Revised Draft Advisory on Superfund Benefits Analysis by Superfund Benefits Analysis Advisory Panel Posted 8-09-05


Deliberative Draft — Do not cite or quote

REVISED DRAFT
ADVISORY ON SUPERFUND BENEFITS ANALYSIS

By Superfund Benefits Analysis Advisory Panel
Posted 8-09-05

DISCLAIMER: This is the second working Draft of the Science Advisory Board (SAB)
Superfund Benefits Analysis Advisory Panel. Panelists will discuss this Draft Advisory in
public teleconferences on August 23, 2005 and September 7, 2005. This draft does not
necessarily represent final or consensus views of the Superfund Benefits Analysis Advisory
Panel. This Draft Advisory has been written as part of the activities of the EPA Science
Advisory Board, a public advisory group providing extramural scientific information and
advice to the Administrator and other officials of the Environmental Protection Agency.
This report has not been reviewed for approval by the chartered Science Advisory Board.
The contents of this report do not necessarily represent the views and policies of the
Environmental Protection Agency, nor of other agencies in the Executive Branch of the
Federal government, nor does mention of trade names or commercial products constitute a
recommendation for use.

For any additional information about these teleconferences, please contact:

Holly Stallworth, Ph.D.

Designated Federal Officer
Science Advisory Board (1400F),

U.S. Environmental Protection Agency
1200 Pennsylvania Avenue, N.W.

Washington, D.C. 20460
E-Mail: stallworth.holly@epa.gov

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Letter to Administrator — to be written
1.0 Executive Summary — to be written
2.0 Background to the Advisory — to be written

3.0 Overview of the SAB's Response to Charge Questions

In the draft SuperfundBenefits Analysis (SB A) the Agency presents an estimate of the
economic benefits associated with the Superfund Program from 1980 to 2004 obtained from
what it describes as a meta-analysis and benefits transfer based on studies of property values
around Superfund sites. The Agency also describes how it proposes to quantify and monetize the
benefits associated with three specific categories of effects and seeks the SAB's advice
concerning its proposals. The three categories of effects are reductions in human health risks,
reductions in injuries to ecological systems, and protection of ground water.

The Panel applauds the Agency for conducting much needed research to try to estimate
the benefits of the Superfund program. While there have been a number of studies of the
economic costs caused by particular hazardous waste sites and of the costs of the Superfund and
RCRA programs overall, there have been only a few studies of the benefits related to the
Superfund program. There have been no published studies that attempt a systematic accounting
of the benefits of the Superfund Program over the last 25 years. This lack of a comprehensive
assessment of the benefits of Superfund may explain in part why the program is often viewed as
controversial.

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While the Panel shares the desire for a credible assessment of the retrospective benefits
of the Superfund Program, we believe the SBA currently falls short of this goal. This is in large
part due to the difficulty of the task at hand, which faces severe methodological and data
constraints. Also, in some cases the SBA does not fully document its assumptions and
procedures, leaving the Panel unable to judge the soundness of its conclusions and findings.

Because the hedonic property value study is the most well-developed of the four
substantive chapters of the report, the bulk of our comments pertain to that effort. Sections 3.1-
3.5 below contain detailed comments on our concerns with the SBA's hedonic meta-analysis and
with the approaches to estimating human health benefits, ecological benefits, and benefits of
ground water protection. In these sections, the Panel offers some recommendations for how
these approaches can be improved.

Below is a general summary of the Panel's comments on the SBA.

1. A more coherent framework for enumerating the many possible benefits of the
Superfund program is needed. This is not, in fact, an easy task. As currently constructed, the
report uses the organization of the current program as an organizing principle for identifying
benefits. In some cases important benefits have been omitted, for example, those related to
removal actions. In other cases the benefits identified would be better characterized as inputs
rather than outcomes. For example, deterrence refers to a change in incentives that leads to the
prevention of harmful releases and thus leads to health and other benefits. The development of a
comprehensive and credible framework could be one of the most important "next steps" in
encouraging the broader academic and research communities to engage in research on this topic.
The Panel believes that more time and effort needs to be devoted to this task, and that outside

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experts need to be involved in the development of a comprehensive benefits framework for the
many components of the Superfund program.

2. Better documentation is needed. The lack of discussion of important methodological
decisions - most notably the selection of the nine existing hedonic studies used in the benefits
transfer — in itself raises questions about the quality of the report. The authors need to explain
why they selected these nine studies. The promises and pitfalls of using a hedonic approach to
capture an ex post stream of Superfund benefits over a 25-year period should be discussed.
Because of the lack of explanation regarding the approach taken, the Panel is not able to assess
whether the selection of these studies for the meta-analysis is appropriate.

A major concern about the analysis as currently conducted is that the studies used in the
meta-analysis are not a representative sample of Superfund sites, and given the limited years of
data each study contains, they are not designed to arrive at a comprehensive, 25-year
retrospective estimate of the benefits of the Superfund program. A better approach would be to
use a larger, more representative sample of Superfund sites, and to obtain market data on
housing prices at each stage of the Superfund process.1

3. The benefits transfer and meta analysis (from hedonic property model studies)
falls short of a national retrospective benefits estimate. At least in theory, many (but not all)
of the benefits of Superfund can be captured by hedonic property models. While the hedonic
property value study is the most well developed of the four categories of benefits discussed in
the study, there are major problems in the way the meta-analysis and benefits transfer have been

'For a study that uses this approach, see Gallagher and Greenstone (2005).

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conducted, given the goal of capturing the historical benefits of cleanup. A hedonic property
model can offer a sound means of assessing the benefits of reducing the perceived disamenities
of a given Superfund site and of assessing how these benefits vary given the availability of
different levels of information to the residents about the site. However, it is not clear that it is
possible to use this same approach to develop an assessment of benefits at the national level, that
is, for all National Priorities List (NPL) sites (unless individual site-specific panel data were
collected). In Section 3.2 below, we discuss why we believe the meta-analysis approach taken in
this study is inadequate and offer some suggestions for an improved hedonic approach.

However, the Agency should recognize that any such improved approach will still contain
unavoidable limitations that will likely inhibit the overall precision of a comprehensive
retrospective benefit estimate.

4.	The Agency's proposed approach to estimating the comprehensive health benefits
of Superfund faces overwhelming data constraints. The feasibility of the Agency's proposed
approach is limited due to the lack of epidemiological and exposure data and the difficulty in
obtaining values for many health endpoints. We instead offer some suggestions on how the
Agency can present illustrative calculations of some components of the benefits to human health
of Superfund, and how the Agency can analyze the benefits related to reduced lead exposure.

5.	The Agency's proposed approach to estimate ecological benefits faces severe data
and methodological constraints. The Agency's approach relies too heavily on the value of
natural resource damages as a proxy for "interim lost use values" and does not address other
important ecological benefits. As is discussed in more detail in Section 3.4, settlement figures
from natural resource damage assessment cases reflect negotiations between the parties and

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should not be viewed as the true value that society places on the ecological effects of the
Superfund program's activities.

The Panel feels that estimating the monetary value of ecological benefits of the
Superfund program is exceedingly difficult for two reasons. First, the physical effects of
remediation on ecological system are not well understood and documented at this time. Second,
despite much recent research in this area, it remains difficult to attach a monetary value to
ecological benefits of environmental programs.

The Panel recommends moving away from the notion of developing an aggregate
monetary estimate of ecological benefits and instead suggests that EPA more fully describe the
various ecological consequences of cleanup and then translate these into descriptions of
beneficial effects that the public can understand. The Panel notes that this would actually be
part of the development of the comprehensive benefits framework suggested earlier. In addition,
EPA could conduct quantitative but not monetary assessments of ecological benefits using
ecological benefits indicators. Finally, the Panel refers the Agency to the recently issued
Millenium Ecosystem Assessment report, which addresses many of these issues, and to the SAB
panel that is examining the valuation of the protection of ecological systems and services.

6. The Agency's proposed meta analysis and benefits transfer to estimate the
benefits of the protection of ground water resources lacks an adequate empirical basis.
[More to be added]

In terms of moving forward from here, one of the major questions discussed by the Panel
is whether to recommend that the Agency continue with any or all of the four proposed

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approaches to capturing the benefits of Superfund. Rather than offering a yes or no, the Panel
offers a set of options and comments on the Agency's various approaches. In addition, the Panel
concludes that the data and methodologies do not support the development of comprehensive
estimates of health, ecological, and ground water protection benefits. Estimating the
retrospective benefits of the Superfund program is an extremely difficult and controversial task.
It is laudable that the Agency is trying to fill this gap in existing research. The Panel believes
that any decision to move forward with any or all parts of this research plan should ignore the
sunk costs involved and consider whether the information produced by the additional efforts is
worth the Agency's additional resource costs.

In considering which, if any, parts of the SBA to continue, the Panel recommends the
Agency separately evaluate the five individual projects (with the fifth effort being the
development of a benefits framework), since each will entail different schedules, expertise, and
research aims. For example, it is clear that there is much more work to be done on all the
sections, and that the sections on human health, ecological and groundwater benefits are much
less developed than the hedonics chapter. Thus, one option for the Agency to consider is to
complete the hedonics research following the suggestions offered in Section 3.2 and to put the
other three analyses on hold. Other options include forgoing an effort to develop a
comprehensive estimate of monetary benefits and focusing on a set of illustrative case studies
based on the available literature as suggested in Sections 3.2-3.5 of this Advisory. A third option
is to terminate the current exercise and to focus attention on a long term strategy for developing
methods and data for estimating future benefits. Because of the importance of the Superfund

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Program and the questions raised here, a multi-year research strategy for assessing the benefits
of Superfund may be needed. The Panel also believes that estimating the full costs of the
program is another critical component of a future research agenda.

In the rest of this section, the Panel describes and critiques the approaches used or
proposed for each of the four categories of benefits. Section 4 provides the Panel's detailed
responses to the charge questions and suggestions for ways in which the Agency might use the
available literature and data on property values, health effects, ecological effects, and ground
water protection to better characterize the beneficial effects of the Program.

3.1. Benefits Framework.

The Panel believes that the Agency could make a major contribution by providing a
coherent framework for thinking about the benefits of the Superfund program, that is, by laying
out an approach to benefits assessment in the specific context of Superfund. Figure 1.1 in the
SBA attempts to provide some structure for thinking about Superfund benefits, but it suffers
from a number of shortcomings. For this reason, the Panel recommends that the Agency lay out
an alternative framework for Superfund benefits assessment.

