PRPs
should be  considered.
   If a waste contributed hy one or more
 of tha parties ofienna « seitiemem
 disproportionately .ncreases :he costs of
 cleanup at tha sue. it may be
 appropriate for parties contributing such
 waste to bear a larger percentage of
 cleanup costs thaa would be the case by
 using solely a volumetric basis.

 3. Strength of Evidence Tracing, th*
 Waitft at ttie Site to the Seating Poniee

   The quality and quantity of tha
 Government t evidence connecting PRPs
 to the wastes at the site obviously
 affects tha settlement value of the
 Government's case. The Government
 must show, by a preponderance of the
 evidence, that the PRP's are connected
 with the wastes in one or more of tha
 ways provided in Section 107 of
 CERCLA. Therefore, if the Government's
 evidence against a particular PRP is
 weak, we should weigh that weakness
 ia evaluating a settlement offer from
 that PRP.
   On the other hand, where indivisible
 harm la shown to exist under the theory
 of joint and several liability the
 Government is in a position to collect
 100% of the cost of cleanup from all
 panes who have contributed to a site.
 Therefore, where the quality and
 quantity of the Government's evidence
 appears to be strong for establishing the
 PRP's liability, the Government should
 rely on the strength of its evidence and
 not decrease the settlement value of its
 case. Discharging such PRPs from
 liability in a partial settlement without
 obtaining a substantial contribution may
 leeve the Government with non-settling
 parties whose involvement at the site
 may be more tenuous.
   Ia aay evaluation of a settlement
 offer, the Agency should weigh the
 amount of information exchange that
 baa occurred before the settlement offer.
 The more the Government knows about
 the evidence it has to connect the
 settling parties to the site, the better this
 evaluation will be. The Information
 collection provisions of RCRA and/or
 CEXGLA should  be used to develop
.evidence prior to preparation of the
 evaluation.

 4. Ability of the Settling Portia To fey
   Ability to pay is not a defense to an
 action by the Government Nevertheless.
 the evaluation of a settlement proposal
 should discuss the financial condition of
 that party, and the practical results of
 pursuing a party for more than the
 Government can hope to actually
 recover. la cost recovery actions it will
 be difficult to negotiate a settlement for
 more thaa a parry's assets. The Region
 should also consider allowing the parry

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                    F«dml Habits* I Vol ML No.  24 / TmxUy. Fabroary 1 IMS / NoUctt
 to reimburse the Fond In reasonable
 installments over a period of time. if the
 party it unable to pay in t lump turn.
 and installment payments would bmtflt
 the Government. A structured
 Mttlmtnt providini for payments over
 time should bt at • payment Itval that
 Uka« into account the party's caah flow.
 An excessive amount could forca a
 party into bankruptcy, which will of
 course make collection vary difficult.
 See tha memorandum dated August 2ft.
 ISO. entitled "Cost Race-vary Action*
 und«r Section 107 of CERCLA* for
 additional guidance on thu subject

 i Litigativw AitJu in Preceding to Trial
   Ubgetive rukj which might ba
 encountered at tnal and which should
 weigh in considaratioo of any settlement
 offar includ* traditional factor* such as:
   a. Admiuibiliiy of the Govtmmeni'i
 Wrfence
   If nacassary Covtmnant avidanca is
 unlikaly to ba admitted in a trial
 bacausa of procadural or substantive
 preblama in tha acquisition or craatton
 alias avidanca. thu infirmity should ba
 considered as reducing tha
 Covanunanfs chanca of succass and,
 tharafora. reducing tht amount tha
 Govamtnant should expect to racaiva in
 a settlement.
•  b. Adequacy of tht Government '$
 tvidtnu
  Certain aspects of this point have
 already been discussed above.
 However, it deserves mention «gsin
 because the Government's case depends
 on substantial quantises of sampling.
 analytical and other technical data and
 expert testimony. If the evidence in
 support of the Government's case is
 incomplete or based upon controversial
 science, or if the Government's evidence
 is otherwise unlikaly to withstand tha
 scrutiny of a tnal the amount that the
 Government might expect to racaiva in a
 settlement will ba reduced.
  la tha unlikely event that one or. more
of the settling parties appears to have a
defense to tha Government's action
under section lOTfb) of CERCLA. tha
Government should expect to receive
lass in a settlement from thai PUP.
Availability of one or more defenses to
one PRP which are not common to all
PRPs in tha case should not however.
lower the expectenon of what an entire
offering group should pay.
d Public Inumt Caiutdentioni
  The purpose of site cleanup is to
protect public health and the
environment. Therefore, in analytin; a
settlement proposal the timing of the
cleanup and the ebillty of the
Government to clean up the site should
be considered. For example. If the State
cannot fund its portion of a Fund-
financed cleanup, a private-party  .
cleanup proposal may ba given more
favorabk consideration than one
received in a case where the State can
fund its portion of cleanup coats, if
necessary.
  Public interest considerations also
inchtde the availability of Federal funds
for necessary cleanup, and whether
privately financed action can begin
more quickly than Federally-financed
activity. Public interest concerns may ba
used to Justify  a settlement of lass than
100* only when there is e demonstrated
need for e quick remedy to protect
public health or the environment.
JO Noun of tttt COM that /Unoins
  In somrcases. the factual situation
may be conducive to estebliahing a
favorable precedent for future
Government action*. For example.
strong case law can be. developed in
cases of first impression. In addition.
settlements in such cases tend to
become precedent* in themselves, and
are examined extensively by PRPs in
other  cases. Settlement of such cases
should always be on term*  most
favorable to the Government. Where
PRPs will not settle on such terms, end
the quality and quannty of  evidence is
strong, it may be in the overall interest
of the Government to try the case.
8. Volut of Obtaining e Pnitnt Stun
  If money can be obtained now and
turned over to the Fund, where it can
earn interest until the tune it it spent to
clean up a site, the net present value of
obtaining the sum offered In settlement
now can be computed ag*i&*t tha
possibility of obtaining a larger turn in
the future. This calculation may show
that tha net praent value of the earn
offered la settlement U. IB reality, higher
than tha amount tha Government can
expect to obtain at vial EPA ha*
developed aa economic modal to aaaess
these and other related economic
factors.  More information on  this model
can be obtaiu«d from the Director.
Office of Waste Programs Enforcement.

A /neonu Rtt md Ajfrarotinf foctcre
  All analyses of settlement propoaals
should flag for the decision makers eny
apparent inequities to tha settling
parties inherent la the Government's
case, and apparent inequities to  others If
the settlement proposal is accepted, and
any aggravating factors. However, it
Bult be understood that the statute
operates on the underlying principle of
strict Usbitity enJ thni equitable
matters are not
  All settlement evaluations should
address the nature of tha case that
remains if the settlement i* accepted.
For example, if there are no financially
viable parties left to proceed against for
the balance of the cleanup aftar the
settlement, the settlement offar should
constitute everything tha Government
expects to obtain at that tita. Tha  .
questions arc What dote the
Government gala by settling this portion
of the caaeT Does tha settlement or its
terms harm tha *-*"'"«»g portion of tha
oaeer will the Government have to
expend the same amount ol resources to
try the  remaining portion of the case? U
aa why should the settlement offer be
accepted?
  This  analysis Is extremely important
and should come at the conclusion of
the evaluation.

 V. f ertial Qoaaupa
  On occasion. PRPs may offer to
perform or pay for one phase of e site
cleenup (such es a surface removal
ectton) but not commit to any other
phase of the cleenup (such  as ground
water treatment). In some
circumstances, it may be appropriate to
enter into settlements for such partial
cleanups, rather than to resolve ell
Issues  in one settlement For example, in
some cases It is necessary to conduct
initial phsses of site cleanup m order to
gather  sufficient data to eveluate the
need for and type of work to be'done on
subsequent phases. In such cases, offers
from PRPs to conduct at pay for less
than all phases of site cleanup should be
evaluated in the seme manner and by
the same criterie as set forth above.
Settlements performed et the site. This
provision does not cover preparation of
aa Rl/FS, which is covered by a
aeparate guidance document Lee
Thomas and Courtney Price's
"Participation of Potentially Responsible
Perties in Rl/FS Development" (March
8X 19M).
VI. CootrlbuHoo Protection
  Contribution among responsible
perties it baaed on the principle that a
jointly  and severally liable perry who
has paid all or e portion of e judgment
or settlement may be entitled to
reimbursement from other jomCy or
severally liable parties. When the
Agency reaches a partial settlement
with some parties.  It will frequently
pursue en enforcement tenon against
non-stttling responsible perues to
recover the remaining  cost* of cleenup
If such on act-™ it undertaken, there is
 a possibility that those pon-ttttlon

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                    Fedtrtl RtfiXar / VoL SO. No.  24 / Tuesday. Ftbrotry 5. 1965 / Noao*
 would ia turn MM Mttiinf parts*. If this
 action by nonatrtliag parties ia
 •ueetttfuL then the Mttliaf partita
 would tod up paying • larger than of
 cleanup costs than wu determined in
 the Agency'* settlement This ia
 obviously a disincentive to settlement
   Contribution protection in a count
 decree can prtvtnt thia outcome. In a
 contribution protection clauaa. tht
 United Sutta would agree to radon its
 judgment agaiast tht ncn-settiiag
 parts*, to tho extant necessary to
      piiah tho atttling party1* Ubility to
 the aonattttiag third party.
. Tha Agency recognize* tha value of
 contribution protection in limited
 situation* in order to provida aomt
 maasura of finality to settlement*..
 Fundamantally. wt baliava that tattling
 parties an protactad from contribution
 action* at a mattar of law. batad on tha
 Uniform Contribution Aaonf
Tottfaaion Act. That Act provide* that
whara Mttlamanu an entered into in
 "good faith", the Mttlon an diachariad
 from "all liability for contribution to any
othar joint tortfeasoFS." To tha extant
 that 'hi* law ia adoptad a* tha Federal
 rule of decision, then will be no need
 for specific clause* ia consent
agreement* to provida contribution
 •o lection.
  Then ha* not yet been any ruling on
 ~»a  iaaua. Thus, tha Agency may lull be
aakad to provide contribution protection
in tha form of offset* and reduction* in
judgment In determining whether
explicit contribution protection dame*
an  appropriate, the Region should
consider the following factors:
  •  Explicit contribution protection
clause* an generally not appropriate
unle** liability can be clearly allocated.
so that the risk of reapportionment by a
judge ia any futun action would be
  • Inclusion should depend on case-
byi7i»
 will not occur.
   Other remedie* may be lei*
 sppropriata for expansive nie**«s
 particularly if the content order or
 agreement does not include perfanneaur
 standards. It may be sppropna!« in *ueh
 circumstancas to negotiate releases tfu:
 become effective several yt«n *('.«
 completion of the remedi*! tenor.. 10
 that the effectiveness ar.d reliability of
 the technology can be cieiriy
 demonstrated. The Aeency  *ntinp^!m
 that responsible paries  may b- ah!* to
 achieve a enater ditree M rrrsur.ry m

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 5040
Federal Ksjjjatar  I  Vol  5a No.  24 / Tuesday. February 5. IBM  /  Notice*
 •etdemiou whu the state of Kitntlflc
 understanding concerning (bit*
 technical issues bu advanced.
  Regardless of the relative
 expaasiveaeas or stringency of the
 rtluM In other respects, at • ""•*«"•«•
 settleiaeat documents must indude
 nopaaen allowing thi Government to
 modify term* tad condition! of the
 egmment for tht following types of
 circumstance*:
  • Where previously unknown or
 undetected conditions thai ahM or an
 discovered at tha aita afttr thi time of
 tha agreement may present an '"T*'"""*
 aad tubitaatiaJ aadaagerment to public
 health, welfare of tha environment
  • Whan tha Agency receive*
 additional information, wtuch w*« not
 available at tha tima of the agreement.
 concerning  tha leiantifie determinations
 on which tha tetUamant wai premised
 (for axampla.  health effect! allocated
 with level*  of exposure, toxieity of
 hazardous substances, and the
 apprepnateaeu of the remedial
 technologies for conditions at the lite)
 and thii additional information
 indicate! that ute condition! may
pnient an imminent and substantial
andangtrmant to the public health or
welfare or tha environment
  In addition, nlaaaa ciauie* muit not
preclude the Government from
recovering coiu incurred in responding
to the type of  imminent and lubitantial
endangevents identified above.
  la extraordinary circumitancei. it
may be clear a her application of the
Mttlemeat criteria sat out in secrion IV
that it ii in the public interest to agree to
a more limited or mon axpaniiva
nleaae not  aubject to the condition!
outlined above. Concurrence of the
Assistant Adminiitnton for OSVVCR
 and OEQ4 (aad tha Arniatant Attorney
 General when tha release ii given oa
 behalf of tha Waited State*) mutt ba
 obtained before the Government's
 negotiating team ii authoriied to
 negotiate nfarding each • nleaaa or
 ceveaaAL
  The extent of nlaaaet thould ba the
 same, whether the private partiei
 conduct tha daamip themselves or pay
 for Federal Government cleanup. Whan
 mponiibla partia* pay for Federal
 Government cleanup, the nleaaa will
 ordinarily not become effective until
 cleanup is completed aad the actual
 coata of the cleanup an ascertained.
 Responsible parties will thereby bear
 the riik of uacartaiabM arising during
 execution of tha cleanup. In limited
 circumstance*, the nlease may become
 effective upon payment for Federal
 Government cleanup, if the payment
 include* a canfully calculated premium
 or other financial instrument that
                    adequately injures the Federal
                    Government against thes« iiawtainties.
                    Finally, the Agency su, M mon willing
                    to aarUa for lea* than the total costs of
                    claanup whan It ia not precluded by a
                    nleaae claua* from eventually
                    mjp»m*»»g eny additional coata that
                    aijht ultimately be iacamd at a aita.
                     Release cUuaea an alao tubtect to the
                    following limitations:
                     •  A nlaase or covenant may be given
                    only to the PRP providiag the
                    coaaidantioa for the nleaae.
                     •  Tha nleaae or covenant mat not
                    involved ia the cat*.
                      • Tha nleaae muat not addms any
                    criminal matter.
                      • Releases for partial cleanup* that
                    do not extend to the entire sit* must b*
                    limited to tht work actually completed,
                      • Federal claim! for natural mourci
                    damage! should not ba nlaased without
                    the approval of Federal trustees.
                      • Responsible parties must nleasa
                    any nlated claim* againat the United
                    States, including tha Hazardous
                    Substances Response Fund.
                      • When the cleanup U to be
                    performed by the PRPs, the release or
                    covenant should normally became
                   .effective only upon the completion of
                    the cleanup (or phase of cleanup) in a
                    manner satisfactory to EPA.
                      • Release clause* should be drafted
                    as covenants not to sue. nthsr than
                    nlaaae* from liability, whan this form
                    may be neceaoary to protect the legal
                   . rights of the Federal Government.
                      A nleasc or covenant not to sue
                    terminate* or seriously Impair* the
                    Government'* rights of action against
                    PUP*. Therefore, tha document should
                    be carefully warded so that tha intent of
                    the parties aad extant of tha Bitten
                    covered by the nleaaa or covenant an
                    dearly stated, Any vn;»ed •ettlemeat
                    «^"««"««l a nleaae •• --• a poastbta
                    ambiguity will ba noosed for further
                    negotiation.
                    VHL Targets for Uttganoo
                      The Region! should identify particular
                    cam for ntoral ia light of tha following
                    factors:
                    —Substantial environmental problem!
                      exist
                    —Tha Agency'! case has legal merit
                    —The amount of money or deanup
                      Involved la rtgnificant
                    — Cood legal precedent ia poaalble
                      (cases should be njteted when tha
                      potential for advene precedent is
                    —The evidence is strong, well
                      developed, or capable of
                      development
                    —Statute of limitations problems exist
—Responsible partiei an financially
  viable.
  The goal of the Agency is to bring
enforcement action wherever needed to
aaaan private party cleanup or to
ncevei costs. The following types of
case* an the tUfaest pttorinea for
nfemls:
—107 actions to which aD costs have
  been lacomd;
—Combined 100/107 actions la which a
  «ijiiiiiM.it phaae has been completed,
  additional iajncove relief is needed
  aad identified, and du Fund will not
  be used
—10B action! which will not be the
  subject of Fund-financed deaaup.
  Referral* for intunctive relief may also
be appropriate in cases when  it is
possible that Fund-financed cleanup will
be undertaken. Such referral*  may be
aeadad when men an potential statute
of limitation concerns, or when tha lit*
has been identified a! ealorcemeat-lead.
aad prospect! for lueceiiful litigation
an good.
  Regional office* should periodically
nevaluate current targets for  referral u
determine if they meet the guidelines
identified above.
  As indicated baton, under the theory
of joint and several liability the
Government is not nojiind to bring
enforcement action against all of the
potentially responsible parties involved
at a site. The primary concern of the
Government ia identifying targets for
Ubgstion is to bring a meritorious case
against responsible parties who have
the ability to undertake or pay for
response action, Tha Government will
determine the targets of litigation ia
order to reach tha largest manageable
Bomber of parties, baaed on tondty and
volume, and financial viability. Owners
aad operators wtD generally be the
target of litigation, oaleaa bankrupt or
otherwise judgment proof. In
appropriate case*, the Government will
consider pioseoitins, claims ia
bankruptcy. The  Government may also
select targets for litigation for limited
pUZpOMft* tttCh §t nt*) ACCUeV
  Parties who an targeted for litigation
an of course not precluded bom
lavolviag parties who have not been
targeted in developing aetdameni offer*
for consideration by me Government.
  la determining the appropriate targets
for litigation, the Government will
consider the willingness of parti** to
settle, as demoasffatad la the
negotiation stag*. la identifying a
manageable number of partia* for
 litigation, the Agency will consider the
 recalcitrance or willingness to settle of
 the parties who wen involved in the

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                   Federal  Refiner /  VoL SO. No. 24 / Tuesday. Febnjiry 5.  \9U I Noriega
                                                                      5041
 negotiations. The Agency will alto
 consider other aggravating and
 mitigating (acton concerning
 rtfpoiuiblt party actiona in identifying
 targets for litigation,
  In addition, it may ba appropriate.
 whan tha Agency ia conducting phased
 cleanup and hai reached a aattlamant
 for oaa phase. to first aua only non-
 •attllBi compaaiai for tbt next phase,
 •""••'•I that fuch financially viable
 partie* art availabla. Thia approach
 would not pnduda nit against settling
 parties. bat non-aattlan would ba auad
 Initially.
  Tha Agency recognizes that Federal
 agtnciaa may b« niponaibla for cleanup
 cotta at haurdoua waste litta.
 Accordingly. Federal facilitiet will ba
 issued nonca letter* and administrative
 order* whan apprepriata/lnstead of
 litigation, tha Agency will. me tha
 procedure* established by Executive
 Order* 12068 and 121 4« and all
 applicable Memoranda of
 Undemanding to resolve iuue*
 concerning tuch agency's liability. The
 Agency vail take all itapa necessary to
 encourage successful negotiations.
  Under our revised policy on
responsible party participation in RI/FS,
PRPa have increased opportunities for
involvement in the development of the
remedial invesogariona and feasibility
studies which the Agency use* to
identify the appropriate remedy.  In-light
of tha fact that PRP* will have received
nonce letter* and the information
identified in section ID of this policy.
prelitigMon negotiations can be
conducted in an expeditious fashion.
  Tbe Negotiation* Dtcutoa Document
(NDD). which follow* completion of the
RI/FS. auk** the pralimfaify
tdeattficatioa  el the eppraprista remedy
for the alit. PreUttgattoe negotUOooa
between the Government end the PRP*
should normally not extend for more
than 00 day* after epproveJ of the NOD.
If significant profroea la oot made within
a reasonable amouat of time, the
Agency will not hesitate to abandon
Qegotiationa and proceed immediately
with edminiavative action or litigation.
It should be noted that these atepa do
not preclude further negotiations.
  Extensions  can be considered in
complex case* where there ia no threat
of seriously delaying cleanup action.
Any extension of this period must be
predicated on having a good faith offer
from the PRP* which, if successfully
-egouated. will aeve the Government
  bstantial time and resource* in
.(taming the cleanup objective*.
 X. Management and Review of
 Settlement Negotiatiooa.

   All settlement documents must
 receive concurrence (ram OWPE and
 OECM-Waite, and be approved by the
 Aaaiatut Administrator of OECM in
 accordance with delegation*. The
 management guideline diacuaaed in
 Section Q allow* the Region* to
 commence negotiations if responsible
 partie* make as imtiaJ offer for a
 substantial proportion of the cleanup
      . Before commencing negotiations
 for partial settlement*, the Regiona
 should prepare e preliminary draft
 evaluation of tha case using the
 settlement cnterie in section (V of this
 policy. A copy of this evaluation shoud
 be forwarded to Headquarters.
   A final detailed evaluation of
 settlements is. required when the
 Regions request Headquarters approval
 of the** settlement*. This written
 evaluation should be submitted to
 OECM-Waste and OWPE by the legal
 and technical personnel on the case.
 These will normally be the Regional
 attorney and technical representative.
   Tha evaluation memorandum should
 indicate whether the settlement ia for
 100% of tha work or cleanup costs. If dus
 figure ia leu than 100%. the
 memorandum should include a
 discussion of the advantage* and
 disadvantages of the proposed
 settlement a* measured by the criteria in
 section IV. The Agency expects full
 evaluation* of fid) of Uw cmer.a
 specified in the policy and will return
 inadequate evaluationa.
   Tbe Regions are authorized to
• conclude .settlements in certain type* of
 hazardous waste cases on dMir own.
 without prior review by Headquarter* or
 DOJ. Caeea selected for this treatment
 wooidnofnajt* ban lowtr priority for
 btigattoe. Categories of cases not
 •abject to Headquarter* rettew include
 aegottattoa far cost teto»eq> cesee
 under S20GJQO and negotiation of claim*
 Bled in bankruptcy. In cost recovery
 case*, the Raglan* should pay particular
 attention to weighing dM  reeources
 neceuary to conduct negotiation* at J
 litigation against the «mounta that may
 be recovered, and the prospects for
   Authority to appear and try ease*
 before the Bankruptcy Court would not
 be delegated to the Regions, but would
 be retained by the Department of
 Justice. The Department will file ceaea
 where an acceptable negotiated
 settlement cannot be reached. Cople* of
 settlement documents for such
 agreement* should be provided ot
 OWPE and OECM.
  Specific detail* concerning these
authorizations will be eddressed in
delegations thet will be forwerded to the
Regions under separate cover.
Headquarter* i* conducting an
evaluation of the effectiveness of
existing delegations, and is assessing
the possibility of additional delegations.

Note on Purpoee and Uses of tfua
•  The policies and procedures set forth
here, and internal Government
procedure* adopted to implement theae
policies, are intended as guidance to
Agency and other Government
employees. They do not constitute
rulamaking by the Agency, and may nut
be relied on to create a substantive or
procedural right or benefit enforceable
by any other person. The Government
may take action that is at variance with
the policies and procedures in this
memorandum.
  If you have any questions or
comments on this policy, or problems
that need to be addressed in further
guidance to implement this policy.
please contact Gene A. Lucero. Director
of the Office of Waste Programs
Enforcement (FTS M2-4614). or Richard
May*. Senior Enforcement Counsel (FTS
382-4137).

Appendix—Discussion of Issue* Raised
by Interim CERCLA Settlement  Policy
  This appendix di*cus»*s in greater
detail certain issues raued by the
interim policy and identifies specific
issues for public umner.t. It focusw un
issues of broad public concern, rather
than issues related primarily to internal
Agency oianagement. The section
headings of this attachment generally
parallel the specific section* of the
enforcement policy.
IGesjonlPTttdple*
  The discussion of general principl**
set* oat the overall philosophy
governing the Superfund enforcement
program. To achieve the greatest
pouiblt number of timely and effect**
cleanup actions, the Agency must strike
a balance between two opposite
approaches. On* approach emahasizf*
quick resort to the Fund and
enforcement authorities, and the other
features more incentive* for privet*
party cleanup.
  We have attempted to combine
feature* of both these spproachn irr.o a
vigorous enforcement program that will
encourage private party cleanups TVw
approaches,  and their limitations. ar»
described in greater detail below.
   Under one general approach, thr
Agency would quickly resor to r.'h*>r

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                   Fadaul lUtift** / Vol Sa  No. 24 I Tuttdiy. February 5. 196S / Notice*
 enforcement acttao nek e* litigation
 tad tdministrative order*, or Federal
 government cleanup under the Fund.
 Release* from liability tad explicit
 contribution protection dauae* would
 b« ithetiy limited under thit approach.
 •ad tha tuna for negotiation* prior to
 enforcement or Puad-fiaaaead cleanup
 action would ba short Tha limitation of
 thii general approach if that EPA may
 not alway* ba abla to move to daan op
 enough aitn. bacauaa of restriction* oa .
 the oaa of tha Fond aad tha time aad
 reaourcea needed to ooopal cleanup
 through anforcana&t Furthermore.
 many privata parti** believe that aa a
 ffaoarml mattar. may eu conduct
 cleanup activities mora quickly and at
 Uaa coat than tha Fadaral government
 aad hava cUmad that this approach may
 discourage privata party initiative*.
  Under tha othar ganeral approach, tha
 Agency would provida additional
 iocantvaa to encourage PRP cleanup.
 For example, tettlements would allow
 mora expansive ralaaaa* from liability.
 contribution protection would ba
 provided, and EPA would take at much
 tima a* naadad to ritolva isiuet through
 negotiations before it raaoned to
enforcement action or Fund-financed
cleanup. It it poaaibla that tha Agency
would raach mora oaf otiated
aattlamanu under thia approach. One
limiution of thu approach it that tha
Agency would aaauma financial riiki if
It become* clear in light of changed
drcumauncat or improved knowledge
of site problem* that additional cleanup
action ia naadad expansive nlease*
(ram liability would preclude the
Agency from pursuing reapotuibla
partai for additional cleanup coita.
  Also, protracted negotiations would
delay cleanup of sites. Further, privata
party cleanup* may am increaaa without
an attendant aggressive enforcement
program (unilatertl admiaiatrative
 order*, imminent hasard aaforcamaot
 fHf«M «p»
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                    Federal Raster  /  Vol. 30.  No. 24 / Tuttdiy.  February  3. IMS  /  Notices
                                                                       5043
 parties an left to previdt the remaining
 cleanup costs.
   The Agency toliciu comment OB
 whether substantial settlements will bt
 possible without • threshold and
 whither eliminating tha thnthold will
 taooun|t • greater number of
 settlements for tithtr • substantial
 portion of thf cost* of cleanup or of (ha
 claaanp iteeli Th« Agency also aolicits
 eomoaat on how tha tana ~dt minimit
 contrtbutor" should ba daflaad
 OL Raie*a* of laformatioo
   Tha Agency will nleaae iaforaution
 concerning tea *ita to faciliuta
 discussion* of Mttlaaant among PRPs.
 This iaformattoa will include
 —(dantiry of notica lattar recipients:
 —Volume and nature of wastes
   identified as delivered to the site:
 —Any ranking by volume of material
   eent to the site:
 Releeie of some of this material  to PRPs
 it discretionary under the Freedom of
 Information Act (FOLA).
   Under, the policy announced today.
 informebon released to PRPs will
 generally  be conditioned on a reciprocal
 release of information by PRPs. Tha
 Agency solicits comment on whether
 informs Don exempt from disclosure
 •nder FOIA should ba made available to
  IPs oa a discretionary  basis.

 IV. Settlement Criteria
   As discussed above, there will no
 longer be any specific threshold for
 considering settlement offers from PRPs.
 Rather, settlement offen will be
 evaluated using the cnter.a in this
 setiton. Evaluations under these criteria
 should result in a full evaluation of the
 offer and will promote consistency
 among Regional offices. These criteria
 will apply ia evaluation offer* from
 PRPs (i) to clean up the site. (2) to pay
 for dean up of the site, and (3) la coat
 recovery actions. Theee criteria iadadas
   • Volume of waatncoatribotad by
 each PR*
   • Nature of waste contributed:
   • Strength of evidence tracng waste
 to settling parties;
   • Ability of settling parties to pay:
  • Lttigative risks ia proceeding to
 trial:
   • Public inter**! conaidarattoaa:
   • Precedential value:
   • Value of obtaining a present sum
certain:
  • Inequities and aggravating factor*
  • Nature of case that remains after
settlement
  Many of these criteria are typical for
assessing  offen to settle any type of
litigation. Although the Agency will
Consider offen of leu than 100 percent
 in accordance with this policy, it will do
 so in light of the Agency's position that
 PRP liability is strict, joint and several
 unless it can be shown by PRPs that
 injury at a site is clearly divisible. EPA
 solicits comment oa the need, if any. for
 additional criteria.

 V. Partial  CUaaupe
  Under tha interim policy. EPA will
 now. on occasion, consider PRP offen to
 perform or pay for one phase of a site
 cleanup. Tha interim policy discusses
 toe circumstance* in which it may be
 appropriate to eatar into settlements for
 such partial cleanups. ESA solicits
 comments oa thaae arrangements.
 VI Contribution Protection
  Contribution among responsible
 parties is based on the principle that
 where liability is joint and several a
 parry who has paid more than his
 proportional share of a judgment or
 settlement is entitled to reimbursement
 from other liable parties. When the
 Agency reaches a partial settlement
 with some parties, it will frequently
 pursue an enforcement action against
 non-settling responsible parties to
 recover the remaining costs of cleanup.
 If such as  action ia undertaken, than ia
 a possibility that those non-settlon
 would in tun sue settling parties.
arguing that the sattlon an liable to
 them for contribution. If this action by
 non-settling parties is successful.
 settling parties could end up paying a
 larger share of cleanup costs than was
 determined in  the Agency's settlement
  A contribution protection clause ia a
 consent decree is one xethod to prevent
 this outcome. While maintaining the
 right to go against non-settlors for ail
 remaining relief, the United States could
 egree to reduce its judgment agaiaat tha
nan-eettling parties,  to the extent
necessary to extinguish the settling
 parry's liability to the non-eeding third
 party. This suggested approach ia OM of
eevenJ cosoibuttoa protection optiona
 available to the covernmeat Paruea
negotiating settlement have frequently
 sought such protection.
  The potation taken by the gove-cment
 in litigation involving contribution ia
that tha courts should adopt a Federal
rule of decision that follows section 4 of
 the Uniform Contribution Among
Tonfaaaon Act Section  4 provides that
whan settlements an entered into n
 "good faith." the seniors an discharged
 from "all liability for contribution to aey
other tonfeasors." Under thia
 interpretation, than ia no need to
 provide contribution protection to PRPs
 who reach good faith settlements with
 the government (We do aot tuapon
 adopting section 1 of tha Uniform Act as
a Fedenl rule of decision. Section 1
would preclude settlots from seeking
contribution from non-settlon unless (h»
settlors financed or performed a 100
percent cleanup at a site.)
  However, since tha right of
contribution under CERQA is not yet e
settled question, the Agency can take
two approaches ia response to reqaeeta
from PRPs for contribution protection:
  • argue that under its legal
Interpretation, explicit contribution
protection clauses are unnecessary:
  • provide explicit contribution
protection clauses ia consent decrees oa
a case-by-case basis, baaed on tha
Agency's ability to clearly apportion
liability, tha percentage of tha cleanup
represented by the settlement and a
case-specific consideration of the law
which ia likely to be applied.
  Explicit contribution protection
clauses nay serve as an incentive for
private party seRlemeat because PRPs
may be mon confident with a
settlement which includes an explicit
contribution protection clause as part of
an agreement. It is consistent with our
position on joint and several liability
and our support for a uniform Federal
rule of decision in this ana. However.
explicit contribution protection clauses
have several limitations. For example.
the Agency eay become vulnerable for
pan  of tha cleanup costs that would
otherwise be borne by responsible
parties. Ia addition, the drilling
problems involved with such clauses an
complex. Finally, such clauses may
embroil the Federal government in
complex litigation rather than resuming
in final settlements.
  In  the interim policy published today.
the Agency has authorized a vary
limited use of contribution protection
clauses. The Agency is soliciting public
comment on whether tha interim policy
provide* for contribution protection in
the proper circumstance*.
VTL
            Fran Liability
  Potentially responsible parties have
frequently sought total release* from
paat and future liability aa a condition of
settlement The Agency has geeenUy
been reluctant to gnat such total
release* because they impair tha
Agency's ability to assure cleanup m
light of changed condition! or new
information concerning a site.
  We ncognin tat current state of
scientific uncertainty concerning tha
impacts of hazardous substances, oar
ability to detect them, and the
effectiveness of remedies at hazardous
waate sue*. It would be inappropriate
for tha Agency to assume tha
ntpon»"'illty for cleanup if previously

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                   F«dml R«giit«t / VoL 30. No.  24 / Tueiday. February  5. 1985  /  Noticei
unknown or undetected condition* arlM
or an discovered after MttlnMnt or if
new information indicates then may be
u imminent and ratMlantUl
•ndanferoent to public htalth or
welfare or the environment
  Three broad approaches for
reconciling the concern* of the Agency
and of PRPi are to:
  • authorize release* for remedial
action* taken pursuant to EPA-approved
Rl/FS and design;
  • authorize total releases for remedial
actions taken pursuant to EPA-approved
RI/FS and design, but include a
reopener clause allowing the Agency to
seek additional cleanup action or
cleanup cost* for unknown conditions
that indicate possible imminent and
substantial endangerments:
  • allow very limited releases with
reopener clauses that not only cover
immm»nt and substantial
endangerment*. but require private
parties to respond to all other releases
or threats of release from the site.
  The guidelines Li this policy take the
second approach. We recognize that an
expansive release policy would be an
incentive for private party cleanup, but
its value as an incentive must be
weighed against the scientific
uncertainties surrounding the nature of .
exposure to hazardous substances, their
degree of toxitity. and the effectiveness
of remedies.
  Generally, the expansivenets of a
release will depend on the degree of
confidence that the Agency has in a
remedy, it may be appropriate to
negotiate a more expansive release
where responsible parties conicnt to
meeting and continuing to attain health
based performance standards. In
addition, the Agency i* considering
allowing more expansive release* where
the private party remedy is a
damonitntad effective alternative to
land disposal such a* incineration.
  Under the second approach, designed
for remedial action*. PRP* will be
required to assum* risk* of imminent
and substantial endangerments
attributable to problem* not known by
the Agency at the time the remedy wa*
•elected. In return. EPA will be
responsible for responding to future
releases of contaminant* that do not ri*e
to the level of an imminent and
substantial endangerment (assuming
dial if PRPs conduct the remedial
action, the approved remedy i*
maintained as required).
  Releases will be of a similar scope.
whether activities will be conducted by
EPA or by pnvate parties. Any release
policy that allowed more extensive
releases when the Agency conducted
the cleanup actions than when private
parties conducted the action* would
discourage private parry cleanup, or. at
e minimum, encourage private parties to
pay for government cleanups rather than
conduct the remedial action themselves.
Private parry conduct of the remedial
action is preferable because it i* likely
to occur sooner than Agency cleanup.
and the use of private money frees the
government to use the Fund for  other
sites with no identified PRPs.
  The Agency is also considering
whether a more expansive release may
be allowed where the PRP* hire an
approved contractor to perform the
cleanup, and the PRPs' performance is
secured by a satisfactory premium
payment  or surety bond in an amount
well in excess of the estimated  cast of
the work. The term "prenuun payment"
refers to risk apportionment device
under which the risk of an ineffective
remedy would be mitigated by a cash
payment in excess of cleanup costs, or
another financial assurance mechanism.
  The Agency solicit* comment* on the
interim release policy, including the
drcumitancM under which raleaie*
should be granted, reopener condition*
that should be included, and when
releases should become effective. The
Agency also solicits comment on the
premium payment or surety bond
concept.
Vm. Targets for Litigation

  The Agency i* not legally required to
bring action againat all potentially
responsible parties at a site. The interim
policy provides that the Agency will
continue to identify target* for litigation
on the basis of factors such as financial
viability, strength of the case, and our
ability to manage litigation. This policy
also provide* an additional incentive for
voluntary cleanup by targeting
recalcitrants for litigation.
  The presence of a Federal agency as a
potentially responsible parry at a
hazardous waste site sometimes delays
negotiations because the position of the
Federal PRP may not be clear to
government negotiators or other PRPs.
The interim policy provides that Federal
facilities are to be treated like other
PRPs in most respects except being
joined as a party in litigation. The
reference to administrative orders is
intended to direct the Regions to make
more aggressive use of adminiitrative
orders in dealing with Federal facilities.
Instead of litigation, we will use the
procedures establi»heri by Executive
Order* ;2C83 and 12146 and appropriate
Memoranda of Understanding to resolve
issues remaining with these facilities
after negotiation sr.ds. EPA will
encourage Federal facilities to
participate in thess negotiations.
(Fft Doc. 84-2359 Filed 2-4-&S; 8:4i 4m)

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                                            OSWER #9835.2
DRAFTING CONSENT DECREES  IN  HAZARDOUS  WASTE



           IMMINENT HAZARD CASES

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                       TABLE: OF CONTENTS

                                                      Page


Introduction                                            1

I.  Re Leases and Contribution Protection                2

        A.   Scope of Releases                          2

        B.   Timing of Releases                         3

        C.   Limiting Releases to Account for           3
             an Inadequate Remedy

        D.   Contribution Protection                    5

        E.   Sample Language on Releases and            7
             Contribution Protection

II.     Site Access                                     9

III.    Authority of the Signatories                    10

IV.     Insurance/Financial Responsibility              10

        A.   Insurance                                  10

        B.   Financial Responsibility                   11

V.      Establishment of a Trust Fund                   1 1

VI.     Restrictions on Conveyance                      13

VII.    Priorities of Claims Versus Non-Settling        14
         Parties

VIII.   Preclusion of Claims Against the Fund           15

IX.     Joinr Responsibility Among Responsible          16
         Farcies for Implementing the Decree

X.      Public Access to Documents                      17

XI.     Dispute Resolution Provisions                   18

XII.    Stipulated Penalties                            20

XIII.   Admissibility of Data                           22

        Disclaimer                                      22

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                                                        OSWER #9835.2
            UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

                        WASHINGTON. D.C.  20460
                             MAY   |  Q85
MEMORANDUM

SUBJECT:  Drafting Consent Decrees in Hazardous Waste Imminent
          Hazard Cases
FROM:     Courtney M. PriceV__J^u~*->k  I)
          Assistant Administrator for Enforcement
            and
          Jack W.
          Acting Assis't&nt Administrator for Solid Waste
            and Emergency Response

TO:       Regional Administrators


INTRODUCTION

     On October 19, 1983, the Office of Legal and Enforcement
Counsel issued guidance on drafting judicial consent decrees.
That document provides general guidance on drafting consent
decrees for settlement of hazardous waste cases, provides a
checklist of provisions which ordinarily should appear in a
decree, and offers sample language for many commonly used
consent decree terms.

     As the Agency enters into more and more consent decrees as
part of the hazardous waste program, there has arisen an
increasing need for supplemental guidance specific to imminent
hazard enforcement actions under the Comprehensive Environmental
Response, Compensation, and Liability Act (CERCLA) and section
7003 of the Resource Conservation and Recovery Act (RCRA).
These actions share common factual circumstances and yet are
sufficiently distinct from other enforcement programs to warrant
separate additional guidance.  For example, many hazardous
waste cases are characterized by multiple defendants, raising
unique liability issues which must be addressed in each decree.
This guidance document will focus on those consent decree
provisions which are vital to settlement in hazardous waste
cases, but which are handled differently (or not at all) under
other programs.

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     The guidance is based upon and supplements the Ager.cv's
settlement policy as scaced in a memorandum enciclea "Interim
C'£RCLA Settlement Policy" (hereinafter "Settlement Policy")
whicr. we issued, along with Hanic Habichc of the Department of
Justice, on December 5, 198&.  EPA enforcement personnel should
interpret and apply this memorandum consistently with the
Settlement Policy and any subsequent -revisions thereto.

     Each decree will be negotiated amidst widely varying factual
situations.  Thus it is not appropriate to mandate tne inclusion
of model terms in each hazardous waste decree.  Rather,  this
memorandum is intended to suggest ways of achieving the  govern-
ment's settlement goals.  The sample consent decree provisions
may be incorporated as is or modified to accommodate the
inevitable eccentricities present in each case.

I.    Releases and Contribution Protection

     Although the greater portion of this memorandum addresses
terms which the government wishes to include within consent
decrees, it is also useful to discuss the major provisions
which are generally requested by responsible parties in  settlement
discussions, i.e., releases, covenants not to sue, and protec-.
tions against contribution.  Since releases directly affect
liability for current and future hazards posed by a site, these
provisions must be drawn as narrowly as possible.

     A.  Scope of Release

         The Agency's policy, absent extraordinary circumstances,
is  to grant releases from liability only for that part of a
cleanup performed or funded by the responsible parties.   If
only surface cleanup has been effected, the release should
clearly be limited co liability for the work undertaken  to
respond to surface contamination (as defined in the decree),
and should expressly reserve our right to bring actions  against
the settling and non-settling parties for all other removal  or
remedial activities.  The release ordinarily should not  forgive
government oversight, monitoring, and. enforcement costs.
unless the settlement payment takes these coses into account,
nor should 1C include natural resource damages without the
consent of the trustee.

     The consent decree should clearly state that the release
only extends to named parties to the agreement, and not to all
parents, subsidiaries, and affiliates, unless  100% of the
cleanup costs are recovered.  Judicial or administrative causes
of action against any other parties are to be  reserved.   This
language is particularly crucial where State law may require
the release of all joint tortfeasors if a release is given to

-------
any one of them.  Although ic Ls our view chat CERCLA calls
for uniform federal rules of decision,  as a precautionary  measure
corsenc decree releases in chese Scaces should be phrasea  in
terms ot a covenant noc co sue in oraer co -ninimize che possibili
that non-seeding parcies would be released from liability oy
the decree.  Furtnerraore, che release should not extend co
liability under dny statutory claim which did not com che
basis for che complaint or clearly apply to the activities of
the seeding parcy.  (For example, a KCRA subtitle C regulator-/
action release should noc cover liability under section 3013
or 7003 of RCRA or section 106 of CERCLA).  Similarly, a release
or covenant not to sue should expressly apply only to civil
liability.  Finally, in most cases (see the Settlement Policy,
page 15). releases should specifically reserve the defendant's
redisposal liability, i.e., liability arising from off-site
disposal of wastes removed from the site.

     B.  Timing of Releases

         Many responsible parcies have sought to obtain
releases which become effective in advance of completing the
needed abatemenc accions.  As a general rule, che Agency should
require thac releases only become effective when all of the
work (including monitoring ) has been completed co EPA's
satisfaction, whecher defendants financed or conducced the
work.

     C.  Limicing Releases co Account for an Inadequace Remedy

         Although secclement agreements are often designed co
accomplish a complete and permanent remedy, che Agency muse
procecc itself from che possibility that the chosen remedial    «
option will fail to entirely abate the releases at a sice  and
the potential for an imminent and substantial endangerment
resulting therefrom.  The Agency should use the consent decree
to minimize the risk that the government will be left to finance
a future cleanup resulting from failure of the remedy at the
sice.

         1.  Where circumstances permit, compliance with
the decree should be linked to achieving enforceable performance-
based standards.  The Agency muse be in a position to move
against the settling parcies for failure co accain a standard.
To the extent possible, the decree should not merely be a
broadly phrased agreement on a remedy designed to generally
meet che goals and objectives of the decree or the statute at
issue.

         2.  The decree should contain detailed oversight,
operation, maintenance, inspection, and monitoring requiremencs-
designed co prevent and uncover deviations from  technical

-------
 standards over an extended period of time.  These requlrener.es
 should be embodied in workpians submitted for approval pursuant
 to  the decree.

         3.  The decree should contain financial responsibilitv
 requirements, (discussed below), sufficient to cover any costs'
 arising from failure of the remedy.

         4.  The decree should clearly articulate any assumptions
 upon which the remedial program is based.  For example,  a remedv
 may be designed with certain characteristics of the surrounding
 area in mind.  If land use patterns change, (for example, where
 a previously unused aquifer is tapped for drinking water),  the
 level of protection afforded to the environment by the remedy
 may be insufficient to protect human health.  If any of  the
 stated assumptions change, the Agency should reserve the right
 to pursue modifications to the remedial program.

         5.  Finally, the decree should contain a clause
 authorizing the government to reopen the decree if the site
may present an imminent and substantial endangennent to  the
 public health or welfare or the environment due to:

             The discovery of previously unknown or
             undetected conditions ac the site; or

             the receipt of new information concerning
             the scientific premises of the decree.
             (See the Settlement Policy, page 16.)

This reservation should allow the government to obtain further
 remediation by the defendants or perform the work itself and
seek cost recovery.  Despite best efforts at designing,
constructing, and implementing a remedial program, it is
inevitable that in a certain percentage of cases additional
work will have Co be performed to eliminate such endangennents.

     Responsible parties, of course, wane the decree to
represent a final disposition of responsibilities.  However,
hazardous waste sice abatement technology has noc progressed
co the point where the Agency can be relatively sure chat che
remedial techniques selecced and implemented coday will  provide .
complete and permanent proceccion co che public on che hundreds
of sites where work has been or will be performed.  The five-pare
program outlined above should maximize che degree of finality
afforded to seeding parcies consiscenc wich che need co
safeguard che interests of che public.

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     D.    Contribucion Protection

           Contribution is an equiraole remedy base a on che
principle chac one who has paiu -nore cnan a reasonaole -roj-or-
cion of a judgment or debc is encicled co reimoursemer.c' : ro-n
ocher liable parties.  The issue of concribucion will oe
particularly critical in nulci-partry cases chac involve secci.e-
mencs wich fewer chan all or che responsible parci.es dnc  -.ere
the government nay still sue some or all or cne non-sect;..-^
parties.  Anticipating chat the government nay sucessrully
pursue a non-settlor, a defendant may demand that che United
States agree to protect it from any claim tor contribution
from any non-settling party as a condition to signing a consent
decree.  The effect of such a contribution protection -lause
sought by a settling defendant would be to have tne Unicea
States agree to reduce its judgment against a non-settiing
responsible party by the amount or contribution ordered co oe
paid by a settling defendant to the non-settling party in
subsequent litigation.

     It is the Agency's view chat contribution protection
clauses are largely unnecessary.  Many States* have already .
enacted laws which protect settlors from subsequent contri-
bution actions.  These laws have been modeled on Section * of
the Uniform Contribution Among Tortfeasors Act (1955 Revision),
drafted by the National Conference of Commissioners on Uniform
State Laws, which provides:

          "When a release or a covenant not to sue or
          not to enforce judgment is given in good faith
          to one of two or more persons liable in tort
          for the same injury or the same wrongful death:

          "(a)   It does not discharge any of the other
          Cortfeasors from liability for the injury or
          wrongful death unless its terras so provide;
          buc 1C reduces the claim against the others to
          Che extent of, any amount stipulated by the
          release or che covenant, or in the amount of
          the consideration paid for it, whichever is
          the greater; and,
* Seventeen States have adopted this Section or a similar
provision:  Alaska, California, Colorado, Florida,  Illinois,
Massachusetts, Michigan, Missouri, Nevada, North Carolina,
North Dakota, Ohio, Oklahoma, Oregon, Tennessee, Virginia, and
Wyoming.

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                             - 6 -
          "(b) Ic discharges the tortfeasor co whom it:
          is given from all liability for contribution
          to any other tortfeasor."

Under this rule,  once a reasonable, comprehensive,  and  good
faith agreement has been reached, settling parties  would  be
immune from third-party contribution claims.

     The Agency is taking the position that federal courts
should use the model rule as the standard for resolving
contribution questions.  The United States will be  willing  to
include language in a consent decree which states that  it
is the intention of the parties that future contribution
actions against settlors be prohibited and encouraging  courts
to consult the Uniform Act as the federal rule of decision.
Contribution protection clauses will therefore generally  not"
be necessary for consent decrees.

     As the Settlement Policy points out, however,  providing
protection from contribution to settling defendants may be
appropriate in limited cases.  If,  under the law likely to  be
applied, contribution actions by nonsettling defendants may
be permitted, EPA may consider providing contribution protection
when two factors are present:

     1)  the settlement addresses a very high percentage  of  the
total cleanup; and

     2)  the relative responsibilities of the responsible
parties can be clearly allocated, so that future actions  are
not likely co reapportion liability.

On a case-by-case basis, the litigation team will assess  whether
these factors and other circumstances in the case warrant
incLustau of contribution protection in the decree.

     Of course, the greater the percentage of cleanup covered
by che decree, the lower the risk that claims for contcibucion
will be successfully asserted against seeding parties.  Compre-
hensive settlements will maximize the chances that compliance
with the terms of che decree discharges a company's liability
for a site.

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     E.     Sample Language on Releases  and  Contribution
           Protection

           The following sample consent decree  language  assumes
that cocal cleanup has been or will be  undertaken  by  the
responsible parties pursuant to EPA approved  procedures.  It
also assumes that the site is located in a  State where the
release of one joint tortfeasor operates as a release on all
others.
          Covenant Not to Sue

          In consideration of work which has been and
          will be performed and payments which have
          been made by the Company under the terras of
          the Decree, the Governmental Parties (herein-
          after "Government") hereby covenant not to
          bring any civil judicial or administrative
          action against the Company and its officers
          and employees for any claim or cause of
          action cited in the Complaint relating to
          "covered matters."  "Covered matters" include
          liability arising from [work performed under
          the decree] and [specified costs incurred to
          date].  The covenant shall become effective
          upon completion to EPA's satisfaction of the
          remedial activities described in the attached
          specifications.  To the extent that State
          law is deemed to govern liability arising
          from activities related to the Site and the
          interpretation of Che terms of this Decree,
          the parties do not intend this section to
          serve as a general unqualified release.
          This section should be construed as a covenant
          not to sue the Company, and should not act
          to release any other party from Liability.

          This covenant not to sue does not extend  to
          liability  for damage to natural resources, as
          defined in CERCLA, to liability arising  from
          hazardous waste removed from  the  site, or to
          future monitoring or oversight expenses  incurred
          by the Government.   In addition,  notwithstanding

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                   - 8 -
any ocher provisions of chis decree, che Government
reserves che righc co seek modificacion co this
Decree or inscicuce a new accion co seek additional
remedial measures ac che sice, chrough an accion
co compel che defendancs' co perform remedial work
or reimburse che Governmenc for cleanup coses,  if:

(1)   ac any cime previously unknown or undececced
condicions ac che Sice presenc or may presenc an
imminenc and subscancial endangerraenc co che
public healch or welfare or che environraenc ;

(2)   che Agency receives new informacion.
concerning che nacure of che subscances ac
che sice or che appropriaceness of che remedy
described in Appendix I, which indicaces chac
sice condicions may presenc an imrainenc and
subscancial endangermenc Co che public healch
or welfare or che environment.

(3)   [chere occurs a change in one or more
assurnpcions upon which che remedial program
is based.  (See discussion in pare C above) .)-

The parcies recognize che possibilicy chac
chere may be brought or asserced againsc che
Company suics or claims for concribucion for
liability for covered matters by persons or
entities that have not entered into this
settlement that might, if successful, obligate
the Company to pay amounts toward covered
matters in addition to those recognized in
this Decree.  It is the expressed intention
of the parcies chac che Company not be required
co pay amounts in contribution for covered
mattera or be required to remain as parties
in any suit or claim for contribution for
covered matters.  Ic is also agreed that the
Governmenc shall be under no obligacion co
assisc che Company in any way in defending
against such suics for contribution.

The parties represent that this Decree was
negotiated in good faith and that the
Company's undertakings ac che Sice represent
a fair and equitable assumption of the Company's
alleged responsibilities for covered matters
considering, among other factors, the fact that
it is in the best interest of the Government

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                             - 9 -
          co encourage equitable settlements  without
          burdensome litigation.  The parties agree
          that federal law should govern questions
          of contribution among parties that  may be
          adjudicated to be liable jointly or severally
          for covered matters.   The parties agree
          that, in determining  the appropriate federal
          rule of decision to establish the effect of
          this Decree on possible rights of contribution,
          a court should adopt  the principle  set forth
          in Section 4 of the Uniform Contribution Among
          Tortfeasors Act.

II.   Site Access

     It is essential that EPA have access to  the site  in order
to observe any work taking place and monitor  compliance with
the  terras of the decree.  Language granting access should
provide access during the effective period of the decree and
describe the scope of the inspector's powers.

     A sample site access clause is:

          During the effective  period of this decree,
          EPA or its representatives, including
          contractors, shall have access at all times
          to the Site and all property owned  or
          controlled by the defendant for purposes of
          conducting any activity authorized  by CERCLA,
          including buc not limited to:

          A.  Monitoring the progress of activities
              caking placer

          B.  Verifying any data or information
              submitted co EPA;

          C.  Conducting investigations relating to
              contamination at or near the site;

          D.  Obtaining samples at the sice;  and

          E.  Inspecting and copying records, operating
              logs, contracts,  or other documents
              required to assess the defendant's
              compliance with the Decree.

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                             - 10 -
           In addi.ci.on, the defendant will noc object to
           EPA's obcaintng, for the above purpose, access
           co any establishment or place owned or operated
           by any third party under contract with the
           defendant.  Nothing herein Limits or otherwise
           affects any right- of entry held by EPA pursuant
           to applicable laws, regulations, or permits.

     Where it is necessary for EPA to have access to the
property of a defendant for a long period of time,  an easement
over the property may be desirable.  The easement should run
with the land and be recorded to place all future purchasers
on notice.

     It is important that access considerations be  taken into
account at the beginning of a lawsuit in order that all
appropriate parties be brought under the court's jurisdiction.
The government may often want to name an "innocent" landowner
as a defendant solely for the purpose of facilitating access
to his or  her property to conduct response activities.

Ill. Authority of the Signatories

     Obviously it is important that persons signing a
settlement agreement have authority to sign for and bind their
principals.  Sample language to provide for this is:

           Each of the signatories to this Decree certifies
           that he or she is fully authorized to enter into
           the terms and conditions of this Decree and
           to legally bind the party to the Decree so
           represented by htm or her.

     Where there is any doubt regarding the commitment  of the
principals to the decree, or in cases where substantial sums
are at stake, the government, in an abundance of caution, may
wish to require that che principals themselves be signatories
co che decree-.

IV.  Irtstiranee/Financial Responsibility

     A.    Insurance.  Where che cleanup is being conducted
by a responsible party, the party should be required co
protect both itself and EPA from liability, by purchasing
insurance  or chrough anocher financial mechanism, from injuries
to third parties due to aces or omissions of che party conducting
the work.  For example:

           The Company shall purchase and maintain in
           force insurance policies in the maximum amount
           available, which shall procecc che Uniced

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          Scaces and the public againsc any and
          aLL  Liabi.Li.cy arising out of che'Company' s
          and  its contractors' and other agents'
          acts or omissions in performance of the
          work.  Prior to commencement of work at
          the  Site, the Company shall provide E?A
          with a certificate of insurance and a copy
          of the insurance policy for EPA's approval.

      B.   Financial Responsibility.  In addition to liability
insurance, it  is important to have assurance that the  party
conducting the work will have the financial capability to
corapLete the work.  This can be accorapL ished by several means.-

           (1)  Performance bond;

           (2)  Letter of credit;

           (3)  Guarantee by a third party;  or

           (4)  The party conducting the work can present the
Agency with internal financial information sufficient  to satisfy
the Agency that the party has enough assets to make  it unnecessary
to require additional assurances.  If this method of financial
responsibility is chosen and if Che term of compliance within
the Decree is greater than one year, then the Decree should
provide for the party to annually submit internal financial
information.   If the Agency then determines the financial
assurances to be inadequate, the Decree should provide that
the party can be required to obtain a bond or one of the other
financial instruments listed above.

