United State;- O" c r So a Waste
Agency O" ce 3; Waste Programs LC'cs.
Seote-ce- ' 593
Mixed Fund in.
Evaluation Report:
The Potential Costs
of Orphan Shares
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MIXED FUNDING EVALUATION REPORT:
THE POTENTIAL COSTS OF
ORPHAN SHARES
Prepared by:
Office of Solid Waste and Emergency Response
Office of Waste Programs Enforcement
September 1993
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MIXK1) ITNDIM, I \ VJ I \li«>^ RK!'t)RT:
THE POTENTIAI (OS IS i VI
ORPHAN
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To obtain the current views of organizations and individuals (including PRPs)
pertaining to mixed funding, the Agency retained a contractor, Kndispulc. Kndispute
noted some problems and perceptions pertaining to mixed funding settlements, such as
the perceived incompatibility of mixed funding with EPA's "enforcement first" approach.
Endispute aiso noted that PRPs believe that the procedures and documentation
requirements for submitting a claim against the Fund (in a preauthorized agreement)
are too burdensome. In summary, the report found that mixed funding could be used
more frequently at sites with, for example, a significant orphan share.
Under Initiative 4 of the Superfund Administrative Improvements, Final Report
(June 23, 1993), the Agency agreed to conduct a two-part evaluation of mixed funding.
This report is the first part of the evaluation. The second part of the evaluation will
explore options for streamlining the mixed funding decision making process and options
for streamlining the application and documentation requirements in a preauthorization
mixed funding agreement. In addition, the Agency will be piloting several mixed funding
settlement projects in FY94.
HI. METHODOLOGY
A. Collecting Data from Ongoing RD/RA Negotiations
OWPE developed a regional survey to obtain orphan share information from on-
going RD/RA negotiations. We chose this group of sites because it provides the Agency
with the most current information on orphan shares.
OWPE identified 78 sites from the May/93 CERCLIS report where Regions are
conducting ongoing RD/RA negotiations with PRPs. Some of the negotiations started
in FY92, others in FY93. We collected remedy and enforcement data. The remedy cost
figures identified were Record of Decision (ROD) cost figures not necessarily site cost
figures, as a particular RD/RA negotiation may only address one operable unit at a site.
OWPE made follow-up telephone calls to the Regions to perform quality assurance. We
present the data in this report in aggregate form to preserve the confidentiality of the
enforcement negotiations and internal deliberations on case strategy.
B. Orphan Share
In this report we define the site "orphan share" as the portion of liability
allocated to PRPs who are non-viable (i.e., defunct, bankrupt, or insolvent) and the
portion of waste at a site which is unallocable (i.e., the volume of hazardous substances
3 "Fact Finding Regarding Mixed Funding and Special Covenants Under CERCLAT
prepared by Michael D. Young, Endispute, dated March 1993.
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which EPA is unable to allocate to a known generator or transporter).5 In Section IV.
we present cost implications of funding the total orphan share 'both non-viable and
unallocable waste shares), as well as separate cost breakdowns for funding non-viable or
unallocable waste shares.
In the survey we asked the Regions to identify the number of PRPs at a site, then
separated the PRP group identified for each site between owner/operators and
generator/transporter PRPs. We then asked whether any of the PRPs were non-viable.
When a Region identified a PRP as non-viable, we asked them to assign a percentage
share of responsibility to that party.5 We asked Regions to identify whether there were
unallocable waste volumes at the site. Where a Region answered yes, we asked for the
basis of the determination (e.g., Did you use volumetric or anecdotal df»*a?). Where a
Region identified unallocable wastes, we asked them to assign a percentage to th
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We also found it necessan. to make a pidiminan Decision on allocating
t. * *
responsibility between the owner/operator and generator/transporter PRPs at a site.