A beginning point for benefits assessment would be to think about the various impacts of
Superfund, i.e., what changes have occurred (in physical terms) because of this legislation. One
can then try to translate these "impacts" into measured "benefits" to the extent possible.
Currently, the discussion of benefits in Chapter 1 appears to be focused on the different
components of the Superfund program, not on a conceptual framework based on impacts. Two

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recent studies on ecosystem benefits can provide some guidance on a conceptual framework for
benefits assessment (National Research Council, 2004, and Millennium Ecosystem Assessment,
2003).

In thinking about translating impacts into benefits, it is important to distinguish among
the following: (i) those impacts that can be valued in monetary terms using standard economic
valuation methods and available data, (ii) those that could be valued in this way //better data
were available, and (iii) those that cannot be captured through economic valuation. For this
latter category, it might still be possible to quantify the impacts in some way that provides
information about the associated benefits, although in some cases even this may not be possible.
The report should discuss clearly what kinds of approaches and data are available to estimate
benefits, what the challenges are, and, from the authors' perspective, what are the best
approaches that can be taken given the current state of the art.

3.2 Hedonic Property Values.

The Panel believes that the approach used in Chapter 4 provides some information on the
benefit of living further away from a Superfund site, but it does not provide a credible estimate
of the monetary value of the retrospective benefits of the Superfund program. There are three
major problems with the approach that lead us to this conclusion.

1. Limitations of the conceptual model. Chapter 4 relies on hedonic property models,
which attempt to estimate the marginal willingness to pay for a non-market housing amenity.
One difficulty with such studies is finding an appropriate measure of the environmental

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disamenity to be valued. Most of the studies cited in chapter 4 use the distance to the Superfund
site as a proxy for the environmental good to be valued. Furthermore, some of the studies are
cross-sectional analyses that, coupled with the distance measure, effectively estimate the
marginal willingness to pay for moving further from the site at a point in time. This measure is
not easily adaptable to a measure of the benefits of eliminating the site altogether, let alone the
benefits of the Superfund program (which, after all, does not lead to the equivalent results as
complete removal of the disamenities associated with the site). Some of the other studies in the
meta-analysis rely on panel data, which are better suited to estimating the marginal willingness
to pay for changes in the status of the site (e.g., as the site progresses through clean up stages).
However, none of the studies estimate price changes between discovery and completed clean-up.
Further, the meta-analysis in chapter 4 still seems to rely on static estimates of the price-distance
gradient even for the panel studies.

The Panel could not discern how the estimated price-distance gradients were mapped into
the aggregate benefit estimates. The Panel believes that the estimated gradients were used to
compute the price change that would result from moving all the neighborhood houses to a point
where there no longer is a price impact stemming from the site. This assumes that the Superfund
program leads to full recovery of housing prices. The Panel believe that there is very limited
evidence of a full price recovery. For the most part, the literature shows a price-distance
gradient, which is evidence of a willingness to pay for distance from a site. But this does not
necessarily imply that prices recover after EPA remediation. There is some evidence in the
literature that the price gradient changes over time (which could be due to perceived rather than

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real changes caused by EPA), but it is still not clear that prices fully recover due to EPA
activities. This is especially difficult to support given that most studies in the meta-analysis are
either cross-sectional or use a narrow range of years of housing sales, neither of which can
provide strong evidence of a full price recovery from Superfund actions.

A related concern is how to determine which price to use as the baseline. Market prices
should fluctuate through each of the many steps from discovery of a site to full clean-up. It is
not clear which price to use as the starting price from which benefits are estimated as in increase
in price or value. And even if the Panel agreed on a starting price, it is even more difficult to
estimate these prices based on the studies used in the meta-analysis.

As just one example, assume that a site is listed on the NPL, causing housing prices to
drop. Assume also that prices then increase after the remedial investigation, which includes the
baseline risk assessment. Should it then be assumed that after remediation, prices will return to
pre-NPL listing, pre-remedial investigation or post-remedial investigation level? It could be that
the initial decrease in prices was due to unfounded beliefs about contamination at the site, which
were then corrected with the release of the risk assessment. Doesn't this suggest that Superfund
has caused a decrease in benefits by spurring the initial beliefs in the first place? Doesn't it also
suggest that the appropriate starting price for the benefits measure is post-remedial investigation,
after people were informed about the risks they face? Also, if pre-discovery is used as the
starting price, doesn't that count any emergency removals as part of this benefits estimate? In
sum, the report glosses over the loss in property values that occurs when a site is placed on
CERCLIS or nominated to NPL. This loss would presumably be a cost of the Superfund

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program. The report misleadingly assumes that all price decreases are independent of Superfund
and are only based on reliable perceptions, and that Superfund actions then fully recover prices
from their lowest levels.

2. What drives the price-distance relationship? One of the biggest problems with
hedonic studies of hazardous waste sites is that misperceptions could be driving some or all of
the price effects. There is no clear way to tell whether the price gradient post-discovery reflects
WTP for risk reduction or amenity improvements, or whether it reflects an irrational or ill-
informed response. Similarly, any estimated price recovery from Superfund activity may be due
to misperceptions about whether the risk or amenity was actually addressed. In the case of the
studies used for this meta-analysis, it is largely assumed that a price-distance gradient implies
that prices will recover after EPA remedial actions. However, this may not happen because of
misinformation about what EPA actually does, or it may happen even if EPA does not actually
address the risk or disamenity. As an extreme (and hypothetical) example, it might be the case
that a low-cost effort to "demonstrate" action without actually doing anything substantive on the
site leads to the same benefits as a real clean-up. More generally, most of the studies used in the
meta-analysis in fact address a much different question than is appropriate for this report. Those
studies (primarily) either estimate the relationship between housing prices and distance (this is
especially the case for the cross-sectional studies), or they estimate how the price-distance
relationship changes as information is released or events occur. Neither of these estimates are
clearly transferable to an estimate of the benefits of Superfund actions. Such an estimate would

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need to estimate price changes over each stage of the Superfund process, with the added
assumption that those changes are motivated by accurate perceptions of Superfund activities.

3. Weakness of the meta-analysis/benefits transfer. The Panel is unconvinced that the
sample studies used in the meta-analysis are representative of the full population of Superfund
sites and that they can therefore be credibly used to estimate the full benefits of the 25 years of
Superfund activities.

Chapter 4 states that a review of the literature produced 30 hedonic studies. In the end,
only 9 of them were used in the meta-analysis. Chapter 4 does not discuss in detail the selection
process that led to only 9 studies being used. The Panel was unable to assess the studies that
were not used for the meta-analysis; however, the Panel questions the appropriateness of some of
the selected studies. For example, the McClelland et al. (1990) article seems like an odd choice
for this meta-analysis. First, the study only has 178 observations. What's more, the variable of
interest is a "neighborhood" measure, so identification comes from even fewer observations (and
thus the standard errors are biased upwards). Aside from the econometric issues, the article's
main claim is that housing prices respond to subjective risk and that subjective risk differs
greatly from objective risk. It does not seem appropriate to blend this study with others where
the maintained assumption of the meta-analysis is that perceived and objective risks are equal.
Finally, McClelland et al. attempt to estimate how housing values vary by subjective risk. They
do not estimate a distance gradient, nor do their findings suggest that benefits would accrue from
Superfund remediation.

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Also, the Gayer et al. (2000) study estimates how the price-risk gradient changes when
new information becomes available. It is not clear how this is incorporated into the meta-
analysis of the benefits of Superfund remediation. Finally, the Mendelsohn et al. (1992) study
does not use distance to the site as the variable of interest, so it is not clear how these estimates
were incorporated in the meta-analysis.

In summary, the meta-analysis is based on a limited number of applicable studies. Given
the small sample of housing price estimates from local markets, the Panel is not comfortable
extrapolating benefits to the full population of sites. There are many reasons why these studies
may not be representative. For example, the study sites tend to be old and early NPL sites, they
tend to be in places with high population density, and they tend to be larger sites. Chapter 4 does
not contain enough information to assess whether the locations, chemicals and pathways, and
other site characteristics are representative of the full population of NPL sites. All of these
differences lead to potential problems with benefits transfer. Furthermore, the meta-analysis
does not control for study characteristics or study site characteristics, which is necessary to
obtain unbiased estimates.

Given these reservations about the estimation of national benefits from the meta-analysis
and benefits transfer, the Panel sees two possible paths for inclusion of property value based data
in the report. One path is to improve the hedonics section by:

• D being explicit about the necessary qualifications and caveats;

• D providing a richer discussion of the conceptual issues involved (baseline price

level, real vs. perceived risks, relevance of the price-distance gradient for

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examining the behavior of house prices over time, assumption of full recovery of
prices);

•	D revising the selection criteria and basing the benefits transfer on a different and

possible larger set of studies;

•	D providing a more complete discussion of the selection criteria for studies included

in the meta-analysis;

•	D de-emphasizing the final figure from the extrapolation; and

•	D placing this chapter after those on health, ecological and other effects.

The results of this benefits transfer should not be described as an estimate of national benefits of
Superfund, since at best it is an estimate of the aggregate housing price effects based on a
particular set of assumptions, none of which have been or can be verified.

The second path is to replace the current hedonics exercise with a qualitative description
of the existing empirical literature on housing prices near Superfund sites (with proper attention
to the difficulties in interpretation) to demonstrate the significance that people apparently place
on the presence of Superfund sites near their homes and changes in the information about
Superfund sites.

3.3. Health Benefits

The Agency proposed to estimate the health benefits of reductions in 5 health endpoints:
acute accidents and injuries; birth defects; lead induced health effects (cognitive deficits and
cardiovascular disease); other chronic non-carcinogenic effects; and adult cancer. The proposed
approach for the first four endpoints is based on Lybarger, et al. (1998). This paper used

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existing epidemiological studies of the health effects of exposure to volatile organic compounds
in drinking water to quantify health effects for seven endpoints associated with living in
proximity to NPL sites and valued these effects using available direct cost-of-illness data. For
adult cancer, no specific method was proposed; but one of our specific charge questions suggests
that extrapolation from a study by Hamilton and Viscusi (1999) was being considered.