     A performance bond by a reputable company is generally
the preferred  type of assurance.  The bond should assure that
the work will be completed regardless of remaining cost.  The
Latter two mechanisms require a detailed examination of the
financial status of the party doing the work and che Guarancor.
No matter which financial instrument is used, EPA should be
authorized in, the Decree Co approve such instrument  before it
is incorporated inco che agreement.

V.    Establishment of a Trust Fund

     Frequently in multiple-party generator cases, the
generators will want to select a contractor to clean up the
site.  If the contractor is a party to the litigation, the
consent decree may make the contractor expressly responsible
for the cleanup and the generators responsible for paying for
the cleanup.  However, in order to assure completion of the
work, the generators should also remain liable until completion.
The funds to pay for the cleanup are collected in advance from

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che generacors.  The most commonly used mechanism for accomp-
lishing Chis is che escablishmenc of a cruse rune or escrow'
accounc for paying che concraccor.  The cruse rune or che
accounc can be adrninis cered by a Scace or ocher public enticv
or a bank or similar encicv experienced in adrainiscering cruse
funds.  Neither EPA nor ocher Federal agencies should adminisce:
che fund.   However, che Decree should . provide chac EPA :nusc
approve che form of che Trusc or escrow agreemenc.  The consenc
decree should specify how che fund will be creaced,  how mucn
money is co be deposiced inco che fund, and how aisburseraer.es
will be made from che fund.  The fund accounc should earn
inceresc.

     Disburseraencs are usually linked to complecion of cercain
milescones required by che decree.  Agency approval may oe
required for each disbursemenc.   The final paymenc shoula noc
be made uncil Che concraccor has cercified, ana che Agency has
confirmed, chac all work co be paid for by che fund has been
corapleced.  Ic may also be desirable co establish a scnedule  of.
payments from che fund co assure chac che money remaining in
che fund is sufficienc to pay for complecion of che cleanup
should che concraccor defaulc.  The Decree should provide chac
EPA does noc guarantee che sufficiency of che fund.   A sample
Cruse fund clause is:

          Wichin chree days afcer che encry of chis
          Decree, che Companies  each shall pay co che
          sice Trusc Fund (hereinafter che "Trusc Fund")
          escablished ac che Bank the sum which is shown
          for chat Company in Exhibit A hereto.  Prior co
          establishment of the Trust Fund, che form of che
          trust agreement must be submitted to EPA
          for its approval.  The Trustee shall deposit
          the money in an interest-bearing account
          and use the money in the Trust Fund to pay the
          Contractor to perform the Work described in
          Exhibit B hereto (hereinafter referred co as
          the "Work"), which Exhibit is hereby incorporated
          by reference and made a part of this Decree as
          though It were set forth verbatim.  All money
          remaining in the Trust Fund after completion
          of che work, including inceresc earned, shall
          be deposiced in che Hazardous Substances Response
          Trusc Fund as recompense for response coses
          incurred by the United States noc otherwise
          reimbursed under the terms of this Decree.

          EPA does noc guarancee the monecary sufficiency
          of the Trust Fund established by this section.

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                             - 13 -


A sample Schedule of ?a;/ner.c clause is:

          The funds will be disbursed in accordance with
          che following schedule.

          (a)  Upon entry of this Decree che Concraccor
          snail receive 5100.000 from che Trust Fund.

          (b)  Upon completion and approval by EPA
          of items 1, 2, and 3 of the'Work, the
          Contractor shall receive $300,000 from the
          Trust Fund within no more than 20 days
          after receipt of the Trustees  of an applica-
          tion for payment by che Contractor.

          (c)  Upon completion and approval by EPA,
          of items k, 5. 6, and 7 of the Work, the
          Contractor shall receive 5500,000 from the
          Trust Fund within no more than 20 days after
          receipt by the Trustees of an  application for
          payment by the Contractor.

          (d)  Upon inspection of the Sice and
          certification by the United States that
          che Contractor has completed che Work, che
          Contractor shall receive $500,000 from the
          Trusc Fund within no more than 30 days after
          receipt by the Trustees of an  applicacion
          for payment by the Company. All remaining
          money in the Trust Fund, including earned
          interest, shall be deposited in che Hazardous
          Substances Response Trusc Fund.

VI.   Restrictions on Conveyance

     It is important chat a subsequent purchaser of real
property is notified that che site is the subject of a  consent
decree, and that he may be required to fulfill the terras
therein.  There ace several methods of providing such notice:

          1.  Depending upon the State,  one may notify  a
subsequent purchaser by recording or filing a copy of the
consent decree with the County Recorder (Registry of Deeds)  or
Clerk of Courts, so Chat a tide search would reveal the exis-
tence of the decree.  Individual Scace law will have co be
considered as to the proper method of recordation.

          2.  The decree may require chat che grancor nocify
the plaintiff, prior to che cransfer of cicle, of  che name of
the grantee and, subjecc to EPA approval, what specific
requireraencs of che consenc decree will be performed by the
grantee.

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                               1J. -
          3.  The grantor may be required co incluae
notification in che conveyance (deed)  chat che property is
subject to the terns of the consent decree,  and ^ay also  be
required to describe in the conveyance the prior use of the
site, (e.g., use as a hazardous waste  disposal facilitv^.

     The major concern in fashioning any type of language  is  -o
allow for free alienation.  Language such as the follovine
should achieve our objectives:

          Within thirty days of approval by  the Court
          of this Decree, defendant shall record a
          copy of this Decree with the Recorder's
          Office, 	 County, State
          of 	.

          The site as described herein may be freely
          alienated proviaed that at least sixty days
          prior to the date of such alienation defendant
          notifies plaintiff of such proposed alienation,
          the name of the grantee, and a description or
          defendant's obligations, if  any, to be perfor-ned
          by such grantee.  In the event of  such alienation,
          all of defendant's obligations pursuant to this
          Decree shall continue to be  met by defendant  or,
          subject to EPA approval, by  the grantee.

          Any deed, title or other instrument of conveyance
          shall contain a notice that  the site is the
          subject of this Decree, setting forth the style
          of the case, case number, and Court having
          jurisdiction herein.

     These provisions, of course, are  only applicable  to  sites
where the landowner is a named defendant.  In cases involving
non-landowner defendants, the government may wish to specify  in
the decree thac sale of the sice has no effect on the  obligations
of such defendants.

VII.. Priority of Claims Versus Non-Sectling  Parties

     When a case is seeded for less chart che total amount
necessary to complete a response action or to reimburse
plaintiff fully for costs incurred, it may be done so with the
anticipation that the non-settling parties will be available
to reimburse the Agency for the remaining balance and/or
complete the response action.  To ensure chat sufficient funds
are available or to avoid delay in collecting on any judgments
as to non-settling parties, a provision may be included in the
consent decree providing that an Agency judgment obtained
against non-settling parties takes priority over that obtained

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                              - 15 -
by any of che settling parries.  Sample priority of  claims
language is as follows:

          Defendant's claim against any other responsible
          party in this or any other proceeding for
          contribution or indemnification of ail or  a
          portion of the cost of its settlement herein
          shall be secondary -to the United States'
          claim against such other responsible party
          as to any remaining balance for the response
          actions or other costs incurred for action
          taken ac the Site.

VIII. Preclusion of Claims Against the Fund

     Section 112 of CERCLA provides a procedure whereby a
private party which has performed a CERCLA cleanup may assert
claims to recover such costs from the Fund assuming  the party
has received "preauthorization" pursuant to the National
Contingency Plan.  See 40 CFR § 300.25(d).  The right to
recover such claims is subrogated to the United States by  the
payment of such a claim.

     In multiple party consent decrees, it is important to
include a provision prohibiting future claims against the  Fund
by the responsible parties, unless the responsible  parties
are explicitly preauthorized to bring a claim as part of the
settlement.V   Such a provision is particularly important  in
cases where defendants may later allege that the percentage
of the total remedial costs that they contributed to the settle-
ment is disproportionate to the extent that they contributed
to the problem at the site.

     The language should be extremely broad and unequivocal.
An example of such a provision is provided below:

          In consideration of the entry of this Consent
          Decree, defendants agree not to make any claims
          pursuant to Section 112 of CERCLA, 42 U.S.C.
          Section 96T2, or any ocher provision of lav
          directly or indirectly against the Hazardous
          Substance Response Trust Fund established, by
          CERCLA or other claims against the United  States
V   As EPA policy on the issue of combining private party
     cleanup with Fund expenditures evolves, there may arise
situations where a claim against the Fund would be permissible.'
The language above should be followed pending further guidance
on circumstances where exceptions might be permitted.  In addition
statutory amendments to CERCLA that would obviate the need for
this provision are currently under consideration by Congress.

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          for expenses related :o chis c-ase -in.d this
          Consent Decree.  N'otning in chis Consent Decree
          shall be deemed co constitute preauchorizarion
          of a CERCLA clai-n within tne meaning of i.0 Cl-'R
          § 300.25(d).

     Consent decrees with similar provisions induce the Petro
Processors, Bluff Road, Chem-Dyne, and Seymour decrees.   In
cases involving jusc one responsible party, such a provision
should also be included since there is always some doubt
concerning whether there may be other, perhaps unknown at the
time, responsible parties.

     This provision should be relatively non-controversial
because any defendant willing to enter a consent decree
presumably is willing to pay the portion of the cleanup
specified in the decree.

IX.  Joint Responsibility Among Responsible Parties for
     Implementing the Decree

     The Agency has consistently interpreted CERCLA as
authorizing imposition of joint and several liability on all
responsible parties.  The predominant case law accepts that
interpretation.   It is important to preserve this principle in
multiple defendant cases.  Also, from a practical point  of
view, it is necessary to have the consent decree recognize
joint responsibility in order to prevent the insolvency  or
other problems of one defendant from delaying the entire
cleanup.

      In order to provide assurance that cleanup will proceed
on schedule, consent decrees should include a joint responsi-
bility provision, such as Che example set forth below:

          The Industry Defendants shall implement the
          remedial actions for both sites as provided
          in this Decree, in accordance with the
          schedules established in. the various plans
          and in this Decree.

          In the event of the insolvency or other
          inability of any one or more Industry
          Defendants to implement the activities
          required by this Decree, the remaining
          Industry Defendants agree to complete all
          such activities and actions required by
          this Decree.

     If there is only one responsible party, then particular
care must be taken in drafting the Guarantee, Performance/
Completion Bond or Financial Responsibility provisions,  to

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provide assurance chac there wi.il be adequate resources  co
complete implemencacion of che remedial measures.

X.   Public Access co Documents

     Many consent decrees require an elaborate inves t igac ion
and scudy phase, similar co a CERCLA RI/ FS,  before sone  or  all
of che final remedial actions are determined.  In  all oases,
many engineering details, protocols, and specifications  are not
determined until the consent decree is implemented.   Substantial
amounts of technical information and detail  will  be  determined
during the implementation of the consent decree unaer EPA's
oversight.

     The public is often intensely interested in  che  progress
of such remedial actions.  When EPA is performing  the remedial
action pursuant to CERCLA, the Agency makes  information  and
draft proposals available through a community relations  plan.

     It is EPA policy to implement at all sites,  regardless
of whether the cleanup is performed by che governmenc or che
responsible party, a community relations plan which  encourages
public participation in the cleanup process.  This policy,
however, must be balanced against the need for confidentiality
in enforcement actions.  Since the implementation  of  a consent
decree may give rise to disputes with the responsible parcy
which end up before the court, implementation of  the  consent
decree is still litigation-related.

     In general, consent decrees should contain provisions
Chat explicitly require that all technical daca and  factual
information generated and subraicced by che defendant  are
available for public inspeccion unless chey are requesced  co
be made confidential by Che defendant pursuant Co  EPA regulacions
(see 40 C.F.R. Part 2).  Where possible, specific  and general
cacegories of data and information chac che defendanc muse
make public should be specified.  Because of Che  need co procecc
open and frank inceragency coraraunicacion, this provision should
noc apply Co Agency information oc documents.  However,  raw
technical data generated by EPA or che State, if applicable,
should be made public nonetheless after all applicable quality
assurance/quality control protocols have been complied with.

     After a consent decree Is signed„ EPA. and the defendants
may nonetheless continue negotiations over macters left
unresolved by che decree, (e.g., remedial proposals which muse
await complecion of additional sampling and analysis).  In some
cases, EPA and the defendancs might be urged to make public
all draft remedial proposals leading up to settlement.  To
avoid this unproductive and impractical procedure, EPA should
include explicit language in che consent decree exempting
negotiation documents from che public disclosure provision.

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                             - 13 -


Also.  EPA should consider clearly articulating from, the outset'
of  the community relacions program chat " negoc iac ion"  documents
are noc official submissions wichin che meaning or the consent
decree clause.

     An example of such a provision is provided below.

          All daca, factual i nforniat ion.  ana documents
          submitted by the Defendant to EPA ana the
          State pursuant to this Consent  Decree shall
          be subject to public inspection unless
          identified as conridential by Defenaant
          in conforraance with 40 C.F.R. Part 2 or
          applicable State law or otherwise exempted
          by the terms of this Consent Decree.  The data,
          factual information and documents so iaentified
          as confiaential will be disclosed only in
          accordance with EPA regulations or applicable
          State law.  The Defendant shall not assert
          confidentiality regarding any hydrogeological
          or chemical data, data submitted in support
          of a remedial proposal or any other
          scientific or engineering tests or data.
          This provision does not apply to documents
          exchanged by the parties relating to issues
          of liability or the determination what additional
          remedies, if any, other than those specifically
          required by the terms of this Decree, may be
          necessary to remedy conditions  at the site.

XI.   Dispute Resolution Provisions

     Hazardous waste consent decrees may  require one or
several parties to take samples, perform  studies, and  implement
other remedial steps  about which there may arise differences
of opinion whether the obligation was satisfied.  Sucli
differences of opinion may also arise over whether or  not  a
force maj eure event has occurred, or whether the defendant has
incurred liability to pay stipulated penalties under the decree.
As noted in Che general guidance on consent decrees, it is
useful for the decree to specify a mechanism or mechanisms to
resolve such disputes.
                                                               *
     Such mechanisms may include negotiations among the parties
as well as judicial resolution.  The sample Language below
provides for both, although the parties would probably discuss
the issue and engage in limited negotiations even if the decree
did not expressly mention such1 a mechanism.

     Particularly where the dispute concerns the  implementation
of remedial work, it is important to resolve it quickly.   Some
disputes may be more quickly resolved by discussion and

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                             - 19 -

negotiation among che parries racher -han a judicial  hearir.a,
however, ic is important not co allow negociacions  co consume
coo much cirae.  Therefore,  che government should r.oc  hesicace
co see'< judicial resolucion of disputes which che parries
cannoc readily resolve among chemselves.

     Where possible,  ic is  helpful co minimize  che  drain on
Agency resources by placing on che d-efendanc che burden co
demonscrace chac ics  proposal is TOSC consiscenc wich che
purposes of che decree.  An acceptable sample provision follows

                       DISPUTE RESOLUTION

              The parcies recognize  chac  a
          dispute may arise among defendant, EPA
          and che Scace regarding plans,  proposals
          or implementation schedules required  co be
          subraicced by defendant pursuant co the terms
          and provisions of this Consent  Decree, or
          regarding whether a force  maj eure event,  as
          defined in paragraph 	 of this Decree,
          has occurred, or  whether defendants have
          incurred liability to pay  stipulated  penalties
          under paragraph 	.  If  such  a dispute  arises,
          the parties will  endeavor  to settle it by gooa
          faith negotiations among themselves.   If  the
          parties cannot resolve the issue within a
          reasonable time,  not to exceed  thirty calendar
          days, then any party may file a petition  with the
          Court setting forth the matter  in dispute.
          The filing of a petition asking the court
          to resolve a dispute shall not  extend or
          postpone defendant's obligations under this
          decree with respect to che disputed issue.

               In the event of a dispute  between
          defendant and EPA or the State, defendant
          shall have che burden of:  (1) showing that
          ics proposal is more appropriate than the
          proposal of EPA. or che Scace co fulfill che
          Cerms, conditions, requirements and goals
          of chis Decree, and (2) demonscracing chac
          ics proposal is consiscenc with che Nacional
          Contingency Plan; will abate hazards at the
          sice; and will procecc public healch, welfare,
          and che environmenc from che release or
          threat of release of .hazardous substances ac
          che sice.  If che dispute concerns an issue
          of science, technology, or public policy
          wichin che areas  of EPA's expercise,  che
          Courc shall adopc che position (if any)
          proposed by EPA,  unless che Courc finds  chac
          posicion co be arbicrary and capricious.

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                             - 20 -


 XII.  ScipuLaced Penalties

      Hazardous wasce decrees which establish obligations for
 defendants co complete  in the future should contain stipulated
 penalty provisions co assure that the defendant will comply
 with  i ts -obi igat ions and to minimize disputes over the
 appropriate,  sanccion for failures co comply.  Such obligations
 will  typically include  che implementation of remedial work
 (including construction requirements), and reporting ana
 monitoring requirements.

      The purpose of a stipulated penalty clause is to deter
 potential violations of the decree by associating with each
 violation the immediate obligation to pay a large enough
 penalty co make compliance :nore attractive than violation.
 However, even payment of a stipulated penalty should not
 deprive the  government  (or the court) of other remedies,
 including injunctive relief, and every stipulated penalty
 provision should contain a clause to this effect.  Stipulated
 penalties should never be considered as setting a maximum
 penalty exposure, subject to negotiation downward.

     The authority of the district court to impose monetary
 penalties or fines for prospective violations of consent
 decrees flows not only from the civil penalty authorities of
 the environmental statutes (e.g., RCRA §§ 3008, 7003(b);
 CERCLA § 106"(b))f buc also from the court's civil contempt
 power—its independent statutory authority to punish violation
 of its lawful orders by fine or imprisonment.  18 U.S.C.
 § 401.  When fines under § 401  are prospective, applying only
 to future violations, they are considered "coercive," intended
 to give the  defendant an incentive to comply with the court's
 order.  Prospective fines under § 401 are not subject to the
monetary limits in the penalty provisions of other statutes.

     Stipulated penalties should be large enough to provide a
 real incentive to the defendant to fulfill its obligations on
 time, considering the financial strength of the defendant, any
 economic saving from, delaying compliance, and any harm or risk
 of harm to public health or the environment from delaying
 compliance,  (See Perfect Fie Industries, Inc» v. Acme Quilting
 Co..  Inc.. 673"T72d 53  (2d Cir. 1982). cert, denied 103 S.Ct. 73..)
 AE the same  time, the magnitude of stipulated penalties should
 nor be so great that the defendant prefers to allow the govern-
ment to perform remedial work with Superfund money, rather
 than perform work itself.
                              *
     Depending on the facts of the case, it may be appropriate
 to:  a) specify all numbered paragraphs the violation of which
will be penalized; b) establish a schedule of per diem  penalties
 which increases with the duration or extent of the violation;  ~-

-------
or c) establish higher penalty amounts for Tore important
violat ions.

     Stipulated penalties ^ay be divided between the United
States and a State is co-plaintiffs,  provided chat:  (1)  the
State has taken an -.^tive part in the litigation,  including
the seeking  of stipulated pena.lt ies , 'and (2)  State law provides
independent  authority for the State to obtain civil  penalties.

     The following sample language demonstrates escalated
stipulated penalties, and a division  of stipulated penalties
between the  United States and a Stace.

                        STIPULATED PENALTIES

          (A)   Unless excused by the  provisions
     of paragraph [force raajeure clause],  the
     Defendant shall  pay the following stipulated
     penalties for any failure to comply with
     time requirements of this Consent Decree,
     including any implementation schedules
     submitted by Defendant and approved by
     EPA/State or this Court:

 Period of Failure to Comply   Penalty Per Violation Per Day

     1st through 14th day                  31,500
     15th through 44th day                 55,000
     45th day  and beyond                   $10,000

          (B)   Stipulated penalties under this  paragraph
     shall be  paid by two certified checks of equal
     amounts wich one-half of the daily penalty payable
     to che  "Treasurer of che the United States" and
     the other one-half payable to the "Arkansas
     Department of Pollution Control  and Ecology."

          (C)   The 'stipulated penalties set forth  above
     shaLL be  irr addition co any other remedies or
     sanctions which  may be available to EPA/State by
     reason of Defendant's failure co comply with  the
     requirements of  this Consent Decree.

          (D)   If the parties disagree whether
     Defendant has violated a provision of this decree
     for which a stipulaterf-pe,nalty is due, the
     Defendant may petition the Court under [dispute
     resolution paragraph").  Defendant must file any
     such petition within 30 days of receiving written
     demand  for payment from the Plaintiff.                   —

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XIII.  Admissibilicv of Daea

     In order Co avoid disputes over the incegricy of sample
results or ocher daca in the evenc chac che parcies disagree
over how co implement che consent decree,  che decree should
provide chac verified daca is admissible in evidence.

     A model clause is:

            The Defendants waive any evidenciary
       objeccion to the admissibility inco evidence
       of daca gathered, generated,  or evaluated
       pursuant to this decree that  has been verified
       by the quality control/quality assurance
       procedures contained in part  	.  However,
       a Defendanc may object to a speci:ic item
       of evidence if the objecting  party demon-
       strates that such item of evidence was not
       gathered or generated in accordance with the
       sampling and analytical procedures* estab-
       lished pursuant to the sice Work Plan.

     The Decree should provide chac  EPA must approve sampling
and analytical procedures.  Additionally,  it is necessary for
there co be a careful oversight program.

DISCLAIMER  -

     The policies and procedures established in this document
are intended solely for the guidance of government personnel.
They are not incended and cannoc be  relied upon to create any
rights, substancive or procedural, enforceable by any party in
licigacion with the United States.  The Agency reserves the
right to act at variance with these  policies and procedures and
to change them at any time without public notice.

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            UNITED STATES ENVIRONMENTAL PROTECTION AJENCY

                        WASHINGTON, O.C. 20460
                             JULI2I9B5                    9BJ2.6
MEMORANDUM

SUBJECT:   Small  Cost Recovery Referrala
 FROM:      Frederick F.  Stiehl
           Associate  Enforcement Counsel for Waste
           Office of  Enforcement and Compliance Monitoring
           Gene A.  Lucero, Director
           Office of Waste Programs Enforcement
           Office of Solid Waste and Emergency Response

 TO:        Regional Counsels, Regions I-X
           Regional Waste Management Division Directors, -
             Regions I-X

      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.  Apparently, a few of the
 Regions believe that Headquarters will not accept these cases
 because the  December 5, 1984,  Interim CERCLA Settlement Policy
 (1) places a high priority on  large dollar amount cases (see
 the section  on targets for litigation (p. 17), which discusses
 referring  cases involving a "significant" amount of money) ,
 and (2) references the possibility that cases under $200,000
 could be handled administratively.

     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 nail cost
 recovery actions is entirely appropriate.  For example, where
 we have initiated  settlement discussions 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 enforcement as a
'vehicle to compel  private party response at CERCLA sites.  In
 addition,  where a  Region has no cases 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 circumstances are ripe for testing some important
 aspect of  law, referral of such a case would be appropriate.

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                                                          9832.6

     As you know, the Agency is working toward providing  the  .
Regions with both the tools and the authority to settle snail
cost recovery cases (up to $500,000) administratively.   To
ensure that such administrative resolutions are attractive
options for responsible parties, however, the Agency oust be
prepared to take judicial action against those who do not
settle on terns acceptable to the Agency.  Under such circum-
stances, email cost recovery actions will take on an even
greater importance, since it vill be necessary to show  the
regulated community that the Agency is serious about pursuing
small cost recovery cases in the judicial, AS well as the
administrative, forum.  In furtherance of that effort,  our
offices and the Department of Justice are prepared to fully
support small cost recovery cases referred by the Regions which
further program goals and are otherwise consistent with Agency
policy.

     For most of you this memorandum simply confirms operating
guidance which you are already following.  We wanted to ensure,
however, that the Settlement Policy did not create any  undue
reluctance on the part of the Regions to develop small  cost
recovery cases for referral.

cc:   David T. Buente, Department of Justice

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              UNITED STATES ENVIRONMENTAL PROTECTION AGENCY   OSWER * 9837.1
\   lr /                     WASHINGTON, D.C. 20460
                             JUL 3 o 1965
                                                          ornci OF tsrotciMiNT
                                                            ANOCOMPLIAfcCI
     MEMORANDUM

     SUBJECT:   Preparation of Hazardous  Waste  Referrals
     FROM:      Frederick F.  Stiehl
               Associate Enforcement  Counsel  for Waste

     TO:        Regional  Counsels, Regions  I-X


         On August  8,  1984,  the  RCRA/CERCLA  Case  Managenent  Handbook
     was  provided  to the EPA Regional Offices to assist  you a,nd  your
     staff  in the  preparation of  judicial  referrals  under  RCRA and
     CERCLA authorities.   The purpose of  this guidance  was to
     describe the  process of assembling a  case and to clearly identify
     the  requirements for all hazardous waste referral packages.  EPA
     must assure that cases  referred  to the Department of  Justice are
     complete and  can be filed within 60 days of referral.

         Experience with the implementation  of the  Case Management
     Handbook has  indicated  that  filing by the Department  of  Justice
     has  been delayed in some cases by the following problems with
     the  referral  packages:

         "   Demand  Letters.   For cost recovery cases, the Region
             should  send Demand Letters and allow  .the response time
             to run  befort referral.   Where prospective  defendant*
             are willing to  settle, the settlement can be  worked
             out before  referring a complaint (and consent decree)
             for filing  or possibly obviating the  need to  file.

         *   Settlement  Negotiations.  In  most cases, limited
             settlement  negotiations  vlch  identified responsible
             parties should  be completed prior to  the referral of a
             cas»  to Headquarters.  This preference  for  conducting
             negotiations prior to requesting that the Department
             of Justice  commence  preparation  of judicial pleadings
             is set  out  in the Case Managenent Handbook. Chapter II.
             If the  negotiations may  result in a consent decree

-------
        or present precedencial issues, Headquarters or the
        Department of Justice can be brought in informally
        without a referral.

      0  Financial Viability of Potential Defendants.  It is
        important that all referrals contain complete information
        based on thorough research regarding the financial
        status and insurance assets of potential defendants.
        Chapter III of the Case Management Handbook describes
        the contents of a hazardous waste referral, including
        the types of information required regarding potential
        defendants.

      *  Endangerment Assessment.  A complete endangement
        assessment must be included in all referral packages
        for CERCLA SI06 and RCRA $7003 cases.  The endangerment
        assessment should contain information sufficient to
        establish a prima facie imminent hazard claim.
        Appendices two and three of the Case Management Hand-
        book contain a 'checklist of facts necessary for imminent
        and substantial endangerment cases.

      *  Cost Documentation.  The Region must submit accurate
        cost recovery check lists to OUPE at least six weeks
        prior to submitting the referral package to Headquarters.
        This will ensure that cost recovery cases referred to
        the Department of Justice will have thorough cost
        documentation as required by the Case Management Hand-
        book, Appendix one.

     The Department of Justice is required to file a complaint
within 60 days of the referral from EPA.  The 60 day period is
intended to allow the Department of Justice Co review the
litigation report and prepare it* final pleadings.  The 60 day
period is not intended to allow cht Agency time co provide
supplemental information for the referral package or sake
initial contact with -the defendant* regarding the possibility
of settlement.

     All requests co che Department of Justice co delay the
filing of a case beyond the 60 day period must bt made by Che
Assistant Administrator for OECM.  To originate such a request,
the Region must write the Assistant Administrator for OECM.
Any request by the Region co OECM co extend che filing dace of
an accion should be made before che 60 day period ac che Depart-
ment of Justice has run.  We have informally stressed co che
Department that che filing of cases should not be delayed in
reliance on the Region'a intention to request such a delay.

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                             - 3 -
     Effective prosecution of hazardous waste cases, once
referred to the Department of Justice, is a critical element
of the Agency's enforcement strategy.  Compliance with the
procedures set out above and in the •"•><=? Management Handbook
will assure that matters approprii     -. Judicial enforcement
will be referred and filed in a tiseiy way.  If you have any
questions regarding these procedures, please contact me.

cc:  Gene A. Lucero, Director, OWPE
     David T. Buente, Acting Chief, Environmental Enforcement
       Section. DOJ
     Richard H. Hays, Senior Enforcement Counsel

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                                                                SEP  13

DHfTATICKS MANUAL                                               1200 TO
                 TOE COMPREHENSIVE ENVIRONMENTAL RESPONSE,
                 "COMPENSATION ASP LIABILITY ACT (CEROA)

          14-14-C.  Administrative Actions Throu^i Consent Orders


 1.  AimORJTy.  After giving notice to the affected state,  to take
 administrative action pursuant to the Comprehensive Environmental Response,
 Compensation and Liability Act, as amended (CERCIA), including,  but not
 limited to, issuing such orders on consent as may be necessary to protect
 public health and welfare and the environment.
2.  TO WHOM CFTra&TFn.  Regional Administrators.

3.  LIMITATIONS.

    a.  Regional Administrators or their delegate** must obtain the advance
concurrence of the Assistant Administrator for Solid Waste and Emergency
Response or his/her deaignee before exercising any of the above authorities.

    b.  The Assistant Administrator for Solid Waste and Emergency Response
or his/her designee may waive advance. concurrence requirements by memorandum.

    c.  This authority does not include recovery of response costs under
CERCLA Section 122 (h) or settlements with de mini mis parties under CERCIA
Section 122(g).

4.  REDELEGATION AUTOORITY.  This authority may be redelegated.

5.  ADDITIONAL REFERENCES.

     a.  Sections 104, 106, and 122 of CEROA.

     b.  AU applicable Agency guidance and directives.

   •  c.  Authority to enter into or exercise Agency concurrence authority
for non-judicial cost recovery agreements or administrative orders is
delegated in 14-14-D, 'Cost Recovery Non-Judicial Agreements and Administrative
Consent Orders »'

     d.  Authority to enter into or exercise Agency concurrence authority in
de minimis settlements under CERCLA Section 122 (g) is delegated in Delegation
14-14-E, "De Minimis Settlements."

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                                                                  SEP  13

DELEGATIONS FttNUAL                                                 1200 TO
                 TOE COMPREHENSIVE ENVIRQWENIAL RESPONSE,
                 "oaMPENSATICN AND LIABILITY ACT (CERQA)

         14-14-B.  Administrative Actions Through Unilateral Orderi
1.  AUIHDRITY.  After giving notice to the affected State,  to take
administrative action pursuant to the Oonprehenaive Environmental Response,
Compensation and Liability Act, as amended (CERQA), including, but not
limited to, issuing such unilateral orders as nay be necessary to protect
public health and welfare and the environment.

2.  TO VftCM DELEGATED.  Regional Administrators.

3.  LIMITATICNS .  Regional Administrators or their delegatees must consult
with the Assistant Administrator for Solid Waste and Emergency Response or
his/her designee When exercising this authority.
4.  Rnyrjr^TICN AlTIHDRITy.  This authority may be redelegated.

5.  ADDITIONAL
    a.  Sections 104, 106, and 122 of CEROA.

    b.  Applicable Agency guidance and OSWER directives.

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DELEGATIONS                                                               1200 TN 9"
                                                                     APR 1 6 aw


                   THE COMPREHENSIVE ENVIRONMENTAL RESPONSE,
                    COMPENSATION AND LIABILITY ACT (CERCLA)

       14-14-A.  Determinations of Imminent and Substantial Endangerment


1.  AUTHORITY.  Pursuant to the Comprehensive Environmental Response,  Compensation
and Liability Act  (CERCLA), to make determinations that there may be an ixmunent
and substantial endangerment to public health or welfare or the environment.

2.  TO WHOM DELEGATED.  Regional Administrators.

3.  LIMITATIONS.  This authority shall be exercised subject to directives
issued by the Assistant Administrator for Solid Vbste and Emergency Response.
Regional Administrators must consult with the Assistant Administrator  for
Solid tfeste and Emergency Response or his/her designee when exercising this
authority.

4.  REDELEGATICN AOTHORITY.  This authority may be redelegated.

5.  ADDITIONAL REFERENCES.  Section 106(a) of CERCLA.

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                                                               SEP  I S

 DELEGATIONS MANUAL                                            1200 TO


                 TOE COMPREHENSIVE ENVIRCWENTAL RESPONSE.
                 "OOMPENSATICM, AND LIABILITY ACT  (CERCLA)

                           14-13-C.  Emergency TROs


 1.  AL7IHDRITY.  To refer  to the Attorney General requests for emergency
 Temporary Restraining Orders under the Comprehensive Environmental Response,
 Condensation  and Liability Act, as amended  (CERCLA).

 2.  TO WH34 DELEGATED.  Regional Administrators and the Assistant Administrator
 for Enforcement and Compliance Monitoring.

 3.  LIMITATIONS.

    a.  The Regional Administrator or his/her delegate* must notify the
 Assistant Administrator for Enforcement and Compliance Monitoring and  the
 Assistant Administrator for Solid  Waste and Emergency Response or their
 designers when exercising this authority.

    b.  The Assistant Administrator for Enforcement and Compliance Monitoring
 or his/her delegatee must notify the appropriate Regional Administrator and
 the Assistant Administrator for Solid Waste and Emergency Response or  their
'designees when exercising this authority.

 4.  REDELEGATICM AUTHORITY.   The Assistant  Administrator for Enforcement and
 Compliance Monitoring may redelegate this authority.  The authority delegated
 to Regional Administrators may be  redelegated to the On-Scene Coordinator
 level.

 5.  ADDITIONAL REFERENCES.

    a.  Memorandum of Understanding between the Agency and  the Department  of
 Justice.

    b.  Section* 106(a),  106(b) and 107 of  CERCLA.

    c.  For r«f«rral of oth*r civil actions under  CERCLA, see Delegation 14-12,
 "Civil Judicial Enforcement Actions."

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                                    -2-

                                                           SEP  13

DELBGATICNS MANUAL                                         1200 TO
                 THE QGMPREHPBIVE EWIRCWEOTAL RESPONSE,
                  OCMPPgATICN,  AND LIABILITY ACT (CgQAT

   14-13-B.  Concurrence in Settlement of Civil Judicial Actions  (cont1)
4.  REDELEGATICN AintCRITY.   The authority to request  the Attorney General
to amend a consent decree issued under CERCLA gay be redelegated to the
Division Director level.  The other authorities cited  in paragraph 1.
above may be redelegated.

5.  ADDITIONAL REFERENCES.

     a.  Sections 104, 106,  107, 109,  and 122 of CEROA.

     b.  All applicable Agency guidance and directives.

     c.  For actions including 31 USC 3711 and its applicable regulations,
see delegations covering claims of EPA found in Chapter  1 of this Manual.

     d.  Settlements under CEROA section 122(g) are covered by delegation
14-14-E,  "De Minimis Settlements."

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                                                                  SEP  13

DELEGATIONS MANUAL                                                 1200 TO
                 TOE ocMpREHEtgivE ENVIRONMENTAL RESPONSE,
                  CCMPENSATICK, AND LIABILITY ACT (CERCLA [

       14-13-B.  Concurrence in Settlement of Civil Judicial Actions
 1.  AUTHORITY.  To exercise the Agency's concurrence in the settlement of
 civil  judicial enforcement actions under the Coaprehenaive Environmental
 Response, Compensation, and Liability Act, as amended (CERCLA), and to
 request the Attorney General to amend a consent decree issued under CERCLA.
2.  TO WHCM pFTTTATPn.  Regional Administrators.

3.  LIMITATIONS.

     a.  Regional Administrators may exercise the Agency's concurrence
authority in settlement of Regionally- initiated CERCLA section 104/107
recovery actions Where the total response costs at the facility do not
exceed $500,000, excluding interest.

     b.  For all cases initiated by the Assistant Administrator for Solid
Waste and Emergency Response , the Regional Administrator or delegatee Bust
obtain the concurrence of the Assistant Administrators for Enforcement and
Compliance Monitoring and Solid Waste and Emergency Response or their
designees before exercising this authority.  The Assistant Administrators
for Enforcement and Compliance Monitoring and Solid Waste and Emergency
Response or their designees may waive the concurrence requirement by
memorandum on a Region-by-Region basis.

     c.  For cases initiated by the Regional Administrator other than those
identified in paragraph 3. a of this delegation  (in which the Regional Adminis-
trator concurs for the Agency), the Regional Administrator or delegatee must
obtain the concurrence of the Assistant Administrators for Enforcement and    •
Compliance Monitoring and SolyJ Waste and Emergency Response or their
designees before exercising this authority.  The Assistant Administrators
for Enforcement and Compliance Monitoring and Solid Waste and Emergency
Response or their designees may waive the concurrence requirement by memorandum
on a Region-byHtegion basis.

     d.  Six sonths after the Administrator's signature of this delegation,
and every six Berths  thereafter, the Assistant  Administrators  for Enforcement
and Compliance Monitoring and Solid Waste and Emergency Response, or their
designees, will review each Region's experience in settlement  of civil
judicial actions and, based upon that  review, will consider^ jointly waiving
or modifying any advance concurrence requirement on  a Region-by-fcegion
basis.  The Administrator  shall be apprised of  the status of  the advance
concurrence requirement upon completion of  each review.

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                                                              SEP I  3 1987

 DELEGATIONS MANUAL                                            1200 TN
                  TOE COMPREHENSIVE ENVIRONMENTAL RESPONSE,
                   COMPENSATION,  AND LIABILITY ACT (CERCLA)

                    14-13-A.   Criminal Enforcement Actions
 1.  AiynORITY.   Pursuant to the Comprehensive Environmental Response,
 Compensation,  and Liability Act,  as amended (CERCLA), to cause criminal
 matters to be referred to the Department of Justice  for assistance in field
 investigation,  for initiation of a grand jury investigation, or for
 prosecution under CERCLA;  to authorize payment of  awards up to $10,000 to
 any individual  who provides information leading to the arrest and conviction
 of any person for a violation subject to a criminal  penalty under CERQA.

.2.  TO v«y DELEGATED.  The Assistant Administrator  for Enforcement and
 Compliance Monitoring.

 3.  LIMITATIONS.   The amount of CERCLA funds to be made available each
 fiscal year for the payment of the awards as authorized by this delegation
 is limited to an amount agreed upon annually by the  Assistant Administrator
 for Enforcement and Compliance Monitoring and the  Assistant Administrator for
 Solid Waste and Emergency Response.

 4.  REDELEGATICN NJTHXUTf.  The authority to refer  cases  may be redelegated.
 The authority to authorize payment of awards may be  redelegated to the
 Senior Enforcement Counsel for Criminal Enforcement.

 5.  ADDITIONAL  KmattNClb.  Sections 103(b)(3), 103(c), 103(d), and 109(d)
 of CERCLA.                                                       .   .

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                                                                  JAN  13

  DELEGATIONS hftNUAL                                                 1200 •
              OOMPRfflBISIVE PJVIRCNMPn'AL RESPONSE, COMPENSATION,
                                  LIABILITY ACT
              14-12.  Civil Judicial Deforcement Actions (cont'd.)
      d.  The General Counsel may only exercise this authority with regard
 to appeals.

      e.  Any exercise of appeal authority will be be exercised by the
 General Counsel and the Assistant Administrator for Biforcement and Compliance
 Monitoring.

      f .  The Regional Administrators must notify the Assistant Administrator
 for Solid Waste and Emergency Response and the Assistant AJainistrator for
 Enforcement and Compliance Monitoring prior to the time they refer cases
 to the Department of Justice.

 4.   prnPT.Pr^TicK AUTHORITY.  The Assistant Administrator for Deforcement
 and Compliance Monitoring and the General Counsel may redelegate this
 authority to the Division Director level.  Regional Administrators may
 redelegate this authority to the Regional Counsel.

 5.   ADDITIONAL
      a .  Memorandum of Understanding between the Agency and the Department
 of Justice, June 1977.

      b.  CSRCLA Sections 104, 106, 107, 109, 122.               •  ,

      c.  See the Chapter 14 delegation entitled "Bnergency TRO's"
for Regional Administrator! ' authority to make direct referrals of  requests
for emergency GESOA Temporary Restraining Orders.

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                                                                   JAH 13

 DELEGATIONS MANUAL                                                 12QQ 73
             COMPREHENSIVE  ENVIRONMENTAL RESPONSE, COMPENSATION.
                             AND LIABILITY ACT

                  14-12.  Civil Judicial Deforcement factions


 1.    AUTH3RITY.   To request  the attorney General to appear and represent
 the Agency in  any civil enforcement action and to intervene in any civil
 anforcement  action instituted under the Comprehensive Environmental Response,
 Compensation,  and Liability  Act, as amended (CTPTLA)? to request the Attorney
 General  to decline to prosecute a previously referred civil enforcement
 action;  and  to request the Attorney General to initiate an appeal of a
 decision in  a  civil enforcement action under CEPQA and represent the
 Agency in such an appeal.

 2.    TO WH3M DEXBGATEZ?.  Regional Administrators, Assistant Administrator •
 for  Enforcement and Compliance Monitoring, and the General Counsel.

 3.    LIMITATIONS.

      a.   The Regional Administrators may exercise this authority only in
 regard to requesting that  the Attorney General appear and represent the
Agency in civil actions under CERCLA, requesting that the Attorney General
 intervene in civil actions under CERdA, exclusive of appeals, and requesting
 that  the  Attorney General  decline to prosecute a previously referred, civil
action.

     b.   The Regional Administrators nay exercise this authority only in
cases specified in and in  accordance with written agreements between authorized
 representatives of the Agency and the Department of Justice.

      c.   The Assistant Administrator for Enforcement and Compliance Monitoring
must  notify  the Assistant Administrator for Solid Waste and Bnergency
 Response  and the  appropriate Regional Administrator prior to initiating or
 intervening  in a  civil action under CEROA, requesting that the Attorney
General declinp to prosecute a previously referred civil enforcement action
under -CEROA, jcvquesting that the Attorney General initiate or intervene
 in a  civil acoton instituted under OEROA, or formally initiating an appeal.

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                                                              S£?  I 3 .567

DELEGATIONS MANUAL                                              1200 TO
                   TOE COMPREHENSIVE EWraCWEyTAL. RESPONSE,
                   "OGMPENSATICN, AND LIABILITY ACT  (CERCLA)

         14-6.   Inspections, Sampling, Information Gathering, Subpoenas,
                             and Entry for Response


1.  ALTIHCRITY..  Pursuant to the Comprehensive Environmental Response, Compen-
sation and Liability Act as amended (CERCLA), to enter any vessel, facility,
establishment,  place, property or location for the purposes of inspections,
sampling, information gathering and response actions; to carry out inspections,
sampling, and information gathering; to require the production of information
and documents;  to issue subpoenas; to issue compliance orders for production
of information  and documents; to issue compliance orders for entry and inspection;
to obtain and execute warrants to support this authority; and to designate
representatives of the Administrator to carry out inspections, sampling, infor-
mation gathering, and response actions.

2.  TO VftCM DELEGATED.  Assistant Administrator for Solid Waste and Emergency
Response, Assistant Administrator for Enforcement and Compliance Monitoring,
and Regional Administrators.

3.  LIMITATIONS.

    a.  Regional Administrators and the Assistant Administrator for Solid Waste
and Emergency Response or their delegatees oust consult with the Assistant
Administrator for Enforcement and Compliance Monitoring, or his/her designee,
prior to issuing compliance orders regarding information gathering or compliance
orders for entry and inspection, or issuing subpoenas, unless or until such
consultation authority is waived by memorandum.

    b.  The Assistant Administrator for Solid Waste  and Emergency Response or
his/her delegatee oust consult with the Assistant Administrator for Enforcement
and Compliance  Monitoring or* his/her designee prior  to obtaining warrants.

    c.  The Assistant Administrator for Solid Waste  and Emergency Response and
the Assistant Administrator  for Enforcement and Compliance Monitoring  or their
delegatees not consult with the appropriate Regional Administrator or his/her
designee prior  to exercising these authorities.

4.  yHMJBflATim AlflHJUTI.'  This authority way be redeleyaLed;

5.  ADDITIONAL  REYTOEH3S.

    a. Sections 104(e), 109 (a),  109(b) and 122(e)  of CERCLA.

    b. National Contingency  Plan, 40 CFR 300.

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                                                OSWZR DZR.  «9841.0
APPENDIX C. (continued)

CAS I    	CHEMICALHAME
TPQ
505-60-2       Mustard gas
534-52-1       Dinitrocresol
624-83-9       Methyl isocyanate
1464-53-5      Diepoxybutane
7550-45-0      Titanium tetrachloride
7647-01-0      Hydrochloric acid (gas only)
7664-39-3      Hydrogen flouride
7664-41-7      ABBOnia
7664-93-9      Sulfuric acid
7697-37-2      Nitric acid
7723-14-0      Phosphorus
7782-50-5      Chlorine
8001-35-2      Toxaphen* (Camphechlor)
500
10/10,000
500
500
100
500
100
500
1,000
1,000
100
100
500/10,000

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OSWER DZR. 19841.0
APPENDIX C.
CAS 1
Section 302 Chemicals on S*cti
CHEMICAL NAME
on 313 List
TPO

50-00-0
51-75-2
56-38-2
57-14-7
57-57-8
57-74-9
58-89-9
60-34-4
62-53-3
62-73-7
62-75-9
67-66-3
74-83-9
74-90-8
75-15-0
75-21-8
75-44-5
75-55-B
75-56-9
77-47-4
77-78-1
79-06-1
79-11-8
79-21-0
91-08-7
95-48-7
98-07-7
98-87-3
98-95-3
100-44-7
106-89-8
107-02-8
107-13-1
107-30-2
108-05-4
108-95*2
111-44-4
123-31-9
151-56-4
302-01-2
309-00-2
542-88-1
584-84-9
(continued)
Formaldahyd*
M*chlor*thamin*
Par a th ion
Di»*thylhydrazin*
Propiolacton*, b*ta-
Chlordan*
Lindan*
M*thylhydrazin*
Anilin*
Dichlorvos
Nitro«odim*thylamin*
Chloroform
Kathyl bromid*
Hydrocyanic acid
Carbon disulfid*
Ethyl *n* ox id*
Pho»g*n*
Propyl«naimin«
Propylana ox id*
H*xachl or ocy cl opcntad i*n*
Dia*thyl tulfat*
Xerylaaid*
Chloroac*tic acid
P*rac*tic acid
Toluan*, 2,6,-diiaocyanat*
Cr*«ol , o-
B*nzotrichlorid*
B*ntal chlorid*
Nitrob«n**n*
B*nzyl chlorid*.
Epichlorohydrin
Xcrol*in
Acrylonitril*
' ChloroB*thyl Mthyl *th*r
Vinyl ac*tat* »onom*r
Phenol
Oichloro«thyl *th*r
Rydroquinon*
rthyl*n«imin*
Hydratin*
Xldrin
Ctiloromathyl *th*r
Toluan* 2,4 ,-diiaocyanat*

500
10
100
1,000
500
1,000
1,000/10,000
500
1,000
1,000
1,000
10,000
1,000
100
10,000
1,000
10
10,000
10,000
100
500
1,000/10,000
100/10,000
500
100
1,000/10,000
100
500
10,000
500
1,000
500
10,000
100
1,000
500/10,000
10,000
500/10,000
500
1,000
500/10,000
100
500


-------
                      TITLE III - EXTREMELY HAZARDOUS SUBSTANCES
                              QCMICALS DELETED FROM LIST
                    (As  of  December  17, 1987 and Februery 25,  1988)
   (Alphabetical Listing)
CAS NO.    NAME
16919-58-7 AmmoViufli Chloroplatlnate
1405-87-4  Bee i tree In
98-09-9    Benzenasultonyl  Chloride
106-99-0   Butadiene
109-19-3   Butyl isovaierate
111-34-2   Butyl vinyl  Ethar
2244-16-8  Carvont
107-20-0   Chioroeeeteidehyde
7440-48-4  Cobalt
117-32-2   Coumaturyl
287-92-3   Cylopentena
633-03-4   C.I. Basic Green 1
84-74-2    01 butyl  Phtheiate
8023-53-8  Dichlorobenzelkonlum Chloride
93-05-0    Diethyi-p-Pnenylenediamlne
Mi-ii-3   Dimethyl Phthaiate
   '-84-0   DIoctyl  Phtheiate
. ^<6-06-0   Dioxolene
2235-23-8  Ethyimereurlc Phosphate
1333-87-1  Hexachloronephthalene .
53-66-1    Indomethecln
10023-97-3 Irldium TetrachlorIde
108-67-8   Mesltylene
7440-02-0* Nickel
65-86-1    Orotic Acid
20816-12-0 Osmium Tetroxlde
76-01-7    Pentechloroathane
87-66-5    Pentachlorochejnol
84-80-0    Phylloqulnene
10025-63-7 Plattnous Chlorltf*
13454-96-1 PI at I MB Tetrechlorlde
1331-17-5  PropylfjM Glycol, Ally I Ether
95-63-6    PsaudOdBMn*
10049^07-7 RhodlM Trichloride
128-36-3   Sodlua  Anthrequlnone-1-
           SuIfonete
1314-32-5  Thai lie Oxide
21564-17-0 Thiocyanlc Acid,  2-(Benxo-
           thlazolylthlo) Methyl  E»ter
640-15-3   Thlometon
52-68-6    Trlchlorophon
3048-64-4  vinyInorbornene
  (Numerical  List  by CAS No.)
CAS No.    NAME
52-68-6    Trlchlorophon
53-86-1    Indomethecin
65-86-1    Orotlc  Acid
76-01-7    Pentechloroethane
64-74-2    Dlbutyl Phthaiatu
84-60-0    PhyIloqulnone
87-66-3    Pentechlorophcnol
93-05-0    Dlethyl-p-Phenyl
95-63-6    Pseudocumene
98-09-9    Benzenesulfonyl Chloride
106-99-0   Butadiene
107-20-0   Chloroacetaldehyde
108-67-6   Metltylene
109-19-3   Butyl  Isovelerata
111-34-2   Butyl Vinyl  Ether
117-52-2   CouMfuryl
117-64-0   DIoctyl Phthalat*
126-56-3   Sodium  Anthraquinon«-1'
           SuIfonate
131-11-3   DI-ethyl Phthalete
287-92-3   Cylopentane
633-03*4   C.I. Basic Green  1
640-13-3   ThlOMton
646-06-0   Dtoxolan*
13U-32-5  Thai Me Oxide
1331-17-5  Propylane Glycol.  Allyl  Eth«r
1335-87-1  Hexechloronaphthaiene
1405-87-4  B*cltrecln
2235-25-8  Ethy(mercuric Phosphate
2244-16-8  Cervone
3046-64-4  Vlnylnorbornen*
7440-02-0* Nick*I
7440-48-4  Cobalt
8023-53-8  Dlchlorooenzalkonlum Chloride
 10025-65-7 PI at I nous Chloride
 10025-97-5 Irldium Tatrachlorlde
 10049-07-7 Rhodium Trichloride
 13434-96-1 Platinum  Tatrachlorlde
 16919-58-7 Amonlum  Chloroplatlnete
 20816-12-0 Osmium Tetroxlda
 21564-17-0 Thiocyanlc  Acid,  2-(Benzo-
           thlazolylthlo) Methyl Ester
   Th. CAS NO. for Nickel .as  Mi'tad "incorrectly  in the Federal Register on Fee-uery  25.
   1988 as 7440-02-2; a eorrtctls* «lli be published In the near future.

-------
      ti I.  TM lUt «f btnoBly Ntltrdout  Ufctttnct* ond thtir Throthold >lomln| Quontltlt*
                                                                                                          root I-*
                                    (CAS
                                               Ordor)
   CAS •
     •73-8
21544-32 3
21*09-*0-S
21*04 53 2
2i*U-23-*
22224 «2-*
23135-22 0
21422-53-9
24017-47-8
24fj4-9l-»
2M19-73-8
2M28-22 8
27137-85-5
28347-13-9
28772-56-7
J0674-80-7
39196-18-4
50782•*«•9
53551 2? 1
58270-08-9

62207.TO-S
Mom:
                                                                             letx
                                                                             ,h
                                                                                   lopertobit
                                                                                   Quontity •  >l«rtin| Quontity
                                                     l, 3-D1thtol*n-2-Ti)

                ltli AttM (H«(M3)>
             Tr(efitoro(0*eMere«(t«nyt)SUanc
             Kylyl*n« OiehleriM

                                 t*oeytn«tt

                            Acid, mtnyl  ,l-(2-(li»(1-MthVHthyl)M»inc)|thyl)«
                                                                                          100
                                                                                        1,000
                                                                                            1
                                                                                            1
                                                                                            ^
                                                                                            1
                                                                                          100
                                                                                            1
            Coboit. ((2.2'-(i.2-lthonodiy(b,0.0>)-

            Only tht ttotutory or fintl 10 i> thonn.   for «ort (nfor«ttlon,  tot 40CH
  500
  300
  500  /10.000
  500  /10.000
  500
   10  /10.000
  100  /10.000

1.000
  500
  500
  100  /ID.000

  500
  500
  100  /10.000
  100  /10.000
  100
  100  /10.000
  100

  100 /10.000
  100 /10.000

  100 /10.000
                                                                                          302.4
                                                                                                        t.
         b   TMt MttfUl  it • r«*cttvt »otid.  Th« TN dott  not dtftult to 10,000
             for  non'pOMdor, nen-aolttn, nen-»olotion fonm.
         e   The  cstcui«tM T»c ef>«f>t»d «fttr toeKn tht ttmiaant of pottnt«tl
             etreinoftnieity end/or other toaieity it coavtotM.
         t   Sututory  Moortiblt «jont(ry for purpnot-of notlflettton tftfor UU Met 304(t)(2).
         f   Tht  itttutory  1 pound  rtporttblt «j*ntity for o»thyl itocymttt mrr bt oajutttd  \n t futur* rultMt
         4   BOM  ch«Bicolt  oddod thot «ort not port of tht orif)

-------
      it |.   The lilt »f litfMly Miardoui Sufestanet* and  thatr Thrathotd Utrrtm Oua*t SB)
             riuerin*
             Sulfur
             Artln*
             ««d1u» AFMnlta
             •avlr
             ThalK
>••••••••
9   Sulfur Trlailda
4   Thallaua Suifata
7   •arcuHe CM or t at
0   Tltaniu* TatracMertda
I
2
2   Ooran Trifluorli
0
3
7
•9
•2
2
• 1
•0
•4
•1
•4
5
>•   Salanioua Acid
•4
,«
•0
2
'4
1
1
5
7
o
3
2
2
3
7
3
0
*
1
•
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9
0
2
1
1
4
5
9
>*
•0
3
•9
•A
•4
0
3
•3
•ft
•9
•1
•7
                                                                                   Quantity •  Ptannlna Quantity

                                                                            ••••••••••••••••••••••a
                                                                            b.a
a
b,a
d

a,I
                  MAlor
                    Chtorldt
            OSOTt
                  ia Sutfttt
             •(trie OKI*
             •Itf^vvt »<««*
               ttMlMI ATMn
-------
     ti •.  The t.iet •» Utr«*ty MI*
                                               tarcat ana ti»e»r Tftraefteld Hannine Ouemitte*
                                                                                                     •at*
                                   (CAS
                                               Orotr)
                                                                                     ortable
  CAI f
                                                                            iietM  (
 991
 990
 999
 1031
 1044
 1122
 1124
 1129
 1303
 1304
 1314
 13U
 1SU
 1327
 1397
 U20
 1444
 1556
 1543
 1400
 1422
 1642
 1752-
 1910-
 19S2-
2001-
2052
2074-
2097-
2104-
2223-
2231-
2230-
2275-
2497-
2524-
2540-
2570-
2507-
2431-
2434
2442-
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 19-0
•54
•42
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 25
•44
•27
 32
 54
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 42-
 47-4
 95-1
 45-7
 50-2
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 44-5
 93-0
 57
 07
 10
 07
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 •2
 2*
 90-0
 37-0
 24 2
 71-9
        4
       -S
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       -4
       -0
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       -5
2757-
2743-
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sns
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 4104
 4170
 4301
 4411
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 4533
 4923
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     30- T
94-4
04-1
n-r
43 5
$7-1
21-2
24-5
It-t
•97-2
• 23-7
•19-1
« 9
•ri-9
-14-7
 JO-
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 11-4
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 42-4
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 47
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 S3
•41
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                         Chlerid*
                      4-litre-,  1-Oiio5 Itftyl later
       »*e*or«t*loU H14. •ttHyl-.0-(4-Ktrecfi«nyl) 0-fMnyl later
                       A«1«,lletl»yl-,0-lthyl o-(4-
-------
    ti I.  T*a Lilt of litra»ly aaiardoua Swbatancat and thoir Thraahold Hanrina Ouanttttaa
                                                                                                      »aaa 1-1
                                 (CAS
                                           r Oroar)
                                                                                   tity
 CM •
»$*•«*••
SM-ZS
543-12
543-41
           Oi tweeter
           Myaraiina
           Aldrin
           •aiacartatt
           fittina
152-14-9
297-7T9
297-97 2
290-00-0
290-02 2
29T04-4
300-42-9
302-01-2
309-00-2
315-11-4
314-42-7
327-9i-0
353-42-4
359-04-1
371-42-0
379-79-3
445-73-4
470-90-4
502-39-4
504-24 5
505-40-2
504-41-4
504 tt 3
504-7B-5
509-14-1
5U-73-I
534-07-4
534-52-1

SU-07-1
541-25 3
U1-S3-7

SA2-M-1
542-90-5   IttiyltM
553-T7-1
                                   Cha»
-------
    IU I.  TM tUt t* Utrwly MtirdM fcMtmm and  th«U Thrmheld Hwwtni •uvttttlw
                                                                                                       ••ft 1-2
                                 (CAS
                                            Ord*r)
   CAS •
••••••••••••I
                             ••••••••••••••••••••••••••••••••••••••••••I
                                                                               Owmttty •  »lw>ii* Quantity
                                                                         •em  (BOOT*)      (MUM)
                                                                      ••••••••••••••••••••••••••••••••••••I*
 M 0V
 •88)
 91-08-
 9S-48-
 97-11-7
 98-OS-S
 98-07-7
 98 13 S
 98-1*-8
 96-87-3
 98-9V3
 100-14-1
 -.00-44-7
 102-34-3
 103-IS-S
 104-89-8
 104-94-7
 107-02-8
 107-07-J
 107-11-9
 107-12-0
 107-1J-1
 107-1S-3
 107-14-4
 107-18-4
.107-JO-2
 107-44-1
 107-49-3
 108-05-4
 108-23-4
                        •Thio6U(4,4-6iet»loro>-
                          Acid
            8«nsetr
-------
     The attached lists represent the complete list of Section
302 Extremely Hazardous Substances of the Emergency Planning and
Community Right to Know Act (Title III).  The substances are
.listed in alphabetical order by chemical name and numerical o
by Chemcial  Abstract Number (CAS No.).  This  l-ist was puoiisnea
as Appendix A and B to the  final rule  (40 CFR 395) In the
Federal Register on April 22, 1987.  (FR 13376) and revised on
December 17, 1987 (FR 48072) and Feb-uery 23, 1988 (FR 5574) to
delete forty substances.  The list of these forty substances Is
also provided for your  information.