We did this to reduce the possibility of overestimaunu the site orphan share (i.e., a
100% owner/cperator orphan share is not the site orphan share) and ensure consistent
between Regions for producing national cost figures. EPVs "Interim Guidelines for
Preparing Nonbinding Preliminary Allocations of Responsibility," OSWER Directive
9839.1 (May 28, 1987)(NBAR guidance) provides factors, but does not specify
(numerically) the allocation of responsibility between owner/operators and
generator/transporters. Actual decisions are made on a siie-by-site basis. For purposes
of this report, we decided to allocate responsibility evenly between owner/operators and
generator/transporters: owner/operators are 50% liable and generator/transporters are
50% liable. We chose these numbers for two reasons; (1) it ensures no Agency bias as to
the respective cuIpabilL between different r*RP groups, and (2) we understand
anecdotaily that PRPs use this breakdown in performing allocations. For example, if a
Region said that non-viable owner/operators were responsible for 50% of the
owner/operator share, we converted that 50% to the "site" orphan share, which would be
25% (50% of 50%). Regions identified sites with both non-viable owner/operators and
non-viable generator/transporters. In those situations the "site" non-viable orphan
share is a combination of these components.
We assigned the unallocable waste share to the generator/transporter portion of
liability at a site. This is consistent with our NBAR guidance and reduces the
possibility that we are overestimating the size of the "site" orphan share. There were a
number of sites where Regions identified unallocable wastes and non-viable PRPs. For
example, if a Region told OWPE that non-viable generator/transporters were
responsible for a 50% share of responsibility and 25% of the wastes at the site were
unallocable, the "site" orphan share would be 37.5% (50% of 50% and 25% of 50%).
When estimating costs, if the combination of non-viable generator/transporter and
unallocable waste shares exceeded the 50% of liability allocated to the
generator/transporter category, we then adjusted the amount to the maximum of 50%.
The pie chart below illustrates OWPE's definition of orphan share.
Liability Apportionment Assumptions
of Orphan Share Analysis*
1 50% ol liability is apportioned to owner/operators and 50% to generator/transporters
2 Any unallocable waste is apportioned to generator/tranporters
Own*rj
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IV. ANALYSIS 01 COSTS TO THI 1 !. M)
OWPE identified 78 sites ssiih undoing KU/H\ iv.ii-.f.i.uions. At 52 of 78 sites
(67*7 of sites- u Region identified an orphan -hart.
A. Annual Mixed Funding Cost EMimotes for Orphan Shares
To establish the orphan share cost, we multiplied the ROD cost figure by the
percentage of the orphan share. We then added up the costs for each site. Based on
this survey, the annual cost to completely mixed fund orphan shares is approximately
$420 million dollars. The annual cost to completely mixed fund non-viable shares is
approximately $270 million dollars. The annual cost to completely mixed fund
unallocable shares is approximately $150 million dollars. Thus, the annual cost to
mixed fund orphan shares ranges from $150 to $420 million.
The Regions were able to identify percentages of the orphan share at 35 of the 52
sites. To develop cost shares for the other 17 sites, OWPE used the average percentage
for that component of the orphan share identified (whether it was non-%iacle
owner/operator, non-viable generator/transporter or unallocable waste), then multiplied
that number by the ROD cost estimate. For example, if the estimated remedy cost was
$30 million, and the Region identified an owner/operator as non-viable but could not
assign a percentage of liability to that party, we assigned the average non-viable
owner/operator share (17.3%) to estimate costs.7 In this example, the site cost to fund
the non-viable owner/operator share would be $5.19 million ($30 million X 17.3%). Set
forth below is the annual cost to completely mixed fund orphan shares, as well as a cost
breakdown for non-viable PRPs and unallocable waste.
Annual Mixed Funding Cost Estimates for Orphan Shares
(Rounded lo me nearest JlO Million)
7 See Section IV.C. for a summary of the average percentages for non-viable
owner/operators, non-viable generator/transporters and unallocable wastes.
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A
B. Frequeno Of the Orphan Share Issue
There were 52 out of 78 sites \vhere a Region identified at least one component ol
the orphan share (either non-\inhle owner/operators, non-viable generator/transporters
or unallocable waste). There were 36 sites out of 78 where a Region identified an
owner/operator as non-viable. There were 18 sites out of 78 where a Region identified a
generator/transporter as non-viable. There were 22 sites out of 78 where Regions
identified unallocable wastes. The graph below shows both the overall frequency and
individual frequency where a Region raised an orphan share issue. [Note: There were a
number of sites (19) where Regions identified two or more of the components of the
orphan share at the same site. To avoid double counting, readers should not add the
individual components together.]