In the Panel's judgment, a comprehensive and defensible estimate of health benefits from
Superfund is not possible at this time for three reasons. The first concerns the epidemiology
data. Superfund sites contain a variety of substances of concern, exposure routes, and numerous
potential adverse health outcomes. The epidemiologic literature is too sparse to allow a complete
assessment of health outcomes attributable to exposures in communities adjacent to sites.
Lybarger et al. (1998) provides an estimate for one of the few classes of chemicals at Superfund
sites for which relevant data exist. The second reason is the limitations of the data on exposure.
Lybarger, et al. (1998) used proximity to an NPL site as an indicator of exposure. But there was
no direct measure of the amount of exposure or dose. Hence variation in degree of exposure
across sites and within the population around any single site were not taken into account. And it
would not be feasible to attempt to develop direct measures of exposure for the large number of
sites affected by Superfund over the past 25 years.

The third reason is difficulties in obtaining values for many of the health endpoints in
question. The Report correctly notes that the direct medical costs as estimated in the EPA Cost
of Illness Handbook (2002) represent a lower bound on the true social cost of illness. There are
both revealed preference and stated preference methods for estimating the willingness to pay to

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avoid morbidity effects (See Freeman (2003), Dickie (2003), or EPA's Handbook for Non-
cancer Health Effects Valuation (2000)). But the Panel is not aware of empirical estimates based
on these methods for most of the health effects of interest here. The Panel notes that the EPA
Cost of Illness Handbook does not give cost of illness data for accidents and injuries or chronic
non-cancer effects. The Panel does not know whether there are cost of illness data for these
effects from other sources.

The Panel is also skeptical of the use of the Hamilton and Viscusi (1999) study (H&V
hereafter) to obtain estimates of the numbers of cancer cases avoided. H&V studied a
nonrandom sample of 150 sites on the NPL where RODs were signed during 1991-2. Rather
than the upper-bound estimates used by EPA, H&V used mean values for ingestion rate,
exposure duration, and chemical concentration to estimate individual and population risks of
cancer for each site. H&V combined the estimates of population risk with data on populations
within 1 mile of each site to estimate the numbers of cancer cases over an assumed 30 year time
horizon. On the assumption that these excess cancer cases would be avoided with site
remediation, this could be the basis for an estimate the benefits of Superfund remediation at
these site.

There are two problems with using H&V data to estimate the benefits for all sites
covered by the remediation program. First, it is not clear that the estimate for the 150 sites in
H&V can be the basis for extrapolation to the universe of sites covered by the Program. H&V
report that almost 90% of the predicted cancer cases in the sample came from one site, indicating
a high degree of variability across sites. Second, H&V used the Agency's estimates of cancer

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risk factors in their own calculation. But at least for those chemicals where the risk factor is
based on animal test data rather than epidemiology, the risk factors are 95% upper confidence
levels rather than maximum likelihood values. Thus an estimate of cancers avoided based on
H&V would still be biased upward perhaps by as much as an order of magnitude.

Although the Panel believes estimates of the aggregate health benefits of Superfund are
not possible, it is possible to present illustrative calculations of some important components of
the benefits to human health. For example, the Panel recommends that Lybarger, et al.'s (1998)
estimates of reductions in several categories of health effects associated with exposures to VOCs
be described. Their estimates of the reductions in the costs of these illnesses should also be
described along with the comment that cost-of-illness is an underestimate of the true social value
of reduced adverse health effects. Some authors have reported evidence that true social values
for some health effects appear to be several times the direct cost-of-illness avoided (see Dickie,
2003, p. 439, and Alberini and Krupnick, 2000). The Panel suggest that the Agency present a
sensitivity analysis of the Lybarger, et al. results based on this evidence.

The Panel also recommends that the Agency consider an analysis of the benefits related
to reduced lead exposure. In this regard, it would be helpful to use a model to quantify the full
range of toxic effects that may result from exposure to lead, including cognitive changes;
behavioral changes that may produce increased rates of criminality, drug abuse, and
incarceration; and cardiovascular disease and stroke related to elevated blood pressure in adults.
An example of this approach is available in Landrigan (2002). See also the lead benefits

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assessment model used by EPA in its Retrospective Benefit Cost Analysis of the Clean Air Act
(EPA, 1997).

These two approaches should be included as examples of estimates of benefits for a few
of the many chemicals of concern. The SBA might explain that due to lack of adequate data for
many chemicals and for exposures to individuals residing near Superfund sites, a complete
economic benefits analysis is not possible. Also, support by Superfund of the planned "National
Children's Study" and of oversampling of populations at strategic Superfund locations will aid in
developing more complete future analysis.

3.4. Ecological Benefits.

The Agency proposed to define the ecological benefits associated with restoration at sites
undertaken because of Superfund as the decrease in the discounted present value of interim lost
use value brought about by restoration compared to the counterfactual scenarios: either natural
recovery or no recovery (as appropriate). Under the law, interim lost use value includes passive
use value (or what is sometimes called nonuse or existence value). This is a reasonable
definition of ecological benefits. To make use of this definition, the Agency needs to have an
estimate of interim lost use value for each site at the time that the restoration action begins, as
well as estimates of the time paths of interim lost use value under natural recovery and under
active restoration. To obtain estimates of interim lost use value the Agency proposes first to
obtain the dollar values of the natural resource damage assessment (NRDA) settlements for those
approximately 130 sites (including 70 NPL sites) where settlements have occurred. For some of
these sites, the Trustee's estimates of interim lost use value can be obtained from the NRDA

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documents. For these cases, the Agency proposes to determine the relationship between the
NRDA estimate of interim lost use value and the settlement amount. For those sites for which
interim lost use value is not available, the Agency would use the ratio of interim lost use value to
the settlement amount to calculate an estimate of interim lost use value as a percentage of the
known settlement amount.

The Panel applauds the Agency's effort to find a way to include ecological benefits in its
accounting of the benefits of Superfund. But the Panel doubts that what is proposed here will
result in defensible estimates of the aggregate ecological benefits of the Superfund program.
Interim lost use value as a percentage of the settlement is probably not constant across sites.
NRD settlements - like any legal settlement - are products of negotiation as much as they are the
products of calculation or analysis. Also, trustees are authorized by law to include restoration
costs and replacement costs of lost resources in their claims. Replacement cost can not be
considered as a proxy for interim lost use values. NRD remedies often include dollar claims for
other remedies besides restoration of damaged resources. For instance, settlements may be used
to construct trails, docks, or other facilities to compensate for losses. Thus, the dollar value of an
NRD settlement is not, and should not be construed as the "value" of ecological impacts.

Finally, the Agency has not identified a way to determine which of those sites for which
settlements have not already occurred can be expected to have ecological benefits.

This chapter might provide more information in which to assess whether the sites from
the hedonic studies are representative of the universe of sites. The SBA misleadingly defines the
universe of sites as ROD sites (including no-action RODS), which seems inappropriate for a

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retrospective study. The extent of these problems depends on whether the report moves forward
with the current meta-hedonic analysis. If the hedonic analysis is to be de-emphasized, then
chapter 3 can be re-written to provide much more information about each of the types of sites
listed in Table 3.3, as a means of explaining the different type of remedial work that Superfund
does. But with the hedonic analysis de-emphasized, it would no longer be necessary to show
that the hedonic sites are representative of the universe of sites (however defined).

If the Agency opts out of pursuing a comprehensive estimate of Superfund's aggregate
benefits, the Panel recommend the following as ways to provide illustrative and qualitative
information on the potential ecological benefits of the Program. The Panel recommends that the
SBA more fully describe the various ecological consequences of cleanup and removal and then
translate those into descriptions of beneficial effects that the public can understand. This will be
a qualitative exercise, but it is a way to convey the range of improvements to well-being that can
result from site cleanups.

In addition, depending on the resources and time available, the Agency could conduct
quantitative, but non-monetary assessments of ecological benefits. This would involve the
development of ecological benefit indicators. This method was described and recommended in
the report of the Panel to Examine Benefits, Costs, & Impacts to the Underground Storage Tanks
(UST) and Resource Conservation Recovery Act (RCRA) Subtitle C Program in 2002. (EPA
SAB, 2002)

3.5. Ground Water Protection Benefits.

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The Agency proposes to quantify "the amount of ground water protected by Superfund
...(p. 5-33)," and to use benefits transfer to estimate the monetary value of ground water
protection. The Superfund Program can affect ground water quality and yield benefits through
three channels:

1. Restoration of the quality of contaminated ground water through remediation;

2. Clean up of sites so as to prevent contaminants from migrating from the sites into
ground water resources; and

3. Deterrence of poor disposal practices so as to prevent the future contamination of
ground water.

Only the second and third channels can be characterized as "protecting" ground water.
The discussion of the areas of NPL sites with contaminated ground water (p. 5-38) suggests that
its focus is on the first two of these channels. But a sentence on the next page of the SBA
suggests that the concern is with the third channel.2 The Agency needs to clarify which of these
channels is being discussed.

The Panel believes that it would be possible to obtain a ball park estimate of the quantity
of ground water that is affected by Superfund through the first channel. However, this would
require an examination of the conceptual models for each site individually to see how much
cleanup has occurred in three dimensions. For a given site, the cleanup criteria for that site may

2Quoting from the SBA, "Many of these areas ... have been controlled or reversed

through Superfund response actions, and there may be some sites where removal actions or state
actions may have prevented potential ground water contamination (p. 5-38)." And, "It might be
possible ... to estimate the amount of ground water that will not be contaminated because of
Superfund, but would have been in the baseline case where no Superfund Program had ever
come into being, (p. 5-39).

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differ. It is strongly suggested that the Agency use more carefully crafted case studies showing
Superfund's impact on groundwater. There are a number of case studies that can be used to
estimate the quantity of ground water cleaned up, for example, the Fairchild Semiconductor
Case; the Ft. Devons Case; the Industri-Plex Case. The Panel does not know of any reliable
ways to estimate the quantities of ground water affected through the second and third channels
above.

Regarding the valuation of protected groundwaters, the Agency proposes to do " ... a
meta-analysis of individual studies to get a range of willingness to pay for ground water quality,
and possibly placing states into groups based on relevant metrics." Based on our examination of
the 13 studies listed in Table 5.6 of the SBA, there is not at the present time an adequate basis
for doing a meta-analysis or benefits transfer. As the SBA points out (p. 5-34), two of the
studies cited in Table 5.6 cast doubt on the feasibility of benefits transfer. And 7 of the 13
studies are about either surface water or nitrate contamination of ground water, making them of
questionable relevance for the purpose of valuing Superfund.

23

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4.0 RESPONSES TO SPECIFIC CHARGE QUESTIONS

Section 4 provides responses to the specific charge questions not addressed in Section 3
of this Advisory.