-------
APPENDIX B.  LIST OF EXTREMELY HAZARDOUS SUBSTANCES
              U.S. Environmental Protection Agency
       THE EMERGENCY PLANNING
                    and
       COMMUNITY RIGHT-TO-KNOW
                ACT of 1986
             List of Extremely
           Hazardous Substances
                 40CFR355
               (Stttlont 302 and 304)
                 March 1,1988

-------
   li  I.   The U«t af UtraMly martfout fc«atancat and thalr Thraanald • lamina. Quantttlaa
                                                                                                        •ata 1-1
                                 (CU
                                             Ordar)
CAI •

      0
30-00-0
30-07-7
30-14-6
31-21
31-73-2
31-O-2
34-11-3
34-42-4
33-91-4
34-23-7
34-30-2
34-72-4
37-U-7
37-24-9
37-47-4
37.37-8
37-64-7
57-74-9
58-34-4
58-09-9
39-88-1
40-J4-4
40-41-3
40-31-3
42-38-4
42-3S-S
   •73-7
   •74-8
42-
42-
44-00-4
44-04-8
43-30-3

67-64-J

71-43-4
72-20-8
74-83-9
74-90-8
74-93
      1
73
73
73
79
73-99
   13-o
  •18
  •21-
                                   Cha*n»,  Salicylata (1:1)
          Oiler
          Ll
                                                                          d
                                                                          e,a
                                                                          a
                                                                          c,a
                                                                          a
                                                                          c
                                                                          a
                                                                          c
                                                                          a
                                                                          c,d

                                                                          d
                                                                          e
                                                                          a
                                                                          a
                                                                          a
                                                                          d
                                                                          a
                                                                          d
                                                                          a
          •atnyl Nydratlna
          ttrydwiina. twlfata
                        Aeatata
          MtUtw
          Sadita riuoraacatata
          • 1 troacdlaatfty l •< na
          Mtaml. S-d-HatHylattiyl)-. HatKyl
          CalcMclna
          •ieotina tulfata
          CyclalMilaidi
                       , 4-AB9

T3-84-5
74-02-0
77-47-4
77-Ti-l
77-11-*
70-00-2
71-34-2
7B-99-9
71-71-7
Tf-97-7
79-04-1

79-19-4
79-21-0
79-22-1
00-43-7
•atftyl vtnirl Utam
lactanltrila
AeryldBida
CMaraagattc
                                                                           I
                                                                           a
                                                                           «.l
                                                                           I
                                                                           d
                                                                           I
                                                                           e.a.l
                                                                           a
                                                                           d.t.
                                                                           d
                                                                           e.a.h
                                                                           c,d
                                                                           a
                                                                           t.h
                                                                           •
                                                                           a
                                                                           4,1
                                                                           a   .
                                                                                         1
                                                                                      .000
                                                                                         1
                                                                                         1
                                                                                         1
                                                                                         1
                                                                                         1
                                                                                       100
                                                                                         1
                                                                                       100
                                                                                         1
                                                                                         1
                                                                                         10
                                                                                         1
                                                                                         10
                                                                                         1
                                                                                          1
                                                                                          1
                                                                                          1
                                                                                          1
                                                                                          1
                                                                                          1
                                                                                         10
                                                                                          1
                                                                                         10
                                                                                        100
                                                                                      3.000
                                                                                         10
                                                                                         10
                                                                                      5,000
                                                                                          1
                                                                                      1.000
                                                                                         10
                                                                                        100
                                                                                        100
                                                                                         1

                                                                                         10



                                                                                         1



                                                                                         1
•atnyl
•atnyl 2-GM
                            ryl«ta
                                                                                            1
                                                                                          100
                                                                                            1
                                                                                         .000
                                                                                            1
                                                                                               1
                                                                                                        tlty
                                                                                       10 /10.000
                                                                                      300
                                                                                      300 /10.000.
                                                                                    1,000 no,ooo
                                                                                      300 /10.000
                                                                                       10
                                                                                      300 /10.000
                                                                                      100
                                                                                      300 /10.000
                                                                                      100
                                                                                      100 /10.000
                                                                                      100
                                                                                      100 /10.000
                                                                                      000
                                                                                      100 /10.000
                                                                                      100 /10.000
                                                                                      300
                                                                                      100 /10.000
                                                                                     1,000
                                                                                      300 /10.000
                                                                                     1,000 710,000
                                                                                     1,000 /10.000
                                                                                      300
                                                                                       100 /10.000
                                                                                       300 /10.000
                                                                                       300 /10.000
                                                                                     1,000
                                                                                     1,000
                                                                                        10 /10.000
                                                                                     1,000
                                                                                       300 710,000
                                                                                        10 /10.000
                                                                                       100 /10.000
                                                                                       100 710,000
                                                                                    10,000
                                                                                       100 710,000
                                                                                       100 710.000
                                                                                       300 710.000
                                                                                     1.000
                                                                                       100
                                                                                       900
                                                                                    10,000
                                                                                       100
                                                                                     1.000
                                                                                        10
                                                                                    10.000
                                                                                    10.000
                                                                                       100
                                                                                     1.000
                                                                                                1.000
                                                                                                 900
                                                                                                 100
                                                                                                 MO
                                                                                                   10
                                                                                                 100
                                                                                                 900
                                                                                                 900
                                                                                                 900
                                                                                                1.000
                                                                                                   10
                                                                                                1.000
                                                                                                1,000  710.000
                                                                                                  100  710.000
                                                                                                  100  710,000
                                                                                                  900
                                                                                                  900
                                                                                                  900

-------
      U A.
   CAS •

   •i-oa-7
  110-57-4
 1031-47-*
24017-47-8
   76-OM
  115-21-*
  S27-f»-0
   W-13-5
 155I-25-4
27137-«S-S
  9W-30-1
   75-77-4
  M4-11-J
 1000-4J-1

  JS5-7T-1
 2001.»S-i
 13U-42-1
  10»-OS-4
SU7D-M-9

 1JU-H-7
The kiat of UtreBely Msardam fcftaiancM  and  their Throanold Henntna. QuontttlM


                      (Alohebetical Ordtr)


                                    •M                           «etM  (
             Trene-1.4-01cMerobutene

             Triatefoo
             T r I chl orojneny l a i I ana
             Trlothoiyallana
             trii
             Trleethyltir.
                          CMori
             vinyl Acetate
             Warfarin
                  m OlcMoH
                                                                                                           »•»* »••
ranot*
Mtana


orida
•

WO
hyUlllene
*onyl)Silona

r»
Phoeanite
ao
«a



• r



0«ntity for •ethyl iaacyenata aey be adjuatad In a future ruloaakini action.
        •   lev cfcoBtcole oddad that vere not eert of the ori«lnai Hat of 402 aubatancoa.
        h   •oviood TOO. beaod on nan or ra-tvaluetad tuicity data.
        j   TW la revleod to Ita calculated velua and doe* not chane* due to technical  region ae In a»o»aia
        k   THO TPfj MO rovlaod after oroBinl due to colculatien error.
        I   ChoBlcola en the erielnel Hat that do not evet the teaicity criteria but  bee ami of their ft ton
            velwe and rocadnlied toaicity ore comldered chaaicala of

-------
A.
             if
                                              enf
                                                                                                   'Oft *
                           (Alphabetical Or«*r)
   CAI •

   91-08-7
  110-57-*
 1031-47-4
24017-47-8
   76-02-8
  115-21-9

   9t 13 5
 1558 25 4
27137-15-5

   n-H-4
  •24-11-1
 10M-4S-1
  639 58 7
  555-T7-1
 2001-95-8
 13U-42-1
  108-05-4
   81-81-2
  129-0*-*
28347-13-9
58270-08-9

 131*-»4-7
                                                                            topertablt    Threshold
                                                                            Quantity • »la«Mn( Quantity
    Toluene 2.e-OHtoey*n*tt
    Trene- 1 .*-Oietileraaytm
    TricMeroMttyl CMerid*
    T r i eft I orottn v 1 1 i I •"•
    TfteMermtt
    T f \ CM oroeft««y 1 1 u tr*
                         i )f < t
    Trttthoryiilmi
    T F ( Mthy I eft I orot i I •"•
    Tr^••t^rltil^ CMori
    Vinyl *C«t«t«
    tMrf«rin tfld
    lytylm 0«cMorid«
       0«v)l«ine>»«ntin*1Mtru«}-,tT-4)-
    Zinc
IOC
1



,h
,k
,h




.»


,h
,«
1.001
.1 »,OQ
19
.!«


100
too
MO 710,000
too
900
SOO
$00
)00
100
SOO
SOO
1.000
100 /10.000
SOO /10.000
\ SOO /10.000
1 100
1 1,000 /10.000
0 100 710,000
0 1,000
o soo no, oco
1 100 /10.000
1 100 710,000
1 100 710,000
                 100
                                                                                        SOO
•   Only th* (tttutery or final 10 it snow,   tor «er«  infor«iti««, M« 40C« T«ftU J02.4
e
d

9
f
                                                    net ttfault to 10,000
In th* technical
of potential
This e»ter
-------
li A.  T1w UUt tf IttroMly MurdM fcAstvxw md th«lr Threshold
   CAS •

  110
 5281-13-0
23505-41-1
10124-50-2
  151-50-8
  506-61-6
 2631-37-0
  106-96-7
   37-57-8
  107-12-0
  542-76-7
   70-69-9
  109-61-5
   75-56-9
   75-55
 2275-18-5
  129-00-0
  UO-76-1
  504-24-5
 1124-33-0
53558 25
U167-18-1
  107-44-8
 7783-00-8
 7791-23-3
  563-41
 3037-72
 7631-89
 7784-44
26628-22-8
  124-65-2
  •143-33-9
   62-74-8
  131-52-2
13410-01-0
10102-18-8
10102-20-2
  900-99*0

   60-41-3
 34*9-24-9
 3549-57-1
 7444-09-5
 77O-40-0
 7446-11-9
 7664-9V9
   77-81 •*
13494-00-9
 7783-00-4
  107-49-1
11071-Tf«t
   78-00-2
  597-44-8
   79-74-1
  909-14-8
10031-59-1
 4533 n 9
 7791-12-0
 2797-18-8
 7444-18-4
 2231-57-4
39196-18-4
  297-97-2
  100-98-5
   79-19-6
 5344-82-1
  4U-7I-8
  7550-45-0
  584-84-9
                !••••••••••••••••••••••••••••••••••••••••
                                                                                 ••port*l*
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                                                                         »lVPln|
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                Arttnltt
                Cytnid*
             « 8Uw Cywiic
                   , Mti-
                                                                     Mtn  (pa*d»)      (POTM)
                                                     !••••••••••••••••••••••••••••••••• •*•••••••••••••••••
                                                        d
                                                        b
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                  i, 4-Mine-
                  »*or
      »ropyl«m Oiidt
              ,  2-»«thyl-5-Vinyl-
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   1
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                                                        d
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                    NydreeMorid*
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      Sodl
      tedt
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             TtlUrU*
      Outran*. Ac*twrytr
-------
     i\t A.  T*o list *f litrwty  MSordM StMtencoo md thttr Thrtehold
                                                                                Qycntitlot
                                     OMticol Order)
US •
                                                                            •OtM
                                                                                  tooortobio
                                                                                  Ouontlty •
                                                                                   (I
   74-93-1
 3733 23 7
  67»-97-1
  9S4-44-9
   78-94-4
  902 39 4
   79-79-4
 1129-41-9
 7716-34-7
  319-18-4
   90-07-7
 4923-22-4
 2743-94-
  309-40-
13443-39-
   94-11-
   49-30
 7697-37-2
10102-43-9
   98-99 3
 1122-40-7
10102-44-0
   42-79-9
  991-42-4
         0
  430-40-4
23139-22-0
          «othyi
                       ton
   78-71-7
   »7-07-4
,0028-13-4
 1910-42-5
 2074-90-2
   94-38 2
  298-00-0
12002-03-8
19424-22-7
 2970-24-9
   79-21-0
  994-42-3
  108-99-2
 4418-44-0
   44-00-4
   U-34-4
  494-28-4
   99-88-1
   42-U-4
 2097-19-0
  103-I9-9
  294-02-2
 4104-14
  947-02
   79-44
  TJ2-11
 13171-21
 7803-31
 2703-11-1
 90712-49-9
 2449-30-7
 3254-43-9
 2U7-90-8
 7723-14-0
 10029-17-3
 10024-13-1
 1314-94-3
 7719-12-2
   97-47-4
   97-44-7
  124-17-8
          •ethyl
          •ethyl
Thfocvonote
Vtnyl Ketone
                                                                           o.h
          •eiectrttto
                    C
          •icetine tulfott
          iltrle  Acid
          •(trie  On do
          •or*oro)ide
          Or*enorfiodt««i Coeploa  (*W-82'
                       147)
          Oitrww,  3,3-IU(ChlorHtthyl)-
          Of an*
                                                                           o.h
                                                                           d
                                                                           c
d.h
o
o
c.e
o

o.h
9
0
0
c.d
c
d
o
o
o
                                                                            o
                                                                            *.
                                                                            o
                                                                            o
                                                                             4.h
                                                                             9
                                                                             0
                                                                             I
                                               0-<4-(Notfcylttil9)MMf«rl)l*tor 9
          fhoeifiemtMtlf Acid. Mttiyl-, |-(2-(m<1-i»oW»ytothYl)A«(no)ltftyl)9
          rneettiornTMnlr Acid. H9tftyl-,0-(4-iitrofMnyl) O-Mionyl l«tor     9
          *M00wtc Acid. OtMtnyi 4-<*othyith(o) Mwfiri leter              9
          meecnoniTMnlr irtn. 0,0-0«e»thyl-«-{2-«othylthto) Ithyl l»ter    c.o.l
                     Oatyehtorido
                                                             k.»
                                                             d
                                                             b.«
                                                             b,<
                     Trichloride
••••••••
  100
    i
    i
    i
    i
    i
    i
    i
   10
1,000
    1
    1
1.000
    1
    1
  100
    1
1.000
   10
1,000
     1
   10
     1
     1
     1
     1
     1
     1
     1
     1
     1
     1
     1
   100
   100
     1
     1
     1
   100
 1.000
     1
     1
     1

     1
     1
   100
     1
   100
     10

     1
     10
     1
     1
    100
     1
      1
      1

      1

  1,000

      1
  1.000
      1
                                                                                                1.
  Threshold
        Ouentitv
  (pouwi)
<••••••••••••••••
   900
   900
   100
 10.000
    10
   900 710.000
   900
   100 710,000
   900
   900 710,000
   900 710,000
    10 710.000
 10.000
   900
      1
   100
   100 710.000
  1,000
   100
 10.000
   900
    100
    000
    100  710,000
     10  710.000
    100  710.000
    100  710,000
    900
    900
    100
     10 710.000
     10 710.000
    100
    100 710.000
    900 710.000
    900
   .100 710.000
    900
    900
    900 710.000
    100 710.000
    100 710.000
    900 710.000
    900 710,000
    900
   1,000 710,000
    900 710.000
     100 710.000
     100 710.000
      10
     100 710.000
     100 710.000
      10
      10 710.000
     100
     900
     900
      100
          Mtyooetitvir
          Hereto* m
                    (1:1)
                        900
                        100
                        900
                        900
                         10
                       1,000
                        'in 710.000
                        100 710.000
                        900 /1C.300

-------
           Tt» LUt tf Utr-tly
                                                   Ml th.«r Thr«hoU
   CAS  •
••••••••i
22224 92
  122-14-
  115-90-
 4)01-50-
 7712-41-
  440-19'
  144-49
  359-04
   51-21
  944-22
   50-00
  107-14
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'4
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2
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                                                                      •••••••••••••••••••••••«•••••••••••••
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   110-00-9
 13450-90-3
   77-47-4
 4135-11-4
   302-01 2
   74-90-1
 7447-01-0
 74*4-39-3
 7TJ2-04-1
 7713-07-5
 77U-04-4
   1IJ-J1 9
 13443-40-4
   m-7i-t
    Ti-H-0
   102-34-3
   445-73-4
    S5-t1-4
  40tt-71-f
   10S-O-*
            Purtri
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             -F..^^- MMOrl*
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                     •«l«n
                                                                      •

                                                                      f
                                                                      ».4




11
101



1
1,000
1
1
1
1
1
1
100
1
1
1
1
10
1
100
1
1
100






10









1,00















1

1.0
1,0




10 710.000
MO
MO
100 710,000
MO
100 710.000
10 710,000
10
500 710,000
500
MO
1,000
500 710,000
100
100 710.000
500
100 /10.000
500
500 /10.000
100
500
1,000
100
500
100
1,000
10
500
500 710,000
100
100 710,000
1,000
MO 710.000
100 710,000
100
100
1.000
MO
MO .
1,000
MO 710,000
.10
1.000 710.000
100
MO 710.000
100
10
MB
MO 710,000
MO 710,000
MO 710,000
1,000
MO
MO
MO
100
MO 710,000
1,«0
MO 710.000
10 MO 710,000
BO MO 710,000
1 MO /10.000
1 MO
00 1.000
00 MO
, 100
10 MO
1 MO
1 MO

-------
        A.
                     If
                                                                                                          »•* A I
   CAS •
• ••••••••••••••••••Ml
21923-23-9
10025-H-7
62207 76-5
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10
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1.000
1
100
100
1.000
1
1
1
1
1
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1
1
1
1
1
1
10
1
1
1
1
1
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1
1
10
1
1
1
1
1
1
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10
1,400
1
1
1
100
1
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100
1
1
1
1
1.000
1
1
1
1
^
10
1
1
1
1
• 5.000
1
1
500
1 /10.000
100 /10.000
10 /10.000
10 /10.000
100 /10.000
500 /10.000
1.000 /10.000
100 /10.000
1.000
1,000
500 /10.000
1.000 /10.000
1.000
100
100 /10.000
10.000
500 /10.000
500
500
100 /10.000
100
10,000
1.000
1.000
100
500
500
100 /10.000
100 /10.000
1.000
10 /10.000
MO
MO no, ooc
MO
MO
100
MO
1.000
10 /10.000
MO /10.000
10 /10.000
100 /10.000
. MO /10.000
MO
10 /10.000
100
MO
MO /10.000
100 /10.0CO
1 /10.000
10 /10.000
MO /10.000
MO /10.000
1.000
100 /10.000
1,000 /10.000
MO /10.000
MO
1.000
1.000
1.000
300
10
1,000
10,000
500
10,000

-------
      U ».   TIM lift tf IxtrMly Nitiroeui SUbtttncn end their Thrwhold
                                                                                Owntttlw
                                                                                                              4-1
                                               Ordto
  CAS f
   75-84
 1752-30
  107-02
   70-04
  107-1)
  814-48
  111-49
  114-04
  309-00
  107-18
  107-11
20859-73
   54-42
   78-5)
 3734-97
 '444-4'
  300-42
   42-53
   88-05
 T713-70
 1397-94
   84-88
 1303 28
 1)27-5)
 77*4-34
 7714-42
 2442-71
   84-50
 .  98-87
   98-14
  100-U
   98-09
 3415-21
   98-07
  100-44
  140-79
15271-41
 7437-07
  353-42
28772-94
1304-19<
2223-93
    •44
  54 25
  51-13
 1943-e*

  7M-19*
   $7-T4
  470-90
 7712-fD
24934-91
  999-81
   79-11
  107-07
  427-11
   47-44
  942-18
  107-30
 3491-35
 1982-47
                                      C»«»-4-Httro-
                  eertonic Acid
            8eni<*itttole. 4.5-Oleniere-2-(Trlflyer*»thyl>.
            •eniotricftierloe
            Oensvt CMoride
            ••nsyl Cvtnid*
            8levct*a.2.1)H«Ptir«-2-C4Ptan4trlte,
                                      With Mthyl
                                                         (1:1)
                                  . e-«C2,4'0(«ttiyi-1, 3-Olttil«l«n>2-Tl)
                         Mthyl  lth«r
                                                                                                          tlty
10
1
1
9.000
100
1
1
1
1
100
1
100
1
1
1
100
1
5.000
1
1
1
100
9000
5000
50*



9,00





10











tea




1,000
1.000 710,000
900
1.000 710,000
10.000
100
1.000
100 710.000
900 710,000
1.000
900
900
900 710.000
900
100 710.000
900
1.000
1.000
900
500
1,000 710.000
500 710,000
100 710,000
100 710,000
900
100
100 710.900
10 710. OOC
900
900
900 710.000
\0 710,000
900 710.000
100
900
900
MO 710,000
10 710.000
900 710.000
MO
MO
1.000
tOO 710.000
MO
100 710.000
1.000 710,000
MO 710,000
MO 710.000
100 710.000
MO 710.000
tOO 710.000
                                                                                             to
                                                                                            too
                                                                                            t
                                                                                         5,e
                                                                                                    U 710,
                                                                                                tO.i
                                                                                                    too
                                                                                                    MO
                                                                                                    tOO 710,000
                                                                                                    tOO 710.000
                                                                                                    MO
                                                                                                   1.000
                                                                                                  10.000
                                                                                                    too
                                                                                                    100
                                                                                                     100 710.000
                                                                                                    900 /tO.000

-------
                                                OSWZR DIR.  19841.0

APPENDIX A.  Summary of Requirements and Enforcement Authorities
    •

A. section*  302 and 303.  Section 302(c) requires the owner or
operator of  a  facility at which an extremely hazardous substance
(EHS) is present  in an amount exceeding its threshold planning
quantity (TPQ) to notify the State Emergency Response Commission
(SERC) by May  17, 1987, that the facility is subject to Title
III.  Section  303(d) requires owner/operators of facilities
regulated under 1302 to notify the Local Emergency Planning
Committee  (LEPC)  of a facility representative to participate in
the planning process.  This notification should have occurred no
more than 30 days after the LEPC was established (or no later
than September 17, 1987).  Section 303(d)(3) requires the
facility to  supply promptly information upon request by the LEPC.

     Section 325(a) authorizes the Administrator to order owners
or operators of facilities to comply with 11302 and 303.  The
local U.S. district court has jurisdiction to enforce the order
and impose a penalty.  Under 1326, State and local governments
can bring civil action against an owner or operator for
violations of  1302(c); SERCs and LEPCs can bring a civil action
for violations of |303(d).  For State and local suits under 1326,
the U.S. district court for the jurisdiction in which the alleged
violation occurred has authority to impose civil penalties
provided by  the statute.

     Penalty?  Violations of 11302 and 303 subject the violator
to civil penalties of not more than $25,000 for each day the
violation or failure to comply with the order continues.


B.   Section 304.  Section 34)4 requires owners or operators of a
facility at  which there has been a release of an EHS or CERCLA
hazardous substance in an amount greater than or equal to its
reportable quantity (RQ), to immediately notify the SERCs and
LEPCs of all States and districts liKely to be affected.  Tor
releases of  EKSs  or CERCLA hazardous substances without a
designated reportable quantity, a release of one pound or more
triggers the notification requirement.  For releases of CERCLA
hazardous substances, notification must also be given to the
National Response Center  (NEC).

     CTECTA  tioa.  The Act requires the person in charge of a
vessel or facility to notify the NRC immediately when there is  a
release of a CERCLA hazardous  substance in an amount greater than
or equal to  its RQ.  For hazardous substances without a
designated RQ, 4  release of one pound or more triggers  the  notice
requirement.

-------
                                                OSWER DIR. 19841.0

      The  CERCLA  1109  and Title  III  1325 enforcement provision*
 for emergency  notification ar«  vary similar.  Both astabliah
 administrative penalties and  tha authority to bring actions
 judicially  to  assess  penalties  for  non-notification.  Both CZRCLA
 and Title III  also  provide criminal fines for knowingly failing
 to  provide.notice or  providing  false or misleading information.
 Section 326(a) of Title III authorizes any citizen to file a
 civil action in  the U.S. district court for failure to submit a
 follow up report on a release required to be reported to State
 and local officials under |304(c).  State and local governments
 may bring civil  action under  the citizen suit provisions for 1304
 violations.1

      Penalties;  Under Title  III 1325 and CERCLA 1109, Class I
 administrative penalty of not more  than $25,000 per violation and
 Class II  administrative penalty of  not more than $25,000 per
 violation per  day may be assessed.  Penalties also may be
 assessed  judicially.   In the  case of subsequent violations,
 penalties of up  to  $75,000 for  each day a violation continues may
 be  assessed.   Any person who  knowingly fails to provide notice in
 accordance  with  CERCLA 1103 or  Title III |304 shall, upon
 conviction, be fined  not more than  $25,000 or imprisoned for not
 more than two  years,  or both.  For  second or subsequent
 convictions, the violator shall be  subject to a fine of not more
 than $50,000 or  imprisoned for  not  more than five years, or both.


 C.    Sections  311..312 and 313. Section 311 requires the  owner
 or  operator of any  facility that is required to prepare or have
 available a Material  Safety Data Sheet  (KSDS) for a hazardous
 chemical  under the  Occupational Safety and Health Administration
 (OSHA) Hazard  Communication Standard and has a certain amount  of
 the  chemicals  onsita,  to submit the KSDS  (or a list of the KSDSs)
 to  the SERC, LEPC,  and local  fire department before the later  of.
 October 17, 1987, or  three months after the owner or operator  is
 required  to prepare or have available a USDS under OSHA.   As a
 result of the  OSHA  expansion, facilities in the nonmanufacturing
 sector are  required to submit MSDSs or a list by September 24,
 1988. •
     1    Title  III  1329  defines  person as  "any individual,
trust, firm, joint •took  company,  corporation,  (including  a
government corporation),  partnership,  association, State,
municipality, commission,  political  subdivision of a  state,  or
interstate body."  Section 326  authorizes any pjEifin  to bring a
civil action against owners and operators for their failure  to
submit reports specified  under  |326(a)(l).

-------
                                                OSWER DIR. #9841.0

     Under  1312(a), the owner or operator of any facility that is
 required to prepare or have available a MSOS for hazardous
 chemicals above a certain threshold level must also submit an
 emergency inventory form containing "Tier I" information
 (aggregate  information on the amounts and location of hazardous
 chemicals at the facility).  The forms are due by March 1, 1988
 and must be submitted annually thereafter.  Section 312(e)(l)
 requires the owner or operator to provide "Tier II" information
 (chemical specific) to the SERC, LEPC, and/or the fire department
 with jurisdiction over the facility upon request.

     Under  1313, owners or operators of certain facilities that
 manufactured, processed, or otherwise used a statutorily defined
 toxic chemical in certain amounts in the previous year must
 submit a toxic chemical release form to EPA and the State for
 each such chemical beginning July 1, 1988 and then annually
 thereafter.

     For each of these three sections, the Administrator can
 assess civil penalties through issuance of administrative orders
 or bring actions to enforce compliance and assess penalties in .
 the U.S. district court.  State and local governments can bring
 civil actions for violations of 11311 and 312 and they can bring
 an action against violators of 1313 through the citizen suit
 provisions.  Citizens have the authority to bring action against
 an owner or operator for violations of all three sections.  In
 civil suits, the district court has the authority to enforce the
 requirement and to impose any civil penalty provided for
 violation of the particular requirement.

     Penalties!  Violation of 1311 subjects the violator to a
 civil penalty of not more'than $10,000 for each such violation. *
 Section 312 and 313 violations subject the violator to civil
penalties of not more than $25,000 for each such violation.  Each
 day a violation continues constitutes a separate violation.


 D.   Section 322 and 323.  Section 322 covers the submittal and
verification of trade secret information.  For violations of this
 section, the Administrator may assess a civil penalty by
 administrative order or bring action to assess and collect
 penalties in the U.S. district court.  Criminal penalties can be
 levied for  persons who knowingly and willfully disclose trade
 secret information.

     Section 323 requires owners or operators of facilities
 subject to  11311, 312, and 313 to provide  information to  health
professionals when requested, -subject to certain restrictions.
The Administrator can assess an administrative penalty or file
an action to assess and collect a penalty  in U.S. district court.

-------
                                                OSWER DIR. 19841.0

Health professionals may also bring an action against a facility
owner or operator in th« U.S. district court.


     p«nalti««:  Any person who fails to furnish information
required under |322(a)(2) or requested by the Administrator under
1322(d) shall be liable for a penalty of not more than $10,000
per violation per day.  For frivolous claims, the trade secret
claimant is liable for a civil penalty of $25,000 per claim.  Any
person who knowingly and willfully discloses trade secret
information shall, upon conviction, be subject to a fine of not
more than $20,000 or to imprisonment not to exceed one year, or
both.  Any person who violates I323(b) shall be subject to a
civil penalty not to exceed $10,000 per violation per day.

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                                                        OSWL.   9334.2
             UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

                         WASHINGTON O.C  20460
                               OCT   9 ;9S5
                                                          o»»>ct o»
                                                 10.'0 «V»JT| AND IM|«OINC» MI'ONSC
MEMORANDUM
SUBJECT:  Timely  Initiation of Responsible Party Searches,
          Issuance of Notice Letters, and Release of  Information

FROM:     Gene A. Lucero, Director
          Off-ice  of Waste Programs

TO:       Addressees


PURPOSE

     This memorandum re-emphasizes  the  importance of  early
identification of potentially responsible parties (PRPs)  and
timely issuance of notice letters for the RI/FS.  These  actions
support the Agency's policy to secure cleanup  by responsible
parties in lieu of Superfund use, where  such cleanup  can be
accomplished in a timely and effective manner.  The sooner
PRPs are identified and notified about  their potential  responsi-
bility, the more  time they have  to  organize themselves  to
assure responsibility for the RI/FS and  cleanup  (See  "Partici-
pation of Potentially Responsible Parties in Development of
Remedial Investigations and Feasiblity Studies Under  CERCLA* "
Lee M. Thomas and Courtney M. Price* March 20, 1984).

     This memo also clarifies Agency policy on release  of
site-specific information to PRPs and others.  It supplements
the information release section of  the  Interim CERCLA Settle-
ment Policy (December 5, 1984).  The clarification  is designed
to facilitate information exchange  in order to encourage effec-
tive negotiation  and coalescing by  PRPs  among  themselves.
Effective PUP negotiations and coalescing are  likely  to engender
effective settlement discussions with the government.

INITIATION OF PRP SEARCHES

     In an effort to expedite and streamline the RI/FS  process,
you should focus  attention on early identification  of PRPs  and
timely issuance of notice letters.  As  you are aware, in FY 86
you will be required to conduct  PRP searches for NPL  Updates
3, 4, 5, and 6.   This will be reflected  in your  SCAP  targets.

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                                                       OSWER * 9834.2
                              -2-
In orier to acccrpli:w.  this,  it will be necessary to start ?5?
searches concurrently witn developing sites for listing.  At
the  latest, PRP searches should be  initiated when candidate
sites  are  sent to KS for N?L  quality control "review.  YOVJ will
need to plan accordingly for  this activity, particularly in
your case  budgets.

     Technical assistance resources for PRP searches are avail-
able through the Techncial Enforcement Support Contracts, TES I
and TES II, and are coordinated through the case budgeting
process.   Each Region will be given a line of credit to support
the costs  of responsible party searches, title searches, and
financial  assessments.  This  credit will be allocated by a
straight-forward calculation  of average past costs of such
activities multiplied by the  number to be done in each Region.

     Because of the heavy work undertaken by TechLaw in both
the TIS I  ar.d TES II contracts, the prine contractors have been
distributing new work assignments for PRP searches to other
subcontractors.  This should  result in more timely reports.

NOTICE LETTER ISSUANCE

     Timely issuance of notice letters for the RI/FS normally
means  that notice letters are issued as soon as possible after
completion of the PR? search  and prior to any Federally-financed
response action.  Timing of the notice letter should take  into
account the number of PRPs and the  complexity of the data
associating PRPs with the site.  In general, notice  letters
should be  issued 60 days before obligation of RI/FS  funds
(See "Procedures for Issuing  Notice Letters** Gene A. Lucero,
October 12, 1984).  PRPs should therefore have sufficient  time
to organize themselves  and initiate preliminary contacts and
discussions with Agency personnel.  This will also avoid delay
in beginnina a Fund financed  RI/FS  should it become  necessary.

     Notice letters are generally combined with information
requests under RCRA 53007 and CERCLA $104(e) (See "Policy on
Enforcing  Information Requests in Hazardous Waste Cases",
Courtney M. Price, September  10, 1984).  Notice letters are an
important  step in determining whether • PRP is willing and
financially capable of  undertaking  • proper response.  The
NEIC Technical Information Center is a useful source for assess-
ing the financial viability of PRPs that offer stock to the
public.  For privately  held companies, the TES contract can be
used to estimate the financial capability.

     Notice letters should be issued only to parties where
sufficient evidence is  available to make a preliminary determi-
nation of  liability under CERCLA $10*7.  Where doubt  exists as
to whether available information supports notice letter
issuance,  information recuests should be sent prior  to notice
letters.

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                               _._                      OSWER # 9834.2
      In the  past,  rot ire letters were se-.t t: P3?s whs -ay cr
 nay  not have been  liarle under CERC1A.   This r.ay oe avoided Sy
 issuing notice letters  to parties where sufficient evidence is
 availaole to make  a preliminary deter-.ination of liability
 under CERCLA $137.   Frr example, parties known to have arranged
 for  disposal of  material which is not known to contain a hazard-
 ous  substance should not receive a notice letter.   The Regions
 should be particularly  aware of the adequacy and completeness
 of the PRP searches.  This will - -far. spending resources on
 the  quality  review of contractc •          I'm sure this will
 save critical resources at a la;..,     .  in the enforcement
 process.

      In addition,  it is imperative that copies of  notice letters
 be sent to Headquarters for purposes of tracking and responding
 to information requests.   Along with other reporting require-
 ments,  each  Region will be responsible  for sending copies of
 notice letters quarterly.

 RELEASE OF SITE-SPECIFIC ISTORMATTCN

      It is important to conduct PRP searches, issue notice
 letters and  collect information as soon as possible, not only
 to expedite  the  RI/FS process,  but to ensure that certain
 site-specific information is available  for use by PRPs.  Avail-
 ability of this  ir.for-atior. to PRPs will helrj PRPs organize
 and  negotiate among themselves.

      As stated i.n  the Interim''CERCLA Settlement Policy, EPA
 will  release  certain site-specific information to PRPs in
 order to  facilitate settlement discussions.  This information
 includes:
                                         \
      •  Identity  of  notice letter recipients;

      0  Volume and  nature of wastes to the extent identified
        as sent to  the site ("waste-in"  list); and

      •  Ranking by  volume of material sent to the site, if
        available

      There are,  however,  certain limitations with regard to the
•information  outlined above.  For example, summary conclusions
 about the volume and nature of waste sent to a site, including
 a volumetric ranking should be provided to the extent .that
 such  information exists.   Volumetric rankings should be developed
 when  the  Region  determines that the rankings will be of signifi-
 cant  benefit to  the Agency and responsible parties in facili-
 tating settlement  or cleanup.  Mo:?over, due to their preliminary
 and  summary  nature, EPA will not expend resources to explain
 or defend any list or ranking.   Lists or rankings released to
 PRPs  ani  others  should  always contain appropriate disclaimers.

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                              -4-

                                                      OSWER *  9834.2

     The settlement policy states that release of information
to PRrs shc-.ld generally be conditioned on a reciprocal release
                                                       does r.ct

recprocal
release
policy
c  infcrration by ???<;.  Tr.e
apply to the release to r?,?s of the nar.es of other notice letter
recipients on a site, or to waste-in lists and volunetric rank-
ings.  Release of any additional information, however, should
be conditioned on a reciprocal release of 'information by PRPs.
In determining the type of additional information to be released,
Regions should consider the possible impact on any potential
litigation.

     Again, 'it is important to'conduct PRP searches, issue
notice letters, and collect information as soon as possible so
that the information discussed here is available for use.
Waste-in lists and volunetric rankings should be developed as
soon as possible after completion of PRP searches.  This infor-
mation should be provided with notice letters, if available.
Such information nay also be released in advance of notice
letters upon request when the Region determines it will facili-
tate settlement.

     T.w,e nanes cf notice letter recipients are available to the
public in response to requests under the Freedom of Informa-
tion net (FOIA) (See "Releasing Identities of Potentially
Responsible Parties in Response to FOIA Requests," January 26,
1984 j.  The nanes nay also be released at the Agency's initia-
tive without a FOIA request.  Now, to the extent the information
exists, waste-in lists and volumetric rankings will also be
available to the public under FOIA and at the Agency's discre-
tion.  Thus, requests for information on notice letter
recipients and for waste-in lists or volunetric rankings, should
be handled consistently whether the requests are made by PRPs
or the general public.

     For further information on topics discussed  in this meno,
please contact Linda Southerland at FTS 382-2035.
Addressees:

Director, Office of Emergency and Remedial  Response
Region II

Director r Air and Wast* Management  Division
Regions  III, IV, VI, VII, VIII

Director, Waste Management  Division
Regions  I, V

Director, Toxics and Waste  Division
Region XX
 •
Director, Air and Waste Division
Region X

Regional Counsels, Regions  I-X

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                             ATTACHMENT
 Documents for Removal Actions*
               data**
 - Removal preliminary assessment
 - Site investigation report
 - Any otfor factual data relating to reasons  why we  selected a
   particular removal action at the site
 - Chain of custody forms**
 - Engineering evaluations
 - Cost analysis documents
 - Final data summary sheets of technical  models  used to evaluate
   the site
 - Action Memorandum
 - ATSDR health assessment (draft versions not included)
 - Memoranda on major site specific policy and legal  interpretations
   (e.g., off-site disposal availability,  compliance  with  other
   environmental statutes, special coordination needs,  e.g., dioxln,
   provisions for State assumption of post-removal site control)
 - Information from telephone logs relied  on in selecting  response
 - New technical information presented by  PRPs during negotiations
 - Guidance documents and technical sources ***
 - Community Relations Plan
 - Public comments, if any
 - Responses to significant comments
 - Copies of any notices, including notices to PRPs,  States, Natural
   Resources Trustees, notices of availability of information
 - Documentation of meetings during which  the  public  and PtPs present
   information upon which the agency bases its decision on selection
   of  a  removal action (may be after-the-fact  restatement  of issues rai
 - Administrative Orders
 - Consent decree(s), comments and responses to comments on the
   consent decree
 - Affidavits or other sworn statements of expert witnesses
 -Amendments to Action Memorandum, including  celling increase Action
   Memoranda, and Action Memoranda on technical changesi information
   which caused the agency to change the decision, comments, and
   responses to comments
 *   Drafts  and  internal memoranda are not Included in the record
 unless  they contain information used to base the decision
 which the  final document does not contain,  or the decision-
.maker chooeies  to base the decision on a draft document.

 •*  QA/OC'd raw"data (e.g., results of QC runs, chromatograms,
 mass spectra)  and chain of custody forms are part of the record  and
 available  to the public, but need not be in the same physical
 location as the record in the .Regional office or in the  information
 repository at  or near the site.

 **• Guidance  documents and technical sources may be kept in a
 central compendium by the docket clerk.  They need not be in
 each site-specific record.  The index to the record should
 reference  titles of relevant guidance documents and technical
 sources.

-------
                              -a-
-. nnriiiMnrifion of eppeituiiily  for  consultation  with  the  State
  on the scope of the  removal action:  comments from State,  if  any,
  and responses to substantive  comments
• Index of documents in  the  record

(Expedited Response Actions  should  be  treated  like removals for
purposes of compiling  an administrative  record;  for purposes of
the administrative record, RZ/PSs should be  treated as  a  phase
of a remedial action,  and not a  removal)

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                              •3-
DoeuiiienLS" for Rffthedial Actions*

- Preliminary assessment reoort
- Site  investigation report
- Any relevant removal documents  (if removal action completed or
  ongoing at site)
- OA/QC'd raw data**
- Data  summary sheets (usually part of the PS)
- Chain of custody forms**
- OAPP
• Initial work plan and any amendments thereto
- RI/PS (final deliverable released for public comment)
- Any other factual data relating to reasons for selectinq the remedia
  action at the site
- Memoranda on site-specific major oolicy and legal interpretations
  e.g., off-site disposal availability
- Information from telephone logs relied on in selecting response
- Guidance documents and technical sources ***
- Community Relations Plan
- Proposed plan and brief analysis of plan
- Feasibility Study (final deliverable released for public consent)
- Endangerment Assessment or other public health assessment    :
- ATSDR Health Assessment (draft versions not included)
- Copies of any notices, including notices to PRPs, States, Natural
  Resources Trustees, notices of availability of information
- Public comments (including a late comments section)
- Documentation of meetings during which the public and PRPs present
  information upon which the agency bases its decision on selection
  of a remedial action (may be after-the-fact restatement of issues
  raised)
- New technical information presented by PRPs during negotiations
-' Documents relating to State involvement (e.g., ARAR determinations,
  opportunity to comment on screening of alternatives, PS, proposed
  plan, selected remedy)
- Responses to substantive comments
- Transcript of required public meeting(s) on the proposed plan
*  Drafts and internal memoranda are not  included in the
record unices they contain  information used to base the decision
which the final document does not contain, or the decision-
maker chooses to bate the decision on a draft document.

**  OA/OC'd raw data (e.g., results of QC runs, chroma too; rams,
mass spectra) and chain of  custody forms are part of the record
and available to the public, but need not be in the same
physical location as the record in the Regional office or  in  the
information repository at or near the site.

***  Guidance documents and technical sources may be kept  in  a
central compendium by the docket clerk.   They need not be  in  each
site-specific record.  The  index to the record should reference
titles of relevant guidance documents and technical sources.

-------
     inrlurting n^**^****-- e£ basis- anff DUrpose of selected
action; summary of alternatives considered; an explanation of
why the Agency chose the preferred alternative; explanation
of any statutory preferences under 512Kb) not met; Explanation
of significant differences between the Proposed Plan and ROD
Amendments to the ROD, information which caused the Agency to
change its decision, comments and responses to those comments
Relevant documents generated during a RCRA corrective action
proceeding-at the site, if applicable
Administrative Orders
Consent decree(s), comments and responses to comments
Affidavits or other sworn statements of expert witnesses
Interagency agreement (for federal facilities)
Index to documents in record

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         l:NITED STATES ENVIRONMENTAL PROTECTION AGENCY
                       WASHINGTON. D.C. 20440
                           NOV 21  1965
                                                     ornci or tv
                                                       AND COMPLIANCI
                                                        MO*rroifNG
MEMORANDUM

SUBJECT:  Procedural Guidance on Treatment of Insurers Under
          CERCLA
                           \ju« 'S A>  r***<
FROM:     Courtney M. Price  	
          Assistant Administrator for Enforcement
            and Compliance Monitoring

TO:       Regional Administrators. I-X             '  .
          Regional Counsels, I-X


INTRODUCTION

     Defendants in EPA's CERCLA enforcement cases have begun
to look to their insurance carriers for both legal representation
and indemnification.  It is  expected that the number of
collateral actions involving the insurance carriers of CERCLA
defendants will continue to  grow, particularly in CERCLA cases
involving multiple parties. _['

     The purpose of this guidance is to provide EPA Regional
offices with che appropriate procedures to follow in issuing
notice letters, developing referrals, and tracking CERCLA
enforcement cases that may include insurers as third party
defendants.  A separate reference notebook and memorandum
of law are being prepared by OECM and the Department of Justice
to supplement this guidance.  The memorandum of law will summarize
che recenc judicial decisions which have interpreted che
applicability and coverage of insurance policies in hazardous
waste cases*
I/   Moat insurance policies are effective on an annual basis
~    and parties commonly changed carriers during che disposal
period, or had several policies in effect at che same time. .
Therefore, large CERCLA lawsuics could involve multiple insurance
carriers and multiple policy periods.

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                              -  2  -
 INSURANCE INFORMATION REQUESTS  -  IDENTIFICATION OF POTENTIAL
 DEFENDANTS

      EPA  Regional  offices  are responsible  for preparing and
 issuing CERCLA notice letters co  potentially responsible
 parties.   These notice letters  generally include requests for
 information under  RCRA S3007(a)(3) and CERCLA S104(e)(4).  All
 information requests  should  include a request for copies of
 insurance policies in force  during the PRP's association with
 the  site.  The requests  should  solicit information regarding
 insurance policies that  are  currently in effect as well as
 those effective during the period of activity in question. 2/

      The  information  request responses from potentially
 responsible parties should be reviewed by  the Regional Counsel's
 Office to determine the  types of  policies  carried by the party
 and  the extent of  coverage under  each policy.  Insurance carriers
 determined to  have exposure  should be notified at the same time
 we notify the  insured PRP.

 REFERRALS TO THE DEPARTMENT  OF  JUSTICE

      The  Department of Justice  attempts to ascertain the
 existence  of insurance coverage and, where appropriate,^to
 assert litigation  theories which  would enable the United States
 to proceed against insurance carriers in hazardous waste cases,
 or to involve  them in settlement  negotiations.  The Department
 of Justice has requested that EPA provide  insurance information
 as a  routine portion  of  our  case  development report and reterral
 package.

     All  referrals of hazardous waste cues to the Department of
 Justice should include a brief  summary of the insurance coverage
 of potential defendants.  This  information is particularly
 important  for  action* involving bankrupt or potentially insolvent
 parties.
21   Set Memorandum "Procedures for Issuing Hotice Letters"
~    Trom Gene A. Luctro, Director EPA Office of Waste Programs
Enforcement,  to Directors, Waste Management Divisions Regions I-
X; Directors, Environmental Services Divisions Regions I-X;
Regional Counsels, Regions I-X.  (October 12. 1984).  Pages 4-5,
and 24.25 discuss information requests regarding the insurance
policies of potentially responsible parties.

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                                -  3 -


 THE INSURANCE POLICY -  DETERMINING THE  SCOPE OF THE COVERAGE

      The standard  liability  insurance policy is broken down
 into three  sections:   1)  declarations;  2) statement of general
 liability;  and 3)  the standard  coverage section.  The declara-
 tions  section contains  general  statements of the intent of
 the parties and the  name  of  the insurer and the insured.  The
 statement of general  liability  contains the definitions
 applicable  to the  policy  and the  provisions common to the
 various  standard coverage sections.  The standard coverage
 sections constitute  the bulk of the policy and contain the
 insuring agreement and  exclusions,  including any pollution
 exclusion provisions.   The standard coverage section usually
 includes the insurer's  promise  to pay on behalf of the insured
 and the  insurer's  duty  to settle  or defend claims against the
 insured  alleging bodily injury  or property damage covered
 under  the policy.  3J

     The interpretation of the  insurance policy should begin
 with a review of the  standard coverage  section to determine the
 theories upon which  EPA can  proceed.  Most insurance policies
 only obligate the  insurance  carrier to  defend against any suit
 seeking  damages or to pay on behalf of  the insured such damages
 which are covered-  under the  terms of the policy.

     Thus,  ic is important to examine che scope of coverage of
 the insurance policy  before  referring an action to the Department
 of  Justice  which may  have insurance aspects.  Claims for injunctive
 or  equitable relief are usually not included within the coverage
 of.the insurance policy,  and the  referral for such relief need
 not include the insurer as a potential  defendant.  It may
 nevertheless be prudent to notify involved carriers of such
 a claim.

     Where  any CERCLA 1107 damage claia it included as a basis
 for relief,  che insurer may  be  identified as a potential
 defendant-.   Claims for  punitive damages may Also be covered
 under the policy and  the  Regions  should include insurers as
*3/    The  insurance carrier has a duty to defend the insured
~"     even, if  che claims are groundless, false or fraudulent

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                              - 4 -


 defendants where punitive damages  are sought.  */  The  referral
 package prepared by the Region should also  include a  discussion
 of the types  of policies which were  issued  to  che responsible
 party.

 TYPES OF INSURANCE POLICIES

      There are two types of  insurance policies.   The  first is
 the traditional casualty insurance contract known as  the
 Conmercial General Liability Policy  (CCL).  The standard CCL
 policy covers  accidental or  sudden bodily injury  and  property
 damage.  The  second cype of  policy is the "claims.made" pollution
 liability policy or Environmental  Impairment Liability (EIL)
 policy.  The  EIL policy covers che insured for liability for
 bodily injury  and property damage  resulting from  gradual pollu-
 tion,  or clean up costs incurred by  the insured.  EIL pollution
 liability policies  enable  owners and  operators of hazardous
 waste  treatment,  storage,  and  disposal facilities to  comply
 with  RCRA's financial  responsibility  requirements.

 CGL Policies

      There are four separate areas of coverage available under
 che' CGL policies  which may be  applicable co CERCLA actions.
 The first is che  premises  and  operations hazard policy.  This
 policy  provides coverage for liabilities resulting from a
 condicion on che  insured1t premises or from ehe insured*s
 operations  in  progress  whether on  or  away from che insured's
 premises.   This  cype of policy would  cover che owner or operator
 of  a facility, whether  che hazardous  vasce facility was accive
 or  inactive, as long as che  covered liability resulted in
 a condicion which originated during coverage.

     The  second area of coverage under che CGL poliey is  che
 products  and completed  operations policy.  This policy provides
 coverage  for liabilities arising afcer produces have lefc .ehe
 physical  possession of  che insured and afcer che work performed
 has been  completed  or abandoned.  This type of poliey may
 cover che generator of  hazardous substances if che wasce  can
 be  characterized  as a  final  produce.
4/   Mote policies are silenc regarding coverage for punitive
~~    damages.  Some states have allowed claims by che insured
for punitive damages paid co the federal government.

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              OUTLXEE  OF  INSURANCE  ISSUES
                   TABLE OF CONTENTS
 INTRODUCTION                                           Page

 I.  Types of Policies Issued                             3 .

     General Introduction   •                              3

     A:  The Comprehensive General Liability (CGL)         5
         Policy

     B.  Development of ehe Pollution Exclusion           7

     C.  The Environaencal Impairment Liability           9
         (EIL)  Policy (appearing in ehe late
         1970's)

     D.  The Insurance Services Office                    9
         (ISO)  Policy


II.  Judicial Construction of CCL and
     ^GL/Pollution Exclusion Policies

     A.  Construction of CGL Policies Generally          10

         1.  "Accidents" under pre-1966 policies.        11

         2.  Definition of the "occurrence" under        12
             post-1966 policies.  (Discussion of
             the "exposure," "manifestation," and
             "triple-trigger" theories for deter-
             mining when an occurrence has taken
             place.

         3.  Apportionment of liability anon*            17
             insurers and insureds.

         4.  The scope of "property dasage"              17
             coverage.  (Discussion of the extent
             to which remedial activity is covered.)

         9.  Statute of limitation questions.            18

         6.  Defenses available to the insurer.          19

     B.  Construction of OCL/Pollution Exclusion         20
         Policies                 '  .

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                          - li -


 INTRODUCTION (continued)                                 plge


III.   Construction of EIL and ISO Policies                 24

      A.   The EIL Policy                                   24

      B.   The ISO Policy     '                              25

 IV.   Statutory Insurance Requirement!                     25

      A.   RCRA Financial Responsibility                    25
          Requirements

      B.   CERCLA Financial Responsibility                  29
          Requirements

  V.   Potential Claims Against Insurers                    31

      A.   Claias Under Federal Lav                         31

          1.  RCRA enforcement claims                      31.

          2.  CERCLA enforcement claims                    32

      B.,  Assigned or Subrogated Claims of the Insured:     36
          Assignment After Judgment,  Assignment Before
          Judgment, Assignment of Claims for Breach of
          Duties, and Assignments After Bankruptcy

      C.   Policy Provisions Allowing  Direct Action         46

      D.   Common Lav Denial of Direct Action               47

      E.   State Direct Action Statutes                     48
                          «:

      F.   Other Procedures for Litigation Between the  .    49
          Insurer and the United States

          1.  Intervention by the Insurer in an action     49
              by the United States against the insured

          2.  Declaratory Judgment suits betveen the       50
              insurer and the insured — including
              a discussion of vhether the United Stater
              may be estopped from bringing a subsequent
              direct action claim by  opposing insurer
              intervention in its* enforcement action,
              or by declining to participate in a
              declaratory relief action betveen the
              insurer and'the insured.

