UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                            WASHINGTON, D.C. 20460

                                 December 6, 1989

                                                        OSWER DIRECTIVE
                                                             #9834.13
                                                             OFFICE OF
                                                     SOLID WASTE AND EMERGENCY RESPONSE

MEMORANDUM

SUBJECT:   Interim Policy on CERCLA Settlements Involving
             Municipalities or Municipal Wastes

FROM:      Don R. Clay /s/
             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.1 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.

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                                                     OSWER DIRECTIVE #9834.13




     Although this interim policy focuses on municipalities and municipal wastes, it




addresses how private parties and certain kinds of commercial, institutional, or industrial




wastes will be handled in the settlement process as well.  It is important to address private




parties and certain kinds of commercial,  institutional, or industrial wastes in this interim




policy because private parties sometimes handle municipal wastes or wastes of a similar




nature and because municipal and private party waste streams are sometimes co-disposed




at sites, particularly municipal landfills.  The kinds of commercial, institutional,  or




industrial wastes covered by this interim policy include "trash from a commercial,




institutional, or industrial entity" and "low-hazardous industrial wastes" 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 (PRPs) 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  PRPs 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

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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/transporters of MSW or




        sewage sludge be included in the information gathering process?




     o  Notification:  Should municipalities be notified that they are PRPs?  Should




        generators/transporters of MSW or sewage sludge be notified as PRPs?




     o  Settlements:  How 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:  How 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?

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                                               OSWER DIRECTIVE #9834.13
B) Key Terms Used in Interim Policy2
The following defines the key terms used in this interim policy:

o  The term "municipalities" refers to any political subdivision of a State and may

   include cities, counties, towns, townships, and other local governmental entities.

o  The term "municipal solid waste" 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 not 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-hazardous substances (e.g., yard waste, food waste,

   glass, and aluminum) and may contain small quantities of household hazardous
    2     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.

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                                                OSWER DIRECTIVE #9834.13

   wastes (e.g., pesticides and solvents) as well as small quantity generator wastes.3

   Many industrial solid wastes and some commercial and institutional solid wastes

   are managed separately from household wastes, but may enter the MSW waste

   stream.

o  The term "municipal landfill" refers to any landfill, whether public or privately

   owned, that has received municipal solid waste for disposal.

o  The term "sewage sludge" refers to any solid, semi-solid, or liquid residue

   removed during the treatment of municipal waste water or domestic sewage.4

o  The term "trash from a commercial, institutional, or industrial entity" refers to

   waste which is very similar to the MSW that is derived from households. This
           All household wastes, including household hazardous wastes, are
    unconditionally exempt from the Federal hazardous waste regulations
    promulgated under Subtitle C of RCRA (See 40 CFR Section 261.4 (b) (1)).
    With regard to non-household sources of solid waste, if such waste is not a listed
    or characteristic hazardous waste accumulated in quantities exceeding the small
    quantity generator limitations (i.e., less than 100 kg/month of hazardous wastes
    and less than 1 kg/month for acute hazardous wastes), such waste is not required
    to be managed in a RCRA Subtitle C hazardous waste treatment, storage, or
    disposal facility (See 40 CFR Section 261.5).  "Household hazardous wastes"
    refers to those wastes which are generated by households and would be managed
    as hazardous wastes under RCRA Subtitle C if they were generated by a non-
    household in quantities exceeding the small 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 May 2,  1989 (See 40 CFR Part 122.2).

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       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.




   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.    CERCLA 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 be PRPs like private parties if municipalities fall within the categories




of liability specified under Section 107(a) of CERCLA.  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

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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 well as for resulting damages 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 who 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 facilities, incineration vessels, or
   5      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).

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                                                   OSWER DIRECTIVE #9834.13




                   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 municipalities and political subdivisions of a State.




Municipalities may, therefore, be PRPs as part of CERCLA's broad definition of who is




potentially liable.




       B)   Municipal Wastes as Potential CERCLA Hazardous Substances




       Similarly, the statute does not provide an exemption from liability for municipal




wastes.  Municipal wastes may be considered hazardous substances in Section 101(14) of




CERCLA. 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 CERCLA and there is a release or threatened release, such municipal




wastes may fall within the CERCLA liability framework.




