Super fund Reform:
Orphan Share
Implementation
August 1996
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Implementation
When providing notice of forthcoming negotiations to PRPs or during on-going
negotiations, Regions should indicate* whether the site is eligible for this reform and should share
any available information about the maximum amount appropriate for compensation. Regions
may request PRPs to submit information regarding the size of the orphan share at the site,
including a basic rationale and supporting documentation.
Headquarters pre-approval will be required for any settlement at a site where the
projected ROD remedy or NTC removal cost exceeds $30 million. To satisfy this pre-approv&l
requirement, Regions should contact Headquarters, either orally or in writing, prior to conveying
a formal settlement offer to a PRP or group of PRPs that includes an orphan share compensation
component. Headquarters will then evaluate such proposed compensation in light of site-specific
factors, state concerns and national priorities; including meaningful implementation of the reform
and impact on the Trust Fund.
For all sites, an analysis of the proposed orphan share compensation provided through
forgiveness of past costs and reduction of liability for future oversight costs should be included
in the enforcement confidential ten-point settlement analysis submitted to Headquarters. This
guidance is not intended to limit EPA's consideration of other settlement factors. The Regions
may elect to compromise a greater or lesser amount than that described herein, based upon other
factors they would consider in their routine settlement analyses, such as litigation or other risks
to reco very or performance, cooperation of the performing parties, and the resources of parties.
Orphan Share Assistance Team
We have established an orphan share assistance team with the Department of Justice to
assist Regions in implementation of this important reform. The team will be in contact with
Regional staff to resolve issues to ensure results.
For further information concerning this guidance, please contact either Susan Boushell
(202-564-5107) or Patricia Mott (202-564-5133) in the Office of Site Remediation Enforcement.
Purpose and Use of this Guidance
This guidance and any internal procedures adopted for its implementation are intended
exclusively as guidance for employees of the U.S. Environmental Protection Agency . This
guidance is not a rule and does not create any legal obligations. Whether and how EPA applies
the guidance to any particular site will depend on the facts at the site.
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share and its ability to pay; or (3) those parties, such as "de micromis" contributors, municipal
solid waste (MSW) contributors or certain lenders or residential homeowners, that EPA would
not ordinarily pursue for cleanup costs. See "Policy on CERCLA Enforcement Against Lenders
and Government Entities that Acquire Property Involuntarily" (Sept. 22,1995); "Policy Toward
Owners of Property Containing Contaminated Aquifers" (May 24, 1995); "Guidance on
CERCLA Settlements with De Micromis Waste Contributors," OSWER Directive No. 9834.17
(July 30,1993); "Policy Toward Owners of Residential Property" (July 3, 1991); "Interim Policy
on CERCLA Settlements Involving Municipalities and Municipal Wastes" (Dec. 6,1989).
A party may be considered to be "insolvent" if EPA determines that a party has no ability
to pay. A party may be considered to be "defunct" if: (1) the entity has ceased to exist or ceased
operations; and (2) the entity has fully dissipated its assets such that the party has no ability to
pay. For both the insolvent and the defunct determinations, EPA's investigation must indicate
that there is no successor or other affiliated party that is potentially liable.
Methods for Determining Appropriate Orphan Share Component of Federal Compromise
Compensation for the orphan share component of the federal compromise in settlement
may be provided through forgiveness of past costs and reduction of liability for future oversight
costs.3 At some sites, forgiveness of some portion of past costs already may have occurred in
conjunction with a prior settlement with PRPs at the site. In such cases, those past costs which
have been forgiven would not be available for use as compensation under this reform with
respect to the same PRPs.
To determine the appropriate orphan share component of the federal compromise at a
particular site, Regions should make a rough estimate of the size of the orphan share. At many
sites, an estimated range will be sufficient to determine whether the share which may be
equitably attributed to insolvent and defunct parties warrants federal compromise. Using total
site costs,4 Regions should estimate the orphan share based upon equitable factors, such as the
3 Although mixed funding might have been used as compensation under this reform,
EPA did not receive a separate appropriation for orphan share compensation and, therefore, any
mixed funding provided under this reform would have reduced the funds available for cleanups.
As a result, compensation under this reform does not include mixed funding. However, this
guidance is not intended to modify or alter EPA's enforcement discretion to enter into mixed
funding agreements under Section 122(b) of CERCLA, 42 U.S.C. § 9622(b).
4 "Total site costs" refer to outstanding past costs and future oversight costs at the site or
operable unit that is the subject of the ROD or NTC removal and projected ROD or NTC
removal costs.
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INTERIM GUIDANCE ON ORPHAN SHARE COMPENSATION FOR SETTLORS OF
REMEDIAL DESIGN/REMEDIAL ACTION AND NON-TIME CRITICAL REMOVALS
Policy Statement and Purpose
On October 2,1995, Administrator Browner announced the third in a series of reforms
designed to" fundamentally change the way EPA implements the Superfund program. Several of
these Superfund Reforms are intended to provide greater fairness, reduce litigation and
transaction costs, and promote private party cleanup of Superfund sites. One of the cornerstones
of the October announcement was the Agency's initiative to exercise its enforcement discretion
to provide orphan share compensation at sites where potentially responsible parties (PRPs) agree
to perform the cleanun.
The purpose of this interim guidance is to provide Regions with further direction for
providing orphan share compensation in settlements with PRPs. This guidance makes clear that,
where EP A determines that there is a share which may be equitably attributed to parties who are
insolvent or defunct (i.e..-the "oiphan share") and which would ordinarily be allocated to viable
PRPs under principles of joint and several liability, EPA intends to consider this factor in its
assessment of the federal compromise it provides in settlement.1 EPA anticipates that its
willingness to contribute to settlement, based in part upon an increased emphasis on the effect of
an oiphan share, will facilitate settlement with performing parties.
Of course, the Region's consideration of an "orphan share" is only one component of a
Region's settlement analysis. Consistent with our historic practice, the total amount of federal
compromise in settlement incorporates other factors in addition to the presence or kbsence of an
orphan share, including: (1) litigation or other risks to recovery or performance; (2) cooperation
of performing parties; and (3) the resources of parties. This guidance simply establishes limits
upon the amounts the Regions may provide as orphan share compensation in light of current
fiscal limitations. This policy preserves the application of common law tort principles of joint
and several liability by recognizing the impact of joint and several liability in the settlement
analysis factors where EPA determines that an orphan share at a given site may be greater than
de minimis.
1 This guidance is intended for settlement purposes only and, therefore, orphan share
compensation is appropriate only where settlement occurs. In the event that settlement does not
occur, Regions should, as appropriate, pursue PRPs jointly and severally for their performance of
cleanup and recovery of response costs. Courts have uniformly found that CERCLA liability is
joint and several where the harm is indivisible, which ensures that the costs of cleanup are borne
by the parties who contributed to the contamination, rather than the tax-paying public. This
guidance does not apply where EPA determines or a court finds that PRPs have met their
substantial burden of proving as a defense to joint and several liability that the harm is divisible
and reasonably capable of apportionment.
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INTERIM GUIDANCE ON ORPHAN SHARE COMPENSATION
FOR SETTLORS OF REMEDIAL DESIGN/ REMEDIAL ACTION AND
NON-TIME-CRITICAL REMOVALS
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
401 M Street, S.W.
Washington, D.C. 20460
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INTERIM GUIDANCE ON ORPHAN SHARE COMPENSATION FOR SETTLORS OF
REMEDIAL DESIGN/REMEDIAL ACTION AND NON-TIME CRITICAL REMOVALS
Policy Statement and Purpose
On October 2,1995, Administrator Browner announced the third in a series of reforms
designed to" fundamentally change the way EPA implements the Superfund program. Several of
these Superfund Reforms are intended to provide greater fairness, reduce litigation and
transaction costs, and promote private party cleanup of Superfimd sites. One of the cornerstones
of the October announcement was the Agency's initiative to exercise its enforcement discretion
to provide orphan share compensation at sites where potentially responsible parties (PRPs) agree
to perform the cleanup.
The purpose of this interim guidance is to provide Regions with further direction for
providing orphan share compensation in settlements with PRPs. This guidance makes clear that,
where EPA determines that there is a share which may be equitably attributed to parties who are
insolvent or defunct (i.e.. the "orphan share") and which would ordinarily be allocated to viable
PRPs under principles of joint and several liability, EPA intends to consider this factor in its
assessment of the federal compromise it provides in settlement.1 EPA anticipates that its
willingness to contribute to settlement, based in part upon an increased emphasis on the effect of
an orphan share, will facilitate settlement with performing parties.
Of course, the Region's consideration of an "orphan share" is only one component of a
Region's settlement analysis. Consistent with our historic practice, the total amount of federal
compromise in settlement incorporates other factors in addition to the presence or absence of an
orphan share, including: (1) litigation or other risks to recovery or performance; (2) cooperation
of performing parties; and (3) the resources of parties. This guidance simply establishes limits
upon the amounts the Regions may provide as orphan share compensation in light of current
fiscal limitations. This policy preserves the application of common law tort principles of joint
and several liability by recognising the impact of joint and several liability in the settlement
analysis factors where EPA determines that an orphan share at a given site may be greater than
de minimis.
1 This guidance is intended for settlement purposes only and, therefore, orphan share
compensation is appropriate only where settlement occurs. In the event that settlement does not
occur, Regions should, as appropriate, pursue PRPs jointly and severally for their performance of
cleanup and recovery of response costs. Courts have uniformly found that CERCLA liability is
joint and several where the harm is indivisible, which ensures that the costs of cleanup are borne
by the parties who contributed to the contamination, rather than the tax-paying public. This
guidance does not apply where EPA determines or a court finds that PRPs have met their
substantial burden of proving as a defense to joint and several liability that the harm is divisible
and reasonably capable of apportionment.
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United States
Environmental Protection Agency August 1996
Superfund Reform:
Orphan Share Implementation
ENFORCEMENT CONFIDENTIAL
TAB 9
Questions & Answers
A. BACKGROUND
1. What is the purpose of the Orphan Share Compensation Reform?
As part of the third series of Superfund Reforms introduced in October 1995, the orphan
share reform is intended to encourage PRPs to perform cleanup work and to facilitate
settlements with performing parties.
2. When does the reform/policy become effective?
In October 1995 EPA committed to compensating the orphan share at RD/RA sites. The
policy setting out guidelines for implementation is effective June 3, 1996.
a. Does the reform apply to settlement negotiations initiated prior to either the
announcement of the reform or the issuance of the guidance?
Yes, as long as there is not a final settlement and settlement negotiations would not be
jeopardized or unduly delayed. However, if an "agreement in principle" was
established at a site prior to issuance of the guidance in June 1996, the Region has
discretion on whether to implement the reform at that site.
3. Since this is only interim guidance, when is the final expected?
The guidance is entitled "interim" to give EPA the flexibility to modify the guidance as we
gain experience through implementing the reform. Although labeled "interim" it has the
same effect as "final" guidance. At a later date, we may modify the guidance to reflect
lessons learned and issue a final version of the guidance.
4. How does the orphan share reform affect the Region's ability to pursue parties under
principles of joint and several liability?
Common law tort principles of joint and several liability are not disturbed by this reform.
CERCLA remains a statute that provides for joint and several liability unless there is
sufficient proof of divisibility of harm and a reasonable basis of apportionment.
SEPA
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For limited settlement purposes, however, the Regions will consider the "orphan share" as
one component of their settlement analysis, along with traditional factors such as litigation
risks, cooperation of performing parties and resources of parties.
a. How does the reform affect the Region's treatment of nonsettlors?
If settlement does not occur, the Regions should pursue non-settling parties jointly and
severally for cleanup work and recovery of response costs. Again, the orphan share
component of the federal compromise is only available through EPA's enforcement
discretion during settlement negotiations and in accordance with the orphan share
guidance.
5. What if the Region or a court determines that parties have met their burden of proving
that the harm is divisible and reasonably capable of apportionment?
The orphan share reform is not intended to disturb a party's divisibility of harm defense to
joint and several liability. The orphan share reform by its terms would not apply because
the party would not be assuming the orphan share since its share has been apportioned.
6. Is mixed funding available to implement the reform?
The reform does not provide for mixed funding nor does it disturb the Agency's
enforcement discretion to enter into mixed funding agreements. See footnote 3, page 3, of
the Guidance.
B. ELIGIBILITY
1. What sites are eligible for orphan share compensation?
Generally, the orphan share reform applies to all sites where parties are signing up for
future cleanup settlements. The site must satisfy the following criteria:
1) there will be or there are ongoing negotiations for a remedial design and/or
remedial action QE for a non-time-critical (NTC) removal at a NPL site under
SACM;
2) PRP or group ofPRPs agree to do the work being negotiated pursuant to a consent
decree or administrative order on consent; AND
3) an orphan share exists at the site.
2. Can I apply orphan share reform to benefit parties in my cost recovery case?
No, the reform does not apply to CERCLA §107 cost recovery cases where parties are not
agreeing to perform RD/RA work or a non-time critical removal at a NPL site.
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3. Since the guidance applies at non-time-critical removals at NPL sites, does this mean
we can't apply it to time-critical removals or non-NPL sites?
The guidance is intended to encourage PRPs to perform cleanup work. The most
appropriate sites-for applying the reform are RD/RA and non-time-critical removals at NPL
sites. However, the Region may determine that it is also appropriate, in light of timing,
resources and other factors, to apply the reform to time-critical removals or removals at non-
NPL sites: This probably would happen in only limited circumstances due to the urgency
of removals.
4. What sites are NOT eligible for orphan share compensation?
The following type of sites are excluded from the benefits of the reform:
1) Federal facilities.
2) Sites where every PRP is liable as current or former owners and/or operators (i.e.,
chain-of-title sites where the only PRPs identified by the Region are owners or
operators and no generators or transporters are PRPs).
3) Sites where work has been completed or subject of settlement negotiations is for past
costs only.
a. Why are owner/operator-only sites (or, chain-of-title sites) excluded from the
reform?
Consistent with legislative reauthorization proposals and to ensure fairness in the
allocation of limited Trust Fund monies, the Agency will not extend the orphan share
reform to those sites where the only identified PRPs are either owners or operators.
Some of the reasons for this exclusion are: 1) current owners benefit financially from
cleanup activities at their site; 2) owners have a duty to inspect property before
purchasing it; 3) owners and operators typically have control over the release of waste
on site.
b. What if an owner/operator was also a generator?
Consistent with the Senate's Superfund Reform Act of 1994 (S. 1834), owner/operator-
only sites are excluded notwithstanding any other basis for liability. In other words,
even if an operator may be liable also as a generator at the site, its generator liability
would not make the site eligible for orphan share compensation.
c. If the only generators at the site are "Aceto" generators, and the only other PRPs
are owner/operators, is the site eligible for orphan share compensation?
Yes, Aceto generators are not necessarily excluded from the orphan share reform
because of their similarities to owner/operator liability. Although generators held liable
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under an "Aceto" theory may have had ownership and some control of wastes generated
from formulating or manufacturing processes at the site, they are held liable under an
"arranger" theory because of their control of the process. See, United States v. Aceto
Agricultural Chem. Corp.. 872 F2d 1373 (8th Cir. 1989) (pesticide manufacturer held
liable as an-arranger when it contracted with pesticide formulator to process
manufacuter's raw material into commercial product; it retained ownership of pesticide
throughout process; and, generation of wastes was inherent in process.)
d. Does this mean that sites that have one or more owner/operators are excluded,
even if there are generators at the site?
No, the exclusion applies only to "pure" owner/operator sites. The presence of a single
PRP whose liability is based on a generator or transporter theory means that the orphan
share reform can apply at the site, even to the benefit of owner PRPs.
5. Are Federal PRPs at a privately owned site eligible for orphan share compensation?
Yes. Federal PRPs are treated the same as private parties at a site for purposes of the orphan
share reform. The Region should offer orphan share compensation to the Federal PRPs as
they would the private parties. This is consistent with analogous liability provisions in
current reauthorization proposals in which Federal PRPs are subject to and entitled to the
benefits of the allocation process. Also, Federal PRPs may receive such compensation even
if federal parties are the only generators or transporters at the site.
6. What if the subject of negotiations is only the remedial action and not the remedial
design?
Orphan share compensation is available wherever future work is being negotiated — whether
the negotiations are for remedial design cr remedial action. But remember, if the subject of
the negotiations is limited to the remedial action, the calculation for determining the
appropriate amount for orphan share compensation must be limited to the EPA's
unreimbursed past costs and future oversight costs; it cannot include the PRP past costs for
work performed at the site (e.g., PRP costs for performing remedial design). Similarly,
when Regions calculate 25% of the ROD costs, they should only use the estimated RA
costs. It should be noted that if, pursuant to the RD, RA costs have increased, Regions may
use that increased number.
7. Can PRPs who are doing work under UAO convert to a consent decree in order to
benefit from orphan share compensation? .
No. PRPs who had the opportunity to agree to perform work cannot renegotiate and obtain
the benefits of the orphan share reform. However, in very limited circumstances, the
Regions may consider offering orphan share compensation where substantial benefit accrues
to the Agency and fairness dictates application of the reform. For example, it may be
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appropriate to apply the reform where the Region issued a UAO to move critical work
forward with the assurance that a CD would be negotiated later.
8. If the Region has filed cost recovery litigation against PRPs based on the statute of
limitations, can the parties benefit from orphan share compensation?
Provided that work remains to be done and RD/RA negotiations have been initiated, the
Region may provide the benefit of orphan share compensation to parties agreeing to perform
the work under a CD. However, the reform is not available at sites where we are only
seeking to recover past costs.
9. Does the reform apply to state-lead sites subject to cooperative agreements?
No. Only the federal government has committed to provide orphan share compensation.
However, when the state-lead site returns to federal lead (usually at the remedial phase) the
site may be eligible for oiphan share compensation, if it satisfies the criteria.
10. Can I give de minimis parties the benefit of orphan share compensation?
De minimis parties may receive the benefit of orphan share compensation where they
participate in a global or concurrent settlement under which other parties have agreed to
perform the remedy at the site or where the de minimis party agrees to do work under the
consent decree being negotiated. If the de minimis parties are cashing-out in a separate
settlement, which is neither global or concurrent, orphan share compensation will not be
available to them.
11. Does the reform apply where the subject of the consent decree consists only of an
agreement to perform operations and maintenance (O&M)?
Yes, the reform applies to settlements in which the PRPs agree to perform only the
operations and maintenance at the site.
C. DETERMINING ORPHAN SHARE
1. What is an "orphan share"?
The orphan share is that share of responsibility for response costs specifically attributable to
identified parties determined the Agency to be:
1) potentially liable;
2) insolvent or defunct; AND
3) unaffiliated with any party potentially liable for response costs at the site.
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2. Does the orphan share include "deltas" - the difference between a party's ability to
pay and their equitable share?
No. The orphan share in this reform does NOT include shares associated with :
1) uriattributable wastes;
2) the difference between a party's actual share and its ability-to-pay share; QR
3) de micromis, MSW and other contributors typically not pursued by the
Agency.
3. When is a party "insolvent"? When is a party "defunct"?.
A party is insolvent when it has "no-ability-to-pay". A party is defunct if the entity ceased
to exist or ceased operations and the entity has fully dissipated its assets such that the party
has "no-ability-to-pay". A PRP which has a successor or other affiliated party with potential
liability cannot be considered to be an insolvent or defunct party.
a. How does the Region determine whether a party has "no-ability-to-pay"?
To determine whether a party has "no-ability-to-pay", the Region should evaluate the
party's financial status. In general, if a party cannot make any payment at a site without
extreme financial hardship, the party would be considered to have "no-ability-to-pay"
(provided a viable affiliate has not been identified). For example, if the Region's
evaluation indicates that a party could pay $100 toward a $1 million claim, the Region
could determine that the party has "no-ability-to-pay" and is an orphan party. However,
if a party could pay $250,000 out of a $1 million claim, the Region could determine that
the party has a "limited ability to pay" and therefore not an orphan party. For further
assistance in making "no-ability-to-pay" determinations, consult the Headquarters
contacts and/or the document, "Overview of the Process for Providing Orphan Share
Compensation," located in the Orphan Share Implementation Notebook at Tab 3.
b. What is an "affiliated party"?
The guidance provides that an insolvent or defunct party affiliated with a potentially
liable and financially viable party cannot be an "orphan" party at the site for purposes
of applying the reform. An affiliated party can include a successor corporation, a parent
corporation, a subsidiary corporation or an individual (e.g., officers, directors,
shareholders, employees). If the affiliate is liable for the "no-ability-to-pay" party's
share under a credible legal theory, the "no-ability-to-pay" party should not be
considered an orphan party.
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4. Does the Region have to perform an ability-to-pay analysis for each party?
No, but an inquiry into the party's financial status is necessary to determine whether the
party is insolvent or defunct. The degree of inquiry for each party depends on the available
information and the specific circumstances of the case. In one case, a party may be
identified as an 'orphan' based upon a review of the party's tax returns while in another case
the expertise of a financial analyst may be appropriate. (See Tab 3 of the Orphan Share
Implementation Notebook, "Overview of the Process for Providing Orphan Share
Compensation.")
5. Should a party be considered an orphan if it has insurance proceeds?
The Region should consider whether funds from sources such as insurance recoveries,
indemnification agreements, contribution actions, and increases in property values resulting
from clean up activities will be available to the party being analyzed. If these funds are
significant and likely to be recovered, they should be considered in determining whether the ¦
party is an 'orphan.' This is consistent with the Agency's ability to pay analysis policy.
6. Should the Gore Factors be considered when estimating the orphan share?
The Gore Factors are usually relied upon by courts in making equitable allocations in
contribution actions and may be helpful to the Region when estimating the equitable share
of the orphan party.
D. CALCULATING ORPHAN SHARE COMPENSATION
1. How should the Region calculate the amount of orphan share compensation to offer?
The guidance provides a presumption that the Region will offer the maximum amount
appropriate for the orphan share component of the federal compromise. The maximum
amount appropriate is the lower of the following dollar figures:
1) Orphan share % of total site costs (total site costs include all unreimbursed past
costs incurred by EPA; ROD costs or NTC removal costs; and projected future
oversight costs);
2) 25% of future ROD costs or removal costs (for the phase being negotiated);
3) EPA's total unreimbursed past costs (not PRP past costs) plus, future oversight
costs.
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2. Why is there a 25% cap on the ROD costs?
Because Congress has not reauthorized Superfund or reinstated the Superfund taxing
authority and has not provided the Agency with a separate appropriation for orphan share
compensation, the Trust Fund will be depleted by costs expended to implement the program
and achieve cleanups. Given these circumstances, EPA believes that establishing a
limitation at every site would strike the appropriate balance between providing meaningful
implementation of this reform and preserving the Trust Fund.
3. If some of the past costs have already been the subject of a prior settlement, should
these costs be used in calculating the maximum available compensation?
It depends on whether the parties to the prior settlement are the same parties to the current
settlement negotiations and whether EPA compromised those past costs in the prior
settlement.
a. If the parties to the prior settlement are the same parties to the current settlement
negotiations —
and some portion of the past costs were forgiven in the prior settlement (i.e., EPA
compromised the costs in the prior settlement), the forgiven costs (and any reimbursed
past costs) should not be used in calculating the appropriate orphan share compensation.
In other words, the costs already forgiven by the Agency and the monies already
collected by the Agency are off the table for purposes of the current settlements
negotiations.
b. If the parties to the prior settlement are different from the parties to the current
settlement negotiations —
and some portion of the past costs were forgiven in the prior settlement, the Region
may decide to include those forgiven past costs in the current settlement negotiations.
The reason that these unreimbursed costs may be included in the calculation of orphan
share compensation here and not in the above scenario is because, consistent with joint
and several liability, these new parties are still liable for the costs not reimbursed by the
other parties. The Agency had not forgiven past costs with respect to this new set of
parties.
4. Is the Region required to offer the maximum amount appropriate for the orphan share
compensation?
There is a presumption that Regions will offer the maximum amount available for orphan
share compensation. In limited circumstances, equitable considerations may justify offering
less than the maximum. The Region must provide an analysis of its decision to offer less
than the maximum amount in the ten-point analysis.
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5. What "equitable factors'* may the Regions consider when calculating the appropriate
amount of orphan share compensation?
The guidance describes three factors to consider when calculating the appropriate amount of
orphan share compensation:
(1) PRP fairness to other PRPs, including small businesses, MSW parties, small
volume waste contributors and certain lenders and homeowners;
(2) PRP cooperation; and
(3) size of the orphan share.
Regions should give greater consideration to these factors when activities encompassed by
the factors occur after issuance of this guidance.
6. How should the orphan share compensation be calculated when the Region is
negotiating with parties to perform less than the entire Operable Unit (OU)?
The benefit of orphan share compensation is based on the work to be performed, so the
Regions should use the estimated costs of only the portion of the OU to be performed (e.g., a
geographical unit may be the appropriate subject of negotiations).
7. How do you deal with using past costs for compensation at sites where there are
multiple OUs?
The basic rule of thumb is that orphan share compensation is available to offset whatever
costs the Region is negotiating (i.e.. "what's on the table"). Where the same PRPs are
liable for each OU at a site, but the Region is only negotiating one of the OUs, the Region
has discretion to agree to recover past costs from other OUs (and provide compensation by
forgiving such past costs) or to determine that such past costs should be recovered separately
when EPA negotiates a settlement with the PRPs for the work at that OU. Where different
sets (or overlapping sets) of PRPs are responsible for the multiple OUs, such settlements
will be so difficult to negotiate that Regions are encouraged to keep costs associated with
each OU separate. (See Question D.3. with regard to prior settlements with PRPs for work
at site.)
8. I have a municipality that sent municipal solid waste (MSW) to my site. The guidance
says that an MSW party cannot be an orphan party. When I allocate shares between
the generators at my site, do I include the volume of the MSW waste sent to the site?
«
No. MSW volumes are not considered in calculating the generator shares because EPA
generally does not pursue parties who contributed MSW to a site. (See, "Interim Policy on
CERCLA Settlements Involving Municipalities and Municipal Wastes," (Dec. 6, 1989).
This is also consistent with the guidance on preparing waste-in lists which states that
Regions should not include volumes attributable to parties whose contribution is solely
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MSW. (See, "Final Guidance on Preparing Waste-in Lists and Volumetric Rankings for
Release to Potentially Responsible Parties (PRPs) under CERCLA," OSWER Directive No.
9835.16 (Feb. 22,1991). Thus, only the wastes of those parties who we would ordinarily
pursue should be included in the total volume of wastes for purposes of allocating equitable
shares amongthe generators.
E. IMPLEMENTATION
1. Should the Region notify all parties about the site's eligibility for orphan share
compensation?
Yes. If negotiations are forthcoming, Regions should indicate in the special notice letter that
the site is eligible for orphan share compensation. If the special notice letter is waived or if
negotiations are ongoing, Regions should send out a letter to PRPs indicating the same.
a. Should the maximum amount appropriate for orphan share compensation be
included in the notice letter?
Whether to inform the PRPs about the specific maximum amount available for orphan
share is left to regional discretion; however, if the Region informs parties of the amount
available, PRPs may haive greater incentive to negotiate. Additionally, EPA will be in a
better position to take credit for an offer of orphan share.
2. Is HQ pre-approval required for every settlement with orphan share compensation?
No. While HQ is available for consultation and assistance at every site, HQ pre-approval is
required only for any settlement offer where the projected ROD remedy or NTC removal
cost exceeds $30 million.
a. When pre-approval is required, how is it obtained?
Regional staff should contact their HQ contact, either orally or in writing, prior to
making the formal offer. HQ will evaluate the proposed offer, considering site-specific
data, state concerns and national priorities.
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3.
Does the Region have to distinguish between OS compensation and litigation risks
when it makes an offer to PRPs? Can't Region just distinguish in ten-point analysis
for HQ use?
Although it is not mandatory that the Region expressly disclose to the settlors what portion
of the federal compromise is actually attributable to the orphan share reform, it is strongly
encouraged. It is important to communicate to the PRPs that the orphan share compensation
offered during setdement is one way in which the Agency is reforming the Superfund
program.
4. How should the orphan share compensation be documented in the ten-point settlement
documents?
The Region should provide an analysis supporting the orphan share party determination and
the orphan share component of the federal compromise in the ten-point settlement
document.
11
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
AUG 2 6 1996
OFFICE OF
ENFORCEMENT AND
COMPLIANCE ASSURANCE
MEMORANDUM
SUBJECT: Orphan Share Reform'
FROM: Barry Breen, Director
Office of Site Remedia
TO:
Program and ORC Branch Chiefs
In October 1995, Administrator Browner announced an initiative to compensate parties
performing work at sites for the shares of insolvent and defunct parties. At sites where parties
agree to perform cleanup (either remedial action under a consent decree, or non-time critical
removal activity under an agreement on consent), the Agency has committed to compensate a
portion of the shares of insolvent and defunct parties. Administrator Browner has committed the
Agency to offering up to $50 million in such compensation by the end of the fiscal year.
In order to facilitate Regional implementation of the orphan share reform, please find
enclosed a notebook which brings together in one convenient reference, many of the documents
needed to implement this reform. The notebook provides background materials, sample
documents and informational documents . We are continuing to develop guidances or
documents to assist you. A note to this effect (a placeholder) has been inserted, so that when the
item is finalized, it can be sent to you for your insertion into this package. Finally, any sample
documents included in the notebook are not meant to be mandatory "models," but rather are
meant to assist in expediting orphan share offers and settlements.
Regions have raised questions regarding the implementation of the orphan share
initiative. We have developed a Questions & Answers section found at Tab 9. For example,
questions have been raised regarding the application of the reform to de minimis parties. In
answer, the final guidance will cla^fy that Regions may provide orphan share compensation to
de minimis parties who enter into a global or concurrent settlement under which other parties
have agreed to perform the remedy at the site. We encourage Regions to include de minimis
parties, where appropriate, in the orphan share reform.
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2
We would greatly appreciate your making this notebook available in a central location for
the convenience of your staff. In addition, RSD's orphan share team is ready to lend expertise
and assistance at any step. One of the attachments (Tab 2) discusses in detail the set-up and role
of the team, but for your convenience, we note here the contact for your Region, as well as DOJ
designated contacts for your Region:
EPA Contact
DOJ Contact
Region 1: Maria Cintron, (202) 564-4227
Region 2: Maria Cintron, (202) 564-4227
Region 3: Kimberly Barr, (202) 564-4212
Region 4: Melissa Ward, (202) 564-4282
Region 5: Victoria van Roden, (202) 564-4268
Region 6: Kimberly Barr, (202) 564-4212
Region 7: Victoria van Roden, (202) 564-4268
Region 8: Melissa Ward, (202) 564-4282
Region 9: David Clay, (202) 564-4228
Region 10: David Clay, (202) 564-4228
Henry Friedman, (202) 514-5268
Henry Friedman, (202) 514-5268
Lynn Dodge, (202) 514-4485
Henry Friedman, (202) 514-5268
Lynn Dodge, (202) 514-4485
Mike McNulty, (202) 514-1210
Mike McNulty, (202) 514-1210
Lynn Dodge, (202) 514-4485
Henry Friedman, (202) 514-5268
Mike McNulty, (202) 514-1210
If you have any questions 1) generally about implementation, please call Patricia Mott, at
(202) 564-5133; 2) about the guidance, please call Susan Boushell, at (202) 564-5107 or Patricia
Mott at (202) 564-5133; or 3) about allocation issues, please call Deniz Ergener, at (202) 564-
4233.
If you have any questions regarding this package, regarding the reform generally, or
regarding site-specific issues, please contact us.
cc: Bruce Gelber
BickyCorman
Linda Boornazian
Orphan Share Workgroup Members
Steve Luftig
Earl Salo
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SEPA
United States
Environmental Protection Agency August 1996
Superfund Reform:
Orphan Share Implementation
NOTEBOOK TABLE OF CONTENTS
Tab 1: -Guidance and Background Materials:
Tab 1-1: "Interim Guidance on Orphan Share Compensation for Settlors of Remedial
Design/Remedial Action and Non-Time-Critical Removals"
Tab 1-2: Orphan Share Compensation Short Sheet — lays out principles of the guidance
Tab 1-3: Letter from Department of Justice concurring in guidance
Tab 2: Memo "Availability of Headquarters Contacts to Assist Regions in Implementing
the Orphan Share Reform" - outlines set-up of HQ's Orphan Share Assistance Team and
assistance available from HQ
Tab 3: Overview of the Process for Providing Orphan Share Compensation — lays out, step
by step, the process for providing orphan share compensation and provides hypothetical
illustrating die process
Tab 4: Making Insolvent and Defunct Determinations
Tab 4-1) Placeholder for Ability to Pay Guidance to be issued soon
Tab 4-2) List of Financial Analysts and Ability to Pay Contacts for Superfund Cases
Tab 4-3) Instructions for Requesting Financial Analysis Contract Support
Tab 4-4) Training Agenda: Financial Analysis/Financial Information and Ability to Pay,
Dallas, Texas on August 27,1996 (NEIC Contact: Gene Lubieniecki (303)
236-5111, ext. 539)
Tab 5: Allocations
Tab 5-1) Developing Allocations Among Potentially Responsible Parties for the Costs
of Superfund Site Cleanups
Tab 5-2) Article "Information Gathering Approaches in the Allocation Process"
Tab 5-3) Article "Court Opinions on Allocations Factors"
Tab 5-4) Chart of Judicial Opinions on Allocations
Tab 5-5) Citations to copyrighted trade press articles
Tab 5-6) Final Guidance on Preparing Waste-in Lists and Volumetric Rankings for
Release to Potentially Responsible Parties (PRPs) Under CERCLA (2/22/91)
-OVER-
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Notice to PRPS (Suggested Sample Notice Letters)
Tab 6-1) Revision to special notice — suggested language to insert in special notice to
PRPs at sites where reform is applicable
Tab 6-2) Sample letter — suggested language for a letter notifying PRPs at ongoing
negotiations or where special notice already issued to give notice to PRPs that
reform may be applicable
Pre-Approval Procedures ~ how to obtain pre-approval from HQ at sites where remedy
exceeds $30 million
Settlement Documents
Tab 8-1: Model RD/RA language (oversight billing) [placeholder]
Tab 8-2: Sample Ten Point Settlement language
Questions and Answers
Guidances Referenced in Orphan Share Guidance
Tab 10-1 Revised Guidance on CERCLA Settlements with De Micromis Waste
Contributors (6/3/96)
Tab 10-2 Policy on CERCLA Enforcement Against Lenders and Government Entities
that Acquire Property Involuntarily (9/22/95)
Tab 10-3 Final Policy Toward Owners of Property Containing Contaminated Aquifers
(5/24/95)
Tab 10-4 Policy Towards Owners of Residential Property at Superfund Sites (7/3/91)
Tab 10-5 Interim Policy on CERCLA Settlements Involving Municipalities and
Municipal Wastes (12/6/89)
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.G. 20460
June 3, 1996
OFFICE OF
ENFORCEMENT AND
COMPLIANCE ASSURANCE
MEMORANDUM
SUBJECT:
FROM:
TO: Regional Administrators, I-X
This memorandum transmits the "Interim Guidance on Orphan Share Compensation for
Settlors of Remedial Design/Remedial Action and Non-Time-Critical Removals." This guidance
provides Regions with further direction to address orphan share compensation in Superfund
settlements.
On October 2, 1995, Administrator Browner announced the third in a series of reforms
designed to fundamentally change the way EPA implements the Superfund program. This
orphan share guidance is the latest installment in the Clinton Administration's commitment to
reform Superfund and provide greater fairness, reduce litigation and promote faster cleanup of
Superfund sites. One of the cornerstones of the October announcement is the Agency's initiative
to exercise its enforcement discretion to provide orphan share compensation at sites where parties
agree to perform the cleanup.
This guidance strikes a balance between the budgetary constraints of a lapse in Superfund
taxing authority and the desire to provide meaningful reform consistent with the
Administration's legislative proposals. In fiscal year 1996 alone, the Administration is prepared
to offer over $50 million in orphan share compensation to potential settlement parties.
For further information concerning this guidance, please contact either Susan Boushell
(202-564-5107) or Patricia Mott (202-564-5133) in the Office of Site Remediation Enforcement.
Attachment
*1 PRO^
Interim Guidance on Orphan Share Compensation for Settlors of
Remedial Design/Remedial Action and Non-Time-Criticai Removals
Steven A. Herman, Assistant Administrator
Office of Enforcement and Compliance Assurance
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cc: Elliott Laws, Assistant Administrator for Solid Waste and Emergency Response
Lois Schiffer, Assistant Attorney General, DOJ
Jerry Clifford, Director, Office of Site Remediation Enforcement
Steve Luftig, Director, Office of Emergency and Remedial Response
Director, Office of Site Remediation and Restoration, Region I
Director, Emergency and Remedial Response Division, Region II
Director, Hazardous Waste Management Division, Regions III, IX
Director, Waste Management Division, Region IV
Director, Superflmd Division, Regions V, VI, VII
Assistant Regional Administrator, Office of Ecosystems Protection and
Remediation, Region VIII
Director, Environmental Cleanup Office, Region X
Regional Counsel, Regions I-X
Larry Starfield, Associate General Counsel, OGC
John Cruden, Deputy Assistant Attorney General, DOJ
Joel Gtoss, Chief, Environmental Enforcement Section, DOJ
Bruce Gelber, Principal Deputy Chief, Environmental Enforcement Section, DOJ
2
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V
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SEPA
United States
Environmental Protection Agency August 1996
Superfund Reform:
Orphan Share Implementation
ORPHAN SHARE COMPENSATION SHORT SHEET
At sites where 'there is an orphan share component, compensation should be made to those PRPs
that are willing to perform the cleanup of the site. Compensation can only be made in settlements —
either the remedial RD/RA CD or non-time-critical removal AOC/CD.
Definition of Orphan Share: Share specifically attributable to parties that are 1) potentially liable; 2)
insolvent or defunct; and 3) unaffiliated with any party potentially liable for response costs at the site.
Goal: For the Agency to OFFER $50M in compensation by September 30,1996. Do not necessarily
need to complete settlement by end of this fiscal year.
To Determine the Maximum Compensation. Calculate the Following;
a. Orphan share % of total site costs - total site costs include: 1) all unreimbursed past
costs; 2) ROD costs***or removal costs and 3) future oversight costs for O.U./removal
being negotiated;
b. 25% of ROD costs*** or removal costs - this would be a cap applied to the costs of
the remedy or removal being negotiated; or
c. EPA's total unreimbursed past costs plus future oversight cost - again, specific to
the remedy or removal being negotiated.
>Maximum Compensation Equals the LOWEST Calculated Amount Listed in Either a., b. or c.
NOTE: The guidance presumes that Regions will offer the "maximum" compensation. However,
in limited circumstances, Regions may use their discretion based on "equitable factors" (pg. 4 of
guidance) to compensate less than the maximum amount.
Exclusion: Orphan share compensation is not available at owner/operator only sites. Specifically,
there must be an outside generators) or transporters) involved at the site. This exclusion is consistent
with the SRA language (see Senate BilJ § 129(a)(4)(c)). Federal facilities are also excluded from the
reform.
Pre-Approval: Only need HQ approval if the ROD*** or removal costs are over $30M. This can be
done either orally or in writing. Please call your HQ contact if you need this approval.
*** ROD costs = estimated costs associated with that particular O.U. being negotiated.
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U. S. Department of Justice
Environment and Natural Resources Division
Ottlce uf the Assistant Attorney General Washington. D.C. 20SSO
June 17, 1996
Steven Herman, Esq.
Assistant Administrator
Office of Enforcement and Compliance Assurance
U.S. Environmental Protection Agency
1200 Pennsylvania Ave., N.W., Room 3202
Mail Code 2201-A
Washington, D.C. 20044
Dear Steve:
Congratulations on issuing the "Interim Guidance on Orphan
Share Compensation for Settlors of Remedial Design/Remedial
Action arid Non-Time-Critical Removals" (June 3, 1996). This
interim guidance instructs EPA's Regions to provide compensation,
through forgiveness of past costs and future oversight claims,
where EPA determines that a share of responsibility at a
Superfund site may be equitably attributable to parties that are
insolvent or defunct, and where PRPs agree to perform remedial or
non-time-critical removal actions. The Department fully supports
this policy because it will help achieve prompt settlements and
promote fairness in the Superfund system.
Joint and sevieral liability continues to be an essential
part of the Superfund liability system. Use of mixed funding,
such as provided expressly in the Orphan Share policy through the
compromise of past and future oversight costs, helps make
implementation of the joint and several liability system fairer
when parties agree to settle with the United States.
The Department recognizes that, in light of the expiration
of the Superfund taxing authority last December and EPA's
resulting concern about funding cleanups in later years, it is
reasonable to specify some limitations on funding in this interim
guidance at this time.*
I have assigned several contact attorneys in the
Environmental Enforcement Section to assist EPA's Orphan Share
Assistance Team with application of this interim guidance in
settlement negotiations. "I look forward to continuing to work
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together to resolve cases quickly and fairly under the Superfund
program. Please call me or my staff at any time if we can be of
additional assistance.
Sincerely,
2JA
Lois J. Schiffer
Assistant Attorney General
Environment & Natural Resources
Division
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i S ri
W
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
APR 3 0 1996
OFFICE OF
ENFORCEMENT AND
COMPLIANCE ASSURANCE
MEMORANDUM
SUBJECT: Availability of Headquarters Contacts to Assist Regions in Implementing the
Orphan Share Refor
FROM: Charles E. Breece '7'7
Acting Division Director
Regional Support Division
TO: Superfund Branch Chiefs
As you know, the Administrator announced on October 2, 1995 that we would seek to
compensate performing parties for a limited portion of the known shares attributable to orphan
parties (defined as insolvent or defunct) in future cleanup negotiations. This reform is not a pilot
— it is a change in the program and one which will assist us in demonstrating our continued
efforts to recognize and address fairness issues.
The Agency must keep the commitment announced by Administrator Browner to offer
oxphan share compensation at the remainder of sites scheduled for negotiations this fiscal year.
This means we must use every effort to fulfill this commitment and, at appropriate sites, provide
some measure of fairness through compensation of a portion of orphan share. The reform must
be implemented at every RD/RA site at which some portion of liability is attributable to
insolvent or defunct parties. It is not an optional settlement tool, although we anticipate that
providing some recognition of this orphan share may encourage settlors to agree to perform
work.
In order to fully ensure that the orphan share reform is being implemented appropriately,
the Office of Site Remediation has established a team that is charged with working toward
implementing the orphan share reform at appropriate sites. This team consists of Regional
Support Division staff.' The mission of the team is to help you and your staffs to implement the
DOJ has indicated willingness to designate staffers'for this effort.
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2
orphan share reform in your Region, so that, by October, the Agency will have offered - and
have provided, where possible - compensation at every site scheduled for RD/RA negotiations.
The first goal of the team has been to develop information on sites in the RD/RA
"pipeline" this fiscal year which may have orphan parties. As you know, we have already started
calling you and your staffs and have developed a list that reflects this universe of sites and
background information regarding each site. Please find attached a list of sites developed
through these calls. (You will find attached only those sites listed for your Region because of
concern over giving wide circulation to potential enforcement sensitive information.)
The second primary goal of the team is to assist you in assessing the applicability of the
reform at particular sites and determining the appropriate orphan share to compensate. The team
will accumulate information and expertise from working with each Region to better assist you in
individual cases.
To assist you, this team has designated a member responsible for specifically addressing
the orphan share issues raised by each Region.2 The designated team contact will be available to
any staff in your Region calling with questions on orphan share. The team contact will also be
calling Regional staffers assigned to sites to gather information and offer assistance. The team
contact will also handle any pre-approval requirements required by the draft or final guidance.
However, the RSD staffer assigned to all other aspects of the case is still responsible for issues
other than orphan share compensation. For example, if a settlement package reaches
Headquarters, it will be routed to the RSD staff assignee to the case. The team contacts for
orphan share reform issues are as follows:
Region 1: Maria Cintron, (202) 564-4227
Region 2: Maria Cintron, (202) 564-4227
Region 3: Kimberly Barr, (202) 564-4212
Region 4: Melissa Ward, (202) 564-4282
Region 5: Victoria van Roden, (202) 564-4268
Region 6: Kimberly BarT, (202) 564-4212
Region 7: Victoria van Roden, (202) 564-4268
Region 8: Melissa Ward, (202) 564-4282
Region 9: David Clay, (202) 564-4228
Region 10: David Clay, (202) 564-4228
2 Regional staffers need not contact the RSD staffer assigned to the case if different from the
RSD orphan share team member. Team members are responsible for coordinating with the RSD staffer
assigned to a case.
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3
For all Regions, the back-up member is Patricia Mott, (202) 564-5133.3 Additionally, if you
have questions regarding only the guidance, you may call Susan Boushell, (202)564-5107 or
Patricia Mott, (202) 564-5133. For allocations issues generally, you may call Deniz Ergener,
(202) 564-4233.
Additionally, each Region has designated the following staffers to participate on a
workgroup drafting the orphan share guidance and resolving issues:
Region 1: Ruthann Sherman
Region 2: Paul Simon
Region 3: Kathy Hodgkiss, Joe Donovan
Region 4: Rick Leahy, Paul Schwartz
Region 5: Liz Murphy, Cynthia Kawakami
Region 6: Anne Foster, Carl Bolden, Pam Travis
Region 7: Cheryle Micinski
Region 8: Maureen O'Reilly, Matt Cohn
Region 9: Lois Green, Matt Strassburg
Region 10: Elizabeth McKenna, Ted Yackulic
Finally, the team will be taking on the role of pulling together information on this reform
for reporting purposes (providing input to semi-annual reports, testimony, speeches, etc.). We
believe that this will take a burden off your staffs and count on your support (and patience) as we
monitor these cases.
If you have any questions regarding this memorandum or the role of this team, please
contact Patricia Mott at (202) 564-5133.
cc: Orphan Share Workgroup (see addressees above)
Jerry Clifford
Linda Boornazian
Steve Luftig
Bruce Gelber, DOJ
3 Should you have an emergency situation, and neither the team member nor the backup is
available, you may, of course, call any team member, or the Team's Advisor, Nancy Browne, (202) 564-
4219.
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IBBtefigv-.
August 1996
, Superfund Refo
inmERI
. .'i1,
'
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vvEPA
United States
Environmental Protection Agency August 1996
Superfund Reform:
Orphan Share Implementation
Enforcement Confidential
TAB 3
OVERVIEW OF THE PROCESS FOR PROVIDING ORPHAN SHARE
COMPENSATION
Step #1: Is It An Appropriate Site?
• Is the Region negotiating or will the Region negotiate with parties to perform
RD/RA or a non-time critical removal at an NPL site?
• Are there parties who are insolvent or defunct and, therefore, unable to pay their
share ("orphan share")?
Step #2: Are There Parties Eligible for Orphan Share?
• Who is not an "orphan" party?
Parties who in the Agency's enforcement discretion are not liable parties:
(1) de micromis contributors
(2) municipal solid waste contributors
(3) lenders
(4) residential homeowners
• Definitions
(1) A party is insolvent if:
(a) it has no ability to pay; and
(b) EPA's investigation indicates there is no successor or other viable
affiliated party that is potentially liable.
(2) A party is defunct if:
(a) the entitjihas ceased to exist or ceased operations;
(b) the entity has fully dissipated its assets such that the party has no
ability to pay; and
(c) EPA's investigation indicates there is no successor or other viable
affiliated party that is potentially liable.