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INTRODUCTION
     Sine* Che passage of the Comprehensive Environmental    ~  '
                                                 I/
Response, Compensation, and Liability Ace (CERCLA7  in 1980,
che Environmental Protection Agency (EPA) and the Department
of Justice (DOJ) have initiated more than 100 enforcement
actions againsc che owners and operators of hazardous waste
facilicies, generaeors who arranged for che disposal of
hazardous subscances, and cransporters who handled hazardous
substances.  Many of these cases, some of which were built
upon prior claims under the Resource Conservation and Recovery
           2/
Ace (RCRA),~ involve claims for millions of dollars of response
costs.  Defendants in these cases generally have sought legal
representation and indemnification from their insurance
carriers.  It is expected chac ehe number of collateral
actions involving ehe insurance carriers of RCRA and CERCLA
defendancs will concinue co grow, parcicularly in cases.
                           3/
involving multiple parties.
     The first purpose of Chis handbook is co provide a basic
understanding of insurance law and pocencial claims for relief
against insurers which will allow EPA and DOJ enforcement
I/  42 U.S.C. II 9601-9656.
2/  42 U.S.C. II 6901, ±t 1«£, «ose commonly 42 U.S.C. I 6973
3/  Host insurance policies are effective on an annual
~   basis, and generaeors commonly changed carriers
during the disposal period or had several policies in
effect at the same time.  Therefore, large RCRA/CERCLA
lawsuits can involve multiple insurance carriers and
multiple policy periods.

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                           -  2  -

lawyers to litigate  these  claims, as well as respond co
defences raised by insurance carriers.
     The second purpose of this handbook is to offer an
understanding of the  insurance requircaents of RCRA and
CERCLA.  Under the financial responsibility regulations
promulgated pursuant  to Section 3004(6) of RCRA, each
owner or operator of  a hazardous watte management facility
oust maintain liability insurance against both sudden
                           y
and accidental occurrences.   An owner or operator of a
hazardous waste facility may also satisfy post-closure
care financial assurance requirements by obtaining post-
closure insurance."   The handbook will review these regu-
latory requirements and their enforcement through compliance
actions, and will also briefly address the insurance program
provided for in Section 108 of CERCLA, which has yet to be
implemented.
     Finally, the handbook is intended to.serve as a basic
reference resource.   Some  of the best articles  and notes on
insurance issues are  included as appendices and, in the
case of tome ittuet,  are referenced in lieu of primary
discussion.  In addition,  an alphabetical compendium of
selected catet appears at  the back of the handbook.
4/  40 C.F.R. 264.147.
5/  40 C.F.R. 264.143(e)

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                           - 3  -

 I.   Types  of Policies  Issued
     General  Introduce ion
      The standard  liability insurance  policy is  broken  down
 inco three sections:   (1)  declarations;  (2)  the  statement
 of  general liability;  and  (3)  Che  standard  coverage sections,
 The declarations section contains  general atateaents of the
 incenc  of  the parties  and  the  naaes of  the  insurer and
 the insured.   The  stateoent of general  liability contains
 Che definitions applicable to  che  policy and the provisions
 common  to  the various  standard coverage  sections.  The
 standard coverage  sections constitute  the bulk of the
 policy  and contain the insuring agreement and exclusions,
                                              6/
 including  any pollution exclusion  provisions.'   The standard
 coverage section usually includes  che  insurer's  promise
 to  pay  on  behalf of che Insured and che  insurer's duty
 to  seecle  or  defend claims againsc che  insured alleging
                                                          If
 bodily  injury or property  damage covered under che policy.
                                                          v
.,     The interpretation of che insurance policy  should begin
 vich a  review of che standard  coverage  seccion.  Most
 insurance  policies only obligace che insurance carrier co
£/  See pp. 20-24 for  a  detailed discussion of  che pollution
~   exclusion.
II  The insurance carrier  has  a ducy  co defend  che insured
    even  if che  claims are groundless, false or fraudulent
See Jackson Tovnship v.  Hartford Ace. & Idem. Co.. 186
H77. Super. 156, 160 (1982)  unciuoeo in  the compendium).

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                           . 4  -

dtftnd against  any  suit  seeking  "damages"  or  co  pay  on behalf
of  Che insured  "damage*"  covered under  che terms  of  the
policy.  Thus,  ic is  important eo examine  Che  scope  of
coverage of  che insurance  policy in reviewing  any potential
referral or  suic againsc a carrier.              ,
     Claims  for injunccive or ocher equitable  relief usually
are not included expressly within che coverage of the insurance
policy.  Nonecheless, several courts have  suscained claims
co recover coses of abatement or response  incurred by the
insured.  See discussion below ac pp. 17-18.   CERCLA Section
107 damages  and response cose claims generally will be
covered, or  a cognizable claim may be made.  Claims  for
penalties under CERCLA Seccion 106(b) or punitive damages
under CERCLA Seccion  107(c)(3) may also be  covered under
che policy,  although  some  insurance agreements specifically
                                      2"
exclude coverage for  punitive damages.   The referral
package prepared by EPA should include, if  information is
available, a discussion of che policies which were issued  .
co chc responsible parcy and copies of ehe  policies.
     There are  two basic types of insurance policy.  The
firsc is che eradicional casualcy insurance concracc known
aa che Comprehensive  General Liabilicy Policy  (CCL).  The
scandard CCL policy covers aceideneal or sudden bodily injury
and propercy damage from an "accidenc," or  "occurrence," during
8/  Hose policies are  silenc regarding coverage for punitive
*   damages.  Some scaces have allowed claims by chc insured
for punitive damages paid to the  federal government.

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                           -  5 -

the policy period,  regardless of when  che claim  is actually
eade.  Since about  1970, CCL policies  generally  have attempted
to exclude coverage of any hazardous substance injuries
that were not "sudden and  accidental"  in nature  and contain
a "pollution exclusion" to chat effect.  These clauses
have not succeeded  in excluding coverage in a broad range
of situations involving hazardous waste "damage."
     The second type of policy is Che  "claims-made" pollution
liability, or Environmental  Impairment Liability (EIL)
policy.  The EIL policy covers the insured*s liability for
bodily injury and property damage resulting from gradual
pollution or cleanup costs incurred.   It is called a "claims-
made" policy because it covers only claims made during the
term of che policy.  The EIL policy is analogous to health
or life insurance,  where cue claimant  is not required to
make a showing of accidental injury.   One class of claims-
made pollution'liability policies is specifically designed
to enable owners and operators of hazardous wasce treatment
storage and disposal facilicies co qomply with RCRA's finan-
cial responsibility requiremencs.  For brief descriptions
of che various types of policies which have been issued
                                        2/
and key typical clauses, tee Appendix A.
A.  The Comprehensive ;*:   si Liability (CCL) Policy
     There are three types of coverage available under CCL
policies.  The first is premises and operations hazard
9/  T. Smich, Jr., "Environmental Damage Insurance -- A
    Primer," reported at VII Chem. & Rad. Waste Lit.
    Rptr. 435*(1983).

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                           . 6  -

coverage.  This  coverage  is for  liabilities  resulting  froa
a condition  on the  insured's premises  or  froa  the  insured's
operations in progress, whether  on or  away froa the insured's
preaises.  This  type  of policy would cover the owner or
                       !£/
operator of  a facility,   whether the  hazardous waste  facility
was active or inactive, as  long  as the disposal, storage or
treataent was still in progress.
     The second  and third areas  of CGI coverage are product
hazard coverage  and coopleted  operations  hazard coverage.
These two, originally ccabined,  are now separate and
distinct.  Product hazard coverage covers injuries arising
out of product use, and is  probably irrelevant to virtually
all CERCLA claims, unless the  court can be persuaded to
view a pollutant as a produce.   In addition, the event of
release probably must take  place after relinquishaent of
control by the generator, and  away froa the generator's
preaises.  Completed  operations  coverage may afford a
soaewhat broader basis for  recovery, but  is nontheless
subject co limitations which would recuire appropriate
facts and careful pleading.  See Appendix C, pp. 562-563
for * suoaary discussion of key  faces  of  both product hazard
and completed operations coverage.
     The standard coverage  section of  a general liability
policy sets  out  the scope of the insurance agreeaent and
the exclusions applicable co claims oade  by the insured.
H)/  CZRCLA Section  107(a), 42 U.S.C. 9607(a).

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                            •  7  -
The exclusions to the scope of  Che  insurance coverage muse
                                I!/
be clearly and precisely drafted.   The exclusion which

insurers invoke against • claims  for daaages created by

hazardous wastes is the pollution exclusion.  The standard

pollution exclusion reads:

     "This insurance does not apply ... to bodily
     injury or property damage arising out of the
     discharge, dispersal, release or escape of
     smoke, vapors, toot, fumes, acids, alkalis,
     toxic chemicals, liquids or gases, waste
     materials, or other irritants, contaminants
     or pollutants into or upon land, the atmosphere
     or any water course or body of water; but this
     exclusion does not apply if such discharge.
     release or escape is sudden and accidental."
   .  (Emphasis added.)

The historical development of this exclusion to the standard

liability policy provides a key to understanding recent

interpretations of the applicability of the pollution

exclusion to hazardous waste cases.

B.  Development of the Pollution Exclusion

     The first standard.fora for general liability insurance

policies was developed in 19&0.  The model policy provision

was drafted to include liability for all claims made by

Che insured that were "caused by accident."  This provision

was widely interpreted by the courts to include coverage

for common lav nuisance claims for environmental damage if
11 /  Because the insurer selects the language for the policy.
    the exclusions are generally interpreted in favor of the
insured.  An exclusion must be drafted with clear and exact
language to be given effect by the courts.  See e.g. Allstate
Ins. Co. v.--Klock Oil Co.. 426 N.Y.S. Zd 603TS.YTApp. 1980)
(induced in tne Compendium).

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                            - 8 -

 che pollueanes were suddenly ano^accidencally discharged":"7
      In 1966, Che Insurance Racing Board developed a new
 model concracc which covered claiaa "caused by occurrence"
 racher ch«n claiaa "cauaed by accidenc."  The Board defined
 occurrence broadly co include "an accidenc," including
 concinuoua or repcaeed exposure co condicions,  which results,
 during che policy period,  "in bodily injury or  propercy
 daaage neicher expected or incended from che scandpoinc  of
 che insured."  The new language required a finding chat  che
 daaages were  noc  foreseeable or incended.   However,  che
 courts concinued  co hold insurance companies liable  for
 environaencal daaages even where che pollueion  was foreseeable
 if  chc daaages were accidencal."""  In 1973,  comprehensive
general liability policies were revised  co include che
           *
pollueion  exclusion clause.  See p.  7 for  che cexc of
che exclusion.  The courts which have interpreted  che
pollueion  exclusion clause have agreed on  chree relevant
poincs:  (1)  che  insurer has  che burden  of proving noncovtrage;
(2) ehe exclusion applies  eo  the ineencional polluter; and
                        • —
(3) the exclusion does  noc apply co  entitle* which neicher
expecc nor intend their conduce eo result  in bodily  injury
12/ See Appendix C, Hourihan, "Insurance Coverage for Environ*
    mental Daaage Claias" IS Forua 551, 552 (1980).
13/  Grand River Liae Co. v. Ohio Casualty Ins. Co.. 32 Ohio
   •App. Zd. 178, 289 N.E. 2d ^60 (1972).

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                            - 9  -

                                                 ii/
or property damage.  See discussion at pp. 20-24.
C.  The Envlronaental Impairment Liability (EIL) Policy
    Regulations promulgated pursuant to. RCRA (tee notes
4 and S) have prompted several  insurance carriers to offer
first party insurance coverage  -• that is, coverage for
injuries caused by the insured, obtained by the insured.
     The most common of these "claias-made" policies is the
EIL policy, which generally provides insurance coverage for
personal injury and property damage only from gradual
pollution, but not that which is sudden and accidental.
Off-site cleanup costs, including those incurred to avert
a loss, are typically covered;  on-site cleanup costs are
not.  Also typically excluded from EIL policies -are coverage
of oil and gas drilling, liability arising from nuclear
fuel, damage to property owned  or occupied by the insured,
fines or penalties, punitive damages, costs of cleaning up
pre-existing conditions at any  site owned or leased by
the insured, and coats of maintenance or routine cleanup.
0-.  Insurance Services Office (ISO) Policy
     Another type of "claims-made" policy is the ISO
pollution liability policy — also developed in response
                                 i •                        •
to RCRA regulatory insurance requirements.  ISO policies
!£/  For a detailed history of  the development of the pollution
     exclusion, see Appendix D, S. Hurvicz & D. Kohanc, "The
Love Canal - Insurance Coverage for Environmental Accidents,"
Insurance Counsel J., July 1983, p. 378.

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                           - 10 -

 provide  indemnification  and defence  coverage for pollution-
 caused bodily  injury  and property  damage  and reimbursement
 coverage for pollution cleanups imposed by  lav or voluntarily
 aasuaed  with the  concent of 'the insured.  Insurance coverage
 under 'an ISO policy is also extended  to sites  used by the
 insured  for storage or treatment but  which  are operated
 by others.  Costs of  defense are provided apart  from
 the liaits of  liability.   The  policy  excludes  from coverage
 damages  which  are expected or  intended by the  insured,
 costs of cleanup  for  sites owned,  operated  or  used by
 the insured, liability froa abandoned sites, or  liability
 arising  froa che  intentional violation of statutes or
 regulations, but does cover both gradual and sudden and
accidental daaages and injuries.
     Despite an increase  in "claims-made" environmental
 insurance policies, coverage for.pollution-related
damages  under  an EIL or  ISO policy is still rare.  It is
much more likely  that a  potential  EPA hazardous  waste
enforcement aceion will  involve a general liability
policy (CCL).
III.  Judicial Construction ofCCL and CCL/Pollution
      Exclusion Policies' •
      A.  Construction of CCL  Policies Generally
     Decisions generally construing CCL policies have focused
on several issues:  whether a  covered "accident" or "occurrence"
has taken place, whether  damage to Che affected  "property"

-------
it eovcrtd, what statute of limitations should be applied
and in what manner, what defenses are available to insurers,
and how should liability be apportioned aaong insurers and
insured*.  A discussion of these issues will be followed by
a separate discussion of pollution exclusion clause construc-
tion.
     1.  "Accidents" under pre-1966 policies.
     CGL policies written prior to 1966 insured against damage
or injury "caused by accident."  Early decisions considering
when events giving rise to an injury were covered focused on
whether or not the event vas "... [a]n event that takes •
place without one's foresight or expectations; an undesigned
sudden and unexpected event, chance, contingency."  United
States Fidelity & Guaranty Co. v. Briscoe. 205 Okla. 618,
239 P.2d 754. 757 (1951) (included in the Compendium).
quoting from Uebster's International Dictionary.  Thus.
cases addressing injuries arising out of consequences of the
insured'* business which were typical and obvious tended to
deny coverage while cases involving unintended consequences.
(even those arising out of failure to foresee that which
should have been seen) tended to affirm coverage.  Two articles
address these issues.  Appendix E, J. Coulka, "The Pollution
Exclusion." VI Chen. & Rad. Waste Lit. Rptr. 745, 745-748.
(1983) contains a succinct introduction to these cases.
Appendix F, C. Mitchell and J. Tesoriero. "Ufaen Does the
Occurrence Exist Under the General Commercial Liability

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                          • 12 -

Policy?," VII Chen. & Rad. Uaste Lit. Rpcr. 457 (1984),
provides an additional detailed background on the history
and development of both the "accident" and "occurrence"
clauses.
     2.  "Occurrences" under post-1966 policies.
     In 1966, most CCL policies began to insure against
damages and injuries arising out of an "occurrence" during
the policy period — leaving open the central question
of when an "occurrence" has taken place and the related
issue of whether sequential or multiple occurrences have
taken place.  The former question is critical in evaluating
which policy or policies may provide coverage and occasionally
whether the statute of limitation may have run on the claim.
The latter question is critical to these issues, to what
policy limits or multiples of limits may apply, and to issues
                                H/
of apportionment among carriers.
     CGL policies generally define an occurrence as "an
accident, including continuous or repeated exposure to
conditions, which results in bodily injury or property
damage neither expected nor intended from the standpoint
IS/  If insurance coverage exists for the entire relevant
     period of time, but the plaintiff cannot establish when
the damage began or how it was apportioned during the period
of time, courts will normally only require the plaintiff to
prove that damages occurred, and leave to the insurance
companies the burden of allocating the damages among then-
selves.  See Appendix G, Hourihan, "Insurance Coverage for
Environmental Damage Claims," IS Forum 551, 559 (1981).

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                           - 13 •

 of cht insured."  The theories upon which courts have
 determined whether and when a covered "occurrrence" has
 happened are several, having evolved to sect generic fact
-patterns.  A discussion of those theories follows.   See
 generally Appendix F and Appendix 0, Charles Maher,
 "Asbestos Extravaganza," 5 Calif. Lawyer 60, 62-63  (June
 1985).
      In stuple property damage cases not involving  slow
 accumulation of damage, the general rule is that there
 is no "occurrence" until the actual ham for which  relief
 is .sought manifests itself.  National Aviation Underwriters.
 Inc. -v. Idaho Aviation Center. Inc.. 93 Idaho 668,  471
 P.2d  56 (1970).  See also Annot.. 57 A.L.R. 2d 1385 (1958).
 This  rule is generally known as the manifestation theory.
      On the other hand, in cases where daaages are  sought
 for sickness or disease resulting from long term exposure
 to toxic substances, courts have found that actual  injury
 occurred during the policy period in which exposure alone
 occurred.  Insurance Company of Horth America v. Forty-
 Eight'Insulations.. Inc.. 451 F.Supp. 1230 (E.D. Mich. 1978).
 affd 633 F.Zd 1212 (6th Cir. 1980).  This rule is  generally
'called the exposure theory. .In addition, in contrast to
 ordinary property damage cases where the manifestation
 theory applies, in property damage cases where daaages
 slowly accumulate, courts have generally applied the
 exposure theory in determining insurance coverage.   So
 long as there is any tangible damage (even if minute)

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                           -  14  -

resulting from exposure,  che courcs have allowed  coverage
froo chat time, although  che damage nay noc manifest  icself
uncil ouch lacer.  See, e.g.. Champion International  Core.
v. Continental Casualty Co.. 546 F.2d 502 (2d clr. 1976),
cert; denied, 434 U.S. 819 (1977); Porter v. Aaeriean Optical
Corp.. 641 F. 2d 1128 (5th Cir. 1981); Union Carbide Corp. v.
Travelers Indeanity Co..  399 F.Supp. 12 (U.D._Pa. 1975); and
Cruol Construction Co. v. Insurance Co. of North Aaerlca.
11 Wash. App. 632 524 P.2d 427  (Wash. Ct. App. 1974).
     Thus., it appears that application of the exposure theory
is appropriate in the context of CCRCLA hazardous waste liti-
gation, since tangible injury and damage to the envtronoenc
can occur soon after exposure co hazardous wastes, although
danage aay not aanifest itself  until ouch later.  At  least one
court has held that where a landfill leaches toxic waste into
ground water over a nuaber of years and ham results, the
                                  16/
exposure theory should be applied.    Application of the
exposure theory in the CERCLA context means that coverage *"
would be triggered under  the insurance policies from the
tiae when the environaent was first exposed to the hazardous
wast*.  Presuaably, under che exposure theory, all policies
fro* che tiae ef disposal forward would be implicated^ so
long as soae tangible damage eo che environaent could
be shown to have occurred at the tiae of exposure and to  .
have continued thereafter.
1^67  Jackson. Tovnshio v.. Aaeriean Hones Assurance Co.. Docket
     L-29236-80 (N.J. Supar.)  (unraoorteo). citeo in Jacicson
Tovnahip v. Hartford Ace. & Indeanity Co.. 186 N.J. Super. 156.
165-166 (1982) (included in the coapcndiua).

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                          - 15 -

     Notably, application of cht exposure  theory  co trigger
insurance coverage does not necessarily rule out  application
of the manifestation theory eo trigger subsequent coverage.
In some cases, in order that'the purpose of the policy not
be undercut and in order eo protect the reasonable expectations
of the insured, the insurance coverage during the period of
manifestation of the injury or daaage is also triggered.
See Kcene Corporation v. Insurance Company of Rorth America.
667 F.2d 1034, 1045 (D.C. Cir. 1981).  This approach is
commonly taown as the "cripple-trigger" or "continuous injury".
cheory.
     The application of the exposure, manifestation, and
triple-trigger theories has frequently risen in the analogous
concexc of the asbestos-related disease cases.  In those
cases dealing with a slowly progressive disease in which
tissue daaage occurs shortly after initial inhalation
(exposure), the courcs have generally favored che more
generous exposure and triple-trigger theories.  See. Porter
v.- American Opcieal Corp.. supra; Insurance Co. of North
Aaerica v. Forty-Eight Insulations. Inc..  supra; and Keene
Corp. v. Insurance Company of North America. supra.
(applying both che exposure and manifestation theories
co crigger atxiaum coverage under che policies.).  One district
court, however, has adopced solely che manifescacion theory
in an asbescos relaced disease case.  See Eaele-Pieher
Industries v. .Liberty Mutual Insurance Co.. 523 F.Supp.
110 (D. Mass. 1981).

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                           .  16 -

     Thertfore, although only one unreporced scact trial
court decision has addressed  chis issue in che hazardous
waste context, there is strong analogous authority to
support application of the more expansive exposure theory
to trigger insurance coverage in waste cases.  Moreover,
there is some analogous authority to support application
of both the manifestation and exposure theories to trigger
insurance coverage.  Consequently, once a pollution incident
has been determined to constitute an "occurrence" not excluded
from coverage under a pollution exclusion clause, there
should be little problem in triggering coverage under the
maximum number of policies by application of these theories..
     Finally, the question must be answered of how many
"occurrences'* have taken place, where the injury continues
over a period of time and may manifest itself in distinct
and separate kinds of damages.  Courts determine the fre-
quency of the "occurrences," for purposes of applying a
policy's per occurrence limit or deductible provisions, by
                              !!/
applying one of several tests.    For a discussion of each
of these toes, see generally Appendix G. pp. 559 et. seq.
 /  Generally, chase tests include:  the "effect test"
~   (looking eo the vantage of the injured party and  .
commonly findlnc more than one "occurrence"); the
"causation test1* (widely accepted view baaed on examination
of cause); the "tine and apace test" (focusing on proximity
of cauaative factors in time and space), the "operative
hazard teat" (exaaining the number of distinct causative
acts); and the "average person test" (which is what it
seems -- the favorite of judges not enamored with more
abstract, rationalized standards).

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                            -  18  -

 and Riehl v. Travelers  Ins. Co.. Civ.  No.  83-0085  (W.D.
 Pa. Aug. 7, 1984), VIII Chem. &  Rad. Waste Lie.  Rpcr. «39
 (included in che Compendium)  (coverage of  CERCLA potentially
 reponsible party's abatement'costs).   For  a more detailed
 discussion of chis issue, see Appendix I,  M. Rodburg and
 R. Chesler of Lowenstein. Sandier, Brochin. Kohl. Fisher.
 Boylan & Meaner, "Beyond che Pollution Exclusion: [etc.],
 (1984), pp. 364-369; and Appendix J, K. Rosenbaum,
 "Insurance, Hazardous Waste, and che Courts:  Unforeseen
 Injuries, Unforeseen Law."  13 ELR 10204, 10205-10207
 (July 1983).
     5.  Statute of limitation questions.
     In scate common lav suits for injuries or damage, che
 court's choice among exposure, manifestation, and triple-'
 trigger cheories of occurrence may have a  substantial
relationship eo che running of the applicable statute of
 limitations..  Fortunately,  chis choice of  cheories to
 determine when injury or" damage "occurs** within the aeaning
 of a comprehensive general  liability policy would not
 determine when che seacuce  of limicacions  should commence
                     18/
 running under CERCLA.    Ochervise. che dace chac injury
13y  Under Section 112(d) of CERCLA. 42 U.S.C. 9612(d)
                         i •
        No claim may be .presented, nor may an
        aceion be commenced for damages under
        chis cicle, unless chae claim is
        prcsenced or aceion commenced within
        chree years from che dace of discovery
        of che loss or che dace or enactment
        of chis Ace, whichever is later . . .

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                            -  17 -

3.  Apportionment of  liability among iniurers and  insureds.
     Determinations concerning Che number and duration of
"occurrences" can have a •ubttantial iapact upon the extent
to vhi£h multiple carriers  of a single or many insured parties
may be liable — a problem  greatly compounded by the technical
complexity and large  numbers of defendants typical in hazardous
waste litigation.  For a thorough treatment of the theories
for determining when  "occurrences" take place and the conse-
quential application  of those theories to apportionment
problems, see Appendix H, Note, "The Applicability of General
Liability Insurance to Hazardous Waste Disposal," 57 So. Cal.
L. Rev. 745 (1984).
     4.  The scope of "property damage" coverage.
     Courts have become progressively more willing to extend
covered "property damage" to costs of voluntary and compulsory
remediation — especially where the insured is responding to
conditions which may  result in further damage to property,
                                «:
health or the environment,  or where a governmental entity
may incur costs and seek eventual reimbursement.  See Lansco.
Inc. v. Dept. of Environmental Protection. 138 H.J. Super.
275 (1975) (included  in the Compendium) (coverage of on*site
spill reaediation required  by state law); US Aviex Co. v.
Travelers Ins. Co.. 125 Mich.  App. 579 (1983) (included in
                                *
the Compendium) (coverage of investigative and remedial
costs for state-mandated groundwater cleanup, founded upon
holding that groundwater was not property of the insured);

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                           - 19 -

or dotage is deemed co occur for purposes of statutes of
limitations is generally Che date of manifestation.  See.
e.g.. United States v. Kubrick. 446 U.S.  Ill, 123-24
(1979); Urie v. Thompson. 337 U.S. 163, 170-71 (1949).
     6*.  Defenses available co the insurer.
     Where an injured person may sue the insurer directly,
before or after judgment against the insured, that suit is
generally subject to all the defenses the insurance company
has against the insured, including the defense that the
insurance company has not received notice of the underlying
lawsuit as per eh* policy terms and deadlines, and the
defense that the insured has not cooperated with the
insurance company.  Centrally, judgment creditors stand in
the shoes of the insured and have rights no greater and no
less than the insured*s rights would be if it had paid the
Judgment and then sued Its insurance company eo recover the
amount paid.  Creer v. Zurich Insurance Co.. 441  S.U. 2d
15,30 (Mo. 1969); accord McHeal v. Manchester Insurance and
I nd earn in try Co.. 540 S.W. 2d 113,  119 (Mo. Ct.App. 1976)
(rights of the injured person are derivative and can rise
no higher Chan chose of the insured).  See also Appendix L,
Appleaan, Insurance Law as Practice SJ 4813-4817 (hereafter
"Appleam").
     Problems wich notice, etc.. may present considerable
difficulties during attempts by the United States to recover
for CERCLA costs against insurance companies.

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                             -  20  -

	 .   B.  Conscruecion  of  CCL/Pollution  Exclusion  Policies
      In  response  co  che judicial  interpretation of  the new
  "occurrence"  language  in  CCL  policies the  insurance industry
  developed a «pecific exclusion to  its policies which was
  meant, to clarify  insurance  coverage  for claims for  pollution
  damage.  See  pp.  7-9 for  exclusion language and history.
  This exclusion, referred  to as the "pollution exclusion."
  has now  been  incorporated into the printed provisions
  of most  commercial insurance  forms.  It was intended by
  the Insurance Rating Board  not to restrict coverage, but
  merely to clarify coverage  by the use of the new  language.
  The pollution exclusion disallows claias for bodily injury '
  or property damage due to a release  of coxic chemicals, waste
 materials, pollutants or  contaminants into the environment
 unless the release is "sudden and accidental."  There is a
  split of authority regarding  the meaning of these tens.
  Several  courts have held  that they are ambiguous, and have
  const trued the clause broadly  in favor of the insured.  In
  these cases,  coverage of  Che  polluter has been upheld.  In
  contrast, some recent decisions have held that the exclusion
 may apply Co  che  knowing, frequent hazardous waste polluter,
  and chat there is no ambiguity in che "sudden and accidental"
        »
  clause in such cases.
      Long-standing principles of insurance contract construc-
  tion include  the  requirement  that to be effective, an
  exclusion must be conspicuous, plain, and clear, and must
  be construed  strictly  against the insurer and liberally in

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                            - 21 -

 favor of cht iniured.  See, e.g.. Pepper Industries,  inc.  v.
 Home Insurance Co..  134 Cal. Rptr. 904,  67 C.A.3d 1012  4th
 Dist. (included in the Compendium).   Any ambiguities  oust
 be resolved in favor of the insured.   See, e.g..  Abbie
                                                        t
 Uriguen Oldsmobile-Buiek.  Inc.  v. United States  Fidelity
 Ins. Co.. 95 Idaho 501, 511 P.2d 783  (Idaho 1973)  and note
 11. supra.  The courts that have considered the  pollution
 exclusion clause have almost unanimously held  it to be
 ambiguous, since it is fairly susceptible to two different
 interpretations.  As such,  they generally have resolved that
 ambiguity in favor of the  Insured. See, e.g..  Union  Pacific
 Insurance Co.  v. Van Westlake Dnion.  Inc.. supra;  Niagara
 County v. Utica Mutual Insurance Co..  103 Misc.  2d 814, 427
 N.Y.S. 2d 171  aff'd 439. K.Y.S. 2d 538 (1981)  (included in
 the Compendium); and MoIton. Allen &  Williams.  Inc. v.  St. Paul
 Fire & Marine  Ins. Co.. 347 So.2d 95,  99 (Ala.  1977)  (included
 in the Compendium).                                         •
      The terms of the pollution exclusion clause focus  on
 the insured'•  intent in the actual discharge of  the pollutant.
 The definition of "occurrence," on the other hand, focuses
 on the insured*s expeecacion or intent vith regard to
 causing damage or harm. The majority of courts,  taking a
 broad view of  insurance carrier's liability, have interpreted
 •
'the pollution  exclusion clause, together vith  the definiton.
 of "occurrence." to provide coverage  except where there is
 an intentional consequence, caused by a  polluter who  expects
 or intends his conduct to  cause damage.   See,  e.g.. Allstate

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                                - 22 -

    Insurance Co. v. Klock Oil  Co.. supra (Included in the
  .  jCompendiua); Union Pacific  Insurance Co.  v. Van's Uesclake
    Union. Inc.. 34 Wash. App.  208, 664 P.2d 1262 (Wash. 1983);
	Jackson Township Municipal  Utilities Authority v. Hartford
    Accidtnt & Indemnity Co.. 186 H.J.  Super. 156, :451  A.2d
    990 (M.J. Super App. Div. 1982) (included in the Coaptndiua).
		In Lansco Inc. v. Department of Environmental Prottction.
    supra at p. 282 (includtd in the Compendium) ,  tht court found
    that tht tern "sudden." rather than meaning "brief or of short
    duration," oeans "happening without previous notice or on
    very brief notice; unforeseen; unexpected; unprepared
    for."  The ten "accidental" aeans happening "unexpectedly
    or by chance."  The court therefore concluded: .
              . . . under the definition of "occurrence"
              concained in the  policy, whether the
              occurrence is accidental must be viewed
              from the standpoint of the insured and
              since the oil spill was neither expected
              nor intended by Lansco, it follows that the
              spill was sudden  and accidental under the
              exclusion clause  even if caused by the
              deliberate act of a third party.
              Similarly, in Union Pacific Insurance Co.. supra.-
    a massive gasoline leak occurred at the insured's gas
    •cation.  Approximately 80.000 gallons of gasoline leaked
    out of a small hole in an underground gasoline pipe over a
    period of months.  Despite  the policy's requirement that
    an occurrence be "sudden" or else subject eo the pollution
    exclusion clauee. the court held that the leaking fron'the
    line was not .expected nor intended, nor was the resulting
    damage.  Therefore, the pollution exclusion clause did not

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                            - 23  -

exclude coverage.  664 P.2d ac 1266.  See also Allstate
Insurance Co.. supra ac 605, where  the court states that
the discharge or escape of gasoline could be boch sudden
and accidental, even chough undetected for a substantial
period, of time, since "sudden," as used in pollution exclusion
clauses, "need not be liaited eo an instantaneous happening."
     A few courts have refused to find any ambiguity in
tne tens "sudden and accidental" where Che insured knowingly
discharges a substance as a normal feature of operations,
but.has no expectation of intent to cause daaage.  In Great
Lakes Container Corp. v. Rational Union Fire Ins. Co.. 727	
F.2d 30 (1st Cir. 1984) (included in Che Compendium) the
court determined chat no insurance coverage was provided to
Great Lakes in connection"with a CERCLA action by the
United States against Great Lakes.and others for hazardous
waste contamination.  Notably, the district court and the
First Circuit focused-on two documents in deciding, whether   -
insurance coverage was triggered:  (1) the comprehensive
general liability insurance policy; and (2) che United
                               ^
States' complaint against Great Lakes.  Because the United
States' complaint alleged that Great Lakes was liable for
contamination which "hat taken place as a concomitant of
its regular business activity .  . . ". che First Circuit
determined ehac no sudden o> accidental occurrence triggering
coverage was alleged.  The court found chae there is no
ambiguity in che policy "when che policy is read againsc
che cooplainc."  Thus, where insurance is or.may be a

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                            - 24 -

factor, cart mutt be taken  to avoid counterproductive
pleading.
     The U.S. District Court for the Eaatern District of
Michigan followed the Great Lakes decision in Aaerican
States Insurance Co. v. Maryland Casualty Co. 587 F. Supp.
1549 (E.D. Mich. 1984) (included in the Coapendiua).  The
  *
court held that the insurance companies did not have a
duty to defend or indemnify the company because the under-
lying National Drum litigation involved the continued,
non-accidental dumping of waste at the site.
     In summary, the general and widely accepted view is
that CCL policies with pollution exclusion clauses provide
coverage for pollution incidents where either the discharge
itself or the resulting damage is unexpected or unintended.
But, under the First Circuit's decision in Great Lakes
Container, supra. the discharge must be "accidental."  For
example, coverage exists for pollution incidents which
involve gradual seepage or  leaking which is unexpected or
unintended.
                      •*»
III. Construction of EIL and ISO Policies
     A.  The EIL Policy
     The Environmental Impairment Liability (EIL) policy
                                                     •
was developed to provide coverage for liabilities not
thought to be covered by CCL policies following development
of the pollution exclusion  — that is, claims for property
damage and personal injury  such as bodily injury, mental
anguish, disability, death  at any time — present or in

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                            • 25 -
                                       .*•*
cht future — caused by non-sudden, non-accidental  "environ-
mental  impairment."  These  policies have not been the subject
of significant Judicial construction.  For an excellent
discussion of their terns,  issuance and use, see Appendix K
   t
P. Mil'vy, "Environmental lopainent Liability Insurance
and Risk Assessment,"  The  Environocntal Forum, Oct. 1982,
p. 30.
     B.  The ISO Policy                               _
          The Insurance Services Office (ISO) policy is
generally more limited.  The EIL policy — restricting
coverage to daaages and losses arising out of a "pollution
incident," which includes only "direct" releases that result
in "injurious amounts" of pollution — is generally believed
to cover only fortuitous daaages, not those which are
"expected or intended."  These policies have not been the
subject of significant Judicial construction, but their
terns are discussed in'Substantial detail and contrasted
with chose of EIL policies  at Appendix A. pp. 449-433.
IV.  Statutory Insurance Requirements
     A.' RCRA Financial Responsibility Requirements
     Under section 3004(6)  of RCRA. EPA must establish
standards "as may be necessary or desirable" for .financial
responsibility. Including financial responsibility for
corrective action, applicable to owners and operators of
                                                            J
hazardous waste treatment,  storage, and disposal facilities.
i9/  42 O.S.C. I 6924(a)(6).

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                            -  26  -
                               ** "*
Tht 1984 amendments co RCRA added  in section 3004(c)  chac
financial responsibility may  be  established by any one
or a combination of che following: insurance, guarantees,
surety bonds, letters of credit, or qualification as a
             J2£/
self•insurer.    RCRA also  requires owners and operators
of facilities with interim  status  to certify that the
facilities are in compliance  with  financial responsibility
requirements.*"
     The regulations require  each  facility owner or operator
to certify financial assurance for both closure and post-closure
activities and to maintain  liability insurance against both'
sudden accidental and non-sudden accidental occurrences.
The requirements constitute Subpart H of Parts 264 and 265
of 40 C.F.R.  Part 264 contains  standards that apply to
interim status facilities.  RCRA also provides for interim
authorization of state programs  chat are substantially equiva-
lent to the federal program.  Many states have some type of
                        •
financial requirements for  closure and post-closure, but
they vary considerably from seace  co state..
     The first step to establish financial assurance for
closure and post-closure is to estimate the cost of closure
and the annual cost of post-closure monitoring and maintenance.
20/  42 U.S.C. §6924(c).
21/  42 U.S.C. Section 6925(e)(2)(B) and (e)(3)(B)

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                           - 27 -

The anoune of financial assurance must ac lease equal che
adjusted cose estimates.  The owner and operacor may use one
or acre of several aechanisas allowed by the regulations to
meet the requireaencs.  As noted above, the possible aechanisas
include cruse funds, surety bonds (that eieher guarantee pay-
aenc into a 'Cruse fund or guarantee performance of closure
or pose-closure), letters of credit, and insurance;  or the
owner or operator aay aeec ehe requireaenc by satisfying
a financial test chae provides a corporate guarantee of
                        22/
closure or pose-closure.    To aeec Che financial assurance
requireaencs, an owner or operaeor aay use aore Chan one
of che options, except Che financial test aechantsa.
One opcion Bay be used co assure funds for all facilities
of one owner or operator.  The aost ofcen used mechanism
is che financial cest (abouc 80 percent) and che least
used is insurance (abouc 2.7 percenc).  EPA will release
ehe facilicy froa che financial assurance requireaencs
afcer receiving certification chac closure has been
accomplished as aec ouc in the closure plan.
     Closure and pose-closure insurance ause sacisfy a number"
of requiremencs.  The owner or operacor must subaic a cercifi-
cace of insurance co the Regional Administrator.  The .policy
muse be insured for a face aaounc ac lease equal co che
227  40 C.F.R. 264.143. 265.143.

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                            -  28  -

closure or pott-closure cost  estimate, and  it muse guarantee
that  the  insurer will pay for Che closure or post-closure
activities.  If Che cose of closure or post-closure is
significantly greater Chan Che face anounc of che policy,
EPA aay withhold reiaburseaent of funds.  The owner or
operacor may noc terainace che policy vichouc EPA approval,
nor nay che Insurer cancel ehe policy excepc for failure
Co pay che premium.  Even upon failure co pay che premium,
che insurer eannoc cancel che policy if within 120 days
of notice of failure, che facility is abandoned, interim
status is eerminated, closure is ordered, or ehe owner or  '
                                                      23/
operacor is named a debcor in a bankruptcy proceeding.
      In addicion eo che closure and pose-closure financial
assurances, che owner or operacor must demonstrate financial
responsibility for claims arising from ies operacion for
                                                      24/
personal injuries or propercy damage Co ehird pareies.
For sudden accidencal occurrences, che owner or operacor
muse mainCain liabilicy coverage of ae lease SI million per
occurrence vieh an annual aggrefftee of ae lease $2 million.
For non-sudden accidencal occurrences, ehe owner or operacor
of a  surface iapoundaenc, landfill, or land ereacaenc facility
must maintain liability coverage of ae lease $3 million per
occurrence vieh an annual aggregaee of $6 million.  The owner
237  40 C.F.R. 264-U3(eH8), 40n C.F.R. 265-U3(d) (8).
24/  40 C.F.R. 264.147, 265.147.

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                           - 29  -

 or operator may demonstrate financial responsibility by
                                                            25 /
 having liability insurance, as  specified  in che regulations—
 by passing a financial test for liability,  or by using  both
 mechanisms.  Variances from these  requirements are  available
 if the owner or operator demonstrates that  the levels of
 insurance are higher Chan necessary.   Conversely, the Regional
 Administrator may impose higher levels of coverage  if warranted.
      The owner or operator must continuously provide liability
 coverage for a facility until final  closure.  Therefore, after
 final closure, claims for personal injury or property damage
 to third parties arc no longer  covered by insurance required
 by RCRA.  However, upon eventual transfer of liability,
 CERCLA's Pott-Closure Liability Trust Fund  will assume  "the
 liability established by this section or any other  law  for
                                                          267
 the owner or operator of a hazardous  waste  facility.  .  .".
 B.  CERCIA FIHAHCIAL RESPONSIBILITY REQUIREMENTS
                           Z7/
      CERCLA Section 108(a)  requires chat  Che owner or operator
'of each described vessel "carrying hazardous substances
 as cargo" maintain at least $5  million in "evidence of
 financial responsibility."  Proof  may be established by
 any combination of "insurance,  guarantee, surety bond,  or
 qualification as a self-insurer."  This requirement is
 essentially an expansion of preexisting spill response
 257   242 C.F.R. 265.147(a)(1).
 267   42 U.S.C. S 9607(K).  The  99th Congress  is considering
    ..eliminating the entire post-closure liability transfer
 scheme.
 277   42 U.S.C. I 132Hp).

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                          - 30 -
                                               287
program requircntncs under chc Clean Uater Ace.    Insurance
policies iaiued under chese programs should be considered
whenever a release from a vessel is involved.  CERCLA
              297
Section 108(b)   requires £..«.; the Admin is tracer, no       ~
earlier than December 11, 1985, promulgate financial respon-
sibility requirements for facilities not covered under the
RCRA subtitle C program.  Priority is to be given to "those
classes of facilities" which "present the highest level of
risk of injury."  This program has not begun, but should
be considered as a potential source of coverage after
December 11, 1985.
     Two articles discuss many of the above issues in
greater detail.  Appendix B, D. Jernberg, "Environmental
Risk Insurance," FIC Quarterly. Winter 1984. pp. 123, et
seq., briefly addresses the RCRA and CERCLA insurance
schemes and follows with a detailed discussion of coverage
under different policy cypes and examines various develop-
ments in che writinn of exclusions.  Appendix C, A. Light,
"The Long Tall of Liability, [etc.J." 2 Va. J. Nat. Res.
L. 179 (1982), discusses uncertainties concerning coverage
as between RCRA program insurance and the CERCLA post-closure
liability fund.
287  42 U.S.C. I 9608(4).
297  42 U.S.C. I 9608(b).

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                            - 32 -

"for bad faith etcher in negotiating or  in  failing to
negotiate the settlement of any elaia."  Thus, che United
States nay assert state direct action claias or assigned
bad faith claias in addition'to its federal direct action
claia.
     One likely enforcement issue occurs where the insured
is in bankruptcy.  RCKA Subsections 3004(t)(2) sad (3)
leaves open the question of whether the insurance proceeds
are part of the estate in bankruptcy.  Our probable position
will be that if the judgment is not satisfied from the
estate after a period of tiae specified by state law,
which is likely since it is in bankruptcy, then the proceeds
are not part of the estate and the government or other
claimants nay take action directly against the insurer for
the judgment.
     2.  CERCIA enforcement claias.
     The only express rights of action against insurance
carriers under CERCLA are authorized at subsections 108(c)
and (d), 42 U.S.C. 9608(c) and (d). and which provide:
         (c) Any claim authorised by section 9607
     or 9611 of this title may be asserted directly
     against any guarantor providing evidence of
     financial responsibility as reported under
     this section.  In defending such a claia, the
     guarantor may invoke all rights and defenses which
     would be available to the owner or operator under
     this subchapter.  The guarantor aay also invoke
     the defense that the incident was caused by the
     willful misconduct of the owner or operator, but
     such guarantor may not invoke any other defense
     that such guarantor might have been entitled to
     invoke in a proceeding brought by the owner or
     operator against him.

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                           - 33 -


         (d) Any guarantor acting In good
     faith against which claims under this                 _."
     Act arc asserted as a guarantor shall
     be liable under section 9607 of this
     title or section 9612(c) of this title
     only up to the monetary.limits of the
     policy of insurance or indemnity contract
     such guarantor has undertaken or the
     guaranty of other evidence of financial
     responsibility furnished under this
     section, and only to the extent that
     liability is not excluded by restrictive
     endorsement: Provided, that this subsec-
     tion shall not alter the liability of any
     person under section 9607 of this title.

     The authorization of a direct claim against a guarantor

is limited to a "guarantor providing evidence of financial

responsibility as required under this section" (emphasis

added).  Section 108 has two provisions requiring evidence

of financial responsibility.  Section 108(a) requires evidence

of financial responsibility by the ovner or operator of

certain vessels and offshore facilities, in accordance with

regulations promulgated by the President.  Thus, once the

President or his designee promulgates such regulations, a

right of direct action is available against any insurer

issuing insurance under chose regulations to a covered
                            IP./
vessel or offshore facility.

     The second requirement for evidence of financial

responsibility is in Section 108(b).  Section 108(b)
307  The Coast Guard takes the view that section 108(a) of
     CERC1A "implicitly" repeals or supersedes financial
responsibility regulations under section 311(p) of the Clean
Water Act. 33 U.S.C. 1321(p), and that under the provision
section 302(c) of CERCLA, 42 U.S.C. 9652(c), the section

             [FOOTNOTE CONTINUED ON NEXT PACE]

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                            - 34 -

establishes a framework  for imposing financial  responsibility
rtquircment* on onshore  facilities, buc on a prolonged
schedule.  Not later than December 11, 1983. the President
is to identify the classes of facilities for which financial
responsibility requirements will be developed.  The actual
requirements are to be promulgated no earlier than December
11, 1985.  When the regulations are promulgated, they are
to impose Incremental financial responsibility requirements
over a period of not less than three years nor more than
six years from the date  of promulgation.  Thus, under the
framework established in Section 108(b), financial respon-
sibility requirements would not begin until at least December
11, 1985, and consequently, a direct claim against an
insurer under Section 108(c) could not be made until
after that date.""
          [FOOTNOTE CONTINUED FROM PREVIOUS PAGE]
311(p) regulations remain in full force and effect until
such time aa section 108(a) regulations are issued.
    Financial responsibility requirements and direct cause
of action provisions similar to chose contained in section
108 of CERCLA are also found in section 311(p) of the Clean
Water Ace, 33 U.S.C. 1321(p), and in section 305 of the Outer
Continental Shelf Lands Act Amendments of 1978, 43 D.S.C.
1815.
                                                »     *
    The authority to promulgate financial responsibility
regulations required under CERCIA section 108U) regarding
vessels and offshore facilities was delegated to the Coast
Guard by Executive Order 12418 (May 5, 1983), 48 Fed.Reg.
20891 (Hay 10, 1983).
31 /  This entire provision may be qualified in the same
     manner*as set forth in RCRA Section 3004(t) during
reauthorization of CERCLA in 1985.

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                           • 35 -

     Tht next quescion if whether some other federal claia
against insurers may be found or iaplied under CERCLA.
The two sections of CERCLA aost relevant to the possibility
of a right of direct action'against an insurer are Sections
107 and 108. 42 U.S.C. I 9607 and 9608.  Section 107 is
the vain liability provision of CERCLA and does not by its
tens include insurers among the list of responsible parties
listed in Section 107(a).  Section 107(e) preserves the
validity of insurance agreements, but does not implicitly
or explicitly authorize actions directly against insurers
by a party other than the insured.  As noted above, an
analysis of the language of section 108 reveals a legislative
intent to permit actions directly against financial respon-
sibility insurers, but only under limited conditions.
     A clear federal direct right of action under CERCLA
against insurance companies appears to be dependent upon the
issuance of financial responsibility regulations.  As to the
onshore facilities with which we deal most frequently, such
regulations vill not be promulgated until at least December
11. 1985.  In che interim, there is only a potential for
developing an Interstitial federal common lav, based on
the need for a uniform approach to the ^assertion of claims  .
generally allowed under state lav.  CERCLA section 302(c)
preserves financial responsibility regulations issued
under section 311(p) of the Clean Water Act and RCRA, as
well as all state direct action claims which the United
States may be entitled to assert.

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                           - 36 -

     B.  Assigned or Subrogated Cltias of eht Insured
         Assignaent After Judgment, Assignaent Before      • • .-
         Judgment, Assignment of Claims for Breach of
         Duties, and Assignments After Bankruptcy
     Thia ••ctlon will discuss whether and under what condi-
tions a defendant or potential defendant in a RCRA or CERCLA
case could assign its claia against its liability insurance
carrier to the United States.  As vith other insurance issues,
these are largely issues of State lav.  Accordingly,  specific
state authorities should be consulted before any strategic
decisions are aade.
     Resolution of assignment questions depends to a sub-
stantial degree on the factual context of the case.   This
discussion assuaes that the United States has a RCPA or
CERCLA claia against * defendant and that the defendant has
possible liability insurance coverage vith respect to that
claia.  If the defendant is a "deep-pocket," i.e., it vill be
able to satisfy any judgment against it, the United States
probably vould not want to take more than a passive role vith
respect to insurance, coverage issues.  Acordingly. for purposes
of further discussion, ve can assuae that the defendant has
little if any assets eo satisfy the CERCLA judgaent and that
the United States' primary hope for substantial recovery is
froa the insurance carrier.
                  Assignaent After Judgaent
     Fundamental Issues regarding the prosecution of direct
action claims against an insurer are usually dependent on

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                             - 37  -

vhcehtr a judgment has  yet been entered against  the  insured
defendant on  the claim.   If  it has, there are a  number
of possible aethods  for pursuing  claims directly against the
insurance carrier.   These may include, depending on  the
jurisdiction  and the insurance policy involved,   proceeding
as a third party beneficiary under the policy, as a judgment
creditor garnishee,  as an assignee, or proceeding under
applicable statutory provisions allowing direct  suit against
the insurance carrier.  See A. Windt, Insurance  Claims and
Disputes 365  (1984).  Of course,  if the insurance carrier
has defended  its insured without  a reservation of its
right to deny coverage, it can be expected to pay the
judgment, co  the extent of policy limits, without the need
for further proceedings.
     In the absence  of a policy provision providing  for
direct action by the injured party, the United States could
proceed after judgment via garnishment or applicable statutory
provisions allowing  direct claims against the.insurer.
Alternatively, an assignment could be taken of the insured's
righcs agaidst it's insurer, in partial or full settlement of
the United States' claim against  Che insured.
     Liability insurance policies generally have a provision
prohibiting assignments.  The following provision is typical.
      Assignment.  Assignment of  interest -under  this
      policy  shall not bind the company until its
      consent is endorsed hereon.
Nevertheless, courts have almost  uniformly held  that the
prohibition is one against assigning the general coverage

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                             -  38  -


provided by  eht policy before  loss,  snd  that  ic  does noc

encompass a  prohibition against assignment after a loss has

occurred.  The basis for  this  distinction has been explained

as follows:

     Although there is soae authority to the
     contrary, the great  weight of authority
     supports the rule that general  stipulations
     in policies prohibiting assignments thereof
     except  with the consent of the  insurer apply
     to assignments before loss only, and do not
     prevent an assignment after  loss, for the
     obvious reason that  the clause  by its own
     terms ordinarily prohibits merely the assign-
     ment of the policy,  as distinguished from a
     claim arising thereunder, and the assignment
     before  loss involves a transfer of a contractual
     relationship while the assignment after loss
     is the  transfer of a right to a money claim.

16 Couch on  Insurance 2d  163:40 (Rev. ed.); accord. 7

Appelman, Insurance Law & Practice §4259; Mancikis v. St.    	

Paul Insurance Co.. 655 F.2d 818, 826. (7th Cir.  1981) ("Policy

provision [against assignments], however, can only prohibit

assignment of policy coverage, not assignment of an accmeo

cause of action."); International Rediscount Corp. v. Hartford

Accident & Indemnity Co.. 425  F.Supp. 669 (D. Del. 1977);

and Brown v. State Farm Mutual Automobile Insurance Asso-

ciation. 1 111. App. 3d 47, 272 R.E. 2d 261. 264 (1971)

     Following an assignment,  the assignee stands in the
                                   •
•hoes of che Insured and will  be subject to any defenses that

che insurer  had against Che insured  prior to assignment.  See

A. Uindt, supra. at 367.  Thus, the  insurer can  assert.that

the claim is noc within che coverage of che policy or that

policy conditions have not been complied with.   Therefore.

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                             • 39  -

 cht value of «ny  Assignment  should be  examined  carefully
 prior  co its acceptance  as consideration  for  settlement.
                  Assignment Before Judraenc
     While an assignnent after judgaent is generally
 allowed', assignaencs before  Judgment present  special
 probleas and may  not be  appropriate in certain situations.
 At least two probleas arise  in the prejudgaent context.
     First, liability policies generally require the insured
 to cooperate with the insurer.  Assignaent of a claim under
 the policy against the insurer could be construed as a viola-
 tion of the cooperation  requireaent.  Such a  construction
would be likely if the insurer has agreed to  defend and has
not denied coverage.  The c —-•raeion clause  of a liability
 insurance policy will be deeaea violated where the insured,
by collusive conduct, appears to be assisting the claiaant
 in the aaintenance of his action.   14 Couch on Insurance.
supra. 151.115; and Brown v. State  Fara Mutual Automobile
 Insurance Association, supra. 272  N. E.2d at 264 (H(C)ollusion
in respect co liability  is,  of course, a direcc violation
of che non-cooperacion clauses of  the insurance policies"? and
 if established is a defense  eo ehe  insurer's liability.").
     However, in a situation where  ehe insurer has denied
       »                      "                        •
coverage and has refused t.?     nd, an assignaent should not
violate che cooperacion  requir«a«nc.  1C has generally been
held chac there is no duty eo cooperate once che insurer has
denied coverage.  14 Couch on Insurance, supra. 151.121; A.
Windt, supra, ac 97; Shemoff & Levine, Insurance; Sad Faith

-------
                             -  40  -


^Litigation.  I3.06[3]  (1984); and  see  Crltz  v.  Fanners  Insurance

Croup.  230 Cal. App.  2d  788. 41 Cal.  Rptr.  401  (1964).   In

Crltz,  the court  rejected  the  argument  that an  assignment of

rights  against the  insurtr violated the cooperation agreement

of  the  policy in  a  situation where the  insurer  had itself

failed  to coaply  vita the  policy.  230 Cal.  App. 2d at 801 .

The Court stated:

     Whatever may be  (the  insured*s]  obligation to
     the carrier, it  does  not  deaand  that he bare
     his breast to  the continued  danger of  personal
     liability.   By executing  the assignment, he
     atteapts only  to shield hiaself  from the
     danger  to which  the company  has  exposed him.
     He is doubtless  less  friendly to his insurer
     than he might  otherwise have been.  The
     absence of cordiality is  attributable  not
     to the  assignment,  but to his fear that the
     insurer has  callously exposed him to extensive
     personal liability.   The  insurer's breach  to
     narrows the  policyholder's duty  of cooperation
     that the self-protective  assignment does not
     violate it.

     The.other obstacle  to an  assignment before judgment is

the standard policy provision  ••  called the "no action"

provision -- requiring a judgment against the insured, or a

settlement consented  to  by the Insurer, before  suit is

commenced against the insurer.  One such provision provides:

    Action Against  Company.  Ho action shall lie
    against  the company  unless, as a  condition  precedent
    thereto, there  shall have  been full compliance with
    all of the terms  of  chit policy,  nor until  the
    amount of the Insured's obligation to pay shall
    have been finally determined  either by  judgment
    against  the insured  after  actual  trial  or by
    written  agreement of the insured, the claimant
    and the  company.

