Superfund Settlements: Leveraging Superfund Settlements: Leveraging - - PowerPoint PPT Presentation

Presenting a live 90‐minute webinar with interactive Q&A

Superfund Settlements: Leveraging Superfund Settlements: Leveraging Recent Developments

Impact of Burlington Northern, the New EPA Settlement Process, the Superfund Tax and More

T d ’ f l f

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific TUES DAY, DECEMBER 7, 2010

Today’s faculty features: Walter Mugdan, Director of the Emergency and Remedial Response Division for Region 2, U.S. Environmental Protection Agency, New Y

• rk

Michael W S teinberg S enior Counsel Morgan Lewis & Bockius Washington D C Michael W. S teinberg, S enior Counsel, Morgan, Lewis & Bockius, Washington, D.C.

The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.

Continuing Education Credits

FOR LIVE EVENT ONLY

For CLE and/ or CPE purposes, please let us know how many people are listening at your location by completing each of the following steps:

• Close the notification box
• In the chat box, type (1) your company name and (2) the number of

attendees at your location

• Click the blue icon beside the box to send

Tips for Optimal Quality

S d Q lit S

• und Quality

If you are listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality of your internet connection. If the sound quality is not satisfactory and you are listening via your computer speakers, you may listen via the phone: dial 1-866-869-6667 and enter your PIN when prompted Otherwise please send us a chat or e mail when prompted. Otherwise, please send us a chat or e-mail sound@ straffordpub.com immediately so we can address the problem. If you dialed in and have any difficulties during the call, press *0 for assistance.

Viewing Qualit y

To maximize your screen, press the F11 key on your keyboard. To exit full screen, press the F11 key again press the F11 key again.

Superfund Settlements Superfund Settlements and Negotiations and Negotiations

Walter Mugdan

Director, Emergency & Remedial Response Division U.S. EPA Region 2 New York, NY Mugdan.Walter@epamail.epa.gov 212 637 4390 212-637-4390

Michael W. Steinberg

Morgan Lewis & Bockius Morgan, Lewis & Bockius Washington, D.C. msteinberg@morganlewis.com 202.739.5141

December 7, 2010

4

Outline Outline

I.

Superfund Trends p

II.

EPA Negotiation Process for PRPs

III.

Burlington Northern & Santa Fe Railway Co.

• v. U.S., 129 S. Ct. 1870 (May 4, 2009)
• v. U.S., 129 S. Ct. 1870 (May 4, 2009)

IV.

Superfund Alternative Approach (“SAA”)

V.

“Best Practices” for Superfund Negotiations

5

S f d T d Superfund Trends

6

CERCLA at 30 CERCLA at 30

 ~ 41,000 sites assessed (of ~ 44,500)

41,000 sites assessed (of 44,500)

 ~ 1680 proposed, final and deleted NPL sites

1095 Sites with all construction complete

 ~ 1095 Sites with all construction complete  ~ 11,000 removal actions at ~ 8,000 sites  ~ $18 billion in EPA cleanup expenditures  Enforcement Program (to 2009):

Enforcement Program (to 2009):

 ~ $26 billion worth of cleanup work by PRPs  ~ $5 3 billion in cost recovery 

$5.3 billion in cost recovery

7

Superfund Trends

 NPL Listings were down for several years (2005-

2008 average = 13/yr final listings) but have 2008, average = 13/yr final listings), but have increased again (2008-2010, average = > 19/yr).

 RA starts and Construction Completions are  RA starts and Construction Completions are

down in recent years

 Pipeline funding (pays for site assessment work)

Pipeline funding (pays for site assessment work) has decreased

 RA funding flat

g

 More orphan sites; decreased percentage of PRP

funding

 More Complex/Costly sites

8

More Orphan Sites

 States more likely to retain sites with

viable PRPs, and refer orphan sites to EPA

 State referrals to EPA may increase due to

y economic stress

 Many state agencies facing reductions in staff

y g g

 State cleanup funds may be depleted  More private party bankruptcies  More private party bankruptcies  RCRA corrective action sites may be referred

to Superfund when companies become p p unable to pay for cleanups

9

More Fund-Lead Sites More Fund Lead Sites

 Historically PRPs paid approx 70% of  Historically, PRPs paid approx. 70% of

Superfund site cleanup costs (combination

• f PRP-lead cleanups and cost recovery)
• f PRP lead cleanups and cost recovery).

 Currently, about 50% - 60% of costs paid

by PRPs by PRPs.