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(3) Determining if a party is affiliated:
An affiliated party can include a successor corporation, a parent corporation, a
subsidiary corporation or a corporate individual (e.g., officers, directors,
shareholders, employees). If that affiliate is potentially liable under CERCLA,
then the share attributable to the insolvent and defunct party cannot be counted as
part of the orphan share. In other words, where an insolvent or defunct party is
affiliated with another party which is viable, and EPA would hold both liable,
then the insolvent or defunct party can't be an "orphan party" because of the
relationship.
Step #3: Determining whether parties are insolvent or defunct
• Level of analysis required determined on case by case basis
Regions have the flexibility to determine the appropriate level of information gathering
and analysis necessary to determine if a party is insolvent or defunct. In many situations,
there will be information readily available that demonstrates a party is insolvent or
defunct (e.g., a 104(e) response). In most cases, however, some additional information
gathering will be necessary.
• Using Ability to Pay Principles in determining orphan parties
The soon-to-be-issued Superfund Ability to Pay (ATP) Guidance may assist you in
making insolvent and defunct determinations for purposes of this reform. Although the
ATP guidance focjises on a different end result — determining the amount a party can pay
(for an "ability to pay" settlement), as opposed to whether that party has no ability to pay
(so that other parties at the site receive orphan share compensation) — the methods and
analysis are similar.
The standard for determining a party's ability to pay set out in Agency ATP guidance is
whether a payment of the amount sought by the government is likely to create an extreme
financial hardship.1 This standard is applicable to the orphan share analysis, except that
you would not seek any payment from an orphan party. Under ATP analysis, if EPA
makes a finding that the satisfaction of an environmental claim will cause a PRP to be
unable to pay for ordinary and necessary business expenses and/or ordinary and necessary
living expenses, then the settlement amount proposed to that party should be reduced.
1 Superfund Ability to Pay Guidance: 1) "General Guidance on Superfund Ability to Pay
Determinations; 2) "Guidance for Superfund Small Business Ability to Pay Determinations; 3)
"Guidance for Superfund Individual Ability to Pay Determinations".
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.3.
For the orphan share reform in general, if a party cannot make any payment at a site
without extreme financial hardship, the party would be considered an "orphan" party,
provided the Region has not identified a viable affiliate.
• Specific methods of gathering and analyzing information
For-purposes of the reform, there are three levels of information gathering and analysis
which may be considered in making orphan share determinations:
(1) An initial screening process which focuses on public information (e.g., Census
information, Dun and Bradstreet reports, SEC filings) and limited financial
submissions (e.g., five years of tax returns);
(2) Computer models, if the initial screening process indicates further analysis is
required (presently, models assist in the analysis of for-profit business entities,
although models for additional entities are being evaluated);
(3) Services of a financial analyst through contract support.
It is up to the Regions to determine the appropriate level of analysis. This overview
document provides some ways in which to implement the initial screening process. For
further information concerning initial screening, computer modeling, and the services of a
financial analyst, consult with experts in these areas in the Regions, National
Enforcement Investigation Center (NEIC), and Headquarters experts. (See also Tabs 4-3
and 4-4: respectively, List of Financial Analysts and Ability to Pay Contacts and
Instructions for Requesting Financial Analysis Contract Support). In addition, NEIC
training materials will be made available as subsequent supplements to this package on
topics such as 1) electronic sources of information; 2) interpretation of Dun & Bradstreet
business reports; and 3) obtaining information from the Internal Revenue Service and the
Securities and Exchange Commission. These topics, among others, will be covered in an
NEIC sponsored training class in Region VI on August 27, 1996 and may be offered
subsequently in other Regions. The agenda may be found at Tab 4-4 and the NEIC
contact for additional information is Gene Lubieniecki (303) 236-5111, ext. 539.
• Initial Screening Process
For many parties, information gathered during the initial screening process will be
sufficient. Generally, the Agency should request federal income tax returns for the 5
most recent years. Similarly, it should request 5 years of audited financial information
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4
and a completed financial questionnaire. Additionally, the party should be asked about
the likelihood of certain recoveries to pay its share of liability.
• Tips and Techniques
~ To determine if a party is bankrupt:
Call the Clerk of the Court of Bankruptcy to see if a bankruptcy petition
has|been filed and whether it was granted or denied in cases of suspected
insolvency. Once the date of the filing and the bankruptcy docket number
have been obtained, a copy of the petition, list of secured creditors, any
other orders issued by the court granting or denying a petition may be
reviewed. If the records are at the court, the court could arrange for
information to be sent to a Regional office. If the case is closed, the
records may be at a federal records center. Access to these records may be
obtained from the Clerk of the Court.
Check with Regional information managers for on-line systems, such as
Information America and CDB "Infotech" among others, which provide
access to the federal bankruptcy court records, dates of filings, etc. On-
line access may vary on a region by region basis.
~ If the party is bankrupt:
A bankruptcy petition that has been granted does not necessarily indicate
that a party is insolvent for purposes of this reform. The type of
bankruptcy claimed is important. If a claim of Chapter 7 bankruptcy
(complete dissolution and discharge) was granted as opposed to a Chapter
11 bankruptcy (reorganization), then it may be more likely that the party
may be found to be insolvent for purposes of this reform.
*¦ To determine if a party might have financial difficulties outside of
bankruptcy:
Check to see if the party has fallen behind in payments to creditors and the
consequences of non-payment. For example, a case team may want to
determine whether creditors have moved to take control of accounts
receivable or secured property or whether a creditor has arranged to
auction secured property. Some of this information may be found in Dun
& Bradstreet reports. Other investigative actions may be required.
Consult civil investigators or financial analyst for further investigative
actions.
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5
Check the Uniform Commercial Code (UCC) filings to determine if
creditors have perfected liens against a party's property. UCC filings are
available on-line and are filed with the Secretary of State.
~ To determine if a corporation has ceased to exist or ceased operations:
Check with the Secretary of State to determine whether a certificate of
dissolution was filed in a case of a suspected defunct corporation. Check
to see when last annual filing was made. If one has not been filed, this
may be an indication that the corporation is going out of business or has
ceased to operate and has dissolved. Also, states may revoke a corporate
license if it is not in good standing.
~ To determine if a municipality or other government entity has ceased to
exist:
Check on whether the entity has lost its status as a subdivision, public
agency or instrumentality of a state.
~ To determine if the party has additional resources:
In 104(e) requests or financial questionnaires, ask the party to disclose its
ability to recover expenses associated with the site. A potential "orphan"
party, like an ability to pay candidate, may have an ability to recover
expenses from other sources. This may include sources such as insurance
recoveries, indemnification agreements, contribution actions, and
increases in property values resulting from clean up activities. If these
funds are significant and likely to be recovered, the recovered expenses
should be considered recoverable to the United States, so that the party
cannot be considered to be an "orphan" party.
Step #4: Allocating the Orphan Share
• Level of analysis required determined on case by case basis
The amount of information gathering and preciseness of the calculation necessary to
approximate the orphan share at a site depends on the needs of the case. For example, if
the Region is reasonably sure under the facts of the case that the orphan share is much
larger than one of the limitations under the policy, then there is not a specific need to
assess the size of the orphan share with precision.
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6
• The allocation process
In order to determine the orphan share, in some cases, this may require considering shares
of classes of parties (i.e., assess the share of the owner/operator class of parties and assess
the share of the generator/transporter class of parties). In other cases, estimating the
orphan share may require consideration of shares of individual parties (e.g., where there
are successive owners, one of whom is defunct). While no guidance exists as to
allocating shares between parties at a site (nor as to allocating the orphan share), many
courts and writers have analyzed how an allocation is conducted and the factors to be
applied. Please see attachments at tabs 5-4 and 5-5 for a chart of case law and citations to
copyrighted trade press publications. Attachments at tabs 5-2 and 5-3 provide excerpts.
from copies of allocations training materials. Attachment 5-1 is a report by EPA on
private party allocation procedures.
Based on the allocations tools, you should allocate a share of liability as a percentage to
insolvent and defunct parties (i.e., the orphan share), and viable parties. Note that, for
convenience, you do not include certain parties in the allocation, because EPA would not
hold them liable (such as municipal solid waste contributors or residential homeowners).
Waste which cannot be attributed to any identified party is "unallocable waste" and
should be distributed on a pro rata basis to all identified parties (viable and insolvent and
defunct parties). See Hypothetical 3, attached to this document.
Step #5: Estimating the orphan share
When the Region has determined the orphan party's or parties' share(s) as a percent of
total liability, this percentage should be converted to a dollar figure. The percentage is
applied to total site costs ~ the sum of unreimbursed past costs and future oversight costs
plus the projected ROD remedy or Non-Time Critical removal costs being negotiated. It
does not include costs incurred by PRPs at a site.
• Orphan Share in dollars:
Orphan Share, as a percent (%) X Total Site Costs
(Unreimbursed past costs + future oversight costs + ROD or removal costs) =
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Step #6: D&gVfaine the Maximum Amount Appropriate for Compensation ("MAAC"!
It is presumed that you will offer the maximum amount appropriate for compensation,
except that in limited circumstances,-certain factors may reduce this amount. The
maximum amount appropriate for compensation (MAAC) is the lesser of three figures:
1) 25% of the projected ROD remedy/NTC removal costs: =
2) the sum of all unreimbursed past costs
and EPA's future oversight costs:
OR
3) the orphan share in dollars from step #5 above
The lesser of the three figures above is the MAAC =
Step #7: Determine Adjusted Compensation
In limited circumstances, at the Regions' discretion, the MAAC may be adjusted
downward based on equitable factors. The guidance lists these factors:
1) PRP fairness to other PRPs, including small businesses, municipal solid waste
parties, small volume waste contributors and certain lenders and homeowners;
2) PRP cooperation; and
3) Size of the orphan share
Regions should give greater consideration to these factors when activities encompassed
by the factors occur after issuance of this guidance, so that PRPs are prospectively aware
that their behavior may influence how much compensation they are given. Additionally,
a discussion of the factors and the reduction taken should be included in the Region's
documentation of its orphan share compensation analysis. See Hypothetical 3 for a
sample application.
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8
Step #8: Offering Compensation to PRPs
• Presumption of Offering Maximum Compensation
Regions should offer the maximum amount appropriate as soon as possible in the
settlement process.2 If possible, Regions should cite the maximum amount appropriate in
special notice letters to PRPs. Not only do such early offers provide incentive for PRPs
to settle with the Agency to conduct cleanup activities, but the Agency then is clearly
meeting its commitment to increase fairness in the enforcement process. Samples are
furnished, for the Region's convenience, setting out language for special notice letters
and for a letter notifying PRPs in ongoing cases of the availability of the reform at their
site at Tabs 6-1 and 6-2.
• Pre-approval requirement at sites where RODs exceed $30 million
Where ROD costs exceed $30 million, Regions must obtain pre-approval by
Headquarters of offers of compensation prior to making an offer. See Tab 7.
• Tracking
Regions should also notify Headquarters, which will be tracking and reporting on offers
of orphan share compensation, when an offer is made. (This information can be
conveyed verbally to the Region's orphan share contact. See contact memo at Tab 2).
The Region should convey sufficient information so that Headquarters understands the
determination that the Region has made with respect to who the orphan share parties are,
the size of the orphan share, and the amount offered. Such information might include: #
PRPs, # orphan parties, cost of ROD or NTC removal, amount of unreimbursed past costs
and future oversight costs; rationale behind determination of orphan parties and size of
orphan share; other litigation risk at the site.
2 It is important to note that a federal compromise may include more than a compromise
based on the orphan share. For example, an offer to forgive $6 million in past costs may consist
of $2 million in orphan share compensation and $4 million based on litigative risk.
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9
Step #9; Documenting Orphan Share
Once agreement has been achieved, Regions should document their analysis in their ten-
point analysis for RD/RA settlements. A hypothetical discussion of such a settlement
including orphan share compensation is attached at Tab 8-2. For settlements at removal
sites, the Region should document their analysis similarly in a stand-alone document.
Regions are requested to share these settlement-confidential documents with
Headquarters.3
3 While these documentation requirements may seem burdensome, it is important such
rationales are documented. Additionally, Regions are encouraged to furnish the information to
Headquarters so that Headquarters can take the major share of tracking and reporting on orphan
share compensation.
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United States
Environmental Protection Agency August 1996
Superfund Reform:
Orphan Share Implementation
TAB 5-5:
ORPHAN SHARE HYPOTHETICAL NO. 11
The EPA has issued a ROD for the Awesome Superfund Site in WA. The ROD remedy
calls for a pump-and-treat system estimated to cost $7,000,000.00. The Shallow family owns
and operates the site which was used for disposing of industrial waste that it transported to the
site from the facilities of its corporate customers. Records obtained by EPA from the Shallows
show the following info:
1. Total waste volume: 250,000 cu. yds.
2. Volume attributable to Shallow's customers:
- French Bridge, Inc.—10,000 cu. yd. of vinyl chloride waste
- Easthome, LTD.--5,000 cu. yd. of PAHs
- Jones Chemical, Inc.—20,000 cu. yd. of cyanide waste
- Kenyaleum, Inc.—15,000 cu. yd. of di-n-octyl butyl phthalate
- Major Energy, Inc.—5,000 cu. yd. of heavy metal
- Der Phunken, Cie.—20,000 cu. yd. of vinyl waste; went out of business when
CDS replaced LPs
- Neil's 99 Cents!—25,000 cu. yd. of oat meal contaminated with a synergy of
hazardous substances
- The Shallows have a limited ability to pay and may be insured.
3. To date, EPA has settled some past costs, leaving $2,000,000 in unreimbursed past costs.
Future oversight costs are estimated at $1,000,000. French and Major have been cooperative; the
others have been difficult to deal with. All PRPs will settle for the right deal.
1.) What is the orphan share (% of liability) and why?
2.) What does that translate to in $$$?
3.) What is the maximum settlement for orphan share allowable under the policy?
4.) What would you recommend as a settlement of the entire case? Why?
£EPA
1 Many thanks to Joe Donovan and Kathy Hodgkiss of Region III for originating this
hypothetical.
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ORPHAN SHARE HYPOTHETICAL NO. 1 ANSWER
First make the determination if there is an insolvent or defunct party.
Yes, Der Phunken, Cie. is defunct (Assuming the Region determined that the company is
not affiliated with any other viable, liable party).
The Shallows require further investigation. A limited ability to pay does not make a
party an orphan under the guidance unless the amount it can pay would cause "undue
hardship". If the party has insurance and the insurance funds are "significant and likely"
to be recovered, it is not an orphan. For purposes of this hypothetical, we will presume
they1 are not an orphan.
Estimate the Orphan Share
Generator Portion - Look at the shares of the parties negotiating at the table. The waste
contributed by those parties amounts to 100,000 cu. yds. The remaining waste (250,000)
is unattributable waste and thus not considered in the allocation of generator shares.
20,000 cu. yds. (De Phunken) out of a 100,000 cu. yds. (total hazardous waste) =
20%. Thus, the orphan share of generator liability = 20%.
Considering the Gore factors as they apply to the specific facts of the site, the Region has
allocated a 50% to the Shallows for its owner/operator and transporter liability. The
remaining 50% is allocated to the generators. Thus, the orphan share = 20% of the 50%
generator liability, or 10%.
Translate Orphan Share % to Dollars
10% of TOTAL SITE COSTS = 10% of $ 10M (7M ROD plus 2M unreimbursed past
costs plus 1M future oversight costs) = $ 1M.
Determine the MAAC (maximum amount available for compensation)
The lesser of:
- 25% of ROD: 25% of 7M = 1.75M
- Past costs plus future oversight costs = 3M
- The actual orphan share from step 2 = 1M
Therefore the MAAC - 1M
Apply adjustment factors where appropriate.
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United States
Environmental Protection Agency August 1996
Superfund Reform:
Orphan Share Implementation
TAB 5-5:
ORPHAN SHARE HYPOTHETICAL NO. 21
Since 1987 EPA has spent $6,500,000 in response costs at the Bayville Superfund Site. The
recent ROD for the site chose an excavation and cap remedy to deal primarily with organics that will
cost $17,000,000, with future oversight costs expected to be an additional $2,000,000.
The site is a former unlined landfill that received industrial waste under an agreement between
the owner/operator, Dave Spozer, and O'Mara Transportation. It also received MSW from several
municipalities and generators. Under the agreements, Mr. Spozer had a high degree of control over the
disposals. O'Mara Transportation hauled industrial waste here from 1965 through 1986. Of the
13,050,000 cu. yds. of waste at the site, 60% are MSW; 40% are the industrial hazardous substances
transported by O'Maia. Upper Downs, Lower Downs, Hugh Downs, Eider Downs, and Churchill
Downs are the municipalities that sent the MSW. There are also 50 customers that generated 1,295 cu.
yds. or less of MSW, in some cases with a few gallons of hazardous substances. There is 100,000 cu.
yds. that is not attributed to known parties. Of the 11 other companies who arranged with O'Mara to
take their industrial waste to the site, 3 (Corroad, Inc. Cezanne, Inc. and Wastemore, Inc.) have been
adjudicated bankrupt and are out of business. There are recorded volumes for the 11 companies but
some are illegible and might bear some additional investigation. Those volumes are:
1. Abyss Mill Co.—300,000 cu. yds. of ball mili tailings
2. Groh Smee Aut, Co.~840,000 cu. yds. of sail boat fiberglass
3. Corroad, Inc.—800,000 cu .yds. of "off-spec" shampoo containing NaOH
4. Cezanne, Inc.—390,000 cu. yds. of acrylics waste left from creating false impressions
5. Wastemore, Inc.—760,000 cu. yds. of "Lose-it-Forever", a cyanide-based rodenticide that
didn't make it as a product (but which endangers rats in the vicinity of the site!)
6. Jephyr's Sons, Inc.—930,000 cu. yds. of scrap nickel
7. Righters, Inc.—400,000 cu. yds. of lead
8. Manna Tea, Ltd.—550,000 cu .yds. of phthlates from tea-bags
9. TerraSquirma Company—150,000 cu. yds. of asphalt
10. Bunns & Behrher, Inc.—50,000 cu. yds. of (equiv.) of benzene
11. Loplop, Inc.—50,000 cu. yds. of cereal contaminated with arsenic
O'Mara is presently reorganizing its debt under Chapter 11 of the Bankruptcy Act. Mr. Spozer
went Chapter 7 and is trying to get back on his feet. Also, Mr. Spozer probably had knowledge of
midnight dumping on his property and failed to prevent it.
*»EPA
1 Many thanks to Joe Donovan and Kathy Hodgkiss of Region III for originating this
hypothetical.
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2
ORPHAN SHARE HYPOTHETICAL NO. 2 ANSWER
1. Is there an orphan party?
Yes, the generator orphans are Corroad, Inc. (800,000 cu. yds.); Cezanne, Inc. (390,000 cu.
yds.); and Wastemore, Inc. (760,000 cu. yds.). The owner/operator orphan is Mr. Spozer. (This
assumes that there are no affiliates.) The Region determined that O'Mara is not an orphan party
because it is not defunct and fails to meet the "no ability to pay" standard. Although it is in
bankruptcy, it is merely reorganizing its debt.
2. What is the size of the orphan share?
Owner Portion - The Region's investigations reveal that the owner/operator had a high degree
of control over the disposals and probably knew about midnight dumpings at the site. Thus, the
Region has allocated a 70% share to Mr. Spozer, a relatively high share for an owner/operator.
Generator Portion - First, add the volumes of hazardous wastes contributed by the generator
orphans 800,000+390,000+760,000 = 1.95M cu. yds. Next, determine the total amount of
hazardous waste contributed by the other generators (either add the volumes of the 11 generator
parties or multiply 40% times the total waste at the site minus the unallocated wastes) =
5,220,000 cu. yds.). Do not include MSW in the calculation.
Therefore 1.95M cu. yds. (amount attributable to generator orphan parties) divided by 5.22M
cu. yds. (total hazardous waste) = 37% of generator liability is orphan.
Based on its analysis of the Gore factors, the Region assigned 20% to the generators and 10% to the
transporter (with the other 70% allocated to the owner/operator as discussed above.)
Thus, the 70% owner share is orphan and
37% of the 20% generator share is orphan = 7.4%
> 70% (owner share) = 7.4% (generator share) = 77.4% Orphan Share.
In dollar figures: 77.4% (orphan share) times $25.5M (total site costs) = S19.73M
3. What is the MAAC (Maximum Amount Appropriate for Compensation) ?
The lesser of:
or.
or
25% ROD(17M) = 4.25M
Past costs plus future oversight costs = 8.5M
Orphan Share = 19.73M
Therefore the MAAC is 4.25M
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United States
Environmental Protection Agency
August 1996
Superfund Reform:
Orphan Share Implementation
ORPHAN SHARE HYPOTHETICAL NO. 3
In 1976, Over Bearing Coip. (OBC), a manufacturer of ball bearings, contracted with a
local farmer, I. Crop, to dispose of hazardous waste from OBC's processes at Mr. Crop's 40-acre
farm located on Bear Wallow road in a remote part of the state. Three other companies,
observing OBC's success in negotiating its contract with unusually favorable terms, rushed to
negotiate their own arrangements with Mr. Crop for disposal of hazardous waste. One of the
companies, the Gore-Onsdorrf Nickel Emporium (GONE) ceased to do business after a Chapter
7 bankruptcy discharge 5 years ago. No successors or assets remain. Additionally, a local army
base disposed of a load of scrap metal in 1982 that was later discovered to contain PCBs. The
president of OBC during the time of disposal, John Poorman, heavily participated in managing
hazardous wastes at the time, and has been named as a PRP. Mr. Poorman is now 81, ill, retired,
relies solely on social security, and was recently evicted when the bank foreclosed on his trailer.
According to the financial documents submitted by Mr. Crop, his only asset is the
contaminated farm. He has no other source of income and lives with his adult children. The
Region has learned that an amusement park developer has recently visited the rural site.
Responses to information requests indicate the following volumes of hazardous wastes
are attributable to:
1. OBC- 100,000cu. yds.
Approximately 50,000 cu. yds. has not been attributable to any party. The Region has selected
an estimated $20 million excavation of certain areas and cap and has $3 million in past costs.
Estimated future oversight costs amount to $2 million.
OBC Corporation and the 2 other viable parties threatened to file contribution actions
against several nearby residential homeowners whose property was contaminated when material
was accidentally dumped across the property lines. EPA entered into de micromis settlements
with the homeowners pursuant to the Agency policy toward residential property owners.
2. GONE -
3. Lotsa Waste Inc.
4. Jerry's Refuse
5. Army base
50,000
25,000
20,000
g.000,
200,000 cu. yds.
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ORPHAN SHARE HYPOTHETICAL NO. 3 ANSWER
1. Is there an orphan party?
Three parties appear to be eligible "orphans":
Mr. Crop - His only asset is the contaminated farm; he has no other source of income and
probably is dependent on his adult children. Based on its analysis of the facts, the Region
has determined that Mr. Crop is "insolvent" for the purposes of the reform.
GONE - It is defunct (i.e., it has ceased to do business and fully dissipated its assets) and
the Region's investigations has not revealed any affiliated successors or viable,
potentially liable parties. Thus, it is an orphan.
Mr. Poorman - Although his financial situation is such that he is unable to contribute
toward his share, the Region determined that he is not an orphan because he is affiliated
with another viable, liable party (OBC).
> Orphan parties = 1 owner and 1 generator.
2. What is the size of the orphan share?
Owner Portion - In addition to due care and knowledge considerations, the Region
considered two important facts: 1) the relative advantage of the disposal contracts for the
companies indicates that Mr. Crop lacked business acumen and the sophistication to understand
the consequences of the materials he was accepting and 2) the property value may increase upon
its cleanup. While the first factor may reduce his relative share, the second factor may increase
it. As a result, he was allocated a share of 30% as owner of the site.
Generator Portion - The total amount of hazardous wastes at the site (200,000 cu. yds.)
divided by the amount of hazardous waste sent by GONE (50,000 cu. yds.) equals 25%. Thus,
GONE's percentage of the total generator liability equals 25% BUT generator liability is only
70% of the total site (30% has been allocated to the owner). Thus, the orphan share of generator
liabiliity is 25% of 70% , or 17.5%.
> 30% (owner portion) + 17.5% (generator portion) = 47.5% OS at site
3. What is the MAAC?
OS = 47.5% X $25 million (total site costs) =$11.875 million
25% of ROD costs ($20 million) = $ 5.0 million
Past costs and future oversight costs = $5.0 million
The maximum amount appropriate to offer at this site is $5.0 million.
-------
2
However, since the parties initiated litigation against residential homeowners, the Region
decided to reduce the orphan share compensation it would offer to all parties by 10% to $4.5
million. (Factor in guidance: PRP fairness to other PRPs, including... homeowners)
Subsequently, the parties did not settle, so that they did not receive orphan share
compensation in a settlement. However, at the end of the year, the Region took credit for making
the offer by adding the amount of this offer to a total dollar amount representing the amount of
compensation that it had offered to parties as part of the Superfund orphan share reform.
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FINANCIAL ANALYSTS & ABILITY TO PAY CONTACTS
FOR SUPERFUND CASES
EPA Office of Enforcement and Compliance Assurance
Tracy Gipson (2272A)
OECA, OSRE, Regional Support Division
U.S. EPA
401 M Street SW
Washington, D.C. 20460
Deborah Valentine (2272A)
OECA, OSRE, Regional Support Division
U.S. EPA
401 M St. SW
Washington, D.C. 20460
Bob Kenney (Masters in Tax law.) (2273A)
OECA, OSRE Policy & Program Evaluation Division
U.S. EPA
401 M Street SW
Washington, D.C. 20460
Jonathan Libber (BEN & ABEL Coordinator)(2248A)
OECA, ORE, Multimedia Enforcement Division
U.S. EPA
401 M Street SW
Washington, D.C. 20460
Kimberly Zanier (Financial Analyst)
OECA, OCEFT, NEIC, Planning and Management Div.
U.S. EPA
Denver Federal Center
Building 53, Box 25227
Denver, CO 80225
Char Ressegvie (Financial Analyst)
OECA, OCEFT, NEIC, Planning and Management Div.
U.S. EPA
Denver Federal Center
Building 53, Box 25227
Denver, CO 80225
TEL 202-564-4236
FAX 202-501-0269
E-MAIL: TGIPSON @ DCOWPE2
TEL 202-564-4279
FAX 202-501-0269
E-MAIL: DVALENTI @ DCOWPE2
TEL 703-603-8931
FAX 703-603-9117
E-MAIL: RKENNEY@DCOWPEl
TEL 202-564-6011
FAX 202-564-0010
E-MAIL: JLIBBER @ DCOELAN3
TEL 303-236-3636 XT 555
FAX 303-236-5116
TEL 303-236-3636 XT 546
FAX 303-236-7573
Asterisk indicates person is designated Ability to Pay Contact for Region or Office.
June 1996
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FINANCIAL ANALYSTS & ABILITY TO PAY CONTACTS
Department of Justice - E&NRD/EES
David Street, Senior Attorney TEL 202-514-5471
Environmental Enforcement Section FAX 202-616-6583
Environment and Natural Resources Division E-MAIL: SS53(STREET) @ AMICUS
U.S. Department of Justice
Ben Franklin Station, P.O. Box 7611
Washington, D.C. 20044
* Tom Swegle, Attorney
Environmental Enforcement Section
Environment and Natural Resources Division
U.S. Department of Justice
Ben Franklin Station, P.O. Box 7611
Washington, D.C. 20044
Jim Conversano (Financial Analyst)
Antitrust Division
U.S. Department of Justice
Bicentennial Bldg..
600 E Street N.W., Suite 1000
Washington, D.C. 20530
TEL 202-514-3143
FAX 202-514-4180
E-MAIL: SS54(SWEGLE) @ AMICUS
TEL 202-307-6069
FAX 202-514-8862
June 1996
2
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FINANCIAL ANALYSTS & ABILITY TO PAY CONTACTS
EPA Region I
Ruthann Sherman (RCT) TEL 617-565-3666
Office of Regional Counsel, CERCLAI FAX 617-565-1141
U.S. EPA Reg. I
John F. Kennedy Federal Building
Boston, MA D2203
Bill Hanscom, Civil Investigator (5ESS-WMD) TEL 617-565-3666
Environmental Enforcement Section
Waste Management Division
U.S. EPA Region I
John F. Kennedy Federal Building
Boston, MA 02203
Mary Medeiros (Financial Analyst) TEL 617-565-3670
Office of Regional Counsel: RCW FAX 617-565-1141
U.S. EPA Reg. I
John F. Kennedy Federal Building
Boston, MA 02203
Lee Clouthier, Financial Analyst TEL 617-565-3323
Planning and Management Division
U.S. EPA Reg. I
John F. Kennedy Federal Building
Boston, MA 02203
EPA Region II
Juan Fajardo, Attorney (20RC-NYCSUP) TEL 212 637-3179
Office of Regional Counsel FAX 212-637-4359
New York/Caribbean Superfund Branch
U.S. EPA Region II
290 Broadway
New York, NY 10007-1866
' [VACANT], (20RC-NJsft>) TEL 212 637-
Office of Regional Counsel FAX 212-637-4359
New Jersey Superfund Branch
U.S. EPA Region II
290 Broadway
June 1996
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FINANCIAL ANALYSTS & ABILITY TO PAY CONTACTS
New York, NY 10007-1866
June 1996
4
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FINANCIAL ANALYSTS & ABILITY TO PAY CONTACTS
EPA Region III
* Leo Muliin, Civil Investigator TEL 215-566-3172
CERCLA Cost Recovery Section FAX 215-566-3001
Superfiind Programs Branch
Hazardous Waste Management Division LAN: SFHUB :LMULLIN
U.S. EPA Region III
841 Chestnut Building
Philadelphia, PA 19107
James Williams, Civil Investigator TEL 215-566-3176
CERCLA Cost Recovery Section (3HW12) FAX 215-566-3001
Superfund Programs Branch
U.S. EPA Region III LAN: SFHUB:JIWILLIA
841 Chestnut Building
Philadelphia, PA 19107
Gary Morton, Civil Investigator TEL 215-566-3159
PRP Search Section (3HW11) FAX 215-566-3001
Superfund Programs Branch
U.S. EPA Region III LAN: SFHUB:GMORTON
841 Chestnut Building
Philadelphia, PA 19107
Harry Steinmetz, Civil Investigator TEL 215-566-3161
PRP Search Section (3HW11) FAX 215-566-3001
Superfund Programs Branch
U.S. EPA Region III LAN: SFHUB:HSTEINME
841 Chestnut Building
Philadelphia, PA 19107
Fred Knapp TEL 215-566-3182
Superfund Programs Branch FAX 215-5 66-3182
U.S. EPA Region III
841 Chestnut Building LAN: SFHUB:HSTEINME
Philadelphia, PA 19107
June 1996
5
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FINANCIAL ANALYSTS & ABILITY TO PAY CONTACTS
EPA Region IV
Don Toney, Civil Investigator
Cost Recovery Unit
Waste Programs Branch
Waste Management Division
U.S. EPA Region IV
345 Courtland Street
Atlanta. GA
Will Waisner, Financial Analyst
Comptroller Branch
Program Management and Support Staff
U.S. EPA Region IV
345 Courtland Street
Atlanta. GA 30365
EPA Region V
Terry Branigan, Attorney (C29A)
Solid Waste & Emergency Response Branch
Office ofRegional Counsel
U.S. EPA Region V
77 West Jackson Boulevard
Chicago, IL 60604-3507
Betty Casmpbell (Financial Analyst)
Superfund Accounting Section
Comptroller Branch
Program Management Division
U.S. EPA Region V
77 West Jackson Boulevard
Chicago, IL 60604-3507
Mary Ellen Ryan (MF-10J)
Superfund Accounting Section
Comptroller Branch
Program Management Division
U.S. EPA Region V
77 West Jackson Boulevard
Chicago, IL 60604-3507
TEL 404-347-5059 XT 6186
LAN: SFHUB:DTONEY
TEL 404-347-3555 XT 6719
E-MAIL: WWAISNER @ R4
SFHUB: WWAISNER
TEL 312-353-4737
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LAN: TBRANIGA
TEL 312-886-7502
FAX 312-886-7514
TEL 312-353-6268
FAX 312-886-7514
June 19 96
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FINANCIAL ANALYSTS & ABILITY TO PAY CONTACTS
Sylvester J. Colletti TEL 312-353-5399
Superfund Accounting Section FAX 312-886-7514
Comptroller Branch
Program Management Division
U.S. EPA Region V
77 West Jackson Boulevard
Chicago, IL 60604-3507
EPA Region VI
* Buddy ParT, Chief (6H-EC)
Cost Recovery Section
Superfund Enforcement Branch
Hazardous Waste Management Division
U.S. EPA Region VI
1445 Ross Avenue, 12th Floor, Suite 1200
Dallas. TX 75202-2733
TEL 214-665-6670
LAN: PARR-BUDDY
E-MAIL: BUDDY.PARR @ R6_
SFHUB:BPARR
* John Eagles, Chief
Superfund Accounting Section
Financial Branch
U.S. EPA Region VI
1445 Ross Avenue, 12th Floor, Suite 1200
Dallas. TX 75202-2733
TEL 214-665-6535
FAX 214-665-2146
LAN: EAGLES-JOHN.
E-MAIL: JOHN.EAGLES @ R6_
EPA Region VII
* Cheryle L. Micinski, Chief
Hazardous Waste/CERCLA Branch
Office of Regional Counsel
U.S. EPA Reg. VII
726 Minnesota Avenue
Kansas City, KS 66101
* Robert L. Morby, Chief
Superfund Branch
Superfund Division
U.S. EPA Reg. VII
726 Minnesota Avenue
Kansas City, KS 66101
TEL 913-551-7274
FAX 913-551-7064
TEL 913-551-7682
FAX 913-551-7063
June 1996
7
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FINANCIAL ANALYSTS & ABILITY TO PAY CONTACTS
Nancy Healey
Superfund Branch
Superfund Division
U.S. EPA Reg. VII
726 Minnesota Avenue
Kansas City, KS 66101
EPA Region VIII
Greg Phoebe (8HWM-5R)
Enforcement Section
Superfund Remedial Branch
Hazardous Waste Management Division
U.S. EPA Reg. VIII
999 18th Street, Suite 500
Denver, CO 80202-2405
Sharon Kercher (8EN-T)
[Office?]
U.S. EPA Reg. VIII
999 18th Street, Suite 500
Denver, CO 80202-2405
Gwen Hooten (8HWM-SR)
Enforcement Section
Superfund Remedial Branch
Hazardous Waste Management Division
U.S. EPA Reg. VIII
999 18th Street, Suite 500
Denver, CO 80202-2405
Jim Stearns (80RC)
Superfund Branch
Office of Regional Counsel
U.S. EPA Region VIII
999 18th Street, Suite 500
Denver, CO 80202-2405
TEL 913-551-7713
FAX 913-551-7063
TEL 303-312-6466
FAX 303-293-1238
LAN: SFHUB:GPHOEBE
TEL 303-312-6352
TEL 303-312-6571
FAX 303-312-6897
LAN: SFHUB:GHOOTEN
TEL 303-312-6912
FAX 303-312-6859
LAN: SFHUB:JSTEARNS
June 1996
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FINANCIAL ANALYSTS & ABILITY TO PAY CONTACTS
EPA Region IX
* Lewis Maldonado, Assistant Regional Counsel
Hazardous Waste Branch (RC-3-2)
Office of Regional Counsel
U.S. EPA Region EX
75 Hawthorne Street
San Francisco, CA 94105
TEL 415-744-1342
FAX 415-744-1041
* Cliff Davis, Civil Investigator
Case Development Section (H-7-4)
TEL 415-744-2377
FAX 415/744-1917
Superfund Enforcement Branch
Hazardous Waste Management Division
U.S. EPA Region IX
75 Hawthorne Street
San Francisco, CA 94105
Mark Calhoon, Civil Investigator TEL 415-744-2376
Case Development Section (H-7-4) FAX 415/744-1917
Superfund Enforcement Branch
Hazardous Waste Management Division
U.S. EPA Region IX
75 Hawthorne Street
San Francisco, CA 94105
Kim Muratore, Case Developer TEL 415-744-2373
Case Development Section (H-7-4) FAX 415-744-1917
Superfund Enforcement Branch
Hazardous Waste Management Division
U.S. EPA Region IX
75 Hawthorne Street
San Francisco, CA 94105
Nancy Riveland-Har, Civil Investigator TEL 415-744-2371
Case Development Section (H-7-4) FAX 415-744-1917
Superfund Enforcement Branch
Hazardous Waste Management Division
U.S. EPA Region IX
75 Hawthorne Street
San Francisco, CA 94105
[Note: Going on detail to R4 in June 1996]
June 1996
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FINANCIAL ANALYSTS & ABILITY TO PAY CONTACTS
EPA Region X
* Elliot Rosenberg, Regional Economist TEL 206-553-1546
Policy Planning and Evaluation Branch FAX 206-553-0119
Management Div. (MD 142) E-MAIL:ROSENBERG.ELLIOT@EPAMAIL.EPA.GO
U.S. EPA Region X LAN: SFHUBiEROSENBE
1200 Sixth Avenue
Seattle, WA 98101
June 1996
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Superfund Refoi
Orphan Share lr
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Instructions for Requesting Financial Analysis Contract Support
OSRE/RSD has arranged for the services of financial analysts employed by Industrial
Economics Incorporated (IEC), of Cambridge, Massachusetts, to support Superfund Cases. This
contract support is intended to be available to case teams in situations where the Region does not
have a financial analyst available, either on staff or through a Regional contract, or in situations
where the financial issues are particularly complex and the case team wants a financial analyst
with special expertise. Case teams that may need financial analysis support should contact
Deborah Roane (at 202-564-4279) or Tracy Gipson (at 202-564-4236) by phone, as soon as
they become aware that they may need such contract support.
To request financial analysis support, in addition to calling Tracy or Deborah, send
them the following information about the case, in writing:
o CASE NAME, NPL SITE, SITE ID NO., AND SITE LOCATION (City, State, Region)
TYPE OF CERCLA CASE: Removal? Remediation? Cost recovery?
IS THIS AN ADMINISTRATIVE REFORM PILOT CASE?
Expedited settlement? De minimis PRPs? Allocation Pilot?
STATUS OF THE CASE
CATEGORY OF PRP(S) THAT CLAIM INABILITY TO PAY
Generator? Transporter? Owner &/or operator?
Corporation? Individual? Small business? Municipal or other non-profit entity?
De minimis PRP? Primary PRP?
PLEASE IDENTIFY THE SPECIFIC PRP'S BY NAME, IF KNOWN.
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o
WHAT ARE THE FINANCIAL ISSUES IN THE CASE?
WHAT ANALYSIS IS THE REGION LOOKING FOR?
o WHAT, IF ANY, FINANCIAL INFORMATION DOES THE REGION ALREADY
HAVE FOR EACH PRP?
WHAT, IF ANY, ANALYSIS HAS THE REGION ALREADY DONE?
o REGIONAL CONTACTS: [names & phone numbers]
ORC:
CIVIL INVESTIGATOR:
REGIONAL FINANCIAL ANALYST:
Send the memo by pouch mail to Deborah Roane or Tracy Gipson, OSRE/Regional Support
Division (2272A), at Headquarters, or by FAX to 202-564-0086 or 202-501-0269.
IEC-IAGVCONTRSUP.INS 5/30/96
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1 -¦¦¦
Financial Analysis
Financial Information and Ability to Pay )1
Dallas, Texas, August 27,1996
I
I
AGENDA
| 8:00 - 8:15 -
Welcome & Introduction i
Barbara Luke, Esquire f
Environmental Protection Agency, Region 6 \
Course Overview f
Kimberly A.. Zanier, CPA j
Senior Financial Analyst
National Enforcement Investigations Center (NEIC)
| 8:15- 9:00
General Steps in a Financial Analysis
Kimberly A. Zanier CPA i;
Provides an overview of the steps a financial analyst will generally go through s
when conducting a financial analysis. f
| 9:00- 9:30
Document Requests >
Kimberly A. Zanier CPA I
Identification and description of the documents to be included in the initial request i
for the entity being evaluated. Focus is on corporate returns. \
| 9:30 - 9:45
Break jj
| 9:45-10:15
Electronic Sources of Information \
Charlotte Resseguie CPA, Financial Analyst I
NEIC j
Identification of the electronic information available through the Region 6 library, jj
NEIC, local libraries, the Internet and other sources including assistance from the ij
NEIC civil investigators. |
\ 10:15-10:45
\
Dun & Bradstreet Business Reports ji
Where does the information come from and how to interpret a D& B report. |
Teresa Rogers and Anne Ruttger, D&B Resource Consultants, Dallas, Texas I
\ 10:45-11:15
Tax Related Information and Currency Transaction Reports :
What information can you get from the Internal Revenue Service and how to get it. ^
Charlotte Resseguie CPA, Financial Analyst
j 11:15 - 12:15
The Securities and Exchange Commission (SEC) ;i
The role of the SEC and documents available through them. |
Thomas J. Baudhuin, Special Counsel, U.S. SEC, Fort Worth District, Fort Worth, |
Texas
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AGENDA (continued)
12:15-1:00
Lunch
1:00-2:00
Overview Corporate Income Tax Returns
Kimberly A. Zanier CPA
Provides an overview of the different components of the Form 1120 tax return,
including the following: Income, Expense, Assets, Liabilities, and Owners Equity.
Focuses on sources of funds which can be used to support penalty payments, clean-
up costs and or purchases of capital equipment.
2:00-2:15
Break
2:15-3:30
Overview Corporate Income Tax Returns (continued)
Kimberly A. Zanier CPA
3:30-5:00
What If Session
Kimberly A. Zanier CPA
Identification and discussion of common problem areas.
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Developing Allocations Among Potentially Responsible
Parties for the Costs of Suoerfund Site Cleanups
by
Leslie Kaschak & Denise Ergener
Office of Site Remediation Enforcement
September 1994
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Table of Contents:
I. Execut ive. Summary . 1
II. Introduction 1
III. Methodology . ........ 2
IV. Developing Allocations . 2
A. Procedural Rules . 3
B. Information Collection and Data Compilation 4
C. Application of Allocation Factors 6
D. Allocations between Classes of Parties 8
E. Federal, State, and Municipal Parties 9
F. Ability to Pay Determinations . . . . : .9
G. Parent and Successor Corporation Issues 10
V. Allocator Expertise 10
VI. Time and Expense Considerations 11
VII. .Purpose and Use of this Document . 11
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Developing Allocations Among Potentially Responsible
Parties for the Costs of Superfund Site Cleanups
I. EXECUTIVE SUMMARY
The Office of Site Remediation Enforcement contacted nine
entities experienced in administering, or participating in the
allocation process to collect information regarding allocation
methods "used to apportion Superfund site costs under the
Comprehensive Environmental Response, Compensation, and Liability
Act. The information gathered serves to assist EPA and the .
parties paying these costs in examining settlement options that
are fair and minimize transaction costs at Superfund' sites. This
report reflects the information that was gathered from the
parties interviewed, and does not reflect the views of the EPA.
The following highlights represent the primary findings of this
research:
o it is important that the allocation process is flexible to
accommodate the site-specific circumstances, and assist with
the ultimate goal of reaching settlement and reducing
transaction costs;
o the factors selected to apportion costs in any allocation
are a function of site type, amount of information
available, and the classes of parties participating in the
allocation;
o the most critical factors in selecting an allocator for a
successful allocation are the neutrality of the allocator
and the PRPs' perception of fairness in the process.
II. INTRODUCTION
The Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA) is often criticized for the high
transaction costs that are incurred by potentially responsible
parties (PRPs)1 in reaching settlements for Superfund site
1 Section 107(a) of CERCLA defines four classes of parties
who may be liable for the cleanup costs at Superfund sites: 1)
present owners and operators of a site; 2) past owners and
operators of a site; 3) parties which arrange for the disposal,
treatment, or storage of the hazardous substance (generators);
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cleanup and in litigating where settlement efforts are
unsuccessful. Many believe that much of these transaction costs
arise as a result of a retroactive, strict, joint and several
liability scheme. One way PRPs may facilitate settlement at the
site and reduce transaction costs is through the use of an
allocator to apportion cleanup Costs among PRPs at the site.
In April 1993, the EPA launched an effort to explore options
by which the Agency could implement Superfund in a more fair and
efficient manner. One of the initiatives that EPA identified
focuses on the use of allocation tools as a way to address
fairness concerns and reduce transaction costs in the enforcement
of Superfund. As part of this initiative, the Agency committed
to conducting information-gathering activities on allocation
issues and distributing, this information to the regulated
community to further facilitate settlements. This report
fulfills that commitment by providing information received in
interviews on allocation practices from the perspective of both
allocators and PRPs participating in allocations.
III. METHODOLOGY
The Office of Site Remediation Enforcement (OSRE) contacted
three organizations experienced in leading and developing
allocations (allocators), five firms experienced in representing
PRPs in CERCLA settlements, three of which function as allocators
when not representing parties at sites, and one in-house counsel,
to discuss their allocation experiences. The nine parties
interviewed are located in, and represent parties from,
geographically diverse areas of the country. These interviews
were conducted in order to identify allocation methods currently
used to allocate costs at sites, and identify issues associated
with the' implementation of allocation processes. The information
in this report is limited to the extent that the number of
parties interviewed was limited.
IV. DEVELOPING ALLOCATIONS
and 4) parties which transported the substances to the site
(transporters). These parties may be pursued by the government
under•sections 104, 106 and 107 of CERCLA and/or by private
parties.
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The process by which PRPs organize to apportion site
remediation costs with the goal of settling among themselves and
collectively with the U.S., is commonly referred to as an
allocation. PRPs often coalesce to allocate cost shares so that
they may resolve potential liability with the United States,
through negotiations with the EPA, to minimize transaction costs
that might otherwise be associated with PRP settlement
negotiations and litigation. To facilitate these processes
(i.e., allocation and settlement), coalescing parties usually set
up an allocation committee. The allocation committee may be
responsible for developing a method to fairly allocate site costs
among the parties and recommending a final allocation to an
executive committee, or the group may hire a private consultant
(an allocator) who would perform all or part of these functions.
The latter arrangement is the focus of this report.
Once the PRPs select an allocator, the allocator's specific
responsibilities are set forth in a contract between the PRPs and
the allocator. The allocator's role may vary in scope from data
collection and compilation activities to development of a cost
allocation. Prior to beginning work, the allocator submits to
the parties a scope of work for the project, including specific
tasks and corresponding cost estimates. The scope of work
assures the allocator that participants agree up front on the
process used for allocation and provides the participants with
necessary control over the-allocator's activities and charges.
The scope of work continues to operate as a master plan
throughout the allocation process.
Some of those interviewed cite that a primary advantage of
involving an allocator.in the settlement process is the degree of
confidentiality afforded contribution information and
confidential business information. Participants are more
forthcoming with information to an allocator with whom they have
entered a confidentiality agreement than they are to an
allocation steering committee with whom there is generally no
such agreement.
Others interviewed report that, in some instances,
especially for sites with few parties and relatively good
contribution information, it is more appropriate for an internal
committee, rather than an outside party, to make cost allocation
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determinations. In these cases, an intermediary adds an
unnecessary layer and cost to the allocation process; however,
many interviewees observe that it is often necessary to hire an
allocator for compilation of the database and to resolve intra-
PRP. group -disputes.