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                             - 41  -

See generally. 11 Couch on  Insurance, supra. §§44:318-44:323.-
Again. in situations where  ehe  insurer -has agreed to defend
ics insured, this provision will  likely prohibit any pre-
Judgnent assignment.  However,  an assignment may be possible
if che insurer refuses co defend.
     As noced above, the standard policy provision requires,
as a predicate to the insurer's liability, a Judgment or a
settleaent aaong the claimant,  the insured and the insurer.
If the situation which creates  the desire for an assignment
is one where the insurer refuses  to settle, a settlement
without the insurer's consent would not ordinarily create a •
basis for liability by the  insurer.  However, it has been
held chat if ehe insurer refuses  to defend ehe insured, the
insured may eneer ineo a reasonable settlement and, there-
after, seek reimbursement from  ics insurer.  This rule is
Stated by Appleaan as follows:
     If an insurer unjustifiably  refuses to defend a
     suit, the insured may  make a reasonable settlement
     or compromise of ehe injured person's1 claim, and is
     ch«n encieled eo reimbursement from the insurer,
     even though ehe policy purports eo avoid liability
     for settlement made without  ehe insurer's consent.
7C Appleaan, supra. 146*90.  In such a situation, che insured
may, as pare of a settlement, "simply assign eereain rights to
che plaintiff."  Id. See also Id. §4714.  In other words, ehe
settlement can include an assignmenc.
    Maneikis v. St. Paul Insurance Co.. 655 F.2d 818 (7th
Cir. 1981) illustrates this point.  There, Maneikis
initially sued an attorney,  Solotke, who represented him

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                           - 42 -

in * prior business matter.  Solotke1a professional liability
insurer, St. Paul Insurance, denied coverage and refused co
defend, claiming the aatter sued upon was not within scope
of the policy.  Thereafter, Maneikia and Solotke entered
into a' settleaent agreement of $200,000 to be satisfied by
Solotke's payment of $50,000 and his assignment to Haneikis
of his rights against St. Paul.  Haneikis sued St. Paul on
the assignment.  The trial court granted summary judgment
to St. Paul.  The Seventh Circuit reversed.  It found that
the policy provision prohibiting assignments did not apply
to assignments of an accrued cause of action and that an
"insurer's wrongful refusal to defend permits the insured
to negotiate a reasonable settlement."  ld_ at 827.  See
also Carter v. Aetna Casualty"and Surety Co.. 473 F.2d
1071  (8th Cir. 1973); Critt v. 'Farmers Insurance Croup.
supra; Samson v. Transaaeriea Insurance Co.. 30 Cal. 3d
220.  240-41. 178 Cal. Rptr. 343. 636 P. 2d 32 (1981);
Shernoff & Levin*, supra. 13.06(3) ("It has also been
held that when the insurer denies coverage and refuses to
defend* its insured, th« insured need not notify the
insurer of any assignment of his or her rights against the
insurer prior to judgment."); and 14 Couch on Insurance.
supra. 151.72.  Couch states the rule as follow*:
     If the insurer unjustifiably refuses to defend
     aa action against the insured, on the ground
     that che action was based upon a claim not
     covered by the policy, it cannot successfully
     invoke the no trial clause to bar liability,
     for the reason that when the settlement by
     the insured after the unjustified refusal to

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                            - 43 -

      defend was made in absolute good f*lch in
      order co avoid the chance of an adverse verdict
      for a much larger SUB,  it would seen grossly
      unjust,  if not contrary to public policy, to
      insist chat there must  be in every case an
      actual trial and verdict.
      To summarize,  where the United States has not  yet
 obtained a judgment and where a defendant's insurer has
                  51/
 refused Co defend,    a eectleaent could be considered with
 the defendant which included,  among other things, assignment
 of the defendant's  claims against its insurer.  Specific
 state authority should, of course,  be consulted before such
 an assignment is negotiated  and accepted.
       Assignment of Claims for Breach Duties
      Another  fact situation  in which the assignment issue
 frequently arises-involves bad faith refusal to settle.
      It.is generally held that an insurance carrier which in
 bad faith refuses to settle  a claim within policy limits may
 thereafter be liable to the  insured if a judgment is entered
 beyond the policy limits. This subject is discussed at length
 in 7C Aooleaan.  supra 114711-15;   See,  e.g..  Critx  v. Farmers
 Insurance Croup, suprsr.
      For exaaple, assume that plaintiff sues  defendant for
 $50,000.  Defendant has an insurance policy with a  $25,000
327 An  insurer may frequently defend  its  insured with a reser-
    vation of its  right  co ultimately deny coverage.  There  is
a  division in authority  as co whether such a  reservation of
righcs,  or non-waiver agreement, must be  consented to by the
insured.  See 14 Couch on Insurance,  supra. 1651:89.  As noted
above,  if there is a defense by tne insurer with reservation
'of righcs,  it may  be questionable  whether Che defendant
could enter into a settlement without the insurer's consent
and still preserve its rights against the insurer.

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                             - 44 -

policy Unit.  During the course of litigation, plaintiff
offers to settle for $25,000.  If the insurance carrier in
bad faith refuse* to accept  the settlement and judgment is
thereafter entered for $50,000, the insurer will be. if its
bad faith is established, liable to pay the entire $50,000
and may also be subject to a punitive damage award.
In the situation described, one assignment issue arises if
the insurer, after judgment, pays plaintiff $25,000 but
refuses to pay the other $25,000.  Can the defendant assign
its bad-faith-refusal-to-pay claim to plaintiff in satisfac-
tion of the judgment against it?  Most courts have said yes.
     Brown v. State Farm Mutual Automobile Insurance Associa-
tion, supra, illustrates this situation.  There., an insured
was sued for $40,000.  It had an automobile liability
policy for $20,000.  After discovery, the plaintiff offered
to settle for $20,000.  The offer was refused.  Judgment
was entered for $40,000.  The Insurer then paid $20,000.  .
The insured1s only assets were $5.500 and a potential claim
against the insurer for bad faith refusal to settle.  Those
assets were assigned to plaintiff,  who then sued the insurer.
The Illinois appellate court allowed the assignment stating:
"We find no valid reason in public policy why the cause of
action should not be assignable.*  272 N.C. 2d at 264;  accord.
Murphy v. Allstate Insurance Co.. 17 Cal. 3d 937, 132 Cal.
Rptr. 424, 533 P.2d 584, 587 (1976) ("The insured may assign
his cause of action for breach of the duty to settle without

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                            - 45 -


content of the Insurance carrier, even when che policy provi-

sion* provide co che contrary.").

     Bad faith refusal to pay claims may well arise in CERCLA

cases, particularly as the requireaents of CERCLA become

more clearly established.  In situations where the claim of

the United States exceeds policy limits and the insured has

little if any assets of its ovn, it may be advisable for the

United States to consider making a less-than-policy-limits

settlement offer.  If the offer is refused and a judgment

beyond policy limits is obtained, the United States can then

consider taking an assignment of the insured's claim against

the insurer for wrongful refusal to settle.

     Finally, assignments in the excess liability context,

i.e.. where a Judgment exceeds policy limits,  are apparently

quite common and allow the judgment creditor to seek full

reimbursement from the insurer.  One treatise describes the

situation as follows:

     A common practice by which the injured third-
     party claimant achieves full compensation, and  •
     che insured is absolved from the liability
     judgment, is an assignment by the insured
     of his rights against the insurer to the
     insurer's judgment-creditor.  In exchange
     for the assignment, the claimant signs a
     covenant not to execute above the policy
     limits against the insured.  The assignment
     thus becomes a convenient way for the insured
     to fully satisfy the injured party.  In
     situations where the insured is basically
     'judgment proof.' 1C may well net the injured
     party far more than execution of the judgment
     against the insured.  One disadvantage of
     this technique for the claimant is that the
     risks of collectibility and litigation
     against the insurer fall upon the claimant.

1  Long, Law of Liability Insurance 15.46.

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                             - 47 -

        a party who hat  obtained judgntnc  under chc  policy
 co  proceed against cht  insurer.  It  provides:
     Any person or organization or che  legal
     representative thereof  who has  secured
     such Judgment or written agreement shall
     thereafter be entitled  to recover  under
     this policy to the extent of the insurance
     afforded  by this policy.
     Where such provisions are present, they are probably
 required by statute.
                                        * 33/
     0.   Common Law Denial of Direct Action"*"
          Common law generally denies claims by injured
 persons  against a  tortfeasor's insurer.  Appieman. I 4861.
 Liability and  indemnity policies  (the first covers the
 insured's  liability, the second primarily serves to cover the
 insured*s  losses)  typically  contain clauses barring Joinder
 of the  insurer  in  actions against the insured, which are
upheld  in the absence of a statute to the contrary.  Applenan,
 f 4861. .  Similarly, most Jurisdictions do not allow the insurer
 to intervene in an action against the insured.  Appleman.
 S 4861.   See, e.g., United States v. northeastern Pharmaceu-
 tical and Chea-ical Co..  Inc..  Civ. Ho. 80-5066-CIV-S-4
 (V.D. Mo.. May  3,  1983)  (included in the Compendium) (denying
 insurer  intervention in a RCRA f 7003 and CERCLA II 106 and
 107 action).
3_3/  The discussion under this heading and the next is
     derived largely from cwo sources:  Appleman, Insurance
Law and Practice (1981, Supplemented 1984), SS 4861, et. seq.
("Appleaan") (Appendix L), and American Insurance Asso-
ciation. Statutes Affeetint Liability insurance U9tH)
(ALA survey) (A summary of direct action rules in the 50
states, Guam and Puerto Rico is presented at Appendix M.).

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                             •  48  -

     There  is  one  notable  exception  co  che  common  law  rule
 regarding direct action.   Some jurisdictions  allow direct
 actions, in Che abstnct of a direct  action  statut.e, where
 the  policy  is  required.  Alabaaa  recognizes such an exception,
 while Arizona  does not.  In Illinois, it is recognized in
 actions on  employer's liability and  compensation policies.
 Appleaan, S 4862.  This exception is aoaetiaes qualified for
 specific forms of  insurance.   See Appendix M.  Since states
 operating approved RCRA regulatory prograas will probably
                \
 require insurance  under state  lav, this exception'may be
 significant.
     E.  State Direct Action Statutes
         As of 1981. twenty-seven states, Puerto Rico and
Guaa had adopted some fora of  direct action statute.  See
Appendix M.  These statutes aay allow Joinder of insurers,
 independent prejudgment litigation against insurers, pose-  .
judgaent suits to  recover directly from insurers, or soae
coabination of these options.  These statutes typically
provide that liability policies aust contain provisions
alloving such suits, or provide that such suits may be
                                                        347
brought notwithstanding a policy clause to the contrary.
     Frequently, authorized direct action claims are limited
by category or are otherwise conditioned.  For exaaple,
34/  The first direct action suit brought by the United States
     to recover froa the-insurer of a RCRA/CERCLA Judgment
debtor is United States v. Continental Insurance Co..  Civ.
Mo. 85-3069-cv-5-<»  (¥.0. Missouri, tileo ttarcn 1902;.   The
complaint is presented as Appendix M.

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                             . 49 -

sixteen state* allow post-judgment suits against  incurtrs
only  if th« judgment has not been be Bet by execution upon
the Insured.  Only Louisiana, Guam and Puerto Rico allow
broad prejudgaent direct actions.  See Appendix M, and the
ALA Survey, which contains details of individual state
statutes.
     Due to the extraordinary variety of state statutes
on this subject, the United States may be served best
by arguing the necessity of a uniform federal common law rule
for direct action in RCRA and CERCIA cases, as has been done
successfully for the similarly diverse issues of joint and
several liability and contribution.  See United States v.
                                   •
A & F Materials. 578 F. Supp. 1249, 1255-56 (S.D.  111. 1984);
United States v. Chem-Dyne. et al.. 572 F. Supp.  802, 807
(S.D. Ohio 1983; and Wehner v. Svntex Agribusiness. Inc..
Civ. No. 83-642 (2) (E.D. Mo. April 1, 1985) IX Chcm. & Rad.
Waste Lit. Rptr. 879.
     F.  Other Procedures for Litigation Between
         Insurers and the United States
         1.  Intervention by the insurer in an action by
             Che United States against the Insured.
             As indicated at p. 47. supra, the courts generally
hav« not allowed insurers to intervene in suits against the
                                                      •
insured.  This has proven true in all cases in which the
question has been tested under RCRA and CERCLA.  On the other
hand, if all parties to Che litigation support permissive
intervention in an action by the United States under an

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                             -  50 -

environmental statute,  there is no obvious reason why
intervention must be denied.
         2.  Declaratory Judgment suits between the
             insurer and the insured.
             Private and governmental civil suits urder RCRA
and CERCLA have spawned several suits for declaratory relief
between  insurers and purportedly insured waste site owners
and operators, transporters aad generators.  A private
attorney reportedly stated in April, 1985 that Aetna Casualty
Ins. Co. (one of the major carriers in the field) was then
receiving an average of two hazardous waste related claims
per day.  In several state court cases involving coverage
disputes between CERCLA responsible parties and their insurers,
efforts have been Bade  to join the United Staes 'as a third
party defendant on the grounds tht it is an interested party.
Hone of these efforts has succeeded.
     Sovereign immunity bars any suit against the United States
in the absence of a specific congressional waiver.  There is'
no statute providing chat Che United States can be named as
a defendant in one of these cases.  The type of relief sought
does not seen to affect the applicability of the immunity
one way or the other; and the cases generally hold that the
doctrine is absolute.  Thus, the state courts do not have
jurisdiction over the United States in these insurance
suits.  Block v. North  Dakota. 103 S.Ct. 1811, 1816 (1983);
United States v. Sherwood. 312 U.S. 584, 586 (19*1).

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                             •  51 -

     Success by che insured  in coverage litigation probably
precludes che insurer from contesting some or all questions
of coverage in a subsequent direct action by the United
States:  The doctrine of collateral estoppel, or issue pre-
clusion, holds that where an issue of fact or lav was actually
litigated and determined by a valid and final Judgment, that
determination is conclusive in a subsequent action involving
the same parties or at least the same party as is sought to
be held, whether it is on the same or on a different claim.
Wright, Lav of Federal Courts I 100A (4th ed. 1983) [hereinafter
Uright] , and cases cited.
     If the United States is not a party to the litigation,
could it be bound?  Ordinarily, persons who were not parties  .
to che first action will not be estopped.  18 C. Urighc, A.
Miller & E. Cooper, Federal Praccice, Procedure, and Juris-
diction II 4448-4449 (1981) and [hereinafter Vright and Miller]
and cases cited.  Where a defendant is not subject to the
jurisdiction of a courc, ic can not be a party and thus can
not be'bound by collateral estoppel.  Zenith Radio Corp. v.
HateItIne Research. Inc.. 395 U.S. 100, 110 (1969); Oil &
Gas Ventures First 19S8 fund. Ltd, v. Hung. 250 F. Supp.
744. 753-54 (S.D.N.Y.. 1966); and 18 Wright & Killer I 4449.
Thus, if a courc could not exercise jurisdiction over the
United States, the United Scaces could noc be considered a
parcy and could noc be escopped by any decision by che courc.

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                             -  52  -

     However, nonparclet  co  suits can  sometimes be held  to
be collaterally estopped  --  if the nonparty actively partic-
ipated in the prior case, and  vas a party in everything  but
name; if the nonparty's in::,  eats were specifically repre-
sented in the first action,  e.g. a trustee or guardian vas
involved in the first suit;  if the nonparcy had soae actual
duty to either enter the  lawsuit or give soae notice that it
was not interested in the suit  and would not consider itself
bound by it; or, if there was  a sufficient party to the
suit. e.g.. they held successive interests in the property
that was the subject of the  suit.  18 Wright & Miller S 4449
and cases cited.
     The first two excepti."..  -o not seea applicable to  the
United States.  The latter two exceptions to the nonparty
rule might conceivably Apply.  The first of these latter
exceptions would extend preclusion to those persons that had
an opportunity co participate  in the litigation, that did
not do so, that did not infora the actual parties that they
night raise the issue in  the future, and thus lead the parties
to believe chat they were not  interested in the litigation.
This exception is primarily espoused in the works of commen-
tators and is really a form of equitable estoppel.  See,
e.g.. 18 Wright & Miller  II 4452 tad 4453; *nd Restatement
(Second)  of Judgments S 62 (1981).  But the rules for applying
equitable estoppel against the United States are unique.  It
is by no Beans clear that the  United States can be estopped
under any circumstances.  Some  Circuit Courts of Appeal  have

-------
                            - 53 -

stated that estoppel cannot lie against the federal govern-
aenc.  Hicks v. Harris. 606 F.2d 65, 68 (5th Cir. 1979).
Other Circuits have allowed the United States to be estopped
under certain liaited circumstances, i.e.. where there has
been a misrepresentation that rises to the level of "affirmative
misconduct."  Community Health Services of Crawford County.
Inc.. v. Califano. 698 F.wd 615, 620-21 (3rd Cir. 1983);
Mendota-Hernandei v. INS. 664 F.2d 635, 639 (7th Cir.  1981).
These decisions allowing estoppel may not be in keeping with
the Supreme Court's latest pronouncement on the issue,
Schweiker v. Hansen. 450 U.S. 785. 788-91  (1981).  But even
if these decisions still are valid, getting a case dismissed
because a court has no jurisdiction and later raising  the
same issue in a court of competent jurisdiction does not
seem to be "affirmative misconduct" — at least where  there
are no representations accompanying the dismissal of the
first case that the issue will not be raised later.
     Even if this exception could be refuted successfully,
it may be a better idea simply to moot it,  since the United
States could do so with a minimum of effort.  All that would
have to be done is to notify the parties after the United
                       . •                                 •
States is dismissed that it will not consider itself bound
by any determinations in the case.
     The second potentially applicable exception to the
nonparty rule holds that where there is some legal relationship
between the nonparty and a party, such as where one isva
predecessor in interest to the same claim or property,  the

-------
                             -  5A  -

nonparty can b« bound in later suits.  An  insurance company
would seem co have a basis for estopping the United States
from retrying the insurance  company's liability under its
contract on this basis only  if the United States actually
has taken an assignment of the assured's claim against the
carrier and has no independent rights of action.
     The preclusive effect on a nonparty judgment creditor
of a finding of no coverage  in a  suit between the insurance
company and its insured was  addressed in Hocken v. Allstate
Insurance Co.. 147 S.U.2d 182  (Mo Ct. App. 1941).  Hocken
filed suit against the insured for personal injuries suffered
as a result of a car accident and recovered a judgment for
                                                 N
$2.500.  While Hocken's suit was  pending, the insurance
company filed suit against the insured and Hocken seeking a
declaration that the policy  was void due to fraudulent
misrepresentations by the insured in the procurement of the
policy.  For undisclosed reasons, the insurance company
dismissed Hocken as a party  and judgment was rendered against
the insured prior to the entry of a judgment for $2,500 in
Hocken's favor in Che underlying personal Injury suit.
     Hocken later brought a  garnishment proceeding against
the insurance company to recover  the $2,500 Judgment.
                                                      •
In its defense, the insurer  contended that the declaratory
judgment against the insured was  not subject to collateral
attack but was binding on Hocken  because she was in privity
with the insured, having derived  her rights against the
insurance company solely through  the insured.  The trial

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                            - 55 -

reversed and remanded chc ease for a new trial on chc Issue
of coverage.
     The enuc of the appellate court's decision was its
holding that, contrary to the insurance company's assertion,
the injured party was not a privy to the suit between the
insurance company and the insured.  It reasoned that Hocken was
not privy because she acquired whatever rights she possessed
under the policy prior to the institution of the declaratory
Judgment action. 147 S.U.2d at 186.  "After those rights
came into existence the insured could not by any act, or by
the submission to the rendition of judgment against him,
lessen the interest vested in [the injured party]." Id.
     Hocken's rights were acquired before the institution
of the declaratory judgment action because under Missouri law
the injured party acquires its rights to the insurance coverage
at the time of the accident or the occurrence- of the injury.
"It is true that those rights were originally derived through
the Insured, but by operation of law they are fixed and
independent of any control by the insured, so that as to all act*
and relations subsequent eo the accident, which gave rise to
plaintiff's rights, they were not in privity." Id. at 188.
See also Math!son v. Public Work Supply District. 401 S.W.
2d 424, 431 (Ho. 1966) ("to make one "privy" to an action he
must have acquired his interest in the subject of'the action
subsequent to the commencement of the suit or rendition of
judgment").

-------
                             - 56  -

     The rights of the United States  against an  insurer
 in an environmental casV, under this  analysis, would be
 acquired at the tiae of the  accident  or occurrence giving
 rise to liability.
     Courts in other »t*     re in accord with the logic
 and holding in Hocken.  In United Farm Bureau Mutual
 Insurance Co. v» Uaapler. 406 N.E.2d  1195 (Ind. Ct. App.
 1980), an injured party sought to execute a Judgnent against
 the insured by proceeding against the insurer.  The insurance
 company asserted that a previous Judgment against the insured
 on the issue of coverage vas res judicata as to the injured
 party.  The court held that  the injured party vas not in
 privity vith the insurer or  the insured and not bound by the
 outcome of the declaratory judgment.  Id. at 1197.  The
 court relied on 7 An.Jur. 2d, Automobile Insurance f!(1963):
             A judgment determining, as b'etveen
             an automobile liability  insurer and the
             insured or a person claiming to be in-
             sured, a question of coverage in favor of
             the insurer does not, as a matter of res
             Judicata, preclude the injured person
             from litigating the question of coverage
             in a subsequent action or proceeding in-
             stituted by him against the insurer, since
             the injured person ia not in privity vith
             any of the parties in the former proceeding.
     In Gladon v. Searle. 412. P.2d 116 (Wash. 1966),
while a suit by an injured party against the insured vas
 pending, the insurance company commenced.an action against
 the insured for a declaratory judgment as to coverage. . The
 company did not notify or attempt to join the injured party,
 and a default judgment was entered in favor of the insurer

-------
                             • 57 -

4ft«r cht insurtd failed co  answer the suit.  The  injured
party subsequently recovered a default judgment against the
insured and filed a garnishment action against the insurance
company.  Judgment was entered against the insurer, which
appealed.  The court held that "third party claimants in an
action of this nature are not bound by a declaratory judgment
in which they were not made a party."  JU at 118.
     The insurance company in Sobina v« Busby. 210 R.E.
769 (111. App. Ct. 1965), sought to use a judgment from a
suit between the insurance company and the insured as a
defense in an action by the  injured parties against the company
to recover on a Judgment entered against the insured.  Citing
Hocken. supra the court observed, "There is ample authority
holding that the plaintiffs  in the underlying .tort action
are not in privity with the  insured, that the insurance
policy is one against liability and not against loss, that
the plaintiffs' rights accrued at the tine of the accident
and were not cut off In a later decree entered in proceedings
to which the plaintiffs were not parties." Id,, ac 772*73.
     Southern farm Bureau Casualty Insurance Co. v.
Robinson. 365 S.U.2d 454, 456 (Ark. 1963). addressed the
following question*.   (        •
            Can a default declaratory judgment
            between an insurer and an insured,
            instituted while suit is pending in
            a foreign jurisdiction between the
            insured and an injured person, which
            ruit the Insurer is defending, destroy
            the rights of the injured person who was
            not a party of the'declaratory judgment
            proceedings?

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                             -  58  -
          «
Th« court said  "No,"  and  explained  chac  che  rights  of  che
injured  parcy arose ac  che  cime of  che  injury  and are
aneagoniseic eo che righcs  of  boeh  Che inaurer and  che insured.
,Id. ac 457; aee al«o  46 C.J.6. Insurance  Si 191 , p.  123 ("The
righcs of che injured person who nay maincain  an aecion
againsc  inaurer are eo be decermined as of che cime of che
aeeidenc ouc of which che cause of  aceion grew ....)" and
Shapiro  v.  Republic  Indeminiey Co.. 341 P.2d  289 (Cal.
1959).   In Shapiro, che injured parcies recovered a judgnenc
againsc  che insured and Chen broughc an aceion againsc che
insurer  on a public liabilicy  insurance policy chac covered
che insured.  The  insurer argued chac ics liabilicy muse be
             N
decermined according  eo ehe policy  as ic was reformed in a
poscaccidenc aceion beeween ehe insurer and che insured.
The coure held  chac,  as chird-parcy beneficiaries of che
insurance policy,  che injured  parcies had an ineeresc chac
could noe be alcered  or condicioned by che independenc aceion
of ehe insurer  and ehe insured in reforming ehe policy.  
-------
                             -  59  -

 injured  person has  a  cause  of  action  cht  mootnc  he  or  she
 ia  injured  end is not In  privity  with the insured,  Virginia  "
 likewise has held ehac, evtn chough a judgment creditor stands
 in  the insurer's shoes, che injured party is not barred by a
 plea  of  res judieata.  Storm v. Nationwide Insurance Co.. 97
 S.E.2d 759  (Va. 1957).  "The insured  and  the Company aay
 not litigate and have [the  injured party's] rights against
 the Coapany, which  had their inception at the tiae of her
 injury,  determined  in an  action to which  she is not a party."
 97  S.E.2d at 764. See also  Bailey v.  United States Fidelity
 and Guaranty Co.. 103 S.E.Zd 638. 641  (S.C. 1937) (injured
 party would not be  privy, and  therefore not bound by judgment
 in  a suit* to which  he w»s not  a party, where her rights were
 acquired at time of injury  and prior  to the rendition of the
judgment).
     The commentators agree with  this  line of cases.  Couch
 states,  "A judgment deceraing  as  between  an automobile liabilit;
 insurer  and the insured or  a person claiming to be insured',
 a question of coverage in favor of the insurer does not, as
*
 a matter of res judicaea, preclude the injured person from
 litigating the question of  coverage in a  subsequent action
 or  proceeding instituted  by him against the insurer, since
 the injured person  is not in privity  with any of the parties
 in  the former .proceeding."  Couch. Cyclopedia of Insurance
 law. 145:943 (2nd ed.).   Likewise, Appieman notes that "an
 injured  person can  neither  be  bound by a  judgment in favor
 of  the insured in a suit  brought  by another claimant, nor by

-------
                            - 60 -

t judgment in favor of Che insurer, in an action brought
upon Che policy by the insured."  Applenan, 511521; see also
69 ALR2d 858, 859.
     One Ohio case that is inconsistent with all of these
other cases.  In Conoid v. Stern. 35 N.E.2d 133 (Ohio 1941),
an injured party recovered a judgment against the insured
for personal injuries sustained in an 4utomobi.lt collision.
The Judgment creditor Chen brought an action against the
insurer to recover the amount of the judgment.  The insured
company averred as a defense a judgment in an action between
the insurer and a different party also injured in the same
collision in which the court held the policy null and void
due co che insuredfs failure co cooperace.  The court held
that a judgmenc in favor of eht insurer in an aceion by
an injured party on the question of noncoopcration vas res
judieat'a in favor of the insurer in a later action by another
person injured in Che same accident.  Id. at 140-41.  The
court reasoned that che righc of che insured against ehe
insurer was fully litigated in che suit by ehe firsc injured
party and che d«cl*racory judgment againsc che insured is a
bar againsc anocher injured parcy whose righc, if any, against
eh* Insurance company is derived from and dependent upon a
valid righc of cbt insured against che insurance company.
     The decision in Conoid novhere mentions che issue of
privity or when che rights of che injured parcy arise, but
                  •
focuses solely on che rights of a judgmenc credicor being
derivative of the rights of the insured.  Also, the ease

-------
                             - 61 -

Involves an action by an  injured party where Judgment has
been entered in favor of  the insurer  in a siailar action by
another person injured in the saae accident.  Most iaportantly,
although the acre recent case* of Celina Mutual Insurance Co.
v. Sadler. 217 M.E.2d 255 (Ohio Ct. App. 1966), suggests
that, the holding in Conoid is still the lav in Ohio, Conoid
has not been followed by the courts of any other state.
Accordingly, although Conoid should caution the United States
against remaining a nonparty to an action in Ohio between an
insured another party injured by the  insured, it should  not
affect the decisions of the United States in other states.
     Yet another exception to the estoppel rule may be
applicable to our cases.  Uhen collateral estoppel would
violate general notions of public policy, or would work  an
injustice, it is not to be applied.   Specifically, where the
government is involved in a case designed to protect the
public, it should not be estopped by  previous cases to which*
it was not a party.  Porter & Dietsch. Inc.. v. FTC. 605
F.2d 294, 299-300 (7ch Clir. 1979); Defenders of Wildlife v.
Andrua. 77 FRO 448, 454 (D.D.C. 1978); Restatement (Second)
of Judgments I 28 (1981); and 18 Wright & Miller I 4426.
Hazardous waste cases appear particularly apposite for applying
this principle.  The United States is attempting to fund the
containment and removal of very serious threats to health
                                                         \
and the environment.  It  should not be hampered in these
efforts by estoppel arising out of litigation.  Moreover,
the line of cases discuased  in the context of whether the

-------
                            - 62 -

United States could be considered as having a relationship
with some party, and thus be bound by his failure in litiga-
tion, is buttressed by the unique public responsibilities of
the government.
     Finally, although it is doubtful that the United States
will vane to intervene in declaratory Judgment actions between
liable parties and their insurers,  it is not at all clear
that che court would allow such intervention in the absence
of a preexisting Judgment and an independent direct action
claim.  See Independent Petrochemical Corp.. v. Aetna Casualty
and Surety Co.. Civ. Ro. 83-3347.  (S.D. Ohio, March 8, 1985}
22 ERC 1523, IX Chen, and Rad. Uaste Lit. Rptr. 911  (included
in the Compendium), denying Rule 24(a)(2) intervention to
individuals asserting unresolved personal injury claims against
the bankrupt IPC; but cf. Re-Solve v. Canadian Universal
Ins. Co.. (Mass. Super Ct., CA No.  14767, May 14, 1984),
discussed at IX Chea. & Rad. Waste Lit.'Rptr. 822 (allowing  ,
the Commonwealth of Massachusetts to intervene in an action
between a polluter and its insurer).

-------
                UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
\ ^^,                     WASHINGTON DC 204(0                OSWER # 9850.C
     SUBJECT:   Endanceraer.t Ass^5S/>ent Guidance
                      '
                       ,i
     FRCM:      J.  Wjjistsr. Porter
               Assistant  Administrator

     TC:        Addressees


     ?VR?OS£

         This  memorandum clarifies the requirement that an
     endangemer.t  assessne.-.t be developed to support all administra-
     tive and  judicial  er.f crcer-.er.t actions under Section 106 of the
     Comprehensive Environnental Response, Compensation, and Liability
     Act  (CERCLA)  and  Section ?003 of the Resource Conservation and
     Recovery Act  (RCRA).  Before taking enforcement action under
     these  provisions  to  abate the hazards or potential hazards at a
     site,  the  Environmental Protection Agency (EPA) must be able tr
     properly document  and  justify 'its assertion that an imminent a.-.d
     substantial endar.germent to public health or welfare or the
     .e-nvironment rray exist.   The endangerment assessment provides th:s
     documentation and  justification.  The endanjerment assessment is
     net  necessary- ta  support Section 104 actions.

         This  memorandum also provides guidance on the content,
     timing,  level of  detail* format, and resources required fcr t"e
     preparation of endangerment assessments.

     WHAT IS AN ENDANGERMENT ASSESSMENT

         An •ndangerment assessment is a determination of the
     magnitude  and probability of actual or potential harm to public
     health or  welfare  or the environment by the threatened or actual
     release  of a  hazardous substance (for a CERCLA action) or a
     hazardous  waste  (for a RCRA action).

         Ah  endangerment assessment evaluates the collective
     demographic,  geographic, physical, chemical, and biological
     factors which describe the extent of the impacts of a potential
     or actual  release  of a hazardous substance and/or hazardous
     waste.

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      1- general,  the  endangeiT.er.t  assessment  should identify  and
 characterize:

      ;»>  Hazardous  s^rsta-ces  a-.d'cr  hazardous  wastes  prese-.-.
          in  all  relevant  environmental  nedia  (e.g.,  air,  water,
          soil; sediment,  biota):

      (b)  Environmental  fate  and  transport  mechanisms withi-
          specified  environmental  media,  such  as  physical,  cher.ical
          and  biological degradation processes and  hydrogeolog;;*:
          evaluations  and  assessments;

      (c)  I-trir.sic  tcxicological  properties or  human health
          standards  and  criteria  cf specified  hazardous  substar.res
          or  hazardous wastes;

      (d)  Exposure pathways and extent of expected  or potential
          expos-re;

      !e)  Populations  at ris'x;  and,

      (f)  Exte-.t  rf  expected  harm  and  the likelihood  of  such  harm
          occurring  (i.e., risk characterization).

WHY PERFORM AN ESSASGERMEST ASSESSMENT

     L-'nder Section 106(a)  of  CERCLA, if  the President determines
that there ray be an  imminent and  substantial  endangerment  to
public healt.n  or welfare or the environment from an actual  or
threatened release of  a  hazardous  substance, the President  may
secure such relief as  r.ay  be  necessary to abate  such  danger or
threat.  Such  relief may be in  the form  of  a judicial action  cr
a.i administrative order  to compel  responsible  parties to respond
to hazardous conditions.

     Before an order  can be issued or  an  action  filed under $136
of CERCLA, EPA nust  be able to  document  and justify its  assert-.or.
that an imminent and substantial  endangerment  to  public  health
or welfare or  the environment may  exist.  The  endangerment  assess-
sent provides  this documentation  and justification.  It  is  tne
basis for the  findings of  fact  in  administrative  orders, ccr.sent
decrees, and complaints.

     In situations dealing with hazardous wastes  or solid  wastes
under RCRA, rather than  hazardous  substances under  CERCLA,  Serticn
7003 of RCRA may be  used as the au-.v--ity under  which EPA may
issue orders or file  civil acti r        Section  7003  of  RCRA
requires a similar -finding of i."~    . and  substantial  endanger-
ment and, therefore,  EPA must a^i- Document and  justify  such  a.-.
assertion with an endangerment  assessment before taking  enforce-
ment action.


I/ "Final Revised. Guidance Memorandum  on. the Use and  Issuance cf
Administrative Orders  '.'nder Section 7003  of the  Resource Conserva-
tion and Recovery Act",  September  26,  1984  signed by Courtney ?r;:e
and Lee Thomas.

-------
     •It  is  important  to  note  that  "imminent"  does  not  mean  irjnediate
harm.  Rather,  it means  an  impending  risjc  of  harm.   Sufficient'—~
 :-st:f iraticn  for a determination  cf  an  imminent endancermer.t -ay
exist  if  harm  is threatened:  nc  actual  injury  need  have  occ.rret"
cr  De  occurring.' Similarly,  "endangerment" means  something  less
than actual h a rm.


WHEN TO  PERFORM AN EN3ASGERMEST  ASSESSMENT

     At  remedial sites subsequently targeted  for CERCLA  5106 or
RCRA $70C3 enforcement action, all of the elements  of  an endanger-
ment assessment will  be  provided by completing  the  contamination
assessment, public health evaluation, and environmental  assessment
during the RI/FS process.  As such, these assessments  are equivalent
to  the endangerment assessment for enforcement  sites.  The  informa-
tion from the contamination assessment,  public  health  evaluation,
and environmental assessment  will  be  considered sufficient  to
issue ar, order  althcjgn  additional work  may be  needed  prior  to
Iiti-aticn  (see Attachment  1  and the  RI/FS guidance documents
referenced or. Page 6  :f  this  guidance).

     Where a-. RI/FS has  r.ct been initiated or  completed, a*
e-.dangernent assessment  must  be  prepared to justify an adminis-
trative order or judicial action under CERCLA  $106  or  RCRA  S^OOS.
For example, orders issued  to govern  responsible party conduct of
an RI/FS or to  compel responsible  party  performance of immediate
response actions will, require an endangerment  assessment prior to
issuance.  In both cases, the endangerment assessments will  demon-
strate that there may .be an imminent  and substantial endangerment
wr.ich justifies eitner further- investigative  action to deterr.ine
the appropriate remedy for a  site  cr  an  immediate  response  actior..

     In  isolated cases,  EPA has  negotiated with potentially  .
responsible parties for  the site remedy  before  it  has  developed
tr.e RI/FS.  In  these  few cases,  an endange-.rment assessment m-st re
developed independently  of the RI/FS  and completed  prior to  issuance
of the order or decree for remedial action.

     An eniangerment  assessment  is required for all future  RCRA
§~OC3 actions, as well as older  RCRA  $7003 cases to which CERCLA
$106 authority has been  or will  be added. An  endangerment assess-
ment is not required  for older RCRA $7003 cases already  filed by
tse Department of Justice without  an  endangerment  assessment.  The
litigation team, however, may determine  on a  case-by-case basis
that the preparation  of  an endangtrment  assessment  or  its equivale-.t
would substantially strengthen the government's case.

     Endangernent assessments must be prepared  for  all RCRA  $"003
cr CERCLA $106 orders issued  to  another  Federal agency for  cleanup
cf a Federally-owned  facility.   Normally, EPA will  seek  response
action at a Federal facility  through  a site-specific compliance
agreement with the appropriate Federal agency  or other responsible
parties.  If, however, a compliance agreement  is not complied witn
by Federal owners or  responsible parties,  EPA may  issue  an  order.

-------
                                -4-

WKAT L:'.TL:	

     The determination  that  an  imminent  and  substantial  eniarcer-
-e-,t to public  health or  welfare  or  the  environment  may  exist  is a
lesal prerequisite  t.-.st rust  be ret  sefcre an  crier  can  be  iss.ei
cr an action  filed.   It is E?A policy  that endangerme-.t  assessre--_s
should be  undertake"  only  to  the  extent  "necessary and sufficie-.t"
co fulfill  the  rec--.rer.er.ts  of  legal enforcement  proceedings.  At
ar.y site,  there is  the  potential  for conducting studies  reyor.d tr.e
level of detail needed  for enforcerent actions.   The  level  of
detail of  the enhancement assessment  should be limited  to  the
amount of  information needed  to sufficiently demonstrate  an  actual
or potential  ir.rinent ani  substantial  endangerment.   The  level cf
detail to  sufficiently  demonstrate endangement will  vary fror, case
to case based or.  the  following  factors:

     0 the  type of  e-.forcem.ent action  (e.g., AO for  removal
       vs  litigat ion);

     0 t-e  tvre cf  response  action  (e.g., removal vs  remedial);
       anr

     0 the  staze  cf rescc-.se  action  'e.g., RI/FS  worfcplar. vs
       P.I/FS  ccrcle-.el).

     The level  cf detail  required to support a particular enforce-
ment action will  ultimately  be determined on a case-by-case
basis by Recicnal procrar  personnel  in consultation  with  Regional
Counsel.   As  a  ce-.eral guide, the matrix on  page  5 defines  these
levels o? detail  rased on  the factors  listed above.   The  matrix
should help the  Pecions to bc.t.n (1)  determine  what constitutes an
adequate e-.dsr.cerrert assessment  for a particular enforcement
action, and (2)  plan  their intramural  and extramural  resources
accordingly.

     v.>,en endar.gerr.ent  assessments are developed  to  support  •
administrative  orders for  private party  RI/FS  or  removal  actions,
information already available about  the  site will generally  be
sufficient.  Where  sites  are  targeted  for enforcement action
after completion  of an RI/FS, the endangerment assessments
developed as part of  the  RI/FS will  be more  detailed  and  ceherally
more quantitative as  they  will  be based  on information obtained
from the remedial investigation.  Such endanoerment  assessments
will b« used  to support any  subseauent CERCLA  5106 orders or
judicial actions  seetino  design and  construction  of  site  remedies.

     The information  gathered in  an  RI/FS  is generally similar
to the type of  information needed for  an endanaerment assessre-.t.
However, RI/FS  and  endangernent assessments  are developed for
different purposes.   RI/FS are used  to determine  aopropriate
response actions  under CERCLA $104,  while endangerment assessments
are used for enforcement  actions  under CERCLA  $106 or RCRA  5rOC3..
For sites with  CERCLA $106 or RCRA $7003 enforcement  potential,
Regions should  review the  RI/FS workplan to  determine whether
information develosed as  part of  the RI/FS will be sufficient
for an eniancerrert assessment.   In  certain  complex  cases,
additional  ir.fcrratior. ray be needed and a separate  endancerr.er.t
assessment wcr^clar ray be recuired.

-------
                                       i JM 11.1 .mi.:.  MM-  i j.vi .1
Comdex ity     Act inn _ _
                Af>  for  renwival
                act inn,  /*> for
                (wivale party
                m/FS,  prelimi-
                nary  sclnrj
                                      Uita
                                     Hay l« limited. probably
                                     cons 1st I nq of  Information
                                     from the Preliminary Site
                                     Assessment, Site  Inspection
                                     Hepnrt, and Hazard Ranking
                                     System evaluation* if
                                     Nb health studies available;
                                     no denngraphic studies avail-
                                     able.   Preliminary sampling
                                     ilata will probably be available
                                     on pollutants present.  Ifcita on
                                     extent of release or concentra-
                                     tions of materials at the pniitl
                                     of exposure may lie avail ah I'-.
                                                          |«ipii-
    I it at ive
of ex|itf>me
lotion  at  risk,
proUihilily of  li.irm occuri irt|.
Critical  pollutants and
t.l*»ir toxicola;*>nati|e aiil prinh^nt.  to     <

m>iy exist  bec.iirv> of I IK-
                                  For  nm»>v.il ,n-l ions
                                  wht^re  HM> nonail si
                                  rnnkiiM) process h.'ir
                                  not  l«ren «:o^dete
                                  .isser.smr»nt may lr«
                                                                                                                   'S, Slate s|-rm-
                                                                                                                   invest i<|at ious,
                                                                                                            written  reports frcm
                                                                                                            inr,|»M't ion-; by
                                                                                                            iiover inw»nt autfmri-
                                                                                                            t ies, ai«l notifica-
                                                                                                            tion in  accordinc'r
                                                                                                            with CM«IA SUM.
l/evl  II
              Issuance of  AO
              or consent «le.cree
              for private  party
              «:leai Rip
l,eve|  III
              Litigation
              fslte-by-site
              basis)
Remedial  Invest li|nt ion curfdcte
or other '«|iiant i tat ive  data
available on nature/extent of
relea;se.   Iktta may lie  available
on mai|nituilr* and dravxirapiiics
of pm>ulation at risk.
Possibly  sojnr? preliminary
liealth effects studies.
!5oun:es and specific
materials associati*! with
relea??e are Ident. if ii«d.
Itl ami rT. c«n|ih>te.   All
required geoloi|ical,
%-by-r.i!>-
   Uiqts as  riijuiieil to r.»ip|»irl  .1 |vu I iriilar enloicmi-nt
   •H.-1 ion.
           itat ivv appraisal
consider iiw| r.|«>cific cxp§>sure
nmtcs awl critical pollu-
tants.  Hie assessment  should
ttential
Iwralth  etfe<:t;;, critical
exposure levels, and necessary
foll«w-up IxMllIt st«idles.
Critical  (ml hit ant s and  nmites
idiMil i f i«xl,  .if* I exist inr| exno-
sur<«r. d«-l inoil or estimated.
'Ihi?; will  conv.litule an
.1'I .lis.ll  to tin* (HV.t of
                                     I»KI«-I I !•:<•
                                     i«.l inwil <•
                                                                                    and know lei li|i* .lint  .in
                                                                                    l  (If IMICI-I I .linl y .
                                  This  assessment must
                                  bn alile to snnjioi I
                                  legal  act ion  in t !>»•
                                  event  that  it  is
                                  dial lentfi^l by  a
                                  recalcitrant   IW.
                                  Should br? ronclus i ..•
                                  enr»i<|h that IKIV.  will
                                  b«l eiicour.Kr*il  to  II..KI-
                                  a firm otnni Imnul  to
                                  crirplete M^iK-«li.»l
                                  action, Iml. not
                                  iHKMv.sar i I y ni»r.it«-
-------
      The  er.iangerment  assessment should evaluate the adecuacy,
 accuracy,  precision.,  comprehensiveness,  reliability, and'overall
 quality cf  identified  information arc data.

      Emergency- act ic-.s do not  recuire the same depth cf assess-
 rent  as planned  or  remedial  activities.   By  definition, a*
 immediate  and  significant ris* cf -ir- to human life or health
 = r  tne environment  will be prese--.  .n an emergency,  raking
 the assess-er.t  of endangerment . i<»s ler to prepare.   Further,
 EPA is justs-fying only the need  for  immediate  action,  not  the
 long-term  remedial  solution.   Thus,  the  endangerment assessrert
 -ay re much  briefer, although  the Regions snould atteff.pt to
 use as r.ucr.  available  information as  feasible.   The  Action
 Memorandum supporting  the emergency  action will normally be
 considered adequate  to serve as  an endangerment assessment in
 support of an  enforcement action under $106  of CERCLA  for  an
 ir.r.eciate  respcr.se.

      Attachment  2 is an abstract cf  a detailed paper :n "Enda-.-
 gerrent Assessments  for Suoerfund Enforcement  Actions', prepared
 ry Tecr.r.ical S.ppcrt Srancr., CESCLA  Enforcement Division,  the
 Cffice cf waste  Programs  Enforcement  (OWPE).   This  paper,
 previously distributed  to the  Regions,  will  provide  technical
 assistance in preparing qualitative  and  quantitative assessments.-
 OWPE  is also prepari-.c  a  handbook on  preparation of  endangerment
 assess re r.ts.

     y.ethodolccies  used for performance  cf such aspects cf the
er.dancerment assessr.er.t as exposure  and  risk assessment should
 be consistent wit-  the  concepts  and  methods  currently  in use ry
 tr.e IFA Cffice of Sesearcr. and Development (ORD).

     Attachment  3 shows how tr.e  various  toxicivy, exposure,  ar.d
 risk evaluations are used to define  the  overall problems and
 hazards 'endange'rr.ent)  at a site.  Although  tne use.of  these.
evaluations  is possible at every site,  the need for  a  detailed
analysis,  as outlined,  is likely to  be  appropriate  at  only a
 limited number of sites to sufficiently  demonstrate  an  actual
zr potential imminent  and substantial endar.germ.ent.

     The Office*  of  Emergency and Remedial Response  (CERR)  has
developed guidance manuals covering  the  performance  of  remedial
 investigations and  feasibility studies.   The chapters  listed
below from these documents and the OWPE  handbook will  provide
guidance in preparing  endangerment assessments:

Guidance on Remedial Investi;-.-. :.--s Under CSP.CLA (OERR. May  19 = :

     Chapter 1 - Site  Characterizatior.
     Chapter 9 - Remedial Investigation  Report Format

Guidance or. Feasibility Studies  Under CERCLA (OERR,  April  1955^

     Chapter 5 --Evaluate Protection  of  Public Health  Requirere-ts

•ij-dbcc'*. r- Preraratic- of i-.dan-er-.er.t  Assessments  (OWPE  -
     Tecnnxca. S.ppcrt  Branch,  Summer 1985)

-------
      Attachment 4 :s a i:st cf references that car. be used
 preparation cf the e-.:a.-.;e rr.er.t assessment.


 F:-R.M.AT
      The endar.cer-ent assessment generally should follow a
 standard framewsr* as provided in Attachment 5 and use qualitative
 and/or quantitative terns as appropriate.

      The Action Memorandum will normally be considered adequate
 to serve as the enhancement assessment document in support cf a-.
 order under 5136 for an emergency action.

      The endangermer.t assessment document may be the order itself
 (where the order crn-air.s all of the elements of an endangerment
 assessment)  or a separate document.  In deciding whether to
 develop a separate document or to include the elements of the
 endanre—.er.t assess-e-.-. :-. the crder, Regions should consider the
 follcwin; factors:

      1.   Are the responsible parties more likely to consent to
 an order if  the endar.germent assessment is part of the body of  •
 the order*  or a separate document?

      2.   Is  the order likely to be issued unilaterally or on
 consent?  A  separate document will, of course, be more important
 in adversarial settings.

      •
-------
                                -8-

      If responsible  parties  elect  to perform the RI/FS,  they  will,
 in effect, perform an  endangerment assessment because they  will
 develop many or  all  cf  the  elements of  an  endangerr.ent assessr.er.t
 as part of the RI/FS.   Regions  should review the RI/FS wOr
-------
                                                             O&.lr * 985'.

                               -9-
Aiiressees:

Regional Administrators.  Reg::-.s I-X
Directors, Environmental Services -'.vision, Regions I-X
Regional Counsels, Regions I-X
Directors, Waste Msnsger.ent Divisions, Regions I, IV, V,
   VI I,  VI11
Director, Emergency and Reneiial Response Division,
   Region II
Director, Kazaficus Waste Management Division, Region III
Directors, Air & waste Management Divisions, Regions II, VI
Director, Toxics & Waste Management Division, Region IX
Director, Hazardc'.s Waste Division, Region X

-------
I.1

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-------
          UNIT  "« \TESENVIRONMENTAL PROTECTION AGENCY
                      WA.MINUTON. O.C. -04»0              OSWER  ft  9829.0


                           DEC 2 3 1995
                                                      O**'Ct 0'
                                             • OUOW4UTI AMDlMinCINCT MMOMSf
MEMORANDUM

SUBJECTt  Policy for Enforcement Actions Against Transporters
          Under CERCLA

FROM:     Gene A. Lucero, Directorfo&A  H',
          Office of Waste Program Enforcement
          Frederick F. Stiehl
          Associate Enforcement' Counsel for Waste

TO:       Regional Counsels
          Regional Waste Management Division Directors


Background

     Section 107(a)(4) of CERCLA  imposes liability  for response
costs on:

     •any person who accepts or accepted any hazardous substances
     for transport to disposal or treatment facilities or sites
     selected by such person, from which there  is a release, or
     a threatened release which causes the incurrence of response
     costs, of a hazardous substance.*.*

     Substantial controversy has  arisen over the interpretation-of
this provision particularly as it relates to interstate common or
contract carriers.  The Agency's  practice has previously been to
issue notice letters to all transporters.  In some  circumstances,
civil judicial enforcement actions have named transporters  as
defendants prior to a determination of whether  they selected the*
facility.  More recently, the Agency practice has been to bring
suit only against those transporters who hsve selected the  facility
or site.

-------
                                -2-
     Transporters  involved  at many  Superfund  sites  have  argued
that CERCLA was  intended to Impart  liability  only when the
transporters selected  the facility  or  site  to which the  hazardous
substances were  delivered.   Consequently, those transporters
contend that interstate common or contract  carriers, who under
the authority of the Interstate Commerce Commission do not exercise
control of the destination  of shipments, are  excluded from the
liability provision of $107(a)(4).  No judicial opinion  has been
rendered to date on the interpretation of this provision.
     As part of the responsible party searches, Regional staff
should gather and review all available information related to
transporters and the nature of their involvement with the facilty
or site at which the hazardous substances are located.  This
review should include all of the common sources of information
such as site records and records from federal, state and local
regulatory agencies.  In addition, information related to the
transporters should be obtained through S104(e) information
request letters to the owner/operators, generators and to the
transporters.  Information request letters, and any subsequent
interviews, should seek documentation as to the source, volume,
nature and location of wastes transported.  Regional staff should
also seek to identify through this process the role of the
transporter in the selection of the facility or site.

     Notice letters informing transporters of potential liability
under CCRCLA will not be issued unless and until the information
gathering process indicates that the transporter may have selected
the site or facility to which the hazardous substance* were
delivered. (Bowever, as indicated above, information request
letters should be routinely sent to all transporters.)  Issuance
of notice letters to transporters is appropriate only when
information obtained indicates that the transporter may have
•elected the site or facility.

     Similarly, enforcement actions (whether administrative or
judicial) would be brought under 1106 or §107 only under the same
circumstance*. . As a matter of policy, CPA will bring action only
•gainst transporters where information is available which indicates
that the transporter ••elected the site or facility.  Bowever, in
the event that information is Inconclusive due to a lack of
cooperation from transporters in providing information, EPA may
bring action againat any transporter to compel full response to
information requests.

-------
to
CO
O)

-------
           UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

                       WASHINGTON. O.C. 204«0
                          MAR i 4 ISoo
                                              SOLID MASTE AND IMfMCENCv MCS'ONSt
MEMORANDUM

SUBJECT:  Reoorting  and  Exchanoe of  I-.formation on State Enforcement
          Actio/is  at  National  Priorities  T,ist  Sites
FROM:      J^  Wlns't'on' Porter
           Assistant  Administrator

TO:        Addressees

     Recent develoments  in  the  Suoerfund  enforcement program
prompt me  to  personally address  the  issue  of  reporting  and exchange
of  information on  State enforcement  actions at National Priorities
List  (NPL) sites.   I recently  approved guidance on  funding States
during their  oversight of  Potentially Responsible Party (PRP)
conduct of Remedial  Investigations  (RI), Feasibility Studies  (FS)
and Remedial  Designs (RD).   Furthermore, the  current Suoerfund
rea-jthorization  language  will  allow  State  funding for a variety of
other enforcement  activities.  These include'such activities  as
oversight  of  PRP conducted Remedial  Actions  (RA), and negotiation,
litigation and other efforts leadinci toward private nartv cleanup.
This exoansion of  the program's  funding authorities will inevitably
increase State enforcement actions at NPL  sites.

     As States exnan>1 their  involvement in the Superfund enforcement
program, the  Agency's oversight  and  review of their actions will
become an  increasingly important activity. He must ensure that
State enforcement  actions  at priority sites are conducted in  a
manner consistent  with Agency  procedures and  are adequate to  Allow
for deletion  from  the NPL.   We must  also be able to determine,  in
addition to a State's enforcement efforts, whether  Federal review
and participation  is necessary.  This can  only occur if we are
keot informed of the progress  and major decisions made  at these
sites.

     CERCLA reauthoritation  will also increase the  amount of
interaction reouired with  States in  conducting Federal  enforcement
actions.   Specifically, the  House Bill mandates State participation
in  the following areas:

     • Applying  State standards  and  permits  to on-site  and off-site
       response  actions carried  out  under  Section 106;
     • Regulations for State involvement  in  the CERCLA  enforcement
       resnonse  process;  and               .
     • State  concurrence  of  Section  106 enforcement actions.

-------
                                                         •9631.2

                               -2-
The  language  in the House Bill  is subject to revision.  However,
I believe the direction  is  towards  increased State participation
and  will continue to be  the case even  if reauthorization takes
some  time to  occur.  This increased emphasis on State participation
in Federal-lead enforcement actions coincides with our need to
keeo  States eaually informed and involved in our activities.  The
sharing of information needs to be  reciprocal if we expect to be
successful in our efforts to seek private party cleanups and NPL
site  deletions.

      As you are aware, on October 2, 1984, EPA and the Association
of State and Territorial Solid Waste Management Officials (ASTSWMC)
signed a joint policy statement establishing a framework for
coordinating  Federal and State enforcement actions.  Among the
many  issues recognized as needing to be dealt with in a cooperative
manner was that "sharing of information between EPA and the States
is key to developing a more effective  relationship."  The polirv
also  encouraged that States "keep EPA  informed of their activities,
including consulting with the Regional office when issues arise
that  do not have clear cut solutions."  I strongly encourage that
you more actively implement the suggested approach toward sharing
of enforcement information outlined in the policy.