10

Construction Completions (CC)

 67% of sites have CC  Non-CC sites are generally more complex  Non CC sites are generally more complex

 Of 527 non-CC sites, 40% are federal facilities

(generally large/complex); or high cost (> $50 M) (generally large/complex); or high cost (> $50 M)

 By contrast, federal facilities and high cost sites

make up 12% of all sites with CC. a e up % o a s tes t CC

 Non-CC sites average 4.2 Operable Units/site; CC

sites average 1.8 OUs/site. g /

 60% of non-CC sites have construction

underway, but at only 12% of these is it the final construction project.

11

More Complex & Costly Sites p y

 Compared to the early years of the Superfund  Compared to the early years of the Superfund

program, in recent years smaller/less complex sites were more often retained by states and handled under RCRA, VCP or brownfields programs.

 The “average” site referred to EPA by states is therefore

l / tl th i th t now more complex/costly than in the past

 As “traditional” waste sites have been addressed,

there has been increased attention to “Mega-Sites” there has been increased attention to Mega-Sites (e.g., urban rivers and large mining sites)

12

EPA’s Integrated Cleanup Initiative

 Launched FY-2010; 3-year effort  Launched FY 2010; 3 year effort

 Accelerate site assessments  Evaluate NPL listing issues including new  Evaluate NPL listing issues, including new

pathways (e.g., vapor intrusion), state concurrence policy, and SAA concurrence policy, and SAA

 Accelerate cleanups  Consider improvements to contracting process  Consider improvements to contracting process  New performance metrics  Applies not only to Superfund but also RCRA  Applies not only to Superfund, but also RCRA

Corrective Action, UST & Brownfields

13

Funding Funding

 Congressional appropriations essentially flat over many

years; therefore reduced buying power over time

 2009: $600 M extra stimulus funding

V tl l t i ll f d d lti l

 Very costly cleanups are typically funded over multiple years  Ongoing cleanups represent first priority for continued

funding in a given year funding in a given year

 At historic annual funding levels, it may not be possible

to start new fund-lead constructions in coming year(s)

 President has proposed reauthorization of Superfund tax  Even if enacted, does not guaranteed increased

appropriations appropriations

14

Superfund Trends – Future of NPL Listings?



NPL listing may be the slowest most



NPL listing may be the slowest, most complicated, and costliest way to clean up a contaminated site.



State cleanups typically faster, less expensive (e.g., Licensed Site Professionals), more pragmatic, less stigmatizing g g



Each new site listed on the NPL represents a de facto long-term commitment of EPA t hi l resources to achieve cleanup.



A typical NPL update with just 5 new “mega-sites” means EPA is “guaranteeing” > $250 MM in long- g g $ g term funding, with no appropriation in place for those out-years.

15

Superfund Trends – Future of NPL Listings? (cont'd)



Given finite resources, a new site should not be listed if other approaches will work, such be listed if other approaches will work, such as:



State enforcement



State voluntary cleanup program



RCRA corrective action program



Superfund removal action



Other federal program (e.g., TSCA, FUDS)

16

Superfund Trends – Future of NPL Listings? (cont'd)



Instead, NPL listing should be “the tool of last resort.”



EPA has long maintained that it views NPL listing as “the tool of last resort” the tool of last resort



E.g., EPA’s 1997 response to GAO on delays in NPL cleanups



But it’s hard to say, because listing is not transparent



From 1983-2008, EPA gave no explanation at all of why it was listing sites on the NPL



Since 2008, EPA briefly explains “need for listing”



Since 2008, EPA briefly explains need for listing



Example: Black River PCBs site in NY (Sept. 2010): “The

State of New York referred the site to EPA because the PCB contamination warrants further investigation.”

17

Superfund Trends – Future of NPL Listings? (cont'd)



Unclear whether EPA’s rulemaking process for NPL listings meets minimum requirements of NPL listings meets minimum requirements of Administrative Procedure Act



Proposed rules must facilitate a genuine p g interchange with commenting parties, rather than mere bureaucratic sport.



Final rules must include a statement of basis and purpose sufficiently detailed to allow hi j di i l ti f h d h th searching judicial scrutiny of how and why the rules were adopted.

18

Superfund Trends – Future of NPL Listings? (cont'd)



Principal “established” alternative to NPL listing is Superfund Alternative Approach listing is Superfund Alternative Approach (“SAA”), announced in 2002. SAA i hi hl t i l d



SAA remains highly controversial and has seen limited use.



SAA is discussed below (Part IV) in detail.