Whether or not a PRP group hires an outside consultant,
there are several well-recognized phases of an allocation: 1)
development of procedures to govern the allocation (this step
includes approval of the allocator's scope of work, where
appropriate); 2) information identification and collection; 3)
database development including resolution of participant disputes
and corrections to the database; 4) submittal of advocacy briefs
from PRPs to the allocator and the use of particular allocation
factors and allocator's review of available information; 5)
issuance of draft allocation report; 6) challenges to the
allocation; 7) issuance of a final allocation report; and 8)
facilitation of a settlement. When an allocator is hired by the
PRP-group, the allocator is primarily responsible for developing
an allocation of cost, with support from technical and legal
support where necessary.
A. Procedural Rules
It is usually during the first phase of the process that the
participants develop rules and procedures regarding, for example,
ex parte communications, dispute resolutions, and appeals. The
allocator may assist in developing a balanced process that
ensures both goals of fairness and of reaching an expeditious
settlement. Some allocators caution against too much process;
they report that the more the allocation process resembles a
mini-trial, the higher the transaction costs. Some interviewees
argued that procedures such as rights of cross-examination and
the use of document production and interrogatory-like requests
add substantially to transaction costs but do not significantly
change the bottom-line allocation results.
Some of those interviewed noted" that confidentiality of
information is an issue which needs to be resolved early in the
process, and noted that parties usually enter into extensive
confidentiality agreements. Parties may agree to keep
information confidential among the participants or with the
allocator, where appropriate. These agreements help to ensure
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that if a party shares information with the allocator that waste
was sent to a particular site other than the site for which an
allocation is being conducted, that information may not be used
in future dealings with EPA or other parties. By identifying the
ground rules.as early in the process as possible, the likelihood
of law suits resulting from inappropriate disclosures is
minimized. This is particularly important to prevent parties
from discontinuing participation, and attempting to settle with
EPA using information gathered from other allocation
participants.
Opening statements provide an opportunity for parties to
propose that certain facts and allocation factors be given
consideration. Parties do not generally agree at the outset as
to what factors the allocator should apply to apportion site
costs. The allocator decides what factors are most relevant and
documents these decisions and additional assumptions in the
allocation report. Once a draft allocation report is issued,-the
parties have the opportunity to comment on factors used to
allocate costs. Essentially, a dialogue takes place between
parties and the allocator until a final allocation report is
issued. At this point the parties may choose to accept the
report as issued, or use it as a basis for negotiation, in order
to reach settlement.
B. Information Collection and Data Compilation
Once the parties agree upon procedures to govern the
allocation, the information collection can officially begin. In
some cases that means continuing where earlier information
gathering efforts ceased. Information-gathering activities vary
depending on the site type and classification of parties.
Sources typically used for waste contribution information
include: responses to EPA's CERCLA section 104(e) information
requests; disposal records; site records; interviews; and
questionnaires.
The majority of those interviewed report that section 104(e)
information is easily obtained as a result of EPA's recent
information-sharing policy; however, one interviewee noted that
104(e) information was available only half of the time needed.
The iatter interviewee proposed that a more diligent use of
104 (e) requests by EPA, including collection of penalties by EPA
5
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for noncompliance, would result in better data and ultimately,
more accurate cost allocations. Availability of 104(e) data
becomes particularly relevant for cases in which parties
identified by EPA as PRPs at the site do not participate in the
allocation process. EPA's 104(e) requests may provide
information to the allocator regarding volume of waste
contributed by those parties not participating in the allocation.
Even though PRP responses to EPA 104(e) requests are readily
available in most cases, allocators are frequently asked to draft
and administer questionnaires. Questionnaires typically include
questions regarding the waste-generation process, disposal
methods, and waste haulers used, to provide the allocator with
additional information on waste contributions and leads on
transporters and pathways of contamination. Generally, employee
statements relied upon for corporate information are required to
be notarized, and corporate officer certification is required for
verification that corporate records have been searched with
diligence. One allocator observed that participant responses to
allocator information requests are often more thorough than
responses to EPA's 104(e) requests because of PRP-allocator
confidentiality agreements.
Information gathering in the case of a generator landfill
allocation initially focuses on obtaining available volumetric
information or information which may be used to generate
surrogate volumetric .information. For periods in which
volumetric information is absent, data is often extrapolated from
waste production and disposal records for a given period to
determine waste contribution for the non-recorded period. The
yearly amount of waste produced and the number of years of
operation are two factors frequently used during extrapolation in
order to better calculate volumetric contributions absent
records. Another example of how extrapolation is used is the
case in which a party utilizes four recycling facilities for
disposal annually. In the absence of other information, the
allocator may, for example, use the assumption that the recycling
facility at issue accepted one-fourth of the facility's waste
during the annual period.
In addition, some allocators rely upon waste output models
of a party's production facility for cases in which waste-
disposal information is absent. For example, if a facility
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manufactures 50 units in a given year and a corresponding
byproduct of 2 gallons of hazardous materials, then, in the
absence of other information, the allocator may assume the
generation of 2 gallons of byproduct in a recordless year
provided that manufacturing remains at 50 units. One interviewee
objected to waste output models because models may inaccurately
portray production during that period, or even worse, they may
unjustly penalize a company for keeping detailed production or
disposal records during other time periods. A model could
attribute the generation of waste to a PRP in excess of the
amount actually produce based on records.
In an effort to fill data gaps, economic issues are also
considered in developing disposal assumptions. For example, an
allocator may rely upon the"assumption that the transporter hired
by the generator used the disposal facility which was most cost
effective for the transporter.
If volumetric contribution information is collected, the
allocator develops a database to house the information. Many of
those interviewed first classify parties by. waste type disposed
(e.g., solids verses liquids). Once waste type categories are
developed, the allocator then ranks parties by volume of waste
disposed. Some interviewees stressed that consistency of
judgment throughout development of the database is critical in
developing an accurate allocation; therefore, the fewer people
directly involved in making interpretations, applying
assumptions, and inputting data, the more reliable the data.
PRPs are generally provided an opportunity to provide a quality
control review of the database for clerical and technical errors.
That review may result in challenges to data input, such as
recording of duplicate transactions and purported
misinterpretations of data.
For sites at .which contamination is due to the historic
operation of a manufacturing facility or facilities (non-landfill
sites) or landfill sites at which the only PRPs are owners or
operators, though the basic information collection process is
similar, interviewees reported that a substantially different
approach must be taken in developing and organizing a database.
The ranking of parties in these situations is dependent upon .site
specific circumstances and generally does not lend to ranking
parties in a purely quantitative manner. In contrast to many
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landfill sites where volumetric data is available from disposal
records, at non-landfill sites disposal data is not available
since any disposal was generally a consequence of a manufacturing
process which included undocumented discharges and inadvertent
spills of hazardous substances. Therefore, surrogate data may be
generated by an evaluation of: 1) typical manufacturing process
discharges and spills; 2) production line practices; and 3) the
environmental fate of contaminants.
Finally, those interviewed report that for sites at which an
allocation is between PRPs which are owners and operators,
information should be obtained regarding the practices and
knowledge of the parties in order to determine relative
responsibility. Information sought typically includes length of
ownership, operational control, degree of control over disposal
practices, knowledge of the hazardous nature of materials
disposed, and financial or other benefit derived from allowing
disposal. Once data is collected, the process of allocating cost
shares, may begin.
C. Application of Allocation Factors
The Gore Amendment2, an unadopted amendment proposed to the
original Superfund bill, contains the following factors to be
considered when allocating site costs among PRPs: (1) the amount
of hazardous substances involved; (2) the degree of toxicity or
hazard of the materials involved; (3) the degree of involvement
by parties in the generation, transportation, treatment, storage,
or disposal of the substances; (4) the degree of care exercised
by the parties with respect to the substances involved; and (5)
the degree of cooperation of the parties with government
officials to prevent any harm to public health or the
environment.
Since proposed, the Gore factors have been applied as
relevant factors, in whole or in part, by allocators in private
2 See H.R. Rep. No. 99-253 (III), 99th Cong., 1st Sess. 19
(1985), reprinted in 1986 U.S. Code Cong. & Admin. News 3042.
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allocations and by courts in contribution actions.3 In both
contexts, a variety of additional factors have been applied
depending on site circumstances and at the discretion of the
judge or allocator. Those factors include: 1) years of
ownership or operation/years of generation or
transportation/years of manufacturing process; 2) consideration
of the petroleum exclusion; 3) the ultimate environmental fate of
wastes at the site; 4) the degree of care exercised in waste
disposal- or ownership and operation; 5) the degree of control
over waste practices; 6) permit violations; 7) the degree to
which a party is providing a public service; and 8) knowledge of
waste disposal practices. One allocator reported using the
degree of party cooperation as a factor since allocations only
work in situations with cooperating PRPs.
Because the goal of the allocation process is settlement,
all interviewees recommend that application of allocation factors
should be flexible to accommodate site-specific situations and to
increase the likelihood of settlement. None of the allocators
interviewed rely on specific formulas or models to allocate cost
shares. They all emphasized that factors applied are a function
of site type, amount of information available, and classes of
parties involved in the allocation. Generally, in
generator/transporter allocations, the allocator primarily
considers volume and contaminant fate in allocating cost shares.
Some interviewees believe that the use of volumetric information
alone is inappropriate to develop a cost allocation. In
owner/operator allocations, the allocator's focus shifts to
factors such as degree of care in, and years of, ownership and
operation.
Of the allocation factors identified, those interviewed
identified toxicity of waste as the factor generating the most
controversy in its application. Interviewees reported that .
claims-of toxicity often result in much time spent name-calling
and little time addressing contribution. Although many of those
interviewed indicate that the toxicity of waste contributed is
3 See "Allocating Contribution Shares in Superfund Cases,"
Chemical Waste Litigation Reporter; "Allocation of Response Costs
in Private Superfund Actions," Chemical Waste Litigation
Reporter, Vol. 17, No. , December 1988.
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considered as a factor in a generator/transporter allocation,
most parties believe that toxicity alone is not an appropriate
modifier because it is a poor measure of site'responsibility.
More specifically, for allocations at landfill sites involving
primarily generators, for example, the degree of toxicity of a
party's waste is used to manipulate the raw volumetric data by
either discounting or appreciating a party's contribution to the
site. , Interviewees report that many PRPs feel that toxicity
should only be used to discount baseline volumetric information
already determined (i.e., more weight is giving to more toxic
waste when volumes are relatively equal). They state that some
PRPs prefer developing a waste contribution table made up solely
of volumetric contributions, and then providing an appeals
process for parties to argue for adjustment of their
contributions based on toxicity claims.
Rather than considering toxicity of a waste alone, many
interviewees propose that toxicity be considered in relation to
the contaminant's role in driving the cost of the remedy at the
site. For example, if a generator disposed of a highly toxic
chemical at a site, but that contaminant was not the primary
contaminant of concern being addressed and resulting in the high
cost of the remedy, then that party's share would not be
increased because of its waste toxicity any more than the parties
who contributed less toxic waste to the,site. In addition, if
the toxic materials disposed at the site are well contained
(e.g., remained immobile and capped as part of landfill
containment) and consequently represent a discernable component
of the cleanup costs, the participant would not be responsible
for a greater cost share associated with a groundwater pump and
treat system simply because of the high toxicity of the material.
This application focuses on the ultimate role of a contaminant in
site remediation, rather than the toxicological characteristic of
the waste.
Although litigative risk is not a factor of the actual
contribution findings, it may be used to modify the ultimate
settlement. Even after the allocator issues a final
recommendation, the degree to which parties are motivated to
settle may still be an issue. For example, litigation risk may
be used as a floor to determine a minimum payment. If volumetric
information does not exist but the party is presumed to have been
a small volume contributor, then the minimum settlement cost for
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that party may be set at the cost of litigation, and that amount
may become the party's allocated share.
D. Allocations between Classes of Parties
None of the allocators interviewed identified specific
formulas or reliance on any particular rule of thumb to determine
shares in cases in which generators/transporters and
owner/operators are both involved. Interviewees stated that
allocations which include owners and operators pose a greater
challenge in achieving a reliable allocation than
generator/transporter allocations.
Unlike generator/transporter allocations, at which
volumetric information or surrogates may be used to generate
volumetric information, raw volumetric data is inapplicable in
calculations of owner/operator allocations. Often, allocators
utilize site-specific facts and court opinions with similar fact
patterns to determine what factors are applicable for an .
owner/operator allocation. Most allocators interviewed rely.on
some or all of the following factors in determining
owner/operator share: (1) degree of care exercised in ownership
or operation; (2) years of ownership or operation; (3) degree of
control over waste practices; (4) permit violations; (5) degree
to which party is providing a public service; (6) knowledge of
waste disposal practices; and (7) economic benefits from
ownership and operation.
For generator/owner/operator allocations, often, the
owner/operator is not part of the original group of coalescing
parties. Generators/transporters commonly initiate and
participate in an allocation without involving the owner/operator
in order to allocate among themselves and adjust for cost shares
depending on a determination of an orphan share. 4 Frequently it
is futile for parties to invest much time in determining an
4 Depending on the allocation, there are different ways to
define orphan share. Aa orphan share may defined as
contamination attributed to defunct, bankrupt or financially
nonviable parties. At other sites it may also be defined as
contamination that cannot be attributed to an identifiable party.
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owner/operator share because the owner/operators are often
financially non-viable, and have little money to contribute to
site cleanup. In cases where generator/transporters have
developed an allocation scheme absent owner/operator
participation,. the generator/transporter participants may look
first to financial viability of the owner/operator. Based on an
ability-to-pay analysis (discussed in more detail below) of the
owner/operator, the group often takes whatever payment the
owner/operator can make, and uses that payment to offset the
total settlement amount. In those cases, no percentage share is
assigned to the owner/operator.
Where a generator and transporter are responsible for the
same waste, interviewees identified a couple of ways to allocate
the costs: (1) divide the cost of their allocated share between
the two parties; or (2) if there is an orphan share, assign the
costs associated with their allocated share to either the
transporter or generator and allocate the orphan share or a
portion thereof to the other party. Facts associated with the
generators' and transporters' activities can affect the share
allocated to those parties. Some factors often considered.with
generator/transporter divisions are whether the transporter had
alternative disposal locations available, or by contract was
required to dispose of waste at a particular location, and the
respective parties' culpability and general practices.
E. Federal. State and Municipal Parties
Most allocators indicate little difference in their
experience whether dealing with private, federal, or state
parties as PRPs. Most interviewees indicate that allocators
treat federal and state parties similarly to other parties;
however, private parties in some cases indicate uneasiness about
participating in allocations with federal parties because of
confidentiality concerns. PRPs develop very extensive agreements
to preserve confidentiality of information shared during the
allocation process; generally these agreements are not entered
into with Federal parties due to the dual role of the government
as enforcer- and PRP. Wii:h the exception of confidentiality
issues, the interviewees did not identify additional issues^ which
arise by virtue of federal and state participation in
allocations.. However, some of those interviewed identified
unique issues which arise with allocations involving
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municipalities.
Some interviewees observed that for cases in which PRPs
perceive that EPA treats municipalities differently than the
other parties at the site, the allocation process may
deteriorate. Of those interviewed, some stated that not knowing
the grounds upon which the EPA may settle with a municipal party
may negatively affect the allocation. In addition, one allocator
stated that when EPA contemplates settling with a municipality
for an amount lower than the amount determined in the allocation
proceeding, participants often feel slighted and the allocation
effort may fail. That allocator suggested that the development
of a cohesive municipal PRP policy by EPA would alleviate these
concerns.
Another interviewee, stressed the significance of
differences between municipalities and other parties which should
be taken into consideration, on a site-specific basis, in
allocations. The allocator observed that municipalities are not
for profit organizations; therefore, economic benefit factors
generally considered in allocations between private parties are
inappropriate to use. The allocator also noted that
determination of cost shares should be tempered by the fact that
municipalities perform a public service. That factor should be
weighed against any culpability a municipality might have
demonstrated in the disposal, transportation, ownership of
operation og hazardous waste.
F. Ability to Pav Determinations
Most sources indicate that, with the exception of
owner/operator contribution determinations, ability-to-pay issues
are not considered until the allocation recommendation is
completed. At that time, inability-to-pay claims are presented,
and where proven, the discounted amount is redistributed among
the remaining parties. In some cases allocators may also be
involved in structured settlements for parties with limited
ability to pay {i.e., development of a payment schedule).
Determinations of ability to pay are reported as most
difficult among municipalities. When allocator's assess a
municipality's financial viability, they must consider issues not
relevant to assessing private parties' viability. Indicators of
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municipal health reportedly used include the following: overall
net debt as percent of full market value of taxable property;
bond rating; unemployment; median household income; property tax
collection rate; and property tax revenues as a percent of full
market value, of taxable property. For assisting in assessment of
municipality assets, one source recommends the article,
"Assessing a Municipality's Ability to Pay Superfund Cleanup
Costs," written, by Tex Ann Reid, U.S. EPA, Region IV, and Edward
M. Clark", Anthony M. Diecidue, and Mark F. Johnson, PRC
Environmental Management, Inc. "Methodology for Analyzing a
Municipality's Financial Capability," by the Economic Analysis
Division, of EPA's Office of Policy, Planning and Evaluation
(February 28, 1985) is also recommended by this person for
assistance in determining municipal financial health.
G. Parent and Successor Corporation Issue
Whether parent and successors of a participating PRP should
be allocated a cost share may be considered at some sites ( e.g.,
in the case of an impending bankruptcy claim). In general,
parent and successor corporation issues are treated in one of . two
ways. At some sites, these issues are not considered in the
allocation; rather, the participants are responsible for seeking
resolution on issues, such as whether the.parent or successor may
be liable under CERCLA, in side-bar.negotiations without the
allocator's assistance or through litigation. At other sites, a
successor may .be brought into the allocation if there has already
been a finding of liability or an allocator is asked to undertake
an analysis of whether a parent company is liable or successor
liability would attach. Some of the interviewees expressed a
reluctance to address issues of parent and successor liability.
V. ALLOCATOR EXPERTISE
All interviewees agreed that the most critical factors for a
successful and accurate allocation are the neutrality of the
allocator and the perception of fairness. One allocator noted
that an allocation is perceived as fair when the participants
have an opportunity to present their arguments, and they.believe
those arguments are taken into consideration and addressed
rationally. Several interviewees noted that an allocator's
neutrality and ethics are key elements to good faith
participation by parties. Interviewees all agree that full
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disclosure of current or prior relevant representation of
interest by the allocator is an absolute necessity prior to
commencing allocation efforts. Because of participant desires
for neutrality, PRPs often disapprove of prescribed formulas or
models. Preconceived models may indicate that an allocator is
not beginning the process with a neutral view.
Most persons interviewed agreed that ideally allocators
should possess extensive familiarity with CERCLA. One allocator
noted that a PRP has greater confidence in the process if a
person experienced in Superfund is allocating cost shares. That
person stated that hands-on experience can not be substituted
with academic experiences. Interviewees did not agree as to
whether or not the allocator should be an attorney. None of the
interviewees expressed interest or concern for an allocator
certification program, nor felt that administrative law judges or
arbitrators are better equipped to conduct Superfund allocations.
Other traits considered helpful to the allocator include:
excellent interpersonal and communication skills (listening to
other ideas and reconsidering when necessary), and problem-
solving abilities. In addition, interviewees agreed that
allocators should be team builders, steer the allocation process,
and periodically update the PRPs on progress of the allocation.
Allocators are also expected to introduce issues needing
resolution, make recommendations as to the resolution of these
issues, and ultimately keep the process moving towards
settlement.
VI. TIME AND EXPENSE CONSIDERATIONS
The time and expenses associated with an allocation varies
greatly from site to site, but are primarily influenced by the
number of parties at a site and the cost of remediation.
Generally, an allocation at an average site may take six months.
At some sites, however, allocations have been completed within
two months. Complicated sites may require up to two years for
resolution. A generally accepted range of time involved for
allocating at sites is ^ix months to two years.
For cases in which remediation is most costly, more time is
required to develop an acceptable allocation. In.addition, a
correlation exists between the amount of documentation available
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and the amount of time invested in negotiating an allocation: for
cases in which ample information is available, less time is
required for an allocation. Allocations are more expensive now
than they were in the 1970s and 1980s in part because volumetric
information is not now as readily available.
The expense of an allocation (e.g., costs of retaining
allocation professional services) depends largely on the number
of parties participating or being allocated shares. Generally,
allocation costs for a'small site range from $25,000 to $100,000.
The expense for complex sites, however, may exceed $200,000, with
a likely maximum of $500,000. For generator/transporter
allocations, a significant portion of the cost is associated with
development of the database.
The internal expense of participating in an allocation
process must also be considered. PRPs represented by internal
counsel report that the expense of participating in an allocation
are minimized because their representative counsel are salaried
employees, costing less than counsel retained on a project-
specific basis.
VII. PURPOSE AND USE OF THIS DOCUMENT
This report reflects the information that was gathered from
entities involved with administering or have participated in an
allocation process to apportion the costs of Superfund
remediation. This report does not constitute the views of EPA or
policy by the Agency and may not be relied upon to create any .
specific rights or privileges,, substantive or procedural,
enforceable, at law or in equity.
F:Alloc\allocati.rpt
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Reform:
are Implen
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INFORMATION GATHERING APPROACHES
IN THE ALLOCATION PROCESS
Any allocation is based on facts. Therefore, every allocation must include an
information gathering phase. The parties and the allocator must be able to work from
the same information base concerning the nature of the parties, their operations, and
the types and volumes of materials sent to or disposed of at the site. Absent a shared
description of the facts, the allocator will not have the information needed to prepare
an allocation, and the parties will not have enough confidence in the allocator's work
product to use it as an equitable division of site responsibility.
At most sites, the ipformation that is collected and assessed falls into two basic
categories: quantitative and qualitative data. "Quantitative data" is typical waste-in
information - gallons, drums, cubic yards and other numerically-based descriptions of
the materials contributed by an individual party or group of parties. "Qualitative data"
consists of all of the other information that describes a party, its material, or its
relationship to a site, and can range from a substance name (i.e.. waste oil or trash),
to the nature of a transaction (a sale versus a manifested disposal), to issues of
responsible party status (for example, a contract confirming that a party conveyed
property with knowledge of contamination). § fundamental rule of allocation is that the
information gathering process must be tailored to every site, because not every site
has all (or even most) types of information available to the PRPs or the allocator.
On the whole, sites subject to allocation efforts generally can be divided into
three categories, based on the types of PRPs present:
A. Owner/operator sites;
B. Generator1 sites; and
C. Sites with a mixture of owners, operators, generators and transporters.
At owner/operator sites, an allocation likely will be based primarily on qualitative
information: in a dispute between present and/or successive owners and operators,
waste or volume numbers usually are not available, and are not as relevant to a
distribution of liability as are contractual terms, knowledge of disposal or housekeeping
practices, financial benefit derived from the contaminating activity, and similar narrative
facts.
1 For the purposes of this discussion, the term "generators" refers to those parties
subject to potential liability under Section 107(a)(3) of the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. §9601
et sea, ("any person who by contract, agreement or otherwise arranged for disposal or
treatment..."). Generators also is used to refer to those parties may be liable
because they brokered or the transfer or disposal of hazardous substances.
-------
For most generator sites, the allocation efforts will focus on quantitative
information: either waste or volume numbers (including waste-in, waste-out or waste-
remaining, depending on the circumstances), or narrative descriptions that can be
converted into numbers. In allocations generally, the goal is to provide each party
with a percentage share of the site. These percentages then often are adjusted by
qualitative information such as the presence of a remedy-driving chemical in a party's
wastestream.
Sites with a mixture of owners, operators, generators and transporters present
a twofold challenge to the information gathering process. First, the allocation
methodology must define the areas of inquiry in such a way that the allocator collects
both qualitative and quantitative information from all parties, so that Jhe necessary
information comes into the process from each type of party. Second, the allocation
methodology also must restrict the areas of inquiry so that the allocator is not deluged
with irrelevant data. It is just as possible to destroy an allocation with too much
information as it is with too little: the allocator and the parties exhaust themselves on
information gathering and assessment, and have no time, money or patience left to
translate the allocation process into a settlement.
No matter which types of PRPs present at a site, however, the allocation
process will proceed through a number of informational steps before the allocator can
proceed with his or her job of producing relative share numbers for each party.
I. Information Collection.
An allocation process may seek information from a variety of sources, including:
A. Information from regulators.
Governmental agencies and departments often are storehouses of relevant
information for an allocation, including such items as:
• A waste-in list2 or NBAR;
2 See Krickenberger, Kit R., & Berman, Eugene, Allocation of Superfund Site Costs
Through Mediation, 12-15 (Alexandria, Virginia: Clean Sites, Inc., 1987). EPA often
provides an initial waste-in list or a Non-Binding Allocation of Responsibility (NBAR),
based on documents available to the agency from site owners and operators, and
occasionally transporters and generator PRPs. The waste-in list or NBAR may, but
usually does not, adjust raw volume* numbers with discounts or multipliers to account
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• responses to information request letters sent out under the authority of
Section 104(e) of CERCLA or a counterpart state superfund-type law;
• regulatory agency files, such as
• federal hazardous waste, water and air permits;
• similar state permits, and transporter manifests or waste hauling
records; and
• local information from health departments, planning and zoning
commissions, public works agencies (building permits,
sewer/waste line plans and approvals), and fire and police
departments.
B. Information from PRPs and other private sources.
The search for relevant allocation information does not end with the regulators'
files. Older or illegal disposal sites, owner/operator disputes, and Aceto-type3 cases
frequently do not have a wealth of regulatory files, because they were not subject to a
regulator's authority. For most other sites, if the regulatory files contained enough
information to create an allocation, the parties would not pay for a private allocator.
The next place to search for information thus becomes private party documents and
recollections, including:
for differences in toxicity, litigation risk, and other common allocation factors. Although
a waste-in list frequently is the first step in an allocation, a completed allocation will
take much more information into account than just the waste-in numbers.
3 In U.S. v. Aceto Agricultural Chemicals Corp.. 872 F.2d 1373 (8th Cir. 1989), the
court denied defendant's motion to dismiss, holding that the "otherwise arranged for"
language of CERCLA Section 107(a)(3) is sufficiently broad to justify the imposition of
liability on manufacturers who retain ownership of a product that is processed at a site
for the manufacturers' benefit and at their direction, and which site later is found to be
contaminated with the manufacturers' substances. The court further justified its
opinion with the fact that waste generation was inherent in the formulation process.
The Aceto theory of toll processor/formulator liability continued with the Ninth Circuit
decision in Jones-Hamilton Co. v. Beazer Materials & Services. Inc.. 959 F.2d 126
(9th Cir. 1992).
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business records
• of owner/operators, such as
• invoices, accounting ledgers, customer cards or lists, call
notebooks, hauling slips, and gatekeeper logs;
• internal memoranda describing material handling practices
that might reveal information about spills or overfills;
• correspondence with regulatory agencies;
• of generators and owner/operators, such as
• raw material purchases;
• waste disposal transactions;
• production records and sales figures;
• equipment maintenance, construction and disposal records;
• technical studies, including site acquisition studies such as
Phase I and Phase II reports, Preliminary Assessments and
Site Investigations;
• operation receipts, ledgers and invoices;
• supplemental responses to Section 104(e) requests;
• of generators and transporters, such as
• manifests, spill reports, hazardous waste storage reports,
disposal facility permits and permit applications, state and
local transporter reports and monitoring records;
• customer lists and ledgers;
interviews with and/or depositions of past and present principals and
employees about customers, materials, handling and disposal practices;
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• allocation questionnaire responses, posed to the parties as part of the
allocation methodology or protocol; and
• relevant litigation files, including proceedings to obtain site access,
insurance coverage and toxic tort cases, as well as any preexisting or
ongoing cost recovery and contribution actions.
During the information collection process, the parties and/or the allocator will inventory
the known-sources of information (such as those described above), determine the best
method for acquiring data from each source, and proceed with acquiring the relevant
information.
The amount of available information often varies among parties, ranging from
those with full documentation and knowledgeable employees able to provide
corroborating testimony, to those with limited or no records or testimonial information.
For parties with little or no readily-available information, the allocation must use other
collection methods, including private investigations and allocation questionnaires.
Private investigation firms can provide valuable data by interviewing witnesses (for
example, site operators or haulers), uncovering additional records, developing
testimonial evidence, or filling in information gaps for missing time periods. In some
cases, the allocator can serve a similar role. With the consent of the interviewed
party, the allocation participants may preserve an interview by tape or video recording
and transcription. The use of allocation questionnaires, often with authentication or
certification, is a reasonably common tool for seeking allocation information.
II. Information Assessment.
After the allocator and the parties collect information, the allocator must analyze
it to begin sorting relevant from irrelevant data, and preparing the framework for the
ultimate allocation. An allocation is more than a waste-in list, and the allocator may
present his or her assessment of the facts and their importance to the allocation
through one or all of the following:
• a report on the status and history of the facility, including
• the owners, operators, and historical users of the site;
• the types of operations and activities conducted at the site;
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• the kinds of permitted and unpermitted processes, operations and
activities that went on at the site, and the consequences of those
acts;
a general description of the nature and chemical composition of
the materials sent to the site;
• a description of the nature and chemical composition of the
contaminants present at the site; and
• a synopsis or analysis of the contractual agreements and
relationships currently existing or which existed in the past
between the parties;
a report for each participating party, summarizing the available
information pertaining to that party, including
• PRP name and address;
facility name and address for each plant or location involved in the
site being allocated;
individual transactions that are or may be linked to the site,
including date, quantity, type of material, source of information,
method of transport, manufacturing process involved, type of
transaction (i.e.. sale or purchase), method of disposal (i.e!. leak,
spill, landfill, incineration), location of disposal, and cross-
referenced corroborating or contradictory information available to
the allocator;
• potential affiliated or co-liable entities (i.e.. a generator or broker);
• eligibility for any discount and/or multiplier factors;
• other information relevant to liability or allocation (i.e.,
owner/operator contractual or deed provisions); and
• applicable defenses;
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• an allocation report, which
• presents individual party volumes in a common unit or units of
measurement;
• suggests the discounts, multipliers, exclusions and defenses that
the allocator believes are appropriate for the site;
• adjusts the individual party volumes by these discounts, multipliers
and exclusions intended to account for differences in toxicity or
contribution to the contamination being addressed at the site,
defenses and litigation risks; and
• derives a numerical total volume for the site, against which
individual party numerical assignments are compared to assign
percentage shares.
When the parties at a site consist only of owners and operators, the allocator
may be able to assess their relative contributions by the amount and type of waste
each disposed of at the site. If production and disposal figures are unavailable, the
allocator may use tenure at the site as a surrogate for waste disposal, particularly if
the processes used at the site did not vary over time. What initially appears to be a
simple allocation, however, often becomes much more difficult because of different
historical facts, such as process or housekeeping changes, relocation of process
areas to different sections of the site, equipment decommissioning and/or updating,
and selective operation or occupation of separate areas of the site by successive
owner/operators. In such cases, the allocator must use qualitative information other
than volume or tenure to evaluate an equitable distribution of shares.
When a site's PRPs include not only owners and operators but also generators
and transporters, the information assessment is both easier and more complex. It is
easier to compare generators and transporters to each other, because the available
information tends towards the numerical - loads, gallons, pounds, drums -- which is
easier to attribute on a volumetric basis than the more narrative information associated
with owners and operators ~ contract and deed terms, dates of installation of pollution
control equipment, etc. The allocation as a whole becomes more complex, though,
because the allocator must engage in an "apples to oranges" comparison; he or she
must apportion site shares among parties who may be liable for the exact same
cleanup costs under different theories of liability.
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For example, at a recycling site, factors such as the history of the site, the
degree of care exhibited by the owner/operator and the length of time each owner or
operator controlled the site may affect the owner/operator relative shares. Generator
and transporter shares may be based on the volume and type of material sent to the
site by each of them. When it comes time for the allocator to assign total allocation
shares to all parties, however, there may be a generator, a transporter, and an
owner/operator who all have or could have liability for the same gallon or pound of
material. The allocator must exercise creativity and judgment in determining how a
court might divide that gallon's or pound's site share between the generator,
transporter, owner and operator.
Finally, the allocators' initial information assessment also may include some
indication of likely orphan shares, including insolvent, absent, or financially shaky
owners, operators, generators and transporters.
III. Quantitative Information.
Quantitative information gives a numerical basis for dividing responsibility
among parties. Quantitative data permits the allocator to develop an allocation share
which directly correlates with the amount of material contributed by each party.
After culling numerical information from a party's records, allocation
questionnaire responses, interviews, briefs and depositions, the allocation consultant
will transfer this quantitative information into a summary format, such as a chart,
graph, report, or computer spreadsheet or database. There are many sources of
quantitative information. Some of the most common are presented below.
A. Owner/operator records.
When available, owner and operator records often provide the most
comprehensive picture of transactions at a site. Documents related to the daily
operation of the site are especially helpful and include:
• shipment logs;
• daily activity sheets;
• batch reports and analytical test records;
• hauling slips and transportation records, including receipts;
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• disposal records;
• worker notebooks, status and problem reports;
• laboratory reports on samples of material; and
• storage locations for handled items.
When an owner/operator's financial records survive, they often contain the
amounts and dates of customer invoices and payments, and serve both as a primary
source pf information and a secondary source of conversion rates, so that a
customer's "one load at $5.00" record can be translated to an appropriate volume. If
the allocator can access the owner/operator's rate structure (charges to or payments
from customers), he or she can infer the volume of material that is the subject of the
financial record at issue.
Site financial records may be in the form of:
• accounts payable and receivable ledgers;
• copies of incoming and outgoing invoices and checks;
• deposit slips; and
• statements of customers' accounts.
Owners and operators now are, and in the last twenty or so years have been,
required by regulators to file various permits and reports with local, state, and/or
federal agencies. These permits and reports may contain references to the quantity
and nature of waste and other material, and include:
• permit applications;
• operation reports;
• deeds and leases; and
• spill notifications.
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Even If owners or operators are insolvent or financially unable to pay for an allocation
or for ultimate site cleanup costs, it is often advisable to allow them to participate in
the allocation process, if only to obtain access to the types of information listed above.
B. Generator and broker records.
Generator responses to state or federal information requests may provide
documentation on the nature and quantity of material sent to the site. Such
information can clarify or supplement site records. Generator business records can
supply details about the nature of that generator's material, or cover periods of time
missing from the operator's records. In some cases with missing or absent site
records, generator documents may provide enough information to reconstruct the site
operations. Brokers, in turn, often hold financial records such as invoices and sales
agreements, or documents confirming the transportation of brokered material to a site.
Although a generator's or broker's records may include copies of reports sent to
regulatory agencies, they more commonly concern finances and the transportation of
material, such as:
• ledgers of accounts payable;
• invoices;
• cancelled checks;
• sales agreements with brokers;
• pick-up slips;
• delivery orders;
• freight bills and bills of lading; and
• waste manifests.
Generators also sometimes have internal memoranda summarizing use of a facility, or
production or waste generation rates from a particular plant. Even if the underlying
records supporting these memoranda have been lost over time, the memoranda
themselves can be important source documents for an allocation.
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C. Transporter records.
Transporter records often refer to many different generators and site owners
and operators, and thus can be useful when parties search for additional PRPs.
Responses from transporters to government information requests can supply
documentary evidence demonstrating the volume or weight of material picked up from
generators or brokers and taken to a site. This information may consist of:
• ledgers;
• invoices to customers;
• photocopies of payments from customers;
• invoices from or payments to a landfill or disposal location;
• customer logs, notebooks or other call records;
• drivers' logs;
•• trip tickets;
• delivery orders and receipts;
• weigh tickets; and
• confirmation slips issued by the plant gate attendants where the
transporter picked up or disposed of material.
Again, transporters may have internal memoranda or copies of letters sent to current
or prospective clients that also may provide quantitative information about the volume
and nature of their transactions with a site.
D. Other sources.
State, federal, and local agencies may also be sources of quantitative
information. Data may include permit applications and permit-related documents, spill
notices, waste manifests, or documents associated with cleanup actions that have
already taken place, including inventories of drums or other items removed from a site.
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IV. Qualitative Information.
When the information gathered does not provide adequate quantitative data to
perform an allocation, as is often the case, the allocator must rely upon qualitative
data. This qualitative data can serve different purposes. First, it may act as a
surrogate for quantitative data, and thus be used to estimate volume for a particular
party. For example, a transporter might recall that he picked up "about 4 drums a
week for 3 years," from a particular PRP and took this material to the site. Clearly,
the allocator can translate this testimony into a numerical entry for the PRP.
Second, qualitative data also can provide non-numerical litigation risk and
allocation factor information, such as, for example, a description of. a generator's
material as being sold to an owner/operator for incorporation into a product, rather
than for disposal. Another example of such qualitative information and its effect on an
allocation is information describing the nature of the contaminants at the site which
require remediation, so that the allocator can attribute specific remedial costs to
specific contributors or wastestreams.
Finally, an allocation can take into account qualitative information about an
entire industry or process, such as standard operating procedures in use during a
given time for the manufacture of a certain product. These "SOPs" can include
information allowing the allocator to make assumptions about the generation of wastes
inherent in the production process. Alternatively, such qualitative information may
confirm that a party did not contribute a specific substance to a site. If, for example, a
specified commercial solvent was not used for general degreasing until five years after
the site closed, a manufacturing PRP who sent cleaning rags to the site is not likely to
have contaminated those rags with that particular solvent.
Such qualitative information can influence the allocator's characterization of the
entire share of a party. The allocator's analysis of this sometimes anecdotal and
almost always narrative type of information is crucial, however, because if a party's
arguments regarding qualitative information are not addressed, that party will not
accept the ultimate allocation. The best way to ensure the acceptability of an
allocation that incorporates qualitative information is to agree about the uses of such
data at the beginning of the process.
A. Qualitative data sources.
Qualitative data may be found in an almost infinite variety of sources, including:
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• deposition transcripts and/or interviews of generators, transporters or
former employees of the site;
• statements from other individuals who may have had knowledge of
operations at the site;
• records from court cases involving the site;
• correspondence between site operators and state, federal, or local
agencies; and
• site investigations by regulatory agencies.
Sources of less specific data may be:
• license and permit applications;
• manufacturing information for a particular facility or industrial process;
• non-site-specific waste generation information for a particular company or
industry;
• effluent reports from wastewater treatment plants;
• news articles;
• standard chemical or manufacturing reference manuals and texts;
• correspondence or records from community action groups; and
• Material Safety Data Sheets.
V. Allocations Incorporating Qualitative and Quantitative Data.
A fully manifested treatment, storage and disposal location, with complete
records, few or no process changes over time, and which accepted standard
compounds for disposal does not need an allocation - it needs a comprehensive
waste-in or waste-out list. The parties can reach settlement using their numerical
percentage shares, and reserve their energy for addressing cleanup concerns. Few
sites currently in the Superfund pipeline meet this criterion.
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An allocation combines numerical data with narrative data to produce an
equitable division of responsibility among the parties. The product of an allocation is a
"rough justice" assignment of percentage shares. Most sites combine quantitative with
qualitative data.
The allocator who proposes an initial division of responsibility must explain to
the parties his or her reason for including each piece of information in the allocation
process. The allocator must be able to satisfy all of the PRPs' questions. To assist
the parties in reaching an ultimate settlement under the allocation, the parties and/or
the allocator "must develop "ground rules" for handling both qualitative and quantitative
data, and obtain agreement on these rules before beginning the allocation. The rules
can include guidelines for included and excluded documents, and provide direction on
making assumptions or extrapolations to account for sketchy or missing information.
Within the guidelines and rules established by the parties, allocation
approaches that allow the allocator to incorporate both numerical and narrative
information can produce allocations for otherwise unallocable sites, including sites
with:
• partial quantitative information (i.e.. 4 out of 10 years' worth of operation
records), but with witness statements for some companiesrduring some
or all of the missing years;
• narrative, non-numerical admissions from a party regarding its use of the
site, which can be combined with a regulator's inventory of drums and
material removed from the site during closure and cleanup; and
• available volume information, but at which the nature of the wastes and
the substances requiring remediation differ significantly, so that an
equitable allocation must include a factor for substances which drive the
remedy.
It is almost always necessary for an allocator to consider both narrative and numerical
information in mixed multi-party sites because:
• generators who contributed high volume, low toxicity substances argue
for a decrease in their volumetric share;
• a certain percentage of the PRPs will be insolvent or have difficulties with
payment, and their shares must be redistributed appropriately; and
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• various of the participants will rely upon the Gore factors as part of the
allocation risk analysis, which requires the allocator to consider such
non-numerical topics as the degree of care or the degree of involvement
of certain PRPs in the activities that produced or cleaned up the
contamination.
The use of the Gore factors in the courts is discussed elsewhere.
Finally, no matter the source or type of data, the parties will argue, and the
allocator will decide, questions about the reliability of the data that is the basis of the
allocation. Different types of information deserve more or less deference, in
allocations as in litigation, and both the allocator and the parties must incorporate
those differentials into an acceptable allocation.
VI. Participating in the Information Gathering Allocation Stage.
An allocation is only as good as the information upon which it is based. If the
allocation participants do not provide the allocator with information, or arrange for him
or her to have access to documents and knowledgeable persons, then the allocation
cannot succeed, because neither the allocator nor the parties will believe that the
allocation product reflects a just division of responsibility.
Accordingly, an allocation participant must plan for the information gathering
stage of an allocation process, so that the participant can supply the allocator with
timely and complete information.
A typical allocation contains several information gathering steps. First, the
parties may send the allocator basic site documents, including
• the RI/FS report;
• the ROD and any ROD amendments or ESD records;
• available RD/RA documents such as cost estimates, treatment plant
specifications and cap criteria;
• Section 104(e) requests and responses;
• any other PRP investigatory files, including private investigator reports
and transcripts or notes of witness interviews; and
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• transporter or owner/operator records, including ledgers, trip tickets and
hauling or disposal receipts.
If the parties or EPA compiled a waste-in list for the site, the participants also may
submit it to the allocator at this time. It is not unusual, however, for the parties to
withhold a waste-in list or interim allocation from the allocator, so that the allocator is
not tainted by the earlier and presumably unacceptable distribution of shares.
Contemporaneous with or immediately after the initial "data dump" to the
allocator, the parties may tender initial position papers or opening briefs. The intent of
these documents is to allow the parties an open forum to tell the allocator whatever
the party believes he or she should know at the beginning of the process, before the
allocator begins to make decisions. Initial position papers frequently have page limits
of under five pages.
Most allocation processes incorporate a discovery or allocation questionnaire
stage. If the parties use an allocation questionnaire, they may agree on its scope and
wording before retaining an allocator, or may work with the allocator to design the
questionnaire. Allocation questionnaires generally seek the following information:
• PRP name, address and type of business;
• The reason the PRP is alleged to be involved with the site;
• Any information in the PRPs' possession concerning actual or possible
use of the site;
• Any information in the PRPs' possession contradicting the actual or
possible use of the site (i.e.. records confirming that the plant at issue
sent the alleged wastestream to another disposal site);
• Copies of any documents used to confirm or rebut a connection to the
site;
• Narrative summaries of testimonial information used to confirm or rebut a
connection to the site, with the names of the people who provided such
information and a description of their knowledge base;
• Actual or estimated volumes of
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the material allegedly linked to the site that was produced by the
disposing plant;
the material that went to the site; and
the material that went to other disposal locations;
• The scope of the PRP's inquiry, including who it asked about the site,
where it looked for documents, and why it chose those people and
places for the inquiry.
The scope of an allocation questionnaire generally is much broader than either
a Section 104(e) request for information or even a discovery request. Either the
allocation questionnaire itself or the parties' allocation or participation agreement
should specify that all information produced to the allocator is confidential, and is
protected from discovery or disclosure in any existing or subsequent litigation
proceedings. As a result, a party may not respond to an allocation questionnaire with
an objection, or withhold any documents other than attorney/client communications.
Parties may give themselves anywhere from thirty to 180 days to respond to an
allocation questionnaire, depending on the complexity of the site. Preparing adequate
answers to an allocation questionnaire consumes a significant amount of time and
money. Failing to prepare a complete and thorough answer to an allocation
questionnaire also will cost time and money, because the allocator and the parties
review the questionnaire responses, and an improper response will not provide a basis
for settlement.
An allocator generally is free to pose additional or supplemental questions to a
party during the allocation process. Similarly, the allocator often can ask to interview
or depose witnesses. An allocation is not a litigation proceeding. If the allocator
wishes to interview or depose a witness, he or she generally will pose the questions
outside the presence of the allocation participants. The allocation process may allow
the participants to supply the allocator with questions for the witness. The allocator's
interview with a witness may or may not be tape recorded, transcribed, or conducted
before a court reporter.
Finally, the parties may opt to use a discovery process, rather than an
allocation questionnaire format, to obtain information for the allocation. In such event,
the rules of the process likely will follow the federal rules of civil procedure. If the
parties are not engaged in litigation, they may tender discovery disputes to the
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allocator. Alternatively, they may retain a separate ADR professional to resolve
discovery issues. If the allocation is proceeding under court order or court
supervision, then the court also may be available to hear discovery disputes.
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Superfund Reform:
Orphan Share Implem
: . . v ¦
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COURT OPINIONS ON ALLOCATION FACTORS:
THE GORE FACTORS AND OTHERS
An allocation is supposed to reflect the relative contributions of the different
PRPs to the costs of site cleanup. The allocator's evaluation of many different facts
and party arguments combine to form an allocation. These interrelationships between
the site facts and the various theories of liability and defense are most often
represented by a "factor" approach to allocation. A PRP's volumetric number is
adjusted by discount and multiplier factors to produce an equitable distribution of
responsibility.
The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. §9601 et seq., does not specify a mechanism for courts, or
parties to use in determining relative responsibility for site costs. CERCLA Section
107(a) imposes the recovery of response costs on liable parties. Prior to enactment of
the 1986 Superfund Amendments and Reauthorization Act ("SARA"), then-
Congressman Albert Gore offered an amendment which would have specified the
factors to be applied in allocating relative responsibility among Superfund PRPs. This
amendment was included in the bill that passed the House,1 but did not appear in the
Senate version which became the final law. Instead, the new Section 113(f)(1)2
provides that courts may allocate such response costs in contribution claims "using
such equitable factors as the court determines are appropriate." Although not
mandated by the statute itself, the "Gore factors," as they have come to be called,
frequently are referenced by courts when reviewing allocation issues.
I. Statutory Contribution
Courts interpret the phrase in Section 113(f)(1), "using such equitable factors as
the court deems appropriate," as providing enormous judicial discretion to balance
whatever factors the court believes will lead to a reasonable contribution result. In the
leading case of U.S. v. R.W. Meyer, Inc., 932 F.2d 568 (6th Cir. 1991), defendant
argued that the word "contribution" in Section 113(f)(1) should be considered the same
way it would be in common law contribution. In other words, a party's contribution
share should be limited to the percentage of the harm caused by the party's improper
disposal of toxic wastes at the site. The court disagreed, holding:
1 See H.R. Rep. No 99-253 (llty 99th Cong., 1st Sess. 19 (1985), reprinted in
1986 U.S. Code Cong. & Admin. News 3042.
2 The Superfund Amendments and Reauthorization Act of 1986 ("SARA") added
Section 113(f)(1) to Superfund for the express purpose of allowing federal courts to
develop a federal common law of contribution, rather than following state contribution
laws and cases.
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[o]n the contrary, by using the term 'equitable factors' Congress intended
to invoke the tradition of equity under which the court must construct a
flexible decree balancing all the equities in the light of the totality of the
circumstances.