      Meanwhile, very little information is currently available
that  outlines the national picture  of  State enforcement actions
at NPL sites.  The information must be brought to a level that
assures responsiveness to our own concerns, as well as to Congress
and other interested parties.  The  Office of Waste Programs
Enforcement (Oi-.'PE) recently reviewed the Case Management System
(CMS) for information on State-lead enforcement sites.  Of the
157 sites currently listed as State-lead enforcement only 44
have  a negotiation activity listina (Removal, RI/FS, RD/RA or
other).  Of the 44 sites, 21 are listed as having initiated
negotiations with PRPs to conduct the  activity.  Of the 21 sites,
only  7 have information on the type of negotiation takind place
(administrative order, judicial action, cost recovery, etc.).
This  is also the case for State-lead enforcement RI/FS.  The
system records only 5 sites as having  obligations for State-lead
enforcement RI/FS.  Furthermore, the system does not provide any
information on the progress in getting these site actions completed.

      As an initial step toward getting a handle on State enforcement
actions, OWPC conducted a survey during the recent first quarter
Superfund'Comprehensive Accomplishments Plan (SCAP) review.  The
survey confirmed those sites listed as State-lead enforcement in
your  Region, and categorized each site by the type of enforcement
action taking place.  I have attached  the results of this survey
for your information, and want OWPE to continue using the SCAP
process to keep me informed of  these ongoing actions.  During the
second quarter SCAP review we may ask  for additional information
on these sites.  I have attached a  list of some additional data

-------
                                                    OSWER I 9831.2
                               -3-
                                      and
                                       *t
would
reouirements that could be addressed
comments you have on collecting this information
be helpful if you could identify what information
collected and exchanced in your Recion.
appreciate any
   It would also
  is routinely
     I also want OWPE to continue working with ASTSWMO and the
National Association of Attorneys General (NAAG) to outline our
future State enforcement information reauirements and the States
desires on information at Federal-lead sites.  I will be calling
on representatives from the Regions to assist in this effort.
without your active participation and support we will not be
able to realize these long-term goals.

     In the meantime, if you have any information to provide or
concerns to address, please contact Jack Stanton (FTS-382-4811)
or Tony Diecidue (FTS-382-4841) of OWPE.

Attachment
Addressees:

Directors. Waste Management Division, Regions I, IV,V ,VII ,VIII
Director, Emergency and Remedial Resoonse Division, Region II
Director, Hazardous v.'aste Management Division, Region ill
Director, Air ana V.'aste Management Division, Region VI
Director, Toxics and Waste Management Division, Region IX
Director, Hazardous Waste Division, Recion X
Regional Superfund Branch Chiefs, Regions I-X
Regional Counsels, Regions I-X .

-------
                                          OSWE?. » 9631.2
STATE-LEAD ENFORCEMENT




    SITES

-------
                                                           OSWLR • 9831.2
     The followina data elements represent a comprehensive list
of information that could be collected on State-lead enforcement
sites.  The data is essentially ecuivalent to the information
collected on Federal-lead sites.  However, we will not collect
State-lead enforcement data at the same level of detail.  I want
this list to serve as a reference for discussion and would like
to receive your opinions on it.

     • Pre-Enforcement

       - PRP Search (Start/Completion; Planned/Actual)
       - PRPs Identified (Number/Names)
       - Notice Letters Sent (Start/Completion;  Planned/Actual)

     6 Enforcement - RI/FS

       - Negotiations (Start/Completion;  Actual)
       - Settlement (Date)
       - Enforcement Actions -- Administrative/Judicial — (Start/
         Completion; Actual)
       - PRP RI/FS (Start/Completion; Planned/Actual)
       - State Enforcement RI/FS (Start/Completion;  Planned/Actual)
       - Remedy Selection (Hate)
       - RI/FS Cost Recovery (Start/Completion;  Planned/Actual)

     0 Enforcement - RD/RA

       - Negotiations (Start/Completion;  Actual)
       - Settlement (Date)
       - PRP RD/RA (Start/Completic -; .:. a-inei/Actual)
       - Enforcement Actions — Administrative/Judicial — (Start/
         'Completion; Actual)
       - RD/RA Cost Recovery (Start/Completion;  Planned/Actual)

-------
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                                                                                                                                                               . ««*
-------
                                     Sta t e-L*arl° t nlor eevenl Site*  Sui»a
n State
               Sit* Na»a
                                                       t ode Coi»"eni
: N>
7 NJ
7 NJ
7 NJ
? NJ
NJ
NJ
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NJ
Nl
NJ
NJ
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7 NJ
r NJ
7 NJ
7 NJ
2 NJ
7 NJ
7 NJ
r NJ
'7 NJ
? NJ
7 NJ
7 NJ
7 NJ
7 NJ
7 NJ
7 NJ
7 NJ
7 NT
7 NT
7 NT
7 NT
7 NT
7 NT
7 NT
7 NT
7 NT
7 NT
•f NT
7 NT
7 NT
/ N»
/ NT
•f NT
/ r|«
/ HI
.' Ml
;• N»
A*ar tcan Cyana*>d
Brady natai*
Brick •oMn*Kie> Landfill
CPS Mad icon
C -e«»ol
Cooper Road
Oia«ond Atkal i
t vOr PK| 1 1 ip*
Fair l avn Ue I l f i a l d
F Or t Oil
Hercuia*
Hopk in* fmrm
{•par lal Oil
JIS Land! il 1
Jackaon toMncKtp Landl i 1 l
LF t Development
Honroe foMnchip Landfill
PjP Landf i i t
Pi jack Far«*
Radiation lecnnolo^y
Sayrev. 1 la Landl i 1 1
SH • a 1 da 1 1 oy
Spanca Far*
Unl var*al Oi 1
Uppar Oaarfiald Landfill
VentrOn
Vmaland St . School
ill l*On Fa»«
Uoodland Rt 537
Woodland R1 77
Anchor C*aa> icat -Roc o Polymer
JoHnatOMn Landfill
«en*ark la>tiie
Liberty InduVlrial Fmi»^inq
LudiOM Sand & G»avei
Hrrcury Pe t • n 1 n^
Nrpera C^eaical
ttirl Rrtkpa^e
Snivmt Sa««e* %
vr \ t A i U» l l fc •'
Vtl 1 nr v I »n|l 1 . ' 1 ||i AS ' •* 1 r 1 1 • t r 1
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A
B
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A
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f
r
r
B.C
F
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B
A
B.C
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B
B
B
AO
AO
AO
AO
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AO
AO-
AO
3_
p
Nr«i
All
AO-
LF
P'l
Uni
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AO
lor PI/FS 1 Pp. PA dratted - PCPA lead
tOr PI /F S * 1 qnvrl
lor PI /I S * «t- rrl
conte«ted. Ill 1' in court
tor PI /l S t • qned
i * t c and i dai *
• I qnrd to. MI/FS - rrmniv «e 1 re t I On uPCO*tn*
69 NJIJIP tundrd randnlale
P| /r S %i^nr«l
im t •» A.*»A«^Mnl ^ i ^r\m ft In* 01/TC t f PA f1C"p tt nn|||
'•I ly •qrer*^n| vi^nvo 'O* wifr^itcr*<.Ul.r^.fc IIOUF
OttaliOti* unqoinq tor • upp 1 r nr n 1 a 1 PI.FS'PU.VA
t,f PI/FS candidate, d. OP drad date I/ il
t,t PI /I S
be i n^ cloved- GU dec ont »m < nai ed under jud or de-
pr opttvrd inidvr N.M'IIIS per *il
late* el AU tor «onilO'*nq and liner in*ellatiOr>
tor PI/FS PO. PA tiqnrd. delict candidate

lor PO. PA ci^ned
ACO vijned H 1 /F S
AO-
AO
AO
AO
AO
AO
fc-» PI/FS
»>qn»d PI/FS » cleanup
lor PO. PA *i«rent concluded
• ivned tor PI /i S
                                                       O
                                                       O
                                                       O
                                                       A
                                                       B
                                                       n
                                                       n
                                                       u
                                                       u
                                                       B
                                                       B
                                                       R
                                                       n
                                                       n
                                                       A
MOU  *i*ned  MitK Oept   o» Hu-an Service*
AO-fc"* PI/FS candidate, drop  dead date 3/31
A0-fc«» PI/IS
AO-fc"? PI/FS
Negotiation* onqotnf)
CO.cOBpany  bankrupt EPA Mill  probably a**u»e
Negotiation* o n 9 o i n q
Negotiation* on*om*
Or der • MOr k
Ne^Ot tat ion* on*o i n«i
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-------
                                    bt*tr-Lr«d  Kn»o«r»»en»  Site* Su»-»<
  State
              Sit* Na«a
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J OE    N»M Ca*tl*
J DC    N»» Cacti* Steal
9 PA    ABM Uad«
J PA    BrodKaad Craak
} PA    9'OHfi'* Bat tar? B'Vatin?  Sil»
J PA    Cantra Countr K»pon»
1 I'A    CA    Mr amc* Landfill
1 PA    Hun««r»tOMn Ro«d Sit*
.1 "A    K iab*r ton
3 >'A    t • mdan* Oump
1 PA    Lo. d S»>0»* LandlHI
J PA    Malu«rf. ICE
J PA    ftod*rn Sanitation
1 PA    Old City 0*  «a>k
] PA    Ovborn* t«nrfliII
t PA    R»«>n Oiaroial
) PA    S^riv*r Corner
1 I'A    U»Btln«nOU«« ElVvatOr  5it»
3 VA    U S.  1itaniu*
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-------
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-------
                                State-Lrad  Cnlo'cvavnt Sitr* Su»«> v
Stata
           Sit*  Na«a
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S IL    Salatbur«/Koppar« t 3 .
b n|    Avanua "t" G U  Contani r>»»ic»l Inc.
s n|    0oto F in>«s Co.
S n|    StA Indapandant  Land* i « I
•7 «l    SoulKw»««  Oll«M« County Lvndli
S "I    Spar «• L*ndl i I I
S 11    Sp«rt*n  O»»ical Co.
S Ml    U*»t«  Han»^«"»"» (Holland  Laqc
•, MN    A^at*  Laka Scrapyard
b nN    Boi«a  Ca«cad*/Onan/n»dt r onic «
1 rm    tact Bat*«al OaMOlition Lar>d< <
b nN    f'**way  Sanitary Landi i i i
b flN    G»nar*l  n M
S nN    St. Auiu»ta Sanitary  Ll/St.  Cloud Ou»p
S nN     St. !>•«•• Pap«r Co.
^ nN    Union  Scrap
b nN     Univar«l|y ol linnatota  IBo««"Ont I
S nN    waita  Park
*i nN     Ua«Hin«ton County LandliM
S nN    w»>ittakar Corp.
S nN    Uindoa DUMP
b OH    Al»co  Anaconda
*> OH    Ntata  Cna«ic«i
*t DM     IRW
'*> OH     lanatvllia uaMiiaid
b Ul    O* I a van Hunicipal U»M No. ft
S Ul    Lauar  I  Sanitary Land* • I •
S Wl    O«a«a  Hill* NortH LandliU
b Wl    Watta  D*«*arCK  and »»ci«-»tion
S Ul    Ur.«al»r  Pit
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                 AOC  tor
                 4tr.  NPL
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                                                                                                                              OJ

-------
Sit*
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-------
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      •
      5       LMTED STATES ENVIRONMENTAL PROTECTION AGENCY
     /-                     WASHINGTON. D.C. 20460
                                                          9832.8
                             MAY 2 3 1986
                                                         omri or t
                                                           ANOCOMF^I«N;
                                                            MOMTO»I>>C
MEMORANDUM
SUBJECT:  Raised Hazardous; Waste Bankruptcy Guidance
FROM:   /^RTclTarJrR. Mays/
          ^Acting Assistant_ Administrator for
            Enforcement arTd Compliance Monitoring
TO:       Regional Counsels, Regions I-X
     The Agency's recent experience in CERCLA and RCRA bankruptcy
actions has identified the need for updated and revised guidance
on the scope .of EPA's enforcement actions against bankrupt parties.
This memorandum is intended to update the May 24, 1984 guidance
•CERCLA Enforcement Against Bankrupt Parties" and the guidelines
on bankruptcy contained in the Cost Recovery Handbook "Procedures
for Documenting Costs for CERCLA $107 Actions," January 30, 198S.
The memorandum defines specific criteria for evaluating the
merits of a potential bankruptcy referral» elaborates on the
policy regarding settlement with bankrupt parties? reviews the
recent judicial decisions  in the areas of the automatic stay,
abandonment* discharge, and claims of administrative expenses;
and briefly describes new enforcement theories which have been
asserted by the Agency in recent pleadings.

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BANKR'JPTCY REFERRALS                                      9832. 8
      EPA  has  referred  22  hazardous  substance cases to the
Department of  Justice  for filing     .jnkruptcy actions.  After
several years  of  litigation  only  two  of these cases have resulted
in  recovery of  funds from the debtor.  The current docket of
bankruptcy cases  has consumed a disproportionate amount of
attorney  resources  based  on  the expected recovery of funds to
the Agency.
      Additional scrutiny  will be  used in evaluating future
referrals from  the  Regions which  include bankruptcy claims.
In all referrals  regarding bankrupt parties, the Regions should
include a justification for  filing  in the bankruptcy action.
The referral justification should be  based on at least one of
the following five  criteria:
          1.  EPA is likely  to recover at least S5,000
              by  filing a  simple  proof of claim as a
              general  unsecured creditor
      Filing a proof of claim is a relatively simple and straight-
forward natter which may  be  appropriate when the Agency has a
claim as a general  unsecured creditor, for example in cases
where the Agency  has completed a  response action before the
bankruptcy is filed.  Where  there appears to be sufficient assets
in the debtor's estate I/ for a snail distribution to the
I/ Determining the extent of the a,,  .3 in the estate can be
~  based on the schedule of assets »*t out in the bankruptcy
petition, the extent of assets and claims published following
the initial meeting of creditors, the court's bankruptcy docket,
and periodic filings available through the court clerk.

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                              - 3 -
                                                       9832.8
government on an unsecured claim, the trustee, debtor, or other

creditors tr,£y well not undertake the trouble and expense to

challenge a dale that does not otherwise threaten the estate.

The chances of such an objection are particularly small where

EPA's claim.Is liquidated and CERCLA liability is clear £/.  As-

a general rule, a proof of claim should be filed in cases where

EPA does not anticipate that an objection will be raiaed by the

creditors or the estate and where the filing of a proof of claim

will lead to a recovery of at least $5,000 J/.  In these cases,

the Region should prepare an abbreviated referral package con-

taining the proof of claim, supporting affidavits and cost

documentation and a brief description of the assets in the

debtor's estate.
          2.  EPA is likelv to recover at least 820.000 of
              response costs through a more complex bankruptcy
                 Tm
              respc
              TTTir
              •^•^••^MMM^M

     As a general rule, prospective referrals of complex

bankruptcy actions (such as a request for an administrative

expense priority) that may lead to recovery of less.than S20.000

are discouraged.
21  Under Section 502(a) of the Bankruptcy Act a claim is deemed
~"   allowed unless oblected to.  Thus, filing a proof of claim,  by
itaelf, will often not lead to the type of extensive litigation
that has characterised many of the Agency's bankruptcy cases so  far,

3/  If costly obstacles or significant challenges at aoae point
~~   do in fact loom over EPA'a proof of claim, the Agency can
always withdraw its claim as a matter of right prior to the
filing of an objection (Bankruptcy Rule 3006).  Even after the
filing of an objection to the proof of claim. EPA can withdraw
its claim, subject to court approval.  As long as the claim was
filed in good faith, a court will be unlikely to deny the with-
drawal of a claim where the government indicates that it is not
in its best Interests to pursue the claim.

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                               - *  -                     9832,8
              «
     Assuming a  recovery  of  S20.000 or more, the Region should
 set  out  the  extent of  the assets in the debtor's estate, the
 number and extent of other claims, the status of other creditors
 (i.e., secured or unsecured), and the theories of recovery which
 will be  asserted in the bankruptcy litigation.  The Region should
 also evaluate the merits of EPA's claims, including the ability
 of the Agency to prove its CERCLA 1107 claims based on available
 cost documentation.
          3.  The bankruptcy action has significant deterrence
              value
     Under this justification, the Regions should establish
 that the bankrupt party may be seeking to avoid liability
 for Superfund cleanup through an unlawful declaration of insol-
vency.  The  referral should include a discussion of the past
 financial practices of the potential defendant and any indication
of misrepresentation or fraudulent transfer of funds.  A bank-
ruptcy case may also be an appropriate candidate for referral  if
the case is made highly visible to-the regulated community and
will serve as a deterrent to other defendants who say contemplate
using the bankruptcy courts as an obvious ahield from potential
Superfund liability to the government ^/.  In these eases, the
LI  The government ha* been successful in dismissing bankruptcy
actions where the government was able to show under Rule 707(a)
or 305(a) that the dismissal was in the public interest.  In In
re Commercial Oil (Ho. 85-01951 Bankr. N.D. Ohio) the Bankruptcy
Court under rule 707(a) dismissed the petition in bankruptcy
citing In re Charles Ceorte Und Reclamation Trust. 30 B.R.  918
(Bankr. C.D. Mass. 1983) which involved a aham bankruptcy filing
in an attempt to avoid Superfund liability.

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9832.8                          '    '
   Region  should attempt  to estimate the  extent  to which the costs
   of litigation may  be recoverable.
   A.  Equitable treatrent  of all  responsible parties
        In some  circumstances the  Region  may wish to refer a case
   against a bankrupt party in the interest of equity and fair
   treatment of  all parties.   For  example, it nay be appropriate
   to pursue the bankrupt owner or operator of a facility who
   contributed significantly  to the  creation of  the hazard,
   particularly  in connection with a settlement with other viable
   responsible parties.   In most cases, the Region should not
   consider a referral against bankrupt generators or transporters
   unless  the case meets  the  criteria set out in justifications
   1  or 2.
        5. Favorable  precedent or  tactical litigation considerations
        In rare  cas^s 'there may be an overriding interest In
   pursuing a bankrupt party  for the purposes of obtaining an
   important and favorable  precedent $J or where there are tactical
   litigation issues  relating to other actions in which the Agency  -.
   IB involved ^/.
   5/   There nay be eases  where  even  though the potential recovery
   *~   is  snail, there is  good opportunity to develop the law in
   the area of environmental  bankruptcy litigation.  Moreover,
   cases where the Agency's claim it  snail nay present the best
   factual situations  for  developing  our  legal arguments.  For
   example, courts nay be  nore willing to grant an administrative
   expense priority when the  size of  EPA's claim Is snail and will
   not keep other administrative clains fron being paid.
   6/   For example,  filing a  proof of clain nay be a useful nechanism
   ~   to  insure that  the  United States receives copies of relevant
   pleadings filed In  the  bankruptcy  and  has access to participate
   in  whatever discovery is conducted in  the bankruptcy proceeding.

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                                                       9832-8
MULTIPLE  CLAIMS
      In several cases, the Regions have referred bankruptcy
cases which address one claim against « debtor, but which do not
mention other, sometimes unrelated, potential claims that may
involve the same debtor.  For example, referrals for the recovery
of funds  spent in an immediate removal nay also have potential
claims for CERCLA remedial action or RCRA corrective action.
There can be conflicts in how the Agency would want to proceed
on the various claims.  Accordingly, it is essential that the
full extent of all potential EPA claims against a debtor be
disclosed to the Department of Justice before any formal action
is taken  in the bankruptcy,,  All litigation reports prepared by
the Regions for bankruptcy cases should summarize all known and
potential claims that EPA nay have against the debtor.
SETTLEMENT VITP BANKRUPT PARTIES UNDER CERCLA
     The Agency's settlement policy 2J states that it nay be
appropriate for the Regions to enter into negotiations with bank*
rupt PRPs even though an offer may not represent a substantial   '  ,
portion of the costs of cleanup.  The policy further states-that
the Regions should avoid becoming involved in bankruptcy proceedings
II  "Interim Hazardous Waste Settlement Policy" Vol. 50, No. 2&
    Federal Register (February 5, 1985) 5034-5044.  See discussion
at ITIManagement Guidelines for Negotiation, claims in bankruptcy
Id. at 5036.

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                              - 7 -                      9832,8
 if there  is little likelihood of recovery, and should recognize
 the risks of negotiating yithout creditor status.  In general,
 the Regions have been given broad authority to settle with
 bankrupt  parties.
     When a Region elects to settle with a bankrupt party the
 following five options should be considered:
          1. Confession of Judgment
     In United States v. Hetate Asbestos Corp. ct al., No. 83-
 309-GLO-RMB (Order of July 12, 1985) the court approved the
 entry of  a consent decree and civil Judgment against certain  of
 the defendants in bankruptcy for $7,085,000.  The order granted
 1udRir>ent jointly and severally in the District Court proceeding
 in settlement of claims against the bankrupt parties.  In this
 case, due to the extremely limited assets of the bankrupt
 individuals,  it is doubtful that the United States will recover
 a substantial portion of the $7 million.  This fora of settlement
 (i.e., a confession of liability and Judgment) is only encouraged
 in a Chapter 11 reorganization action where a specific provision
 for enforcement of the judgment it set out in the confirmed plan
of reorganization. £/
8/  Unless otherwise provided for In the plan of reorganization,
~   the confirmation of the plan discharges the debtor from
all debts arising before the date of confirmation, 11 U.S.C.
I1141(d)(1).  In addition, 11 U.S.C. I524(a) provides that
a discharge voids judgments on discharged debts and enjoins
any legal action to collect such debts from the debtor or the
property of the debtor.

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                              - 8 -                      9832,8

          2.  Vritten agreement with trustee and other creditors
              regarding satisfaction of claim with appropriate
              reservations
      It  is also possible for the Agency to enter into an agree-
ment  with the trustee for the debtor regarding a future payment
of funds upon dissolution of the estate.  For example, in one
case  in  the Northern District of Florida Che Agency is contem-
plating  entering into a stipulation with the trustee and the
mortgage holder on the contaminated property.  As a condition of
settlement, EPA will agree to release the debtor from liability
and allow the cleaned up property to be sold or leased.  EPA and
che mortgage holder would split Che proceeds from the sale or
lease of the property thereby recovering a substantial portion
of the Agency's cleanup costs.
      In  a second case, in Che Eastern District of North Carolina,
the Agency is considering entering into a similar arrangement.
The dfbtor-in-possession has submitted a liquidation plan of
reorganization in which che debtor agrees Co retain title to che
contaminated property during the EPA cleanup.  When che cleanup
is completed, che debtor will sell Che property.  The proceeds
vill  go  first to cover adminiscracive expenses involved in che
•ale  and thtn co EPA for reimbursement of response costs.  EPA
has requested that language be included in the plan which pro-
Cects che righc of EPA Co recovtr againsc che debtor's insurance
companies.

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                              - 9 -
9832,8
          3.  Agreerent with trustee regarding pro rata
              distribution of assets'
     Pending a final accounting, EPA may agree with the trustee
to a pro-rata payment of our claim in bankruptcy.  In In re
Crystal Checical Corpan?. No. 81-02901-HB-4 (Bankr. S.D. Texas),
EPA entered into a stipulation with the trustee for a pro rata
payment of cleanup costs after liquidation.  The stipulation  was
reached after a four day presentation of evidence to the bank-
ruptcy court where EPA was seeking an imaediate payment of funds
for the ongoing cleanup.
          4.  Settlements contained in the reorganization plan
     A Chapter 11 reorganization plan is a type of settlement
document.  Reorganization plans can be used to set forth
various settlement-type provisions that are in the Agency's
Interest.  For example, in In re Thomas Solvent Co.. NK 86-00843
(Bankr. W.D. Mich.), the Second Amended Plan of Reorganization,
which was confirmed by the court, Included, at the government's
insistence, provisions relating to preserving claims against
liability insurers and provision! relating to restrictions on
transfer of contaminated property.  Other appropriate provisions
in such plans night be provision* on access to property and
retention of records.  The Agency should insist on this type  of
provision in cases where a plan cannot be confined without our
concurrence.

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                              - 10 -
                                                       9832,8
         5. Settlement with other creditors.
     In some cases, other creditors will be a party to a settlement
between FPA and the debtor.  For example, in In re Thomas Solvent
Co., NK 84-008O (Bankr. W.D. Mich.), there is approximately
5350,000 available for distribution to creditors.  The significant
creditors are EPA, the State of Michigan and two residents  groups
with health dales.  FPA, the State and the two groups have
filed multi-million dollar claims.  We are presently finalizing
a settlement aTong these creditors and the debtor which will
provide for the distribution of the $350,000.  One primary
benefit of such a settlement is that it avoids the need for time
consuming and expensive litigation in bankruptcy court among
creditors dar.aged by the same activities, and will allow us to
devote our full resources to pursuing a cost recovery action
against other responsible parties.
     There are numerous other options for settlement, and
for documentation of settlement, vith a bankrupt party,
including those used to resolve non-bankruptcy proceedings
under CERCLA.  Although Headquarters vill be flexible in
reviewing these settlements, it ia important chat the Regions
consult with Headquarters and the Department of Justice before
entering into final negotiations vith a bankrupt party.  An
abbreviated referral of the bankruptcy aettlement agreement is
acceptable.

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                              - 11
                                                      9832,8
JUDICIAL DEVELOPMENTS
     Since the May 24, 1984 guidance was issued regarding  CERCLA
enforcement againt bankrupt parties, there has been an increase
in judicial activity in the area of environmental bankruptcy
actions, particularly in cases involving hazardous waste sites.
In addition to several significant District Court and  Appellate
Court decisions, the Supreme Court has issued two significant
rulings in this area in Ohio v. Kovaes, 105 S. Ct. 705 (19851,
and Midlantic National Bank v. New Jersey Department of
Environmental Protection, 54 U.S.L.W. 4138 (U.S.  Jan.  27,  1986)
("Quanta Resources").
     1.  Automatic Stays
     Several courts have adopted the Agency's interpretation
that the automatic stay provision cf section 362  of the
Bankruptcy Code does not apply to actions taken by a govern-
mental unit to prevent environmental harm.  In Penn Terra
Ltd, v. Department of Environmental Resources, 733 F.2d 267,
274 (3d Cir. 1984), the court held that actions taken  to
•rectify harmful environmental hazards* were an obvious
exercise of the State's authority under the police power and
therefore were exempt.from the automatic stay.  The Supreme
Court, in a footnote to the Kovaes decision* suggested that
Penn Terra may be applicable to hazardous waste cleanup actions,
105 S.Ct. 705, 718, n. 11.
     A recent CERCLA decision regarding the Film Recovery
site in Illinois was also favorable to the Agency on the issue
of the automatic stay, United States v. B.R. MaeKay t  Sons Inc.,

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                                    "                   9632,8
    al. .  Uo. 65-C-6925 (N.D. 11).. Jan. 17, 1986).  In the  McKav
 decision the court held that CERCLA cost recovery actions fall
 squarely within the governmental enforcement exception to the
 automatic stay.  Id. at 7.
      Other'recent decisions indicate a split of authority on the
 ISSUP of whether the automatic stay applies  to enforcement actions
 brought  pursuant to CERCLA.  In United States v.  ILCO.  48 B.R.
 1016 (N.D.  Ala. 19*5),  EPA asserted claims pursuant  to RCRA
 53008. CWA  5S301 and 309.  and CERCLA 1106.   The Court's decision
 in the ILCO case stated clearly that the CERCLA $106 claims were
 exempt from the automatic  stay because the government's complaint,
 which sought a  cr>urt order compelling ILCO to remedy environmental
 harm, constituted an equitable action to prevent  future harm,
 rather than an  action to enforce a money judgment.   Recognizing
 that the debtor would have co expend funds in order  to satisfy
..the  requested mandatory relief, the Court indicated  chat
                                                                •
 compliance  with environmental laws is of greacer  importance than.
 the  rifchts  of the credieors.   The ILCO decision cites  Penn Terra.
 733  F.2d 277 and Kovaes  in support.   See also.  In che  Matter of
 Hildftnan Indus.. Inc. (Btnkr. N.D. N.J.  Dec.  17,  1984)  (dloxin
 sampling taken  purauant  to an administrative  order falls  within
 che  enforcement of Che  police or regulatory  powers of  a
 governmental unit).   But see,  In re Thomas Solvent Co., Bankr.

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                                                         9832,8
 L.  Rep.  (CCC)  170,111  (Bankr. W.D. Mich.  1984)  (automatic stay
 held  applicable  to Michigan's attempt  to  enforce a pre-bankruptcy
 cleanup  injunction).
      Enforcement  actions  brought pursuant to the Resource
 Conservation- and  Recovery Act and its  applicable regulations
 have  also been found to be exempt from the automatic stay in
 most  of  the  recent decisions.  The Bankruptcy Court In In re
 Wheeling Pittsburg Steel  Corp.. et al.. v. United States
 Environmental  Protection  Agency and Ralph V. Siskind,
 No. P5-793 (PGK)  No. 85-0236 (Bankr. W.D. Penn. Oct. 31, 1985),
 granted  the  United States' motion to dismiss the complaint
 to  enforce the automatic  stay.  In that decision, the court
 held  that the  United States can:  1) proceed to enforce RCRA;
 2)  seek  to determine the  existence of any violations of RCRA;
 3)  seek  to rectify those  violations; and 6) seek the entry of  a
money judgment on any penalties assessed (but cannot seek to
 enforce  such judgment without an order from the court).
     Similarly, on appeal to the U.S. District Court for the
Western  District  of Texas from Che Bankruptcy Court, in .In
 the Matter of  Commonwea1th Oil Refining Co.. Inc.,  Offieal
 Committee of Unsecured Creditors and the Indentured Trustee v.
 United States  Environmental Protection Agency. No.  SA 85-CA-20A5
 (W.D. Texas, Nov. 5, 1985). Che court held chat an EPA enforce-
ment  action  co require a  debcor Co comply with RCRA'a Part B
 requirements was  an exercise of Che Agency's regulatory power,

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                              - 14 -
                                                          9832  8
and thus excepted from the automatic stay under 11  U.S.C.        '
S362(b)(4).  The court stated that the expense which the  debtor
will incur to comply with environmental laws does not convert
into an enforcement of a money judgment which would be auto-
matically stayed, slip op. at 3..  See also, United  States v.
ILCO, 48 B.F". 1016, 1021, 1024 (N.D. Ala. 1985);  In re Bayonne
Barrel and Drum Co., Inc., No. 82-04747, slip op. at 1 (D.  N.J.
July 17, 1984).  But see, In re Professional Sales  Corp.,  48
B.R. 651 (Bankr. N.D. 111. 1985), rev'd 56 B.R. 753 (N.D.  111.
1985).
     There is also sone authority to suggest that the collection
of a civil administrative fine or penalty it an exercise  of the
government's regulatory power, and therefore is exempt from the
automatic stay provisions, United States v. Energy  International
Inc., 19 BR 1020, (S.D. Ohio, 1981).
     2.   Abandonment
     In Midlentic National Bank v. New Jersey Dept. of
Environmental Protection, ("Quanta Resources") 54 U.S.L.W.  4138
(Jan. 27, 1986), the Supreme Court held that "a trustee may not
abandon property in contravention of a state statute or regula-
tion that it reasonably .designed to protect the public health  or
safety from identified hazards."  The Court qualified this holding
by stating that this exception to the abandonment power would  not
apply if the state statute did not address an 'imminent and
identifiable harm" or if the violations alleged were "speculative
or indeterminate future" events. Id. at n.9.  The Court left

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                               -  15  -
       v,        ,     ,   „   u                                9832,8
 op*n  the  question  of  whether  trustees oust  comply with health
 and safety lavs  no matter how "onerous" their provisions.  However,
 the Court Hid  eive so:i>e  clue  when It described security fencing,
 drainage  and diking repairs,  sealing deteriorating tanks, and
 removing  explosive agents as  "relatively minor steps."  _Id_ at
 n.3.
      Prior to  the  Supreme Court'o ruling, abandonment decisions
 in the lower courts were mixed.  Compare, In re T.P.Long Chemical
 Inc.,  No.  581-906  (Bankr. N.D. Ohio. Jan. 31. 1985) (the trustee
 was denied permission to use  abandonment to avoid CERCLA liabil-
 ities) with, Catarount Dyers.  13 B.C.D. 321 (Bankr. D. Vt. 1985)
 (abandonment of  contaminated  property allowed); In re Union
 Scrap  Iron and M»tel.  13 P.C.D. 29  (Bankr. D. Minn., 1985 (same)).
      3.   Discharge
     The  Supreme Court recently addressed the issue of whether a
 bankruptcy discharge  relieves  the debtor from fulfilling
•environmental  duties  that nay  have  arisen prior to filing the
 petition  in bankruptcy.   In Ohio v. Kovaes. 105 S. Ct. 705
 (HR5) the Court stated  that  • pr«-petition Injunction for cleanup'
 of the Chem Dyne hazardous waste alt* Is •  dischargeable debt
 where  the debtor had  been dispossessed of the property and hence
 the State vac-seeking nothing  more  than payment of money for
 the cltanup.   However, the Kovacs decision noted that an
 affirmative injunction not to  bring waste to a site (which would
 not Involve an expenditure of  money) was not a disehargeable
 debt.  The Agency  has taken the position that the Kovaes ruling

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                              - 16 -
                                                           9832,8
should be applied only to those sites where the debtor is no
longer in possession or control of the contaminated property.
An equally narrow interpretation can be made of the decision
in In re Robinson, No. 84-404-BK-J-GP (Bankr. M.D. Fla.
Feb. 4, 1985), rev'd. (A pre-petition injunction to restore
marshland which the debtor had illegally excavated was also held
to be dischargeable even though the debtor was not dispossessed,
because the restoration project would have required an expenditure
of money and was not an affirmative injunction.  In contrast,
EPA enforcement actions or cleanup compliance orders could be
characterized as an affirmative injunction).
     4.  Recovery of Response Costs - Administrative
         Expenses
     The Agency has successfully argued that the EPA's response
costs are necessary to preserve the estate of the debtor and
should be accorded the priority allowed for administrative
expenses, In re T.P. Long Chemical Inc., No. 581-906 (Bankr.
N.D. Ohio, Jan. 31, 1985).  In the T.P. Long case, the
Court held that the estate was a liable party under CERCLA
$107 and that the CERCLA liabilities of the estate were
entitled to priority treatment as an administrative expense.
Kovacs 105 S.Ct. at 711-712.
     The Supreme Court's decision in Midlantic Bank nay be read
to support the holding in T.P. Long that CERCLA liabilities
of the estate are administrative expenses.  Although the Court
attempted to reserve the administrative expenses question, the

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                                                           9832,8
implication of the Court's holding that trustees must comply
with health and safety laws is that such compliance is an
•actual, necessary cost and expense of preserving the estate."
11 U.S.C. S503(b)(l)(A).  See also, In the Matter of Thomas
Solvent Co., No. NK-84-00843 (Bankr. N.D. Mich, Jan. 2, 1986)
(court order requiring construction of a fence on contaminated
property owned by the debtor stated that cost of construction  is
an administrative expense pursuant to $503(b) of the Bankruptcy
Code); In re Geuder Paesehe t Frey Co., (Bankr. E.D. Wise.)
(cleanup costs are administrative expenses); In re Laurinberq
Oil Co. , Inc. , No. B-84-00011 (M.D. N.C. Sept, 14, 1984)
(expenses incurred to abate violations of state water pollution
laws are administrative expenses); but see, Southern Railway
Co. v. Johnson Bronze Co., 758 F.2d 137 (3d Cir. 1985) (in the
absence of fraud, purchaser of property from the debtor does not
have claims against the bankrupt's estate for the costs of
cleaning up the site); In re Charles A. Stevens, 53 BR 783
(Bankr. D.C. Maine, Oct. 9, 1985) (costs for investigation of
waste oil contamination were found not to be an administrative
expense and constitute only a general, unsecured claim against
the debtor's ••tat*)} «nd In re Wall Tube and Metal Products
Co., No. 3-84-00278 (Bankr. E.D. Tenn. Jan. 17, 1986), appeal
pending (environmental response co«t« incurred by the State of
Tennessee did not constitute administrative expenses.).
     An important First Circuit decision which may have applica-
bility in the recovery of CERCLA penalties from bankrupt parties

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                                                          9832*8
is the case In re Charlesbark Laundry, Inc^, 755 F.2d 200
(1st. Cir. 1985), which held that a State fine assessed for
violation of a preliminary injunction is properly an adminis-
trative expense.
     Governments have also been successful in recovering cleanup
costs through property liens.  In In re Berg Chemical Co., Inc..
Case No. 82-B-12052 (Bankr. S.D. N.Y. July 9, 1984), the City
was granted a superpriority lien against the property to clean
up chemical wastes.  But see, In re Charles A. Stevens 53 BR 783
(Bankr. D.C. Maine Oct. 9, 1985) (the State's pre-bankruptcy
investigation costs did not give rise to a lien against the
property).
     5. Federal Lien
     The proposed CERCLA reauthorization legislation establishes
a federal lien on property belonging to persons otherwise liable
for costs and damages under CERCLA.  (Amendments to CERCLA $107).
The Senate bill provides that the lien is not valid against the
purchaser, holder of security interest, or judgment creditor
until notice of lien .is filed in the State where the property  is
located.  The House bill provides that the Agency's lien would
be subject to the rights of purchasers, judgment lien creditors,
or holders of security interests under Stats Isw until notice  of
lien is filed.  The Rouse version slso establishes a maritime
lien applicable to vessels.

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                              - 19 -
                                                        9832,8
FNTOPCEMFNT THEORIES
    •There have been several new enforcement theories developed
by the EPA Regional Offices, the Department of Justice and the
Office of Enforcement and Compliance Monitoring in the area
of environmental enforcement against bankrupt parties.  Two of
these legal theories may be particularly useful in the cases
involving insolvent hazardous waste handlers.
     1. Withdrawal of Reference to District Court
     In deciding whether a bankruptcy court is the appropriate
forum there are two issues which are relevant: whether the
proceeding is a core proceeding under Section 157(b) and,  if
so, whether Section 157(d) applies.
     The bankruptcy courts have the authority to render final
decisions on all core proceedings listed under the bankruptcy
code.  However, both core and non-core proceedings, such as
factual  determinations of liability for environmental damages,
nay be referred to the federal district court.  Pursuant to
11 U.S.C. Il57(d) the district court is required to withdraw
a natter fron bankruptcy court when its resolution will involve
consideration of the bankruptcy code and other federal statutes
regulating organisations or activities affecting interstate
Connerce.
     In United States v. ILCO. Inc.. 48 Bankr. Rep. 1016 (N.D.
Ala., 1985). the district court held that Section 157(d) applied
to, and required withdrawal fron the bankruptcy court of, claims
asserted by F.PA under CERCUV and other environnental statutes.

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                               -  20  -                     9832*8
The court  found  that  CERCLA  and  the other environmental statutes
relied on  were "tlearly.. .rooted In the commerce clause and
are the type of  laws  Congress  had in nind when it enacted the
mandatory  withdrawal  provision."  Id. at 1021.  The court in ILCO
clearly sta'ted that withdrawal was only appropriate if the resolu-
tion of the claim required substantial and material consideration
of CERCLA; not that the CERCLA issues were "merely incidental"
for resolution of the matter.  See also, briefs filed by the
government in In re Johns Manville Corp.. No. 85-6828(A) (S.D.
N.Y. Dec.  30. 1985) .
     Seeking withdrawal froa the bankruptcy court to the
district court will allow the Agency a more favorable forum
which is experienced  in hearing complex issues of fact, and
will allow the Agency to obtain a judgment enforceable in the
bankruptcy court.
     •2.  Discharge of Debts
     All pre-petition debts are automatically dismissed when
the debtor is granted a discharge in bankruptcy, 11 U.S.C.
»727(b). 11 U.S.C. 1502. 11 U.S.C. 11U1(d)(1)(A).  The definition
of a pre-petition debt .include* any action where a claim or
where a potential claim existed before the debtor filed for
bankruptcy (i.e, where a creditor could have sued or could have
filed a proof of claim).  Discharges are available in individual
bankrupteiea (f727(b)) and in  Chapter 11 reorganization*
($1U1(d)(1) (A)'.  They are not available in corporate or

-------
                              - 21 -                    9832,8

partnership Chapter 7 proceedings, or in Chapter 11 liquidations
(51141 (d)(3).  This raises three questions for the Agency:
1) what type of bankruptcy proceeding is involved?  2) when did
the debt  arise?  and 3) is the debt subject to discharge?
     First, .if the Agency did not incur response costs at  a site
prior  to  the bankruptcy filing, the Agency may wish to argue
that the  debt (or potential debt) did not arise until after
commencement of the bankruptcy action.  The Agency nay then
preserve  its right to pursue an action against the party after
discharge.  However, a discharge in a Chapter 11  proceeding may
be read broadly to include all claims that arose pre-confirmation,
*11&1(d).  The issue of the proper treatment of post-petition,
pre-confirmation claims is currently being litigated by the
Agency in the action against Johns Manville at the Iron Horse
Park site in North Billerica, Massachusetts, In re Johns Manville
No. *5-6828(A) (S.D. N.Y. Dec. 30, 1985).
     It may be advantageous in a Chapter 7 liquidation case for
the Agency to argue that the CERCLA cost-recovery claim "arose" -
pre-petition. when the environmental harm first occurred or was
discovered, even though response costs were not incurred until
after the petition.  This ia due to the fact that the debtor
docs not  survive the bankruptcy and therefore recovery during
liquidation of the estate, as a pre-petition creditor, is  EPA's
only chance for recovery.
     Second, if the debtor is an individual, or corporation or
partnership under Chaptar 11 Reorganisation, the Agency aay wish
to take the position that even if the debt is a pre-petition

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                               - 22  -
9832,8
debt, EPA's claim  is not subject to discharge because It falls
under one of the stated exceptions to discharge set out in 11
U.S.C. §523(a).  The exceptions that would be applicable are
those which apply  to fines or .penalties payable to and for the
benefit of" a governmental unit, 11 U.S.C. I523(«)(7), or for
willful or malicious injury to property, 11  U.S.C. I523(a)(6).
In cases of misrepresentation by the debtor, the discharge can
also be blocked by:  proof that the debtor made fraudulent
statements regarding its financial condition; failure by the
debtor to produce  books and records; or failure by the debtor
to explain losses, 11 U.S.C. S523(a).
CONCLUSION
     Future CERCLA bankruptcy referrals will be carefully
reviewed by Headquarters to determine if the action merits
referral to the Department of Justice under the five criteria
set out in this guidance. 'Settlement with bankrupt responsible
parties is encouraged and, consistent with the Agency's current
settlement policy, the Region is given greater flexibility and
authority to settle claims against bankrupt parties.  Recent
judicial decisions and enforcement theories developed by EPA and
the Department of Justice will strengthen the Agency's legal
position in those  cases where the Agency has decided to pursue
an enforcement action against a bankrupt party.

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                              -  23
9832.6
IMPLEMENTATION

     This guidance updates the  procedures  contained in the

existing bankruptcy and cost  recovery  policies.  All future

hazardous waste bankruptcy referrels and settlements should

follow this guidance.   If you have  any questions concerning

these procedures please contact Heidi  Hughes of oy office

(FTS 382-2P45).

cc:  F. Henry Habicht  II
     David T. Buente
     Gene A. Lucero

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(
&)
UNITED STATES ENVIRONMENTAL PROTECTION AGEr

            WASHINGTON. D.C.  20460
                                                        Q ft •» ^
                                                        9832 '5
                          JUN 2 7 32
MEMORANDUM

SUBJECT
FROM:
 Policy on Recovering Indirect Costs
 in CERCLA Section 107iCost Recovery Actions
                      ^'
 Frederick F. Stiehl
 Associate Enforcemen
TO
 John J. Stanton, Director
 CERCLA Enforcement Divisi

 Regional Counsels
 Regional Waste Management" Division Directors
     This memorandum is a clarification of the Agency's
policy regarding the recovery of indirect costs in CERCLA
cost recovery actions.  Previous memoranda from the Financial
Management Division transmitting yearly indirect cost
multipliers have indicated that indirect costs oust be claimed
in all cost recovery actions ("Recovering Indirect Costs
Related to Superfund Site Cleanup," Vincette Goerl to Regional
Financial Management Officers/Regions I - X, December 12, 1985;
"Superfund Indirect Cost Manual for Cost Recovery Purposes -
FY 1983 through FY 1986," Morgan Kinghorn, March 1986).  However,
to avoid disruption of ongoing settlement negotiations with
PRPs in existing CERCLA Section 107 actions, and to avoid
placing the Agency in an apparently inequitable posture before
the court adjudicating the claim, it nay not be appropriate to
seek indirect costs in all on-going cases.

     The decision whether or not co seek indirect costs in
existing cases will be made by the Regions after consultation
with DOJ and with the concurrence of OECM and OWPE.  The
decision, which will be made on a case-by-case basis, will
depend upon whether EPA haa disclosed the overall cost figure
in either negotiations or formal discovery and whether that
figure has been the basis of the parties' settlement
negotiations.  For those cases where no negotiations have
occurred (and therefore the parties have not relied upon a
specific cost figure), but a cost figure has been produced
during discovery, the litigation team ahould supplement the
pertinent discovery and seek indirect costs so long as the

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                                                          9832.5
corr.plaint (particularly the prayer for relief regarding costs)
is broad enough to include indirect costs. /•

     For those cases where indirect costs for past activities
will not be sought (i.e., those cases that meet the criteria
delineated aoove), the Region should notify tne defendants at
the next appropriate opportunity, but no later than July 30,
1986, that indirect costs associated with Agency activities
undertaken after that date will be included in the Agency's
demands.  The defendants should also be notified, where
appropriate, that all indirect costs will be sought if  the case
proceeds to trial.

     Of course, all new CERCLA Section 107 referrals must seek
indirect costs.  Accordingly, cost recovery complaints  filed  in
new cases should include indirect costs as part of the  total
amount sought and CERCLA demand letters must include indirect
costs as a portion of the total demand made upon potentially
responsible parties.

     If you have any questions or this policy, contact
David Van Slyke (OECM-Waste)  at FTS 382-3082 or Janet Farella
(OWPE) at FTS 382-2034.
cc:  Vincette Goerl, FMD
     David Buente, DOJ
/•   Depending upon the posture of the case, it may be possible to
—   amend the complaint to include a request for indirect costs.

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            UNITED STATES
              -  ------   WAJHINOTUN. U.L.
                             29 887
                                                 OSVER Olrtccive 9833.3
                                                        OMICf Of
                                               •OUO WACTf AMD IMIHOINCV MIS*
 MEMORANDUM
 SUBJECT
 FROM
TO:
Administrative Records for Decisions on Selection of
CERCLA Response Actions

Gene A. Lucero, Director
Office of Waste Programs

Henry L. Longest II, Director
Office of Emergency and Remedia

Addressees
                                               nse  (WB-548)
     As you are aware, section 113 (k) of the Comprehensive Environ-
mental Response/ Compensation, and Liability Act  (CERCLA), as
amended by the Superfund Amendments and Reauthorization Act  (SARA),
requires that the Agency establish administrative records containing
information used by the Agency to make its decision on selection
of response action under CERCLA.  Section 113 also requires  that
the records be kept "at or near the facility at issue.'"  This
memorandum is to inform you of steps which must be implemented by
the Regions immediately to assemble administrative records,  if
not already done.

     As the section 113 requirement for the establishment of
records is in effect, the Region* should ensure that information
on selection of a response action is assembled now, and is avail-
able for public, including potentially responsible party, review
both in the Regional Office and "at or near the facility at
issue."  This requirement applies to all sites for which a remedial
investigation has begun.  It also applies to removal actions
where an Action Memorandum has been signed or public cement has
been solicited.

     This administrative record consists of information upon
which the Agency bases its decision on selection of response
action.  It is a subset of information included in the site  file.
The site files will contain information on potentially responsible
party liability and cost documentation, for example, which is not
included in the administrative record.  The administrative record
will also overlap with the community relations information in the
information repositories, the Federal facility docket, and the

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                                                      OSWER Dir«cciv« 983
                             -2-


 NPL listing docket.   A separate tnfmnranriun concerning seetfng up
-atte fllesr aTta~Tong term management of administrative records
 is under development.  At this time, as you assemble and
 reproduce administrative records, vou should keep other records
 management matters in mind.

      Three million dollars were available in contract Funds
 for records management in FY '87, some of which is still available.
 Additional funds averaging about SIOO.OOO per Region have been
 earmarked thjls fiscal year specifically to assist in setting  up
 administrative records.  The Regions should submit a list of
 priority sites at which they will require assistance in compiling
 a record, and an estimate of the cost of such activities.  Top
 priority should be given to those sites for which the Agency
 will be signing Records of Decision (RODs) in this fiscal year,
 and those for which a remedial investigation/feasibility studv
 (RI/FS) is currently available for public comment.  The next
 highest priority Includes those sites where a ROD has been  signed
 and the PRPs are not undertaking the remedial design (RD) or
 remedial action (RA); sites where a RI/FS workplan is available:
 and sites where a removal action is underway.  Third priority
 sites are those where a ROT) has been signed and PRPs are undertaking
 the remedial design or remedial action.                       j

      The Regions should also list sites which presently have    f
 funding for an administrative record.  A coordinator should
 be designated in each Region to manage the compilation of
 priority sites and oversee the compilation of these administrative
 records.  Pleas* submit your list of priority sites and contract
 needs within two weeks to Linda Boornazian in OWPF.  She can  he
 reached at 38Z-4H3H.

      The Agency plans to propose regulations establishing proce-
 dures for the administrative records. These administrative
 record regulations are expected to be issued In con1unction with   '
 the proposed NCP revisions.  The upcoming proposed regulations
 will serve as interim guidance under SARA for the creation  of
 adequate administrative records for response action decisions.
 We have been working vlth representatives from the Regions  on
 these regulations,.

      During the court* of developing these regulations, numerous
 policy iaawes have surfaced.  These Issues are currently being
 addressed tt headquarters.  This memorandum will be followed
 shortly by e memorandum addressing Issues related to the admini-
 strative record requirements, in greater detail.  The upcoming
 memorandum will summarise the Agency's current direction on these
 administrative record issues.  We will also be addressing the
 administrative record requirements in the Superfund Record  of
 Decision Workshops In June and July of 1987, emphasizing information
 on FY '87 RODs.

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                              -3-
                                                    OSWER Dir.ccivt 9833.3
      Attached  is  a  list  of items which_, if generated for a
 particular  site,  should  be__inciud«d ih_j;hit nrlmin-jstrat ivt IBLUIJ.—""
 Plea**- HOte that1  information  upon which the decision on selection
 of  response action  is  based must be included in the record.

      The A9N»cy will be  refining this list.   The upcoming memorandum
 will  go infii much greater  detail on all aspects of the administra-
 tive  record.   Until then,  the above lists of documents should be
 used  as an  indication  of information which should be placed  in the
 administrative record.

      Please call  Deborah Holpe of OWPE at FTS 475-8235 if you
 have  any questions.

 Attachment

 Addressees:

    Directors, waste Management Division, Reg.  I, IV, V, VII, VIII
    Director,  Emergency  and Remedial Response Division, Reg.  u
    Directors, Hazardous waste Management Division, Reg. in, yz
    Director,  Toxics and Waste Management Division, Reg. II
    Director,  Hazardous  Waste Division, Reg. X            ...      •
    Regional Counsels, Regions I-X                              •
    Superfund  Branch Chiefs,  Regions I-X                        <
    Superfund  Section  Chiefs,  Regions I-X                       '

cc: Lloyd Guerci, OWPE
    Russel Wyer,  HSCD
    Tim Fields, ERD
    Edward Reich, OECM
    Mark Greenwood, OGC
    Nancy Firestone, DOJ

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<0
00

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          UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                           FEB 12
                                  OSWER Directive Number 9835.4
MEMORANDUM
SUBJECT:
FROM:
           Interim Guidance: Streamlining the CERCLA
           Settlement Decision Process
                                    Emergency Response
TO:
          J. Winston Porter
          Assistant Administrator
          Office of Solid Waste -
              ^	V.  VC~- -».
          Thomas L. Adams,  Jr.
          Assistant Administrator fi\r Enforcement
            and Compliance  Monitorii

          Regional Administrators,  Regions I-X
          Waste Management  Division Directors, Regions  I-X
          Regional Counsels,  Regions I-X
     During the Administrator's Superfund Implementation Meeting
of November 19-20, 1986, several concepts were presented for
streamlining and improving the CERCLA settlement decision process.
Those concepts addressed three major areas:

     1. Negotiation Preparation;
     2. Management Review of Settlement Decisions; and
     3. Deadline Management.

The purpose of this memorandum is to set forth those concepts in
greater detail and to define the roles, responsibilities and
procedures necessary to implement this important initiative.

BACKGROUND

     (Jnder CERCLA, EPA's goal has been and will continue to be to
maximize the number of sites which can be cleaned up.  Congress
clearly indicated their support for this goal in the Section 122
settlement procedures of the Superfund Amendments and
Reauthorization Act of 1986 (SARA).  That goal requires constant
review of old policies and development of new measures which
promote privately financed response actions.

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                                  OSWEP Directive Number 9835.4

                               -2-

     Clearly, one  important measure to encourage settlement is to
maintain aggressive use of Section 106 administrative and judicial
enforcement authorities to compel private party response (see
Porter/Mays memorandum "Use of CERCLA $106 Judicial Authority-Short
Term Strategy", dated July 8, 1986).  The office of Solid Waste
and Emergency Response (OSWER) has recently amended aspects of
the Supeffund" Comprehensive Accomplishments Plan (SCAP) to offset
some of the attendant project delay due to CEPCLA section 106
litigation.  Regions may now request funding for remedial design
(RD)'for enforcement lead sites concurrent with their referral^
This approach not  only minimizes the time where no site action
proceeds, but also puts the government in a stronger position at
trial.  Regions would be expected to pursue the litigation to
completion'absent  extraordinary circumstances or compelling
public health concerns.

     Congress recognized the value of enhancing the settlement
process in enacting SARA.  The provisions for Section 122 are
based in large part upon EPA's Interim CEPCLA Settlement Policy
(50 PR 5034)'and are designed to increase potentially responsible
party (PRP) participation"in response actions.  The new provisions
related to special notice, information sharing and neootiation
mcratoria are particularly important.  They attempt to strike a
balance between the competing demands of prompting more settlements,
conserving limited government resources/ and rinimizing the delay
in the clean-up process.

     Additionally, our experience in the last six years has
shown us that the  way in which we manage other parts of the
settlement process can also have dramatic effects on the chances
for successful negotiations.  For example, setting deadlines too
tightly can destroy the willingness 'of"PRPs to attempt to settle.
On the other hand, prolonged and inconclusive negotiations can
seriously delay response actions at a site.  Based on our
experience, and comments from the Regions and other pa-rties
involved in the process, the Agency has concluded that there are
three areas, in addition to the matters covered by SARA, where
certain changes will help improve and streamline our process for
conducting settlement discussions:

      •  Negotiation Preparation;
      •  Management Review of Settlement Decisions; and
      •  Deadline  Management.

     Before describing these changes in the sections which follow,
a brief description of the problems that have been encountered
will help to explain why this guidance has been prepared.

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                                  OSWER Directive Number 9835.4

                               -3-

     There are  two kinds of problems sometimes associated with
negotiation preparation; instances where EPA does not fully
prepare  itself  for negotiations and instances where EPA does not
facilitate the  preparation of PRPs.  Negotiations are occasionally
begun without the benefit of government proposed settlement
documents (e.g., a draft consent decree and technical support
documents).  Ideally, negotiating teams should have a strategy
for settlement  which addresses goals, interim milestones for
continuing negotiations, firm schedules and followup steps in the
event settlement is not achieved.  When EPA does not adequately
plan, it is difficult for the government to live up to its
responsibilities in moving discussions towards conclusion.