4.1. Charge Question 1: Chapter 1 provides a framework for capturing the benefits of
the Superfund program in the Superfund Benefits Analysis (SBA). Chapter 2
reviews the literature relevant to the SBA; and Chapter 3 describes the structure of
the Superfund program. Please comment on the adequacy and appropriateness of
these introductory chapters as a foundation for the SBA.

The Panel recommends that this chapter receive major revisions. The chapter does a nice
job of introducing the reader to the Superfund program, but the language in the first few pages
reads more like a public relations document than an objective description of the program. In
addition, the Panel recommends a revision of a few misstatements about the program, such as the
statement (p. 1-4) that many of the worst sites are now addressed by state programs and that
Superfund addresses "abandoned" hazardous waste sites (p. 1-7).

This chapter should have two primary goals: (1) to lay out a framework for the report
and (2) to provide a coherent framework for thinking about the benefits of the Superfund
program. These two goals are not independent, however, since the framework for thinking about
benefits should in turn inform the framework for the report.

In terms of the first goal, the Panel recommends that the introduction provide a
motivation for the report, a discussion of the analytical approach taken, any critical caveats, and
a roadmap to the remainder of the report. The introduction could provide a clearer statement of
purpose of the report and could be more clearly organized to distinguish the following

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components: roadmap for the report, overview of the Superfund program, definition of how the
term "benefit" is used in the report, description of benefits, and methodology or approach for
estimating benefits.

The Panel did not find the delineation of either "approaches" or "benefits" in Figure 1.1
very useful, and the mapping between the two was unclear. Likewise, the Panel did not find the
distinction between fundamental and embedded benefits, or their definitions, to be very helpful
as an organizing principle. For example, why is "community involvement" a separate approach
(rather than part of "response") and why is "empowerment" per se a benefit category (rather than
a means toward an end, namely, better outcomes)? Why is reduced uncertainty about the nature
and extent of the actual health risks associated with releases considered part of the amenities
benefit, and why aren't deterrence and emergency preparedness simply means toward an end
(reduced damages)?

Much of Chapter 1 appears to follow EPA's Guidelines for Preparing Economic
Analyses (2000). However, the central focus on this guidance detracts rather than adds to this
section, and hence the Panel recommends eliminating the discussion of this guidance. This
guidance was developed for prospective analyses, not retrospective ones, and is probably not
even appropriate for this kind of study. For example, starting a section on "Problem Definition"
after already discussing Superfund and introducing a basic approach to be taken (through Figure
1.1) seems backwards. Likewise, in the context of this retrospective analysis, which considers
only benefits and no costs, the section on "Reasons for Market Failure and the Need for Federal
Action" adds little. The chapter then goes on to define Superfund approaches and Superfund

25

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benefits, but this is several sections after these concepts have already been introduced as a basic
organizational framework for the report in Figure 1.1. The section on "Methodology" is a
combination of a discussion of methods and a discussion of some benefit categories. For
example, the paragraphs on p. 1-17 say very little, if anything, about methodologies that will be
used in the assessment. It is useful to have a mapping between benefits and methods, but the
Panel generally found the attempt to do this through Figure 1.2 confusing.

The literature review in Chapter 2 is a thorough review of the literature that it covers.
However, much of the paper-by-paper description is tedious and might be better put in an
appendix. The Panel recommends that the text focus on general conclusions from the literature,
rather than a detailed account of individual studies, with the purpose of identifying gaps in our
understanding.

In addition, Chapter 2 omits some relevant literature. For example, the chapter could
include the literature on methods of benefit estimation as well as on previous studies of the
Superfund program. There is little in this chapter, or in the rest of the report, about the promises
and pitfalls of the hedonics approach for capturing benefits, nor on some of the other approaches.
Another example is the recent literature on ecosystem valuation (e.g., NRC report, Millenium
Assessment). This literature provides both a logical framework for thinking about benefits
assessment of ecosystem services, and reviews of the current state of knowledge in this area. A
third neglected literature relates to uncertainty. The Panel recommends a greater elaboration of
the uncertainty inherent in the estimation of the benefits of Superfund and discussion of how
uncertainty can and should be treated.

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Finally, the Panel recommends the case studies be more closely tied to text or eliminated.
They are well-written but not well integrated into the report or used as support for the text.

4.2 Charge Question 2: The latter part of Chapter 3 discusses the data used for the

SBA. With regard to this data discussion, please address the following.

Chapter 3 of the SBA covers two distinct topics: (1) a description of the Superfund
program (pages 31- through 3-25) and (2) methods for characterizing NPL boundaries and
potentially affected populations for use in subsequent chapters (pages 3-26 through 3-49).
Charge questions 2a - 2d pertain to the latter topic, however the following comments relate to
the first part of this Chapter. In this regard, the Panel's discussion centered on three issues
discussed below.

1. the link between the problem definition in Chapter 1 and the description of Superfund
responses in Chapter 3.

With regard to the first point, Chapter 1 casts a broad net over CERCLA benefits that
includes not only the response sections of the Superfund program, but also lists the following
approaches: community involvement, enforcement, research and development, training and
natural resource damage assessments. Yet, the Description of Superfund Responses in Chapter 3
deals principally with Response Actions, and does so without being clear as to its overall role in
the benefits analysis. In addition, while a description of the Superfund program is of course
useful to this report, it is unclear if the reader needs, for example, to know the details of the site
screening process and the remedy selection process in order to understand and estimate the
benefits of the program.

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As mentioned in the comments on Chapter 1, the core focus of the SB A is on
"benefits"and the Panel recommends the rest of the report provide the information needed for
that purpose. The reader needs to understand CERCLA's basic authorities and goals, and
something about how the program functions, but whether it is necessary to describe the remedial
process in Chapter 3 in such detail is unclear. It would be more useful to discuss what the law
requires in terms of protection of public health and the environment, a very brief overview of the
removal, remedial and enforcement program, summary data on the number of different kinds of
actions, information on the evolution of the program over time, program accomplishments to
date, and the heterogeneity among NPL sites, specifically noting how Federal Facilities are
different from other NPL sites, and perhaps also discussing what kinds of sites are on the NPL.

2. the representation of the Superfundprocess

With regard to the second issue, the Panel believes that the overall description is a
reasonable representation of the Superfund process. However, correcting a number of statements
throughout this chapter would improve the report. Some examples are: the discussion of EPA
enforcement does not seem fully cognizant of the critical role that settlements play; the
description of state capabilities is not accurate; there is no mention of the fact that Superfund
liability is retroactive; and the text incorrectly states that sites must be on the NPL for the
liability scheme to be invoked. Also, citations are needed for many of the statements in this
chapter. For example, the Remedial Investigation and Feasibility Study process is described on
pages 3-12 and 3-13 of the report. A good reference document for this section is EPA's 1988
Guidance for Conducting Remedial Investigations and Feasibility Studies under CERCLA. In

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addition, the discussion of the CERCLA Remedy Selection Criteria (EPA 1988) is given on page
3-13, and the SBA goes on to state under Selection of Remedy that the "FS identifies the best
response options". More accurately, the Feasibility Study evaluates a range of alternatives and
compares them to the first seven selection criteria. The criteria of State and Community
Acceptance are evaluated by the EPA, in consultation with stakeholder (states, Tribes, U.S. Fish
and Wildlife Service), public input, and in consideration of environmental justice issues (1997a,
1999).

More attention might be given to the role of risk assessment in the remedy-decision
process. Ultimately, all remedies are based to a large part upon protection of human health and
the environment, so the ties between the Human Health and Ecological Risk Assessment
processes (EPA 1989, 1995a, 1997) need to be better explained and documented.

Substantively, the Panel's greatest concern related to the description of the roles of the
states. While it is true that CERCLA requires states to pay for 10% of FUND-lead remedial
[Note to Panel: What is FUND?] actions (and 100% of operations and maintenance for these
actions, i.e. not at RP-lead actions), it is not clear that most states would say that CERCLA
provides a 'substantial role" for states. When states do carry out actions, all decision-making
powers still are with the EPA, and not the states. At a more general level, the discussion of state
funding and capabilities does not comport with the research of others about state capabilities and
capacity for NPL-level cleanups. More weight is given to the report from ECOS [Note to Panel:
Need reference.], which is not specifically about Superfund, than the Environmental Law
Institute and Resources for the Future [Note to Panel: Need references.] research that is more

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focused on cleanup activity. The assumption that 25% of state cleanups are paid for with federal
dollars seems highly speculative. Also, the Panel would recommend against including a chart
that conflates all Superfund actions. Figure 3.4 aggregates state and EPA actions, and removal
and remedial actions, in a single chart. These are truly apples and oranges in terms of their costs
and their accomplishments.

Also, the ELI report must be examined quite carefully as it includes cleanups under a
variety of programs, not just Superfund. [Please check.] The Panel strongly recommends taking
proposed NPL sites out of the statistics (would note that the RFF 2001 Report includes a site by
site description of the status of NPL "proposed" sites at that time), and separating federal facility
sites from other NPL sites. As an example, the SB A makes mention of the Lower Fox River site
in Wisconsin as an NPL site; that site is nominated, but not listed. The Lower Fox River
remains a Wisconsin state-lead project. It is true that the EPA is an active participant, and that
some benefits may be construed from the Agency's participation, but the distinction needs to be
clear.

3. Whether the appropriate Superfund responses were used in subsequent sections to
characterize Superfund benefits.

The Panel discussed whether the appropriate Superfund responses were used in
subsequent sections to characterize and quantify Superfund benefits. The majority of the SB A
focuses on actions at NPL sites. There are two concerns regarding this decision. First, NPL sites
are anything but homogeneous. To the extent that the study relies on a subset of sites it is critical
to assess how this subset represents the full NPL, and what types of sites should be analyzed in

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separate categories. These categories, we would note, might be different for different types of
benefits analyses (e.g. for the hedonic study vs. the cost of illness study.) Still, it seems clear
that, at a minimum, federal facilities should be kept separate from non-federal facility sites. In
addition, it is important to acknowledge that the benefits of so-called "redevelopment" sites, of
which Industri-Plex is a good example, as captured in a hedonics approach, would capture not
only the benefit of cleanup, but also the benefits of redevelopment. It would be helpful to
address this issue in the SB A. The second and more troubling concern is the fact that while the
authors note that removal actions may well result in much of the decrease in current risk, these
actions appear to be ignored in the remainder of the report.