19

EPA Negotiation Process for PRPs

20

Negotiation Process g

 RD/RA negotiations duration increased

/ g significantly between 1990 and 2008

 Average duration 1990-1993 = 197 days

g y

 Average duration 2004-2008 = 305 days

• Previously “rigid” negotiation
• Previously, rigid negotiation

timeframes required HQ concurrence for extensions extensions

• 9/30/09 OECA Interim Policy on

Managing Duration of RD/RA Managing Duration of RD/RA Negotiations

21

RD/RA Negotiations Interim Policy

 New process intended to be more flexible  Enforcement process to be engaged earlier at  Enforcement process to be engaged earlier, at

Proposed Plan stage

Negotiation Plan to be developed starting prior to

 Negotiation Plan to be developed starting prior to

ROD, with benchmarks, deadlines

 Plan will identify trigger for issuance of UAO  Plan will identify trigger for issuance of UAO  Plan & Pre-Referral Negotiation (PRN) package to

be submitted w/in 30 days after ROD be submitted w/in 30 days after ROD

 DOJ to comment on PRN w/in 30 days  Special Notice Letter (SNL) to be issued w/in 90  Special Notice Letter (SNL) to be issued w/in 90

days of ROD

22

RD/RA Negotiations Interim Policy (Cont’d)

 Region HQ & DOJ will hold frequent  Region, HQ & DOJ will hold frequent

status conferences on strategy & timeline Goal: complete negotiations w/in 120 days

 Goal: complete negotiations w/in 120 days

• f SNL

If ttl t t D 120 t t

 If no settlement at Day 120, status

conference at middle management level Further strategy to be set out in status memo

 Further strategy to be set out in status memo

to upper management level

 Additional status conferences at Day 240 and  Additional status conferences at Day 240 and

Day 300 after SNL.

23

Negotiation Process: Interim Guidance (cont'd)

 Interim policy encourages the increased use of Unilateral

Administrative Orders (UAO) when negotiations drag on (if Administrative Orders (UAO) when negotiations drag on (if “settlement is unreasonably delayed”) Current EPA guidance says DOJ should lodge a Consent

 Current EPA guidance says DOJ should lodge a Consent

Decree within 30 days of receipt of a final executed settlement from EPA, and move for entry of the Consent Decree within 45 days after it is lodged Decree within 45 days after it is lodged.

 Interim policy encourages EPA regions to work with DOJ to

“ h h b f h C i kl “to have the agreement before the Court as quickly as possible in order to get the cleanup started.”

24

RD/RA Negotiations Interim Policy (Cont’d)

 Deviations from Timeline

 If no SNL by Day 90, status conference then

and at Day 150, and every 30 days thereafter

 Site-specific alternative schedules may be

adopted in “rare” cases

 Increased attention to time required for

lodging and entry of consent decree

 Policy to be re-evaluated after 18 months.

25

Negotiation Process: Model Consent Decree

OSRE’ “R i d CERCLA M d l RD/RA C t

 OSRE’s “Revised CERCLA Model RD/RA Consent

Decree” (Oct. 1, 2009), available at http://www.epa.gov/compliance/resources/polici http://www.epa.gov/compliance/resources/polici es/cleanup/superfund/rev-rdra-2009-mem.pdf

 Selected changes made to the model RD/RA

Consent Decree since last revisited in 2001.

Fi i l A

• Financial Assurance
• Contribution Rights
• Special Accounts
• Special Accounts

26

Negotiation Process: Financial Assurance

 2009 revisions to Model CD tighten the screws on FA in

g many ways:

 PRPs must use only liquid mechanisms (no financial test

t ) if th lti l h i t

• r guarantee) if they use multiple mechanisms to cover

the total estimated cost (¶ 44).

 In computing financial test eligibility, PRPs must include

In computing financial test eligibility, PRPs must include not only the ratios specified in EPA’s rules, but also “any

• ther” federal obligation, or any state environmental

liability assured through “a financial test or guarantee” liability, assured through a financial test or guarantee (¶ 44.e).

27

Negotiation Process: Financial Assurance (cont’d)

 Even if PRPs qualify for the financial test or corporate

q y p guarantee, EPA has “discretion” to require that they use a liquid mechanism instead (Note on ¶¶ 44-45).

 Regions encouraged to think about “the industry

sector(s)” in which the PRP operates sector(s) in which the PRP operates

 FA mechanism must be in place within 10 days of the

Effective Date (¶ 45).

28

Negotiation Process: Contribution Rights

What EPA typically wants is for a few PRPs to

 What EPA typically wants is for a few PRPs to

pay for something that is only partly their fault. PRPs will often do so anticipating that they will

 PRPs will often do so, anticipating that they will

then obtain equitable contribution from others who caused the problem. who caused the problem.

 But the Model CD provides the “worker” PRPs

with little assistance, and several impediments. , p

 Let’s look at a few examples.

29

Negotiation Process: Contribution Rights (cont’d)

W k PRP t i US t l t 60 d ’ i ti

 Worker PRPs must give US at least 60 days’ prior notice

before they seek contribution from (or file any litigation against) any other person (¶ 115).