     Perhaps more important, though, are the issues related to
our support of  the PRP preparation process.  PRPs at Superfund
sites are often facing multi-million dollar liability.  There are
generally many  of them (sometimes hundreds) and our success.in
negotiations is greatly influenced by the extent to which the
PRPs have the time and information to organize themselves.  Our
occasional failure to give early notice or to provide adequate
information (including draft settlement documents) to PRPs has
been clearly counterproductive.  Conversely, in those instances
where notice has been.given early in the process, substantial
information has been made available and where EPA has assisted
in the formation of steering committees (with or without third
party assistance), we have been much more successful in settlement
efforts.

     Prompt conclusion of some negotiations has also been
occasionally hampered by breakdowns in EPA's management review
of settlement decisions.  Superfund settlements have frequently
posed issues which are difficult either because of their prece-
dential nature  or the sheer magnitude of the clean-up.  Delayed
decisions often affect the willingness of PRPs to settle and
always impair the credibility of the negotiating team.  When
delays have occurred, they are generally attributable to several
factors.- In some instances, negotiating teams did not raise
issues to management early in the process, and decisions ultimately
are forced by crisis.  In other cases, decisions seemingly can
be made only by the highest levels of Headquarters management.
The relative inaccessability of those decision-makers to decide
on critical issues in a timely way has sometimes been a major
impediment to settlement.

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                              OSWER Directive Number  9835.4

                               -4-

     The  third problem area  in the settlement process relates to
managing  deadlines for negotiations.  In recognition of the fact
that these are multi-party negotiations over complicated legal
and technical issues, a reasonable opportunity should be provided.
However,  guidelines must be  established for bringing closure to
issues so as not to excessively delay the clean-up at the site.
At times, decisions are made to extend negotiations based on a
showing of some subjective "progress", even where there is no
concrete  result to show for  that progress.  Decisions are sometimes
made to continue negotiations based on concerns over future cost
recovery  actions.

     In order to substantially improve the CERCLA settlement
process,  attention must be given to solutions for each of the
three areas discussed above.  The framework set forth herein is
intended  as a major first step in that direction.  However,
refinement and modification  of these steps will be considered
based on  your comments and experience gained in the coming months.

SETTLEMENT PROCESS IMPROVEMENTS

Negotiation Preparation

     Regions should improve  negotiation preparation through four
activities:

     1.   Earlier, Better Responsible Party Searches
     2.   Earlier Notice and  Information Exchange
   . 3.   Initiating Discussions Earlier
     4.  Preparation of a Strategy and Draft Settlement Documents.

     The  PRP Search is the first step in the settlement process
and is one of the most critical to success.  Regions must pay
close attention to both the  timing and quality of the PRP search
since inadequate information on the identity of PRPs and their
contributions can be a significant impediment to the PRPs
organizing themselves to present an offer of settlement.  Guidance
and targets established under the SCAP now require that PRP
searches be initiated concurrent with the Expanded Site
Investigation or National Priorities List (NPL) scoring quality
assurance process.  PRP searches are required to be completed
not later than the year in which the site is proposed for the
NPL.  Contractor efforts should be supplemented by issuance of
information request letters  or the use of administrative subpoenas
(a new provision of SARA) at the earliest possible time.  It  is
imperative that these searches be comprehensive and of  high

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                                   OSWER Directive  Number  9835.4

                                -5-

 quality.   That places  a  heavy  responsibility  on  Regional  staff
 to provide direction  to  and  review of  contractor efforts.   In-
 house civil investigators  will  be  hired and available  to  Regions
 this  year to assist  in this  effort.   In addition,  Headquarters
 staff from both OSWER  and  the Office  of Enforcement  and Compliance
 Monitoring (OECM)  will revise the  the  "Potentially Responsible
 Party Search Manual" as  well as present a  training program
 for Regional staff and contractors on  the  conduct  and  review of
 PRP searches.   That  training should be initiated late  this  year.
 In the meantime,  Regional  staff should carefully evaluate the
 adequacy  of PRP searches for sites scheduled  for fund  obligations
 or judicial referral during  FY  87  and  early FY 88  to determine
 whether supplemental work  is necessary.

      Regions should give notice to PRPs of their potential
 liability through  the  traditional  notice letters at  the earliest
 practicable time  and,  in all cases, well in advance  of initiating
 the negotiation moratorium.  This  is  not to be confused with the
 Special Notice which triggers the  moratorium  as  described in
 S122(e).  (Guidance on  Special Notice  and the  moratorium is  forth-
 coming.)   It is not acceptable  to  postpone issuing notice until
 only  the  minimal  time  for  negotiations remains prior to obligation
 of  funds.   Notice  may  be given  to  some parties where further
 investigation  or  analysis  is necessary to  identify additional
 PRPs.

      Notice letters should routinely  include  information  requests
 under Section  104(e) if  not  previously issued. Notice  letters
 should to the  maximum  extent practicable also provide  information
 as  to other PRPs  (i.e. names, volumes  contributed  and  rankings).
 In  some cases, it  may  be more pratical to  provide  this information
 after analyzing the responses to the  information requests.

      It is likewise  important to initiate  discussions  with  PRPs
 earlier in the process.  While  formal  negotiations may not  begin
 until after Special Notice and  closer to the  planned obligation
 date  for  the project,  EPA  should encourage earlier discussions
 that  will further  the  process of educating the PRPs  as to the
 site, EPA's approach to  it and  the information we  have that may
 bear  on allocation or  other  pertinent matters.
•
      The  litigation team must also begin early the process  of
 preparing draft settlement documents  and a negotiation strategy.
 A  draft Consent Decree (or administrative  order  for  Remedial
 Investigation/Feasibility  Study (RI/PS)) should  be prepared
 along with any negotiation support documents  outlining technical
 objectives to  be  presented at or before the  first  negotiation

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                                  OSWER Directive Number 9835.4

                               -6-

session.   (Note  that a  "Negotiation Support Document" to be used
as a technical attachment for an RI/FS settlement may be prepared
by a contractor  but must be  initiated well in advance of
negotiations).   Regional staff should also prepare for regional
management  rev-iew a negotiation strategy which addresses:

     0   initial  positions on major issues with alternative and
         bottomline positions or statements of settlement objectives;

     8   schedule for negotiations which identifies not only the
         drop-dead date  but also interim milestones at which
         negotiations can be evaluated for progress (date for good
         faith proposal  with  line-by-line response to draft settle-
         ment document;  date  for resolution of major issues related
         to  scope of work, funding arrangements, reimbursement;
         date for receipt of all necessary submittals from PRPs
         such as  technical attachments, preauthorization requests,
         trust agreements, etc);

     0   strategy and schedule for action against PRPs in the
         event negotiations are unsuccessful (i.e., issuance of
         unilateral Administrative Order (AO) concurrent with
         Remedial Design (RD) obligation, Section 106
         referral, etc).

     The timing  of most of these activities is critical and in
many cases  will  be related to the proposed date of obligation of
funds. •  For that reason, management attention to the entire site
management  planning process  is critical to ensure that the required
activities  at sites are properly sequenced.  In order to assist
you in this, attached for your Region is an Enforcement Confidential
printout taken from the Integrated SCAP which shows the status
of key settlement related activities for sites with planned
obligations during FY 87 or  FY 88.  (Attachment I)

Management  Review of Settlement Decisions

     To  help improve the management review of settlements, this
section  sets out roles  and accountability in the decision process.
In addition, it  adds two new elements to focus and streamline
policy reviews

     •   A Settlement Decision Committee (SDC); and the
     0   Assistant Administrator (AA) Level Review Team.

     The existing negotiation team approach will continue to  be  the .
primary  vehicle  for developing settlements.  The negotiation  team
will routinely be comprised  of a representative from  the Waste
Management  Division and a representative from the Office of Regional
Counsel.  Department of Justice (DOJ), OECM, the Office  of Waste

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                                  OSWER Directive Number 9835.4

                               -7-

Programs Enforcement (OWPE) staff and appropriate State representa-
tives may participate as necessary.  The responsibilities of the
negotiation team are to:

     0  ensure that PPP searches, notice and information exchange
        are properly scheduled and completed;

     0  devel-op a comprehensive negotiations strategy in advance
        of negotiations;

     0  develop and share draft settlement documents, includina
        technical scopes of work, in advance of negotiations;

     0  conduct negotiations; and

     0  raise issues to the Regional Administrator, and where
        necessary, to the Settlement Decision Committee for
        resolution.

     The Regional Administrator, in consultation with DCJ, is
expected to be the primary decision-maker on CERCLA settlement
issues.   Administrative settlements for RI/FS are fully the
Regional Administrator's responsibility.  OSWFR and OEC« con-
currence continues to be reauired on remedial settlements.  In
particular, certain najor or precedential issues in Remedial
Design/Remedial Action  (RD/PA) negotiations should be referred
for early Headouarters  resolution.  Those issues include mixed
funding or preauthorization arrangements, broad releases,
de minimis settlements, deferred payment schemes, and remedies
that deviate significantly from the Record of Decision (ROD).
More detailed guidance  on those issues will be prepared and mad*
available to you in the coming months.

     At the same time such guidance is being prepared,'Headauarters
will develop an oversight program that ensures quality and con-
sistency in Regional program administration, and provides sufficient
feedback to allow future'policy adjustments.  Once guidance is
finalized, some experience has been gained, and the oversight
program is in-place, "we fully expect that the Regional Administrator
will have broad authority 'to reach settlement decisions within  the
framework of that guidance.  In the meantime, initial delegations
of certain new authorities will be limited by consultation or
concurrence requirements.  After a period of experience, waivers
of concurrence may be made to those Regions which demonstrate
continuous quality and  consistency in administering  the CERCLA
enforcement "process.  At this point, which is likely to occur
within approximately one year, OSWER and OECM will largely  fill  an
oversight role, assuring effective settlements consistent with
applicable Guidance and'developing additional guidance as necessary.
That role will also include periodically  reviewing whether  waivers
of concurrence remain justified.

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                                  OSWER Directive Number 9835.4


                                -8-

     In  the  interim, a Settlement Decision Committee (SDC) has been
created  in Headquarters to provide timely action on issues which
require  Headquarters review.  The SDC will r>e made up of the
following individuals:

Chair:    Gene A. Lucero, Director, OWPE
Members:  Edward E. Reich, Associate Enforcement Counsel for Waste,
              OECM
          David T. Buente, Chief, Environmental Enforcement Section,
              DOJ
          Basil G. Constantelos, Director, Waste Management Division,
              Region V
          Bruce Diamond, Regional Counsel, Region III

          Henry L. Longest, Director, Office of Emergency and
              Remedial Response (OERR) (when necessary)

     Regional representatives to the SDC will be rotated every six
months.  The SDC will meet approximately every 3-4 weeks, or more
often if necessary.  Its primary responsibility will be to coordin-
ate decisions on policy issues raised by Regions.  Most settlement
issues requiring Headquarters review will be resolved at this
level.  The Chief, Compliance Branch, CERCLA Enforcement Division
(CED), OWPE will serve as secretary for the SDC and will coordinate
communicating policy decisions to the affected Region, and more
broadly where decisions create precedent which may be transferable
to other sites.  The SDC will also monitor Regions' progress towards
finalizing settlements, paying particulary close attention to
pending deadlines.

     Regions should access the SDC through either OECM-Waste or
the CERCLA Enforcement Division, OWPC.  Regions should be prepared
to provide a brief summary of the issue, options and their
recommendation.  Regions may, at their discretion, attend the SDC
meeting  to present or elaborate on the issue.  (More detailed
procedures will be established by the SDC.)

     The Assistant Administrator Review Team which was established
during April 1986, will become a formal part of the management
review and decision-making process.  The group will be chaired by
the AA-OSWER and include the AA-OECM and the Assistant Attorney
General  for Lands and Natural Resources, DOJ.  The primary function
of this Team will be to provide overall policy direction on
settlement concepts, but will also be available to resolve major
policy issues specific to sites where necessary, as determined by
the SDC.  The AA Review Team will meet at  least quarterly, but
may convene more frequently, if required by circumstances.   As
Chair of the AA Review Team, the AA-OSWER  must approve  extensions
of negotiations beyond the 30 day authority granted to  Regional
Administrators below.

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                                   OSWER Directive Number 9835.4

                                 -9-

 Dcadline Management

      Effective management of negotiations in the CERCLA program
 will require increase management attention both in Regions  and
 Headquarters.  In order to facilitate the management overview
 that will be necessary, particularly within both the program and
 counsel's office in the Region,  OSWER will provide to you periodic
 reports from the Integrated SCAP,  similar to Attachment I,  which
 highlight negotiations in progress or planned for the next  quarter.
 Headquarters staff and management  will use these reports to track
 the progress of and preparation  for negotiations.

      Recognizing the complexity  of CERCLA settlement discussions,
 it is clear that there will be instances where extension of
 discussion beyond the moratorium period will be appropriate.  The
 framework for considering extensions includes:

      1.  Thirty day Extension by the Regional Administrators
      2.  Additional Extension by AA-OSWER in Exceptional
          Circumstances

      While the SARA Section 122  provisions related to special
 notice  and negotiation tnoratoria are discretionary, EPA policy
 will be that those provisions should generally be employed.
 Section 122 provides for up to a 120 day moratorium before  remedial
 action, during which time EPA. may not initiate enforcement  action
 or remedial action.  The full moratorium period is conditioned on
 receiving a good faith offer from the PRPs within 60 days.   In its
 absence,  the moratorium expires  after 60 days.  (.Note that  while
 EPA may proceed with design work,  as a general rule, we will not.)
 Where adequate preparation as discussed above has preceded  special
 notice, Regions should generally be able -to conclude negotiations,  •
 or at a minimum, resolve all major issues during that period.
 While negotiation extensions should not be encouraged. Regional
 Administrators may grant extensions to negotiations when it is
 believed-that a settlement is likely and imminent.  However, this
 period  should not to exceed 30 days.

      Further extension of negotiations beyond that 30 day period
.may be  approved only by the AA-OSWER.  Absent that approval,
 Regions are expected to move forward with Fund-financed action,
 administrative order or judicial referral where appropriate.
 (Note that negotiations may be resumed at any point after referral
 and filing of a Section 106 action.) Extensions will be granted
 only in rare and extraordinary circumstances and will generally
 be for  short duration where the  expectation is that final agreement
 is imminent.  Requests for extension should be made by the Regional
 Administrator in writing through the Director, OWPE to the AA-OSWER

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                                    OSWER Directive Number  9335.4


                                -10-

an d should sec out succinctly:  1) the length of extension re-
quested; 2) status of negotiations (issues resolved and those
unresolved); 3) justification for extension; and &) actions to be
taken in the event chat negotiations are unsuccessful.  The AA-OSWER
will only consider requests for extensions made by the Regional
Administrator and not direct requests made by PRPs.

     In order to avoid any misunderstanding, these limitations
should be communicated co che PRPs early in any discussions.
Moreover, che schedule for negotiations, so long as it respects
these deadlines, is always open to adluscment by agreement among
the parties.

     As discussed earlier, it is important to recognize that
negotiations are not limited to the 120 day period established by
the special notice provisions of the law.  Information requests
and traditional notice letters should be sent as soon as possible,
and initial discussions should almost always occur with PRPs before
the special notice is provided.  We are developing more detailed
guidance on notice letters, and the use of che special notice
procedures, and we anticipate circulating chis guidance for
comment within the next monch.

     One of che lessons learned as a resulc of che limited April-
May 1986 funding during che Superfund slowdown was that there are
benefits derived by having several settlements which are on a
parallel and firm schedule for final resolution.  Hoc only did we
find chac firm schedules tend to force issues co resolution, hire
ic proved co facilitate management review in that sices wich
similar issues could be dealc wich concurrently.  In order to
excend chis "clustering" effect, OSWER is considering including
in che FY 88 Strategic Planning and Management System (SPMS)
commicments a target for completion of RD/RA negoelaciotTS.

Approach for RI/FS Negociations

     In light of the delegation of RI/FS decisions, ouch of che
above process is not relevane for RI/FS negotiations.  The Agency
continues eo encourage PRP conduct of RI/FS In appropriate
circumstances (see Thomas/ Price memorandun "Participation of
Potentially Reeponaible Parties in Development of Remedial
Investigation and Feasibility Studies", dated March 21. 19*4).
RI/FS settlement issues should generally be resolved by the Regional
Administrator and need not be submitted to the SDC or the AA-level
review group.  Section 122 authorizes a 90 day moratorium for
negotiations, conditioned on receiving a good faith offer from
PRPs within 60 days of special notice.  Regional Administrators
have discretion to terminate or extend negotiations after 90  davs.
However, extension of negociations beyond an additional 30  davs
should be authorized by the Regional Administrator only in

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                                        OSWER Directive Number 9835
                                -11-
liaiced cases.  The points made above in Negotiation Preparation
are equally applicable to RI/FS negotiations, with the exception
that negotiacion strategies do not require Headquarters review.

SUMMARY

     Implementation of these steps to streamline the settlement
process was identified by the Administrator as one of his highest
priorities under SARA.  We urge you to Rive this topic the same
priority in your Regions and provide a commensurate level of
management attention.

     If you have any questions about these measures or their
implementation, please contact either of us directly.

Attachment

cc:  Superfund Branch Chiefs
     Regional Counsel RCRA/CERCLA Branch Chiefs
     Enforcement Section Chiefs
     Gene A. Lucero
     Henry Longest
     Ed Reich
     Jack Stanton
     Russ Wyer
     David Buente

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19920
Federal Register / Vol. 52. No.  102 / Thursday. May 28. 1987 / Notices
 PRPs within 30 days of receipt of the
 notice.
   Then an certain situations when an
 NBAR may be particularly appropriate.
 For example, in a case that involves
 federal agencies as PRPs. preparing an
 NBAR in order to ascertain the
 percentage of federal agency
 responsibility is likely to promote
 settlement even  though e significant
 percentage of PRPs did not request it
 Similarly, if a state or municipality is
 involved at a site as a PRP. NBAR
 preparation may be deemed likely to
 promote settlement. Or. it might be
 appropriate to prepare an NBAR in a
 case with a large number of PRPs
 including, perhaps, a sizeable de
 minima contingent An NBAR may help
 coalesce a previously unorganized PRP
 group into  a steering committee, and
 thus promote settlement
   There are also situations where an
 NBAR should probsbly not be prepared.
 For example, it may be dear very early
 in the process thst there is insufficient
 information available on which to base
 an NBAR. or that the number of PRPs
 not de minima is so small that an NBAR
 would not expedite settlement. In some
 cases it may seem that an equitable
 settlement can be more expeditiously or
 effectively echieved without use of
 NBAR procedures. There may also be
 cases when NBAR preparation is ruled
 out because an allocation for the site is
 already being prepared by or for PRPs.
   Again, whether to prepare an NBAR
 at any particular site, inducing any
 state enforcement lead site, is a decision
 within EPA's discretion and will depend
.on the particular circumstsnces of each
 case. The decision whether to prepare
 an NBAR at any particular site rests
 with the Regional Administrator.
   IF EPA deddes to prepare an NBAR. it
 will notify  PRPs of that fact in writing as
 early as is  feasible. An NBAR
 notification should specify that the
 decision to prepare an NBAR is
 discretionary ••«i if contingent at a
 mjfltm^m upon *h? availability of
 sufficient data.
 IIL How To Prepare an N1AR
   The purpose of the NBAR is to
 promote expedited settlement thus
 miniiniting ttintertltm costs: an NBAR
 must be nondutied la a fair, efficient

 end other practical reasons, the
 allocation process presented hen Is
 based primarily upon volume and the
 settlement criteria,
   EPA considered and refected models
 based on toxidty because of the
 complexity of their application and the
 lack of agreement among the scientific
 community about degrees of. toxidty of
                   •padfle K««afAin«
                                                                 •tut
                                      synergisttc effects. Also, toxidty is
                                      usually causally related to the coat of
                                      cleanup for only a few substances (e.g,
                                      PCBs* dioxin).
                                        SOIL the allocation process presented
                                      ban is not intended to be exclusive.
                                      There will, of course, be eases where
                                      other factors, such as toxidty or
                                      mobility, must take priority in the
                                      interests of fairness to the parties. If a
                                      Region prefers to use another allocation
                                             , it should confer with the
                                      Director of the Office of Waste
                                      Programs Enforcement prior to such use.
                                        Activities involved in «^««'"^«g en
                                      NBAR fall into two major categories:
                                      Information i*flll*Trt*>ft •«««< assessment
                                      ^i*^ allocation*

                                      Information Collection and Assessment
                                        While aggressive'infomation
                                      collection efforts occur in every case.
                                      additional information may be
                                      necessary for NBAR purposes.
                                      Additions! information on actual volume
                                      and specific wastes with respect to each
                                      PRP at an NBAR site may be required.
                                        Section 12(e)(3)(B) of SARA
                                      authorizes EPA to subpoena witnesses
                                      and documents.  Section 104(e) of
                                      CERCLA. as amended by SARA.
                                      authorizes EPA to obtain access to
                                      information about a person's ability to
                                      pay and about the nature and quantity
                                      of hazardous substances generated.
                                      treated stored, or disposed of by that
                                      person. These authorities may be used
                                      to gather data for an NBAR.
                                        Subpoena of witnesses, authorized by
                                      section 122 (e)(3HB). may be used in
                                      some cases as pan of the information
                                      collection process. Considerable case-
                                      specific judgment must be exercised
                                      about the extent to which the subpoena
                                      authority will be used due to its
                                      resource-intensive nature.
                                        Information being collected must be
                                      reviewed by technical and legal staff as
                                      it is received so  that pertinent
                                      information may be culled and gaps and
                                      inconsistencies Identified. Collection
                                      completed by the end of the RL so that
                                      the allocation on be completed by the
                                      end of the PS.
                                        On the W t** of information collection

                                      determine the waste types and volumes
                                      for each PRP. Thto volumetric ranking is
                                      part of the information that must be
                                      provided wtth a pre cleanup negotiation
                                      special notice letter.
                                        The legislative history of section 122
                                      states that the allocation Itself should be
                                      made by federal employee*. Consultants
                                      or states with cooperative agreements
process. The allocation phase of aa
NBAR can be moat effectively
undertaken by the same technical and
legal nenoael who directed the
faubmatioB coQectton *"^ assessment
efforts.

Allocation

  In most cases, waste at a site is
           and therefore iadivisible.
                                                         commingled waste cases, the first step
                                                         a the allocation phase of aa NBAR is
                                                         allocate 100 percent of responsibility
                                                         among generators, based on the volum
                                                         each contributed. The product of this
                                                         step will often differ from the volumetr
                                                                      d with special notice
                                                         letters
      Moaase any waste that is
                                                         attributable to unknown parties is
                                                         allocated to known parties in proportic
                                                         to their volume.
                                                          In • limited number of cases, it is
                                                         possible to link particular remedial
                                                         activities with specific waste types am
                                                         volumes. For example, in the easy but
                                                         rare case of divisible waste, the cost o
                                                         removing barrels from a warehouse on
                                                         larger site can be separately attributed
                                                         to the contributors of the barrels. Or. t
                                                         cost of incinerating soil contaminated
                                                         solely by PCBs can be attributed  to PC
                                                         contributors. When it is possible to dc
                                                         so. waste types and volumes that
                                                         aecessitate particular remedial activiti
                                                         will be fully attributed to the
                                                         appropriate contributors.
                                                          The second step In tff^ allocation
                                                         phase of the NBAR process involves
                                                         adjustments based en consideration of
                                                         the settlement criteria. Any percentage
                                                         allocated to a defunct or impecunious
                                                         parry should be reallocated. Where
                                                         appropriate, credit may be given  for a;
                                                         PRP contributions to RJ/FS and/or
                                                         removal activities at the site.
                                                          In addition, percentages of
                                                         responsibility should be allocated to
                                                         financially viable owners, operators at
                                                         transporters. How much to allocate to
                                                         each parties Is a case specific detiaten
                                                         baaed upon coasidention of the
                                                             w           r/opentor ndpehtii
                                                         Is e rlgr**""** lector in determining th
                                                         percentage of responsibility to be
                                                         allocated. For example, a commercial
                                                         owner aad/or operator thst managed
                                                         watte badly should receive e higher
                                                         allocation than a passive.
                                                         noncommercial landowner that doesn
                                                         qualify as taaocent under section
                                                         122(|M1MB) of SARA. The relative
                                                         allocation among successive owners
                                                         aad/or operators may  he determined.
                                                         whan all other droomstances an equi
                                                         by the relative length of time each
                                                         owned aad/or operated the site.
                                                         Transporter allocations may be based

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                    FodarsJ Ramjets* / Vol 52.  No. 102 / Thursday. May a. 1987 / Notices^
                                                                                               OSWER
                                                                   »  9839.1
                                                                    1W1U
  DetstMayaiaV.
 rasBA,Nowal.
 Utinmt Adauctttrasor /far Aaesarca eno*
 nt DOC. r-una PIM i-r-er. tu M|
                      of
              (N8AR)
        Environment*! Protection
 Mtacy.
        Request for public comment.
        r. Section l«e)(3) of the
 Supcrfund Amendments and
 Reauthorization Act of 1988 (SARA).
 which amended the Comprehensive
 Environmental Response.
 Compensation, and Liability Act
 (CERCLA). require* the Environmental
 Protection Agency (EPA) to develop
 guideline* for preparing nonbinding
 preliminary allocations of responsibility
 (NBARs). EPA is publishing today the
 Interim Guidelines for Preparing
 Nonbinding Preliminary Allocations of
Responsibility to announce that the
guidelines are in effect and to solicit
 public comment on them.
DATE Comments must be provided on or
before July 27. M87.
 •rtoeiiM. Comments should be
addressed to Debbie Wood. U.S.
Environmental Protection Agency.
Office of Waste Programs Enforcement.
WH-SZ7. .401 M Si. SW.. Washington.
DC 20460.
POM PWrrMKIt SJSPOS1MATIOM COtTTAOrS
Debbie Wood. US. Environmental
Protection Agency. Office of Waste
Programs Enforcement. WH-S2T. 401 M
SL SW. Washington. DC 20460. (202)
382-3002.
          T AST* •SPOMSATMie As
defined in section 122(e)(3)(A) of SARA.
an NBAR is an allocation by EPA among-
potentially responsible parties (PRPs) of
percentage of total response coeta at a
facility. The outpace of NBARs Is to
promote expedited settlement. NBARs
•re not binding oa the government or
PRPK they cannot be admitted M
evidence or reviewed in any judicial
proceeding, indudlnj dttun suit*.
Whether to prepare en NBAR »i any
particular CERCLA site is a decision
within EPA's discretion.
  EPA will consider preparing an NBAR
at a site if It appears that an NBAR may
help to promote settlement SdlL NBARs
will not be routine. In general EPA's
policy is that PRPs should work out
among themselves questions of hew
     etch will pay toward senlemeat at
a ait*.
  Cooatnta may address the overall
approach taken in the interim guidelines
or focus on any aspect of it. EPA
particularly solicits comment oa
appropriate factors  to consider in
determining percentage allocations for
owners, operators* and ti*ansporters.
  The policies and procedures set forth
tn the interim guidelines are guidance to
EPA employees. The interim guidelines
include enforcement ponds* and
internal procedures that are not
appropriate or necessary subjects for
nileiBakmg. Thus, the guidelines do not
constitute ralemaking  by EPA and may
not be raited on to create a substantive
or procedural right or benefit
enforceable by any  other person. EPA
may. therefore, take action that is at
variance with policies and procedures
contained in this document.
  EPA is publishing the Interim
guidelines to provide wide public
distribution of information on this
aspect of SARA implementation, and to
gain the benefit of public comment. The
interim guidelines follow:
  Dated: VUy 1ft, 1987.
I m M Thneiii
Administrator.

INTERIM GUIDELINES FOR
PREPARING NONBINDING
PRELIMINARY ALLOCATIONS OF
RESPONSIBILITY
L Introduction
  Section 122(e)(3) of the Superhmd
Amendments and Reauthorization Act
of :aae (SARA). Pub. L NO. 99-499.
which amended the Comprehensive
Environmental Response.
Compensation, and Liability Act of 1980
(CERCLA). 42 U-S.C. 9001 ft see,
requires the Environmental Protection
Agency (EPA) to develop guidelines for
ffnpej^^f nonbindtai preliminary
allocations of iftr*y«'fr'H*y (NBARs).
As defined in section U2UX3MA1. an
NBAR is an allocation by EPA among
potentially responsible parties (PRPs) of
percentages of total response casts at e
facility. SARA authorize} EPA to
provide NBAJU at its discretion. NBARs
in • tool EPA may UM in tppropruu
ceeei to promote remedial Mttlenenu.
  NBARt will allocatt 100 percent of
response casts among PRPs. The
discretion to prepare an NBAR does not
change the goal of the interim CERCLA
settlement policy, published at SO FR
MM (February 5.1985). to achieve 100
percent of-cleanup or coats in
otttlaaent.
  la preparing an NBAR. EPA may
consider such (actors as volume.
toxidty. and mobility of hazardous
substance* contributed to the site by
PRPs, and other settlement criteria
ndaded in the interim settlement policy
(SO FR 5034.5037-8038). The settlement
criteria include strength of evidence
tracing the wastes et a site to PRPs.
ability of PRPs to pay. Utigative risks in
proceeding to trial public interest
considerations, precedential value.
value of obtaining a present sum certain,
inequities and aggravating factors, and
nature of the case that remains after
settlement
  An NBAR is not binding on the
government or PRPs: it cannot be
admitted as evidence or reviewed in any
tudioal proceeding, including dozen
suits. An NBAR is preliminary in the
sense that PRPs are free to adjust the
percentages allocated by EPA among
themselves.
  Should EPA decide to prepare an
NBAR, it will normally be prepared
during the remedial investigation and
feasibility study (Rl/FS). and provided
to PRPs as soon as practicable, but not
later than  completion of the Rl/FS for
the site. The NBAR process will
normally be used only in cases where
the discretionary  special notice
procedures of section I22(e) are
invoked.
  Following presentation of an NBAR  to
PRPs. PRPs have an opportunity to offer
to 'iFM**tTVt or fir*T*f* cleanup. EPA
need consider only substantial offers. A
substantial offer is defined in pan fV of
these guidelines. EPA must provide e
written explanation to PRPs if it rejects
e substantial offer based oa an NBAR.
Under section 122(e)(3HE). the decision
to reject e substantial offer based on an
NBAR is not subject to jutiiael review.
  Section  122(e)(3)(Dl states thet the
costs incurred by EPA in preparing an
NBAR shall be reimbursed by PRPs
whose offer is accepted. If a settlement
offer is not accepted. NBAR preparation
coats an considered response costs
under SARA.
IL When To Use the NBAR
  The NBAR is meant to promote
MtUcmcnt and, tfaut. reduce mnioction
costs. C«nemUy. EPA vn:I consider
NBAR preparation when it appear* that
•a NBAR may Kelp to promote
settlement. EPA will give partieuUr
consideration to preparing en NBAR
whenever a significant percentage of
PRPs at a site request one. What
constitutes a significant percentage is  a
case-specific dettmuaation. Regions
should note the existence of the NBAR
proems in all pre-Rl/FS notice tetters.
and indicate its potential svsilability If
requested by a significant percentage of

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                      Federml Register  / Vol.  52. No.  102 / Thursday.  May 28.  1987 / Notices
                                                                    19921
  00 venae, taking into account
  appropriate considerations such at
  packaging and placement of wait* at a
  •ita. Detailed guidance oa allocation!
  for transporter*, owners, and operator*
  may be prepand at a latar data on tha
  basii of axpehanot undar these interim
  guidelines.
    Again, an NBAR will allocata 100
  percent of retponM costs, bacauia tha
  goal It to achieve 100 percent of cleanup
  or emu in settlement
  IV. Often Baaed oa NBAftS
    Once tha technical and legal
  panonnel complete the NBAR. the
  numerical reaulta will be transmitted in
- writing to PRPs. EPA will not provide a
  detailed explanation for the results, due
  to the enforcement-eensitiv* nature of
  the decisions involved. EPA will provide
  a general explanation of the rationale
  used in preparing the NEAR. Data
  gathered in the information collection
  phase may be made evailable to PRPt.
    EPA  will provide the NBAR results to
  PRPs as early as possible. The sooner
  PRPs receive the results, the more time
  they have to organize among themselves
  and negotiate with EPA on remedy. A
  limited period should be provided for
  PRPs to digest the  NBAR results before
  notice for cleanup negotiations is sent.
    EPA  will attempt to complete  the
  NBAR before selection of a preferred
  remedy and public comment, or at-least
  prior to the Record of Decision (ROD)..
    Special notice under section
  122ie)(2)(A) of SARA will generally be ..
  provided prior to cleanup negotiations in
  cases where an NBAR is used. If within
 .60 days of special notice for cleanup
  negotiations. EPA receives no offer for
  settlement it may proceed as usual with
  action under section 104 or 106 of
  CERCLA- If EPA receives an offer ;hat is
  not e substantial/good faith proposal it
  should  so notify the PRPs before
  proceeding with action undar section
  104 or 106.
    A good faith offer is an offer in writing
  in which PRPs make a showing of their
  qualifications and willingness to
  conduct or finance the major elements
  of the remedy. A substantial offer must
, .meet three criteria. Pint, it must equal or
  exceed the cumulative allocated shares
  of those making the offer. Second, it
  must amount to a predominant portion
  of cleanup coats- Third. It must be
  acceptable to EPA in regard to all other
  terms and conditions, such as release
  provisions or dispute resolution
  mechanisms.
    If EPA receives a substantial/good
  faith offer within 60 days of special
  notice for cleanup. EPA will provide an
  additional 60 day* for negotiation. If an
  agreement for remedial action is
reached it must be embodied in a
consent decree. The State should be
kept apprised of negotiations if it
chooses not to participate. Should
negotiations for settlement baaed on an
NBAR fail a section 106 unilateral order
or civil action may be used to initiate
remedial action. Should EPA proceed
with cleanup under section 104. the
NBAR may still be useful In developing
demand letters for a section 107 cost
recovery action.
  Dt auniaui and mixed funding
settlements, also authorised by section
122. may occur in combination with an
NBAR, Whether EPA wiD accept a
mixed funding or de anniaiit proposal at
an NBAR site will depend on the results
of additional analyses specifically
designed to evaluate such proposals.
  If EPA rejects a  substantial/good faith
offer, it must provide a written
explanation to the PRPs. after
consultation with DOJ and review at
EPA Headquarters. In general rejection
of a substantial offer that is sufficient in
amount is  likely to be  based on failure
to reech agreement on terms and
conditions. After a written explanation
for rejection of a substantial/good faith
offer is sent. EPA may proceed under
section 104 or 106.
(FK Dec 87-12114 FU»d S-»-t7: MS am)
Toxic and Ha
Control* Contractor
       to Confidential Business
AOSMCT*. Environmental Protection
Agency (EPA).
acnoir. Notice. _

smtsuurr EPA has authorized several
contractors and subcontractors for
access to information submitted to EPA
under venous sections of the Toxic
Substances Control Act (TSCA). Some
of the information may be claimed or
determined to be confidential business
information (CBI).
                            r*cr
Edward A. Klein. Director. TSCA
Assistance Office (TS-7M). Office of
Toxic Substances. Environmental
Protection Agency. Room B-WJ. 401 M
Street SW, Washington. DC 20460 (202-
554-1404).

TSCA. EPA must determine whether the
manufacture, processing, distribution in
commerce, use. or disposal of certain
chemical substance* or mixtures may
present an unreasonable risk of injury to
human health or the environment New
chemical substances. La. those not
listed on the TSCA Inventory of
Chemical Substances, an evaluated by
EPA under section S of TSCA. Existing.
chtwic*' substances, listed on the TSCA
Inventory, are evaluated by tha Agency
under sections 4.6.7. and 8 of TSCA.
Section 12 requires a person to report
his or her intent to export certain   . •
chemical substances to foreign
countries.
  In accordance with 40 CFR 2J68(J).
EPA has determined that the following
contractors and subcontractors will
require access to CBI aaeWitted to EPA
under TSCA to successfully perform
work under the contracts described in
the following units of this notice.
L Previously Announced Contract

  As wes announced in the Federal
Register of May 1.1966 fFR 16205). the
Dynamac Corporation. 11140 Rockville
Pike. Rockville. Maryland, is authorized
for access to CBI submitted to EPA
under sections 4 and 8 of TSCA. EPA is
issuing this notice to extend Dynamac's
access to TSCA CBI under EPA Contract
No. 66-02-4231 to February 28.1989.

0. New Coatractors and Subcontractors

  Access to CBI by the contractor! and
subcontractor* described in this section
is being announced for the first time.
EPA is issuing this notice to affected
businesses informing them that EPA
may provide access to TSCA CBI to
these contractor* and subcontractors
under the indicated contracts on s need-
to-know basis.
  Under.EPA Contract No. 68-01-7282.
subcontractor CRC Systems.
Incorporated. 4020 Williamsburg Court
Fairfax Virginia, will assist the Office of
Toxic Substances' Information
Management Division in performing
work under delivery order MCCS17—
PENT A Analysis and Design Evaluation.
CRC as a subcontractor, will be
working for the prime contractor.  Boot
Allen and Hamilton. Booz. Allen and
Hamilton will not require access to '
TSCA CBI under this contract CRC will
not conduct substantive review of any
TSCA CBI: however. CRC personnel will
require access to CBI on computer
screens in order to evaluate technical
aspects of computer programs to
perform contract tasks. In addition.
personnel will occasionally be required
to review CBI documents to compare
hardcopy data for those data elements
contained in the systems. The systems
to be accessed are PENT A. Molecular
Access System (MACCSJ. and the
Document and Personnel Security
System (DAPSS). Under this contract
CRC personnel will be authorized for

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        i UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
       /                WASHINGTON. DC 20460

                              JUN - 5 1967
                                                           OSVER DIRECTIV

                                                               9829.2
 MEMORANDUM

 SUBJECT:  EntTry  and  Continued Access Under CERCLA

 FROM:     Thomas L.  Adams, Jr.     Vj          \    V 0
          Assistant  Administrator "^rVjcxM^^  V\ . v>» c> e* *--*\

 TO:       Regional Administrators  I»X
          Regional Counsels  I-X


 I.   INTRODUCTION

     This memorandum sets forth EPA's policy on entry and
 continued access  to  facilities by  EPA officers, employees, and
 representatives  for  the purposes of response and civil enforce-
ment activities  under CERCLA. II   In short, the policy recommends
 that EPA should,  in  the first Instance, seek to obtain access
 through consent.  Entry on consent is preferable across Che full
 range of onsite  activities.  If content is denied, EPA should
use judicial process o.r an administrative order co gain access.
The appropriate  type of Judicial process varies depending on
 the nature of the onsite activity.  When entry  is needed for
short-term and non-intrusive activities, an ex parte. judicial
warrant should be sought.  In situations involving .long-term or
 intrusive access, EPA should generally file suit to obtain a
court order.

     The memorandum's first section addresses the recently amended
access provision  in  CERCLA.  The memorandum then sees forth EPA
policy on obtaining  entry and the procedures which should be
used to implement this policy, including separate discussions on
consent, warrants, court orders, and administrative orders.
II  This policy does not address  Information requests under
~   Section 104(e)(2).

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                              - 2 -
II.  STATUTORY AUTHORITY

     EPA needs access co private property co conduce investiga-
tions, studies, and cleanups.  The Superfund Amendments and
Reauthorization Act of 1986  (SARA) explicitly grants EPA 21 the
authority to enter property  for each of these purposes.  Section
104(e)(1) provides that entry if permitted for "determining che
need for response, or choosing or caking Any res pome action
under  this  title, or otherwise enforcing che provision* of this
title."

     SARA also establishes A standard for when access aay be
sought and defines what property may bf entered.  EPA may exercise
its entry authority "if there is a reasonable basis to believe
there may be a release or threat of a release of a hazardous
substance or pollutant or contaminant."  i 104(e)(1).  SARA,
however, does not require that there be a release or threatened
release on the property to be entered. ^/  Places and properties
subject to entry under Section 104(e) include any place any
hazardous substance may be or has been generated, stored, treated,
disposed of, or transported  from; any place a hazardous substanct
has or may have been released; any place which is or aay be
threatened by the release of a hazardous substance; or any place
where entry is needed to determine the need for response or the
appropriate response, or to effectuate a response action under
CERCLA.  S 10A(e)(3).  EPA is also authorized to enter any place
or property adjacent to the  places and properties described in
the previous sentence.  I 104(e)(1).

     EPA is granted explicit power to enforce its entry authority
in Section 104(e)(5).  Under that provision EPA may either issue
an administrative order directing compliance with an entry request
or proceed immediately to federal district court for injunctive
relief.  Orders may be issued where consent to entry 1* denied.
Prior to the effective date  of the order, EPA must provide such
notice and opportunity for consultation aa is reasonably appro-
priate under the circumstances.  If EPA Issues an order, the
order can ba enforced in court.  Where there is a "reasonable
basis to believe there may be a relaaae or threat of a release of
a hazardonaismbstance or pollutant or contaainant," courts are
instructed tav enforce an EPA. request or order unless the EPA
2/  Although CERCLA and SARA confer authority upon the President
    that authority has been delegated to the EPA Administrator.
Exec. Order No. 12580. I 2(g) and  (1), 52 Fad. Rag. 1923 (1987).

3/  The House Energy and Commerce  bill at one point contained
    this limitation.  H.R. Rep. No. 99-253 Part 1, 99th Cong..  1st
Sess.. 158 (1985).  This limitation, however, was dropped prior to
introduction of the bill for floor debate.  See H.R. 2817. 99th
Cong., 1st Sess., 131 Cong. Rec. H10857  (DecenTer 4, 1985).

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                               -  3 -


 "demand for entry or  inspection  is arbitrary  and capricious, an
 abuse of discretion,  or  otherwise not  In accordance with law."
 f  104(«)(5).   The legislative  history  makes clear that courts
 should enforce an EPA demand  or-order  for entry if EPA's binding
 that  there  is  a reasonable  basis  to  believe there nay be a release
 or threat of release  is  not arbitrary  and capricious.  132 Cong.
 Rec.  SU929 (October  3,  1986)  (Statement  of Sen. Thurmond); 132
 Cong. Rec.  H9582  (October 8.  1986) (Statement of Rep. Glickman).
 See United  States v.  Standard  Equipment.  Inc.. No. C83-252M (W.D.
 Wash. November 3, 1986).  In  addition, a  penalty not to exceed
 525,000/day may be assessed by the court  for  failure to comply
 with  an EPA order or  the provisions  of subsection (e).

      Finally.  Section 104(e)(6)  contains  a savings provision
 which preserves EPA's power to secure  access  in "any lawful
 manner."  This broad  savings  provision is significant coming
 in the wake of the Supreme  Court's holding that:

          When Congress  invests  an agency with enforce-
          ment and investigatory authority, it is not
          necessary to identify  explicitly each and every
          technique that may  be  used in  the course of
          executing the statutory mission.

          .  .  .  Regulatory  or  enforcement authority
          generally carries with  it  all  the nodes of
          inquiry and investigation  traditionally employed
          or useful to execute the authority  granted.

 Dow Chemical Co.  v. United  States. 90  L.Ed. 2d 226, 23* (1986). 4>
 One lawful  means  of gaining access -covered by chis paragraph is ~
 use of Judicially-issued warrants.   See  S. Rep. No. 99-11. 99th
 Conf.  lat Sess. 26 (1985).     .

      In numerous  instances  prior to  the  passage of SARA, EPA
 obtained court rulings affirming  its authority to enter property
 to conduct  CIRCLA activities.  5/   Following enactment of SARA.
4/ See alto, Mobil  Oil  Corp.  v.  EPA.  716  F.2d  1187,  1189  (7th
"  tTr.lTO).  cart,  denied..466T7S.  980 (1984)  (EPA authority
to sample  affluent  under  Section 308  of  the Clean Water Act
broadly construed); CEP*.  Inc. v.  EPA, 743 F.2d  1092 (7th.Cir.
1984). cert, denied.  471  U.S.  1015TT985).

5/ United  States v. Pepper Steel and  Alloy.  Inc.. No. 83-1717-
~  CIV-EPS (3.D. Fla. October 10.  1966);  Bunker  Limited Partnership
v. United  States. No. 85-3133 (D.  Idaho  October  21.  1985); Uniteo
States v.  coieman Evans Uood  Preserving  Co., No.  85-211-CIV-J-lfe
CM.D. Fla.  June 10. J.S65);  Un-itec  States  v.' Baird &  MeCuire
Co.  No. 83-3002-Y  (D.'Mass.  hay 2,  1965); United States  v.  Unitee
Nuclear Cor?..  22 ERC 1791,  15 ELR 20443  (D.K.M.  April  18, 1965;.

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                              - 4 -
several courts have ordered siceowners co permit EPA access.
United States v. Long. No. C-l-87-167  (S.D. Ohio May 13, 1987)-
united States v. Dickerson. No. 8^-76-VAL (M.D. Ga. »May 4.  1987);
United States v. Standara Equipment, Inc., No. C83-252M (W.D.
wash. Nov. 3. 1986).  Further, the one adverse ruling on EPA'«
right of  access has been vacated by the Supreme Court.  Outboard
Marine Corp. v. Thomas. 773 F.2d 883 (7th Cir. 1985), vacated	
93 L. Ed.  2d 695 (1986).                              	

III.  EPA  ACCESS POLICY

     EPA  needs access to sites for several types of activities,
including:

      0 preliminary site investigations;

      0 removal actions;

      e RI/FSs; and

      0 remedial actions.

Within each of these categories, the scope of  the work and the
time needed to complete that work may  vary substantially.  This
memorandum sets Agency policy on what  means should bt used to
gain access over the range of these various activities.

     EPA may seek access through consent, warrant, administrative
order, or  court order.  Consent is the preferred means of gaining
access for all activities because it is consistent with EPA policy
of seeking voluntary cooperation from  responsible parties and
the public.  In certain circumstances, however, the Region should
consider obtaining judicial authorization or issuing an admini-
strative  order in addition to obtaining consent.  For example,
where uncertainty exists whether a siteowner will continue to
permit access over an extended period, reliance on content alone
may result in a substantial delay if that consent is withdrawn.

     When  cemeent is denied. EPA should seek judicial authori-
zation or  amould issue an administrative order.  If che judicial
route is  choaan, EPA «ay seek an ex parte warrant or a court
order.  Warrants art traditionally granted for short-term entries.
Generally, warrants should not be used when the EPA access will
involve long-tern occupation or highly intrusive activities.
Clearly,  warrants are appropriate for  preliminary aite investiga-
tions.  On the other hand, because of  Che long, involved nature
of remedial actions, acctsa for such projects  ahould be sought
through a  request for a court order.   Neither  removals nor RI/FSs,
however,  can be rigidly matched with a given judicial access
procedure.  Depending on the activities to be  undertaken and  the
circumstances at the site, either a warrant or a court order  may
be appropriate.

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                               -  5  •
      In  deciding whether to use a warrant or a court order when
 access  Is  needed for a  removal or to conduct a RI/FS, the follow-
 ing  general principles  should be considered.  First, if the
 activity will take  longer than 60 days a court order normally is
 appropriate.  Second, even if the activity will take less than 60
 days, when the entry involves removal of large quantities of soil
 or destruction of permanent fixtures, a court order may again be
 appropriate.  Finally,  warrants should not be used if EPA action
 will  substantially  interfere with the operation of onsite business
 activities.  These  issues must be resolved on a case-by-case basis.

     If EPA needs to gain access for a responsible party who has
 agreed to undertake cleanup activities under an administrative
 order or judicial decree, EPA may, in appropriate circumstances,
 designate the responsible party as EPA's authorized representative
 solely for the purpose  of access, and exercise the authorities
 contained in Section 104(e) on behalf of the responsible party.
 Such  a procedure may only be used where the responsible party
 demonstrates to EPA's satisfaction that It has made best efforts
 to obtain access.  A further condition on the use of this procedure
 is that the responsible party agree to indemnify and hold harmless
EPA and the United States for all claims related to injuries and
damages caused by acts  or omissions of the responsible party.
The responsible party should also be advised that the expenses
incurred by the government in gaining access for the responsible
party are response costs for which the responsible party is liable.
Before designating any  responsible party as an authorized repre-
sentative,  the Region should consult with the Office of Enforcement
and Compliance Monitoring.

 IV. ACCESS PROCEDURES

     A.  Entry on Consent

          1.  General Procedures

     The following procedures should be observed in seeking
consent:

    Initial Centact.  Prior to visiting a site, EPA personnel £/
    should cfMlder contacting the siteowner to determine if
    conaent will be forthcoming.  EPA personnel should use this
    opportunity to explain EPATo access authority, the purpose
    for which entry is  needed, and the activities which will be
    conducted.
6/   Aa used In this guidance, the tera "EPA personnel" includes
     contractors acting as EPA's authorized representatives.

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                               - 6 -
     Arrival.   EPA personnel should arrive ac the site ac  a
     reasonable tine of day under the circumstances.   In most
     instances this will mean during normal working  hours.   When
     there is  a demonstrable need to enter a site at  other times,
     however,  arrival need not be limited to this timeframe.
     Entry must be reasonable given the exigencies of the  situation,

     Identification.  EPA personnel should show proper identifi-
     cation upon arrival.

     Request for Entry.  In asking for consent,  EPA  personnel
     should state the purpose for which entry is sought and
     describe  the activities to be conducted.  EPA personnel
     should also present a date-stamped written request to the
     owner or  person-in-charge.  A copy of this request should
     be retained by EPA.  Consent to entry oust be sought
     from the  owner TJ  or the person-in-charge at that time.

      If practicable under the circumstances, consent to entry
 should be memorialized in writing.  A sample consent form is
 attached.  Although oral consents are routinely approved  by the
 courts,  a signed consent form protects the Agency by serving as
 a  permanent record of  a transaction which may be raited as  a
 defense or in a claim  for damages many years later.   If a site-
 owner  is unwilling to  sign a consent fora but nonetheless orally
.agrees to allow access, EPA should document this oral consent  by
 a  follow-up letter confirming the consent.

     Since EPA contractors often are involved in gaining  access .
 in the first  instance, the Regions should ensure that their
 contractors are acquainted with these procedures.

            2.   Denial  of Entry

      If consent is denied. EPA personnel or contractors,  before
 leaving, should attempt to determine the grounds for the  denial.
 EPA personnel,  however, should not threaten che siteowner with
 penalties or  other monetary liability or make any other remarks
 which  could be construed as threatening.  EPA personnel nay
 explain EPA'a statutory access authority, che grounds upon  which
 this auchortfB7 »ay be  exercised, and chac Che authority may be
 enforced la court.
 I/   If EPA's  planned alee activities will noc have a physical
 ~   effect on the property,  EPA generally need noc seek consent
 from the owner of leased property where che lessee is in pos-
 session.  The proper person  in.chose circumatancea is che lessee.
 But  where EPA entry will have a substantial physical effect on
 the  property, both the lessee and the property-owner should be
 contacted since in chis inscance interests of boch will be
 involved.

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          3.  Conditions Upon Entry

     Persons on whose property EPA wishes to enter often attempt
to place conditions upon entry.  EPA personnel should not agree
to conditions which restrict or impede the manner or extent of an
inspection or response action, impose indemnity or compensatory
obligations on EPA, or operate as a release of liability.  The
imposition of conditions of this nature on entry snould be treated
as denial of consent and a warrant or order should be obtained.
See U.S. EPA, General Counsel Opinions, "Visitors' Release and
Hold Harmless Agreements as a Condition co Entry of EPA Employees
on Industrial Facilities," Cen'l and Admin, ac 125 (11/8/72).
If persons are concerned about confidentiality, they should be
made aware that business secrets are protected by the statute
and Agency regulations.  42 U.S.C. f 9604(e); 40 C.F.R. S 2.203(b).
EPA personnel should enter into no further agreements regarding
confidentiality.

     B.  Warrants

          1. General Procedures

     To secure a warrant, the following procedures should be
observed:

     Contact Regional Counsel.  EPA personnel should discuss
     with Regional Counsel the facts regarding the denial of
     consent or other factors Justifying a warrant and the
     circumstances which give rise co che need for entry.

     Contact Department of Justice.  If afcer consultation with
     Regional Counsel a decision is made co stek a warrant, che
     Regional Counsel must contact directly che Environmental
     Enforcement Section in che Land and Nacural Resources Division
     ac che Department of Justice. 8/  The person to call at
     the Departmcnc it cht Assistant" Chief in the Environmental
     En'fbrcenent Section assigned to the Region.  The Assistant
     Chief will Chen Arrange, in a timely Banner, for the matter
     to be handled by either an Environaencal Enforceaenc Seccion
     attorney or a U.S. Attorney.  The Region oust send to che
     Enviresjsjental Enforcement Section, by Hagnafax or other
8/  This procedure  is necessary  co comply with  internal
~   Department of Justice delegations of authority.  Referral
to a local U.S. Attorney's office  it not sufficient  for CERCLA
warrants.  The Environmental  Enforcement Section of  che Department
of Justice must approve  all warrant applications.   (See Memorandum
from David T. Buente, Jr. to  All Environmental  Enforcement
Attorneys, "Procedures for Authorizing  Applications  for Civil
Search warrants Under CERCLA"  (4/3/87)  attached).

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                              - 8 -
     cxpedictd means, a draft warrant application and a short
     memorandum concisely stating why the warrant is needed.

     Prepare Warrant Application.  The warrant application oust
     contain the following:

          1) a statement of EPA's authority co inspect;
             (see S II, supra)

          2) a clear identification of the name and location
             of the site and, if known, the naae(s) of che
             owner and operator of che sice;

          3) a statenent explaining che grounds for a finding
             of a reasonable basis for entry (i.e., a reasonable
             basis to believe chat there nay be a release or
             threatened release of a hazardous substance or
             pollutant or contaminant) and che purpose for encry
             (i.e., determining che need for response, or choosing*
             or caking any response action, or ochervise enforcing
             CERCU) ;

          it) affidavits supporting che asserted reasonable basis
             for encry and describing any acceapcs co gain access
             on consent, if applicable; and

          5) a specific descripcion of che extent, nature, and
             timing of che inspection;•

     Following preparacion of che warranc application, che
     Juscice Department attorney Vill file che' applicacion vich
     che local U.S. Magistrate.

     EPA nay .ask che Juscice Deparcaenc accomey co se«k che
assiscance of che United Scaces Marshals Service in execucing che
warranc where EPA perceives a danger  co che personnel executing
che varranc or where chert Is che possibilicy chac evidence will
be descroyed.
            •
          1» laaaonable Easts for Encry

     A warrant for access on*a civil  matter aay be obtained upon
a showing of a reasonable basis  for encry.  This reasonable
basis nay be established etcher by presenting specific evidence
relating co che factltcy co be entered or by deaonecrating chat
che entry is pare of a neucral administrative inspection plan.

     A specific evidence standard is  incorporated  in  SARA  as a
condition on EPA's exercise of ics access authority:   EPA ausc
have "a reasonable basis co believe  chere aay be a release or

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                               -  9  -
 threat  of  a  release  of a hazardous substance or pollutant or
 contaminant."   $  104(e)(1).   SARA's express specific evidence
 standard  is  consistent with how courts have formulated the
 specific  evidence test in  the absence of statutory guidance.
 E.g.. West Point-Pepperell. Inc. v. Donovan. 689 F. 2d 950, 958
 U'th Cir. 1982)  (there must  be a "showing of specific evidence
 sufficient to support a reasonable suspicion of a violation").