Orphan Shares
Frequency of orphan share issue among the 78 sites surveyed.
Pe.-cen
of Tola
70 -
60 -
50 -
40
30 -
20 '
10 -
i SJ
B 67%
':"-';'.'.'.. . . . .-.':
'"'':-'/'-'''.,-
' .
48%
: i'life SiB*: i: '':
.-:->:0:0: ': :
28%
'WY. .«.... .....
lljflfj
££: .-' ' : ' ." '* ' "'"'' °' -: ' ;^:o:->::: '.
liiiii l
Total Sites Non-viable (ton viable Unallocable Waste
wth Orphan Shares Owner/Operatore Generator/Transporters 132 Sites)
(52 S«BS) (36 Sues) 118 Sues)
C. Average Size of the Orphan Share
Where a Region identified the percentage of orphan share, OWPE then totalled
the amounts to derive statistical data. Of the 52 sites identified with an orphan share,
Regions identified percentages of the orphan shares at 35 sites. The average size of the
orphan share was 26.7%. Of the 36 sites where a Region identified an owner/opei aior
as non-viable, they were able to assign a percentage at 20 of those sites. The average
non-viable owner/operator share was 17.3%. Of the 18 sites where a Region identified a
generator/transporter as non-viable, they were able to assign a percentage at 13 of
sites, The average non-viable generator/transporter share was 16.5%. Of the 22 sites
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where Regions identified unallocable Bastes. ihc\ assigned a percentage at 15 of those
sites. The average unallocable waste share was 26.9rc. The graph below shows the mean
(average), median and range of the orphan share for the total sites in the survey and b>
individual component. [Note: There were a number of sites (10) where Regions
identified and assigned percentages to two or more of the components of the orphan
share. To avoid double counting, readers should not add the individual components
together.)
Average Size of Orphan Share (by percentage)
Total Liability ^ _ _ '00%
Average SUB Orcnan Si e (Overall)
Mean ___^^__^^_
Median ___^^^____ 25%
Range ^___^_____________^^________^_ 05.35%
Non-viable Owner/Operaiors
Mean ____ ^^_ >7.3%
Median ___^_ 12.5%
Range ___^^^__^.^_^_^^^ 05-40%
Non-viable Generator/Transporters
Mean 16.5%
Median _ 5%
Range 0.5-50%
Unallocable Shares
Mean __^_^___^^^_ 269%
Median _Mn.««__wa__ 25.0%
Range ____^^_ ^_________ 0.15-50%
V. COMPARISON OF ORPHAN SHARE FUNDING TO OTHER PROGRAM
COSTS
PRPs now perform the RD/RA at over 70% of sites, which represents
approximately $1.14 billion dollars of commitments to perform work per year - that is,
money the Agency will not have to spend for cleanup. To put the PRP RD/RA numbers
in perspective, the Superfund appropriation for FY93 is approximately $1.57 bi'lion
dollars.8
8 The FY94 Administration Budget for Superfund proposes $1.49 billion for the
Superfund Program, approximately a 9.4% budget reduction.
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s
In situations \shere I'RPs do not perform the RD/RA ui little less than jn't ol
sites) the Agency \vill obligate funds to perform the uork. From KY89-*>2, the Vi»enc>
averaged $474.0 million dollars per \ear for fund-financed RD/RA obligations. For
FY93, \ve estimate obligations of approximate!} $447 0 million dollars for fund-financed
RD/RA cleanups. The graph below sets forth these numbers relative to funding of
orphan shares.
Comparison of Orphan Share Funding
to Other Program Costs
of Dollars
5 *-
:
05
$1 57 B.nion
_L
S474 Million
Total Supertund Average Value Average
Appropriation of PRP EPA Obligation to* Qfpnan Share Cost
FY93 RCVRA Commitments Funa-leaa RCVRA
FV90-92 FY89-92
VI. PURPOSE AND USE OF THIS DOCUMENT
This report does not constitute a rulemaking by the Agency and may not be relied
upon to create a specific right or benefit, substantive or procedural, enforceable at law
or in equity by any person.
This document does not represent a decision by the Agency to mixed fund orphan
shares, and may not be used for any purpose in negotiations with PRPs.
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