 Worker PRPs must waive their right to seek contribution

from de minimis PRPs at the site (¶ 111). from de minimis PRPs at the site (¶ 111).

 In effect, workers must give EPA first crack at cashing out de

minimis parties;

 EPA is supposed to put proceeds from those de minimis

pp p p settlements into special site accounts and then disburse those funds to the worker PRPs;

 But as we’ll see in a moment, EPA usually doesn’t do that.

30

Negotiation Process: Contribution Rights (cont’d)

 Work performed in compliance with the CD is  Work performed in compliance with the CD is

“presumed” to be consistent with the NCP, but the worker PRPs must prove their compliance.

 They cannot wait until EPA certifies completion

• f the work, because the statute of limitations is

short and EPA is slow to certify.

 Yet if they seek EPA’s testimony confirming their

l d l d l compliance, EPA may decline to respond, relying

• n 40 C.F.R.

2.402 (Tuohy rule giving EPA discretion to ignore subpoenas in private party discretion to ignore subpoenas in private-party litigation).

31

Negotiation Process: Contribution Rights (cont’d)

 Finally, after Atlantic Research, worker PRPs should be in

an even stronger position than before.

 They should be free to sue non-settlers under § 107.

They should be free to sue non settlers under 107.

 They should be shielded from any

107 claims against them. B t the a e not

 But they are not.  DOJ takes the position that any party signing the Model

Consent Decree is not a “volunteer,” and so has no 107 claim, despite Atlantic Research.

 Yet the Model CD fails to protect settling parties from

107 claims brought by non-settlers (¶ 114). 107 claims brought by non settlers (¶ 114).

32

Negotiation Process: Special Site Accounts

 The new Model CD adds extensive language  The new Model CD adds extensive language

dealing with what the PRPs must do before EPA will disburse money to them, and with when EPA is justified in retaking the money (¶¶ 62-68).

 But the Model CD still doesn’t assume that any

money will be disbursed to PRPs (“decision to disburse funds is within EPA’s sole discretion”). h fl k ’

 This reflects a continuing weakness in EPA’s

implementation of this Administrative Reform.

33

Negotiation Process: Special Site Accounts (cont'd)

 This Administrative Reform was announced by EPA in

y 1995 as intended to “Increase Fairness in the Enforcement Process.”

 EPA changed its past practice “of placing settlement  EPA changed its past practice of placing settlement

proceeds . . . in the general Superfund,” and promised instead to “utilize site-specific special accounts.”

 PRPs understood that such funds would be paid to the  PRPs understood that such funds would be paid to the

worker PRPs to help defray their cleanup costs.

 As EPA explained in its 1998 guidance: “Special account

d h ld ll b di b d t th PRP proceeds . . . should generally be disbursed to the PRP that agrees to perform [the] response action.”

34

Negotiation Process: Special Site Accounts (cont'd)

 EPA added in its 2001 guidance that “[t]he highest

g [ ] g priority for [special account funds] is as a settlement incentive to obtain commitments from PRPs to conduct future response actions ” future response actions . . .

 EPA has over $1 billion in more than 800 site accounts.  Yet barely 10% of the money is actually disbursed to

Yet barely 10% of the money is actually disbursed to PRPs, or even targeted for disbursement to PRPs.

 Most of it goes for other things, which are unrelated to

th f thi Ad i i t ti R f “t i the purpose of this Administrative Reform – “to increase fairness in the enforcement process.”

35

Negotiation Process: Consent Decree for RI/FS



Potential Advantages: G t t i t PRP ’ i ht t t ib ti d

§ 113(f)(1)

 Greater certainty re PRPs’ right to contribution under § 113(f)(1)  Courts have not been receptive to § 113(f)(3) claims based on

EPA’s Model AOC for RI/FS work



Potential Disadvantages:

 DOJ needs a Rule 11 basis to file suit earlier in the process

Wh t h t ti d b DOJ l i th h

 What happens to parties sued by DOJ early in the process who

choose not to participate in the RI/FS consent decree?

 Model CD language needs adjustments to address RI/FS

36

Burlington Northern & Santa Fe Railway Co v United States Railway Co. v. United States 129 S. Ct. 1870 (May 4, 2009)

37

Burlington Northern Burlington Northern

 “Arranger” Liability  Divisibility of Harm  Burlington Northern & Its Progeny  Impact on Negotiations

38

Brown & Bryant Superfund Site

39

Burlington Northern: “Arranger” Liability

 What does it mean to “arrange for disposal” of a

g p hazardous substance under CERCLA § 107(a)(3)?