932 F.2d at 572.
The R.W. Meyer court also quoted what it felt was pertinent legislative history:
New subsection 113(g)(1) of CERCLA was also amended by the
Committee to ratify current judicial decisions that the courts may use
their equitable powers to apportion the costs of cleanup among the
various responsible parties involved with the site. The Committee
emphasizes that courts are to resolve claims for apportionment on a
case-by-case basis pursuant to Federal common law, taking relevant
equitable considerations into account. Thus, after all questions of liability
and remedy have been resolved, courts may consider any criteria
relevant to determining whether there should be an apportionment.
Id., citing H.R. 253 (III), 99th Cong., 2d Sess. 19 (1985), reprinted in 1986
U.S.C.C.A.N. 2835, 3038, 3041-42.
Finally, the court noted that:
Congress [in passing new section 113(f)(1),] reemphasized that the trial
court should invoke its moral as well as its legal sense by providing that
the court use not just 'equitable factors' which phrase already implies a
large degree of discretion, but 'such equitable factors as the court
determines are appropriate.' This language broadens the trial court's
scope of discretion even further... Thus, under §9613(f)(1) the court
may consider any factor it deems in the interest of justice in allocating
contribution recovery. . . No exhaustive list of criteria need or should be
formulated.
Other courts agree with the R.W. Meyer interpretation of Section 113(f)(1). See, e.g.,
FMC Corp. v. Aero Industries, Inc., 998 F.2d 842, 37 Env't. Rep. Cas. (BNA) 1043,
1047 (10th Cir. 1993); Amoco Oil Co. v. Borden, 889 F.2d 664, 672 (5th Cir. 1989);
Town of Munster v. Sherwin-Williams Co., 27 F.3d 1268 (7th Cir. 1994).
One of the most recent allocation opinions, and surely one of the most factually
comprehensive, is U.S. v. Atlas Minerals & Chemicals, Inc., 41 Env't. Rep. Cas. (BNA)
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1417 (E.D. Pa., Aug. 25, 1995). In Atlas Minerals, the court determined that the
"allocation of response costs in this case should consider each party's relative
responsibility for (1) the need for remediation at the Site, (2) the selection of the
particular remedy, and (3) the cost of the selected remedy." Id. at 1489. The court
went on to state:
However, the allocation of costs must be decided based on equitable factors
that the court deems appropriate in light of the facts of the individual case.
Section 113(f)(1) provides courts with broad discretion in making allocation
decisions; the language contained in that section does not constitute an
invitation to courts to create allocation 'rules.' Another trial court allocating
response costs connected with cleaning up another site may consider a
completely different set of equitable factors to be relevant to that site. Thus,
any method this court employs in this case will likely have limited precedential
value.
Id. at 1490. The Atlas Minerals court ultimately used a combined volume and toxicity
analysis as its "equitable factors," further discussed in Section II, below.
In spite of the judicial ability to consider any relevant factors, the complex
nature of CERCLA cases makes it difficult for a court to address a large number of
such factors. A typical CERCLA case involves a site where many persons or
companies released multiple hazardous substances over an extended period of years.
Recognizing this and the limited nature of judicial resources, the courts expend their
efforts in simplifying and attempting to bring rationality to enormously complex factual
situations by using a relatively small number of factors. Numerous courts begin their
equitable analysis with the Gore factors (see Section II below), and only supplement
the Gore analysis with other factors (see Section III below).
II. The Gore Factors
The Gore factors consist of the following:
the ability of the parties to demonstrate that their contribution to a
discharge, release, or disposal of a hazardous can be distinguished;
the amount of hazardous waste involved at the site;
the degree of toxicity of the hazardous waste involved at the site;
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the degree of involvement by the parties in the generation,
transportation, treatment, storage, or disposal of the hazardous waste;
the degree of care exercised by the parties with respect to the hazardous
waste concerned, taking into account the characteristics of such
hazardous waste; and
the degree of cooperation by the parties with Federal, State, or local
officials to prevent any harm to the public health or the environment.3
Each of these factors appears in court opinions in a variety of guises and with varying
results.
A. Distinguishable Costs
In some cases, certain cleanup costs can be attributed to specific wastes or
types of wastes. These distinguishable costs may be allocated solely to the PRPs
responsible for these wastes. The courts have treated divisible costs in a variety of
ways.
In Central Maine Power Co. v. F.J. O'Connor Co., 838 F. Supp. 641, 38 Env't.
Rep. Cas. (BNA) 1323 (D. Me. 1993), a dispute between site owners and generators,
the court engaged in a separate liability apportionment for one chemical, lead, finding
one party 67 percent liable, another party 33 percent liable, and a third party 0 percent
liable. Because the non-liable party, a generator, demonstrated that its waste stream
contained no lead, the court held that the generator should not be required to pay to
clean up lead.
The court in Hatco v. W.R. Grace & Co.-Connecticut, 836 F. Supp. 1049
(D.N.J. 1993), used several methods to separate the costs of cleanup. The court
began its inquiry by analyzing the parties' exclusive use of certain chemicals.
However, the court refused to use an "exclusive use" analysis for ali site cleanup
costs, because such an analysis alone would not show which party was responsible
for the precise distribution of contamination. The court in Hatco also further defined
costs in areas that contained "hot spots" of contamination by developing overall
percentages of responsibility for each category of contaminant.
3 H.R. 7020, §3071 (a)(3)(B), 97th Cong., 2d Sess. 2 (1985), reprinted in A
Legislative History of the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980 (Superfund), at 440.
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Sometimes, physical characteristics may be used as a surrogate for cleanup
costs. As one commentator has noted,4 the court in U.S. y. Ottati & Goss, 24 Env't.
Rep. Cas. (BNA) 1152 (D.N.H. 1986), issued an early order holding that the liability for
the surface cleanup would be apportioned according to the number of drums each
generator contributed to the site and thus, once the cost of the surface cleanup was
later determined, each party would pay its proportional percentage of that cost.
Finally, parties occasionally convince a court to distinguish costs using a
surrogate such as geography. In U.S. v. Broderick Investment Co., 862 F. Supp. 272
(D. Colo. 1994), the court approved a divisibility analysis based on geography, and
found the defendant responsible for only one of two district areas of pentachlorophenol
contamination in soil and groundwater at a facility.
B. Volume or Amount of Hazardous Waste
The most common factor considered in cost allocations is the volume of waste
that each responsible parly contributed to the site, without regard to its toxicity , or other
characteristics. Volume is perhaps of greatest significance in distinguishing initial cost
shares among generators.
Because determining the volume or amount of waste generally comes at an
early stage in a Superfund case, and because volume rarely is the factor of greatest
controversy, detailed discussions of volume do not appear often in court decisions.
EPA guidance provides information about developing a "waste-in" list, but the courts
seldom reference this guidance.5 Volume is often used to identify de minimis parties
in settlements with EPA. De minimis settlements are expressly provided for in
CERCLA. See Section 122(g) of CERCLA, 42 U.S.C. § 9622(g). In sites with many
generators, a de minimis category reduces the complexity of a settlement while
recognizing the much more limited liability of certain parties. See U.S. v. Cannons
Engineering Corp., 899 F.2d 79, 31 Env't. Rep. Cas. (BNA) 1049, 1055 (1st Cir.
1990).
4 See Issue Analysis - Allocating Cleanup Costs Under CERCLA, The Information
Network for Superfund Settlements (Morgan Lewis & Bockius) at A-9 (April 1, 1993)
(Information Network Cost Analysis). See also Singh & Hinerman, Superfund Cost
Allocation: Equitable Techniques and Principles, 9 Toxics L. Rep. 531 (Oct. 12, 1994);
Butler, et al., Allocating Superfund Costs: Cleaning Up the Controversy, 23 Envtl. L.
Rep. 10133 (1993).
5 Information Network Cost Analysis at A-4.
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In EPA v. Sequa Corp. (In re Bell Petroleum Services), 3 F.3d 889 (5th Cir.
1993), the Fifth Circuit found that only one hazardous substance, chromium, had
entered the ground water. In addition, only three parties had operated the site and
each had operated it at mutually exclusive times. The court found it reasonable to
assume that the harm done by each party was proportionate to the volume of
chromium-contaminated water each discharged into the environment. The Fifth Circuit
remanded the case to the district court so that one of the three operators, Sequa,
could attempt to show, through volume or surrogates for volume, the divisibility of the
harm at the site.
Perhaps one of the greatest problems with volume as a cost apportionment
method is illustrated by B.F. Goodrich v. Murtha, 958 F.2d 1192 (2d Cir. 1992), aff'g,
745 F. Supp. 960 (D. Conn. 1991). In Murtha the Second Circuit found that a
municipality should not necessarily be required to pay its share solely on the basis of
volume when that material is high in quantity but low in relative toxicity.
Another example of the difficulty created by mixed municipal and industrial
waste materials is Atlas Minerals, 41 Env't. Rep. Cas. (BNA) 1417. The site, a mixed
co-disposal facility that accepted both municipal and industrial materials, covers 27
acres and operated for twenty years. An EPA-selected remedy calls for construction
of a multi-layer cap over the landfill, fencing, deed restrictions, groundwater
monitoring, private adjoining well-head treatment units, and wetlands replacement.
In a third party cost recovery action, both plaintiffs and defendants offered the
court competing allocation models, one focussed primarily on volume (offered by the
industrial PRPs), and the other concentrating on toxicity (presented by the municipal
waste generators). The Atlas Minerals court declined to follow either model, and
instead created its own:
The following principles will guide the court's allocation:
(1) It is impossible to calculate, with mathematical
precision, the extent to which volume and toxicity each
contributed to the incurrence and extent of response costs
at the Site. However, the court is convinced that both
volume and toxicity contributed substantially to the harm:
(a) The presence of 'high waste strength' waste streams
heavily influenced the Site's placement on the NPL and
probably also influenced EPA's selection of a multi-layer
cap as the permanent remedy for the Site;
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(b)(sic) Assuming that a multi-layer cap is the permanent
remedy, its total cost is driven by volume;
(3) Each waste stream contributed some hazardous
substances and some volume to the Site;
(4) Similar waste streams should be treated the same;
5) One ton of waste with a high waste strength should
bear a larger share of responsibility than one ton of low
waste strength waste."
Id. at 1496-97. The court then assigned each party's relative share by the following
method:
The court will isolate those waste streams that have low waste strength
or, in Third Party Defendants' parlance, are nonhazardous. Half of the
costs will be allocated among those waste streams, which are likely to
have affected response costs primarily because of their volume. . . . The
other half of the costs will be allocated among those waste streams that
, have high waste strength and are more likely to have affected response
costs because of their toxicity.. . . Given the substantial impact of both
volume and toxicity on the environmental harm that precipitated the
response costs at the Site, a 50/50 distribution between these two
factors is equitable.
Each waste stream's toxicity and volume will be accounted for once.
The court will multiply each waste stream's volume by its KPC score [a
waste strength assignment method] to arrive at a 'weighted volume'
figure. The 50% share assigned to each class will be allocated within
that class in proportion to the waste streams' relative weighted volume.
Each party's share will be determined by aggregating the shares assigned to its
various waste streams.
Id. at 1496-97. For the majority of mixed municipal and industrial waste sites, an Atlas
Minerals approach (combining volume and toxicity factors for an allocation) may be
appropriate.
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C. Toxicity
Toxicity is an obvious consideration to take into account in a hazardous waste
disposal site allocation. After all, if the wastes were not "toxic" or "hazardous," the site
would not be within CERCLA's ambit and there would be little concern about cleaning
up the site.
As discussed above in Murtha and Atlas Minerals, a typical municipal landfill will
contain a lot of low toxicity material, which causes problems in evaluating each
municipal generator's share. Comparative hazardousness or toxicity between
particular substances, while obviously a significant factor, does not often appear in
reported court decisions.
In U.S. v. Acton, 749 F. Supp. 616, 32 Env*t. Rep. Cas. (BNA) 1629, 1632
(D.N.J. 1990), the court held that "toxicity is an important factor that EPA may
consider in entering into consent decrees. This case involved the Lone Pine Landfill in
New Jersey, at which EPA proposed entering into a consent decree with 116
defendants. Under court supervision, the parties entered into an alternative dispute
resolution (ADR) process for the largest waste contributors. The ADR consultant
could consider the volume of waste sent to the site by the party; the toxicity, mobility,
persistence, ignitability, corrosivity, reactivity, volatility and flammability of the party's
waste; and any other factor that the arbitrator found fair and reasonable. Id. at 1632
n.2. (Emphasis added.)
In contrast, in Hatco, 836 F. Supp. at 1063, the court found that absent a risk
assessment detailing and determining the risk of exposure posed by each chemical
detected at the site, the relative toxicity of chemicals at the site was not a relevant
factor in dividing responsibility for contamination.
D. Degree of Involvement
Degree of involvement, similar to degree of care and degree of cooperation
(two other qualitative and subjective Gore factors), is a characteristic of a potentially
responsible party, and often is more useful for allocating among categories of parties
(for example, between generators and the owner/operator or between owners and
operators), than among the members of a single class. The degree of involvement in,
or the extent to which a person is or was active in, the management or operation of a
particular site is key to an evaluation of the actual (i.e. factual or "moral") responsibility
of a party. Vagueness can be the fatal flaw of this factor.
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Given the courts' wide allocation discretion, judges need not develop detailed
rationales describing how they derive a precise number associated with "degree of
involvement." Accordingly, most cases are silent on this issue. In the few opinions
addressing this Gore factor's rationale, the courts appear to use this factor as a
private party would in settlement negotiations: focus on the party's use of the site, the
time of use, the manufacturing activities, and production rates, and decide whether or
not these facts justify a reduction or increase in responsibility. See Hatco at 1059.
When the allocation controversy occurs between two operators of a facility, the
courts have found that one equitable factor to consider is the number of years each
operator was at the facility. The court in In re Allegheny International, Inc., 158 Bankr.
361, 383 (Bankr. W.D. Pa. 1993), held that the actual years of ownership and
operation combine into a significant factor for consideration in a final decision.
In U.S. v. R.W. Meyer, 932 F.2d at 571, the court had no quantifiable measure
to use as a surrogate for degree of involvement. Nevertheless, the court found that
the lessee was the primary actor who allowed the site to become contaminated, and
further found the landowner liable based on owner status and because he constructed
a defective sewer that contributed to the contamination. The court divided liability into
thirds, assigning an equal share to the lessee, its principal shareholder and the owner.
In Amoco Oil v. Dingwell (Dingwell), 690 F. Supp. 78 (D. Me. 1988), affd. sub.
nom., Travelers Indemnity Co. v. Dingwell, 884 F.2d 629 (1st Cir. 1989), Dingwell
owned and operated a landfill. Fifteen generators filed suit against him for response
costs. Several of the generators paid most of the cleanup costs, and Dingwell agreed
to join them in signing a consent decree and contributing 65 percent of the cleanup
costs after they agreed to seek recovery only from his insurance policies and not his
personal assets. The district court in Dingwell decided that the degree of
involvement by the parties was equally proportionate: the generators were fully
involved in the generation of hazardous waste and Dingwell was fully involved in the
treatment, storage, and disposal of waste. Accordingly, Dingwell deserved his 65
percent.
E. Degree of Care
The degree of care factor considers the measures a party took to prevent or
minimize environmental contamination. In theory, if the party had taken adequate care
in the first instance, the cleanup costs would be lower or non-existent. As discussed
earlier, however, it is not always easy to transform a qualitative concept, such as
degree of care, into a quantifiable amount.
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Virtually an archetype of the considerations involved in the degree of care
factor, the decision in Versatile Metals, Inc., v. Union Corp., 693 F. Supp. 1563 (E.D.
Pa. 1988), a seller/purchaser dispute, demonstrates how not to show due care for
potential contamination at a site. The original contract between the parties provided
that the site was free of any contamination. Later, PCBs were found at the site.
The court decided that the contamination came from both preexisting conditions and
from the mishandling of hazardous waste left at the site by the previous owner.
The purchase contract provided that if the purchaser discovered contamination,
it would give prompt notice to the seller, act in a reasonable manner to prevent
leakage and contamination, and keep the former owner's assets segregated from its
own. When the release of hazardous substances occurred, the purchaser failed to
take any of the measures spelled out in the contract.
The court found the purchaser responsible for all contamination that had
occurred during its tenancy and denied contribution from the seller, because the
purchaser failed to abide by the terms of the sale contract. The court noted that the
contract had required no more than what a reasonable person would have been
expected to do under the circumstances.
The case of U.S. v. Tyson, slip op., Civ. 84-2663, 1989 U.S. Dist. LEXIS 15,761
(E.D. Pa. Dec. 29, 1989), also illustrates a lack of due care and its costly
consequences. In Tyson, the United States and the State entered into a consent
decree with the four identified generators at the site. The principal generator agreed
to perform the cleanup even if any other settling generator failed to pay its respective
share. The principal generator then moved for summary judgment against the owner
of the waste disposal site, seeking a 50 percent contribution to the cleanup costs.
The court found that the owner was an active participant at the site who had
failed to exercise due care, and who repeatedly failed to cooperate with federal and
state officials. Therefore, the court held the site owner liable for the requested 50
percent contribution share.
In reviewing the six Gore factors, the court in Dingwell, 690 F. Supp. at 86,
found that the last three Gore factors - degree of involvement, care exhibited and
cooperation - were the most important in a dispute between operators and
generators. However, the courts assessment might have been colored by the specific
circumstances of the case: the generators admitted liability and paid for the cleanup,
and neither the amount nor the toxicity of each generator's contribution to the on-site
hazardous wastes remained relevant. Perhaps just as important, Dingwell raised
neither volume nor toxicity as issues. The court accepted Dingwell's 65 percent
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liability, and noted that the only case brought to its attention concerning apportioning
costs between generators and owner/operator had held the owner/operator 70 percent
liable. Id. at 87, citing Advance Circuits, Inc. v. Carriers Properties, No. 84-3316
(Minn. D. Ct., Hennepin County, Feb. 18, 1987), aff'd, No. C8-87-1436 (Minn. Ct.
App., Feb. 9, 1988)(unpublished).
Finally, in Folino v. Hampden Color & Chemical Co., 832 F. Supp. 757, 37
Env*t. Rep. Cas. (BNA) 1838 (D.Vt. 1993), the court found an owner/operator and a
lessee/operator equally liable; they used the same chemicals and both had poor
handling practices. In BCW Associates Ltd. v. Occidental Chemical Corp. (BCW), slip
op., No. 86-5947, 1988 U.S. Dist. LEXIS 11,275 (E.D. Pa. September 29, 1988), the
court reviewed the relative care of the parties and noted that one of the previous
owners exercised due care in its manufacturing practices. The court released that
owner from liability. The court also found, however, that an earlier owner did not use
adequate care in its manufacturing practices and caused the contamination. The
court assessed this earlier owner one-third of the response costs.
F. Degree of Cooperation
The degree of cooperation with government officials appears to have a
significant influence on the perception of a court. It is used more often with site
owners than with generators.
In U.S. v. R.W. Meyer, 932 F.2d 568, the court stated that neither the lessee
nor the landowner cooperated with or assisted EPA during the investigation and
eventual cleanup. Inferentially, the court found all of the parties equally recalcitrant
and thus assessed to each equal shares of the response costs.
In U.S. v. Tyson, 1989 U.S. Dist. LEXIS 15,761, EPA ordered a waste disposal
site owner to clean up the site. The owner refused, forcing EPA to contain the
contamination. EPA filed suit to recover its response costs. The generators,
particularly the largest one, admitted liability and agreed to conduct a feasibility study.
The site owner denied all responsibility. Although initially identified as a PRP only
because of its landowner status, testimony at trial showed that the owner actively
participated in the business of transporting and disposing of waste. The court required
the owner to pay 50 percent of the cleanup costs.
In Amoco v. Dingwell, 690 F. Supp. 78, the court found that, with regard to the
degree of cooperation, Dingwell had not cooperated with EPA and the state, while the
generators, on the other hand, provided million of dollars for the cleanup and
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negotiated a consent decree. Use of the cooperation factor required Dingwell to pay a
higher portion of the costs.
Lastly, the court in Central Maine Power; 838 F. Supp. 641, determined that
Centra! Maine Power sent substantially more waste to the site than the other
generator, Westinghouse, but that Westinghouse did not cooperate with government
officials to the same extent as Central Maine Power or the site owner. The court
found Central Maine Power 46.5 percent liable, Westinghouse 41 percent liable, and
site owner 12.5 percent liable.
III. Other Factors
Because of the enormous discretion granted to the courts by CERCLA Section
113(f)(1), the courts have developed various other factors for use in CERCLA
apportionment decisions.
A. The Innocent Landowner Defense
This concept, included within the statute itself,6 permits an owner and/or a
purchaser of property to avoid liability altogether by showing that it exercised due care
itself and used all appropriate precautions to prevent third parties from causing any
contamination. It is very difficult to prove.
The court decision discussed here is typical of the many cases where the
innocent landowner defense failed. In the case of In re Sterling Treating, Inc., 94
Bankr. 924 (Bankr. E.D. Mich. 1989), the court held that where the purchaser of the.
debtor's heat treating steel business had business dealings with the debtor before the
sale and was aware of the industrial use of the property, the innocent landowner
defense was not available to the purchaser because the purchaser failed to inspect
the property before the sale. Id. at 930.
B. Fault
Courts are often called upon to consider the relative fault or culpability of the
PRPs.
6 See Section 107(b)(3)(a) and (3)(b) of CERCLA, 42 U.S.C. § 9607(b)(3)(a) and
(b)(3)(b).
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In Environmental Transportation Systems (ETS) v. ENSCO, 969 F.2d 503, 35
Env't. Rep. Cas. (BNA) 1209 (7th Cir. 1992), a case involving a transporter, the court
thoroughly discussed the question of fault. In this case a truck overturned carrying
used transformers that contained PCBs. The accident was the ETS truck driver's
fault, because he was going too fast. In spite of efforts by ETS to argue that the
generator should be required to pay some of the cleanup costs because it shipped the
transformers without draining their PCB-laden liquid, ETS provided no expert testimony
that improper loading of the transformers caused the accident. Id. at 1211. As a
consequence, ETS had to pay all costs.
As noted earlier, some courts have considered the entire process of cost
allocation to be one addressing relative fault or culpability. In U.S. v. Stn'ngfellow,
199.3 U.S. Dist. LEXIS 19,113 *300 (C.D. Cal. November 30, 1993), a Special Master
opined that the primary equitable allocation factors were the interrelated concepts of
relative fault and causation. To the Special Master, the case evidence revealed "a
vast disparity in relative fault among the parties." Id. at *308. Using the relative fault
and causation concepts, the Special Master found the State 65 percent liable for the
CERCLA claims asserted against it. Id. at *329.
C. Degree of Knowledge
Related to the concept of involvement, the degree of knowledge of the
contamination at a site arises most often between categories of parties, such as
between generators and transporters or among owners as a class, particularly for sites
at which one owner is the purchaser and one is the seller.
When the courts consider degree of knowledge, they tend to view it as a
significant factor in allocating costs. In Danella Southwest, Inc. v. Southwestern Bell
Telephone Co., 775 F. Supp. 1227, sum. affd, 978 F.2d 1263 (8th Cir. 1992), the
court did not require a transporter to pay any costs, and ultimately held it not liable,
when the transporter took dioxin-contaminated soil to a disposal site, but performed
his duties in a professional manner and did not know that the soil was contaminated.
Moreover, upon learning of the contamination the transporter immediately ceased
operations. Id. at 1234-35.
In the cost allocation phase of Folino v. Hampden Color & Chemical Co., 832
F.Supp. 757, 37 Env't. Rep. Cas. (BNA) 1838, Hampden, as the successor operator of
the chemical distribution business at the site, sought response costs from the previous
operator and the owner, Folino. The court found that before Hampden purchased the
site, Hampden received an environmental assessment of the site that showed
contamination, but Hampden coicealed this information from Folino and leased the
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site anyway. Based largely on Hampden's concealment, the court refused to require
response costs from Folino. Id. at 1844. Hampden's knowledge of the contamination
weighed heavily against him.
In allocating costs of cleanup in Weyerhauser v. Koppers, 771 F. Supp. 1420,
1426, 33 Env't. Rep. CaSi (BNA) 1919, 1924 (D. Md. 1991), the court considered two
primary factors -- the knowledge and/or acquiescence of the parties in the
contaminating activities, and the economic benefits the parties received from the
contaminating activities. Weyerhauser owned property in Baltimore where it sold and
distributed forest products, including treated and untreated lumber. Koppers and its
predecessor leased a part of Weyerhauser's property where they operated a wood
treatment plant.
In arriving at an allocation of responsibility, the Weyerhauser court used the
reasoning in two cases cited by both parties - South Florida Water Management
District v. Montalvo (Montalvo), No. 88-8038, 1989 U.S. Dist. LEXIS 17,555 (S.D. Fla.
Feb. 15, 1989), and BCW, 1988 U.S. Dist. LEXIS 11,275. The Weyerhauser court
noted that in Montalvo the owner of the property had knowledge of the contaminating
activity but received no financial benefit, and yet was assessed 25 percent of the
cleanup costs. The Weyerhauser court also noted that in BCW, the court assessed
the new owner 33 percent of the cleanup costs, in part because the new owner had at
least some sense that something was wrong with the dusty warehouse he purchased
at a discount and in an "as is" condition. Id. at 1426-27.
In Weyerhauser the court held that the owner of the property not only knew of
and acquiesced in his lessee's wood treatment plant, but required its construction as
part of the lease. The court, using a knowledge factor as one of the principal issues
to be considered, assessed the owner 40 percent of the cleanup costs.
0. Financial Capability
Courts often consider the financial capability of an individual party to pay for the
cleanup of a particular site.
While mentioned in Murtha, 958 F.2d 1192, this factor was considered in
somewhat greater detail in Central Maine Power, 836 F. Supp. 641. In that case the
court noted that both Central Maine Power and Westinghouse had greater financial
resources than the site owner and thus could pay greater proportionate shares.
Similarly, in Emergency Technical Services Corp. v. Morton International, slip op. No.
92-C-3376, 1994 U.S. Dist. LEXIS 899 (N.D. III. Jan. 31, 1994), the court deemed it
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appropriate to consider available financial resources, as well as benefits received from
and knowledge of contamination, as appropriate allocation factors.
E. Financial Benefits Derived From Waste-Producing Activity
The financial benefits derived from the waste-producing activity is occasionally
considered by the courts.
For example, the court in Weyerhauser v. Koppers, 771 F. Supp. at 1426, used
"knowledge of the contaminating activity" with "financial benefits received" to arrive at
an allocation. The case of U.S. v. Mexico Feed & Seed Co., 980 F.2d 478, 483, 490
(8th Cir. 1992), involved the sale of a waste oil business that the purchaser did not
continue, and for which the landowner received "no" financial benefit. Because of the
lack of financial reward and the fact that the landowner was "unhappy" with the
contamination on his land, the court required the lessee to pay the landowner's
attorney's fees and assigned the landowner a zero allocation share.
In Central Maine Power, 836 F. Supp 641, the court determined that all of the
parties received a financial benefit from the waste-producing activity, but it appears
that the court considered the relative size of that benefit to be of little relevance. The
owner of the scrap business, who was the site owner, paid one generator $60,000 and
the other $250,000 and the court did not indicate the size of the financial benefit to the
site owner.
F. Financial Benefits Derived From Remediation
The courts occasionally evaluate the financial benefit to the party after cleanup
of a previously contaminated site. Courts also consider this concept in the slightly
different context of a discounted sales price for a contaminated site.
In BCW, 1988 U.S. Dist. LEXIS 11,275, the court discussed the financial
benefits derived from remediation. The case concerned the sale and reuse of a
warehouse. The court found that BCW had purchased a dusty warehouse at a
discounted price and after clean-up had a clean warehouse. Knoll, the tenant/lessee
who had been using the warehouse to store furniture, now had a clean storage
location. Thus Knoll and BCW each benefited financially from the remediation, and so
each had to pay 33 percent of the clean-up costs. The original owner who had
caused the contamination, Firestone, also paid a one-third share.
The court in PVO International v. Drew Chemical Corp., CA No. 87-3921
(D.N.J. June 27, 1988)(unpublished), denied summary judgment to a current owner
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and a the past owner because neither addressed "one of the relevant equitable
considerations in allocating liability between the parties: the increase in the value of
the property which will result if it is rid of hazardous wastes." The court stated that
"responsibility for contamination is not the only factor to be considered in allocating
response costs."
G. Land Sales and The Discounted Purchase Price
Sales of known contaminated sites usually occur at a much lower price than
that of an equivalent uncontaminated site. When the sale of contaminated land
occurs, the question that arises is whether or not the purchaser paid a discounted
price for the land. If the answer to the question is yes, then the purchaser cannot
avail him or her self of the innocent landowner exception to Superfund liability and
escape all liability, because he or she acquired the property with knowledge of
contamination. If the answer to the question is no (the purchaser did, indeed, pay full
price), then the purchaser may be able to show that he or she did not know about the
contamination. Even if the purchaser is unable to use the full benefit of the defense, if
he or she can show payment of an undiscounted purchase price, the seller may have
to pay more for cleaning up any contamination.
In Smith Land Improvement Co. v. Celotex, 851 F.2d 86, 90, 28 Env't. Rep.
Cas. (BNA) 1083 (3d Cir. 1988), concerning a sale of industrial land from Celotex to
Smith Land, the court held: Smith Land inspected the property it purchased from
Celotex on five occasions, knew of its past use, and recognized that the pile of waste
at the site was a "negative" factor. Based on these facts, the court believed Smith
Land to be a sophisticated purchaser, and that the price it paid for the property
"reflected the possibility of environmental risks." 28 ERC 1083, at 1084 (3d Cir. 1988).
Thus the court considered the price Smith Land paid to be a discounted one. As a
result of this discounted price, the court refused to compel the seller, Celotex, to pay
as much as it otherwise would in the final cost allocation.
In another case, In re Allegheny International, Inc., 158 Bankr. at 383, the court
considered a discounted steel plant purchase price the most compelling and
dispositive allocation factor in the case. Allegheny Ludlum sold several steel plants to
Allegheny International (Al). After a number of intervening property transfers, a third
party acquired the plants with full knowledge of the contamination. The third party
subtracted environmental costs from the acquisition price dollar for dollar, until the
sales price reached $1.00. When the purchaser/seller Al sought contribution from the
original seller Allegheny LudlunYs bankruptcy estate, the court found that because the
purchase price had already been completely discounted, Al's claim against Allegheny
Ludlum's bankrupt estate would be«calcu!ated as zero. Al knew when it sold the
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plants that they were contaminated, and transferred the properties with knowledge of
their contamination. It would receive no contribution from Allegheny Ludlum in the
cost allocation between the current owner and Al.
H. Relevant Contracts
Contracts between PRPs generally do not protect parties from all liability under
CERCLA, but may offer substantial and sometimes complete contractual protection in
a contribution action. Passing liability to another through indemnification or insurance
can be a significant factor in reducing responsibility in a cost allocation under
CERCLA.
The first, second, third, fifth, seventh, ninth, and tenth circuits all recognize the
enforceability of indemnification clauses or other contractual provisions to shift
CERCLA liability as between private parties. See Beazer East, Inc. v. Mead Corp., 34
F.3d 206 (3d Cir. 1994); Joslyn Manufacturing Co. v. Koppers Co., 40 F.3d 750 (5th
Cir. 1994), and Harley-Davidson, Inc. v. Ministar, Inc., 41 F.3d 341 (7th Cir. 1994).
The two cases described below are examples of the many cases discussing
contracts that can change a cost allocation despite the existence of statutory liability.
In Kerr-McGee Chemical Corp. v. Lefton Iron & Metal Co., 14 F.3d 321, 326
(7th Cir. 1994), Lefton Iron purchased a 40-acre site from Kerr-McGee's predecessor
in interest. Kerr-McGee's predecessor actually caused most of pollution. The contract
transferring ownership of site to Lefton provided: "[Lefton] expressly agrees to
indemnify and to defend and hold [predecessor] harmless from and against any and
all claims, damages,. . . however the same shall be caused . . . arising out of or
resulting from .. .the maintenance of any action, claim or order concerning pollution or
nuisance." The Seventh Circuit reversed a district court decision limiting the effect of
this contract, finding fault irrelevant because of the wording of the contract. As a
result, the $1.5 million Kerr-McGee had already spent was to be reimbursed by Lefton,
and Lefton was held responsible for all future costs, estimated as likely to exceed $5
million.
In Village of Fox River Grove, III. v. Grayhill, Inc., 806 F. Supp. 785, 794-95
(N.D. III. 1992), the court held that the village's lessee, an aluminum anodizing
business, was not liable for contribution under CERCLA because the village had
released its lessee in a court settlement. The court found that although the release
was a general one and usually inapplicable to unknown claims, the village was well
aware of the possible contamination of water discharged by its lessee.
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Conclusion
The cases presented here concerning the Gore factors and other factors are
not exhaustive but rather are designed to provide examples of how courts use their
equitable discretion.
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August 1
,ii-
Superfund Reform:
Orphan Share lmpl<
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ALLOCATION CASE CHART
July 18, 1995
Conn
Case
Parties/
Factors
Comments
Allocation
Facility type
App. Ct.
U.S. v.
Owners/
(1) Ability to pay should not influence the amount ol'
Federal District Ct. did not abuse its discretion in
1994
Charles
Operators
assessment.
approving consent decrees.
George
1st Cir.
Trucking,
Generators/
(2) Compare the proportion of total projected costs to he paid
Fndorscs, in general, LvPA's practice of negotiating
Inc.
transporters
by the settlers with the proportion of liability attributable to
with a representative group of I'KP's and then
them, (hen factor into tlic equation any reasonable discounts
permitting the group members to divide the burden
39 ERC
Hazardous waste
for litigation risks, lime savings, and the like that may be
of lite settlement among themselves.
1690
site
justified.
Ct. stressed the importance of good records, as bad
Consent decrees
records make allocation difficult to determine.
D. Maine
Centra)
Former owner=
(1)6 Gore factors as outlined in United Stales v. A F
In a dispute between waste generators and the site
1993
Maine
12.5%
Materials Co., 578 F.Supp. I24«>, 1256 (S.I). III. t')K4).
operator, the last 3 Gore factors are most important.
Power Co.
1 si Cir.
v. F.J.
Generators
(2) Financial resources of (lie parties in volved
Conn looked heavily at:
O'Connor
(disposed of
(3) Benefits received by the parties from contaminating
(1) cooperation with the government.
Co.
electrical scrap
activities
(2) financial resources
equipment)
(4) Knowledge and/or acquiescence of the panics in lite
(3) conveyance of the property
838
contaminating activities.
F.Supp.
Hi =46.5%
(5) Circumstances and conditions involved in tlie property's
641
conveyance, including price paid and discounts granted.
// 2=41%
Scrap equipment
silc
!
-------
D.
Amoco
owner/
(1) the ability of the parlies to demonstrate that their
'1 he court emphasized that factors 4, 5, and 6 arc
Maine
Oil Co.
operators
contribution to a discharge, release or disposal of h-a/nrdous
most important in a dispute between generators and
1988
v.
= 65%
waste can be distinguished;
operators.
Dingwell
(2) the amount of the hazardous waste involved;
1st Cir.
generators
(3) the degree of toxicity of the hazardous waste involved;
690
= 35%
(4) the degree of involvement by the parties in the generation,
F.Supp.
transportation, treatment, storage, or disposal of the hazardous
78
Landfill
waste;
(5) the degree of care exercised by the parties with respect to
the hazardous waste concerned, taking into account I lie
characteristics of such hazardous waste; and
(6) the degree of cooperation by the parties with Federal, State,
or local officials to prevent any harm to the public health or
the environment.
D. N.H.
United A
Owners of
Each party is subject to liability only for the portion of the
Burden of proof on Defendant to establish that a
1985
States v.
property
total harm that lie has himself caused.
reasonable basis exists for apportioning the harm.
Ottati &
1st Cir.
Goss, Inc.
Generators of
waste contained in
630
drums
F.Supp.
1361
Drum
reconditioning
facility
App. Ct.
B.F.
Owners
(1) Relative volume and toxicity of the substances
The amount of liability imposed will not necessarily
1992
Goodrich
Operators
(2) Relative cleanup costs incurred
be a function solely of the total volume of municipal
Co. v.
Municipality
(3) The degree of care exercised by each party with respect to
waste disposed of in the landfills, but rather will be
2nd Cir.
Murtha
the hazardous substances
a function of the extent to which municipal dumping
Landfills
(4) Financial resources of the parlies involved
of hazardous substances both engendered the
958
necessity, and contributed to the costs, of cleanup.
F2d
1192
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WD.
NY.
1991
2nd
Cir.
Purolator
Products
Corp. v.
Allied-
Signal,
Inc.
772
P.Supp.
124
Purchaser
Seller
Automotive parts
factory
The court stated that (lie Gore factors could he used to allocate
costs among parties However, further factual developments
were necessary in this case before these factors could be
evaluated. The precise apportionment of damages, therefore,
must await further proof concerning the amount of damages,
the nature and source of the hazardous waste as well as the
other circumstances relevant to an equitable apportionment of
response costs.
N.D. NY
1991
2nd Cir.
U.S. v.
Alcan
Aluminum
Corp.
34 ERC
1744
Generators
Cornell= 6%
Alcan= 94%
Landfill
(1) The Gore factors
(2) The Court examined tlic recklessness of the panics.
(3) Court did not consider the fact that defendant is Cornell
University and the other defendants billion.dollar companies
relevant.
(4) Toxicity of waste is of little significance here
The equitable factors to be applied by the courts
should be case specific and not etched in stone.
Court looked favorable on Cornell and unfavorably
on Alcan for their degree of care in treatment of
waste and cooperation with the Gov't.
D. NJ
1993
3rd Cir.
Hatco
Corp.
v.
W.R.
Grace &
Co -Conn.
836
l;.Supp.
1049
current owner:
PCHs = 3.84%
UNs = 9.74%
VOCs = 15.48%
former owner:
PCBs = 96.16%
UNs = 90.26%
VOCs = 84.52%
Chemical plant
(1) the knowledge of the panics;
(2) the degree of care exercised by the parties, taking into
account the relevant statutes and regulations;
(3) the degree of cooperation with federal, state and local
officials exhibited by the parties to prevent-harm to public
health or the environment, without regard to periods of
ownership;
(4) any financial benefit to the parties arising from
remediation;
(5) the extent to which the parties undertook reasonable efforts
to mitigate the environmental damage; and
(6) any benefits the parlies received from the activities that
lead to the environmental damage.
These percentage allocations' are only for areas of
joint use. f or areas of use by only one of the
parties, the court allocated 100%. The court simply
applied the equitable factors to the facts of the case
without treating any one particular factor as more
important llian another.
This is an interim allocation awaiting the
determination of response costs. If remediation of
PCBs arc the driving cost," then Grace would be
allocated a greater share due to its greater share of
PC1J contamination.
I£.D.
Pa.
1991
3rd
Cir.
Ellman v.
Woo
34 ERC
1969
Owner/ Landlord=
50%
Operator/
Tenant= 50%
Dry cleaning
facility
(1) Owner's awareness of the existence of hazardous waste
(2) Indication that defendants engaged in conduct that they
knew to be violative of environmental regulations.
(3) Amount of contamination attributable to each party.
Court found that each parly was responsible for one
of the contaminants. As cleanup of one would
necessarily cleanup the other, equity requires that
neither parly escape liability, and tlicy share costs
evenly.
3
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E D. Pa.
U.S.
owner/
(1) the amount of hazardous substances involved;
In support of its 50% apportionment to the owner,
1989
v.
operator
(2) the degree of toxicity or hazard of" the materials involved.
the court noted that it was an "active participant"—
Tyson
= 50%
(3) the degree of involvement by parties in the generation,
not an "innocent landowner."
3rd Cir.
transportation, treatment, storage or disposal.of the substances;
The court spent little time on factors U\ and It2--
1989 u.s:
generator
(4) the degree of care exercised by the parties with respect to
oiily noting that the wastes were highly toxic. The
Dist.
= 50%
the substances involved; and
court emphasized that the owner "knew or should
LEXIS
(5) the degree of cooperation of the parlies with government
have known of the human health hazards." The
15761
Cesspool,
officials to prevent any harm to public health or the
court also added that the owner repeatedly refused
industrial, and
environment.
to cooperate with the authorities and failed to
chemical waste
exercise due care in handling the hazardous
disposal business
substances.
ED.
BCW
former owner/
(1) knowledge of the environmental harm;
The court stated that the most important factor it
Pa.
Assocs.
operator
(2) responsibility for (he environmental harm; and
considered was that the present owner would
1988
V.
= 1/3
(3) benefits, if any, received because of the clean up.
receive substantial collateral benefits from the clean
Occidental
up of the property because it had originally
3rd.
Chem.
current owner and
purchased the property "as is."
Cir.
Corp.
current operator
= 2/3 jointly
1988 U.S.
Dist.
warehouse
LEXIS
11275
-
A pp. Ct.
Smith
Current and
If land was sold at a discount because of contamination, then
No record of case on remand. Parties must have
1988
Land &
Former owners
when resolving contribution suits between the former and
settled.
Imp. Corp.
current landowners, the court can consider
3rd Cir.
v.
Large pile of
(1) the amount of the discount;
Celotcx
manufacturing
(2) the cost of response; and
Corp.
waste containing
(3) other considerations.
asbestos found on
851
property
P.2d
86
Industrial facility
1
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D.N.J.
Jersey City
Owner = 0%
Court notes it may use ;i(iy equitable laclois it determines
While all parlies arc subject to the allocation, one
1987
Redevelop
appropriate, but finds trend in common law is toward use of
parly was not found liable under CliRCLA, but
ment
Generators =
comparative fault. Court focuses on who had or should have
rather was liable under common law. In a footnote
Authority
100% jointly
had knowledge lliat the IIII dirt was contaminated.
the court states that if feels CFRCLA docs not
3d Cir.
v. PPG
prevent allocation among liable and non-liable
Indus.,
parties, liven ilCFRCLA did prevent such
Inc
construction site:
allocation, it could be upheld under the common
fill dirt contained
law.
1987 WL
chromium.
54410
F..D.
North-
Past & current
Gore factors (but no mention of "degree of involvement"
Coii| ribution stage of proceeding appropriate for
Va.
western
owners
factor).
consideration of allocation of responsibility.
1994
Mutual
Life v.
Mortgage holder
"Weverhaeuscr v. Konocrs factors" (but no mention of parties'
4th Cir.
Atlantic *
relative degree of fault).
Research
Cliem waste
storage site
847
F.Supp.
389
Dist. Ct.
Weyer-
owner
(I)the ability of the parties to demonstrate that their
The.court emphasized factor 114 as to the degree of
Md.
haeuser
= 40%
contribution to a discharge, release or disposal of hazardous
involvement in generation, which gave the generator
1991
Co. v.
waste can be distinguished;
the "lion's share" of the costs. Factors and II9
Koppcrs
generator
(2) the amount of the hazardous waste involved;
were determinative in the owner's allocation.
4lh Cir.
Co., Inc.
= 60%
(3) the degree of toxicity of the hazardous waste involved;
(4) the degree of involvement by the parties in the generation,
The court noted that jt was not limited to any
771
wood treatment
transportation, treatment, storage, or disposal of the hazardous
specific equitable factors but may consider those
F.Supp.
plant
waste;
factors relevant to flic circumstances of the case.
1420
(5) the degree of care exercised by the parties with respect to
the hazardous waste concerned, taking into account the
characteristics of such hazardous waste;
(6) the degree of cooperation by the parties with Federal, State,
or local officials to prevent any harm to the public health or
the environment.
(7) the parties' relative degree of fault;
(8) the benefits received by the panics from the contaminating
activities; and
(9) the knowledge and/or acquiescence of the parties in the
contaminating activities.
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App.
Cl.
.1993
5th Cir.
Matter of
Bell
Petroleum
Services
3 F.3d 889
Current/
Former Owners
Cleanup of aquifer
contaminated with
chromium from a
chrome-plating
facility
(1) Apportionment may be based on (lie volume of waste the
parties discharged.
(2) The court, in dicta, staled that the "(jure Factors" as
outlined in United Slalcs v. A & F Materials mav Ik used to
"soften" the modern common law approach to joint and
several' liability.
The question whether (here is a reasonable basis for
apportionment depends on whether there is
sufficient evidence from which the court can
determine the amount of harm caused by each
defendant.
App.
Cl.
1989
511)
Cir.
Amoco
Oil v.
Border,
Inc.
889 F.2d ,
664
Former and
current owners
Fertilizer
Plant (incl.
radioactive)
5 Gore factors as outlined in the Amendments Report, pt. Ill
(Reprinted in U.S. Code Cong. &. Admin. News at IIVI2).
"Smilli Land v. Cclotcx factors" should be weighed (incl. nrice
paid and discounts granted) [when applicable!.
Indicates § 9(> 13(f) provision-provides court with
considerable latitude in determining parties' shares.
Court's citation of "degree of cooperation" factor
reads "to prevent any harm to public health or the
environment."
WE).
Mich.
1992
6th Cir.
Hastings
Bldg.
Prods, v.
National
Aluminum
Corp.
1992 U S.
Hist. Lexis
11533
Previous owner/
operator= 3/4
Current owner/
operator^ 1/4
Soil and
groundwater
contamination at
factory
Cl. is free to allocate responsibility according to any
combination of equitable factors it deems appropriate. The
court may consider among other factors, the following:
(1) the ability of the parties to demonstrate that their
contribution to a discharge, release, or disposal of a hazardous
waste can be distinguished
(2) the amount of the hazardous waste involved
(3) the degree of toxicity of the hazardous waste involved
(4) the degree of involvement by the parties in lilt generation,
transportation, treatment, storage, or disposal of the hazardous
waste
(5) the degree of care exercised by the parlies witli respect to
the hazardous waste concerned, taking into account the
characteristics of such hazardous waste; and
(6) the degree of cooperation by the parties with Federal, State,
or local officials to prevent any harm to the public health or
the environment
The court found the 4lh factor most important and
also placed emphasis on the 1st, 5th, and 6tli.
The court also, took notice of the existence of an
indemnity clause.
6
-------
W.D.
CPC Inter-
Successors/
(1) A responsible party's degree of involvement in tlu: disposal
The question of successor liability could have some
Mich.
national
parent
of hazardous waste.
relevance to the court's future determination on the
1991
Inc. v.
subsidiary
(2) flic amount ol hazardous waste involved.
issue of apportionment.
Aerojet -
(3) The degree of care exercised by the parties.
The court deferred any conclusions with respect to
6th Cir.
General
Chemical
succcssorship until it reached allocation issues at the
Corp.
manufacturing
facility
conclusion of the remedy phase of this case.
777
F.Supp.
549
App. Ct.
U.S.
owner
Appeal of Northcrnaire case above. In.addition to ilic criteria
1 his case affirms the Northcrnaire apportionment.
1991
v.
R.W.
= 1/3
listed by the Northcrnaire trial court, the court noted that the
trial court could have considered:
6th Cir.
Meyer,
former
(1) the state of mind of the parties,
Inc.
operator/generator
= 2/3
(2) their economic status,
(3) any contracts between them bearing on the subject.
932
(4) any traditional equitable defenses as mitigating factor, and
F.2d
Immediate
(5) any other factors deemed appropriate to balance the
568
removal action
at metal
electroplating
business
equities in the totality of the circumstances.
7
-------
W.D.
U.S.
owner
(1) the abilityof the parties to demonstrate that their
In determining the landowner's share, the court
Mich.
v.
= 1/3
contribution to a discharge, release or disposal of hazardous
stressed its;
1989
Northern-
waste can be distinguished;
(1) business involvement with the generator;
aire
generator/
(2) the amount of the hazardous waste involved:
(2) knowledge of the generator's activities;
6th Cir.