     In drafting  a warrant application, conclusory allegations
 regarding  the specific evidence standard under subsection 104(e)
 will not suffice.  Courts generally have refused to approve
 warrants where  the application contains mere boilerplate asser-
 tions of statutory violations.  Warrant applications have been
 granted, on  the other hand, where the application contained
 detailed attestations by government officials or third-party
 complaints which  have some indicia of reliability.   Ideally,
 EPA warrant  applications should contain an affidavit of a person
 who has personally observed conditions which indicate that there
 may be a release  or  threat of a release of a hazardous substance.
 If they are  available, sampling results, although not required,
 should also  be  attached.  Warrant applications based on citizen,
 employee, or competitor complaints should include details chat
 establish the complainant's credibility. 9/

     C.   Court Orders

     The provisions  in CERCLA authorizing EPA access may be
 enforced by court order.   To obtain a court order for entry, the
 Region should follow the normal referral process.  If only access
 is .required,  the  referral package can obviously be much abbrev-
 iated.  If timing  is critical, EPA HQ will move expeditiously
 and will refer  the case orally if necessary.  The Regions, how-
 ever, should attempt to anticipate the sites at which access nay
 prove problematic and should Allow sufficient lead tine for the
 referral process  and the operation of the courts.  The Regions
 should also not enter lengthy negotiations with landowners over
 access.   EPA and  DOJ are prepared co licigate aggressively to
 establish EPA's right of access.
9/  If information gathered*in a civil investigation suggests
~~   that a criminal violation may have occurred, EPA personnel
should consult the guidance on parallel proceedings.  (Memorandum
from Courtney Price to Assistant Administrators et al.. "Policy
and Procedures on Parallel Proceedings at the Environmental
Protection Agency" (1/23/84)).  Use of CERCLA'• information-
gathering authority in criminal investigations  is addressed in
separate guidance.  (Memorandum from Courtney M. Price to Assistant
Administrators et al.. "The Use of Administrative Discovery
Devices in the Development of Cases Assigned to the Office of
Criminal Investigations" (2/16/84)).

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                                10 -
      Prior co seeking a courc order, EPA should requesc access,
 generally in writing, and assemble the record related to access.
 The  showing necessary co obtain a courc order is the same as for
 obtaining a warrant:  EPA muse show a reasonable basis co believe
 chat  there nay be a release or a threat of a release of a hazardous
 subscance or pollutant or contaminant.  An EPA finding on whether
 there is reason co believe a release has occurred or is about co
 occur must be reviewed on the arbitrary and capricious standard.
 S I04(e)(5) (B)(i).  if che naccer is noc already in court,  EPA
 muse  file a complaint seeking injunctive and declaratory relief.
 Simultaneous to filing the complaint, EPA may, if necessary,
 file  a mocion, supported by affidavits documenting the release
 or threatened release, requesting an immediate order in aid  of
 access.  If the matter is already in licigacion, EPA may proceed
 by notion co seek an order granting access. J_0/

      In a memorandum supporting EPA's requesc for relief ic
 should be made clear chat by invoking judicial process, EPA it
 noc  inviting judicial review of ics decision co undertake response.
 accion or of any administrative determinations with regard co che
 response accion.  Seccion 113(h) of SARA bars judicial review
of removal or remedial accion excepc in five tnumeraced circum-
stances.  A judicial accion co compel access Is noc one of che
exceptions.   Statements on che floor of che House and che Senate
confirm chat EPA enforcemenc of ics access authority does noc
provide an opporcunicy for judicial review of response dtcisions.
Senacor Thurmond, chairman of che Judiciary Commiccee, remarked
 chat when EPA requests a courc co compel access "chere is no
jurisdiction ac that cime co review any response accion . .  .
H)/  Parenthetically, ic should be noced that che broad equicable
     power granced co courcs in Seccion 106 can also be relied
on co obcain a courc order.  An additional source of authority
for courcs in this regard is che All Writs Ace.. 28 U.S.C. f 1651.
The Ace authorizes federal courts co "issue all wrics necessary
or appropriate in aid of cheir respective jurisdictions . . . ."
28 U.S.C. I 1651.  This auchoricy  excends under appropriate
circumstances, to persons who. chough noc parcies to che original
accion or 4Hs)ifed in wrongdoing are in a position co fruscrace
che implementation of a courc order . . . ." United States v. New
York Telephone Co.. 434 U.S. 159, 174 (1977).  Thus, the All WrTcs
Ace nay prove useful as a means of compelling persons not a parcy
co a consenc decree to cooperate with EPA and other settling
parties in execution of the decree.  The use of the All Writs
Ace, however, may be limited in light of the Supreae Court's
incerprecacion of the Act in Pennsylvania Bureau of Correction v.
Uniced Scaces Marshal Service. 88 L Ed. zo 1B» (1985).

-------
 [T]he  court may only review whether the Agency's conclusion that
 there  is  a release or  threatened release of hazardous substances
 is arbitrary or capricious."  132 Cong. Rec. SU929 (October 3
 1986)  (Statement of Sen. Thurmond); 132 Cong. Rec. 119582
 (October  8, 1986) (Statement of Rep. Glickman); tee United States
 v. Standard Equipment.  Inc.. No. C83-252M (U.D. Eash. Nov. 3, 1986).

     D. Administrative  Orders

     If a siteovner denies an EPA request for access, EPA may
 issue  an  adminstrative  order directing compliance with the
 request.  S 1 (K(e)(5)(A).  Each administrative order must include
 a finding by the Regional Administrator that there exists a
 reasonable belief that  there may be a release or threat of release
 of a hazardous substance and a description of the purpose for the
 entry  and of the activities to be conducted and their probable
 duration.  The order should indicate the nature of the prior
 request for access.  Further, the order should advise the re-
 spondent  that the administrative record upon which the order was
 issued is available for  review and that an EPA officer or employee
 will be available to confer with respondent prior to the effective
 date of the order.  The  length of the time period during which
 such a conferences may  be requested should be reasonable under
 the circumstances.  In  deciding what is a reasonable tint period.
consideration should be given to the interference access will cause
with onsite operations,  the threat to human health and the environ-
ment posed by the site, and the extent of prior contacts with the
 respondent.  The order  should advise the respondent that penalties
of up  to  525,000 per day may be assessed by a court against any
 party  who unreasonably  fails to comply with an order.  I I04(e)(5).
 Following the time period for the conference and any conference,
 the issuing official should tend • document to the respondent
summarizing any conference, EPA's resolution of any objections,
 and stating the effective date of che order.

     If,'following issuance of an administrative order, the site-
 owner  contioves to refuse access co EPA, the order may be enforced
 in federal ••art.  EPA  should not use self-help to execute orders.
 Ceurts art required eo  enforce administrative orders where there
 is a reasonable basis to believe that there may be a release or
 threat of • release of  a hazardous substance.  EPA's determination
 in this retard aust be upheld unless it is arbitrary and capricious
 I 104(e)(5)(B)(i).  L?A will seek penalties from those parties who
 unreasonably fail to comply with orders.

     All  administrative  orders for access oust be concurred on by
 the Office of Enforcement and Compliance Monitoring prior to
 issuance.

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                               -  12- -


DISCLAIMER
     The policies and procedures  established  in  chis docum.nr a~
intended solely for the guidance  of government personnel  "hev
are not intended, and cannot be relied upon to create ani rUht.
substantive or procedural, enforceable by any party in Iltl««i2;
with the United States.  The Agency reserves  thTright to .« a?

                                                          "
Attachments

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                CONSENT  FOR ACCESS TO  PROPERTY
 Name:
Address of Property:
     I corner.c to officers, employees, and authorized
representatives of the Ur.ited States Environmental Protection
Agency (EPA) entering and having continued access to ay
property for the following purposes.-

     [the taking of such soil, water, and air samples as may
      be determined to be necessary;]

     [the sampling of ar.y solids or liquids stored or disposed
      of on site;]

     [the drilling of holes and installation of monitoring veil*
      for subsurface investigation,-]

     [other actions related to the investigation of surface or
      subsurface contamination;]

     [the taking of a response action including  . . . .]

1 realize that these actions by EPA are undertaken pursuant
to its response and enforcement responsibilities under the
Comprehensive .Environmental Response, Compensation and Liability
Act (Superfund). 42 U.S.C. S 9601 et seq.

     This written permission is given by •• voluntarily with
knovlege of ay right to refuse and without tnreata or promises
of any'kind.
    Dae*                    •  .           Signature

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     Procedures for Authorizing Application
     for Civil Search Warrants Under CERCLA
April 3, 1987
To
     All EES Attorneys
                                                  Environaental
                                                        Section
             Under I  104(e)  of CERCLA,  a*  aaended by SARA,  the
   United  States cay seek access by warrant,  adainistrative  order,
   or  court order.   If access is obtained  by adainistrative order,
   the appropriate docuaents are issued by relevant client  agencies.
   If  access is to be obtained by court order,  then the Assistant
   Attorney General of the Land and Natural Resources  Division  Bust
   approve  the coaplaint,  upon referral froa the relevant client
   agency according to ordinary procedures. For access to  be sought
   through  application on  a civil CERCLA warrant,1 the instant
   •eaorandua will confirm the procedures  to be used by the
   Oepartaent of Justice.

             Under 15.320-A-2 of the U.S.  Attorney's Manual.
   application for warrant under CERCLA Bay not be handled
   unilaterally by the U.S.  Attorneys.   Applications for such
   warrants Bust be coordinated through the Environaental
  . Enforceaent Section.

             Clearance through the Environaental Enforceaent  Section
   is  iaportant for a variety of reasons.   First, the  nature  of the
   governaental activities involved under  CERCLA civil warrants aay
   be  auch  broader and last considerably longer than an inspection
   under  the other federal environmental regulatory statutes.
   Typically the latter require only a  few days or weeks to conduct
   routine  environaental sampling.   Under  CERCLA, access Bay  be
   •ought under a warrant  for not only  saapling, but even siaple
       1  The aemorandua  does  not  cover procedures for seeking a
  criminal search warrant where  a  CERCLA violation Bay be
  involved.  All such  Batters  are  to  be referred to the Director,
  Environaental Crimes Unit, EES.

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                               - 2 -

 reaoval-type activity,  e.g.,  security/fencing,  liaited drua
 removal.   The greater relative coaplexity of  the governmental
 activity  involved can be expected to provoke  aore challenges to
 CERCLA civil warrants than those undtr othar  statutes and the
 issues raised by CCRCLA warrants Bay be auch  aora complex.
 Second, this is a relatively  naw and vital area of tha law.  w«
 aust ansura that maximum efforts ara Bade to  develop this
 critical  araa of tha  law in an excellent Banner.  CES lawyers
 Bust Bake all reasonable efforts to ensure that exercises of the
 civil warrant authority under CERCLA will be  vindicated by the
 federal courts,  through proper presentation of facts and legal
 arguments by Departaental attorneys with experience in this area.
 Finally,  since our experience has shown that  judicial challenges
 to  civil  CERCLA warrants tend to aove very rapidly, soaetlaes on
 an  emergency motion basis,  CCS needs to work  closely with client
 agencies  on these matters so  that the Division's Appellate
 Section is advised and  prepared with sufficient lead time to
 expeditiously address appellate proceedings.

           Coordinating  these  warrant applications through CCS '
 aust  be done on  an expedited  basis so that client agencies'
 program objectives are  achieved.   Moreover, our resources Bust
 not be consumed  by duplicative work.   Balancing the needs for
 careful warrant  application preparations with that for
 expeditious handling  of these Betters,  we will use the following
 procedures:

           1.   The client agency will  telephonically notify the
 relevant  CCS Assistant  Chief  or Senior Lawyer when the Agency
 plans to  seek a  civil warrant.

           2.   The client agency will  follow-up the request by  .
 expeditiously transmitting  a  short memorandum concisely
 explaining why the warrant  is needed  with a draft copy of the
 warrant application and supporting affidavits.

           3.   Upon receipt  of the telephonic  notification or
written request,  whichever  first occurs,  the  CCS Assistant Chief
 or Sr* Lawyer will arrange  for either an CCS  staff attorney or an
AUSA to handle the review and prosecution of  the application.
Unless a  dispute  develops ^between ECS/AUSA personnel end the
 client •gejicy, the ECS  Assistant Chief or Sr. Lawyer say approve
 the application.   Zf  such*a dispute develops, it must be brought
to the attention  of the  Chief or Deputy Chief, EE5 for
resolution.

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                              - 3 -


         . 4.  Handling of these Batters is to be afforded
priority on our docket.  Moreover, the Chief or Assistant Chitf
of the Appellate Section shall be advised of each application
request by the EE5 Assistant Chief or ST. Lawyer as soon as
possible after notification by the client agency, so that
Appellate can be prepared to handle expeditiously appeal Batters.

          5. All civil actions to mntorcm civil CERCLA warrants,
by way of application for civil contempt or other judicial
orders, shall be authorixed in writing by the Assistant Attorney
General. Such actions shall be afforded highest priority on the
docket.

          For general advice/guidance on handling CERCUk civil
warrant natters, contact John Fleuchaus, ORCM-Haste, 382-3109.
Attachment

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                                                          9832,9
             UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

                         WASHINGTON. O.C. 204«0
                                                              or
                         I IN I 9 MHT               §01.10 WAtTI ANOIMINOIMCT MU'ONSi

MEMORANDUM

SUBJECT:  ,Cost Recovery Actions/Statute of Limitations

PROM:     Gene A. Lucero, Director K>A\£  H-
          Office of Waste Programs enforcement

TO:       Directors, Waste Management Division,
          Regions I,IV,v,VII,VIII

          Director, Emergency and Remedial Response Division,
          Region ZZ

          Directors, Hazardous Waste Management Division,
          Regions III, VI

          Director, Toxic and Waste Management Division,
          Region ZX

          Director, Hazardous Waste Division, Region X           .  .

 .".•'The purposes of this memorandum are to:

     1.   Update EPA's policy on timing of cost recovery action (This
          memorandum supersedes Timing of Cost Recovery Action, G.
          Lucero, October 7, 1985).

     2.   Request that you bring your personal attention to the
          accuracy of data being used to brief Congress on the status
          of cost recovery-efforts at sites.

     3.   'Request'the initiation of cost recovery action for those
          sites where the statute of limitations date is approaching.

     It remains the Agency's goal, where appropriate, to seek recovery
of all monies eipended at Superfund sites.  Moreover, to promote cost
recovery and obtain interest, the Agency will transmit demand letters
as early as practicable.  Additional guidance on the timing and content
of demand letters, including guidance on maximizing interest, will be
sent in the near future.

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                                                           9832. 9
I.  Timing of Cost Recovery

     Section 113(g)(2) of the Comprehensive Environmental Response,
Compensation and Liability Act  (CERCLA), as amended by the Superfund
Amendments and Reauthorization Act  (SARA), contains specific provisions
on the statute of limitations for cost recovery actions under section
107.  This memorandum does not set  forth the statute of limitations for
pre-SARA response actions.  Section 113(g) requires that cost recovery
actions be commenced:

     A.   for removal actions, within three years after completion of
          the removal action.  Where the Agency has made a deter-
          mination to grant a waiver under section  104(c)(l)(C) for
          continued response action, the cost recovery action must be
          brought within six years  after  this determination} and

     B.   for remedial actions, within six years after the initiation
          of physical on-site construction of the remedial action.  Zf
          the remedial action is initiated within three years after
          completion of the removal action, the removal costs .may be
          recovered under the remedial action statute of limitations
          for cost recovery  (i.e. within six years after the initiation
          of on-site construction of the remedial action).

     The term "commenced" as used in section 113(g) means a
filed section 107 cost recovery action.  As a matter of policy, the
Agency views completion of the removal action as the day the cleanup
contractor demobilizes at the site  and completes the scope of work
identified in the original or modified action memorandum.  The final
Pollution Report (POLREP) submitted by the OSC normally contains this
information.  (See Superfund Removal Procedures, Revision 12,
August 20, 1964).  Remedial investigations/feasibility studies  (RI/PS)
may fall within the statutory definition of removal action.  Por
purposes of cost recovery they should bt trtattd as a separate removal
action.  Therefore, a cost recovery action should be commenced within
three years of completing the original removal  (exclusive of the RZ/PS)
unless phys4-o*l on-site construction has started.

     Although section 113(9)(2)(A)  of CERCLA, as amended, allows three
years from completion of a removal  to initiate cost recovery action, it
still remains our policy to begin cost recovery activity within one
year after completion of the removal.  Por remedial actions, Agency
policy requires that cost recovery  activity be initiated within 18
months after the signing of the Record of Decision  (ROD) or during the
later phase of construction of the  remedial action, if tbe construction
is expected to take Bore than two years after the ROD is signed.
Adherence to these time frames will ensure that current, not stale,
evidence and knowledgeable witnesses will be available to support  the
prosecution of the action and that  the Agency will  not be faced with
statute of limitation risks.

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                                                            9832*9
     At this point it is appropriate to clarify the Agency's position
on priorities for removal cost recovery referrals.  Due to the resource
commitment of litigation, the Agency has established that cost recovery
cases where the costs exceed $200,000 should take priority for
referral.  There is no prohibition on referring cases under $200,000.
However, the judicious use of limited resources dictates that the
Agency first address those sites which promise a better return on the
Agency's time and money investments.  Where appropriate, cases under
$200,000 have been and should continue to be referred.   Selection of
cases for referral is a Regional determination which should be based  on
a variety of factors including strength of evidence, financial
viability of defendants and likely return to the Agency including
enforcement costs.

     Section 122(h) of CERCLA now provides the Agency with the
authority necessary to compromise claims for cost recovery actions
where the total of all response costs expended at a site is less than
$500,000.  This new authority should assist the Agency in addressing
the lower dollar value cases without litigation where an appropriate
settlement can be made.  The Agency is currently developing procedures
for settlement of claims under $500,000.

II.  Opdate of Information

     Attached for your review is information on completed removals for
each of your Regions.  Please review this information and, using the
comment field provided, indicate your schedule for referral of cost
recovery action.  Cost recovery actions may not be appropriate for some
sites:  for example, where no PRP can be identified, or where the PRPs
are not financially viable.  If you do not intend to refer the case,
please note this fact.  Where you decide that cost recovery action is
inappropriate, you should explain the decision not to take cost
recovery action in a signed memorandum in your files.  You should
assume that there will eventually be audits of these cases, by
Headquarters, and perhaps the Inspector General and Congressional
Oversight Committees.

     Please ust the following categories when completing the comment-
field for sites where actions will not be referred:

     1) Mo PRPs identified
     2) PRPs not financially viable
     3) Questionable evidence
     4) Questionable legal case
     5) other (specify)

     The accuracy and completeness of this information  is critical to
our ability to demonstrate the effectiveness of EPA's cost recovery
program.  The current data, which has been provided  in  response  to
Congressional requests,  indicates that EPA has initiated cost recovery
efforts at only 29% of the completed removal sites.   (They account for
approximately 52% of the available obligations).  To the extent

-------
                                                       9832.9
information was available, the above figure on cases subject to cost
recovery was determined by subtracting from the universe of completed
removals, those where it appeared that cost recovery' is inappropriate.

     While we believe that our data base may not be current, the low
level of case initiation does point out the need for serious management
attention.  A referral should be planned in this or next years
Superfund Comprehensive Accomplishments Plan (SCAP) and so indicated on
the attached reports.  Where action is not appropriate, it is critical
that the data base be adjusted to so indicate.  Please provide your
comments and schedule for activity on the attached material within two
weeks.

III.  Initiation of Actions

     If, after review of the attached site information, there are any
cases which require filing immediately or in the near future, please
adviie OWPE, OECM and the Environmental Enforcement Section of the
Justice Department immediately, so that we may expedite the referral
and filing process.  All planned referrals should be incorporated into
the Integrated SCAP.

     We will provide you with updates of removal completions and
ongoing remedial actions  (similar to the attached charts) on a
quarterly basis for your review and comment.  We also solicit your
suggestions on the chart format and content.

     Any questions on this memorandum or the attached information may
be addressed to Janet Parella of my staff.  She may be reached on
PTS 382-2034.
                                                                       s
ATTACHMENTS
                                                                    /
cc:  Edward E. Reich, OECM
     David Buente, DOJ                                         .
     Regional Counsels, Regions I-X

-------
      } UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
     f                WASHINGTON. DC 20460
                           JUN 12 (997
MEMORANDUM                                        OSWER*  9833.2


SUBJECT:  Consent Orders and the Reimbursement Provision
          Under Section 106(b) of CERCLA

FROM:     Gene A. Lucero, Director
          Office of waste Programs

          Steven Leifer, Acting Associate
            Enforcement Counsel for waste
          Office of Enforcement and Compliance Monitoring

TO:       Addressees

     The Superfund Amendments and Reauthorization Act (SARA)
amended section 106 of CERCLA to add section 106(b)(2).
This provision entitles persons to seek reimbursement from the
Superfund for costs spent in complying with section 106  orders.
Congress included the provision as an incentive for PRP's to
take response actions even though they migfct disagree with
EPA's unilateral order.  It preserves their right to contest
issues of liability or the nature of the response action  at a
later date.

     This memorandum provides guidance regarding terms of
consent orders to preclude parties who have signed consent
agreements to subsequently seek reimbursement under section
106(b).  To  assure that parties to a consent order or decree
do not seek-reimbursement by contesting issues of liability
in a later reimbursement proceeding, consent orders should
contain a stipulation that the respondents) waives its  right
to seek reimbursement under section 106.  For example:  "In
entering into this Consent Order, the Respondent waives  any
right to seek reimbursement under Section 106(b)(2) of CERCLA
for any past costs and costs incurred in complying with  this
order.*

     Reimbursement issues under SARA will be addressed more
comprehensively in the specific guidance on the reimbursement
procedures,  and in revisions to the August 1983 guidance on
Administrative Orders under $106.

-------
     If you have any questions please call Rich Hopen at
382-2035.

Addressees:  Directors, waste Management Division,
               Regions I, IV, V, VI, VII, VIII
             Director, Air & waste Management Division,
               Region II
             Directors, Hazardous Waste Management Division,
               Regions III,  X
             Director, Toxic & Waste Management Division,
               Region IX
             Regional Counsels,
               Regions I-X

-------
                                                                                          OSWER  #  9834.7

                    Federal  Register  /  VoL  32. No. 125  /  Tuesday.  June 30. 1987  /  Notices             24333
   AbttracL Petroleum refineries and
 chemical manufacturers must limit
 benzene emissions from new and
 existing fugitivt emission source*.
 Owntn and operators muat tubmit to
 EPA one-time notification* for new
 construction, modification, and start-up.
 They must alto lubmit tcmi-annual
 report* of the number of valve*, pump*.
 and comprea*ort for which leak* were
 detected. EPA uae* the collected
 Information a* the basis for enforcement
 action* a* well at to tpot trend* and
 plan program itntegie*.
   Respondent* Chemical manufacturer*
 and petroleum reflnehe*.
   Eitimoted Annual Burden: 91.697
 hour*.
 Office of PMbdda* aad Toxic
 Subeuncee
 Title: Household Survey* of Chemical
   Product Utage (EPA ICR »12DO). (This
   i* a renewal without revnion of a
   currenUy approved  collection.)
 Abstract: These annual surveys wiU
   provide information on household use
   of common chemical product*. From
   the results. EPA will derive exposure
   assessments for use in making
   regulatory decisions required by the
  Toxic Substances Control Act
Rftpondenu: Individual* and
  households.
Estimated Annual Burden: 800 hour*.
Agency PRA Clearance Requests
Completed by OMB
EPA ICR «om Pesticide Application
  Certification Form. Training and
  Examination of Applicator*: we*
  approved 8/17/87 [OMB »2070-00»
  expire* 6/30/90).
EPA ICR «0813, Trade Secret Clearance
  Justification for Pesticide*, we*
  extended 6/18/87 (OMB «2070-OOS3-
  expires 9/30/87).
EPA ICR 1160, NSPS for Wool
  Fiberglass Manufacturing (Subpart
  PPP) Information Requirement*, we*
  approved 6/12/87 (OMB aroeo-0114;
  expire* 6/30/90).
EPA ICR *i313. Information Request for
  Development of NESHAP for
  Chromium Plating and Anodizing
  Operation*, was approved 6/11/87
  (OMB '2060-0142: expires 12/31/87).
EPA ICR *1382. NESHAP for Coke Oven
  Emission* from Wet-Coal Charged By-
  Product Coke Oven Batteries, was
  approved 6/1S/87 (OMB »2060-0144;
  expices 6/30/90).
  Send comment* on the above
abstract)*) to:
Patricia Minami. PM-23. US
  Environmental Protection Agency.
  Information and Regulatory System*
  Division. 401 M Street. SW.
  Washington. DC 20460
      and
 Susan Dudley (ICR an200) and Nicola*
   Garcia (ICR* 0940 and 1153), Office of
   Management and Budget Office of
   Information, and Regulatory Affair*.
   New Executive Office Building. 728
   lackaoo Place. NW. Washington. DC
   20503
   Date* IBM 24.19*7.
 DaaM ]. norlaa.
 Dirtaor, Information and Regulatory Syttemt
 Divitiaa.
 |FR Doc. S7-14BOO Filed 0-29-87: MS am)
        Advisory Boart Eaocutrv*
 July n thraotb 22. 1887.
  Under Pub. L 92-463. notice i* hereby
 given of a meeting of the Executive
 Committee at the Science Advisory
 Board on |uly 21 through 22. 1987. The
 meeting will be held at the US
 Environmental Protection Agency. 401 M
 Street. SW. On July 21 the meeting will
 be held  in the Administrator's
 Conference Room. 1101. The meeting
 will begin at 94)0 *Jn- and will adjourn
 at approximately 540 pjn. The meeting
 )uly 22 will be held in the North
 Conference Center Room * 3 from MO
*jn. to approximately 1240 noon.
  laaue* to be discussed at the meeting
 include: a status report of the Board's
 review of scientific issues related to
 municipal waste combustion: working
 relationships with the Science Advisory
 Panel: consideration of a request from
 the Deputy Administrator to form an
 indoor air panel: reports of committee*
 and (ubcommitteer. and other issues of
 member mtutat
  The meeting  is open to the public. Any
 member of the public wishing to attend
 obtain information, or submit written
 comments should contact Dr. Terry P.
 Yoaie, Director. Science Advisory Board
 or Mrk-foanna Foallmer located at 401
 M Street SW.  Washington. DC 20480 or
 call (202) 382-4126 by Jose of business
 July 16. 1967.
  Dated: (uae at 19*7.
 Teoy r. Yease.
 |FR Dec a7-14Bm FUed B-a-T: MS sm|
Start* PffTU Imiee Heasarcti and
Evtauatton Group (SFmeo* Open
        Notice.
        R There will be a 2-day
meeting of the Slate FIFRA Issues
Raaearch and Evaluation Croup
(SFIRECJ. The meeting will be open to
the public
OATt: Monday. July 20 and Tuesday.
July 21. 1987. beginning at 830 a.m. each
day and ending by 430 nan. on Tuesday.
Julytl.
onosntt; The meeting will be held at:
The Hyatt Regency. Crystal City. 2799
Jefferson Davia Highway. Arlington. VA.
(703-U6-1234).
                                                                 r«cr
By mall: Philip H. Cray. |r. Office of
  Pesticide Programs (TS-766Q. 401 M
  SL. SW. Waabington. DC 2046a
Office location and telephone number
  Rm. 1115. Crystal MalL Building No. 2.
  Arlington. VA. (703-557-7096).
•ummiHTAirr MTOMMATWSC This will
be the twenty-seventh meeting of the
full Croup. The tentative agenda thus far
Includes the following topics:  . -
  1. Action Items from the March 1987
meeting of the SFTREC.
  2. Regional report*.
  3. Working Conurittee report*.
  4. Other topic* which mey *rtse.
  Dated June 21 1H7.
Kftetor. Offlet ofPnticid* Progr
(PR Doe. 17-14670 FUed 4-2S-87: 6:45 «m|
8up«rrund Program; Do Ulntonsa
      r Environmental Protection
Agency.
ACnosc Reqoeat for public comment
      R Environmental Protection
Agency (EPAJ.
       r The Agency is publishing-
today It* Interim Guidance on
Settlement* with Or Minima Waste
Contributors oadar section 122(g) of
SARA tn order to inform the public and
to solicit public comment on this
important aspect of the Superfund
enforcement process. This document
provides guidelines for determining
which potentially responsible parties
("PRPs") under section 107(a) of the
Comprehensive Environmental
Response. Compensation, and Liability
Act of 1980 (-CERCLA- or -SuperfutuT),
as amended by the Superfund
Amendments and Raauthoriiation Act
of 1986 rSAAA-V may qualify for
treatment aa at minima waste
oontriboton pursuant to section
122U)(1«A) of SARA. It also provide*

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24334
Federal Register  /  Vol.  52. No. 125 / Tuetday. June  30. 1987  /  Notices
guidelines for negotiating with de
minimi* wait* conthbuton and for
entering tnto settlements with nefa
parties pursuant to section 122(g) of
SARA.
  Thii publication don not address
qualifications for or Mttltmenu with de
minima landowner! under section
1Z2UM1HB) of SARA, which will be
covered by Mpante guidsme.
DATC Commenu mutt be provided on or
before August n. 1887.
ADeniM; Conunenti should be
addressed to Janice Linett U.S.
Environmental Protection Agency.
Office of Enforcement and Compliance
Monitoring, Waste Enforeanent
Division. LB-U4S. 401 M Street SW.
Washington. DC 20460. (202) 38W077.
                   LTIOM coarTAcr:
lantce Linen. U.S. Environmental
Protection Agency. Office of
Enforcement and Compliance
Monitoring. Waste Enforcement
Division. LE-1MS. 401 M Street. SW.
Washington. DC 20460, (202) 36-9077.
sum«ieurTAiry MOMumoic Section
12218) of SARA provides EPA with
discretionary authorry to enter into
expedited, final settlement! with de
mintmi* waste contributors to
Superfund sites. De minimi* waste
contributors are those generator and
transporter PRPs who. in the judgment
of the Agency (as delefttee of the
President), contributed haardouv
substances in an amount and of such
toxic or other hazardous effects as to be
minimal in comparison to other
hazardous substances  at the facility.
Section 122(g)(l)(A). Pursuant to the
requirements of section 12Z(j)(l). d*
mimmii contributor settlements must be
practicable and in the public interest. M
determined by the Agency, and must
involve only a minor portion of the
response coats at the facility coacaned
with respect to each settling patty.
  Dt minima contributor aetdamenta
under section 122fj) of SAtA offar
potential advantages to PRPs sad the
Agency alike. For dt marincf p*rae*.
such settlements can bt M effective
means of achieving an ttrty and
equitable resolution of their liability
with the expenditure of reduced legal
fees and other transaction costs. For the
Agency, section 122(g) settlements
provide t means of simplifying the
CERCLA enforcement process through
early elimination from litigation and
negotiations of the often numerous
minimal contributor PRPs. Dt minima
settlements also offer the potential for
increased numbers of voluntary
settlement agreements. This is because
dr. minim;* contributor* may be
                   attracted by the advantages offered by
                   section 122(gl settlements, and non-oV
                   minima parties may be encouraged to
                   settle as a result of the revenues raised
                   through such agreements.
                    To use the de minima settlement
                   provision most effectively, the Agency
                   will focus on achieving settlements in
                   which multiple 4? minima PRPs at a
                  .particular site are "cashed out" under"
                   one comprehensive agrnaufnVDe
                   minima panics should be encouraged to-
                   organize and present multiparty
                   settlement offers to the government
                   Further, to limit governmental and PRP
                   transaetim costs, dt minima
                   settlements should be standardized in
                   form and should not be the subject of
                   lengthy negotiation*.
                    In the typical de minimi* settlement
                   the settling parties. in exchange for a
                   payment, will receive statutory
                   contribution protection under section
                   122(g)(S) of SARA and may be granted a
                   covenant not to sue where such a
                   covenant is consistent with the public
                   interest under section 122(g)(2). The
                   scope of the covenant not to sue will
                   vary depending upon the timing of the
                   settlement the amount of information
                   available to the Agency about site PRPi
                   and response costs, the amount of any
                   premium payments recovered through
                   the settlement and other relevant
                   considerations.
                    The Agency is awmre that df minima
                   contributor settlements are the subject
                   of great interest to potentially
                   responsible perties and the public.
                   Therefore. EPA is publishing this Interim
                   guidance to provide wide public
                   distribution of information on this
                   aspect of SARA implementation and to
                   gain the benefit of public comment EPA
                   will reevaluate this interim guidance
                   based upon its experience with Its
                   implementation and upon any public
                   comments that may be received.
                    Too interim guidance follows.
                    Data* IWMU. Ua7.                  *

                   Acting Ast tsiBM AdmMttntorfrr
                   Enferemwm omf ComfHoaet MomHoriep.
                    Dated; |«na 19. •VHP.
                   J. WiBMaarfofter.
                   Aatuant Ad.ninittrotor for Solid W
                   toe/I»ner ftoponse.
                   Subject: Interim Cuidanva on Settlements
                      with D» Minima Waste Couributom
                      wder Secian l«i) of SARA
                   From: Edward L Reich. Acting Assistant
                      Administrator (or gnlnrctment mad
                      Compliance Monltorinj
                     |. Wlaaion Portet. Astiaiani Administrator
                      for Solid VV»»u and Emergency
  Regional Cowutii
  Reftmal Waait MsnaeawMt Oitiwor
    Dinaoii
June 19. lt«r
  The purpose of this memorandum
provide interim guidance for
determining which PRPs qualify for
treatment as d» minima waste
contributor! pursuant to section
123g)(lUA) of the Superfund
Amendments and Reauthorization A
of 1986 ("SARA"). Pub. L No. W-«99
and to present interim guidelines for
settlement with such de minima psr
pursuant to section 122(g) of SARA.
Guidance on de minima landowners
under section  122U1UHB) of SARA *
be provided by separate memorandu
IL Background

  When the harm is indivisible.
generators and transporters of
hazardous substances disposed of at
facility are strictly and jointly and
severally liable for all costs of remov
or remedial action incurred by the
United States under section 107|a) of
Comprehensive Environmental
Response. Compensation, and Uabili
Act of 1880 rCERCUT). 42 U.&C.
960?(a). as amended by SARA. Altho
this liability is not sututonly limited
the amount or type of hazardous
substance generated or transported U
the facility. Congress, in section
122UH1HA) of SARA, receguted the
                   To: Rettonal AdminUtrvton
concept of the de minimi* waste
contributor, iav the potsntially
responsible party ("PUP") who aatisH.
the requirements for liability under
section 10T(a) of CERCLA and who dc
not have a valid section 107(b) defens
but who has made only a minimal
contribution (by amount and toxidry)
comparison to other hazardous
substances at the slta.
  Since the beginning of theSuporfeni
program, the Agency has been faced
with the probiem of how to treat dt
minimi* contributor PRPs. The legal ft
and other transactions costs of
negotiating and litigating with the
Government compounded by the
potential costs of asserting and
defending claims for contribution with
other PRPs si the site, often could
exceed the amount such minimal
contributors would be expected to pa>
even under a settlement or a judgment
unfavorable to them.  As s result, de
minima parties often seek s swift and
efficient means to pay • sum that is
commensurate with their involvement
the site and allows them to be dismissi
from further negotiations and litigation
The Agency also needs a-method for

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                             Rtp«t«r  / Vol. U. No. 123 / Tmtday. [une 30. 1987 / Notices
                                                                      24335
 tdmving settlements with minimal
 *a*ie contributor* in onto lo make
 Mfottatioat and litigation men
 Banageabie.
   EPA formally recognized and
 endorsed the concept of the d* minimi*
 contributor MtiltfMnt in the Interim
 QERCLA Settlement Policy ("Settlement
 Policy'}. SO PR SOJ4 (Fib. 5.1*3). The
 Settlement Policy advised that
 negotiations with de minima parties
 should (oeui on achieving cash
 settlements aad ihould be linutad to km
 volume, low toxidty disposers who
 aormally would not make a significant
 contribution to tha coats of deikujp in
 any want
   Section «2(j) of SARA ' la to lanjw
 part a codification of the Agency'i
 poeition with regard to settlements with
 d» minima partial. While recognizing
 the liability of tuch partiat. that section
 five* EPA discretionary authonty to
 aotar into expedited aettlemenu with de
 minima waste contributors and dt
 minima landowners. Section I22(g)(1)
 generaUy provides (hat when EPA
 determines that a settlement is
 "practicable and in the public interest."
 the Agency shall, "as promptly as
 possible." seek to reach a "fins!"
 settlement with a de minima PR? by
 consent decree or administrative order.
 if the settlement "involves only a minor
 portion of the response costs at the
 facility concerned' Section «Z(g](l). A
de minima contributor settlement with •
generator or transporter is authorized if
 theme criteria are met and if the Agency
determines  that both "the amount of the
hazardous substance* contributed by
 that party to the facility." and "the toxic
or other hazardous effect! of the
 substances  contributed by that party to
 tha facility." are "minimal in eompariaoa
 to other hazardous substances at the
facility.- Section 122(g)fl)(A|. Section
 12Z(g) further authorizes settlements
 with de minimi* landowners as defined
 by section U21g)|l)|B) of SARA.
Because the Agency will be providing a
separate guidance document oa de   '
minimii landowners under SARA, thia
 document will foot* oa the definition
 and settlement reeuifeBtents of the de
minimi* waate contributor.

 IILGuM«UaaafarN«fOliatiasWltfcae  ••
 MloiaU Parties)
  De minima contributor settlements
 under section 122(g) of SARA can be an
effective mean* of providing d* minima
parties with an early and equitable
 resolution of their liability while
minimizing  their transaction costs. De
 minima settlements can be particularly
  1 TW Ml i«ii tt •cue* 1SI») of SARA i
 uaaful to the Government in complex
 cases involving numerous PUP*. In such
 cases, de minima settlements offer the
 Agency a method of simplifying
 CERCLA enforcement actions through
 early elimination of the sometimes
 numerous minimal contributor PRPs
 from litigation aad negotiations. Dt
 minima aettlaaenu may also increase
 the amount of raaponae coata lecoveied
 through voluntary settlement
 agreements. This is because dt minima
 parties (who otherwise might oat have
 participated la settlements) may be
 attracted by the advantage* offered by
 de minimii settlements and encouraged
 by the fact that their funds will be used
 to pay costs of cleanup, rather than
 transaction costs. Finally, de minima
 settlements may increase the likelihood
• of settlement with the major waste
 contributors by raising sufficient
 revenues to reduce  the overall liabilities
 of such parties.
   To use the de minima settlement
 provision most effectively, the Agency
 will focus on achieving comprehensive
 settlement! in which interested de
 minima PRPs at a particular site are
 addressed  In one settlement agreement.
 De minima parties  should be
 encouraged to organize and present
 multi-parry settlement offers to the
 Government, To limit Governmental aad
 PRP transaction costs, de minima
 settlement* should lake the form of
 standardized agreements, aad the
 Regions should try to avoid lengthy
 settlement negotiations with de minimii
 parties.
   At sites with dozens or hundreds of
 PRPs, the de minima settlement
 authority will be particularly netful In
 helping to simplify the negotiation
 process. In situations of this kind, it is
 particularly important for the Agency to
 gather and release Information about
 PRP waste contributions to tha site at aa
 early stage, ao thai potentially de
 minima parties can identify and
 organize themselves to pretest
 settlement offers to die Government.
 Where sufficient inhumation ta
 available, the Agency may tentatively
 Identify-potentially de minima parties in
 the Information released to PRPs under
 section 122UKU of SARA. The Agency
 may  also consider negotiating
 separately with PRP Steering
 Committees representing substantial
 numbers of dt minima parties. In
 addition, the Agency may wish is
 consult with the major. i«u non-de
 minimii. parties dunng the de minimii
 negotiation* in'ordtr to facilitate a later.
 comprehensive settlement with such
 major parties. This  is because, among
 other things, the volume and toxicity
 criteria established by the Agency for
 participation in the de minima
 settlement may have a significant effect
 oa the willingness of the major parties
 to settle.
   In determining the timing of e de
 minima settlement, the Agency must
 consider a variety of factors: the amount
 of information available about tha PRPa
 aad their waste contribution* to the elte:
 the amount of information available
 about the cast* of remediating sit*
              the native of the
 reopsaars included lathe covenant not
 to ear the amount of the premium to be
 paid by the stttliag parties: aad the
 voloBM aad toxicity criteria used by the
 Agency to distinguish between the de
 minimii aad major parties at the site.
 The approach taken at a particular site
 should be designed to promote
 voluntary settlement minimize
 transaction costs for both ths PRPs and
 the Government, address the legitimate
 interest* of the de minima and major
• parties at the sits, and assure that the
 level of nek to th* Agency is acceptable.
 The Region* are not encouraged to
 devote extensive effort to assessing
 proposals for de minima settlement
 unless there is a reasonable prospect of
 auccauful settlement
  The Agency may consider early
 aattlatMBt where complete information
 concerning PRP contributions and the  -
 nature of the remedy is oot yet
 available, la such early settlements, the
 reopeaers should be more expansive.
 and/or the premiums should be
 substantial la addition, volume and
 toxicity levels should normally be set
 low. so thai parties who  may
 legitimately be treated as major do not
 instead aad up being treated as de
 minima. Where the Agency determine*
 that It is more important to have finality
 ta releases and reopeners aad more
 certainty in the definition of premium*
 aad volume/toxJcity levels, negotiation*
 lor de minima settlements should be
 deferred until the remedial Investigation
 aad feasibility study have been
•completed aad tha remedy aad the
 relative PRP contributions have been
 definitively identified-

 IV. Guttetiaes for-OaJlaiat *a De
 Mminu* Waste Contributor

  Because site conditions, remedial
 program*, namber of PRPs aad other
 considerations vary tremendously
 among site*, the approach taken by this
 guidance, consistent with section
 122WUHA) of SARA, i*  that the de
 minimii contributor will be defined on a
 sits-epecific basis. To qualify as • de
 minima generator or transporter, the
 PRP must nave contributed an amount of

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24338
Federal Rtgbter  /  Vol. 52.  No. 125  / Tuetday.  lane 30> 1MT / NottcM
hazardous substances which ia minimal
in comparaon to the tout amount at the
facility. The- PRP nwn  Mr eKuMnwd by *h*
                                                           Aemey »tw/ to •mini* HMO • dr

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                    F«dml Eoprtar / Vol Si No.  1Z3 / Tondty. fun* ML 1H7 / Netfetf
                                                                  US37
  r minima aotoament with aa
  ipananre eowaant MI le tue of tail
  Ad may bt aandad*d prior to
  trnpiatioaofUMRl/FSandROa
  Bwwtr. If lha Aftncy to relatively
  mfldmt «{ iu ability to oaUmaie future
  raponae coeta. tad DM eetUtmtni ufcaa
  «a aeo»«Bi tha tomaiarl krvel of
  Manaiary throufb IB adequate
  ftaJua payment tad/or other
  aftfluanU. 5e» eectioo VfBlU) baiow.
  iMAfBBcrwiUatooeoaaidar
  Jtaroattvt method* of amicfuriai pre-
  U/TS asd ROD dr awuoui tattlamenta.
  vale* afford deauunu contributor*
  he opportunity for tarty terUaaenu
  when coat information u law canam)
 vhile proieeuaf the Government tf unit
 lha additional nak* praaenied by auch
 urly afntemeBit. Opnoni for inch
 MtUaaanu are diacuaaed in Section
 V(B|(2) below.

 0. Conunt and Form of S*ttltm*r>u

 1. Introducooa

  Tha goal of netoriaboiu with rfr
minima partial u : J achieve Quick and
elandareitad etreemenu through thi
expenditure of minimal enforcement
reeouroee and trtnaaction ooeta- To
attain nil foal. rht dr minima
atttlammt aormaily «iD be a "caihout"
i*_ it will aol Include a eomaUtmaai to
ptrform work.* but ftibar will raquin a
payment to bo mada to tha Hasardoui
Subttanca Suptrfuad.* la eichaate for
thia payment (aa aaniint ptrtiet will
receive etatvtory ceaihbvuon protection
aadav eection 1SUKSI of SARA and
may receive a covoMnt MI to aua ai
dttcntMd la aactooo V(BH>) balow.

t lUiasaa* from liability and Rtopanan
          MI to m» lof ervil ciaimt
          ttM attt waich aoak
                          tn of
CEXCLrV «M» IPA Mtarateaa that
aa«h aMtivtMni ia conaiitent with tba
public iBtafMt, aa pwidod ia aarton
t22(»J{2) of SARA.* na aeopa of thia
  ttet hr tfet •><*. •+- •• tlin w«a««Mt win.
              i r»tf »«M*nt t* « • HMWIM
      • 1 »t» • «ll»4Moric Mil ttttt I* »•
                    r tfMW* «M m*0 lor
                    > •> tki* ••• wilt tf

                              > MI  bting) eomplatad at tha alia.
•aad lha Aftncy baa aufftdant
 mformauon upon which to tvalnata tba
 Ukalthood of coat ovtrruni or futura
 mpoaaa acttoa and tht potaattai tMta
 aaaooatod wtth thtaa emttaaaat tvtata.
 than tha Aftncy may accept a praaium
payment bom lha attUiat * aumau*
awttaa ia bm of OM or bata of thaaa
two rtfiBtnan. rtapaaiilni aa lha lacu.
Mowtm. if a dt muumiM tatUamaat»

•abataattal oampWooa} of tha 10/R aad
ROD. at a Oaa whan tha Afancy bat
taauffirttat laformattoa apon which to
Vfihuta thaaa rtaki aad dtvtlop a
prauumij-payBtBt eaomtMuntt wttb
them, than rtopaMrt for ooat ovtrmni
aad rutura raapoaaa OCMB ftaoraUy
wUl ba raauind. ta appropriate caae*.
Iba Aftacy may make anapaem to mil
faaaral rata aad aeaapi a vary htah
pratanm paymaaL which proihdaa a
wtda marflr of aafety to the
Covarnmant. at an tartler iu»» tr the
procaat n Utu of thaaa rwe raopentn.
  Aa acted abovt. the Aiency will alie
eaniidtr vanoui fatmi of pre-Rl/FS and
ROD dt nauaut aattlamtnu which
arovida dt auruma coaQibuton the
oppertouty for early aanieaentt white
proiacttaf &• Covemment aiainit tae
addittonal rtaka pratantad by  tuch early
aaraamanu. For aaampka. EPA nay
onaidar partel aaitltmaata in which the
dt minima partial mtkt a aayoiant in
aauafacaon of their liability for aait
ooau aad proiaoad Rl/FS coata.
fatuamanu of ihii had would aot
addret* the aattoat paroei liability for
poat
                                     • minima PRPv finally, if ih* major PRP«

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24338
Federal Register  /  Vol. 52.  No. 12S / Tuesday. June 30. 1987 / Notices
have expressly assumed the dt minima
parties' liability for cost overrun* and
futon remediation n part of •
comprehensive settlement with the
Government, then these risks will be
boms by the major parties, and a
promiuc payment or reopener for cost
overruns end futu.-* remediation  will not
be n*?i>invi by the Government from the
•••-•'' 'i dt minima parties.

3. Amount of Payment

  In the typical de minimil settlement
the cash offer submitted by the de
minima parties must be at least equal to
their volumetric share of the total past
and projected response costs at the
site.' Nature of the waste is less
relevant to the amount of payment of a
de minima settlement because the
waste must be minimal in toxicity in
order for a party to meet the basic
eligibility criteria for de minimis  status.
Volume is. therefore, a useful and simple
method for tentatively determining the
de minimit share. It is based upon the
type of information that is most likely to
be readily available and does not
require the PRPs and the Agency to
invest an inordinate amount of effort
arguing about the appropriate share.
  The volumetric share may be
adjusted, however, based upon the other
factors regarding partial settlements
identified in  the Interim CERCLA
Settlement Policy (Pan IV. SO FR  9037.
38). Factors that may be of particular
importance include ability to pay.
litigetive risks, public interest
considerations, value of a present sum
certain. Inequities and aggravating
factors, and the nature of the case
remaining against other parties after
settlement The shares may also be
adjusted on the basis of a Nonbinding
Preliminary Allocation of Responsibility.
If one has been developed for the site
pursuant to section U2(e)(3) of SARA.  .
  In addition to the volumetric share of
past and projected response coats, the
Agency generally will require payment
of a premium from each settling d»
minimit party in exchange for granting a
covenant not to sue which dees not
Include reopeners for coal overruns and
future response action.* If the settlement
BMMtvlly »Koirtd bt OMod OB •
                   Is concluded prior to completion of the
                   RI/FS and ROD. and information about
                   projected costs is limited then the cost
                   overrun and future response action
                   premiums should be calculated to reflect
                   this Increased level of uncertainty. '• As
                   discussed earlier, if the major PRPs an
                   •••inning the responsibility for
                   conducting me cleanup *eathe
                   premium amounts may be made
                   available to those PRPs rather than to
                   the Agency. In this situation,  the
                   premium amounts may be negotiated
                   between the major PRPs and  the de
                   minima settlors.
                     Furthermore, because de minima
                   PRPs an jointly and severally liable for
                   response costs at the site, the amount to
                   be paid by a de minima settlor is
                   affected by the amount available from
                   other PRPs. Thus, if a significant portion
                   of the major parties at the site an
                   bankrupt or otherwise not financially
                   viable, then the de minimis offer may
                   need to refledt a greater proportion of
                   response costs, rather then simply e
                   volumetric shan and a  premium. It is
                   also possible that mixed funding may be
                   appropriate in such a situation."
                   4. Enforcement of Payment
                     If a settling party fails to make any
                   payment required by a de minima
                   settlement or otherwise fails to comply
                   with any term or condition of the
                   settlement that party is subject to
                   enforcement action, including imposition
                   of civil penalties pursuant to  Section 109
                   of CERCLA. as amended. 5m section
                   122(1) of SARA. In addition, the
                   Agendcy may include a porovtsion in
                   the settlement document which permits
                   the agreement to be vacated in the event
                   of noncompliance.
                   5. Type of Agreement
                     Section 122ti)(4) of SARA requires
                   that de minima settlements be entered
                   as either judicial consent decrees or
                   administrative orders on consent The
                                    procedures under
                   which these two alternatives should be
                   used an briefly describe below.
                     a. Judicial Content Decree. Under
                   section 122(d)(1)(A) of SARA.
                   settlements with non-de minima PRPs
                   which provide for remedial action must
                   be embodied IB consent decrees. Thus, if
                   the dt minima settlement is part of a
                   larger, mon compnhensive agreement
                   with the non-de minima parties under
                   which remedial action will be
                   performed it may be advisable and
  • TW BIMUWB p*ymmt *4uen tht liability of
*• BOB Miuiai MPt m ft* MMMI of rt» PJHIML
     OIlMmnOf •PO^OJOd to QW MttiOBMM
      fll. IB OMM OMM* H MBy M BBOPOPnOtt fOF
        » to tat dooooMd hi • Q)U  «Mtlf>c MM
                 r B. S, •. 14.
                    •• totter fMBBM M o«le»Ulta» »»OBU
                   •tyoMM* win te BMiidtd by MOMM*
efficient to use e consent decree for the
entire settlement Similarly. If the
Government has alnady filed e
CERCLA Section 106 or 107 action with
respect to  the site, a consent decree wit!
the de minima parties may b* .<.eful
because the court will be familiar wi1'-
the case arJ should be eble to ap«.ove
the settlement expeditiousiy.
  At the present time, all de minimis
consent decrees must be referred to
Headquarters by the Regions and must
receive the concurrence of the Assistan:
Administrator for Enforcement and
Compliance Monitoring ("AA-OECM")
and the Assistant Administrator for
Solid Waste and Emergency Response
("AA-OSWER") or his or her designee
prior to referral to the Department of
justice for filing. Further, all de minimis
consent decrees will be subject to a
thirty-day  public comment period after
lodging.11  A model section 122(g)
consent decree will be issued shortly.
  b. Adminstntive Order on Consent, f
de minimis settlement may also be
embodied  in an administrative order on
consent ("consent order"). See section
122(d)(l)(A) of SARA. Because of the.
potential effect of administrative de
minimis settlements upon  fulun
litigation and negotiations with the
major waste contributors at the site, all
such settlements currently must receive
the concurrence of the AA-OECM snd
the AA-OSWER prior to signature by
the Regional Administrator.
Additionally, if the total past and
projected response costs at the site.
excluding  interest exceed SSOO.OOO (as
will generally be the case at sites
involving de minimis settlements).
section 122(g)(4) of SARA  requires that
the dr minima consent order receive th
prior written approval of the Attorney
General or his designee ("AC"). That
subsection of SARA gives the AC thirt>
days from nferral by EPA to approve o
disapprove the settlement unless the
AC has nached agreement with the
Afency on an extension of time.
  Section  122(1) of SARA requires notic
of all administrative de minimis
settlements to be published in the
Federal Register for a thirty-day public
e^fiiiMtit period The Agency must
consider all comments received and
"may withdraw or withhold consent to
the proposed settlement if such
comments disclose facts or
considerations which Indicate the
proposed settlement is Inappropriate.
  '• Tht MjyOMBt pro»ioto«» of o> ariimmi COBM«
 digOM thoMd aM ivqMra oirBMai to bt «*dt
 •MU Bftor Ow UBilod SUM* hB« MOponotd 10 any.
 Mbhe BMMMMi netivod iad MUU «f Mr tM) oonri

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                      Federal RtgiHer  / Vol. 52. No. 123 I Tue»day. June  30.  1987 /  Neticei
                                                                                                                  24339
 Improper, or inadequate." '* Section
 122(i)(3) of SARA. Modifying or
 withdrawing content to an
 administrative Mitlemeni if subject to
 the taroe OECM and OSWER
 concurrencel as are initial agreement*.
   More detailed guidance on the
 procedural aspects of dt minimit
 consent order*, including Regional
 referral of order* for Headquarters
 concurrence and AC approval
 solicitation of public comment
 enforcement of order*, and other related
 matter*, will be provided by separate
 memorandum. A model section 122(g)
 consent order will be issued shortly.

 VI. Purpose and Use of This
 Memorandum

   This memorandum end any internal
 procedures adopted for its
 implementation ere intended solely as
 guidance for employees of the U.S.
 Environmental Protection Agency. They
 do not constitute rulemaking by the
 Agency and may not be relied upon to
 create a right or a benefit,  substantive or
 procedural, enforceable at law or in
 equity, by eny person. The Agency may
 take action at variance with this
 memorandum or Its internal
 implementing procedures.

Appendix—Teat of Section 123g) of Saie
  (1) firpeeVrec' Final Sett/emem— Whenever
practicable and ia ih« public interest ti
determined by the President, the President
shell at-promptly at possible reach a flnal
settlement with • potentially responsible
parry in an administrative or civil action
unger MCI ion 106 or 107 if such settlement
involves only a minor portion of the response
costs at the facility concerned and. in the
judgment of the President, the conditions in
either of the following subperefraph (A) or
fB) are met
  (A) Both of the following an minimal in
comparison to other hazardous substances at
the facility:
  (i) The amount of the hazardous substances
contributed by thai party to the facility.
  (II) The toxic or other ha*ardo«e effects of '
the substances contributed by that party to
the facility.
  fB) The potentially responsible party—
  (I) ia the owner of the ieaJ property on or la
which the facility Is located:
  (li) did not conduct or permit the
generation, transportation, storage, treatment.
or disposal of any basardous substance et the
facility: and
  (IK) did not contribute to the release or
threat of releese of a hasardoM substance at
the facility through any action or omission.
  ••neper*
               ro»uiu