 Supreme Court called for a “fact-intensive inquiry” into  Supreme Court called for a fact-intensive inquiry into

the arrangement.

 I ntent to dispose is now the key to “arranger” liability.  Is the Aceto doctrine still good law? United States v  Is the Aceto doctrine still good law? United States v.

Aceto, 872 F.2d 1373 (8th Cir. 1989) (pesticide manufacturers liable as “arrangers” for expected spills and losses incidental to off-site formulation of product) and losses incidental to off-site formulation of product)

40

Burlington Northern: Divisibility of Harm

 What is the evidentiary basis required to

y q apportion harm among PRPs?

 There must be a “reasonable basis” for apportioning

the harm among the PRPs. g

 Relevant factors: chronology (years of activity),

volume of hazardous substances, geography (relative acreage used or controlled) type of (relative acreage used or controlled), type of contaminants (toxicity, etc.).

 Burlington court’s flawed arithmetic

 Is joint and several liability still the default rule?

41

Burlington Northern: Its Progeny – “ ” “Arranger Liability”



Celanese Corp. v. Martin K. Eby Construction Co. (5th Cir. Oct. 1, 2010)

• Backhoe operator was unaware that he struck and damaged

underground pipeline carrying methanol. Plaintiff urged that the company’s “conscious disregard of its duty to investigate is company s conscious disregard of its duty to investigate is tantamount to intentionally taking steps to dispose of methanol.”

• Court ruled that construction company did not take intentional

p y steps, or plan, to dispose of methanol. Even in Burlington Northern, where Shell had actually arranged for shipments that it knew would result in spills and leaks, the Supreme Court held no “arranger” liability arose there no arranger liability arose there

42

Burlington Northern: Its Progeny – “ ” ( ’ ) “Arranger Liability” (cont’d)

 Frontier Communications Corp. v. Barrett Paving

Materials, 2009 WL 1941920 (D. Maine July 7, 2009)

• Allegations of disposal via municipal sewer lines

survive motion to dismiss.

 United States v. Washington State Dept. of Transp.,

2009 WL 2985474 (W.D. Wash. Sept. 15, 2009)

• Army Corps of Engineers may have “arranged for

y p g y g disposal” by dredging contaminated waterways, disposing of the contaminated dredge materials, and/or issuing permits for others to dredge and dispose as well dispose as well.

43

Burlington Northern: Its Progeny – “ ” ( ’ ) “Arranger Liability” (cont’d)

d

 Hinds Investments, L.P. v. Team Enterprises,

Inc., (E.D. Cal. Jan. 15, 2010, Mar. 12, 2010, Apr 22 2010):

• Apr. 22, 2010):

 In successive rulings, the district court dismissed

“arranger” liability claims against: g y g

 the manufacturer of dry cleaning equipment and the

franchisor of a dry cleaning business;

 a dry cleaning machine manufacturer that through its  a dry cleaning machine manufacturer that, through its

instruction manual, directed customers to flush PCE- contaminated water down an open drain; and

 a manufacturer of dry cleaning waste equipment  a manufacturer of dry cleaning waste equipment

44

Burlington Northern: Its Progeny – “ ” ( ’ ) “Arranger” Liability (cont’d)

’l l d

 American Int’l Specialty Lines Ins. Co. v. United

States, 2010 WL 2635768 (C.D. Cal. June 30, 2010): 2010):

 United States liable as “arranger” for disposal

• f perchlorate at contractor site because it
• f perchlorate at contractor site because it

 Delivered rocket engines for refurbishing;  Owned the perchlorate in those engines; and

Owned the perchlorate in those engines; and

 Intended that the perchlorate be disposed of as

waste during the engine refurbishing process

45

Burlington Northern: Its Progeny -- Divisibility

 District courts generally seem to recognize that

g y g Burlington Northern changed the law on “divisibility”

 Appleton Papers Inc. v. George A. Whiting Paper Co.

(E.D. Wis. 2009)

• Burlington Northern “significantly eases the burden on
• Burlington Northern significantly eases the burden on

defendants who seek to avoid joint and several liability by allowing courts more leeway in d t i i h th th d i ti i determining whether the damage in question is capable of being apportioned . . . . But these are largely evidentiary issues.” g y y

46

Burlington Northern: Its Progeny – ( ’ ) Divisibility (cont’d)

 Evansville Greenway & Remediation Trust v. Southern

Indiana Gas & Electric Co., 2009 WL 3163180 (S.D. Ind. 2009)

• “[W]here the applicable law appears to be in flux like

this, perhaps the best role the district court can play in the process is to hold a trial and make the detailed findings of fact needed to inform higher courts as findings of fact needed to inform higher courts as they address the questions of law.” C t U it d St t I M t i Mi I 2010

 Contra, United States v. Iron Mountain Mines, Inc. 2010

WL 1854118 (E.D.Cal. May 06, 2010) (Burlington Northern did “not constitute a change in law [regarding apportionment]”) apportionment] ) .