Plating
transporter
(3) the degree of toxicity of the hazardous waste involved;
(3) failure to notify the generator of its knowledge
Co.
= 2/3
(4) the degree of involvement by the parties in the generation.
of the inadequacy'of its facilities for the generator's
transportation, treatment, storage, or disposal of the hazardous
activities;
1989 U.S.
Immediate
waste;
(4) lack of cooperation with the authorities;
Dist.
removal action at
(5) the degree of care exercised by the parties with respect to
and (5) classification as a "landowner".
LEXIS
metal
the hazardous waste concerned, taking into account-the
15913
electroplating
characteristics of such hazardous waste;
In determining the generator's share, the court
property.
(6) the degree of cooperation by the parties with Federal, State,
stressed:
20
or local officials to prevent any harm to the public health or
(1) the volume and toxicity of the wastes;
ELR
the environment;
(2) the generator's high degree of involvement in the
20200
(7) classification as a "landowner" or a "generator"
generation, treatment and storage of the. wastes;
(8) relative fault
(3) the.generator's fault: "their careless and
(Not
negligent containment and disposal of the hazardous
published
wastes";
in F
(4) the generator's lack of cooperation;
Supp.)
and (5) their classification as "generators" (the court
said that generators should bear the majority of costs
in a contribution action with an owner).
S.D.
United
Generators
If the harm is divisible and if there is a reasonable basis for
Burden of proof as to apportionment is upon the
Ohio
States v.
Transporters
apportionment of damages, each defendant is liable only for
Defendant to limit his liability.
1983
Chem-
the portion ofliarm he himself caused.
Dync
Treatment facility
6th Cir.
Corp.
572
F.Supp.
802
0
-------
Bank-
ruptcy
R.I).
Mich.
1989
6th Cir.
In re
Sterling
Steel
Treating
v.
Bcckcr
94
Bankr.
924
A
Present land
owner
= 50%
Prior land owner
in
bankruptcy/
trustee
= 30%
Industrial property
was used to heat
treat steel
Trailer containing
haz. wastes was on
the property.
present owner:
(1) caveat emptor — duty to inspect properly before buying
(2) knowledge of prior operations
prior owner/trustee:
(3) fiduciary duty to know assets being sold
(4) duty to disclose knowledge of wastes
The court did not take into account the discount
given on lite final purchase price for clean-up
expenses.
App.
Ct.
1994
7th
Cir.
Kerr-
McGee
Chemical
v.
Lefton
Iron &
Metal
14
F.3d
321
Prior owners^ 0%
Current owners=
100%
Wood treatment
plant
(1) Relevant fault of the parties; relevant "Gore Factors" as
outlined in Environmental Transportation Svstcms v. Ensco.
Inc.. 969 F. 2d 503.
(2) I lowcvcr. relevant (iore factors are neither an exhaustive
or exclusive list of the factors to be considered.
(3) Contracts between the parties (indemnities) bearing on the
allocation of cleanup costs must be looked at.
hi determining the relative contribution of (tie
parlies, courts must look to the totality of the
circumstances.
The court determined that the indemnification
agreement allocated the costs to the current owners.
9
-------
CD. 11).
Environ-
Transporter
The court considered fault the deciding factor.
This court refused to enumerate specific factors to
1991 and
mental
= 100%
he used in allocation cases generally. Each court
App.
Transp.
In dicta, the court cited the Gore 1 actors with approval, hut
has the discretion to consider any ("actors
Ct.
Systems,
Generator
said this list was neither exhaustive nor exclusive. I'ro rata
appropriate to balance the equities in the totality of
1992
Inc.
v.
- 0%
apportionment is also acceptable, though not in this case. It
also cited will) approval eases that used the following factors:
the circumstances of the ease before it.
7th Cir.
Ensco,
Subcontractor
(1) financial resources of the parties involved,
Appeals Court affirmed district court.
Inc.
transported
(2) benefits received from contaminating activities.
763 P.
transformers
(3) compliance with applicable regulations as it relates to the
Supp. 384,
containing PCBs
degree of care, and
969
(4) knowledge and/or acquiescence of the parties in that
F.2d
activity.
503
N.I).
Allied
Operator of waste
The court found that the factors that might persuade a court to
The court made "no ruling as to the propriety of the
Illinois
Corp. v. *
disposal site
reject joint and several liability where llie harm is indivisible
approach in cost recovery claims involving the
1988
Acme
are the Gore factors as outlined in A &. I; Materials. 578 1\
government as plaintiff."
Solvents
Customers of
Supp. at 1256.
7th
Reclaimin
waste disposal site
Cir.
g, Inc.
691
F.Supp.
1100
Waste disposal site
(motion to dismiss
denied)
The court determined that the scope of liability will
be determined upon consideration of the specific
and unique facts of the case.
10
-------
S.D.
United
Generators
Court said Congress intended the courts In enforce CFRCI.A
Ilunlen ol proof as to apportionment is upon the
Illinois
Slates v.
by applying evolving principles of federal common law on a
defendant who seeks lo limit his liability.
1984
A & F
Waste Disposal
case by case basis.
Materials
Site
Gore factors provide a noncxliaustive but valuable
7th Cir.
Co., Inc.
578
F.Supp.
1249
The Court also used the Gore Factors:
(1) the ability of the parlies to demonstrate that their
contribution to a discharge release or disposal of a hazardous
waste can be distinguished.
(2) tlic amount of (lie hazardous waste involved
(3) the degree of toxicity of the hazardous waste involved
(4) the degree of involvement by the parties in the generation,
transportation, treatment, storage, or disposalnl'ihc hazardous
waste
(5) the degree of care exercised by the parties with respect to
the hazardous waste concerned, taking into account the
characteristics of such hazardous waste; and
(6) the degree of cooperation by the parties with f ederal, Stale
or local officials to prevent any harm to the public health or
the environment.
roster of equitable apportionment considerations.
N.D. III.
Alcan-
Current
Court recognizes fault. Gore factors, financial resources.
1995
Toyo
owner/operator
benefits received, and contracts between parlies as equitable
America,
= 10%
factors that may be considered. Court says laches, unclean
Inc. v.
hands, estoppel, and caveat emptor, while not defenses, are
7th Cir.
Northern
Illinois
Former
owner/operators
equitable factors 1 hat may be considered.
Gas Co.,
= 90% jointly
Court initially focuses on fault and finds defendants were the
sole cause of the contain illation. Court also linds lhat Alcan-
881 F.
coal processing
Toyo, as current owner, assumed some liability in acquiring
Supp. 342
plant
the properly alter CERCI ,A was enacted.
11
-------
N.D. 111.
United
Former
Court makes note of Gore factors and oilier factors that may be
1992
States
owner/operator =
considered in an allocation process, hut then simply states (hat
Steel
15%
a review of the totality of the circumstances indicates that Alco
Supply
is primarily responsible for the generation pf flic majority of
7th Cir.
Inc. v.
Former
the contamination. USSSI's allocation share seems based on
Alco
owner/operator =
its release of some contaminants and lack of care in
Standard
85%
responding to knowledge of contamination.
Corp.
1992 WL
Steel heat treating
229252
facility
App.
Gopher
Purchaser
Court affirmed the district court's findings that:
Ct.
Oil
= 0%
1992
Co. v.
(1) Seller knew of and is responsible for the leaking, spilling
Union Oil «•
Seller= 100%
and dumping of oil and industrial chemicals resulting in
8th
Co.
contamination of the site.
Cir.
(2) Purchaser did not materially contribute to the
955 F.2d
Oil and chemical
contamination and did not have specific knowledge of the
519
facility
contamination
(3) The contamination Seller caused is extensive and of a toxic
nature.
(4) The contamination Seller caused evidences a hick of care
exercised in the blending, packaging and disposal of oil and
industrial chemicals
App. Ct.
U.S. v.
lessee waste oil
Weverhaeuser v. Koppcrs Co. factors:
Court determined that while landlord was not
1992 8th
Mexico
service
the benefits the landlord ree'd from the operation resulting in
innocent and unsuspecting, lie was hardly in the
Cir.
Feed &
coinpany/presidcnt
the contamination; the landlord's knowledge of llu- clangers of
waste oil hauling business. 1 le had no close
Seed Co.,
/active
the operation and acquiescence to those dangers; llic
relationship with the lessee/waste oil co., and was if
Inc., 980
m anger=owners/o
relationship between the parlies; their relative degree of fault;
anything, very unhappy with its operations. He
F.2d 478
perators
and, their relative equality.
benefitted very little from the placement of the tanks
lessor
(771 F. Supp. 1420, 1423. 1427 (1). Md. 1991).
in his land, and put no oil in them. In fact he had .
waste oil service
tried to have them removed. Therefore the 8tli Cir.
No reference to Ihc Gore factors.
concurred w/the District Court's findings, including
a portion of the landlord's and his company's legal
costs in its contribution award.
-------
l-.D. Mo.
Danella
Owner/
(1) the ability of the parties to demonstrate thai their
The court noted that the transporter's failure to
1991
Southwest
operator
contribution to a discharge, release or disposal of hazardous
detect the contamination was not its fault. The court
v.
= 100%
waste can be distinguished;
also pointed out that the transporter fully cooperated
8th Cir.
South-
(2) the amount of the hazardous waste involved:
with authorities.
western
Transporter/
(3) the degree of toxicity ol the hazardous waste involved;
Hell
contractor
(4) the degree of involvement by the parlies in the generation.
As for the ownter, the court cmpltnsi/.ed (hat, under
Telephone
= 0%
transportation, treatment, storage, or disposal ol" the hazardous
waste;
the facts of the case, it knew or should have known
of the contamination.
775
Dioxin
(5) the degree of tare exercised by the parties with respect to
F.Supp.
contaminated dirt
the hazardous waste concerned, taking into account the
1227
removed during
construction
characteristics of such hazardous waste;
(6) the degree of cooperation by the parties with Federal, State,
or local officials to prevent any harm to the public health or
the environment;
(7) relative fault
E.I). Mo.
Anschutz
Current
Court notes the Ciorc Factors but did not specifically apply
1995
Mining
owner/operator
them as they had no precedent value, ( uni t simplv notes
Corp. V.
= 20%
allocation must be done in an equitable fashion and then
NL Indus.,
contrasts duration of operation and amount of hazardous
8th Cir.
Inc.
891 F.
Supp. 492
Former
owner/operator
= 80%
material extracted by each company.
Minn. Ct.
Advance
generator ~ 30%
Court concluded that owner/operator's care in the storage and
App.
Circuits,
treatment of material was primarily responsible lor the cost of
1988
Inc. v.
owner/operator =
cleanup. Court reasoned the generators had to bear some
Carricre
70%
responsibility simply because they were the originators of the
Properties
hazardous material. Gore factors were not mentioned.
8th Cir.
1988
Minn.
App.
LEXIS
118
Recycling facility
13
-------
W.D.
United
Gcnerator= 3.7%
The Court used the proportion of volume of waste the
Wash.
States v.
defendants dumped at the site to determine their contribution
1992
Western
Transporter
towards response costs.
Processing
1.7%
9lli
Co.
Cir.
Waste
35 ERC
processing Facility
1727
App.
In Re Dant
Operator/
The Court affirmed the bankruptcy court's determination that
Not a good allocation case. The allocation is based
Ct.
& Russell,
Tenant = 52%
the tenant was liable for the proportion of the total cleanup
purely on tenants years on sight and docs not assign
1991
Inc.
costs by converting to percentage the number of years the
any share to owner or other operators.
Wood treatment
tenant operated the site out of the total number of years all
9th
951 F.2d *
factory
tenants had operated the site. Because the tenant operated at
Cir.
246
the site for 12 of the 23 years, it was held liable for 12/23 or
52% of cleanup costs.
W.I)
Louisiana-
Owners
(1) The Gore factors
Economic benefit was an important consideration
Wash.
Pacific
= 0%- 10%
(2) Causation
1991
Corp. v.
(3) Fault
Asarco
Generator
(4) Economic benefit or loss caused by the pollution or
9th Cir.
Inc.
= 79%-100%
contamination
Trpnscrip
Multiple Sites:
t of
Landfill &
Judge's
logyards
Oral
Decision
21 Chem.
Waste Lit.
Rep. 1165
14
-------
W.L).
U.S. v.
Generator
The court rejected the use of the Gore factors in determining
Wash.
Western
arranged for the
liability, but said that llicy are appropriate considerations on
1990
Processing
treatment and
the issues of allocution and contribution.
Company,
disposal of arsenic
Qll)
Inc.
at the Western
Cir.
Processing Site
734
F.Supp.
Waste processing
930
facility
S.D. Cal.
Price v.
Former owner =
The court used "equity" to arrive at litis allocation, lint did not
flic case is also of limited value when proceeding
1992
United
1%
mention the Gore factors.
through allocation pilots because the court never
Slates
reached the issue of the owner of the facility at the
Navy
operator/contractor
time of the Navy's disposal. In the allocation all
= 4%
parties will be pari of (lie process.
9lli Cir.
818 F.
Supp.
Navy as
1326
Generator/
Transporter = 95%
D.
Atlantic
Owners/
(1) The amount of hazardous waste involved
A court may consider several factors, a few factors.
Ok.
Richfield
Generators
(2) The degree of involvement by the parties in the generation,
or only one determining factor depending on the
1993
Co. v.
transportation, treatment, storage, or disposal of the hazardous
totality of the circumstances presented to the court.
American
Sand Springs
waste
10th
Airlines,
Home=6.!9%
(3) The degree of carc exercised by the parties with respeel to
flic court found the fact that Home did not generate
Cir.
Inc.
the hazardous waste concerned, taking into account I lie
any waste nor did it transport any wasle to the site
'
Non-settling
characteristics of such hazardous waste
important. It also looked favorably upon Home's
1993
defendants
(4) Hie degree of cooperation by llic parties with federal, state
.cooperation with the cleanup.
U.S. Dist.
contend that the
or local officials to prevent any harm to the public health or
LEXIS
settlement reached
the environment
flic court also looked at the fact that Home is not in
20278
between ARCO
(5) The financial resources of the parties
the waste oil hauling or solvent recycling business;
and Sand Springs
(6) Public interest considerations
it benefitted very little from placement of the
Home is unfair to
(7) Status as a charitable institution
storage tanks on its lands.
tlicm
Court rejected the idea that 1 Ionic should be liable
Petrochemical
for between 25% to 50% simply because il is a
Complex
landowner.
15
-------
1). Colo.
State of
Mining company
(1) Demonstration by a preponderance o) Hie evidence thai lite
Person Jiekl jointly and severally liable with one or
1985
Colorado
contribution of such person lo a discharge, release, or disposal'
more persons is entitled lo seek contribution from
v. Asarco,
Mining claim
of a hazardous substance can be distinguished or apportioned;
such persons.
10th Cir.
Inc.
owners who have
liability of such person shall be limited n> that iwriion of ilie
claims in
release or damages to which such person contributed.
Contribution is only available where joint liability
608
contaminated
(2) Amount and degree of toxicity of hazardous substance
can be imposed.
F.Supp.
tunnel
involved.
1484
(3) Degree of cooperation with Government
Court emphasized using federal common law to
Mining waste
(4) Degree of cure exercised by i)ic parlies
determine liability.
S.D IMa
South
Owner
present owner:
I'hc court emphasized factors // 2 and 114 in its
1989
Florida
= 25%
(1) landowner's'limited degree of participation.
apportionment, which it believed accurately.
Water
(2) knowledge oi" prior operations.
corresponded to the level of fault involved.
11 tli Cir.
Mgmt.
Operator/
(3) failure to inspect properly upon purchase.
Dist.
Generator
The court said the Gore Factors arc not applicable
v.
= 75%
operator/generator:
to this case because they were meant to allocate
Montalvo
(4) generation of the contaminates.
costs between operators and generators — not-
Pesticide business
(5) profit from contaminating operations,
landowners and generators.
1989 U.S.
Dist.
fjoth parlies:
LEXIS
(6) amount, if any, of a discount when laud was purchased,
17555
and
(7) cooperation of the parties.
1G
-------
-------
<3~T
-------
August 1996
ntation
<
-------
SEPA
United States
Environmental Protection Agency August 1996
Superfund Reform:
Orphan Share Implementation
TAB 5-5
CITATIONS TO TRADE PRESS PUBLICATIONS
1. Singh and Hinerman, Superfund Costs Allocations: Equitable Techniques and Principles,
Toxic Law Report (October 12, 1994).
2. Hall et ai, Superfund Response Costs Allocations: The Law, The Science, and the
PracticeThe Business Lawyer, Vol. 49, #4 (August 1994).
See also Tabs 5-1, 5-2 and 5-3 for copies of non-copyrighted materials.
-------
)
-------
Superfund Reform
Orphan Share Impl
-------
* a\
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
FEP 22 1991
OFFICE OF
SOLD WASTE AND EMERGENCY RESPONSE
MEMORANDUM
SUBJECT: Final Guidance on Preparing Waste-in Lists and Volumetric
Rankings for Release to Potentially Responsible Parties
(PRPs) Under CERCLA ("Waste-in"Guidance)
FROM: Bruce M. Diamond, Director.^
Office of Waste Programs Enforcement
TO: Director, Waste Management Division,
Regions I, IV, V, and VII
Director, Emergency and Remedial Response Division,
Region II
Director, Hazardous Waste Management Division,
Regions III, VI, VIII, and IX
Director, Hazardous Waste Division,
Region X
This memorandum transmits to you out "Final Guidance on
Preparing Waste-in Lists and Volumetric Rankings for Release to
Potentially Responsible Parties (PRPs) Under CERCLA," which has
been referred to as the "waste-in" guidance.
If EPA invokes special notice procedures under CERCLA section
122(e)(1), the Agency must provide PRPs with the names and
addresses of all PRPs, the volumes and types of substances sent to
the site by each PRP, and the volumes of all substances present at
the site. To the extent such information is available, it must be
released with the special notice letter.
This document provides guidance on the compilation and release
of waste-in lists and volumetric rankings to help you comply with
the information release requirements of CERCLA section 122(e) and
the information release and exchange policies outlined in OSWER
Directives 9835.12 and 9834.10.
Based on Regional input, we made several significant changes
to the guidance relating to information release with RI/FS special
notice, commonly contributed volumes, and the status of "mom and
pop" gas station waste oil generators on waste-in lists. I thank
you for your assistance.
Attachment
cc: Superfund Branch Chiefs, Regions I - X
"Waste-in" Guidance Contacts, Regions I - X
Prixltd on Rtcycled Paper
-------
OSWER Directive 9835.16
GUIDANCE ON PREPARING HASTE-IN LISTS
AND VOLUMETRIC RANKINGS FOR RELEASE
TO POTENTIALLY RESPONSIBLE PARTIES (PRPs) UNDER CERCLA
FINAL
February 20, 1991
This guidance and any internal procedures adopted for its
implementation are intended solely as guidance for employees of the
U.S. Environmental Protection Agency. Such guidance and procedures
do not constitute rulemaking by the Agency and may not be relied
upon to create a right or benefit, substantive or procedural,
enforceable at law or in equity, by any person. The Agency may
take action at variance with this guidance and its internal
implementing procedures.
-------
OSWER Directive 9835.16
wastes at a site, the latter of which is referred to in this
guidance as "waste-in information."
Because waste-in lists have proven a valuable tool in
initiating PRP negotiations and bringing about settlements, the
Agency is providing guidance to improve the process of
information gathering, waste-in compilation, and information
release to PRPs. Production of waste-in lists will vary widely,
depending upon the classes of PRPs (e.g., owner/operator vs.
multigenerator) and available information. Where sufficient
information is available, Regions should provide waste-in lists
to PRPs.
Increasingly, and particularly at large, complex Superfund
sites with multiple contributors, PRPs have been requesting EPA
to furnish them with waste-in information in order to reach a
settlement among themselves and with the Agency. This represents
a shift from past experience, where PRPs often preferred to
compile waste-in lists themselves. Whether EPA produces waste-in
information on a site, or chooses to use or adopt waste-in
information developed, at least in part, by PRPs must be a site-
specific determination reflecting the Region's or PRPs'
respective resources, willingness, familiarity with the site and
experience with transactional databases. Where PRPs compile'
waste-in information, Regions must ensure that the information
meets the qualitative standards articulated in this guidance
before releasing it to other PRPs.
Often, Regions must rely heavily on information provided by
the PRPs through 104(e) responses in order to compile a waste-in
list or volumetric ranking. While Regions have broad discretion
in providing PRPs with supporting documentation, waste-in
information — when developed — should be sent to all identified
PRPs at a site, consistent with OSWER Directive 9835.12.
III. DEFINITIONS
The following "wa«te-in" terms are defined solely for
purposes of this guidance and are intended to assist Regions in
its implementation:
Waste-in Information - Information on the type and quantity
of hazardous substances at a facility. Waste-in information
includes waste-in lists and volumetric rankings.
2
-------
OSWER Directive 9835.16
Guidance for Sites in the Superfund Remedial Program. OWPE, June,
1989, OSWER Directive No. 9834.3-2a). The supplemental guidance
describes a two-phased process for conducting PRP searches and
outlines the format and content for remedial PRP search reports.
Although the following sections refer to remedial PRP searches,
the waste-in information development process described in this
guidance applies to both remedial and removal searches.
1) Baseline PRP Search
Phase one of a PRP search is called the baseline phase. Its
focus is primarily on establishing owner/operator liability and
identifying generators and transporters associated with the site.
Baseline-phase activities usually include collecting records from
federal, state, and local government agencies; interviewing
current and past government officials; conducting a title search;
and issuing section 104(e) information request letters to site
owners and operators. Typically, owner/operator transactional
records will be the only waste-in information that is developed
during the baseline phase. Although these may not provide a
complete waste-in picture, they will certainly provide a
significant number of leads that can be pursued during the
follow-up PRP search.
2) Follow-up PRP Search
The second phase of a PRP search is called the follow-up
phase. Its focus is on establishing generator and transporter
liability and developing waste-in information for waste-in lists
and volumetric rankings. Activities for the follow-up phase can
vary considerably from site-to-site depending on site complexity,
the number of generators and transporters associated with the
site, and the difficulties encountered with waste-in information
development. Follow-up PRP search activities usually include
issuing section 104(e) information request letters to generators
and transporters, interviewing PRPs and current and past PRP
employees, and conducting specialized tasks, as needed, which are
described in the PRP Search Manual. OWPE, November, 1987, OSWER
Directive No. 9834.6.
In addition to the development of evidence for 106 and 107
actions, activities conducted during the follow-up PRP search
should focus on waste-in information for waste-in lists and
volumetric rankings. Often, the person who can provide
information on a PRP's liability can provide information on the
wastes that were sent to the site.
4
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OSWER Directive 9835.16
unit in which to express volume. However, some sites such as
landfills may have large amounts of solid waste, trash, and other
hazardous substances coming in by weight, in which case pounds or
tons may be more appropriate. Where transactional records are
divided among liquid volumes and weights, Regions should convert
all volumes to a single standard using the equation 1 gallon =
8.33 pounds, unless more specific density information is
provided. Attachment 2 is a list of standard conversion factors
that can be used to convert volumes and weights to a common unit
of measurement.
3) Compilation
a) Making Assumptions About Waste-in Information
In order to compile waste-in lists and volumetric rankings,
Regional staff may have to interpret ambiguous data and make
assumptions regarding waste-in information. When making
assumptions about waste-in information, Regions should generally
follow three broad rules:
o Assumptions should be defensible. Regions should use
established conversion standards and base assumptions
on patterns established in the data in order to avoid
charges of being arbitrary or capricious.
o state assumptions openlv. When interpreting illegible
numbers on a manifest, or assuming a disposal
destination from an unclear hauling ticket, it is
preferable to let PRPs know where EPA made assumptions
and to identify where ambiguity still exists. The lists
are thus more credible and PRPs have the opportunity to
make their own corrections. Assumptions should be
reviewed bv Regional counsel to ensure that thev do not
jeopardize a cost recovery case or other enforcement
action.
o Be consistent. PRPs involved at more than one site
within a single Region will be aware of any
discrepancies in the kinds of assumptions made for
waste-in lists at these sites, and disputes over
inconsistent assumptions only slow down the settlement
process. Regions should ensure that everyone compiling
waste-in information is using the same Region-wide set
of assumptions and compilation methodology. Some
6
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OSWER Directive 9835.16
C) Information Release with General Notice
To provide PRPs ample time to organize and develop a
reasonable offer to conduct or finance a response action, Regions
should issue a general notice letter (GNL) prior to issuing a
special notice letter (SNL) under section 122(e) for an RI/FS or
RD/RA. General notice letters should be sent to all persons
where there is sufficient evidence to make a preliminary
determination of potential liability under section 107. For more
information on general and special notice letters, see Interim
Guidance on Notice Letters. Negotiations, and Information
Exchange. OSWER, October, 1987, OSWER Directive 9834.10.
In most cases, Regions should not expect to release waste-in
lists and rankings to PRPs with general notice letters issued
before an RI/FS. This is due to the fact that follow-up PRP
search activities are being conducted and complete waste-in
information has not yet been developed. General notice letters,
however, may include the names and addresses of PRPs to the
extent this information is available.
D) Refining and Revising Waste-in Lists and Volumetric
Rankings
If waste-in lists and volumetric rankings are released
before issuance of special notice letters, Regions should revise
and update this information prior to its release with special
notice letters to ensure that the information provided to the
PRPs is based on currently available data. The following
guidelines pertain to list and ranking revisions prior to
issuance of special notice letters, or prior to information
release where no special notice letter is sent for RI/FS or RD/RA
work:
o Regions should not spend an unreasonable amount of time
on waste allocation. Waste-in lists and volumetric
rankings are intended to provide PRPs with contribution
information, but do not constitute EPA's final position
on PRP contributions or allocations.
o Regions should not spend unreasonable amounts of time
on waste characterization. Where records give detailed
information on chemical compounds and hazardous
constituents, Regions should provide as much detail as
available in the waste-in list to help convince PRPs of
the strength of EPA's evidence and encourage them to
8
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OSWER Directive 9835.16
V. GENERAL CONSIDERATIONS FOR RELEASING WASTE-IN INFORMATION
The following are general guidelines on what to consider
when releasing waste-in information to PRPs:
1. Always include a disclaimer when releasing waste-in
information to PRPs. Waste-in information is not equivalent
to a nonbinding preliminary allocation of responsibility
(NBAR) or cost allocation; emphasize this in the disclaimer.
Similarly, it is important to emphasize the preliminary (and
hence incomplete) nature of waste-in information. Regions
should include the following disclaimer when releasing
waste-in information to PRPs:
"This information does not constitute a non-binding
preliminary allocation of responsibility under CERCLA
section 122(e)(3). This information should not be construed
as an allocation of responsibility or liability by EPA.
This waste-in list and volumetric ranking is provided solely
for your information. This list is preliminary and subject
to revisions based upon new information asr and if, it
becomes available."
2. When releasing waste-in information to PRPs. Regions should
openly state assumptions made when compiling the lists and
rankings. Where records are less than complete, assumptions
typically must be made about volumes and weights, conversion
factors, waste characterization and shipment and disposal
destinations. By stating assumptions openly, and by
identifying uncertainties in a list or ranking, PRPs will
have better information upon which to judge the accuracy of
waste-in information, to revise lists themselves, and to
base allocation among themselves — all of which can
facilitate settlement. Assumptions should not, however,
jeopardize a cost recovery case or other enforcement
actions.
Because the lists are not binding and do not serve as
preliminary allocations of responsibility or liability, PRPs
should not be able to successfully challenge waste-in
information, although many will undoubtedly dispute EPA's
rankings and volumetric attributions. Additionally. EPA
should always state that the burden is on the PRPs to
demonstrate where EPA's assumptions are incorrect.
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OSWER Directive 9835.16
Due to resource implications, Regions should not become
overly concerned with internal PRP allocation issues, even
when smaller contributors may claim coercion from larger
contributors. Regions might consider involvement in
allocation questions, however, when they appear to
jeopardize the likelihood of settlement. Small contributors
may be eligible for a de minimis settlement. (Guidance on
Landowner Liability Under Section 107 (aWl) of CERCIA. De
Minimis Settlements Under Section 122(qWlHBl of CERCLA.
and Settlements with Prospective Purchasers of Contaminated
Property. OSWER, June 6, 1989, OSWER Directive 9835.9).
7. EPA should inform PRP groups that viable PRPs will have to
absorb orphan shares. Many waste-in lists are characterized
by unattributable volumes and hazardous substances. Where
lists and rankings contain these "orphan" shares, Regions
should encourage PRP negotiating groups to absorb these
shares and apportion the shares as part of the internal
allocation process.
VI. FORMAT AND CONTENT OF WASTE-IN INFORMATION
For the sake of illustration, waste-in lists and volumetric
rankings are discussed in this section as separate documents,
even though the information could very easily be combined into a
single document that also includes the names and addresses of
PRPs.
A) Waste-in Lists [CERCLA section 122(e)(1)(B)]
Waste-in lists contain the volume and nature of substances
contributed by each PRP identified at a facility. At a minimum,
the lists should contain columns for the names and addresses of
PRPs as well as the types and volumes of hazardous substances.
Although EPA is under no statutory obligation to release
information beyond this in a waste-in list, Regions should
release supplemental waste-in list information unless there are
countervailing legal, policy, or strategy reasons not to do so.
(See OSWER Directive 9835.12). Supplemental waste-in information
can include, but is not limited to, the dates of shipments, the
names of transporters, the types of evidence from which waste-in
lists were derived, and comments to clarify assumptions,
ambiguities, and double-counts. Attachment 4 is a waste-in list
that contains supplemental waste-in information.
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OSWER Directive 9835.16
D) Accounting for Commonly Contributed Volumes
Where hazardous substances are contributed both by the
generator and the transporter who designated the treatment or
disposal site, Regions should attribute the volumes to both
parties when compiling waste-in information. EPA should not trv
to apportion responsibility for a hazardous substance shipment
generated bv one PRP and transported bv another among the two
PRPs in a volumetric ranking or waste-in list, but should let the
PRPs themselves allocate their respective responsibilities for
r:oTmnon"lv contributed volumes.
Commonly contributed volumes can be accounted for on
volumetric rankings of PRPs by attributing the volume of each
shipment to both generator and transporter. This is the
preferred approach when separate generator and transporter
volumetric rankings have been prepared; however, it creates a
situation where some shipments can be counted twice, which may
cause PRPs to question the validity of methodologies used to
compile waste-in information unless double-counted shipments are
clearly identified and their impact on total volumes is
explained. Accordingly, when volumetric rankings of PRPs contain
double-counted shipment volumes, Regions should provide PRPs with
an explanation of why shipments have been double-counted and
clearly identify, by means of a comment field or other notation,
which shipment volumes have been attributed to both generators
and transporters.
Another way of accounting for commonly contributed volumes
is to identify the transporter linked to each shipment on a
generator waste-in list and indicate whether the transporter
designated the treatment or disposal facility. This is the
preferred approach when separate generator and transporter
volumetric rankings cannot be prepared due to insufficient
information or information management system limitations.
Further, it is recommended that waste-in lists be prepared in
this way even when commonly contributed volumes are accounted for
on volumetric rankings of PRPs to ensure that these volumes are
consistently identified on all waste-in information that EPA
releases to PRPs.
VII. SITE-SPECIFIC VOLUMETRIC INFORMATION GUIDANCE
This section offers guidance specific to the following types
of Superfund sites: municipal landfills, removal actions, sites
14
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OSWER Directive 9835.16
should only send notice letters> waste-in lists, and volumetric
rankings to those identified as PRPs.
Regions should also compare information they have gathered
at a landfill site with information on PRPs and hazardous
substances at other Superfund sites in the area. In some
instances, the same transporters who shipped hazardous substances
to nearby facilities or Superfund sites may have also shipped
substances to the municipal landfill. Interviews and civil
investigations of nearby industries and commercial entities may
provide information that can link hazardous substance shipments
from these entities to a municipal landfill, particularly where
transactional records show that hazardous substance shipments did
not reach a designated RCRA facility for disposal.
B) Removals
Host removal sites are not good candidates for compiling
waste-in information since they require clean-up action sooner
than the time it would take to produce waste-in lists. Non-time-
critical removal sites, with a planning process of six months or
more, are the only sites for which waste-in lists and rankings
should be considered. Where adequate transaction documentation
exists and settlement seems possible, Regions should prepare
waste-in lists and rankings as described in section 122(e)(1) for
release to PRPs.
As with remedial sites, Regions should begin preparing a
schedule for waste-in list and ranking compilation, revision and
release during the early stages of the PRP search. Because
removals proceed at an accelerated rate, it is important to start
waste-in preparation early, spend less time fine-tuning lists and
rankings, and release the information to PRPs as early as
possible. Regions should notify PRPs of their potential
liability orally, followed by a confirming written notice, or
through a general notice letter. Information on the identity of
other PRPs at a site, and evidence on individual contribution,
should be sent out with this written notice. Where a special
notice letter is sent, Vaste-in lists and rankings should be sent
out with or before the special notice letter. Where no special
notice letter is sent, Regions can either send waste-in lists and
rankings through a separate mailing between the general notice
and the beginning of the removal action, or distribute the
information at a meeting of PRPs during that time. Where a
removal site involves large numbers of PRPs, Regions may prefer
to distribute waste-in information at a central meeting as they
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OSWER Directive 9835.16
o Administrative Subpoenas, as provided in CERCLA section
122(e)(3)(B), which are available to Regions "to
collect information necessary or appropriate" for
performing a preliminary non-binding allocation of
responsibility or "for otherwise implementing this
section," including preparation of waste-in information
under section 122(e)(1). Administrative subpoenas,
whose use is encouraged in the Administrator's
Management Review of Superfund. June, 1989, provide
Regions with an additional enforcement tool for
deposing witnesses and collecting "reports, papers,
documents, answers to questions, and other information
that the President deems necessary." I Guidance on Use
and Enforcement of CERCLA Information Requests and
Administrative Subpoenas. OECM, August, 1988, OSWER
Directive 9834.4-A).
D) Solvent Recycling and Other Transshipment Sites
Solvent recycling and other transshipment sites are often
characterized by operations that make it difficult to compile
accurate waste-in information, even though good transactional
records may exist. Transshipment activities usually involve the
temporary storage of hazardous substances prior to off-site
shipment for treatment or disposal. Recycling activities
typically involve the recovery and sale of "pure" products from
spent solvents and waste oils.
Regions may encounter difficulties when compiling waste-in
list volumes for solvent recycling and transshipment sites.
Unless records indicate clearly what percentage of incoming
substances were shipped off-site as pure product or as
temporarily stored substances, Regions should include all
incoming wastes in both volumetric rankings and waste-in lists,
and put the burden on PRPs to demonstrate that hazardous
substances left the facility and in what quantities.
Where all hazardous substances were brought to a central
site and then shipped to subsequent disposal sites, Regions may
find it easier to create a main transactional database for the
central site and subcategories for each disposal site within the
main database, or create separate lists for each site. Again,
the purpose of waste-in information is not to produce an exact
allocation of substances contributed by each PRP, but an
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OSWER Directive 9835.16
F) Mining Sites
Abandoned mining sites or sites contaminated by mining
overburden also frequently may pose difficulties for producing
waste-in information. This is due to the fact that documentation
is rarely available; PRPs are often no longer in business,
insolvent or untraceable; calculating volumes can be extremely
difficult due to the large volume of wastes; and under RCRA [40
CFR 261.4(b)(3)], certain mining wastes are exempt as RCRA
hazardous wastes and therefore may not be CERCLA hazardous
substances (unless some other basis exists for defining the
material as a hazardous substance under CERCLA section 101(14)).
Municipalities may keep records on land ownership or mining
leases, and occasionally record annual tonnage and profit figures
for individual mines. Even these records, however, may require
major assumptions on the amounts of waste produced per ton of
mined product. In general, unless documentation is good and
viable PRPs can be found, Regions should not attempt compiling
waste-in information for mining sites.
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Attachment 2
OSWER Directive 9835.16
STANDARD CONVERSION FACTORS FOR
WASTE-IN LISTS AND VOLUMETRIC RANKINGS1
1 truckload = 74 drums
1 drum = 55 gallons
1 barrel = 55 gallons
1 gallon = 8.33 pounds
1 pail = 5 gallons
1 ton = 2,000 pounds
1 metric ton = 2,204 pounds
1 ton = 250 gallons
1 liter = 0.264 gallons
1 cubic foot = 7.482 gallons
1 cubic yard = 202.018 gallons
1 box = 1 gallon
1 tank truck = 4,500 gallons
1 pound <= 1 pint = 0.125 gallons
In addition, asbestos ceiling tile is assumed to be l inch
thick. One square foot is therefore assumed to = 0.6233 gallons.
Where volumes indicated on transactional records are
unclear, such as "pallet," "wheelbarrow," "box car," Regions
should try to corroborate assumptions or estimates of volumes
through interviews, alternate sources of records, or site-log
information. Where there is no corroborating evidence, Regions
should include their best estimate of the volume and indicate it
is an estimate.
1Tank trucks and drums come in several different sizes and
Regions should check waste-in documents carefully to ensure that
the correct conversion factor is used.
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Attachment 3
OSWER Directive 9835.16
Commercial, industrial or institutional trash is
hazardous and should be included in vaste-in lists and
volumetric rankings unless PRPs can demonstrate
otherwise. The Interim CERCLA Municipal Settlement
Policy (OSWER Dir. 9834.13) provides that generators
and transporters of trash from a commercial, industrial
or institutional entity generally will be notified as
PRPs unless they can demonstrate that none of the
hazardous substances contained in the trash are derived
from commercial, industrial or institutional processes
or activities, and where the amount and toxicity of
those hazardous substances are not above the level
commonly found in household trash. Where EPA is
compiling the lists, it is better to include industrial
trash as hazardous, and let PRPs make necessary
revisions afterwards. On the other hand, the Interim
CERCLA Municipal Settlement Policy indicates that
generators and transporters of household trash
generally will not be notified as PRPs.
Anything labeled "solvent" is hazardous, and should be
included in waste-in and volumetric lists. In many
cases, labels on drums will describe hazardous
substances generically and not include information on
specific compounds. Regions should make reasonable
efforts to find other evidence to corroborate the
hazardous nature of a substance, where possible.
Where hazardous and nonhazardous substances are mixed
together, the mixture is considered hazardous and
should be included in its entirety on waste-in and
vni"Tn«»+-ric lists. Solid wastes, when mixed with one
or more hazardous wastes, are considered a RCRA
hazardous waste as described in 40 CFR sections
261.3(a)(2)(iii) and (iv), except where the waste was a
characteristic waste and no longer exhibits any of the
characteristics of a hazardous waste or where it has
been excluded as a hazardous waste in 40 CFR 261.3.
Under CERCLA, where there is mixing of hazardous and
nonhazardous substances during transport or disposal,
the combination would be subject to CERCLA if it still
contains a hazardous substance.
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Superfund Refo
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c/EPA
United States
Environmental Protection Agency August 1996
Superfund Reform:
Orphan Share Implementation
Enforcement Confidential
REVISIONS TO MODEL RD/RA SPECIAL NOTICE LETTERS
On p. 2, after paragraph 2, add new paragraph1:
Pursuant to the Superfund Reforms announced October 2, 1995, when EPA enters into
future RD/RA settlements, EPA intends to compensate settlors for a portion of the shares
specifically attributable to insolvent and defunct PRPs ("orphan share"), if any. EPA
believes that there may be PRPs at this site who are insolvent or defunct. [Alternative
language, if EPA knows ofparties that are insolvent or defunct: These parties include:
(list names of known insolvent and defunct PRPs)]. [If EPA knows of no insolvent or
defunct PRPs: At this site, EPA does not believe that there are any PRPs who are
insolvent or defunct and, therefore, this reform is not applicable.] If you, either
individually or with other PRPs, enter into an RD/RA settlement with EPA and provide
sufficient information about the existence, liability, and relative shares of responsibility
of insolvent and defunct PRPs, EPA will analyze the information, determining whether to
consider the shares of these parties in the amount of EPA's past costs and future
oversight costs to recover in such settlement.
For purposes of this reform, the term orphan share refers to that share of responsibility
specifically attributable to identified parties EPA has determined are: (1) potentially
liable; (2) insolvent or defunct; and (3) unaffiliated with any party potentially liable for
response costs at the site. You should note that this definition of orphan share does not
include shares due to, for example: (1) unallocable waste; (2) the difference between a
party's share and its ability to pay; or (3) those parties, such as de micromis contributors,
municipal solid waste contributors or certain lenders or residential homeowners, that EPA
would not ordinarily pursue for cleanup costs. £e§ "Policy on CERCLA Enforcement
Against Lenders and Government Entities that Acquire Property Involuntarily" (Sept. 22,
1995); "Policy Toward Owners of Property Containing Contaminated Aquifers" (May 24,
1995); "Guidance on CER0LA Settlements with De Micromis Waste Contributors,"
1 This language modifies the model special notice letter for RD/RA issued under the signature
of Bruce Diamond, OSWER Directive No. 9834.10 (Feb. 7, 1989). However, Regions may have
developed their own models to which this language may be added.
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2
OSWER Directive No. 9834.17 (July 30, 1993); "Policy Toward Owners of Residential
Property" (July 3, 1991); "Interim Policy on CERCLA Settlements Involving
Municipalities and Municipal Wastes" (Dec. 6, 1989).
On p. 3, add at the end of element 1:
If you believe that there are insolvent or defunct PRPs at the site [Or, if EPA previously
named PRPs:: other than the ones identified above], you should submit to EPA the
names, addresses, evidence of liability and relative shares of responsibility for each such
insolvent or defunct PRP, together with detailed information as to the basis for your claim
that each such party is insolvent or defunct; as defined by EPA's guidelines.
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United State*
Environmental Protection Agency
August 1996
nd Reforms
-------
United States
Environmental Protection Agency August 1996
Superfund Reform:
Orphan Share Implementation
Enforcement Confidential
NOTE: Case-specific language in [brackets].
DATE
PRPGROUP
Address
Dear ,
This letter is being sent to ensure that you are aware of the Environmental Protection
Agency's (EPA) new policy on orphan share compensation. On October 2, 1995, Administrator
Browner announced several new Superfund Reforms intended to promote fairness, reduce
Superfund costs and promote settlements at Superfund sites. The cornerstone of these reforms
was the announcement of EPA's intent to provide a limited portion of orphan share
compensation at sites where parties agree to perform the cleanup.
The policy on compensating orphan shares applies to sites where (1) EPA initiates or is
engaged in on-going negotiations for a remedial design or remedial action (RD/RA) at a site or
for a non-time-critical removal (NTC) at a National Priorities List site under the Superfund
Accelerated Cleanup Model (SACM); (2) a PRP or group of PRPs agrees to conduct the RD/RA
or RA pursuant to a consent decree or the NTC removal pursuant to an administrative order on
consent or consent decree; and (3) an "orphan share" exists at the site. For purposes of this
reform, the term orphan share refers to that share of responsibility specifically attributable to
identified parties EPA has determined are: (1) potentially liable; (2) insolvent or defunct; and (3)
unaffiliated with any party potentially liable for response costs at the site. A party may be
considered to be "insolvent" if EPA determines that a party has no ability to pay. A party may be
considered to be "defunct" if: (1) the entity has ceased to exist or ceased operations; and (2) the
entity has fully dissipated its assets such that the party has no ability to pay.
Compensation for the orphan share may be provided through forgiveness of past costs
and reduction of liability for future oversight costs, subject to certain limits [as described more
fully in the attached interim guidance].
\vEPA
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2
[Where special notice has already been issued, or will not be issued, the Region may
want to add this explanatory language indicating why this notice is being furnished'. Generally,
EPA Regions will provide notice of the potential availability of this reform at the time it provides
notice of forthcoming negotiations. In the case of (site name), advance notice is not possible
because negotiations began prior to the implementation of this reform. Accordingly, we are
sending you this notice now.] [or for where special notice has not yet been issued, but the Region
wants to notify parties or initiate negotiations'. Although negotiations are not .yet scheduled to be
opened in this case, we believe that it is important to notify you of the principles of this reform.]
It appears that this policy may have application at the (name) site [and we invite you to provide
any information you wish to submit regarding the proposed orphan share, along with a basic
rationale and supporting documentation].
[If the Region has exchanged settlement proposals with PRPs: Please note that this letter
does not constitute a new proposal in settlement discussions and should not be interpreted as
comprising in whole or in part a response or counter-offer to (prior proposals).]
Please feel free to call me at (###) if you have any questions or require any further
information.
Sincerely,
XXX
Assistant Regional Counsel
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. 4':*
• •
• >•¦, rK
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United States
. Environmental Protection Agency August 1996
SEPA Superfund Administrative Reforms:
Orphan Share Implementation
TAB 7:
ORPHAN SHARE PRE-APPROVAL PROCEDURES
Headquarters pre-approval will be required for any proposed settlement at a site where the
projected ROD remedy or non-time critical (NTC) removal costs exceed $30 million.
When pre-approval required: prior to formal settlement offer
• Pre-approval is required prior to conveying a formal settlement offer to a PRP or group of PRPs
that includes an orphan share component.
• Should the offer be subsequently reduced (and it can only be reduced pursuant to factors
enumerated in the guidance or as a result of a change in site cost information) or if it increases
pursuant to additional information, the Region should contact Headquarters again.
How to obtain pre-approval: call or write team contact
• Regions should, either orally or in writing, notify their Regional contact on the Orphan Share
Assistance Team (see attached) to initiate the pre-approval process, conveying sufficient
information so that Headquarters understands the determination that the Region has made with
respect to who the orphan share parties are, the size of the orphan share and any deadlines
running in the case. Such information might include: # PRPs, # orphan parties, cost of ROD or
NTC removal, amount of unreimbursed past costs and future oversight costs; rationale behind
determination of orphan parties and size of orphan share; other litigation risk at the site.
• The Regional contact on the Team will coordinate with Regional Support Division (RSD)
management and any RSD staffer assigned to case to evaluate the proposed offer based on
criteria in the orphan share guidance.
Evaluation and Decision:
• Headquarters will promptly evaluate the proposed compensation in light of site-specific factors,
state concerns and national priorities, including meaningful implementation of the reform and
impact on the Trust Fund.
• RSD Division Director will issue memorandum to Regional [Branch Chief] conveying reasons
for pre-approval; OR
Regional contact will set up conference call with the Region to work out a resolution of
differences. Upon resolution, RSD will issue memo to Region regarding approval.
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1
2
3
4:
5:
6:
7:
8:
9:
ORPHAN SHARE ASSISTANCE TEAM
REGIONAL CONTACTS
OFFICE OF SITE REMEDIATION ENFORCMENT,
REGIONAL SUPPORT DIVISION
Maria Cintron, (202) 564-4227
Maria Cintron, (202) 564-4227
Kimberly Barr, (202) 564-4212
Melissa Ward, (202) 564-4282
"Victoria van Roden, (202) 564-4268
Kimberly Barr, (202) 564-4212
Victoria van Roden, (202) 564-4268
Melissa Ward, (202) 564-4282
David Clay, (202) 564-4228
David Clay, (202) 564-4228
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United States
Environmental Protection Agency August 1996
Superfund Reform:
Orphan Share Implementation
TAB 8-1:
PLACEHOLDER FOR
MODEL RD/RA LANGUAGE
REGARDING THE PAYMENT OF OVERSIGHT COSTS
1 Language for the model decree will set out how oversight costs are to be credited as
part of the reform. For example, language may be offered such as "Parties may receive a credit
of a fixed sum for payment of oversight costs as compensation for the orphan share. Their
obligation to pay oversight costs would be triggered once EPA had billed oversight costs up to
the credit they receive."