III.  INFORMATION GATHERING




     The Regions should include all municipal and private party owners/operators and




generators/transporters in the information gathering process, including the




generators/transporters of municipal wastes.  This means that municipal owners/operators




as well as municipal generators/transporters should generally receive Section 104(e)




information request letters and should otherwise be fully included in the information

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                                                   OSWER DIRECTIVE #9834.13

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 be 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.
6      The Regions may accept and consider credible site-specific information from any
party to supplement their own information gathering efforts as appropriate.

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      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 of not


7       The categories of wastes discussed below, 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.E.).

8       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" conducted 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.
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notifying parties who are generators/transporters of HHW extends to "HHW collection

day programs" as well.9

       This also means that such parties may be notified as PRPs 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 situation, the Regions should seriously consider notifying the
9      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 D 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 technically adequate for the site.
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generators/transporters of MSW containing a hazardous substance from households as




PRPs and include them 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
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   o   the amount and toxicity of the hazardous substances contained in the trash does

       not exceed that which one would expect to find in common household trash.

   4.  Any 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 CERCLA other than hazardous

substances that may be contained in MSW, sewage sludge, or trash from 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.     SETTLEMENTS

       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 pending CERCLA claims,  and is

consistent with both applicable statutory requirements and EPA's Interim CERCLA
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Settlement Policy.11 This means that at sites where both municipal and private PRPs

exist, EPA will attempt to include both types of parties in one settlement agreement.

       Although one settlement agreement is the goal for each site, separate settlement

agreements may be used at any site to facilitate settlement, where appropriate. This

includes sites involving municipalities or municipal wastes.  Separate settlements are not

automatically available to municipalities and are generally available to such parties under

the same conditions as for private parties.  Examples of separate settlements are Section

122 (g) de minimis settlements and cash-outs which may be used when they are

consistent with applicable statutory requirements and existing EPA guidance.12

       B)     Settlement Provisions That  May Be Particularly Suitable for Certain

              Municipalities

       As indicated, once parties are notified as PRPs, the overall process and goals for

reaching settlement at sites involving municipalities or municipal wastes is the same as

for other Superfund sites. Nonetheless, there are some settlement provisions (e.g.,

delayed payments, delayed payment schedules, and in-kind contributions) that may
11     "Interim CERCLA Settlement Policy", February 5, 1985, 50 FR 5034.

12      For example, see "Interim Guidance on Settlements with De Minimis Waste
Contributors," June 30, 1987, 52 FR 24333.
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                                                    OSWER DIRECTIVE #9834.13

be particularly suitable for facilitating settlement with certain municipal PRPs because

they take 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., where 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, where appropriate.

    The following discusses how 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 for cleanup needs, the settlement could be
13      In some circumstances a municipality's governmental status may impose practical
constraints on its ability to carry out its legal obligation as 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 where it is a PRP. These settlement provisions are designed to
take into account these types of unavoidable constraints that may exist.
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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 schedules (payments over time):  An alternative to a delayed

payment is to allow a delayed payment schedule where the  settlement 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-kind contributions: The  settlement 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 use 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 value of the in-kind

contribution, and the effect of the in-kind contribution on the overall effort to achieve

settlement.
14      Delayed payment schedules may include "structured settlements" which are
settlements paid over time generally through annuity. EPA is currently developing
guidance, titled "Interim Guidance on the Use of Structured Settlements Under
CERCLA", 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.
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       One mechanism for allowing an in-kind contribution could be a "carve-out" order

when, for example, the municipal PRP 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 offences 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 interim policy affects the rights of any party in seeking

contribution from 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)

ofCERCLA.15

VI.     DISCLAIMER

       This interim policy is intended solely for the guidance of EPA personnel. It is not

intended and can not be relied upon to create any rights, substantive or procedural,

enforceable by any party in litigation with the United States.  The Agency reserves the

right to act at variance with this policy and to change it at any time without public notice.
15      Under Section 113(f), where EPA determines 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 PRP by EPA but wishes to settle its potential CERCLA liability.
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VII.    FOR FURTHER INFORMATION




      For further information or questions about this interim policy, the Regions may




contact Kathleen MacKinnon in the Office of Waste Programs Enforcement at FTS-475-




9812.  Inquiries by other persons should be directed to Ms. MacKinnon at 202-475-6771.
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