47

Burlington Northern: Its Progeny -- ( ’ ) Divisibility (cont’d)

 Applications of new “divisibility” standard:

pp y

 Reichold, Inc. v. U.S. Metals Refining, 2009 U.S. Dist.

LEXIS 52471 at * 131-33 (D.N.J. 2009)

• Capping remedy was distinct harm and readily divisible as between defendant

pp g y y and a third party, each of whom caused sufficient metals contamination to require the cap even if the other’s activities had not occurred.

 ITT Industries, Inc. v. Borgwarner, Inc., 700 F. Supp.2d

848 (W D Mich 2010) 848 (W.D. Mich. 2010)

• Defendants urged divisibility based on, e.g., geographic scope of operations and

substances used (PCE versus TCE);

 Ashley II of Charleston LLC v PCS Nitrogen Inc

2010

 Ashley II of Charleston, LLC v. PCS Nitrogen, Inc., 2010

WL 4025885 (D.S.C. Oct. 13, 2010) (rejecting multiple theories of divisibility of harm)

48

Impact on Negotiations Impact on Negotiations

 Burlington Northern issues likely to be  Burlington Northern issues likely to be

raised in many, perhaps most, Superfund negotiations negotiations

 Extent of impact still hotly contested  Very broad potential applicability  Very broad potential applicability  Stakes potentially very high for both

government and PRPs (whether as defendants government and PRPs (whether as defendants

• r as plaintiffs)

49

Impact on Negotiations (cont’d) Impact on Negotiations (cont d)

 “Arranger” Liability: PRPs whose only 

Arranger Liability: PRPs whose only exposure is based on § 107(a)(3) will weigh carefully the pros and cons of g y p litigating instead of settling.

 Very limited impact in landfill cases and urban

h d l h waterway cases, where disposal was the apparent objective for all concerned

 Much greater impact at recycling sites toll  Much greater impact at recycling sites, toll

processing cases, etc., where disposal was at most an unavoidable part of the transaction. p

50

Impact on Negotiations (cont’d) Impact on Negotiations (cont d)

 Divisibility: PRPs at multi-party sites now  Divisibility: PRPs at multi party sites now

see the potential for avoiding joint and several liability if any “reasonable basis” several liability if any reasonable basis exists for dividing up the harm.

 Burlington Northern seems to say that the  Burlington Northern seems to say that the

“reasonable basis” for divisibility need not be highly technical nor overly precise. g y y p

51

Impact on Negotiations (cont’d) Impact on Negotiations (cont d)

 Generally less incentive for PRPs to settle  Generally less incentive for PRPs to settle

early in the process with the government and/or with other PRPs and/or with other PRPs. At it f PRP ill h

 At some sites, one group of PRPs will have

much stronger arguments than other PRP ti i t l d i PRPs, creating a new internal dynamic that may impede settlements.

52

Impact on Negotiations (cont’d) p g ( )

 Uncertainty makes it harder to

i compromise…

 … but litigation may also be viewed as more

i k b t di t bl risky, because outcome more unpredictable

 Trials are likely to be longer and more

complex as they address whether the environmental harm is in fact divisible.

 The expected higher cost of litigation may

create counter-currents that favor early ttl t ti l l b PRP h t settlements, particularly by PRPs who cannot hope to show divisibility.

53

Impact on Negotiations (cont’d) Impact on Negotiations (cont d)

 All the above dynamics mean that more  All the above dynamics mean that more

sites will come to EPA with an orphan share component share component.

 Increased need for Mixed Funding

G t d i il bl f d l & t t

 Greater drain on available federal & state

funds

54

Superfund Alternative Approach (“SAA”)

55

Superfund Alternative Approach Superfund Alternative Approach

 Currently three options for sites judged to  Currently three options for sites judged to

require remedial action:

 NPL listing  NPL listing  Deferral to other programs (RCRA, States)

Superfund Alternative Approach (SAA)

 Superfund Alternative Approach (SAA)

 Investigation, cleanup & enforcement

d SAA ti ll id ti l process under SAA are essentially identical to Superfund; only difference is that site is t l d NPL not placed on NPL

56

Superfund Alternative Approach: Origins

 Throughout the 1990s, some Regions handled

• ug out t e

990s, so e eg o s a d ed some CERCLA sites outside the NPL process (so- called “NPL Equivalent Sites”).

 In response to a proposed NPL listing, the PRPs

typically agreed to address the site through typically agreed to address the site through some combination of accelerated study and removal action.