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Qp
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August 1996
Superfund Reform:
Orphan Share Impiementati
mm
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United States
Environmental Protection Agency . August 1996
Superfund Reform:
Orphan Share Implementation
SAMPLE TEN POINT MEMORANDUM ANALYSIS
As part of the settlement, the Region compensated settling PRPs for the portion of
orphan share attributable to insolvent/defunct parties. This compensation was in the form of
forgiveness of past costs and of future oversight costs.
The Region determined that of the 15 PRPs, two fell within the definition of insolvent or
defunct. After analysis of financial information (tax returns and financial questionnaires), the
Region determined that Mr. Smith, the current owner of the site, has no ability to pay absent
extreme hardship. Mr. Smith is retired, and on a limited income, although he owns his house.
The other PRP, Peerless Inc., a former generator, ceased operations 10 years ago. No assets
remain and the Region has determined that Peerless had no successor nor was the corporation
affiliated with any other party with liability at the site.
The Region analyzed the facts of the case to determine a fair allocation between the
parties at the site, using Gore factors, applicable judicial decisions, and other tools. Mr. Smith
was owner of the site during the entire period of disposal. He accepted waste for disposal at the
site, but the Region believes that waste generators may have taken advantage of his lack of
sophistication. Accordingly, the Region attributes an orphan share of 40-50% to Mr. Smith.
Peerless contributed wastes from its plating operations during a period of 10 years of the
20 years of operation of the site. Although deposition testimony indicates that Peerless'
production was minimal, and its subsequent wastes also minimal, its wastes contained toxic
metals. The 13 PRPs, while they contributed much greater volume of materials, did not
contribute waste as high in toxicity. Accordingly, the Region attributes 20-25% orphan share to
Peerless (approximately 1/2 of the generator share).
The total of past costs and future oversight costs is $10 million. Added to the estimated
ROD costs of $10 million, total site costs are estimated to be $20 million. The orphan share in
dollars is $12 million to 15 million (60-75% times total site costs of $20 million. Twenty-five
percent of ROD costs of $10 million are 2.5 million. Thus, the maximum amount appropriation
for compensation at this site was thfcs $2.5 million (the 25% of ROD costs total was the limiting
factor).
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2
Despite the strong presumption that settling PRPs should receive the maximum available
compensation at a site, at this site the larger, viable PRPs brought numerous contribution actions
against small parties.. Accordingly, the Region reduced the available compensation by 20%, to
$2 million.
The Region compromised ah additional $1 million in past costs, due to strength of
evidence considerations against the remaining PRPs (see discussion at page of this Ten Point
Memorandum). Thus total compromises at this site amounted to $3 million.
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^r
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Superfund Reforms
Orphan Share Implement
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Department of Juifiee
U.S. Environmental Protection Agency
June 3, 1996
MEMORANDUM
SUBJECT:
FROM:
ircement
jtection Agency
TO:
Revised Guidance on CERCLA Settlements with De Micromis Waste
Contributors
Jerry Clifford, Direci
Office of Site Re:
U.S. Environme
Bruce S. Gelber, Deputy Chief
Environmental Enforcement Section
Environment and Natural Resources Division
U.S. Department of Justice
Regional Counsel, Regions I - X
Director, Office of Site Remediation and Restoration, Region I
Director, Emergency and Remedial Response Division, Region II
Director, Hazardous Waste Management Division, Regions III, IX
Director, Waste Management Division, Region IV
Director, Superfund Division, Regions V, VI, VII
Assistant Regional Administrator, Office of Ecosystems Protection and
Remediation, Region VIII
Director, Environmental Cleanup Office, Region X
Assistant Chiefs, Environmental Enforcement Section
This memorandum transmits the "Revised Guidance on CERCLA Settlements with De
Micromis Waste Contributors." The revised guidance supersedes EPA's "Guidance on CERCLA
Settlements with De Micromis Waste Contributors," issued on July 30, 1993. It consists of a
memorandum and seven attachments which are designed to provide guidance on using
CERCLA's settlement authorities to resolve the liability of potentially responsible parties
("PRPs") who have contributed even less hazardous substances to a site that the traditional de
minimis party.
As stated in the 1993 guidance, de micromis settlements are simply a subset of de
minimis settlements and are entered under the de minimis contributor settlement authority of
Section 122(g)(1)(A) of CERCLA, 42 U.S.C. § 9622(g)(1)(A). De micromis settlements may be
available to parties who generated or transported a minuscule amount of waste to a Superfund
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site, an amount less than the minimal amount normally contributed by de minimis waste
contributors. De micromis settlements are not available to owners or operators of Superfund
sites. This guidance document is not intended to affect ongoing de minimis settlement
negotiations.
Summary of Major Changes Made bv Revised Guidance
As announced in EPA's Administrative Reform initiative of October 1995, the revised
guidance makes three important changes to EPA's 1993 de micromis policy. First, the 1993
guidance provided as examples two volumetric cut-offs for eligibility for a de micromis
settlement: 0.001% of total volume'for hazardous substance contributors; and 0.1% for municipal
solid waste (MSW) contributors. The revised guidance endorses eligibility cut-off levels that
double the levels identified in the 1993 guidance (0.002% for hazardous substance contributors
and 0.2% for MSW contributors). Moreover, where the Region determines that site-specific
factors warrant the use of an absolute volume cut-off for hazardous substance contributors, the
guidance endorses the use of an eligibility cut-off at 110 gallons (such as two 55-gallon drums)
or 200 pounds.
Second, the 1993 guidance recommended that the Regions determine de micromis
settlement payments using a "matrix approach" that considers both individual volumetric
contribution and total site costs. Reflecting EPA's policy that de micromis parties, who have
contributed only a minuscule amount of waste to the site, should not participate in financing the
cleanup, the revised guidance recommends that de micromis settlements be effected without any
exchange of money. (Although the Administrative Reform initiative referred to "one-dollar de
micromis settlements," for purposes of administrative efficiency and resource, savings, the
revised guidance does not recommend collecting the $1.00 payment.)
Third, the revised guidance clarifies that de micromis settlements should only be
considered when the Region finds that minuscule contributors are being pursued by other PRPs
.at the site. Specifically, the revised guidance recommends that the Region offer a de micromis
settlement to qualifying parties only if such parties: (1) have been sued by other PRPs at the site;
(2) face the concrete threat of litigation by other PRPs at the site; or (3) have approached EPA
seeking settlement, and the Region has determined that such parties have a reasonable
expectation of facing contribution litigation.
Description of Attachments
In addition to the guidance memorandum itself, the revised guidance includes seven
attachments:
(1) An informational brochure entitled "Superfund and Small Volume Waste
Contributors: De Micromis Settlements"
(2) Sample Cover Letter for De Micromis Questionnaire
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(3) Model De Micromis Questionnaire
(4) Sample Cover Letter for De Micromis Settlement
(5) Model GERCLA § 122(g)(4) De Micromis Administrative Order on Consent (AOC)
(6) Model CERCLA § 122(g)(4) De Micromis Consent Decree (CD)
(7) Model CERCLA § 122(i) De Micromis Federal Register Notice
The attachments are designed to increase the speed and efficiency of the de micromis
settlement process by establishing regular arid routine settlement practices. Attachment 1 is an
informational brochure that provides introductory information for potential settlors about the
Superfund program and de micromis settlements. Attachment 2 is a sample cover letter to be
used with the third attachment, the de micromis questionnaire. The cover letter introduces the
recipient to the Superfund program, the site and the concept of de micromis settlements, and
invites the recipient to fill out the questionnaire. Attachment 3, the questionnaire, is designed to
assist EPA staff in determining which parties are eligible for de micromis settlements. It is a
form to be filled out by potential de micromis settlors which contains a series of questions about
the potential settlor's waste and its involvement with the site.
Attachment 4 is a sample cover letter to accompany the de micromis settlement when it is
sent out for signature by the settling party. Attachment 5; the de micromis AOC, provides model
settlement language for administrative resolution of a de micromis party's liability. Attachment
6, the de micromis CD provides model settlement language for the judicial resolution of a de
micromis party's liability. In general, EPA and DOJ prefer resolution by AOC because
administrative settlements usually are quicker and less expensive than judicial settlements.
Typically, the CD would be used when the settling de micromis party has been named as a
defendant in a contribution action or when the United States has already initiated CERCLA
litigation at the site.
The AOC and CD are brief in length, are written in plain English, and are designed to be
self-explanatory and non-threatening to the potential settlor. We encourage our staff to use them
as guidance when drafting settlements and'to adhere as closely as possible to their terms. Once
the appropriate model has been tailored to the facts and circumstances of the case it should not be
subject to negotiation with the settling parties. This will ensure that de micromis settlements will
be completed quickly, will contain nationally-consistent terms, will receive expeditious
management review and approval at EPA and DOJ, and will be accomplished with the
expenditure of fewer resources to settling parties and to the Government than would be necessary
for a negotiated settlement.
The seventh and final attachment is a model Federal Register notice. It is for use by EPA
staff when providing the public noticaand opportunity to comment on administrative de
micromis settlements required by Section 122(1) of CERCLA, 42 U.S.C. § 6922(1). (The
Department of Justice will use a similar Federal Register notice for de micromis CDS.)
3
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This guidance was developed with the assistance of workgroup members from
Headquarters, the Regions, and the Department of Justice, and we would like to thank all
workgroup members for their contribution to this project.
If you have any questions about the revised guidance, please contact Susan Boushell of
the Program and Policy Evaluation Division of OSRJB at (202) 564-5107 or Tom Mariani of the
Environmental Enforcement Section (EES) at (202) 514-4620. If you have any questions about
the attached models, please contact Janice Linett of the Regional Support Division in OSRE at
(202) 564-5131 or Tom Mariani of EES.
For EPA staff, the guidance and attachments are available electronically in the Superfund
Enforcement Infobase by accessing Agency LAN Services/Information Services. For DOJ staff,
the guidance and the model AOC, CD, and questionnaire are available electronically on the
Section's work product directory: N:\NET\SS52\UDD\EESINDEX\CERMODEL.
Attachments (7)
cc: Lawrence E. Starfield, Associate General Counsel,
-Solid Waste and Emergency Response Division
Stephen D. Luftig, Director, Office of Emergency and Remedial Response
Joel S. Gross, Chief, Environmental Enforcement Section
Letitia Grishaw, Chief, Environmental Defense Section
Regional Counsel Branch Chiefs, Regions I - X (with disk containing attachments 2-7)
Regional Waste Management Branch Chiefs, Regions I - X
4
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REVISED GUIDANCE ON CERCLA
SETTLEMENTS WITH DE MICROMIS WASTE CONTRIBUTORS
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
401 M Street, S.W.
Washington, D.C. 20460
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REVISED GUIDANCE ON CERCLA
SETTLEMENTS WITH DE MICROMIS WASTE CONTRIBUTORS
I. Background and Purpose
EPA strongly supports efforts to resolve quickly and fairly the liability of small volume
waste generators and transporters.1 The Agency has published several guidance documents'to
assist the Regions in resolving the liability of these contributors using the provisions of § 122(g)
of the Comprehensive Environmental Response, Compensation, and Liability Act of 19S0, as
amended by the Superfund Amendments and Reauthorization Act of 1986 (CERCLA), 42 U.S.C.
§ 9622(g).1 This guidance document is focused specifically on EPA's use of CERCLA
settlement authorities to resolve the liability of "de micromis" parties who may be sued in
contribution by other parties at the site. As described in more detail below, a de micromis party
is typically one that contributed either: (a) a minuscule quantity of hazardous substances to a site
(even less than a typical de minimis partvl: (b) a small quantity of municipal solid waste (MSW)
or industrial trash;3 or possibly (c) both.
There are various situations in which EPA may best serve the public interest by
exercising its enforcement discretion and offering a de micromis settlement to eligible parties.
This guidance explains how to use EPA's existing settlement authority in an expeditious manner
to resol ve the liability of de micromis parties so they may receive the full extent of contribution
1 Performed under the authority of CERCLA § 122(g)(1)(A), de micromis settlements are
available only to parties who may be liable as generators or transporters (under § 107(a)(3) or §
107(a)(4), respectively), and not to parties whose liability derives from ownership or operation of
a facility.
2 This guidance document supersedes EPA's existing guidance on de micromis settlements:
"Guidance on CERCLA Settlements with De Micromis Waste Contributors" (White/Diamond,
July 30,1993). However, this document supplements existing guidance regarding de minimis
settlements insofar as they may apply to de micromis settlements. See, e.g.. "Streamlined
Approach for Settlements with De Minimis Waste Contributors under CERCLA § 122(g)(1)(A)"
(Diamond/White, July 30, 1993) (OSWER Directive #9834.7-1D); "Methodology for Early De
Minimis Waste Contributor Settlements under CERCLA § 122(g)(1)(A)" (Diamond/White, June
2, 1992) (OSWER Directive #9834.7-1C); "Methodologies for Implementation of CERCLA §
122(g)(! )(A) De Minimis Waste Contributor Settlements" (Diarnond/Unterberger, December 20,
1989) (OSWER Directive #9834.7-1 B); "Interim Guidance on Settlements with De Minimis
Waste Contributors under § 122(£) of SARA," (Adams/Porter, June 19, 1987) published at 52
Fed. Reg. 24333 (June 30, .1987).
5 For definition of the terms "municipal solid waste" and "industrial trash," as they are used
in this guidance, Regions should refer to the "Interim Policy on CERCLA Settlements Involving
Municipalities or Municipal Waste" (Clay, Dec. 6, 1989) (OSWER Dir. # 9834.13), at 4-6,
published at 54 Fed. Reg. 51071 (Dec. 12, 1989).
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protection available under the statute,
To provide further assistance, attached are several additional documents: an
informational brochure entitled "Small Volume Waste Contributors: De Micromis Settlements"
(attachment 1); a sample cover letter to accompany the De Micromis Questionnaire (attachment
2); a model De Micromis Questionnaire (attachment 3); a sample cover letter to accompany the
De Micromis Settlement (attachment 4); a.model CERCLA § 122(g)(4) De Micromis
Administrative Order on Consent (attachment 5); a model CERCLA § 122(g)(4) De Micromis
Consent Decfee (attachment 6); and a model CERCLA § 122(i) De Micromis Federal Register
Notice (attachment 7).
II. Policy Discussion
Under § 122(g) of CERCLA, EPA has the authority to enter into settlements at any point
in the cleanup process with persons who may have contributed minuscule amounts of hazardous
substances. EPA has determined that de minimis settlements are in the public interest because
they simplify cases, reduce the transaction costs of both de minimis and non-de minimis parties,
and provide greater certainty to the de minimis parties who are able to resolve their liability at a.
site. In addition, for many de minimis parties, the cost of legal representation, absent early
settlement, may exceed those parties' proportional share of responsibility. For these reasons,
EPA has redoubled its efforts to resolve the liability of small volume waste contributors.
These efforts are not enough, however, for those parties whose contributions are so small
that their shares of responsibility are in effect zero. For these de micromis parties, the
administrative costs of determining and verifying the party's share, if any, and the cost of
collecting the small payment required through a de minimis settlement could far exceed that
share. Therefore, as a matter of national policy, EPA intends to use its authority where
appropriate to review and resolve the potential liability of de micromis parties without incurring
such costs. This settlement guidance is designed to provide assistance to Regional personnel at
sites where the Agency determines that a de micromis settlement may be in the public interest.
A de. micromis settlement may be appropriate for many types of parties, including
homeowners, small businesses, or other entities whose activities resulted in the generation or
disposal of only an insignificant amount of hazardous substances. A de micromis settlement may
also be appropriate for federal agencies or industrial/commercial entities if their contribution to
the site meets the de micromis eligibility test established for a particular Superfund site. De
midromis contributor settlements are not available to owners or operators of Superfund sites.4
* See supra note 1.
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EPA's regional offices have discretion to decide whether and when to. offer a de micromis
serJement. In general, the Region should only offer a de micromis settlement to qualifying (or
potentially qualifying) parties if one of the following conditions is met: (1) such parties have
been sued by other PRPs at the site; (2) such parties face the concrete threat of litigation from
other PRPs at the site; or (3) such parties have approached EPA seeking a settlement, and the
Region has determined that such parties have a reasonable expectation of facing contribution
litigation.
Iq some cases, EPA may obtain advance notice of this type of third-party .litigation. For
example, the defendants in a CERCLA action brought by the United States may move to join
potentially de micromis parties to a pending enforcement action, or signatories to a consent
decree may notify EPA of contribution suits they initiate (as required by 93 of the Final
Revised Model CERCLA RD/RA Consent Decree (Herman/Schiffer, July 13, 1995), published
at 60 Fed. Reg. 38817 (July 28, 1995)). In such cases, it may be appropriate for the Region to
consider the feasibility of a de micromis settlement.
However, if there are de micromis parties at a site who are not being pursued by other
PRPs, EPA should not offer a de micromis settlement. De micromis parties are, by definition,
parties that EPA believes should not be pursued or otherwise compelled to expend transaction
costs to resolve potential Superfund liability. Even reading, understanding, and responding to a
de micromis settlement offer made by the United States may cost a de micromis party legal fees
or cause them to incur other financial burdens. For this reason, EPA should not extend a
settlement offer to parties who are under no threat of suit and incurring no transaction costs in
connection with the site.
This guidance is not intended to affect ongoing de minimis settlement negotiations.
Indeed, the Regions are encouraged to conduct de minimis settlements where they have
determined that small volume contributors at the site should share the costs of response and
would benefit from an expedited settlement. If the Region is in the process of conducting a de
minimis settlement at the site, it may, in its discretion, choose to establish both a de minimis and
a de micromis class within the known small volume waste contributors at the site. A distinction
between de minimis and de micromis parties may be appropriate, for example, if de micromis
partiesare known to EPA but would not normally be pursued by EPA for response costs — either
because of the type of waste contributed (e.g.. MSW) or the very low volume contributed.
Unlike traditional de minimis settlements, the Region should use its discretion to offer de
micromis settlements only where they would be helpful to the parties involved; it should not,
typically, offer such settlements where qualifying parties would suffer no detriment in the
absence of EPA's assistance. Finally, even if small contributors at a site are parties to (or have
been threatened with) contribution litigation, the Region has discretion, under appropriate
circumstances, to decline to offer de micromis settlements.
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III. Settlement Authority
A. Section 122
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IV. De Micromis Settlement Procedures
A. Eligibility
De micromis settlements are a subset of de minimis contributor settlements under
CERCLA section 122(g), and are intended to encompass only the parties who contributed
minuscule amounts of hazardous substances to a site, including parties who sent only MSW or
industrial trash to the site. Therefore, in considering whether parties are eligible for de micromis
settlements, the Region must first be able to make the findings required by § 122(g) for a de
minimis settlement with respect to those parties: (1) that the amount of hazardous substances
contributed is minimal in comparison to the other hazardous substances at the site; (2) that the
toxic or other hazardous effects of the substances contributed are minimal in comparison to the
other hazardous substances at the site; and (3) that the settlement is practicable and in the public
interest and involves only a minor portion of the response costs at the site. Next, the Region
should establish a volumetric cut-off, above which no party could qualify for a de micromis
settlement. Parties above this cutoff may still qualify for a de minimis settlement, but not a de
micromis settlement. In relative terms, to qualify for a de micromis settlement, the party's waste
contribution must be smaller than "minor" ~ it must be minuscule.
The Region should consider several factors in determining the de micromis eligibility
cut-off. For example, the Region should consider the settlor's contribution of hazardous
substances in relation to the total volume of waste at the site, the toxic or other hazardous effects
of such hazardous substances, and the effect of the de micromis settlement on the remaining
parties at the site. Below are a few examples of how a de micromis cutoff might be established
at different types of sites. Of course, these examples are illustrative only; there may be sites at
which the eligibility criteria suggested in these examples would be too high or too low, or at
which it may be inappropriate to offer a de micromis settlement at all. Similarly, there may be
other types of sites where a de micromis settlement might be appropriate. Furthermore, disposal
of minuscule amounts of hazardous substances does not automatically make a party eligible for a
de micromis settlement. The Region should evaluate site-specific factors in determining whether
a de micromis settlement is appropriate in a given situation.7
1. Sites containing wastes of similar toxicity
As mentioned above, to satisfy the statutory (§ 122(g)(1)(A)) requirement for a de
minimis or de micromis settlement, the toxic or other hazardous effects of an eligible party's
7 A de micromis settlement rrmy be appropriate even where the Agency is considering
performing a non-binding allocation of responsibility (NBAR) or adopting a private party
allocation at the site. Offering a de micromis settlement to qualifying parties, rather than
including such parties in an allocation process, is consistent with EPA's view that de micromis
parties should not be required to participate in financing or performing the cleanup.
5
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substances must be minimal in comparison to the other hazardous substances at the facility. At a
site where the wastes are found to, be essentially,similar in toxicity (such as at a battery cracking,
waste oil recycling, or scrap metal facility), a de micromis settlement may be appropriate with
parties who contributed only a minuscule amount. In such cases, the Region.could establish a
cut-off for de micromis eligibility based simply on the volumetric waste contribution (e.g.. the
percentage of the number of batteries or gallons of waste oil sent, by a party as compared to the
total number of batteries or gallons of waste oil at the site). Given, the nature of wastes at these
sites and their similar toxicities, a typical de micromis cutoff might be 0.002% of the total
volume of waste at the site, or 110 gallons (such as two 5 5-gallon drums) or 200 pounds of
materials containing hazardous substances, whichever is greater.
Of course, the Region may vary this cutoff in accordance with site-specific factors. For
example, at a small site, a 110-gallon contributor may actually be responsible for 1% (or even
5%) of the total waste at the site. In such a case, the Region might determine that the 110-gallon
contributor is eligible for a de minimis settlement, or perhaps not eligible for an expedited
settlement at all. Furthermore, where the Region has extensive volumetric information, a natural
break in the data might justify a slightly higher or lower de micromis cutoff. Regardless of the
percentage of waste contributed, however, where the toxic or other hazardous effects of the 110-
gallon contributor's waste is hot "minimal in comparison to the other hazardous substances at the
facility," a CERCLA § 122(g) settlement is not appropriate.
2. Co-disposal landfills containing wastes of varying toxicity
Co-disposal landfills are typically sites that received MSW, industrial trash, or municipal
sewage sludge (MSS)! as well as hazardous substances derived from a commercial, institutional,
or .industrial process or activity. Although the waste at these landfills varies in toxicity, the
MSW and industrial trash contributions are generally of high volume and low toxicity. Based on
the significantly lower toxicity of MSW and industrial trash as compared to industrial hazardous
substances, it is appropriate for a Regi6n to consider a higher volumetric cut-off for de micromis
eligibility for parties contributing such wastes. Accordingly:
(a) If a potential de micromis party contributed solely MSW or industrial trash, the
Region should consider a de micromis settlement to a PRP whose contribution did not exceed
0.2% of the total waste at the site.9 The Region should also take site-specific factors into account
' See "Interim Policy on CERCLA Settlements Involving Municipalities or Municipal
Wastes." supra note 3 at 4-6, for general definitions of the terms "municipal solid waste,"
"industrial trash," and "municipal sewage sludge."
9 Generators of MSS sometimes seek settlement under CERCLA § 122(g)(4). EPA explained
in 1989 that, as with MSW and industrial trash contributors, the Agency typically would not
pursue contributors of MSS unless site-specific evidence indicated that such contributions
contained hazardous substances derived from a commercial, institutional, or industrial process or
6
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when establishing this volumetric cut-off. In order to qualify for a de micromis settlement under
these criteria, parties must certify that their contribution to the site, was solely MSW or industrial
trash.
.(b) If a potential de micromis party contributed solely hazardous substances derived from
a commercial, institutional, or industrial process or activity, the Region should consider utilizing
an eligibility cutoff for such party as described in Section IV.A. 1 above fi.e.. 0.002% of the total
volume of waste containing hazardous substances at the site or 110 gallons/200 pounds of
materials containing hazardous substances).
(c) If a potential de micromis party contributed both (1) MSW or industrial trash and (2)
hazardous substances-derived from a commercial, institutional, or industrial process or activity
fe.g.. MSW mixed with trace amounts of industrial hazardous substances that are distinct from
ordinary household hazardous waste), the Region should consider some combination of the
cutoffs described above in (1) fi.e.. 0.002% for wastes of similar toxicity) and (2)(a) fi.e.. 0.2%
for MSW).10
B. Site-specific Information
The Region should evaluate the following site information before pursuing a de micromis
settlement (assuming one or more of the circumstances described in II above is present): (1)
information regarding hazardous substances sent to the site by the de micromis party, and (2) the
total estimate of waste at the site.
The Region may use a variety of site-specific information to determine a party's
eligibility for a de micromis settlement. Sources of this type of information include: state
activity. See "Interim Policy on CERCLA Settlements Involving Municipalities or Municipal
Waste," supra note 3 at 12. However, to offer a de micromis settlement to an MSS contributor —
and thus give covenants and contribution protection — goes beyond the Agency's decision to
refrain from enforcement. Wastes containing widely varying concentrations or amounts of
hazardous substances may well be called MSS, distinguishing this category somewhat from
MSW or industrial trash. Nevertheless, where a Region concludes that the MSS contributed by a
PRP to a particular site is essentially the same as MSW, the Region may elect to treat such MSS
like MSW for purposes of determining whether that PRP qualifies for a de micromis settlement.
For a Region to conclude that any particular MSS is essentially the same as MSW, the case-
specific facts must show that the MSS in question did not contain any greater concentration or
amount of hazardous substances^han typically found in MSW.
10 The Agency has developed these eligibility cutoffs because parties responsible for even
minuscule waste contributions may be statutorily liable under CERCLA. These eligibility
cutoffs are intended only to inform the Regions' exercise of discretion in deciding whether to
settle with such minuscule contributors.
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records, manifests, site records, canceled checks, interviews, waste-in lists, other allocation
documents, or § 104(e) information request responses. The Region does not have to produce a
waste-in list, even if the information is available, if the Region has information in its possession
to determine that the potential settlor is a de micromis party. However, the Region should use a
prepared waste-in list if it is available. As described below, the Region should use a
questionnaire to assess the nature and quantity of wastes contributed by each potential de
micromis party to determine eligibility.11 In some cases, where the Region already has sufficient
information about each party's contribution, the questionnaire may be replaced with a more
simplified self-certification that may, in some cases, be simply included in the settlement
document.
C. Contacting De Micromis Settlors
As mentioned above, EPA's regional offices have discretion to decide whether and when
to offer a de micromis settlement. In general, the Region should only offer a de micromis
settlement if there are contributors of minuscule volumes of waste at the site that havfc either: (1)
been sued by other PRPs at the site, (2) been threatened with suit by other PRPs at the site; or (3)
approached EPA seeking a settlement and EPA believes they may reasonably expect to soon face
contribution demands by other PRPs. As previously discussed, if there are de micromis parties at
a site who do not meet this test, EPA should not offer them a de micromis settlement.
Where EPA determines it is appropriate to offer a de micromis settlement, the Region
should be particularly sensitive when it contacts and communicates with potential de micromis
parties. Such parties may not be familiar with the Superfund process. Indeed, they may see no
practical difference between a demand letter from a settling PRP and a letter from the
government containing a de micromis settlement offer. The potential de micromis settlor may be
unaware of the possibilities of contribution litigation and any benefits such a person would
receive by settling with the government, such as contribution protection and reduced transaction
costs. Therefore, the site case team should formulate a communication strategy before the
settlement offer is sent to the de micromis parties.
Such a strategy will aid in communicating EPA's actions to public officials, potential de
micromis parties, and other PRPs at the site. Effective communication increases fairness, could
reduce later settlement challenges, and may identify issues or additional information that should
be considered in the settlement offer. After consideration of the number of parties and site-
specific circumstances, it may be appropriate for the case team to discuss the settlement strategy
with EPA's congressional affairs representatives and community relations personnel. The case
team should develop a communication strategy which states that the parties are being sent a
" The model De Micromis Questionnaire (attachment 3) includes a certification by the
potential settlor that it has made a thorough search for documents and information relating to its
involvement with the site and has accurately and completely filled out the questionnaire.
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preemptive settlement offer rather than a threat of enforcement action and explains how the
settlement will benefit the de micromis party. The communication strategy should also state that
the federal government does not intend to pursue bona fide de micromis parties who decide not
to enter into a settlement. EPA's congressional affairs representatives should be given a copy of
the draft settlement offer letter where legislators may have an interest. Finally, in appropriate
circumstances, the case team should consider offering a briefing to local, state, and federal
elected officials early in the settlement process.
Attached are several documents to assist in preliminary communications with potential de
micromis parties: (1) a brochure describing the basic facts of de micromis settlements
(attachment 1); (2) a model preliminary letter to be attached to the questionnaire and certification
(attachment 2); and (3) a model follow-up letter confirming the party's eligibility for a de
micromis settlement (attachment 4). These are written in plain English, emphasize the voluntary
nature of de micromis settlements, and inform the recipient that de micromis settlement terms are
non-negotiable to reduce transaction costs and administrative expenses.
D. Notification of EPA Headquarters. Department of Justice and Federal Trustees
In accordance with current delegations, the Region must consult with the Director of the
Regional Support Division in the Office of Site Remediation Enforcement at Headquarters when
planning the Region's first de micromis settlement. Subsequent de micromis settlements do not
require Headquarter1 s consultation. A de micromis settlement does not require the concurrence
of Headquarter's Office of Enforcement and Compliance Assurance unless it "significantly
deviates from written Agency policy" or "breaks new ground in an important, sensitive area."'2
In addition, the Department of Justice (DOJ) must approve all administrative de micromis
settlements where total site costs are expected to exceed $500,000 and all de micromis consent
decrees.
If the settlement requires DOJ approval, the Region should consult with DOJ as early in
the process as possible, and keep the Department apprised of progress toward settlement and any
significant departures from this guidance or its attachments. Within 30 days of receiving the
Region's referral of the proposed settlement, DOJ will advise the Region whether the settlement
is approved. For administrative settlements, the settlement will be deemed approved if DOJ does
not reject a proposed de micromis settlement within the.30-day period, unless there has been an
agreement to enlarge this time period between the appropriate Assistant Section Chief from
DOJ's Environmental Enforcement Section and EPA's Regional Counsel (or other appropriate
regional official).
12 See "Office of Enforcement Compliance and Assurance and Regional Roles in Civil
Judicial and Administrative Site Remediation Enforcement Cases" (Herman, May 19, 1995) at
page 2 of the attachment.
9
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The federal natural resource trustees have agreed to waive the natural resource damage
claim against de micromis settlors whose monetary consideration is $1.00 or less, subject to a
right to withdraw that consent in a given case. For this reason, the Region should notify the
trustees as early in the process as possible after it has decided to develop a de micromis
settlement offer. For both administrative and judicial settlements, the Region must give
potentially interested federal trustees 30 days to review a proposed settlement prior to EPA's
signing it. The 30 days may run concurrently with the period given to the de micromis parties to
review and sign the proposed settlement. Unless a trustee objects within the 30-day period (or ah
enlarged time-period agreed to by the Region and the trustee), the trustee's generic waiver of
natural resource claims applies.
E. Public Comment Requirements
The Region must publish notice of all administrative de micromis settlements in the
Federal Register for no fewer than 30 days, pursuant to § 122(i) of CERCLA. Although the
Regional Administrator may sign the settlement either before or after this public comment
period, DOJ approval must be complete before the Federal Register notice is published by the
Region. DOJ will lodge judicial de micromis settlements with the court and provide no fewer
than 30 days for public notice and comment.
V. De Micromis Settlement Provisions
The terms of a de micromis settlement are set forth in the Model CERCLA § 122(g)(4) .
De Micromis Administrative Order on Consent (AOC) (attachment 5) and the Model CERCLA §
122(g)(4) De Micromis Consent Decree (CD) (attachment 6). Tne main provisions of these
model documents are described below.
A. Resolution of Liability
De micromis settlements under CERCLA § 122(g) (administrative or judicial) will
address a party's potential liability under §§ 106 and 107 of CERCLA and § 7003 of RCRA and
provide the settlor with an immediately effective covenant not to sue for past and future liability
at the site. EPA intends de micromis settlements to be a final resolution of the de micromis
party's potential liability, save for a few relatively narrow reservations which are described under
(B) below.
B. Reservations of Rights
A de micromis settlement under § 122(g) should generally contain a reservation of rights
for the following situations: (1) EPA obtains new information showing that the settlor no longer
qualifies for a de micromis settlement under, the criteria established for the site (e.g.. the waste
contributed was of a greater volume or toxicity than the de micromis threshold); and (2) after
10
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signature of the De Micromis Questionnaire, the settlor becomes an owner or operator of the site
or undertakes any activity with respect to a hazardous substance or solid waste at the site.
Further, all de micromis settlement agreements should state that the settlement has no effect on
the Agency's ability to pursue non-settling parties.
C. Contribution Protection
The de micromis settlement should contain language that the settlor receives protection
against contribution actions to the full extent provided in CERCLA §§ 113(f) and 122(g)(5). As
reflected in the model De Micromis CD and AOC, this contribution protection applies to all
maners addressed in the settlement, defined as "all response actions taken and to be taken and all
response costs incurred and to be incurred, in connection with the Site, by the United States or by
any person who is a potentially responsible party under CERCLA at the Site." The "matters
addressed" do not include those response actions and those response costs for which liability is
reserved in the United States' reservation of rights.
D. Obligations of the Settling Party
This guidance establishes a change in EPA's approach to establishing settlement values
for de micromis offers. Consistent with the model administrative order and consent decree, the
Regions should generally not require any monetary payment as part of a de micromis settlement.
This approach reflects EPA's position that it would be inequitable to require de micromis parties
to participate in financing or performing cleanup at the site because their liability is negligible at
most. Moreover, because a de micromis party's actual connection to the site is so small, the
administrative costs of executing a de micromis settlement, combined with the private party's
associated transaction costs will likely equal or exceed the de micromis party's proportional
share of response costs at the site, if any. Given this inequity, it is fair, and thus in the public
interest, to conclude zero-dollar de micromis settlements with qualifying parties.
In exchange for the United States' broad covenant not to sue and receipt of.full
contribution protection, the settlor certifies that it has responded fully and accurately to the De
Micromis Questionnaire (and any other EPA requests for information regarding the site).
Moreover, the settlor agrees not to assert any claims against the United States or its contractors
or employees with respect to the site or the settlement. Further, the settlor is required to waive
all claims regarding the site against any other person who may be a potentially responsible party
at the site. Where multiple settlors are involved, each settlor also waives its claims regarding the
site against every other settlor.
VI. Purpose and Use of this Guidance
This guidance and any internal procedures adopted for its implementation are intended
exclusively as guidance for employees of the U.S. Environmental Protection Agency and the
11
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U.S. Department of Justice. This guidance is not a rule and does not create any legal obligations.
Whether.and how EPA applies the guidance to any particular site will depend on the facts at the
site.
VU. Further Information
For further information concerning this guidance, please contact Susan Boushell in the
Office of Site Remediation Enforcement at 202-564-5107. For further information on any of the
attachments, contact Janice Linett in the Office of Site Remediation Enforcement at 202-564-
5131.
12
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What is Superfund?
Superfund ij a federal program, administered by
[he Environmental Protection Agency (EPA), that Is
designed to clean up hazardous substances (or
'Iwaste") that may pose a threat to human health or
the environment. The full name of the law is the
Comprehensive Environmental Response,
Compensation, and Liability Act of 1980
(CERCLA).
Superfund sites are frequently areas or facilities
where solvents, sludges, heavy metals, or other
wastes have been disposed. In some cases,
Superfund sites are old landnils that have received
municipal solid waste as well as industrial waste.
Sites vary significantly In size — from a 1/4-acre
metal plating shop to a 250-squarc mile mining
complex. Contamination from these sites is often
found in the soil, groundwater, anil/or nearby
streams and lakes.
Where Can I Get More
Information?
To find out more about dc micromis settlements,
and whether you might qualify, contact the nearest
Regional U.S. Environmental Protection Agency
(EPA) Superfund program office. Ask to spealc to
the attorney, project manager, or community
relations representative assigned to your site. If you
do not know where the nearest EPA office Is located,
call 1-800-424-9346 for assistance.
Who Pays for Cleanups?
When Congress enacted Superfund, it Intended
to make the "polluters pay" for the costs of cleaning
up these sites. The Superfund law holds parties who
contributed to the contamination responsible for the
costs of cleanup, even if their actions were in
accordance with the law at the time of waste
disposal.
Superfund and
Small Waste
Contributors
De Micromis
Settlements
—=5>m*J—
Have you been contacted regarding your
possible involvement with a Superfund site? If
you believe you contributed only a minuscule
amount of waste to the site, or only household
trash, you should learn about "de micromis
settlements."
This pamphlet describes what Superfund is,
what de micromis means, and why a Superfund
de micromis settlement may be to your
advantage.
U.S. Environmental Protection Agency (EPA)
Office of Enforcement and Compliance Assurance
Office of Site Remediation Enforcement
401 M St., S.W., Washington, D.C. 20460
-------
Am 1 a "De Micromis" Party?
Who is Eligible for a "De
micromis" Settlement?
What are the Benefits of a
"De micromis" Settlement?
"De micromis"partics can be Individuals, small
businesses, schools, large companies, or any party
who has contributed a minuscule amount or
hazardous substances to a Superfund site. At any
given site, the U.S. Environmental Protection
Agency's (EPA) Regional office determines who
qualifies for a de micromis settlement. Some parties
may qualify as de micromis because their sole
contribution to a site was a small amount of
municipal solid waste. Other parties may qualify as
de micromis because they contrilAited a very small
amount of hazardous substances to the site.
As a matter of policy, EPA docs not pursue
de micromis parties for the costs of cleaning up a
site, because their contribution was so small it would
be inequitable to require them to make a payment.
However, because a de micromis party may be
responsible for waste disposed of at a site, other
parlies at the site may approach them, or even sue
(hcni,to recover cleanup costs. Dc micromis
settlements serve to protect dc micromis pnrtics
from such actions.
How Much Does a "De
micromis" Settlement Cost?
If EPA determines that you arc eligible for a
de micromis settlement, you will not be asked to
make any payment to EPA.
Tlic Superfund statute Includes a set of required
"findings" that EPA must make in order to
determine that a party Is eligible for a de micromis
settlement. In addition to these few statutory
requirements, EPA hns significant discretion at each
site to determine who qualifies for a dc micromis
settlement.
In general, the statute requires that, In order to
be eligible for a dc micromis settlement:
» the amount of waste you contributed to the
site must be minimnl compared to the other
hazardous substances at the site;
~ the toxic or other hazardous effects of the
waste you contributed must be minimal In
comparison to the other hazardous
substances at the site; and
> the dc micromis settlement must be in the
public interest, and involve only a minor
portion of the response costs at the site.
Not all parties who meet this description will be
eligible for a de micromis settlement. Some small
volume contributors, who meet these statutory
requirements, are considered de minimis parties,
and may be offered a slightly difTcrcnt type of
settlement with EPA. The decision of who qualifies
for de minimb and dc micromis settlements is made
by EPA's Regional Office on a site-specific basis.
EPA wants to ensure that dc micromis parties
arc not pursued for the recovery of response costs at
a site — not by EPA or by any other parties
associated with the site. Dc micromis settlements
provide this type of protection.
The benefits of a dc micromis settlement include:
"Contribution Protection" - This provision
offers protection to the dc micromis settlor from
being sued by other "potentially responsible parties'
(PRPs) at the site. Frequently, major waste
contributors will sue many small waste contributors
to recover their cleanup costs. A dc micromis
settlement provides protection from such suits that
extends to all matters covered by the settlement.
"Covenant Not to Sue" - This provision is a
promise that the EPA will not bring any future leg;
actions against the dc micromis party regarding tin
site and the specific matters named in the
settlement.
Taken together, contribution protection, the
covenant not to sue, and other dc micromis
settlement terms provide settlors with a high level o;
certainty that their responsibilities at the site arc
fulfilled, and that they arc protected from future
legal actions rclnted to those matters addressed by
the settlement.
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ATTACHMENT 2
SAMPLE COVER LETTER FOR DE' MICROMIS QUESTIONNAIRE
RE: Questionnaire for [insert site name and location]
Dear [name of potential settling party]:
The United States . Environmental Protection Agency (EPA) is
currently working to clean up the [insert site name] Site,
located in [city, county, state], using the Superfund program.
Superfund is a Federal program administered by the EPA that is
designed to clean up hazardous substances that may pose a threat
to human health or the environment.
EPA is writing to you because [[if recipient has been sued
for contribution, insert: "you have been identified as a
defendant in a lawsuit entitled [insert case name, court, and
civil action number]. In this lavsuitr [insert name of
plaintiff] is asking you to contribute to site cleanup costs
because you may have sent trash or other material to the site."
If recipient has not been sued for contribution, insert
applicable facts such as: "you have been contacted by a party
associated with this site who may be asking you to contribute to
site cleanup costs based on that party's belief that you may have
sent trash or other material to the site.*']]
In general, EPA does not believe that contributors of
minuscule quantities of waste should be required to participate
either in financing or performing cleanup efforts at Superfund
sites. EPA would like to protect parties that sent minuscule
amounts of waste to Superfund sites from lawsuits [such as the
one filed against you] . You may be eligible to receive this kind
of protection, which can be. obtained through a; "de micromis"
settlement with EPA.
"De micromis" settlements are based on authority EPA has
under the Superfund law to reach quick and final settlements with
parties whose waste contribution to a site is minimal in volume
and toxicity. This authority is found in Section 122(g) of the
Superfund law, which is formally known as the Comprehensive
Environmental Response, Compensation, and Liability Act, 42
U.S.C. Section 9622(g). If you qualify, a "de micromis"
settlement can provide , you with protection against legal action
by private parties seeking collection of costs they may have
incurred in performing or financing cleanup at the site. "De
micromis" settlements car* also provide you with the assurance
that EPA will not pursue you for costs associated with the site.
If you would like EPA to consider whether you' might be
eligible for this type of settlement, please complete the
enclosed questionnaire- The questionnaire is intended to gather
information about the nature and quantity of trash or other
material that you may have sent to the [insert site name] site.
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2
The" questionnaire must be completed, signed, and returned no
later than: [insert date]. This deadline is necessary to reduce
legal and administrative costs to EPA. A self-addressed,
postage-paid envelope is enclosed. Please keep a copy of the
signed questionnaire and any materials you submit with it for
your files. If we do not receive the completed and signed
questionnaire from you by [insert date], we will assume that you
do not wish to be considered for a "de micromis" settlement at
this site.
Please keep in mind that this process is entirely voluntary.
Please also be assured that you are not obligated to enter into a
"de micromis" settlement merely because you return a completed
questionnaire. If, after review of your questionnaire, EPA finds
that you are eligible for a "de micromis" settlement, EPA will
send you a "de micromis" settlement document, which you may
choose to sign or not to sign at that time.
Enclosed with this letter is an informational brochure
entitled "Superfund and Small Waste Contributors: De Micromis
Settlements," which provides additional background information on
"de micromis" settlements and may answer some of your questions.
If you have any other questions regarding this letter or the
questionnaire, please contact [insert Regional contact's name and
telephone number].
Sincerely,
Enclosures:
1) Questionnaire, 2) Self-addressed, postage-paid envelope, and
3) informational "de micromis" brochure
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ATTACHMENT 3
MODEL DE MICROMIS QUESTIONNAIRE
[NOTE: When using the questionnaire, questions may be modified,
added, or deleted, as necessary, to reflect known site-specific
information. For example, questions may be tailored to the dates
of operation of the facility, known haulers or transporters may
be identified, and. additional questions may be added about sewage
sludge.]
[INSERT SITE NAME] QUESTIONNAIRE
This questionnaire is designed to gather information about
the trash or other material you may have sent to the [insert site
name] Superfund site located in [insert location] and any other
involvement you may have had with this site. Your answers to
this questionnaire will be used by the United States
Environmental Protection Agency (EPA) to determine if you are
eligible to partipate in a "de micromis" settlement. Please fill
out this form as completely and accurately as possible. Your
answers should reflect your best recollection of the quantity and
types of trash or other material you may have sent to the site
and any other involvement you may have had with the site. When
answering questions, you may rely on records or other documents,
such as receipts, canceled checks, invoices, contracts, etc., as
well as on other sources of information, including discussions
with others. If your answers do not fit in the spaces provided,
you may continue them on additional sheets of paper. Please
write your name and the name of the site on the top of any
additional sheets of paper and please identify the number of the
question that is being continued.
If you have any questions about this form, please call:
[insert Regional contact's name and phone number].
I. PROMISE THAT QUESTIONNAIRE WILL BE FILLED OUT
TRUTHFULLY AND COMPLETELY
I, . (insert your name),
certify -that I am authorized to complete this questionnaire on
behalf of ' (insert name of party
for whom you are responding, or if you are responding on behalf
of yourself as an individtfel, insert "self") , and that I am
authorized to make the representations set forth below.
I further certify that I have made a thorough,
comprehensive, and good faith search for all records, documents,
or. other information in the possession or control of
¦ (insert name of party for whom
you are responding, or if you are responding oh behalf of
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2
yourself as an individual*, insert "self") to obtain all
information which relates in any way to the ownership or
operation of the.[insert site name and location] ("the site") or
to the ownership, operation, transportation, treatment, storage,
and/or disposal of trash or other material at the site, including
having discussions with persons who have or may have knowledge
about these matters. Based upon my review of such records, I
certify that the answers stated below are true, accurate, and
complete.
I DECLARE UNDER PENALTY OF PERJURY THAT THE INFORMATION SUBMITTED
IN RESPONSE TO THIS QUESTIONNAIRE IS TRUE, ACCURATE, AND COMPLETE
TO THE BEST OF MY KNOWLEDGE, INFORMATION, AND BELIEF:
Signature: Date:
Print Name:
Title (if any) :
Address:
Telephone (including area code):
II. BACKGROUND INFORMATION
A. Identity of Proposed De Micromis Settlor
Name: ,
Address: ;
Telephone (including area code): ; ;
If you have an attorney representing you for matters relating to
this site, please give the following information about your
attorney:
Name: ;
Address: ;
Telephone (including area code) :_ ; ;
B. Do you currently own or control, or have you ever owned or
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3
controlled, any of the real property at the site? By own or
control we mean hold title, an easement, or a right-of-way
through the property, or rent or lease the property. By real
property we mean, land, buildings, or other fixtures (any items
intended to stay attached to the property permanently).
yes no
If yes, please explain this ownership or control.
C. Save you ever worked at the site or been involved in the
operation of the site in any capacity? yes " no
If yes, please describe the work you did, the dates of the work,
and your title, if any. .
D. Have you ever hauled or transported to the site trash or
other material produced by persons other than yourself?
yes no
E. Could any trash or other material that you produced have
ended up at the site? yes no
If no, where did your trash or other material go during the years
through ? [NOTE: INSERT YEARS DURING WHICH SITE
OPERATED]
F. What is. the source of any of your own trash or other material
that could have ended up at the site?
l. Single residence? yes no
a. Is there a business or commercial enterprise (for
example, dry cleaner, beauty shop, automobile repair,
electroplating or furniture repair, etc.) that operates or
has operated from this single residence? yes no
If yes, please state the type of enterprise and briefly
describe it: .