One small but important point is that some percentage of RODs are what are called "no
action RODs" meaning that EPA determines that no remedy is needed at the site. A second
important point about RODs, in terms of assessing site progress, is that a larger percentage of
NPL sites have more than one remedy, and more than one ROD. While this is mentioned, it is
unclear how this is addressed in terms of assessing site progress. The Panel notes that it would
be worth finding out what number or percentage of deleted and construction complete sites are
"no action ROD" sites. Defining the universe of sites as ROD sites (including no-action RODS)
may be misleading in a retrospective study.

Charge Question 2a. The lack of NPL site boundary information makes it necessary
to estimate the numbers of nearby residents and homes at various distances from
NPL sites; these are needed for the analyses in Chapters 4 and 5. Is the use of
circular areas based on site size, as illustrated in Figures 3.5-3.8, an adequate
approach?

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Yes, this is an adequate approach. Of course, this measure ignores the possibility that
risk varies across sites, but there are no easy ways to account for differential risk. At any rate,
the authors do not have any information about contamination pathways, contaminant plumes,
etc. The report does sound GIS work on mapping the sites and the boundaries.

To our knowledge, the use of circular buffers is widespread in GIS-based type of studies
in the absence of more detailed information about property boundaries. This is probably
sufficient for the purposes of the report, and it would seem reasonable if the site is small relative
to the 2.5-mile or 5-mile buffer.

As a related thought, we note from Figure 3.10 that most of the exposed U.S. population
lives near a small fraction of the sites. Given that the benefit analysis is based on a limited
number of sites, it isn't possible to calculate benefit estimates by population density. However,
Figure 3.10 can be improved (and some clarification can be added to the text of the report)
describing how population is concentrated around a limited subset of sites.

Charge Question 2b. Is it appropriate to ignore proximity to more than one NPL
site? What methods might be used to account for effects associated with proximity
to two or more NPL sites?

If one wishes to develop a measure of exposure to contaminants, it seems possible that a
receptor could be exposed to pollution coming from more than one site. Accounting for this,
however, requires extensive information about pollution plumes and pathways, which is not
possible within the scope of this study.

We conclude that it is acceptable to ignore proximity to more than one NPL site because
there is no clear means to account for multiple sites. An alternative measure was used in Gayer,

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Hamilton, and Viscusi (2000, 2002), which aggregated the lifetime excess cancer risk estimates
of the neighborhood sites. This would be prohibitively difficult to replicate on a nation-wide
scale, and would not be amenable to a benefits-transfer estimate using the distance gradients.

Charge Question 2c. Are the correct inferences about comparability between the
NPL site groups in Table 3.3 correctly drawn? Are there other groups that it might
be useful to define and analyze?

The Panel isn't clear on the meaning of this question. A retrospective study of benefits
should include only the sites in which remediation is completed, especially given the mixed
evidence that prices fully recover from Superfund actions. Many of the ROD sites are not
completed, so they should not be included in a benefits estimate that assumes full price recovery
(or, at the very least, the benefits of unfinished sites should be discounted). What's more, some
RODs recommend no-action, which suggests no benefit of remediation. It may be useful to
show benefits by different types of sites (by population density; by remediation strategy; by
removal vs. remediation, etc.), but this is not possible given the benefits-transfer method used in
this study.

3 Regarding proximity to the site in hedonic property models (HPMs), most of the previous
studies have looked at the distance to the nearest Superfund site, ignoring the presence of
others. Ihlanfeldt and Taylor (2003) have also looked at the second-closest site, which
became important when they calculated the TIF revenue afforded by the cleanup (which
changed the value of a property). It should be borne in mind, however, almost all of the
sites considered by these authors at their study locale (Fulton County, Georgia) are
CERCLIS, not NPL, sites. In a recent (and unpublished) study, Longo and Alberini control
for the distance to the second-closest listed site, and also include among the independent
variables of the HPM the number of the sites within a specified buffer. It should be kept in
mind, however, that both of these studies focus on properties slated for commercial and
industrial use, and not on homes.

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Turning to the attributes of the sites in the various groups of Table 3.3, it is reasonable to

expect that the proportion of construction completed ROD sites is higher than the entire NPL

universe because the construction of the remedies on site will be initiated and completed only

after its ROD has been issued. That a lower percentage of federal sites has CC complete is

consistent with the idea that federal sites are large and complex. H & V chose sites with well-

developed ROD and contamination characterizations, as these were needed to develop the data.

The HPM sites probably looked at complex sites. [Note to Panel: Explain this acronym.]

The authors of the SBA are correct in pointing out that population density in the HPM

group of sites is higher than in the other group. This is consistent with high population densities

and numerous homes being sold at a continuum of distances from the site, as one would typically

want when doing an HPM study. The average size of NPL sites tend to be smaller in the HPM

studies, but the median in this group is perfectly aligned with that of the NPL, ROD, MROD.

Federal sites are very large and HV tend to be smaller.

Other possible groups could be formed on the basis of the type of contaminant, the

contaminated media (e.g., groundwater), or of the possible involvement of the PRPs. [Note to

Panel: Explain this acronym.] More information on the characteristics of the study sites is

needed in the SBA, as well as the sites in each of the groups listed in Table 3.3. To the extent

that the report relies on the estimates of the study sites, it is essential to get a sense of how

representative those sites are of the universe of sites.

Charge Question 2d. Is it appropriate to assume a uniform distribution of
populations and residences across census blocks? What other approaches could be
taken?

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We agree that the approach is appropriate, especially given the relatively refined measure
of census blocks.

Below are two additional points regarding Charge Question 2:

1. The use of 2.5-mile rings seems reasonable, but it would be good to provide some
more support for this decision. Many studies estimate a price gradient, but don't assess the
distance at which price effects go to zero. As a result, many studies arbitrarily assume a distance
in which the price effect goes to zero, or they choose a distance based on the data they have. To
the extent that the hedonic analysis moves forward, it would be useful to discuss this issue in
more detail.

2. There is a possible benefits-transfer problem because the hedonic property studies
used in the meta-analysis are located in more populated areas than the typical NPL site. Larger
populations mean more and larger housing markets, which could affect the gradient estimate.
Riechert, Small, and Mohanty (1992) find some evidence property values in rural areas are not
responsive to distance to a landfill. Similarly, the studies used in the meta-analysis take longer
to clean up, suggesting that they are more problematic (perhaps higher risk). More generally, a
benefits transfer problem will exist to the extent that the study sites are not representative of the
full population of sites. This is one the Panel's reservations about using the meta-hedonic
approach.

4.3 Charge Question 3: Chapter 4 presents a benefits transfer analysis applied to all
those NPL sites where the benefits are expected to occur from 1980 - 2024. With
regard to this chapter, please address the following.

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Charge Question 3a. Are the challenges associated with the benefits methodology as

applied to hedonic price studies in Chapter 4 satisfactorily met?

In addition to the comments related to this question in Section 3.2, we offer the
following:

- Using ROD sites: As stated in Section 3 of this Advisory, the Panel has a concern with
using all ROD sites as the basis for the benefits estimate. Many of the ROD sites are not yet
cleaned up, so the uncertainty of whether they will happen and the discounted benefits of the
delay would reduce the estimate of retrospective benefits of Superfund.

- Omitted-variable bias: Omitted-variable bias is potentially a big problem with hedonic
property studies and needs to be mentioned. The NPL sites are likely located in unattractive
areas, so the price-distance gradient could be picking up un-measurable characteristics of the
neighborhood. Atkinson and Crocker (1987) and Graves et al. (1988) both find evidence of a
problem with omitted variables. This problem would be especially acute for the cross-sectional
studies used in the meta-analysis. The Greenstone and Gallagher [citation needed] may provide
a research design that can potentially address this problem.

- Inferences about infra-marginal changes: The report should be more explicit about
about the difficulty of using estimates of the hedonic price function to make inferences about
infra-marginal changes.

-Market size and market segmentation: Considerable space is dedicated to discussing the
issue of the size of the market, and of whether there are separate housing markets. Unfortunately,
the criteria used to identify the size of the market (40% of the homes in Middlesex Co. are within

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2.5 miles of the NPL site; commuting times) are unconvincing. The discussion on page 4-4 does
not clearly address concerns about appropriate market size and segmentation.

- Also, it is unclear why using a single market would underestimate benefits. This might
be the case with Michaels and Smith (1990), but this claim may not apply to all hedonic property
studies. To elaborate on this, consider the claim made by the authors that if the disamenity
impacts are stronger on the high-end homes, then single-pooled hedonic regressions will likely
give underestimates of the effects. It seems to us that the effect estimated from single-pooled
data would be a weighted average of the two effects, which may or may not be an underestimate,
depending on the specific market.

Charge Question 3b. Both Circular A-4 (Office of Management and Budget 2003 pp.
24-26) and the recent comments on the Underground Storage Tanks (UST) Cleanup
& Resource Conservation & Recovery Act (RCRA) Subtitle C Program Benefits, Costs,
& Impacts (BCI) Assessments: An SAB Advisory (Science Advisory Board 2002 pp.
20-22) contain specific comments associated with the methodology used in Chapter
4. Have these comments been addressed adequately? In light of these comments,
has the benefits transfer methodology been applied correctly?

This is difficult to answer. Circular A-4 is meant to guide prospective studies not

retrospective studies. This retrospective study does not consider costs or alternative policies.

Perhaps it would be better not to refer to the circular, since it really is not appropriate for this

type of analysis.

Charge Question 3c. Are the estimates of the price effect (Figures 4.3 and 4.4 and
Tables 4.4 and 4.5) based on the best available data and a sound methodology?

As mentioned earlier, the selection of studies needs better documentation and

justification. More specifically, the literature review produced a total of 30 studies, including

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book chapters, reports, and journal articles. In the end, only 9 of them are used for the benefit
transfer. The authors must explicitly discuss the reasons why the others were dropped and these
were selected. Additional considerations include:

- Was a subjective assessment of the quality of the study ever a consideration in the
selection of these nine studies? None of these studies control, for example, for whether the
homes in an area that are sold are representative of those that did not sell. In other words, none
ask the question whether proximity to the site altered the frequency at which homes are sold, in
addition to the sale price. Moreover, only two of the studies in the sample of nine use panel
data, in spite of the accepted notion that cross-sectional studies are inadequate in this type of
analysis.

- Nine is a very small sample, perhaps too small for extrapolation. Perhaps the results
based on this sample could be compared with those from a broader sample, where the studies
selected by the authors are supplemented with others, even if the latter do not focus on NPL
sites, as long as a comparable announcement event is identified.