 In return, EPA typically agreed to defer action

l d d d f l

• n NPL listing and to reconsider need for listing

after PRPs completed the work.

57

Superfund Alternative Approach: Origins (cont'd)

 Major Benefits of “NPL-Equivalent” Path:  Major Benefits of NPL Equivalent Path:

 Avoids stigma of NPL listing  More flexibility re process timing standards  More flexibility re process, timing, standards  Achieves faster progress toward cleanup

Community sees results sooner

 Community sees results sooner.  Conserves EPA funds for sites that need to be

• n NPL
• n NPL.

58

Superfund Alternative Approach: Origins (cont'd)

 EPA HQ Concerns with Non-NPL Path:  EPA HQ Concerns with Non NPL Path:

 EPA got no “credit” or resources for these

cleanups cleanups

 PRPs might clean up just enough to prevent

an NPL listing, then stop, leaving EPA no an NPL listing, then stop, leaving EPA no immediate recourse

 Lack of uniform financial assurance

requirements

 Lack of standardized public participation

p p p

 Trustees’ NRD claims might be barred by SOL

59

Superfund Alternative Approach: Origins (cont'd)

 SAA first announced in June 24 2002  SAA first announced in June 24, 2002

guidance, revised in 2004

 “Revised Response Selection and Settlement 

Revised Response Selection and Settlement Approach for Superfund Alternative Sites” (June 17, 2004) (Ju e , 00 )

 “One-size-fits-all” approach to non-NPL

sites sites

 SAA presented as an “option” for PRPs

who prefer to avoid NPL listing who prefer to avoid NPL listing

60

Superfund Alternative Approach: Elements

 Non-NPL Superfund pathway intended to use

p p y the investigation and cleanup process and standards that are used for NPL sites.

 SAA eligibility based on 3 criteria:  SAA eligibility based on 3 criteria:

 Site contamination is significant enough that site

would be eligible for listing on the NPL (i.e., would likely score > 28 5 on HRS); likely score > 28.5 on HRS);

 Long-term response is anticipated; and  There is at least one willing and capable PRP to

perform the investigation and cleanup perform the investigation and cleanup.

 SAA sites not eligible for Superfund cleanup

money.

61

Superfund Alternative Approach: Elements (cont’d) Elements (cont d)

 Community Engagement activities must be

Community Engagement activities must be comparable to those available under Superfund Superfund

 Use of SAA

 2002 2010: 49 agreements for 64 sites  2002-2010: 49 agreements for 64 sites

 ~ 2% of all CERCLA agreements during that time

 Concentrated (84%) in two regions – R4 & R5  Concentrated (84% ) in two regions – R4 & R5

 Large number of MGP sites

 Two regions have none – R1 & R2  Two regions have none

R1 & R2

 Remaining regions have 1 or 2 each

62

Superfund Alternative Approach: El t ( t’d) Elements (cont’d)

 Enforceable Agreement Required

g q

 Typically AOC for investigation, and …  Judicial Consent Decree for cleanup

ud a Co s

• a up

 Customary provisions from model instruments

apply (e.g., dispute resolution, stipulated pp y ( g , p , p penalties, etc.)

63

Superfund Alternative Approach: Elements (cont'd)

 PRPs must accept standard terms &  PRPs must accept standard terms &

conditions

 NCP process governs study and cleanup (“as  NCP process governs study and cleanup ( as

if” the site were listed on the NPL)

 Up-front liquid financial assurance to  Up front liquid financial assurance to

complete work

 Funding of TAG-type community group(s)  Funding of TAG type community group(s)  Waiver of right to challenge future NPL

listing; and listing; and

 Tolling of SOL for trustees’ NRD claims

64

Superfund Alternative Approach:

PRP Reaction

 Prior Regional practice on “NPL-equivalent” sites was  Prior Regional practice on NPL equivalent sites was

beneficial; yet SAA was designed to end that flexibility St d d SAA t d diti l i id

 Standard SAA terms and conditions are overly rigid:

 No basis for mandating liquid financial assurance  No statutory basis for funding community groups  Not EPA’s job to preserve trustees’ NRD claims

 Some Regions reportedly using SAA coercively

g p y g y

 “If you won’t sign an SAA agreement at this non-NPL site, then

we’ll issue a 106 order and make you do the cleanup that way.”

65

Superfund Alternative Approach: Controversy

 SAA has been the subject of several studies and

S as bee t e subject o se e a stud es a d evaluations; many suggest SAA not ready for prime time. EPA i l i i 2004

 EPA internal review in 2004:

 “EPA generally has not demonstrated clearly the

appropriateness of addressing Alternative Sites appropriateness of addressing Alternative Sites relative to funding work at existing NPL sites.”