2. Multiple-unit residence (including apartment building,
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4
condominium) ? yes no
If yes, please state the number of residential units:
a. Is there & business or commercial enterprise (for
example, dry cleaner, beauty shop, automobile repair,
electroplating or furniture repair, etc.) that operates or
has operated from this multiple-unit residence?
yes- no
If yes, please state the type of enterprise and briefly
describe it:
3. Business or commercial establishment? yes no
If yes, please state the type of business or commercial
establishment and briefly describe it:
4. Governmental entity? yes no
If yes, please state the type of governmental entity:
5. Other (such as school, hospital, non-profit organization)?
yes no
If ,yes, please describe: -
III. QUESTIONS TO BE ANSWERED BY POTENTIAL SETTLORS WHOSE OWN
TRASH OR OTHER MATERIAL COULD HAVE ENDED UP AT THE SITE
For purposes of this questionnaire, the following
definitions apply:
"Household Waste" means any material (including garbage,
trash, and sanitary wastes in septic tanks) derived from
households (including single residences and multiple-unit
residences, hotels and motels, bunkhouses, ranger stations, crew
quarters, campgrounds, picnic grounds and day-use recreation
areas). Household waste is primarily composed of non-hazardous
substances (including yard waste, food waste, paper waste, glass
and aluminum) and may contain small quantities of household
¦hazardous wastes (including pesticides and solvents).
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5
"Industrial Trash" means any material from a commercial,
institutional, or industrial entity which is very similar to
"Household Waste." This term covers only those wastes that are
essentially the same as what one would expect to find in common
household trash.' This term does not include hazardous substances
that are derived from a commercial., institutional, or industrial
process or activity.
"Sewage Sludge" means any solid, semi-solid, or liquid
residue removed during the treatment of municipal wastewater or
domestic sewage.
"Other Waste" means hazardous substances that are derived
from a commercial, institutional, or industrial process or
activity, and any material not covered by any of the other three
definitions.
A. What type of trash or other material that you produced could
have ended up at the site?
1. Household Waste? yes no
If yes, please describe the type of material that was
contained in this Household Waste:
2. Industrial Trash? yes no
If yes, please describe the type of material that was
contained in this Industrial Trash:
3. Sewage Sludge? yes no
4. Other Waste? yes no
If yes, please describe this Other Waste:
5.
If the trash or other material was from a commercial,
institutional, and/or industrial process or activity, please
describe the process: ¦ .
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6
6. If the trash or other material was from a commercial,
institutional, and/or industrial process or activity, please
describe the type of materials contained in this waste. In
particular, please identify all materials that contained
hazardous substances. Please attach any Material Safety
Data Sheets you may have for these materials, and any other
documents showing the contents of these materials:
B. How much of your trash or other material could have ended up
at the site?
1. Please estimate the total quantity. Please identify the
unit(s) of measurement used in your response, such as
pounds, gallons, cubic yards, barrels, bags, dumpsters:
2. Please estimate the percentage of this total that was
Household Waste %, Industrial Trash %, Sewage Sludge
%, or Other Waste %
3. Please estimate how much of the waste or other material
contained hazardous substances: •
4. How did you arrive at the estimates included in your
responses to questions 1, 2 and 3?
C. Please describe the measures, if any, that you took to
separate trash or other material containing hazardous substances
from other types of trash oS other material, and, if you took
such measures, how did you dispose of the hazardous substances:
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7
D. Did you haul or transport the trash or other material to the
site yourself? yes no
If yes, please provide the dates during which you did this
hauling or transporting?
If no, please state the name, address, and telephone number (if
known) of the hauler or transporter. If more than one hauler or
transporter was used, please give the names, addresses, and
telephone numbers of each and please give the dates each were
used:
E. If possible, please estimate the number of times your trash ot
other material was transported to the site:
T. Was any of your trash or other material compacted prior to
disposal at the site? yes no
If yes, how did this compaction take place?
If . yes, was the quantity of trash or other material you
identified in your responses to Question III(B) the quantity
before or after compaction? before after
IV. QUESTIONS TO BE ANSWERED BY POTENTIAL SETTLORS WHO HAULED
OR TRANSPORTED TO THE SITE TRASH OR OTHER MATERIAL PRODUCED
BY OTHER PEOPLE
A. What were the dates during which your hauled or transported
to the site? ;
B. How often during those dates did you haul or transport to the
site? /
c. What type of trash or other material did you haul or
transport to the site?
1.
2.
3 .
4.
Household Waste? yes no
Industrial Trash? yes no
Sewage Sludge? yes no
Other Waste? yes no
If yes, please describe this Other Waste:
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8
D. How much trash or other material did you haul or transport to
the site?
1. Please estimate the total quantity. Please identify the
unit(s) of measurement used in your response, such as
pounds, gallons, cubic yards, barrels, bags, dumpsters:
2. Please estimate the percentage of this total that was
Household Waste %, Industrial Trash %, Sewage Sludge
%, or Other Waste %
3. Please estimate how much of the waste or other material
contained hazardous substances:
4. How did you arrive at the estimates included- in your
responses to questions 1, 2 and 3?
E. Please describe the measures, if any, that you took to
separate trash or other material containing hazardous substances
from other types of trash or other material, and, if you took
such measures, how did you dispose of the hazardous substances:
F. Was any of the trash or other material that you hauled or
transported to the site coDQ^cted prior to disposal?
yes no
If yes, how did this compaction take place?
If yes, was the quantity of trash or other material that you
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9
identified in your responses to Question IV(D) the quantity
before or after compaction? before after
G. Please list the clients for whom you hauled or transported to
the site (give names, addresses, and telephone numbers, if
known):
V. SOURCES OF INFORMATION
Please check the. sources of information you used to fill out this
questionnaire (more than one may apply):
Personal knowledge
Written records
Information from other persons
If your responses are based on information from other persons,
please give the names, addresses, and telephone numbers of the
other persons and a description of the information which they
were able to provide:
Please attach copies of any records or other documents you used
to fill out this questionnaire. Documents may include items such
as receipts, canceled checks, invoices, contracts, or written
agreements. Please write your name and the name of the site on
the top of each attachment.
[NOTE ON USE OF MODEL: This model and any internal procedures
adopted for it3 implementation and use are intended 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 any person. The Agency may
take action at variance with this model or its internal
implementing procedures.]
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ATTACHMENT 4
SAMPLE COVER LETTER FOR DE MICROM1S SETTLEMENT
RE: De Micromis Settlement at [insert site name and location]
Dear [name of potential settling party]:
Thank you for taking the time to complete the questionnaire
concerning your involvement with the [insert site name] superfund
Site. The United States Environmental Protection Agency (EPA)
has carefully reviewed your questionnaire and any information
that you may have submitted with it. We have used your responses
to evaluate the nature and quantity of trash or other material
that you may have contributed to this site. We have concluded
that you are eligible for a "de micromis" settlement at this
site.
A "de micromis" settlement document is enclosed with this
letter. This letter will provide you with an explanation of what
EPA means by a "de micromis" settlement to assist you in deciding
whether to participate. Additional .background information on "de
micromis" settlements is provided in the brochure entitled
"Superfund and Small Waste Contibutors: De Micromis
¦Settlements," which we provided to you with the De Micromis
Questionnaire. Please keep in mind that participation in this
settlement is entirely voluntary. A decision by you not to take
part in this settlement will not be held against you in any way.
As you already know, EPA is currently working to clean up
the [insert site name] Superfund site. Superfund is an EPA-
administered Federal. program that is designed to clean up sites
contaminated with hazardous substances that may pose a threat to
human health or the environment. EPA does not believe that
parties such as yourself who contributed minuscule quantities of
waste to a site should be required to participate either in
financing or performing Superfund cleanups. [[Insert applicable
facts, such as: "Unfortunately, other parties who are
potentially liable to EPA based upon their greater involvement
with the site have [contacted you] [filed a lawsuit against you]
to ask you to contribute to 3ite cleanup costs."]]
Through a "de micromis" settlement with EPA, you can obtain
legal protection against lawsuits seeking payment of Superfund
cleanup costs or performance of Superfund cleanups.. EPA uses "de
micromis" settlements to i?each quick and final settlements with
parties whose waste contribution to a site is extremely minimal
in both volume and toxicity. These settlements are based on
authority EPA has under Section 122(g) of the Superfund law,
which is formally known as the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. Section
9622(g).
In exchange for the protection provided by the "de micromis"
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2
settlement., EPA asks that" you sign the settlement and agree to
its terms. The settlement does not require you to pay any money
to EPA or to any person who may have liability at the site under
the Superfund law .(persons who may have such liability are known
as "potentially responsible parties"). It requires only that
you: 1) certify that you fully and accurately completed the De
Micromis Questionnaire; 2) promise not to bring claims relating
to the site against the United States; and 3) promise not to
bring claims relating to the site against any potentially
responsible party at the site. The settlement is not a
negotiable document. This will reduce legal and administrative
costs to EPA and to you as well, and will lead to equal treatment
for all parties who qualify for "de micromis" settlements.
If you would like to participate in the settlement, please
complete the signature page of the enclosed settlement and return
the entire agreement in the enclosed envelope. We suggest that
you keep a copy of the entire settlement for your files. If we
do not receive your signed settlement by [insert, date], we will
assume that you are not interested in settling at this time.
Thank you for your prompt attention to this matter. If you
have any questions, please contact [insert Regional contact's
name and phone number].
Sincerely,
Enclosures: 1) "De. Micromis" Settlement, 2) Self-addressed,
postage-paid envelope
4
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ATTACHMENT 5
MODEL CERCLA SECTION 122(g)(4) DE MICROMIS
ADMINISTRATIVE ORDER ON CONSENT
IN THE MATTER OF:
[Insert Site Name and Location]
Proceeding under Section 122(g)(4)
of CERCLA, 42 U.S.C. § 9622(g)(4)
U.S. EPA Docket No.
DE MICROMIS
ADMINISTRATIVE ORDER
ON CONSENT
1. Jurisdiction/Parties Bound. This Administrative Order
on Consent ("Consent Order") is issued under Section 122(g)(4) of
the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA" or "Superfund"), 42
U.S.C. § 9622(g)(4). This Consent Order is binding upon the
United States Environmental Protection Agency ("EPA") and upon
the parties who are identified in Attachment who are
signatories to this Consent Order ("Settlors"). Settlors do not
admit any liability.
2. Purpose. The purpose of this Consent Order is to reach
a final "de micromis" settlement with Settlors which: a)
resolves Settlors' potential civil liability to the. United States
under Superfund for payment of response costs and for performance
of cleanup at the [insert site name]; and b) protects Settlors
from any lawsuits seeking recovery of Site cleanup costs.
3. Statement of Facts. The [insert site name] ("the Site")
is located at [insert address or location] in [city, county,
state], and is generally [shown on/described by] the
[map/property description] attached to this Consent Order as
Attachment . Under Section 104 of CERCLA, 42 U.S.C. § 9604,
EPA has incurred [approximately $ is] response costs at the
Site and [will/may] incur additional costs. EPA currently
estimates that total past and future response costs at the Site,
including the costs of EPA and CERCLA potentially responsible
parties, will be [insert either ••$ " or "between $_ and
$ " or "in excess of $ "]. Each Settlor may have
contributed hazardous substances to the Site which are not in
excess of [insert number of pounds or gallons] of materials
containing hazardous substances [or, stated as a percentage, %
of the hazardous substances at the Site] and which are not
significantly more toxic or of significantly greater hazardous
effect than other hazardous substances at the Site.
«
4. Determinations. EPA determines that: a) in accordance
with Section 122(g) of CERCLA, 42 U.S.C. § 9622(g), it is
practicable and in the public interest to reach this final
settlement, involving only a minor portion of the response costs
at the [insert site name] facility, with Settlors who may be
potentially responsible parties who each may have contributed a
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minimal amount of hazardous substances to the Site, the toxic or
other hazardous effects of which are minimal in comparison to
other hazardous substances at the Site; and b) Settlors are
eligible for a de micromis settlement because they each
contributed no more than a minuscule amount of hazardous
substances to the Site, an amount which is so minor that it would
be inequitable to require them to help finance or perform cleanup
at the Site[.] [Insert if applicable: and c) total past and
projected response costs of the United States at the Site will
not exceed $500,000, excluding interest."]
5. Certification. Each Settlor certifies that to the best
of its knowledge it has fully and accurately completed the
[insert site name] De Micromis Questionnaire.
6. United States' Covenant Not to Sue. In consideration of
Settlors' agreement to this Consent Order, and except as
specifically provided in Paragraph 7, the United States covenants
not to sue or take administrative action against Settlors under
Sections 106 or 107 of CERCLA, 42 U.S.C. §§ 9606 and 9607, and
Section -7003 of the- Resource Conservation and Recovery Act, 42
U.S.C. § 6973/ relating to the Site.
7. United states' Reservations of Rights. The United
States reserves the right to seek additional relief from any
Settlor if: 1) information is discovered indicating that such
Settlor's contribution of hazardous substances to the Site is of
such greater amount or of such greater toxic or other hazardous
effect that it no longer qualifies for settlement under the
criteria stated in Paragraph 3; or 2) after Settlor signs the
[insert site name] De Micromis Questionnaire, such Settlor
becomes an owner or operator of the Site or undertakes any
activity" with regard to hazardous substances or solid wastes at
the Site. The United States also reserves all rights which it
may have as to any matter relating in any way to the Site against
any person who is not a party to this Consent Order.
8. Settlors' Covenant Not to Sue. Settlors covenant not to
sue and agree not to assert any claims against the United States
or its contractors or employees with respect to the Site or this
Consent Order. Settlors also covenant not to sue and agree not
to assert any claims with respect to the Site against each other
or against any other person who is a potentially responsible
party under CERCLA at the Site.
9. Contribution Protection. Each Settlor is entitled to
protection from contribution claims as provided by Sections
113(f)(2) and 122(g)(5) of CERCLA, 42 U.S.C. §§ 9613(f)(2) and
9622(g)(5), for "matters addressed" in this Consent Order. The
"matters addressed" in this Consent Order are all response
actions taken and to be taken and all response costs incurred and
to be incurred, in connection with the Site, by the United States
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3
or by any person who,is a potentially .responsible party under
CERCIA at the Site, except for those limited areas in Paragraph 7
for which the United States has reserved its rights.
10. [NOTE: Insert if total past and projected response
costs at the site will exceed $500,000, excluding interest.]
Attorney General' Approval. The Attorney General has approved
this settlement as required by Section 122(g)(4) of CERCLA, 42
U.S.C. §.9622(g)(4).
11. Public rnrnwftwt/Effective Date. This Consent Order is
subject to public comment under Section 122(i) of CERCLA, 42
U.S.C. § 9622(i), and is effective on the date that. EPA issues
written notice that the public comment period has closed and that
comments received, if any, do not require modification of or EPA
withdrawal from this Consent Order.
IT IS SO AGREED AND ORDERED:
U.S. Environmental Protection Agency
By: ;
[Name] [Date]
[Insert Title of Delegated Official]
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THE UNDERSIGNED SETTLOR enters in to this Consent Order in the
matter of [insert U.S. EPA docket number], relating to the
[insert site name and location]:
FOR SETTLOR:
[Name]
[Address]
By:
[Name] [Date]
[NOTE ON USE OF MODEL: This model and any internal procedures
adopted for its implementation and use are intended 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 any person. The Agency may
take action at variance with this model or its internal
implementing procedures.]
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ATTACHMENT 6
MODEL CERCLA SECTION 122(g)(4) DE MICROMIS CONSENT DECREE
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF [ ].
[ ; ] DIVISION1
UNITED STATES OF AMERICA,
Plaintiff,
v.
[DEFENDANTS]
Defendants.
Civil Action No.
Judge
DE MICROMIS CONSENT DECREE2
A. [NOTE: Insert explanation of procedural posture of the
case-. To the extent applicable/ the following language nay be
used.] The United States on behalf of the Environmental
Protection Agency ("EPA") filed a complaint in this matter under
Section 107 of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.c. § 9607, as
amended ("CERCLA" or "Superfund"), to recover costs it has spent
for the cleanup of the [insert site name]. The defendants sued
by the United States filed contribution actions against third-
party defendants, some of whom are Settlors under this Consent
Decree. Settlors do not admit any liability.
B. The [insert site name] ("the Site") is located at
[insert address or location] in [city, county, state], and is
generally [shown on/described by] the [map/property description]
attached to this Consent Decree as Attachment . Under Section
104 of CERCLA, 42 U.S.C. § 9604, EPA has incurred [approximately
in] response costs at the Site and [will/may] incur
additional costs. EPA currently estimates that total past and
future response costs at the Site, including costs of EPA and
CERCLA potentially responsible parties, will be [insert either
" or "between $ and " or "in excess of $ "].
Each Settlor may have contributed hazardous substances to the
4
1 Follow local rules for caption format.
2 As a general rule, a judicial consent decree should only
be used if the settlor has already been named as a defendant in a
contribution action, or if the United States has already
initiated CERCLA litigation at the site.
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2
Site which are not in excess of [insert number of pounds or
gallons] of materials containing hazardous substances [or, stated
as a percentage, % of the hazardous substances at the Site]
and which are not significantly more toxic or of significantly
greater hazardous effect than other hazardous substances at the
Site.
C. EPA has determined that: l) in accordance with Section
122(g) of CERCLA, 42 U.S.C. § 9622(g), it is practicable and in
the public interest to reach this final settlement, involving
only a minor portion of the response costs at the [insert site
name] facility, with Settlors who may be potentially responsible
parties-who each may have contributed a minimal amount of
hazardous substances to the Site, the toxic or other hazardous
effects of which are minimal in comparison to other hazardous
substances at the Site; and 2) Settlors are eligible for a de
micromis settlement because they each contributed no more than a
minuscule amount of hazardous substances to the Site, an amount
which, is so minor that it would be inequitable to require them to
help finance or perforin cleanup at the Site.
THEREFORE, with the consent of the parties to this Decree,
it is ORDERED, ADJUDGED, AND DECREED:
1. Jurisdiction/Parties Bound. This Court has jurisdiction
over the subject matter of this action pursuant to 28 U.S.C. §§
1331 and 1345 and 42 U.S.C. § 9613(b) and also has personal
jurisdiction over Settlors. Settlors consent to this Consent
Decree and this Court's jurisdiction to enter and enforce this
Consent Decree. This Consent Decree is binding upon the United
States and upon the parties who are identified in Attachment
who are signatories to this Consent Decree ("Settlors").
2. Purpose. The purpose of this Consent Decree is to reach
a final de micromis settlement with Settlors, which: a) resolves
Settlors' potential civil liability to the United States under
Superfund for payment of response costs and for performance of
cleanup at the Site; and b) protects Settlors from any lawsuits
seeking recovery of Site cleanup costs.
3. Certification. Each Settlor certifies that to the best
of its knowledge it has fully and accurately completed the
[insert site name] De Micromis Questionnaire.
4. United States' Covenant Not to Sue. In consideration of
Settlors' agreement to^this Consent Decree, and except as
specifically provided in Paragraph 5, the United States covenants
not to sue or take administrative action against Settlors under
Sections 106 or 107 of CERCLA, 42 U.S.C. §§ 9606 and 9607, and
Section 7 003 of the Resource Conservation and Recovery Act, 4 2
U.S.C. § 6973, relating to the Site.
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3
5. United States' Reservations of Rights. The United
States reserves the right to seek additional relief from any
Settlor: 1) if information is discovered indicating that such
Settlor's contribution of hazardous substances to the Site is of
such greater amount or of such greater toxic or other hazardous
effect that it no longer qualifies for settlement under the
criteria stated in Paragraph B; or 2) after signing the [insert
site najne] De Micromis Questionnaire, such Settlor becomes an
owner or operator of the Site or undertakes any activity with
regard to hazardous substances or solid wastes at the Site. The
United States also reserves all rights which it may have as to
any matter relating in any way to the Site against any person who
is not a party to this Consent Decree.
6. Settlor's Covenant Not to sue. Settlors covenant not to
sue and agree not to assert any claims against the United States
or its contractors or employees with respect to the Site or this
Consent Decree. Settlors also covenant not to sue and agree not
to assert any claims with respect to the Site against each other
or against any other person who is a potentially responsible
party under CERCLA at the Site.
7. Contribution Protection. Each Settling Defendant is
entitled to protection from contribution actions or claims as
provided by Sections 113(f)(2) and 122(g)(5) of CERCLA, 42 U.S.C.
§§ 9613(f)(2) and 9622(g)(5), for "matters addressed" in this
Consent Decree. The "matters addressed" in this Consent Decree
are all response actions taken and to be taken and all response
costs incurred and to be incurred, in connection with the Site,
by the United States or by any person who is a potentially
responsible party under CERCLA at the Site, except for those
limited areas in Paragraph 5 for which the United States has
reserved its rights.
8. Public Comment/Effective Date. The United States will
lodge this Consent Decree with the Court for a period of not less
than 3 0 days for public notice and comment. Provided that the
United States does not withdraw the Consent Decree following such
public notice and comment, this Consent Decree shall be effective
on the date of entry by this Court.
9. Service. For all matters relating to this Consent
Decree, each Settlor will personally receive service of process
by mail sent to the name and address provided on the attached
signature page, unless such Settlor provides the name and address
of an agent for service*of process on the attached signature
page. Settlors agree to accept service in this manner and to
waive the formal service requirements of Rule 4 of the Federal
Rules of Civil Procedure and any applicable local rules of this
Court, including but not limited to, service of a summons.
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4
SO ORDERED THIS DAY OF . 19
United States District Judge
THE UNDERSIGNED PARTIES enter into this Consent Decree in the
matter of [insert case name and civil action number], relating to
the Superfund Site.
FOR THE UNITED STATES OF AMERICA
Date: :
[Name]
Assistant Attorney General
Environment and Natural Resources
Division
U.S. Department of Justice
Washington, D.C. 20530
[NAME]
United States Attorney
[Address]
[NAME]
Attorney
Environmental Enforcement Section
Environment and Natural Resources
Division
U.S. Department of Justice
P.O. Box 7611
Washington, DC 20044-7611
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THE UNDERSIGNED PARTIES enter into this Consent Decree in the
matter of [insert case name and civil action number], relating to-
the Superfund Site.
[Name]
Regional Administrator, Region [ ]
U.S. Environmental Protection
Agency
[Address]
[Name]
Assistant Regional Counsel
U.S. Environmental Protection
Agency
[Address]
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6
THE UNDERSIGNED PARTY enters into this Consent Decree in the
matter of [insert case name and civil action number], relating to
the Superfund Site.
FOR SETTLOR [ ]
Date: ¦
[Name and address of Settlor or
Settlor's signatory]
Agent Authorized to Accept Service on Behalf of Above-signed
Party:
Name:
Title:
Address:
[NOTE ON USE OF MODEL: This model and any internal procedures
adopted for its implementation and use are intended as guidance
for employees of the U.S. Environmental Protection Agency and
U.S. Department of Justice. They do not constitute rulemaking by
the Agency or Department and may not be relied upon to create a
right or a benefit, substantive or procedural, enforceable at law
or in equity, by any person. The Agency or Department may take
action at variance with this model or its internal implementing
procedures.]
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ATTACHMENT 7
MODEL CERCLA SECTION 122 (i) DE KICROMIS
FEDERAL REGISTER NOTICE
Proper format is very important for a Federal Register
notice. . The format is shown in the following model. The notice
should be typed on plain bond paper, not EPA letterhead
stationery. . Each page, including the.first, should be
consecutively numbered. The notice should be double-spaced and
single-sided. Heading titles may not be varied. The official
format requires the top, bottom and right margins to be one inch
wide and the left margin to be one and a half inches wide, but
minor variations in margin size will not result in rejection of
the notice. Legal citations should be written as, e.g.,
42 U.S.C. 9622 (i) ' (do not include a section symbol [§] or the
word "section.") The notice should be signed by a Regional
official authorized to submit documents for publication in the
Federal Register by EPA Delegation 1-21. The name and title of
the official signing the notice should be typed on the notice.
If an acting official will be signing for the authorized
official, the acting official's name and the acting official's
title, e.g. . "Acting Regional Administrator," must be¦ typed on
the notice. ' The billing code should be typed or hand-written at
the end of the notice below the Regional, official's signature. ¦
To publish the notice, the Region should send l) the
original signed notice, 2) three single-sided copies of the
signed notice, 3) a disk containing the file for the notice, and
4) a completed Federal Register Typesetting Request (EPA Form
234 0-15) to: Vickie Reed, Federal Register Liaison (Mail Code
213 6) , Regulation Development Branch, Regulatory Management
Division, Office of Regulatory Management and Evaluation, Office
of Policy, Planning and Evaluation, EPA Headquarters, 401 M St.,
S.W., Washington, D.C., 204 60. When filling out the Federal
Register Typesetting Request, publication costs should be billed
to the site-specific Super fund account number. The formula for
calculating publication costs on the Typesetting Request is as
follows: two double-spaced pages equals one column, and one
column costs $100.00 (half pages and half columns should be
rounded up; if a disk is not provided, the per column cost
increases to $125.00).
Questions about tt^ase procedures should be directed to
Vickie Reed at (202) 260-7204.
[NOTE ON USE OF MODEL: This model and any internal procedures
adopted for its implementation and use are intended 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 any person. The Agency may
take action at variance with this model or its internal
implementing procedures.]
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1
ENVIRONMENTAL PROTECTION AGENCY
[ ] [NOTE: Leave brackets to left blank.]
Proposed CERCLA Administrative De Micromis Settlement;
[Insert name"of settling party, or if there are multiple
settling parties, insert site name — capitalize first
letter of each word]
AGENCY: Environmental Protection Agency
ACTION:, Notice; request for public comment
SUMMARY: In accordance with Section 122(i) of the
Comprehensive Environmental Response, Compensation, and
Liability Act, as amended ("CERCLA"), 42 U.S.C. 9622(i),
notice is hereby given of a proposed administrative de
micromis settlement concerning the [insert site name] site
in [insert site location] with the following settling
party(ies): [insert names here or reference list included
in Supplementary Information portion of notice]. The
settlement is designed to resolve fully [the/each] settling
party's liability at the site through a covenant not to sue
under Sections 106 and 107 of CERCLA, 42 U.S.C. 9606 and
9607, and Section 7003 of the Resource Conservation and
Recovery Act, 42 U.S.C. 6973. For thirty (30) days
following the date of publication of this notice, the Agency
will receive written comments relating to the settlement..
The Agency will consider all comments received and may
modify or withdraw its consent to the settlement if comments
received disclose facts or considerations which indicate
that the settlement is inappropriate, improper, or
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2
inadequate. The Agency's response to any comments received
will be available for public inspection at [insert address
of information repository at or near site] and [insert
address of Regional public docket]. Coinmenters may request
an opportunity for a public meeting in the affected area in
accordance with Section 7003(d) of RCRA, 42 U.S.C. 6973(d).
DATES: Comments must be submitted on or before [insert 3 0
days from date of publication]. [NOTE: Do not fill in
date; just type DATES sentence, including bracketed
portion, exactly as it appears here.]
ADDRESSES: The proposed settlement and additional
background information relating to the settlement are
available for public inspection at [insert address of
Regional public docket or other Regional office location].
A copy of the proposed settlement may be obtained from
[insert name, address, and telephone number of Regional
docket clerk or other Regional representative]. Comments
should reference the. [insert' site name, location] and EPA
Docket No. [insert EPA docket number for settlement]
and should be addressed to [insert name and address of
Regional docket clerk or other Regional representative
designated to receive comments].
FOR FURTHER INFORMATICS CONTACT: [Insert name, address,
ard telephone number of Regional representative who has
knowledge of settlement].
SUPPLEMENTARY INFORMATION: [Use this optional section to,
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3
e.g. , list parties too numerous to list in Summary portion
of notice or to provide further details about settlement].
[Insert typed name and Date
title of Segional official]
[Insert billing code]
-------
o
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-------
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-------
i \ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
I ? WASHINGTON, D.C. 20460
*<¦ pks^ U.S. Department of Justice
Hbshwgion, D.C 20530
10/23/95 NOTE FROM EPA: The memorandum belov has been altered from the original
memorandum Issued on 9/22/95 to reflect updated information about obtaining
additional copies and whom to contact for further Information. No other changes
were made to th* text of the policy thus, references to the policy should
reflect the issuance date of 9/22/95.
MEMORANDUM
SUBJECT: Policy on CERCLA Enforcement Against Lenders and
Government Entities^jthat Acquire Property Involuntarily
FROM: Steven A. Hemra<7!5ssistant Administrator
Office of Enforcement and Compliance Assu.ance
United States Environmental Protection Agency
Lois. J.^SflW^hfer, Assistant Attorney General
Environment and Natural Resources Division
United States Department of Justice
TO: Regional Administrators, Regions I - X, EPA
Regional Counsel, Regions I - X, EPA
Waste Management Division Directors, Region I - X, EPA
Chief, Environmental Enforcement Section, DOJ
Assistant Section Chiefs, Environmental Enforcement
Section, DOJ
This memorandum sets forth the Environmental Protection
Agency's ("EPA") and the Department of Justice's ("DOJ") policy
regarding the government's enforcement of the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA")
against lenders and against government entities that acquire
property involuntarily. As an enforcement policy, EPA and DOJ
intend to apply as guidance the provisions of the "Lender Liability
Rule" promulgated in 1992, thereby endorsing the interpretations
and rationales announced in the Rule. See "Final Rule on Lender
Liability Under CERCLA," 57 Fed. Reg. 18,344 (April 29, 1992)-1
(This rule has been vacated by a court, as described below in the
"Background" section).
1 This guidance.does not address lender liability under any
statutory or regulatory authority, rule, regulation, policy, or
guidance, other than CERCLA. Specifically, this guidance does not
cover lender liability determinations as they relate to the
Resource Conservation and Recovery Act ("RCRA") and RCRA's
Underground Storage Tank program.
-1-
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ADDRESSES: Additional copies of this policy statement can be
ordered from the: National Technical Information Service (NTIS) ,
U.S. Department of Commerce, 5285 Port Royal Rd., Springfield, VA
22161. Orders must reference NTIS accession number PB95-234498.
For telephone orders: or further information.on- placing an order,
call NTIS at 703-487-4650 for regular service or 800-553-NTIS for
rush service. For orders via email/Internet send to the following
address: orders@ntis.fedworld.gov.
FOR FURTHER INFORMATION CONTACT: Laura Bulatao, Office of Site
Remediation Enforcement (2273-G), U.S. Environmental Protection
Agency, 401 M Street, S.W. Washington, D.C. 20460 (703-603-9005) ,
or the RCRA/Superfund Hotline at 800-424-9346 {in the Washington,
D.C. area at 703-412-9810).
I. Background
This policy guidance establishes EPA's and DOJ's position
regarding possible enforcement actions against lenders .and
government entities who are associated with property that may be
subject to a CERCLA. response action. EPA and DOJ recognize
CERCLA's unintended effects on lenders and government entities and
the relative concern from these parties regarding the consequences
of poteintial enforcement. In light of these concerns, lenders may
refuse to lend money to an owner or developer of a contaminated or
potentially contaminated property or they may hesitate in
exercising their rights as secured parties if such loans are made.
Additionally, goveranent entities that involuntarily acquire
property may be reluctant to perform certain actions related to
contaminated or potentially contaminated property.
The language of Section 101(20)(A) lea\js lenders and other
interested parties uncertain as to which types of actions such
as monitoring vessel or facility operations, requiring compliance
with applicable laws, and refinancing or undertaking loan workouts
-- they may take to protect their security interests without
risking EPA enforcement under CERCLA. Courts have not always
agreed on when a lender's actions are "primarily to protect a
security interest," and what degree of "participation in the
management" of the property will forfeit the lender's eligibility
for the exemption. This uncertainty was heightened by dicta in the
-2-
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Fleet Factors2 opinion, where the circuit court suggested that a
lender participating in the management of a vessel or facility "to
a degree indicating a capacity to influence the corporation's
treatment of hazardous waste" could be considered liable under
CERCLA.3
The lack -of legislative history on and consistent court
treatment of the CERCLA Section 101(20) (A) security interest
exemption prompted EPA to address potential lender liability for
cleanup costs at CERCLA sites in the Lender Liability Rule, which
was promulgated in April 1992.
Regarding the exemption for government entities, neither the
legislative history of CERCLA Sections 101(20) (D) and 101(35)(A)
nor the case law provide sufficient explanation of when a property
acquisition or transfer is considered involuntary. Thus, in the
Rule, EPA also clarified' the language of these sections, describing
when a government entity was exempted from CERCLA enforcement as an
ownfer or operator or was protected from third party actions.
However, in Kellev v. EPA.* the Circuit Court of Appeals for
the" District of Columbia vacated the Rule on the ground that EPA
lacked authority to issue the Rule as a binding regulation.
Nevertheless, the Kelley decision did not preclude EPA and DOJ from
following the provisions of the Rule as enforcement policy, and the
agencies have generally done so.
II. Policy Statement
This memorandum reaffirms EPA's and DOJ's intentions to follow
the provisions of the Lender Liability Rule as enforcement policy.
EPA and DOJ endorse the interpretations and rationales announced in
the Rule and its preamble. The purpose of this memorandum is. to
provide guidance within EPA and DOJ on the exercise of en? orcement
discretion in determining whether particular lenders and government
entities that acquire property involuntarily may be subject to
CERCLA enforcement actions. In making such determinations, EPA and
DOJ personnel should consult both the regulatory text of the Rule
and the accompanying preamble language in exercising their
2 United States v. Fleet Factors Corp.. 901 F.2d 1550, 1557
(11th Cir. 1990), cert, denied,. Ill S. Ct. 752 (1991).
3 Fleet. 901 F.2d at: 1557.
4 15 F.3d 1100 (D.C . Cir. 1994), reh. denied, 25 F.3d 1088
(D.C. Cir. 1994), cert, denied, American Bankers Ass'n v. Kelly.
115 S.Ct. 900 (1995) .
-3-
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enforcement discretion under CERCLA as to lenders and government
entities that acquire property involuntarily.5
After the promulgation of the Lender Liability Rule, but prior
to its invalidation, several district and circuit courts adhered to
the terms of the Rule or interpreted the statute in a manner
consistent with the Rule.6 Moreover, notwithstanding the Rule's
invalidation in Kellev. since that decision several courts have
also interpreted the statute in a way. that is consistent with the
Rule. EPA and DOJ believe that this case law is further evidence
of the reasonableness of the agencies' interpretation of the
statute, as embodied formerly ir. the Rule and now in this policy
statement.
III. Use of This Policy
The policies and procedures established in this document and
any internal procedures adopted for its implementation are intended
solely as' guidance for ¦ employees of EPA and DOJ. They do not
constitute rulemaking and may not be relied on to create a right or
benefit, substantive or procedural, enforceable at law, or in
equity, by any person. EPA and DOJ reserve the right to act at
variance with this guidance or its internal implementing
procedures.
5 See 57 Fed. Reg. 18,344 (April 29, 1932) (text and preamble) .
6 See Northeast Doran. Inc. v. Kev Bank of Maine, 15 F.3rd 1
(1st Cir. 1994); United States v. McLamb. 5 F.3d 69 (4th Cir.
1993); Waterville Indus.. Inc. v. Finance Authority of Maine, 984
F. 2d 549 (1st Cir. 1993); United States v. Fleet Factors. 901 F.2d
1150 (11th Cir. 1990), on remand. 821 F. Supp. 07 (S.D. Ga. 1993);
Kellev v. Tiscornia. 810 F. Supp. 901 (W.D. Mich. <1993); Grantors
to the Silresim Site Trust y. State Street Bank & Trust Co.. 23 ELR
20428 (D. Mass. Nov. 24, 1992).
7 See Z & Z Leasing. lac, v. Graying Reel. Inc., 873 F.Supp.
51 (E.D. Mich. 1995); Kemp Industries. Inc. v. Safety Light Corp..
857 F.Supp. 373 (D.N.J. 1994). ..
-4-
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I
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Superfund Reforr
Orphan Share lm
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
PRClfc<
WASHINGTON. D.C. 20460
OFFICE OF
ENFORCEMENTANO
- COMPLIANCE ASSURANCE
MAY 2 A 1995
MEMORANDUM
SUBJECT: Final Policy Toward Owners of Propef£y Containing
Contaminated Aquifers
FROM: Bruce M. Diamond, Director*
Office of Site Remediation Enforcement
TO: Regional Counsel. (Region 1-10)
Waste Management Division Directors (Region 1-10)
Brownfields Coordinators (Regions 1-10)
Attached please find the final "Policy Toward Owners of
Property Containing Contaminated Aquifers." This Policy states
the agency's position thatsubject to certain conditions, where
hazardous substances have come to be located on or in a property
solely as the result of subsurface migration in an aquifer from'a
source or sources outside the property, EPA will not tak=
enforcement actions against the owner of such property co require
tne performance of response actions or the payment cf response
costs. Further, as outlined in the policy, EPA may consider cie
minimis settlements under Section 122(g)(1)(B). of CERCLA where
necessary to protect such landowners from contribution suits.
The development of this policy was announced by the
Administrator as part of the Superfund Administrative Reforms.
It is also a component of the Agency's Brownfields Initiative to
remove barriers to economic redevelopment.
The comments received from many Regional and Headquarters
offices, as well as the Department of Justice, were very helpful
in developing" this Policy. I appreciate your assistance,
especially given the short turnaround time.
EPA intends to pui^Lish this Policy in the Federal Register
within the next 30 days.
fTy ftecycMfflacyclabl*
n Oi Primvd MA SotwC4*cU Mi o*t ptfpw Ml
eomjtfw a mm S0% r«cyo*o
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.If you have any questions about this Policy, please call
Ellen Kandell at 703-603-8996, mail code 2273-G or by FAX at 703-
603-9117 or 603-9119.
Attachment
cc: Elliot Laws, OSWER
Lisa Friedman, OGC
Bruce Gelber, DOJ
Linda Boornazian, PPED
Sandra Connors, RSD
Steve Luftig, OERR
Larry Reed, HSED
Earl Salo, OGC
Crane Harris, OSWER
2
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Policy Toward Owners of Property
Containing Contaminated Aquifers
I. STATEMENT OF POLICY
Based on the Agency's interpretation of CERCLA, existing EPA
guidance,, and EPA's Superfund program expertise, it is the
Agency's position that where hazardous substances have come to be
located on or in a property solely as the result of subsurface
migration in an aquifer from a source or sources outside the
property, EPA will not take enforcement action against the owner
of such property"to require the performance of response actions
or the payment of response costs.1 Further, EPA may consider de
minimis settlements under Section 122(g)(1)(B) of CERCLA where
necessary to protect such landowners from contribution suits.
This Policy is subject to the following conditions:
A) The landowner did not cause, contribute to, or
exacerbate the release or threat of release of any hazardous
substances, through an act or omission. The failure to take
affirmative steps to mitigate or address groundwater
contamination, such as conducting groundwater investigations
or installing groundwater remediation systems, will not, in
the absence of Exceptional circumstances, constitute an
"omission" by the landowner within the meaning of this
condition. This policy may not apply where the property
contains a groundwater well, the existence or operation of
which may affect the migration of contamination in the.
affected aquifer. These cases will require fact-specific
analysis.
B) The person that caused the release is not an agent or
employee of the landowner, and was not in a direct or
indirect contractual relationship with the landowner. In
cases where the landowner acquired the property, directly or
indirectly, from a person that caused the original release,
application 6f this Policy will require an analysis of
whether, at the time the property was acquired, the
landowner knew or had reason to know of the disposal of
hazardous substances that gave rise to the contamination in
the aquifer.
By this Policy, EPA does not intend to compromise or
affect any right it possesses to seek access pursuant to Section
104(e) of CERCLA.
1
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C) There is no alternative basis for the landowner's
liability for the contaminated aquifer, such as liability as
a generator or transporter under Section 107(a)(3) or (4) of
CERCLA, or liability as an owner by reason of the existence
of a source of contamination on the landowner's property
other than'the contamination that migrated in an aquifer
from a source outside the property.
In appropriate circumstances, EPA may exercise its
discretion under Section 122(g)(1)(B) to consider de minimis
settlements with a landowner that satisfies the foregoing
conditions. Such settlements may be particularly appropriate
where such a landowner has been sued or threatened with
contribution suits. EPA's Guidance on Landowner Liability and
Section 122(g)(1)(B) De Minimis Settlements2 should be consulted
in connection with this circumstance.
In exchange for a covenant not to sue from the Agency and
statutory contribution protection under Sections 113(f)(2) and
122(g)(5) of CERCLA, EPA may seek consideration from the
landowner, such as the landowner's full cooperation (including
but not limited to providing access) in evaluating the need for
and implementing institutional controls or any other response
actions at the site.
The Agency intends to use its Section 104(e) information
gathering authority under CERCLA, 42 U.S.C. § 9604(e), as
appropriate, to verify the presence of the conditions under which
the Policy would be applied, unless the source of contamination
and lack of culpability of the property owner are otherwise
2 See Guidance on Landowner Liability Under Section
107falfl) of CERCLA. De Minimis Settlements under Section 122
(q)(1)(B) of CERCLA, and Settlements with Prospective Purchasers
of Contaminated Property. OSWER Directive No. 9835.9, June 6,
1989, 54 Fed. Reg. 34,235 (August 18, 1989) (hereinafter
"Guidance on Landowner Liability and Section 122(g)fl)fB) De
Minimis Settlements").
3 •
A more complete discussion of the appropriate
consideration that may be sought under Section 122(g)(1)(B)
settlements is contained in Section IV.B.3.a. of Guidance on
Landowner Liability and Section 122 fa)(1)(B) De Minimis
Settlements. supra note 2.
4 The Agency has developed guidance which explains the
authorities and procedures by which EPA obtains access or
information. See Entry and Continued Access under CERCLA. OSWER
Directive #9829.2, June 5, 1987; Guidance on Use and Enforcement
of CERCLA Information Requests and Administrative Subpoenas.
OSWER Directive 9834.4-A, August 25, 1988.
2
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clear. Accordingly, failure by an property owner to provide
certified responses to EPA1s' information requests may, by itself,
be grounds for EPA to decline to offer a Section 122(g)(1)(B) de
minimis settlement.
II. DISCUSSION
A. Background
Nationwide there are numerous sites that are the subject
of response actions under CERCLA due to contaminated groundwater.
Approximately 85% of the sites on the National Priorities List
have some degree of groundwater contamination. Natural
subsurface processes, such as infiltration and groundwater flow,
often carry contaminants relatively large distances from their
sources. Thus, the plume of contaminated groundwater may be
relatively long and/or extend over a large area. For this
reason, it is sometimes difficult to determine the source or
sources of such contamination.
Any person owning property to which contamination has
migrated in an aquifer faces potential uncertainty with respect
to liability as an "owner" under Section 107(a)(1) of CERCLA, 42
U.S.C. § 9601(a)(1), even where such owner has had no
participation in the handling of hazardous substances, and has
taken no action to exacerbate the release.
Some owners of property containing contaminated aquifers
have experienced difficulty selling these properties or obtaining
financing for development because prospective purchasers and
lenders sometimes view the potential for CERCLA liability as a
significant risk. The Agency is concerned that such unintended
effects are having an adverse impact on property owners and on
the ability of communities to develop or redevelop property.
EPA is issuing this policy to address the concerns raised by
owners of property to which contamination has migrated in an
aquifer, as well as lenders and prospective purchasers of such
property. The intent of this policy is to lower the barriers to
transfer of such property by reducing uncertainty regarding the
possibility that EPA or third parties may take actions against
these landowners.
See Guidance on Landowner Liability and Section
122(a)(1)(B) De Minimis Settlements, supra note 2, for an outline
of the types of information which should be provided by the
landowner to support a request for a de minimis settlement.
3
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B. Existing Agency Policy
This policy is related to other guidance that EPA has
issued. The Agency has previously published guidance on issues
of landowner liability and de minimis landowner settlements.5
Moreover, in other EPA policies, EPA has asserted its enforcement
discretion in determining which parties not to pursue.7
C. Basis for the Policy
1. The Section 107 (bW3^ Defense
Section 107(a)(1) of'CERCLA imposes liability on an owner or
operator of a "facility" from which there is a release or
threatened release of a hazardous substance.8 A "facility" is
defined under Section 101(9) as including any "area where a
hazardous substance has . . . come to be located." The standard
of liability imposed under Section 107 is strict, and the
government need not prove that an owner contributed to the
release in any manner to establish a prima facie case.
However, Section 107(b)(3) provides an affirmative defense to
liability where the release or threat of release was caused
See Guidance on Landowner Liability and Section
122(aWlWBl De Minimis Settlements, supra note 2. This guidance
analyzes the language in Sections 107(b)(3) and 122(g)(1)(B) of
CERCLA.
7 See, e.g.. Policy Towards Owners of Residential
Property at Superfund Sites. OSWER Directive #9834.6, (July 3,
1991) (hereinafter "Residential Property Owners Policy") (stating
Agency policy not to take enforcement actions against an owner of
residential property unless homeowner's activities led to a
release); National Priorities List for Uncontrolled Hazardous
Waste Sites. 60 Fed. Reg. 20330, 20333 (April 25, 1995). In this
notice the Residential Property Owners Policy was applied to
"...residential property owners whose property is located above a
groundwater plume that is proposed to or on the NPL, where the
residential property owner did not contribute to the
contamination of the site.'-' See also. Interim Policy on CERCLA
Settlements Involving Municipalities or Municipal Waste. OSWER
Directive #9834.13, (December 6, 1989).
8 EPA has taken the position that lessees may be "owners"
for purposes of liability. See Guidance on Landowner Liability
and Section 122(g)(1)(B)«De Minimis Settlements, supra note 2,
footnote 10.
9 x See. e.g.. U.S. v. R.W. Mever. Inc.. 889 F.2d 1497,
1507 (6th Cir. 1989)("CERCLA contemplates strict liability for
landowners").
4
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solely by "an act or omission of a third party other than an
employee or agent of the defendant-, or than one whose act or
omission occurs in connection with a contractual relationship
existing directly or indirectly with the defendant . . ." In
order to invoke this defense, the defendant must additionally
establish, by a. preponderance of the evidence, that "(a) he
exercised due care with respect to the hazardous substance
concerned taking into consideration the characteristics of such
hazardous substance, in light of all relevant facts and
circumstances, and (b) he took precautions against foreseeable
acts or omissions of any such third party and the consequences
that could foreseeably result from such acts or omissions." 42
U.S.C. § 9607(b)(3).
a. Due Care and Precautions
An owner of property may typically be unable to detect by
reasonable means when or whether hazardous substances have come
to be located beneath the property due to subsurface migration in
ah aquifer from a source or sources outside the property. Based
on EPA's interpretation of CERCLA, it is the Agency's position
that where the release or threat of release was caused solely by
an unrelated third party at a location off the landowner's
property, the landowner is not required to take any affirmative
steps to investigate or prevent the activities that gave rise to
the original release in order to satisfy the "due care" or
"precautions" elements of the Section 107(b)(3) defense.
Not only is groundwater contamination difficult to detect,
but once identified, it is often difficult to mitigate or address
without extensive studies and pump and treat remediation. Based
on EPA's technical experience and the Agency's interpretation of
CERCLA, EPA has concluded that the failure by such an owner to
take affirmative actions, such as conducting groundwater
investigations or installing groundwater remediation systems, is
not, in the absence of exceptional circumstances, a failure to
exercise "due care" or "take precautions" within the meaning of
Section 107(b)(3).