- Table 4.2 is unclear. What is the "absolute effect" in column 2? What distance does this
price effect refer to?

- Do the studies' sites differ for type of contaminated site, type of contaminant, PRP
participation and state government involvement? More information is needed here.

- Most of the studies used in this chapter are old and refer to early NPL sites. Would they
be still suitable for sites more recently nominated to the NPL, which have been described as

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being larger and more complex than earlier sites? This raises an issue of temporal stability of the
benefits/benefit transfer.

- Table 4.4 is unclear.

- Once the selected studies are used to estimate an appreciation effect associated with the
issue of the ROD, such appreciation is aggregated over the housing units within the specified
distance of each Superfund site. Doing so, however, in some cases assumes that the size and
structural characteristics of the dwellings are similar across locales. Is it possible to obtain
information about the typical housing size at the various locales, perhaps using the Census or the
American Housing Survey, express prices and appreciation on a per square foot basis, and then
multiply the latter by the size of the typical dwelling in the vicinity of each Superfund site to get
a better sense of the total benefits?

In sum, more information is needed on both the selection criteria and the studies. (See 3a

above for concerns about inferences drawn from the studies). It is important that the assumed

causal link between the issuance of the ROD and a rebound effect be clearly detailed.

Charge Question 3d. Does the application of the price effect to estimate the value of
Remedial Actions at NPL sites match the relevant theoretical principles? In
particular, does the analysis of reversals of the negative price effect found in the
literature (and associated with Figure 4.3) provide a sound basis for assuming that
reversals always occur?

The Panel has some problems with the inferences, and questions using full reversals of
negative price effects as a basis for the benefits estimate. See all the points listed under 3a and
under 3c.

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Charge Question 3e. Are the four model specifications (Equations 4.2 through 4.5)
appropriate? In particular, these models calibrate the basic benefits transfer model
(Equation 4.2) for non-linear effects and/or differences in home values. Are these
calibrations appropriate? Are there other calibrations that could be made to
improve the estimate?

Yes, they seem to be correct.

Charge Question 3f. Are the study sites reasonably representative of the policy
sites?

The Panel's answer to this charge sounds common themes with that of charge question
3c. The report needs to provide a more informative discussion on how the 9 studies were chosen
and why the other 21 were dropped out of the initial sample of 30. In addition, Gayer et al.
(2002) seems more appropriate for this report than does Gayer et al. (2000). Finally, as to
whether the study sites are reasonably representative of the NPL sites, the SB A does not contain
enough information about locations, chemicals and pathways, PRP involvement, community
involvement, role of the State and the EPA, etc. to allow us to conclude whether the study sites
are or are not representative of the universe. If housing price depreciation/appreciation is
affected by these factors (which we also do not know), it is unclear how the benefit transfer can
be applied to the universe.

Charge Question 3g. Although there are no federal facilities among the study sites,
federal facilities (e.g., the Camp Pendleton and Savannah River sites) are included
among the policy sites. The analysis of NPL site groups in Chapter 3 suggests there
may be no significant differences in relevant characteristics (e.g., nearby population,
cost of nearby homes, and the price effect). Should federal sites be included in this
analysis or not? If so, how? Can estimates both with and without federal sites be
included, and which one does the Panel think would be more reliable?

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Earlier evidence suggests that federal sites take longer than non-federal sites to transition
through the different phases of the Superfund program. In many cases, we would expect them to
be large sites with complex pollution problems and heavy "dread" effects (radioactive waste,
nuclear plants, etc.). Absent studies that specifically looked at the price effects of the proximity
to federal NPL sites, or that at least controlled more carefully for the type of contamination, the
assumption that the depreciation/appreciation mechanism associated with the ROD applies to
federal sites goes a bit too far.

In addition, two other points are offered. Regarding the question of "Market Size" (pp.
4-4 to 4-6), the concern of the earlier SAB Panel was whether or not the hedonic price function
(HPF) would shift as a result of a change in the vector of characteristics. If it does, then using
the sum of the predicted changes in prices would lead to biased a estimate of the welfare change.
The SBA is not clear on this point. Also, there are no guidelines for determining in advance
whether to expect the HPF to shift. So the discussion in the SBA that this will not be a problem
isn't fully persuasive.

Second, regarding "Ex Ante Data" pp. 4-6 to 4-7), the SBA misstates the Bartik
conclusion. What Bartik wrote was, "... the WTP for the improvements of households originally
at improved sites will underestimate benefits. (Bartik, 1988, p. 176, emphasis added) "

4.4 Charge Question 4: Chapter 5 presents a proposed analysis for capture health
effects of Superfund. Should the health effect-by-effect analysis proposed in
Chapter 5 proceed?

Charge Question 4a. Is the epidemiology-based approach adapted from Lybarger
et al. (1998) appropriate? If so, does the Panel have any specific recommendations
for implementing it?

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See Section 3.3.

Charge Question 4b. Are there other feasible methods for monetizing the value of
avoided morbidity besides Cost of Illness? Of these other methods, how can they be
prioritized (i.e. which ones should EPA investigate first)?

See Section 3.3.

Charge Question 4c. Have the content and limitations of the literature on the
epidemiology of hazardous substances in the environment and related material been
described adequately?

The review does an adequate job of delineating the limitations of the epidemiologic
literature. In view of the limited exposure data, the lack of the ability to address additive or
synergistic exposures, and limitations of sample size related to the sometimes small populations
involved, it should be pointed out that it is remarkable that some studies have found elevated
(and sometimes statistically significant) risks.

Charge Question 4d. What recommendations does the Panel have for using the
Integrated Exposure Uptake Biokinetic model for lead?

The EPA Integrated Exposure Uptake Biokinetic (IEUBK) model is proposed for use in
this analysis. A modeling approach to evaluate lead blood levels was initiated in 1985 and has
been developed to its present state as the IEUBK model. The current model provides many
advantages over the previous explicit mathematical methods used for estimating the potential for
adverse health risks as a result of exposures to lead. However, the model has definite limitations
that if violated will potentially jeopardize the accuracy of predictions provided by simulations.

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The IEUBK model for children exposed to lead was developed for ages 0 to 84 months
that may potentially be exposed through a range of possible pathways. It is a probability based
model rather than a deterministic model which has the advantage of providing estimates of
outcomes within a range of conditions. Long term exposures are used to estimate a geometric
mean blood level for the exposed children. This model was developed for individual estimates,
but can be used to evaluate neighborhood exposures to predict blood lead levels. The model can
be used at several scales including a single location or a neighborhood. Single locations, such as
a single dwelling, are used to estimate exposures for a single child. Multiple locations within a
single neighborhood that has homogeneous media or a heterogeneous media are two other scales.
This can be extended to more than one neighborhood with heterogeneous media. The multiple
locations are appropriate for exposure of a population of children.

Advantages of the IEUBK model include a predictive capability to estimate blood lead
levels and evaluate effects of efforts to reduce exposures. The deterministic models rely on
slope factors that are not universal constants. Slope factors change due to differences in uptake,
site characteristics, among other conditions. The IEUBK model allows for multiple media
exposure and multiple pathways. Model simulations can be run to evaluate the effect of
mitigation strategies to reduce risks. Isolation of key pathways of exposure can be used to guide
more effective remediation strategies and set clean up targets. Individual or neighborhood blood
levels can be predicted as a consequence of remediation alternatives. Such an approach can
reduce removal and remediation costs associated with lead contamination.

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There are significant limitations to the model, notably that the model was developed for
children and most childhood exposures to lead are the result of household exposures. Any model
is only as good as the data available and assumptions made in its execution and the IEUBK
model is no different. There are few pathways through which such young children would be
exposed to NPL sites. However, the model has been adapted for adult lead exposures and this
development has potential, especially related to fetal exposures to lead which are known to
potentially have significant adverse health effects. If the model is applied within its limitations,
the error of the analysis can be determined which provides an analysis of associated uncertainty.

The IEUBK model would be useful in the SBA since it offers probabilistic based
estimates which provide a more realistic predication of potential outcomes due to exposures.

Charge Question 4e. What recommendations does the Panel have for using the
results from "Calculating Risks?" for estimating the benefit of avoided adult
cancers?

See the Panel's discussion in Section 3.3 of this Advisory. In addition, the following
comments are offered. Hamilton and Viscusi develop the thesis that the current risk assessment
practice is overly conservative, providing quantitative evidence to support this assertion. They
focus on the effect that parameters have on the estimated risks according to the following
equation:

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where ED is exposure duration; EF is exposure frequency; IR is the ingestion rate; i is the
contaminant; j is the pathway; AT is the averaging time, BW is the body weight, CC is the
contaminant concentration; and TOX is the toxicity.

By varying the values for the 'constants' the estimated LECR can vary several orders of
magnitude. They argue that using the reasonable maximum exposure (RME) is overly
conservative. They recommend using mean or median values for CC instead of the RME. They
further argue that EPA recommended ED, EF, and IR default values exceed those observed at
several sites. They evaluate the use of probabilistic approaches to estimates of risk.

They do not address the TOX values and how these can vary. The uncertainty of this
parameter can be significant. This value can be adjusted by uncertainty factors (UF) or
modifying factors(MF) that reflect uncertainties in extrapolating toxicity values determined for
different species, between organisms within the same species, among several other adjustments.
These adjustments could surpass those of the uncertainty in the constants factors. The equation
must be considered in its entirety. The magnitude of variability of all parameters must be
evaluated.

The value of this approach is to adopt more widely a probability based risk assessment
approach. This approach will result in estimates that reflect the range imposed by the
uncertainties in the approximation. Such results can help identify those parameters most
responsible for creating the uncertainty.

4.5 Charge Question 5: Chapter 5 also presents a proposed method for capturing the
ecological benefits of Superfund. Should the ecological benefit analyses proposed in
Chapter 5 proceed?

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First the Panel would like to comment on a central premise that runs through the report -
that ecological values under CERCLA are tied implicitly and explicitly with services to
humans(see Table 1.2). Examples of ecological benefits included fishing, harvestable forests,
water filtration, and even golf courses. While economists may effectively argue that these are
the best indicators for valuing ecological resources, the Panel points out that ecological resources
and risks under CERCLA are valued intrinsically in-and-of themselves, and not solely on their
potential to bring benefits to humans (NRC 2001; EPA 1992, 1995a,b, 1997b, 1999). The
danger in not making this distinction is that the report implies that unless human services from
ecological resources are shown to be negatively impacted, there would be no ecological benefits
from a CERCLA remedial response action.

A case-in-point is for wildlife that is protected under the Endangered Species Act (EPA
1997). For example, the 1999 listing of bull trout (Salvelinus confluentus) under the Endangered
Species Act1 requires consideration of risks to bull trout not only in the ecological risk
assessment, but also in the Remedy Selection process as an Applicable or Relevant and
Appropriate Requirement (ARAR) under Section 404 of the Clean Water Act (CWA) and
Section 10 of the Rivers and Harbors Act of 18999. The Panel believes that this distinction
between ecological risks under CERCLA, and ecological benefits should be made very clear in
the document.

1	Federal Register, Volume 64, Number 210, Thursday, October, 28, 1999,

2	The CWA Section 404(b)(1) Guidelines are contained in 40 CFR §230.12(a), while the Rivers and Harbors Act
requirements are listed in Regulatory Programs of the U.S. Army Corps of Engineers [33 CFR §320.4(a)].

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The Panel's general comments on the SBA's proposed ecological benefits analysis may
be found in Section 3.4 of this Advisory.

Charge Question 5a. Is the method of using data from detailed Natural Resource
Damage Assessments to estimate benefits on a site-specific basis appropriate and in
accordance with accepted theory?

See Section 3.4.

Charge Question 5b. Will the method of investigating NRDAs proposed on pages 5-
31 through 5-33 provide insight into the value of ecological benefits created by
CERCLA and SARA? In particular, will an investigation of specific NRDA
examples, be helpful? Will the proposed comparison of settlement amounts and
estimated benefits be helpful? If not, what better approaches might be used to
understand these benefits?

See Section 3.4.

Charge Question 5c. In cases where natural recovery would otherwise take place
over finite but lengthy periods (decades to centuries), the benefits of active
restoration accrue over similar periods. It is not clear whether these should be
considered infra-generational or inter-generational. Is there a way to decide, or
perhaps to avoid making this decision?

The approach taken by the report is appropriate: namely, the use of 3 alternative discount
reference points - a zero, three, and seven percent discount rate. This allows for "sensitivity
analysis" of results and is consistent with accepted federal and economic practice.

4.6 Charge Question 6: Are each of the non-quantified benefits discussed in Chapter 6
presented appropriately and sufficiently?

This chapter of the report presents these benefits in a very cursory manner. The Panel
recommends either presenting a more thorough discussion of theses benefits and how they might
be captured, or noting that they are really just being "mentioned" here and are not truly

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addressed in this benefits analysis. Also, depending on how the description of Superfund benefits
is revised (see comments on Charge question #1) it is not clear if these particular "benefits" will
still be included in this section of the report.

Amenities: This section correctly points out that a benefit of the Superfund program is
the "removal of unsightly, often abandoned facilities." This is likely to be a significant
component of the benefits of Superfund. It's less clear that "psychological benefits associated
with reducing the uncertainty and fear of unknown risks" constitute an amenity component of
the benefits. If anything, this constitutes a health or information component of benefits. But one
must also consider the possibility of negative "psychological" effects of the program.

Amenities may not be "non-quantified," since the hedonic property models used in
chapter 4 (along with perceived health benefits) could be capturing amenity effects. Indeed,
hedonics may over-estimate amenities. Chapter 4 uses the estimated price gradients from the
HPM studies and assumes that remediation leads to a full recovery of the housing prices. For the
cross-sectional studies, this means that the estimate is based on the assumption that remediating
a site is the same as moving a house to a distance in which there is no price drop-off This
implies that the remediation eliminates all health risks and removes the entire disamenity of
living near the site. If anything, this over-states the amenity benefits of the Superfund program,
because remediation does not necessarily rid the site of all its visual disamenities.

Materials: The SBA claims that "In terms of avoiding material damages, the Superfund
program often helps convert unusable commercial properties back into productive real estate. In
many cases, the avoided damage is associated with removal of both uncertainty about the
presence of hazardous substances and with uncertainty about the cost of restoring the site to a

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usable condition." Clearly, this claim is in sharp contrast with the widely held view that the
Superfund program actually created abandoned and underused previously used properties
because of fear of possible liability associated with the cost of cleaning up the site (Simons,
1998). Others (Bartsch, DATE) have even claimed that listing in CERCLIS alone creates stigma,
and it is often felt that the purpose of many state and local legislation and programs passed in the
1990s (e.g., voluntary cleanup programs, brownfield programs) and offering relief from liability
and various incentives to parties that voluntarily clean up sites was to offset the perverse
incentives over real estate created by the liability features of the Superfund program. The
Agency needs, therefore, to be careful about this kind of claim, and to justify carefully any
statements made in this regard.

Regarding uncertainty, we would argue that uncertainty exists about (i) the existence and
severity of contamination at the site, and (ii) possible changes in cleanup requirements and
standards, both of which translate into uncertainty about the liability for cleanup at the site.
Unfortunately, the SBA is not clear about which aspect of the Superfund removes the
uncertainty, assuming that it does, and the reader is left wondering whether perhaps the authors
meant to apply earlier claims about the ROD and rebounding of property values to commercial
and industrial properties as well. (The Panel isn't aware of any studies documenting such an
effect.)

In general, the SBA does a good job emphasizing that the market for commercial and
industrial real estate has a completely different nature from the residential property market.
Specifically, the size of the market and the number of players are much smaller, there are far
fewer transactions, and there are different rates of property turnover. It would be useful to see

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some statistics, perhaps drawn from national statistics, to support these claims. Similarly, it
would be useful to cite formal studies to support the report's claims that commercial and
industrial developers and end users are interested in a different set of amenities than
homeowners. There is, for example, a vast literature that has used the hedonic pricing approach
to establish the importance of infrastructure, distance to roads, distance to the central business
district etc. on commercial property values. The SBA is also correct in pointing out that there
have been very few studies documenting the impact of contamination on commercial and
industrial property values, but has missed the article by McGrath (2000).

The SBA does not adequately discuss and characterize the effects of liability on
commercial property prices and turnover. In a revised draft that addresses this point, it would be
useful to organize the effects of liability into direct effects (e.g., cost of cleanup, lower sale
prices of development projects, but also lower cost of acquiring potentially contaminated
properties for real estate developers) and indirect effects (through the lenders).

The SBA needs to acknowledge that there may be much heterogeneity in the effects of
the Superfund program across different areas, due to the different economic and growth
conditions, as well as within the same city. An example of the former is the difference in
conditions (and study findings) across Atlanta, studied by Ihlanfeldt and Taylor (2003), and
Baltimore, studied by Howland in 2004. The latter's results are, in turn, different from those
found by Schoenbaum (2002) for the same city, but different areas.

The report needs to acknowledge that there may be much heterogeneity across developers
in their responses to the incentives created by the Superfund program. See, for example, Alberini
et al. (forthcoming), who find that developers experienced with projects at contaminated sites are

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much more responsive to financial incentives offered by the government than inexperienced
developers, who instead respond more to offers of liability relief.

It is also important to examine whether (dis-)incentives and effects have changed over
time, as the US Environmental Agency became more efficient at recognizing and addressing
contaminated sites, and potentially responsible parties became better acquainted with the
expectations imposed upon them by the agency. (The type of sites and the effects on neighboring
properties may have changed too.)

Insufficient evidence is provided for the following assertion in the SBA: "It is important
to consider if and how the materials benefit would appear in the policy case (i.e., no Superfund
program). Similar to other benefit categories, the fact that without Superfund fewer responses
would occur and uncertainty associated with toxic contamination of real property would be
greater suggests that a large fraction of the materials benefits should be assigned to Superfund."
In addition, the meaning of "a large fraction of the materials benefits" is unclear.

Empowerment: The Panel has some concerns about the use of the word "empowerment"
to describe this particular set of "benefits" of the Superfund program. (This refers as well to the
use of "empower" throughout the text.) Public education and involvement may well be more
appropriate terms to referring to the set of activities described here. This raises a second point,
which is that much of this section describes activities and programs of EPA and ATSDR, and
while these are important "inputs" to the full range of Superfund benefits, they are not, in and of
themselves "benefits." This relates to the Panel's comments on Chapter 1 suggesting ways in
which the overall description of Superfund benefits might be improved.

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As noted just above, SBA's section on empowerment appears to be more a description of
program activities than of the benefits that result, without an explanation of how these activities
are benefits of the Superfund program. This section also appears to be written from the
perspective of an agency advocate, in that it describes all the public activities in glowing terms,
rather than in a more objective and analytical fashion. For example, on page. 6-9 the text reads
"EPA maintains a substantial outreach and information effort..and in the paragraph that
follows "The Superfund program also uses it community outreach mechanisms to create
partnerships..While these statements are likely true for some sites, it is well documented (as
shown in the number of sites with and without TAGs) that at some sites there are very active
communities, and at others, not. In addition, most likely the intensity and quality of community
involvement activities vary according to EPA region, and to the individual conducting these
activities. None of this variation is alluded to, much less documented, in this section.

The superfund program has several programs intended to provide information to
communities. In addition to the Technical Assistance Grant (TAG) program, which provides up
to $50,000 for communities to procure technical advice on site documents related to final and
proposed NPL sites, there is a similar program, the Technical Outreach Services to Communities
(TOSC) program, which is similar to TAGs but is for communities with non-NPL sites. Other
mechanisms for providing information to the community and the general public include the
Superfund website and various outreach activities, as well as the Superfund Job Training
Initiative (Super JTI) which provides information on all sites, investigates sites, and makes
recommendations. Other efforts in community outreach are required as part of the Superfund

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Basic Research Program. The outreach efforts in these Superfund Centers take many forms from
education to children, museum displays, community programs, among many others.

These efforts provide information to people. If risks do exist, people can learn how they
can protect themselves. If the public is educated on the issues, they are better able to participate
in the decision making processes.

Perhaps more importantly, it is unclear exactly what the "benefits" to be discussed are.
While community education is a good thing, should it really be considered a "benefit" of the
Superfund program? How effective these programs are is difficult to determine. This section
would benefit from a more nuanced discussion about community education and involvement
benefits, and which of these should be considered benefits of the program, in comparison to
important components of, for example, the remedy selection process. Once the section is revised
to focus on benefits, the next challenge would be to discuss what metrics can be used to evaluate
their impact. For example, is trust being built between EPA and the communities? Have the
various outreach efforts improved citizens' knowledge about current risks at a site, steps they
can take to protect themselves, and the pros and cons of alternative remedies?