The latter conclusion does not necessarily apply in the case
where the property contains a groundwater well and the existence
or operation of this well may affect the migration of
contamination in the affected aquifer. In such a case,
application of the "due care" and "precautions" tests of Section
107(b)(3) and evaluation of the appropriateness of a de minimis
siettlement under Section 122(g)(1) (B) require a fact-specific
analysis of the circumstances, including, but not limited to, the
impact of the well and/or the owner's use of it on the spread or
containment of the contamination in the aquifer. Accordingly,
this Policy does not apply in the case where the property
contains a groundwater well, the existence or operation of which
may affect the migration of contamination in the affected
5
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aquifer. In such a case, however, the landowner may choose to
assert a Section 107(b)(3) defense, depending on the case-
specific facts and circumstances, and EPA a>ay still exercise its
discretion to enter into, a Section 122(g)(1)(B) de minimis
settlement.
b. Contractual Relationship
The Section 107(b)(3) defense is not available if the act or
omission causing the release occurred in connection with a direct
or indirect contractual relationship between the defendant and
the third party that caused the release- Under Section
101(35)(A) of CERCLA, a "contractual relationship" for this
purpose includes any land contract, deed, or instrument,
transferring title to or possession of real property, except in
limited specified circumstances. Thus, application of the
defense in the circumstances addressed by this Policy requires an
examination of whether the landowner acquired the property,
directly or indirectly, from a person that caused the original
release. An example of this scenario would be where the property
at issue was originally part of a larger parcel owned by the
person that caused the release. If the larger parcel was
subsequently subdivided, and the subdivided property was
eventually sold to the current landowner, there may be a direct
or indirect "contractual relationship" between the person that
caused the release and the current landowner.
Even if the landowner acquired the property, directly or
indirectly, from a person that caused the original release this
may or may not constitute a "contractual relationship" within the
meaning of Section 101(35)(A), precluding the availability of the
Section 107(b)(3) defense. Land contracts or instruments
transferring title are not considered "contractual relationships"
if the land was acquired after the disposal or placement of the
hazardous substances on, in or at the facility under Section
101(35)(A) and the landowner establishes, pursuant to Section
101(35)(A)(i), that, at the time of the acquisition, the
landowner "did not know and had no reason to know that any
hazardous substance which is the subject of the release . . . was
disposed of on, in, or at the facility."10 Thus, in the
subdivision scenario described above, the current landowner miight
still qualify, for the Section 107(b)(3) defense if he or she did
not know or have reason to know that the original landowner had
disposed of hazardous substances elsewhere on the larger parcel.
Section 101(35)(A) also excludes from the definition of
"contractual relationship" certain acquisitions of property by
government entities and certain acquisitions by inheritance or
bequest, so long as the other requirements of Section 101(35)(A)
are met. See 42 U.S.C. § 101(35)(A)(ii) and (iii)^
6
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2. Settlements Under Section 122/aHlHB)
To address concerns that strict liability under Section
107(a)(1) could cause inequitable results with respect to
landowners who had not been involved in hazardous substance
disposal activities, Congress authorized the Agency to enter into
de minimis settlements with certain property owners under Section
122(g)(1)(B) of CERCLA, 42 U.S.C. § 9622 (g)(1)(B). Under this
Section, when the Agency determines that a settlement is
"practicable and in the public interest," it "shall as promptly
as possible reach a final settlement" if the settlement "involves
only a minor portion of the response costs at the facility
concerned" and the Agency determines that the potentially
responsible party: "(i) is an owner of the real property on or in
which the facility is located; (ii) did not conduct or permit the
generation, transportation, storage, treatment or disposal of any
hazardous substance at the. facility; and (iii) did not contribute
to the release or threat of release .... through any act or
omission.1,11
The requirements which must be satisfied in order for the
Agency to consider a settlement with landowners under the de
minimis settlement provisions of Section 122(g)(1)(B) are
substantially the same as the elements which must be proved at
trial in order for a landowner to establish a third party defense
under Section 107(b)(3), as described above.1
D. Use of the Policy
This Policy does not constitute rulemaking by the Agency and
is not intended and cannot be relied on to create a right or a
benefit, substantive or procedural, enforceable at law or in
equity, by any person. Furthermore, the Agency may take action
at variance with this Policy.
For further information concerning this Policy, please
contact Ellen Kandell in the Office of Site Remediation
Enforcement at (703) 603-8996.
A detailed discussion of each of these components of
Section 122(g)(1)(B) and guidance on structuring settlements
under this Section are provided in the Guidance on Landowner
Liability and Section 122faWlWBl De Minimis Settlements, supra
note 2.
7
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o
jt,
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' i UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
kW
2 WASHINGTON DC 2C460
4c 0*90*1°
^ 3 1991
OSWER Directive #9834.6
MEMORANDUM
SUBJECT:
FROM:
TO:
Policy Towards Owners of Residential Property at
Superfund Sites
Don R. Clay
Assistant Administrate
Office of Solid Waste
Raymond B. Ludwiszewski X. tf-M
Acting Assistant^Administrator
Office of Enforcement I
Regional Administrators, Regions I - X
gency Response
This memorandum transmits to you the Agency's "Policy
Towards Owners of Residential Property at Superfund Sites."
The guidance sets forth the Agency's enforcement policy
towards owners of residential property located on a Superfund
site under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (CERCLA), as amended by
the Superfund Amendments and Reauthorization Act of 1986 (SARA).
This guidance has been developed jointly by the Office of
Solid Waste and Emergency Response and Office of Enforcement.
The guidance reflects input from the Regions, Office of General
Counsel and the Department of Justice. There have been several
drafts of this guidance and changes based on comments have been
incorporated. We thank you for your assistance.
Attachment
cc: Director, Waste Management Division,
Regions I, IV, V, and VII
Director, Emergency and Remedial Response Division,
Region II
Director, Hazardous Waste Management Division,
Regions III, VI, VIII, and IX
Director, Hazardous Waste Division, Region X
Director, Environmental Services Division,
Regions I, VI, and VII
Regional Counsel, Regions I-X
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OSWER Directive #9834.6
POLICY TOWARDS OWNERS OF RESIDENTIAL PROPERTY
AT SUPERFUND SITES
U.S. Environmental Protection Agency
Office of Solid Waste and Emergency Response
Office of Enforcement
Washington, D.C. 20460
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OSWER Directive #9834.6
I. INTRODUCTION
A. Purpose and Summary
This guidance describes EPA's policy for enforcement actions
to recover response costs or to require response actions under
the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (CERCLA or Superfund) as amended by the
Superfund Amendments and Reauthorization Act of 1986 (SARA), with
respect to owners of residential property located on a Superfund
site.
Under this policy, EPA, in the exercise of its enforcement
discretion, will not take enforcement actions against an owner of
residential property to require such owner to undertake response
actions or pay response costs, unless the residential homeowner's
activities lead to a release or threat of release of hazardous
substances, resulting in the taking of a response action at the
site.1 This policy does not apply when an owner of residential
property fails to cooperate with the Agency's response actions or
with a state that is taking a response action under a cooperative
agreement with EPA pursuant to section 104(d)(1) of CERCLA. This
policy also does not apply where the owner of residential
property fails to meet other CERCLA obligations, or uses the
residential property in any manner inconsistent with residential
use.
EPA is issuing this policy to address concerns raised by
owners of residential property, and to provide a nationally
consistent approach on this issue.
B. Background
Several sites that are the subject of a response action
(removal or remedial activities) under CERCLA include properties
that are used exclusively as single family residences (one-to-
four dwelling units). At several larger sites, soil or ground
water contamination may be so extensive that there are several
hundred of these residential properties located on a Superfund
site.
Some owners of residential property located on a Superfund
site are concerned about potential liability for performance of a
response action or payment of cleanup costs because they may come
1 This policy does not provide an exemption from potential
CERCLA liability for any party; it is a statement of the Agency's
enforcement discretion. Liability is governed by Section 107 of
CERCLA.
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2
OSWER Directive #9834.6
within the definition of "owner" under the statute.2 Owners of
residential property located on a Superfund site have expressed
the concern that they may be unable to sell these properties
because the buyer and the lending institution may also be
concerned about potential liability.
C. . Past Agency Practice and Basis for Policy
In the past, the Agency has not required owners of
residential property located on a Superfund site to perform
response actions or pay response costs except where the
residential homeowners' activities lead to a release or threat of
a release of hazardous substances, resulting in the taking of a
response action at the site.3 Despite this general practice,
some owners of residential property have asked EPA for individual
assurances that the Agency not take an enforcement action against
them for performance of the response action or payment of
response costs. The Agency has not been able to provide
individual owners of residential property with assurances of no
enforcement action outside the framework of a legal settlement,
and this policy does not alter EPA's policy of not providing no
action assurances.4
This guidance instead constitutes a general statement of
policy regarding the Agency's exercise of enforcement discretion
with respect to owners of residential property located on a
Superfund site. The purpose of this policy is to continue the
Agency's past practice and to provide guidance for Agency
enforcement staff.
II. DEFINITION OF KEY TERMS
The following definitions are applicable for the limited
purposes of this policy, and do not represent the Agency's
interpretation of these or any similar or related statutory terms
in any context other than this policy:
2 Under section 107(a)(1) of CERCLA, a person is liable if
it is the owner or operator of a facility. 42 U.S.C. Section
9607(a)(1). Under section 101(9)(B) of CERCLA, a facility is
defined to include "any site or area where a hazardous
substance...has...come to be located." 42 U.S.C. Section
9601(9)(B). *
3 The Agency has required owners of residential property to
provide access to the residential property in order to assess the
need for a response action or implement a response action, and to
otherwise cooperate with cleanup activities.
4 See HPolicv Against No Action Assurances." (November 15,
1984).
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3
OSWER Directive #9834.6
o The term "owner of residential property," means a
person, as defined under section 101(21) of CERCLA, who
owns residential property located on a Superfund site,
and who uses or allows the use of the residential
property exclusively for residential purposes. The
term also includes owners who make improvements that
are consistent' with residential use. Such term does
not include 1) any owner who has conducted or permitted
the generation, transportation, storage, treatment or
handling of hazardous substances on the residential
property other than in quantities and uses typical of
residential uses; 2) any owner who disposes of
hazardous substances on the residential property
resulting in the taking of a response action; and 3)
any owner who acquires or develops the residential
property for commercial use, or for any other use
inconsistent with residential use.
o The term "residential property," refers to single
family residences of one-to-four dwelling units,
including accessory land, buildings or improvements
incidental to such dwellings which are exclusively for
residential use.5
o The phrase "located on a Superfund site" means
properties that are within an area designated for
investigation or study under CERCLA, listed as a
Superfund site on the National Priorities List,
identified as the subject of planned or current removal
or remedial activities, where hazardous substances have
come to be located, or which are subject to or affected
by a removal or remedial action.
III. STATEMENT OF POLICY
In implementing CERCLA, EPA may use enforcement discretion
in pursuing potentially responsible parties (PRPs) for
enforcement actions. It is within the Agency's enforcement
discretion to identify appropriate PRPs to perform response
actions or pay response costs.6
In the exercise of its enforcement discretion, the Agency
*
EPA notes that this definition of "residential property"
is consistent with the designation for single family residences
under the National Housing Act, 12 U.S.C. Section 1701.
6 See generally. Heckler v. Chanev. 470 U.S. 821 (1985);
U.S. v. Helen Kramer, et al. No. 89-4340 (D.N.J. February 8,
1991).
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4
OSVJER Directive #9834.6
has determined that it will not require owners of residential
property located on a Superfund site to perform a response action
or pay response costs if the owner's activities are consistent
with this policy.7 Under this policy, EPA's exercise of
enforcement discretion will extend to lessees of residential
property provided that the lessees' activities are consistent
with this policy. This policy also applies to persons who
acquire residential property through purchase, foreclosure, gift,
inheritance or other form of acquisition, as long as those
persons' activities after acquisition are consistent with this
policy.8
This policy does not apply to an owner of residential
property who has undertaken activities leading to a release or
threat of release of hazardous substances, resulting in the
taking of a response action at the site.9 In such situations,
the Agency would contemplate bringing an enforcement action
against the owner of the residential property to perform a
response action or to pay response costs. In addition, if an
owner of residential property located on a Superfund site
develops or improves the property in a manner inconsistent with
residential use, or the development of the residential property
leads to a release or threat of release of hazardous substances
resulting in the taking of a response action at the site, then
the owner would not be within the scope of this policy. Also, if
an owner of residential property fails to provide the Agency with
access to the residential property located on a Superfund site to
evaluate the need for a response action or to implement a
response action, or fails to comply with any other CERCLA
obligations, this policy would not apply.10
This exercise of enforcement discretion applies to owners of
residential property located on a Superfund site who purchased or
7 Consistent with the Agency's no action assurance policy
(see footnote 4), this policy does not require the Agency to make
prospective determinations of whether particular owners of
residential property meet the requirements of this policy.
8 If the Agency has perfected a federal lien on the
residential property prior to the acquisition by the new owner,
this policy does not affect the status of that lien.
9 The Agency's experience has been that in general,
activities which are undertaken consistent with single family
residential use do not lead to a release or threat of a release
of hazardous substances, resulting in a response action being
taken at a site.
10 see Section IV of this policy for a further discussion
of other CERCLA obligations.
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5
OSWER Directive *9834.6
sold the residential property in the past or who purchase or sell
the residential property after the issuance of this policy.
Whether an owner of residential property has or had knowledge or
reason to know that contamination was present on the site at the
time of purchase or sale of the residential property will not
affect EPA's exercise of enforcement discretion under this
policy.
This policy is not based on, and has no effect on, the
defenses to liability available to an owner of residential
property, or any other person, under section 107(b) of CERCLA.
This policy is not related to the "innocent landowner defense"
described in sections 107(b)(3) and 101(35) of CERCLA; it is
based entirely on EPA's enforcement discretion. Thus, the
ability of an owner of residential property to assert any defense
to liability is unaffected by this policy.
IV. OTHER CERCLA OBLIGATIONS
Although the Agency, in the exercise of its enforcement
discretion, will not require owners of residential property to
undertake or pay for response actions if the owners' activities
are consistent with this policy, to benefit from this policy an
owner of residential property must comply with other CERCLA
obligations.
To come within the scope of this policy, owners of
residential property must provide access to the residential
property when requested by EPA, or report information requested
by the Agency. In addition, owners of residential property
must cooperate with EPA and not interfere with any of the
Agency's activities on the residential property taken to respond
to the release or threat of release, similarly, owners of
residential property must cooperate with and not interfere with
the activities of a state that is taking a response action under
a cooperative agreement with EPA pursuant to section 104(d)(1) of
CERCLA. Moreover, owners of residential property must comply
with institutional controls placed on their residential property
in order to facilitate performance of a response action and to
protect human health and the environment.12
11 The Agency has developed guidance which explains the
authorities and procedures by which EPA obtains access or
information. See OSWER Directive #9829.2, Entry and Continued
Access under CERCLA (June 5, 1987). See also OSWER Directive
#9834.4-A, Guidance on Use and Enforcement of CERCLA Information
Requests and Administrative Subpoenas (August 25, 1988).
12 Institutional controls are conditions or limitations
commonly placed on property by local or state authorities to
ensure that activities (e.g., excavation, construction or other
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o*
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August 1:
Superfund Refoi
¦ ;
yff
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON! D.C. 20460
OSWER DIRECTIVE
#9834.13
DEC -6 1989
<:«¦<:£ z*
SCi.:C <*«STS ANO S^6»CENCV agS'CVSe
naiopAypvM
SUBJECT: Interim Policy on CERCLA Settlements Involving
Municipali :es
FROM: Don R. Clay—-C7>V/ J
Assistant Administrator
TO:
Regional Administrators, Regions I - X
I. INTRODUCTION
A) Focus of Interim Policy
This memorandum establishes EPA's interim policy on
settlements involving municipalities or municipal wastes under
Section 122 of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (CERCLA or Superfund) as
amended by the Superfund Amendments and Reauthorization Act of
1986 (SARA). In particular, this interim policy indicates how
EPA will exercise its enforcement discretion when pursuing
settlements which involve municipalities or municipal wastes.
The municipal wastes addressed by this interim policy are
municipal solid waste (MSW) and sewage sludge as defined below.
This interim policy has been developed to provide a consistent
Agency-wide approach for addressing municipalities and municipal
wastes in the Superfund settlement process.
1 This interim policy does not provide an exemption from
potential CERCLA liability for any party? potential liability
continues to apply in all situations covered under Section 107 of
CERCLA.
Friwttd m KtcycUd Paper
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OSWER DIRECTIVE 198 34.13
Although this interim policy focuses on municipalities and
municipal wastes, it addresses how private parties and certain
kinds of commercial, institutional, or industrial vastes will be
handled in the settlement process as well. It is important to
address private parties and certain Icinds of commercial,
institutional, or industrial vastes in this interim policy
because private parties sometimes handle municipal vastes or
wastes of a similar nature and because municipal and private
party waste streams are sometimes co-disposed at sites,
particularly municipal landfills. The Icinds of commercial,
institutional, or industrial vastes covered by this interim
policy include "trash from a commercial, institutional, or
industrial entity" and "low-hazardous industrial vastes" as
defined below.
There are three fundamental issues addressed by this interim
policy. First is whether to notify generators/transporters of
MSW or sewage sludge that they are considered to be potentially
responsible parties (?RPs) and to include them In the Superfund
settlement process. Such parties are usually municipalities,
although they may include private parties as well. Second is how
municipalities should be handled in the Superfund settlement
process when the decision is made to notify them that they are
FRPs under Section 107(a)*of CERCLA. Third is how the treatment
of municipalities and municipal wastes under this interim policy
affects the treatment of private parties and certain kinds of
2
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OSWER DIRECTIVE 19834.13
commercial, institutional, or industrial wastes in the Superfund
settlement-process.
Key questions specifically addressed as part of this interim
policy include the following:
o Information Gathering: Should municipalities be
included in the Agency's information gathering process?
Should generators/transportelrs of MSW or sevage sludge
be included in the information gathering process?
o Notification: Should municipalities be notified that
they are PRPs? Should generators/transporters of MSW
or sevage sludge be notified as PRPs?
o Settlements: Hov should municipalities be handled in
the Superfund settlement process? What settlement
process and settlement tools should be used to
facilitate settlement involving municipalities or
municipal wastes?
o Private Parties: Hov does the treatment of
municipalities and municipal wastes affect the Agency's
treatment of private parties and certain kinds of
commercial, institutional, or industrial wastes?
3
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OSWER DIRECTIVE #9834.13
B) Rev Tenia Used in Interim Policy2
The following defines the key terms used in this interim
policy:
o The tern "Municipalities" refers to any political
subdivision of a State and nay include cities,
counties, towns, townships, and other local
governmental entities,
o The term "municipal solid vasts" refers to solid waste
generated primarily by households, but may include some
contribution of wastes from commercial, institutional
and industrial sources as well. As defined under the
Resource Conservation and Recovery Act (RCRA), MSW
contains only those wastes which are hot required to be
managed as hazardous wastes under Subtitle C of RCRA
(e.g., non-hazardous substances, household hazardous
wastes (HHW), or small quantity generator (SQG)
wastes). Although the actual composition of such
wastes varies considerably at individual sites, MSW is
generally composed of large volumes of non-ha2ardous
substances (e.g., yard waste, food waste, glass, and
The definitions provided under this section are for the
purpose of this interim policy only. Where possible, this
Interim policy includes already existing definitions used under
other Federal environmental programs (e.g., under the Resource
Conservation and Recovery Act or the Clean Water Act). However,
nothing in this interim policy affects the regulatory efforts of
these other programs.
4
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OSWER DIRECTIVE #9834.13
aluainum) and say contain small quantities of household
hazardous wastes (a.?./ pesticides and solvents) as
veil as small quantity generator wastes.3 Many
industrial sol id wastes and soae coaaercial and
institutional solid wastes are managed separately froa
household wastes, but may enter the KSW waste stream,
o The tera "municipal landfill" refers to any landfill,
whether publicly or privately owned, that has received
municipal solid waste for disposal,
o The tera "sewage sludge" refers to any solid, semi*
solid, or liquid residue reaoved during the treatment
of municipal vaste water or doaestic sewage.*
o The tera "trash froa a coaaercial, institutional, or
industrial entity" refers to waste which is very
All household wastes, including household hazardous
wastes, are unconditionally exeapt froa the Federal hazardous
vaste regulations promulgated under Subtitle C of SCRA (See 4 0
CFR Section 261.4 (b)(1)). With regard to non-household sources
of solid waste, if such vaste is not a listed or characteristic
hazardous vaste accuaulated in quantities exceeding the small
quantity generator limitations (i.e., less than 100 kg/month of
hazardous wastes and less than l kg/month for acute hazardous
wastes), such vaste is not required to be managed in a RCRA
Subtitle C hazardous vaste treatment, storage, or disposal
facility (See 40 CFR Section 261.5). "Household hazardous
wastes* refers to those vastes which are generated by households
and would be managed as hazardous vastes under RCRA Subtitle C if
they were generated by a non-household in quantities exceeding
the saall quantity generator limitations.
4 The definition of sewage sludge is contained in the
National Pollutant Discharge Elimination System Sewage Sludge
Permit Regulations published in the Federal Register as a final
rule Kay 2, 1989 (See 40 CFR Part 122.2).
9
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OSWER DIRECTIVE #9834.13
similar to the KSW that is derived from households.
This term covers only those wastes that are essentially
the same as vhat one would expect to find in common
household trash. This term does not include hazardous
substances that are derived from a commercial,
institutional, or industrial process or activity,
o The term "low-hazardous industrial wastes" refers to
high volume wastes that contain small quantities of
hazardous substances derived from an industrial,
commercial, or institutional process or activity.
Examples may include certain paint sludges or
industrial wastewaters.
II. CERCTA LIABILITY
Important questions have been raised about whether
municipalities may be PRPs and whether municipal wastes (i.e.,
MSW and sewage sludge) may be considered hazardous substances
under CERCLA.
A) Municipalities as PRPs
The statute does not provide an exemption from liability for
municipalities. Municipalities may b« PRPs like private parties
if municipalities fall within the categories of liability
specified under Section 107(a) of CZRCIA. In general, Section
107(a) establishes liability for past and present owners or
operators of facilities as well as generators or transporters of
hazardous substances for the release or threatened release of
6
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OSWER DIRECTIVE #9834.13
hazardous substances. Such parties may be liable for the costs
of responding to a release or threatened release of hazardous
substances as veil as for resulting daaages to natural resources.
The specific categories of liable parties under Section 107(a)
are:
1. the owner and operator of a vessel or a facility,
2. any person vho at the time of disposal of any hazardous
substance owned or operated any facility at which such
hazardous substances were disposed of,
3. any person who by contract, agreement, or otherwise
arranged for disposal or treatment, or arranged with a
transporter for transport for disposal or treatment, of
hazardous substances owned or possessed by such person,
by any other party or entity, at any facility or
incineration vessel owned or operated by another party
or entity and containing such hazardous substances,
[commonly referred to as "generators"5], and
4. any person who accepts or accepted any hazardous
substances for transport to disposal or treatment
s Persons who fall* into this category are commonly referred
to as "generators," although liability under this Section extends
beyond "true generators" of hazardous substances to include
persons who arranged for the disposal or treatment of hazardous
substances owned or possessed by such party or another party.
The term "generator" is used throughout this document to refer to
any party who is potentially liable under Section 107(a)(3).
7
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OSWER DIRECTIVE #983 4.13
facilities, incineration vessels, or sites selected by
such person (commonly referred to as "transporters"}.
Section 107(a) describes liable parties as "persons" and the
definition, of "person" under Section 101(21) includes municipal-
ities and political subdivisions of a State. Municipalities nay,
therefore, be PRPs as part of CERCLA's broad definition of vho is
potentially liable.
8) Municipal Wastes as Potential CERCIA Hazardous
Similarly, the statute does not provide an exemption from
liability for municipal wastes. Municipal wastes may be
considered hazardous substances if they are covered under the
definition of hazardous substances in Section 101(14) of CERCIA.
As indicated under the definitions of MSW and sewage sludge,
these municipal wastes are generally characterized by large
volumes of non-hazardous substances and may contain small
quantities of household hazardous or other wastes, although the
actual composition of the waste streams vary considerably at
individual sites. To the extent municipal wastes contain a
hazardous substance that is covered under Section 101(14) of
CERCIA and there is a release or threatened release, such
municipal wastes may fall within the CERCIA liability framework.
III. INFORMATION GATEERINt*
The Regions should include all municipal and private party
owners/operators and generators/transporters in the information
8
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OSVER DIRECTIVE 19834.13
gathering process, including the generators/transporters of
municipal wastes. This means that municipal owners/operators as
veil as municipal generators/transporters should generally
receive Section 104(e) information request letters and should
otherwise be fully included in the information gathering process
like private parties. Information obtained through such letters
or through other means is important for determining (among other
things) whether it is appropriate to notify a party as a PRP,
including whether to notify a generator/transporter of MSW or
sewage sludge as discussed below.6
IV. NOTIFICATION OF POTENTIAL RESPONSIBILITY
A) Owners/Operators
The same approach will b« used for both municipalities and
private parties when determining whether to notify them as
owners/operators. Specifically,.such parties will generally be
notified where they were past owners or operators of facilities
at the time of disposal of hazardous substances, or they are
present owners or operators of facilities where hazardous
substances have been released or there is a threatened release.
The Regions may accept and consider credible site-
specific information froa any party to supplement their own
information gathering efforts as appropriate.
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OSWER DIRECTIVE #9834.13
B) Generators/Transporters7
1. Municipal solid waste! Municipalities and private
parties will be treated the same when determining whether to
notify them as PRPs when they are generators/transporters of MSW.
Specifically, such parties will not generally be notified unless:
o the Region obtains site-specific information that the
MSW contains a hazardous substance;8 AND
o the Region has reason to believe that the hazardous
substance is derived from a commercial, institutional,
or industrial process or activity.
This means that EPA will not generally notify municipalities or
private parties who are generators/transporters of MSW if only
household hazardous wastes (HHW) are present, unless the truly
exceptional situation discussed below exists. The general policy
7 The categories of wastes discussed belov, i.e., relating
to municipal solid waste, sewage sludge, trash from a commercial,
institutional, or industrial entity, and low-hazardous industrial
wastes, are defined in the "Introduction" to this interim policy
(See I.B.).
* The term "site-specific" information refers to
information pertaining to a particular Superfund site. "Site-
specific" information does not generally include, for example,
"general studies" conduoted by EPA or other parties which draw
general conclusions about whether MSW or sewage sludge typically
contain a certain percentage of hazardous substances, unless the
"general study" includes "site-specific" information obtained
from the PRP or Superfund site in question. "General studies"
may nonetheless be used to supplement "site-specific"
information.
10
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OSWER DIRECTIVE #9834.13
of not notifying parties who are generators/transporters of HHW
extends to "HHW collection day programs" as well.*
This also means that such parties may be notified as PRfs if
the MSW. contains hazardous substances from non-household sources.
Non-household sources include, but are not limited to. small
quantity generator (SQG) wastes from commercial or industrial
processes or activities, or used oil or spent solvents from
private or municipally-owned maintenance shops.
Notwithstanding the above general policy, there may be
truly exceptional situations where EPA may consider notifying
generators/transporters of MSW which contains a hazardous
substance derived only from households. Such notification may be
appropriate where the total contribution of commercial,
institutional, and industrial hazardous waste by private parties
to the' site is insignificant when compared to the.MSW.10 In this
The term "HHW collection day programs" refers to programs
that have generally been sponsored by municipalities or community
organizations whereby residents voluntarily remove their HHW from
their household waste. The HHW is then typically disposed of in
a RCRA Subtitle C hazardous waste facility and the household
waste is typically disposed of in a RCRA Subtitle 0 solid waste
facility.
10 The Regions should consider both the volume and the
toxicity of the commercial, institutional, and industrial
hazardous waste when determining whether it is insignificant when
compared to the MSW. In determining whether the volume is
insignificant, the Regions should consider the,total volume of
such waste contributed by all private parties. In determining
whether the toxicity is insignificant, the Regions should
consider whether such waste is significantly more toxic than the
MSW and whether such waste requires a disproportionately high
treatment and disposal cost or requires a different: or more
costly remedial technique than that which otherwise would be
11
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OSWER DIRECTIVE #9334.13
situation, the Regions should seriously consider notifying the
generators/transporters of MSW containing a hazardous substance
from households as PRPs and include thea in the settlement
process where it would promote either settlement or response
action at the site.
2. Sewage sludge: Municipalities and private parties will
be treated the same when determining whether to notify them as
PRPs when they are generators/transporters of sewage sludge.
Specifically, such parties will not generally be notified unless:
o the Region obtains site-specific information that the
sewage sludge contains a hazardous substance; AND
o the Region has reason to believe that the hazardous
substance is derived from a commercial, institutional,
or industrial process or activity.
3. Trash from a commercial. institutional, or industrial
entity; Parties who are generators/transporters of trash from a
commercial, institutional, or industrial entity will not
generally be notified as PRPs if such parties demonstrate to the
Region that:
o none of the hazardous substances contained in the trash
are derived from a commercial, institutional, or
industrial process or activity; and
technically adequate for the site.
12
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OSWER DIRECTIVE #9834.13
o the amount and toxicity of the hazardous substances
contained in the trash does not exceed that vhich one
would expect to find in coaaon household trash.
4. Anv other hazardous substance, including low-hazardous
industrial wastes: Municipalities or private parties who are
generators/transporters of "any other hazardous substance" will
generally be notified as PRPs if the Region obtains information
that the substance is hazardous or that it contains a hazardous
substance. This includes notification of private parties who are
the generators/transporters of low-hazardous industrial wastes.
"Any other hazardous substance" in this category refers to any
hazardous substance covered under Section 101(14) of CERCIA other
than hazardous substances that may be contained in MSW, sewage
sludge, or trash froa a commercial, institutional, or industrial
entity (as discussed under IV.B.l., IV.B.2., or IV.B.3. above).
The generators/transporters of hazardous substances that may be
contained as part of the waste streams discussed under IV.B.l.,
IV.B.2., or IV.B.3. should be addressed as specified above.
V. SETTLEHEHTS
A) Settlement Process
Once the notification decision is made, the general goal and
overall process for reaching settlement at sites involving
municipalities or municipal wastes is the same as for other
sites. The general goal remains to negotiate with PRPs to reach
one settlement agreement that provides complete resolution of all
13
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OSWER DIRECTIVE *9
pending CERCLA claims, and is consistent with both applic
statutory requirements and EPA's Interim CERCLA Settlemen
Policy.11 Thismeans that at sites where both municipal a
private PRPs exist, EPA will attempt to include both type
parties in.one settlement agreement.
Although one settlement agreement is the goal for ea
separate settlement agreements may be used at any site to
facilitate settlement, where appropriate. This includes
involving municipalities or municipal wastes. Separate
settlements are not automatically available to municipali
are generally available to such parties under the same co
as for private parties. Examples of separate settlements
Section 122(g) de minimis settlements and cash-outs which
used when they are consistent with applicable statutory
requirements and existing EPA guidance.12
B) Settlement Provisions That Mav Be Particularly
for Certain Municipalities
As indicated, once parties are notified as PRPs, the
process and goals for reaching settlement at sites involvir
municipalities or municipal wastes is the same as for othex
Superfund sites. Nonetheless, there are some settlement
provisions (e.g., delayed payments, delayed payment sched
11 "Interim CERCIA Settlement Policy", February 5, 1
50 FR 5034.
12 For example, see "Interim Guidance on Settlements
D« Minimis Waste Contributors," June 30, 1987, 52 FR 2433
14
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OSWER DIRECTIVE 19834.13
and in-kind contributions) that may be particularly suitable for
facilitating settlement with certain municipal PRPs because they
taJce into account a municipality's status as a governmental
entity.13
Such settlement provisions are not routinely available to
municipalities. As a general rule, they may be considered where
a municipality has successfully demonstrated to EPA that they are
appropriate (e.g., vhere valid ability to pay or procedural
constraints that affect the timing of payment exist). These
settlement provisions may be embodied in separate settlements or
they may be folded into a larger settlement that includes private
parties. In addition, although these settlement provisions may
be particularly suitable for municipalities, they may also be
available to private parties, such as certain small businesses,
vhere appropriate.
The following discusses hov delayed payments, delayed
payment schedules, and in-kind contributions may be used:
1. Delayed payment: If a municipality has demonstrated
difficulty providing a lump-sum payment upfront for past costs or
13 In some circumstances a municipality's governmental
status may impose practical constraints on its ability to carry
out its legal obligation ast a PRP under CERCLA. For example, a
municipality may need to hold a special vote involving its
legislative body or its citizens to gain approval to issue a bond
or arrange other financing to cover cleanup costs at a Superfund
site vhere it is a PRP. These settlement provisions are designed
to take into account these types of unavoidable constraints that
may exist.
IS
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OSWER DIRECTIVE 19834.13
for cleanup needs, the settleaent could be structured to allow
the municipality-to pay at a specified future date. This would
allow the municipality time to raise the money needed to cover
its contribution. This may include an interest payment.
2. Delayed payment schedule /payments over tlm^ ? An
alternative to a delayed payment is to allov a delayed payment
schedule where the settleaent is structured to allow the
municipality to pay over time based upon a predetermined schedule
of payments. The payment schedule would be adjusted in such a
way that the discounted present value of the payment would be
greater than or equal to the settlement.14
3. In-Tclnd contributions; The settleaent could be
%
structured to allow for an in-kind contribution, especially where
a municipality can provide only a portion of its share of costs
or is unable to provide a monetary payment. In-kind
contributions may be made in conjunction with or in lieu of cash.
Factors the Regions may us* in considering the appropriateness of
an in-kind contribution may include the overall financial health
of the municipality, the amount of the municipality's share, the
Delayed payment schedules may include "structured
settlements" which are settlements paid ever time generally
through an annuity. EPA is currently developing guidance, titled
"Interim Guidance on the Use of Structured Settlements Under
CERCIA," which will establish criteria for evaluating whether a
particular site is a good candidate for a structured settlement.
EPA expects to issue this interim guidance in the Spring of 1990.
1«
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OSWER DIRECTIVE 19834.13
value of the in-kind contribution, and the effect of the in-kind
contribution on the overall effort to achieve settlement.
One mechanism for allowing an in-kind contribution could be
a "carve-out"order when, for example, the municipal FRP has
agreed to provide the operation and maintenance at the facility.
Other in-kind contributions could include the use of trucks and
equipment to carry out cleanup activities, the installation of
fences and the provision of other security measures to control
public access to the site, or the use of the municipality's
sewage treatment plant.
C) Contribution Protection
Nothing in this interia policy affects the rights of any
party in seeking contribution frost another party, unless such
party has entered into a settlement with the United States or a
State and obtained contribution protection pursuant to Section
113(f) of CERCLA.15
VI. DISCLAIMER
This interia policy is intended solely for the guidance of
EFA personnel. It is not intended and can not be relied upon to
create any rights, substantive or procedural, enforceable by any
paxty in litigation with the United States. The Agency reserves
13 Under Section 113(f), where EPA deteraines that
settlement is in the best interests of the Federal government,
CERCLA provides contribution protection to the settling parties
for matters covered by the settlement. This may include a party
who has not been notified as a PR? by EPA but wishes to settle
its potential CERCLA liability.
17
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OSWER DIRECTIVE #
the right to act at variance vith this policy and to cha
any time without public notice.
VII. FOR FURTHER INFORMATION
For further information or questions about this int
policy, the Regions aay contact Kathleen MacKinnon in th
of Waste Programs Enforcement at FTS-475-9812. Inquirie
other persons should be directed to Ms. MacKinnon at
202-475-6771.
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Decer-oer "989
United States
Environmental Protection
Agency
Solid Waste And Emergency Response 'OS-5'O'
EPA Environmental Fact Sheet
Interim CERCLA
Municipal Settlement Policy
Overview The Environmental Protection Agency
(EPA) has developed an interim policy on
how municipalities and municipal waste
will be included in the Superfund settle-
ment process under Section 122 of the
Comprehensive Environmental Response,
Compensation, and Liability Act of 1980
(CERCLA or Superfund) as amended by
the Superfund Amendments and Reauth-
orization Act of 1986 (SARA). This in-
terim policy focuses on situations where
EPA is seeking voluntary settlement of
cleanup at Superfund sites that involve
municipalities or municipal wastes. It also
addresses EPA's treatment of private par-
ties and certain kinds of commercial,
institutional, or industrial wastes. Its pub-
lication follows nearly two years of dis-
cussions with state and local governments
and organizations, industry and
Content The interim policy generally provides that
wastes from households will not be
included by EPA in the Superfund settle-
ment process, and that, when municipali-
ties are potentially liable for cleanup,
they will be treated in the same manner
as private parties.
EPA generally will continue to pur-
sue both municipal and private-party
owners or operators of facilities that have
become Superfund sites. EPA generally
will also continue to pursue both munici-
pal and private-party generators or trans-
porters of hazardous substances.
EPA genially will not pursue muni-
cipalities and private parties who are gen-
erators or transporters of manicipal solid
waste or sewage sledge to help pay for
Superfund cleanup costs when the waste
is believed to be derived from house-
holds. except in some truly exceptional
situations. EPA may pursue such parties,
however, if either waste contains a
environmental groups, as well as Congres-
sional staff. EPA has listened to all points
of view in developing the new approach,
which it believes is both fair and man-
ageable.
EPA is publishing the interim policy
at this time to inform the public about
the proposed new nationwide approach
and to solicit public comment. The pol-
icy provides F.PA's Regional offices for
the first time with nationally consistent
guidelines for exercising their enforce-
ment discretion in dealing with munici-
palities and municipal wastes in the
Superfund settlement process. It also
provides municipalities and private par-
ties who may be potentially liable for the
cost of Superfund cleanups with a sense
about how EPA will treat them in the
settlement process.
hazardous substance from a commercial,
institutional, or industrial process or
activity. EPA generally will not pursue
generators or transporters of trash frnm a
commercial, institutional, or industrial
entity when the content of the*waste is
believed to be very similar to that derived
from households. EPA generally will
pursue generators or transporters of low-
hazardous industrial wastes such as
certain paint sludges and industrial waste-
waters because such wastes are derived
from a commercial, institutional, or
industrial process or activity.
When municipalities arc considered
to be potentially liable for cleanup costs,
they will be treated essentially the same
as private parties in the Superfund settle-
ment process although delayed payments,
delayed payment schedules, and in-kind
contributions may be available to some
municipalities under certain circum-
stances.
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Significance
Public
Involvement
Comments
Sought
Who To Contact
Involving municipalises and municipal
wastes in the settlement process is an
issue because questions have been raised
about how such panics and wastes should
be treated in the settlement process.
I'niil the development of this interim
policy, EPA had not addressed these
questions from a national perspective.
This issue is important because about
25 percent of the sites proposed for or
actually included on EPA's National Pri-
orities List (NPL) for Superfund cleanup
are sites that involve municipalities or
municipal wastes. Of those, about one in
five sites is a municipal landfill. EPA
expects the number of NPL sites involv-
ing municipalities or municipal waste to
increase in the future. This issue is par-
ticularly complex because sites that typ-
ically involve municipalities or municipal
waste are often municipal landfills that
include multiple responsible parties
In March 1988. EPA sponsored a Munici-
pal Settlement Conference that was
attended by over 100 representatives of
state and local governments and organiza-
tions; industry, environmental, and other
groups; as well as Congressional staff. To
continue this dialogue with interested
parties, EPA established the Municipal
Settlement Discussion Croup which met
in June, August, and October 1988.
These forums have been open to the pub-
lic and have been organized primarily as
information exchange mechanisms; EPA
has used these forums to inform inter-
ested parties about the issues EPA is
addressing as part of the interim policy as
well as to stimulate public debate on these
issues.
The interim policy is expected to be pub-
lished in the Federal Register for public
comment on Decembs? 12, 1989. The
public will be provided with 60 days
from the date <4 publication to review
and comment on the interim policy. CPA
For further information on this interim
policy, please contact Kathleen
MacKinnon in the Office of Waste
Programs Enforcement at 202-475-6771.
(sometimes hundreds nf partie*). rttul
t'P'e sources nf wastes (often tnuniur.ii
and industrial wastes)., as wdl dr. t -.t-
waste streams tin terms of amount
f OXlC'lt >
I he important questions aUdrc^-.:
the interim policy arc who should he
included in the infurmation eatheriiu
process, who should he considered p«-*vn-
tially responsible for cleanup costs hv
EPA. how municipalities should be treat-
ed in the settlement process once they arc
considered potentially liable by HP\. and.
how the treatment of municipalities and
municipal wastes affect fcl'A's treatment
of private parties and certain kinds of
commercial, institutional, or industrial
wastes. Private parties and certain kinds
of commercial, institutional, or industrial
wastes are an issue for this interim polio
because private parties sometimes handle
municipal waste or generate waste stream:
that may be considered to be similar to
municipal wastes, and because municipal
and industrial wastes are often co-
disposed at individual sites.
Forum Participants have included* f* Nawnai
League e* OSes. U.S. Conference o» m
Nafionai Assoaaoon of Towns and Townyvc O*oi'-
NaUonai Assooanon at Counties: ihe intemaoona (
Managers Assooaton: trie Government Refuse
Coflecoon ana Disposal Association me National
Governors' Assooason: Commerce: ihe National Soad wave
Management Association: the National Associate" c'
Manufacturers; P>e Oiemcal Manufacturers Assooax
the Airman Petroleum institute.' Waste Managemert.
Inc.: frownrg-Fems. Inc.: (he Natiraf Resources
Oetenic Core*: the Conservation Fojndascn. anc
Congressional salt. Other representatives from onvn
ccmpar**. inOwXat slate and local governments, ar
taw fcms represoitng municipal and private party
clients haw either attended and partcipated n tese
tomms or have been kept informed through CPA s
minutes of Iwse meetings.
may change the interim policy at a later
date or address additional issues in re-
sponse to public comment or as EPA
gains experience in implementing it ove
the next several months.
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r"'-;
INTERIM CERCLA
MUNICIPAL SETTLEMENT (JS,)
POLICY FACT SHEET
*t me'*"
December 1989
Office of Waste Programs Enforcement
I. INTRODUCTION
This fact ifceet luaaaritos eertain k*y provisions of
the "Interia Policy on CflCLA Jettlaaenta Invalving
iMiicipelities or Municipal WMtaa* (OSWQ Directive
MU4.13); it doM not cower a(l aapects of t»»e interia
policy nor provide definitions of key teraa. The Mniclpsl
Settteaent »ol1ey hos boon developed to provide tho legions
«i tn national gut done a on how to involve ajvcipeli ties and
aiiieipat nutn (i.e., wiicipal Htid aoati (MW> or
tMOfo sludge) in tho itsorfwd aettlwnt proeooo. It oloa
addresses how ttio traetaent of afiicipalitiee and suticipel
aostes affects the treatment of private psrties «rd certain
kinds of eoaaarcial, institutions!, or industrial aestss.
II. CERCLA LIABILITY
eucu dose not provide an awawtlon froa liability for
«jriicipalit1ea nor for ajticipsl «oetee. fenicipolIties aey
oil potentially responsible psrties (W») like private
portioo if they fall aitfiin tfte eatogoriee of liability
specified wrdor Section 107(a) of eUCLA (e.g., if they era
stnen/ooerotoet «f fecilitiee, or generators/transporters
of hazardouo substances). swicipsl asstes asy Bo
considered heieroous icBstances if they aro conored verier
tno definition of hassrdous sufistanus in Soetion 101(1*) of
CUOji and if tftay aro tM ufijoct of a rolaosa or
threatened retease. Ilio intoria policy doos not provide an
Maaption froa legal liability for wrr porty or any
substance; potent1si liability eontiiwests apply in alt
situations covarod vrder Section 107 of CXIOJI.
III. INFORMATION
GATHERING
All oMnars/oporstors «nd generators/transporters should
generally bo Included in tf» inferaatlon gathering process
(o.f., they should all generally receive Section 10Me)
Inforaotion request letters). This Includes ajtioipsl
omra/operators of facilities es eoll es aaiiclpst and
privets party gOTsrotors/trenoporters of snidpol esstss.
IV. NOTIFICATION
(Wwi/ooorotorst loth Micipel and privete porty
post and present ouwrs/oporetors should generally receiva
notice letters.
Cemratore/tronoaortors of ¦Jiiclaol solid ^eoto:
emieipel rt privets party garwr a ton/transport en of HSU
Mill not gererslly be notified es m uilesa:
o the legion attains eite-apsciftc inforaetiot that
the mw csitsina o tstsrdM sȣetanee;
o no legion hes reason to believe that tha
haurdow shbetance Is derived froa a cosaarciel,
inetitutiawl, or in^atrial process or activity.
sotvitfistandinf this gawral policy, DA soy consider
notifying gemrstors/traneperters for *» containing a
hsaardous nPstancs. derived enly fras houMfwlds in truly
eacaptionol situstlona rftere the total contribution of
coaaaroiel, inotitutionel, and industrial Nexarooue aaote Sy
private psrtios is insignificant rftan eaapsred to the *SW.
Conantors/tranaaortora of levoaa umaa: Vncuel
and privets porty gsnerstors/trensporters of leego sluoge
¦ill not generally bo notified eo MM ijueas:
s die legion osteins site-specific inforaotion tnot
die sewage sludge contains a heierdoM theotarce;
m
o tlio legion hes rase on to boliawa Met the
haurdaus aubstance ie derived froa e eemmrtitl,
imtitwlOTsl, or industrial process or act-vity.
eenerotore/tranaaortors of traen fi m I iweii riil
Instieutlenel. in^atrial entityt Pertiaa 1*0 era
generotors/trenoportera of treeft trm e caMorciel,
inatltutiswl, or Induitriel entity eill not.gonorolly be
notified as Wl If Mdi pertles Jaaaatrato to the legion
tftett
0 m of tfco Itezerdaue ntetmea contained in ttw
tree* era derivad froa 0 coMorciei,
Instltutlonel, or industrial procoes or activity;
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nt and toaicify of tf»a itmraM
hMIKM cvttaimd In t*a traafc 4b not
utMl 0m would aapaat to fin*
In tamm taMMli xrw*.
Canaratan/trmaaortara af my tfMT 'HTtiM
n^atarca. i*clud oUl ganorally pa not (Mod M W«. T*(» includao
laM-AuardM irttjatr«a( aoataa Ilka eartain paint tludpaa
and industrial aaatawatara.
V. SETTLEMENTS
TTia owarall proem and #oala for raacflinp »att lamina
at sitaa iiwolvini auiicipalftiaa or aaticlpal mim it tftt
um as 'or otfcor Stearfwrf litaa <*.§., to roacfi ana
tattlaaant afroaMnt), although taparata aattlaaants liko &
miftimit aattlaaanta aay ba uaad Mr* asprtpriato.
aanattwloaa, tnora ara mm aattliaant prowl a I ana that
aar ba particularly auitablo for ajnfcipal Wi (a.f.,
dotayod paiawnta, dalayad pa>«ant acftadulaa, and In*kind
cantributiona). Ttiaaa tattlaaant provlaiona ara not
roucinaly aval labia to wiicfpat HH, but aay ba cenaidarod
*ri a utfeipality haa tuccasafwlty daaenatratad to CPA
mat itiay ara apprapriata. niaa* aattlaaait prwlaiona aar
b» Mcanu sottlaaartta or aav ba fotdad into a tartar
aartlaaant utat includaa privata partlaa. AltMugh tltaa*
tattlaaant provfaiana mr ba particularly apprapriata for
MTcipalltiaa, tftoy aay ba avoi labia ta prirata partiaa,
aa carta in aaall Buairaaaaa, ahara apprapriata.
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