This section is plagued by many assertions about various benefits that could well be true,
but are not backed up by any kind of independent research and analysis. For example, the
discussion suggesting that community empowerment might reduce property value declines does
not appear grounded in any research, but is a hypothesis yet to be tested. For example, the
authors could have documented the number of NPL sites with active vs. inactive community
groups, as well as examined some of the internal and external reports that have tried to evaluate
the quality of EPA's community involvement efforts.

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Similarly, there is a lengthy description of the role of ATSDR, that describes its
activities, but just what the benefits are is not clearly defined nor measured in any fashion.

Deterrence: As noted in the response to charge question 1, the Panel feels that deterrence
is a means to an end, namely, reduced contamination, which in turn leads to reduced negative
environmental or health impacts. The SBA notes that the deterrence benefit is "indirect."
However, the reduction in impacts that results from deterrence or avoidance of contamination in
the first place is no less important potentially than the reduction that results from cleaning up
existing contamination. Thus, there is no apparent justification or logic for including this as an
indirect or "embedded" benefit. In revising Chapter 1 to develop a benefits assessment
framework, the authors should consider including deterrence not as a separate "indirect" benefit
category but rather as part of the health, amenities, ecological and materials benefits of
Superfund. Of course, in doing so, it will be important to distinguish between impacts or
benefits stemming from past contamination (where the opportunities for deterrence are limited to
containment) and those that would result from future contamination (which can still be prevented
or reduced).

The report's treatment of deterrence focuses almost exclusively on TRI, which is not
really considered to be part of the Superfund program since it is funded through a separate
appropriation [Note to Panel: need to check this]. It does not address the primary deterrence
effect created by CERCLA's liability provision, which is a key component of the legislation.
The Panel recognizes the challenges associated with measuring the deterrence effects of
Superfund, i.e., estimating the benefits resulting from prevention or containment of
contamination. However, there is a growing body of empirical evidence, as well as a substantial

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theoretical literature, regarding the impact of liability on firm behavior. (References for some
of the empirical studies are given below.) While limited, this literature does suggest some
conclusions regarding the impact of CERCLA liability. The Panel advises the Agency to draw
on the work that has been done to date to examine the deterrence benefits of Superfund in an
expanded discussion in the report.

Emergency Preparedness: This appears to be more of a description of the EPA removal
and emergency response program and capabilities than an objective discussion of the benefits of
these activities. The question is not what resources are put into this activity, but what are the
accomplishments. If this section is supposed to describe benefits, then the SBA could be
improved with a focus on accomplishments and how these accomplishments could be captured
in economic terms. In addition, while participating in the response to the World Trade Center,
the anthrax attacks and picking up the debris from the Columbia shuttle disaster are important,
and worth mentioning, they are by no means the center of the emergency response program.
And, in shifting resources to these new areas, the SBA fails to mention that resources were most
likely drawn from other Superfund activities.

Information and Innovation: The Panel believes that one of the "shining stars" of the
CERCLA program has been the innovative methods and technologies developed from the
various programs funded by Superfund, and in particular the Office of Research and
Development. This section of the SBA Report covers those topics well. A recent SAB Advisory
on the Office of Research and Development's Contaminated Sites and RCRA Multi-Year Plans
concluded that these programs have played, and will continue to play, a vital role in developing
the science and technology for evaluating and cleaning-up the nation's hazardous waste sites.

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[Add cite.] The Panel recommends that the authors for the SB A Report incorporate some of
those findings and conclusions herein.

International benefits: Many of the benefits from the Superfund program are applicable
to international activities which are already considered by other benefit categories. However, it
is worth expanding this section to include examples of international benefits, for example:

- Risk assessment approaches - monitoring, characterizing, RAs on sites

- Aid especially to Eastern European countries with heavy contamination and serious
health problems as a result of environmental contamination. They have no money for research
and development and look to the U.S. for ways to improve conditions.

- Databases for health effects and ecological impacts from exposures.

- Remediation technologies - development, U.S. companies working overseas with
technologies developed at U.S. sites.

- Exposures often for worse in other countries - better to monitor for biomarkers to
isolate specific effects/consequences from exposure.

4.7 Charge Question 7: Please comment on the overall organization and flow the report.

The Panel has addressed this issue in multiple areas of this Advisory.

4.8 Charge Question 8: Chapter 5 presents a proposed analysis for assessing the ground
water effects of Superfund. Please comment on the proposed ground water effect-
by-effect analysis with a consideration of the following questions.

Charge Question 8a. Will the approach described on pages 5-38 and 5-39 for
quantifying the fraction of aquifers in the United States protected by Superfund
provide useful information? Is the proposed approach to monetizing this benefit
feasible? Is there a better approach to addressing the question of ground water
protection?

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See Section 3.5.

Charge Question 8b. The proposed methodology will probably not adequately
capture the amount of ground water that will not become contaminated because of
the Superfund program. Does the Panel have any suggestions about how to do so.

The Panel agrees with the SBA's assessment of the difficulties in developing the

counterfactual of ground water contamination without Superfund. The Panel is without

suggestions about how to do this in a credible fashion.

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5.0 REFERENCES

Alberini, Anna, and Alan Krupnick. 2000. "Cost-of-Illness and Willingness-to-Pay Estimates of
the Benefits of Improved Air Quality: Evidence from Taiwan," Land Economics. 76(1):
337-53.

Dickie, Mark. 2003.

Freeman, 2003.

Hamilton and Viscusi. Journal of Policy Analysis and Management.

Landrigan PJ , "Environmental Pollutants and Disease in American Children: Estimates of
Morbidity, Mortality, and Costs for Lead Poisoning, As thma, Cancer, and
Developmental Disabilities, et al., Environ HealthPerspect 110:721-728 (2002).

Lybarger, et al. 1998.

Millennium Ecosystem Assessment. 2003.

National Research Coouncil. 2004.

US EPA. 2002. Cost of Illness Handbook

U.S. EPA/SAB. 2002. "Underground Storage Tanks Cleanup and and Recovery Act (RCRA)
Subtitle C Program Benefits, Costs and Impacts: An SAB Advisory." (EPA-SAB-EC-ADV-03-
001, December 2002).

US EPA. 2000. Guidelines for Preparing Economic Analyses.

US EPA. 2000. Handbook for Nan-Cancer Health Effects Valuation

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Alberini, et a. (forthcoming).

Atkinson and Crocker. 1987
Bartsch (from Alberini)

Howland (2004) (from Alberini)

Gayer, Hamilton, and Viscusi. 2000
Gayer, Hamilton, and Viscusi. 2002
Graves et al. 1988
Ihlanfeldt and Taylor. 2003
McGrath. Jour. Urban Econ. 2000

Mendelsohn, Robert, et al., 1992. " "Journal of Environmental Economics and Management 22,
#3..

Michaels and Smith. 1990

National Research Council (NRC), 2001. A Risk-Management Strategy for PCB-contaminated
Sediments. Committee on Remediation of PCB-contaminated sediments. National
Research Council. Prepared for the National Academy of Sciences and the United States
Environmental Protection Agency. National Academy Press, Washington, DC.

Schoenbaum. (2002
Simons 1998.

U.S. Environmental Protection Agency (EPA), 1988. Guidance for Conducting Remedial
Investigations and Feasibility Studies Under CERCLA. EPA/540/G-89/004. United States
Environmental Protection Agency.

EPA, 1989. Risk Assessment Guidance for Superfund, Vol. 1 Interim Final (Part A) of Human
Health Evaluation Manual. EPA 540/1 89 002. United States Environmental Protection
Agency, Washington, D.C.

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EPA, 1992. Framework for Ecological Risk Assessment. EPA/630/4 92/001. United States
Environmental Protection Agency, Risk Assessment Forum, Washington, D.C. February.

EPA, 1995a. Guidance for Risk Characterization. United States Environmental Protection
Agency, Science Policy Council. February.

EPA, 1995b. Policy for Risk Characterization at the U.S. Environmental Protection Agency.
United States Environmental Protection Agency. March 21.

EPA 1997a. Rules of Thumb for Remedy Selection. Office of Solid Waste and Emergency
Response. U.S. Environmental Protection Agency. EPA 540-R-97-013. OSWER 9355.0-
69 PB97-963301. August 1997.

EPA, 1997b. Ecological Risk Assessment Guidance for Superfund: Process for Designing and
Conducting Ecological Risk Assessments. Interim Final. EPA 540-R-97-006. United
States Environmental Protection Agency, Office of Solid Waste and Emergency
Response, Edison, New Jersey. June 5.

EPA, 1999. A Guide for Preparing Superfund Proposed Plans, Records of Decision, and Other
Remedy Selection Decision Documents. EPA/540/R-98/031, OSWER Directive 92001.1-
23P, July 1999.

Alberini, Anna, and David Austin, (2002), "Accidents Waiting to Happen: Liability Policy and
Toxic Pollution Releases," Review of Economics and Statistics, 84(4): 729-41.

Boyd, James, Winston Harrington, and Molly K. Macauley (1996), "The Effects of
Environmental Liability on Industrial Real Estate Development," Journal of Real Estate Finance
and Economics, 12:37-58.

Dewees, Don, David Duff, and Michael Trebilcock (1996), Exploring the Domain of Accident
Law: Taking the Facts Seriously, New York and Oxford: Oxford University Press.

Garber, Steven, and James K. Hammitt, (1998), "Risk Premiums for Environmental Liability:
Does Superfund Increase the Cost of Capital?" Journal of Environmental Economics and
Management, 3 6(3):267-294.

Merolla, A. Todd (1998), "The Effect of Latent Hazards on Firm Exit in Manufacturing
Industries," International Review ofLaw and Economics, 18: 13-24.

Rausser, Gordon C., Leo K. Simon, and Jinhua Zhao (1998), "Information Asymmetries,
Uncertainties, and Cleanup Delays at Superfund Sites," Journal of Environmental Economics
and Management, 35(1): 48-68.

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Ringleb, A. H., and S.N. Wiggins (1990), "Liability and Large-scale, Long-term Hazards,"
Journal of Political Economy, 98:574-95.

Sigman, Hilary (1998), "Liability Funding and Superfund Clean-up Remedies," Journal of
Environmental Economics and Management, 35: 205-24.

Sigman, Hilary (2001b), "The Pace of Progress at Superfund Sites: Policy Goals and Interest
Group Influence," Journal of Law and Economics, 44(l):315-344.

Stafford, Sarah L. (2003), "Assessing the Effectiveness of State Regulation and Enforcement of
Hazardous Waste," Journal of Regulatory Economics, 23:27-41.

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