EPA evaluation in 2007:

 noted mixed reviews from stakeholders;

recommended that SAA remain an option for appropriate cases

66

Superfund Alternative Approach: C t ( t’d) Controversy (cont’d)

 Concerns:  Concerns:

 Transparency

 Which sites will become SAA sites?  Which sites will become SAA sites?  Who decides? On what administrative record?  Are the PRPs consulted before an SAA designation

g is made?

 Does the community receive notice before – or

ft SAA d i ti ? D th h even after – an SAA designation? Do they have any say in the decisionmaking process?

67

Superfund Alternative Approach: C t ( t’d) Controversy (cont’d)

 Concerns (cont’d):  Concerns (cont d):

 Resources & funding

 No FTEs or dollars allocated to SAA sites  No FTEs or dollars allocated to SAA sites  SAA sites divert EPA resources from NPL sites that

are presumably higher priorities

 EPA does not list on the NPL every site that is likely to

score 28.5 on the HRS

 Potential for slowing progress at NPL sites  Potential for slowing progress at NPL sites

 Possible delays if PRPs fail to perform

68

Best Practices for Superfund Best Practices for Superfund Negotiations, or “The 7 Habits of Highly Effective EPA Superfund Highly Effective EPA Superfund Lawyers”

69

Best Practices: The PRPs Best Practices: The PRPs

 PRPs are part of the solution.

p

 Most sites are the result of disposal practices that have

long since been outlawed or discontinued.

 Most PRPs have made their peace with Superfund  Most PRPs have made their peace with Superfund.  We’re prepared to step up to the plate.  In a business model, we are your biggest customers!  It’s just not productive to treat PRPs as wrong-doers.

As Rep. Al Swift (D—OR) said during the 1994 debate on Superfund reauthorization, “I try to focus on making the Superfund reauthorization, I try to focus on making the statute work better, and I leave the punishment to God.”

 Look for ways to encourage and incentivize settlements.

70

Best Practices: Rough Justice for Workers

 Help PRPs obtain “rough justice.”

p g j

 Being a PRP shouldn’t feel like being mugged in a dark

alley

 CERCLA gives you the tools to help the PRPs obtain  CERCLA gives you the tools to help the PRPs obtain

“rough justice” and thereby incentivize them to perform the cleanup E l

 Examples:  Early and thorough PRP searches  Pursuing the largest manageable number of parties  Pursuing the largest manageable number of parties  Using settlement proceeds from site accounts to help

defray the PRPs’ cleanup costs R i i th h h d di ti EPA’

 Recognizing the orphan share and discounting EPA’s

demands accordingly

71

Best Practices: Rough Justice for ( ’ ) Workers (cont’d)

 Doing so is not only good government, it will  Doing so is not only good government, it will

help you get better results and faster progress at your sites

 Example:  New Jersey site where “black box” with 85

y settling defendants whose identities and shares were unknown to the government until h d the very end

72

Best Practices: “Party Cloudy, with C f C ” a Chance of Contribution”

 What EPA typically wants is for a small group of

PRPs to pay for something that is only partially their fault (based on joint and several liability).

 Contribution is the “relief valve” that made joint

d l li bilit t l bl and several liability tolerable

 But muddled and confusing case law over the

last 5 ea s has made it m ch ha de fo PRPs last 5 years has made it much harder for PRPs to get contribution.

73

Best Practices: “Party Cloudy, with C f C ” ( ’ ) a Chance of Contribution” (cont’d)

h ddl d h l ?

 Just how muddled is the case law?  Conflicting Second Circuit decisions in 2 recent

cases where plaintiffs had signed consent orders cases where plaintiffs had signed consent orders with New York DEC

 First case: plaintiffs can seek cost recovery

First case: plaintiffs can seek cost recovery under 107, but not contribution under 113 (W.R. Grace v. Zotos, 559 F.3d 85 (2d Cir. 2009)) d l ff k b

 Second case: plaintiffs can seek contribution

under 113, but not cost recovery under 107 (Niagara Mohawk v. Chevron, 596 F 3d 112 107 (Niagara Mohawk v. Chevron, 596 F.3d 112

(2d Cir. 2010)

74

Best Practices: “Party Cloudy, with a Chance of Contribution” (cont’d)



Even where contribution claims under § 113 are available, they are

• ften hampered by common-law doctrines that do not fit well with

the practicalities of CERCLA S d h l d f b l



So EPA needs to help PRPs pursue and perfect contribution claims.



Especially with governmental PRPs (DOD, DOE, state and local government).



We’ll tell you at each site what would be most helpful



We ll tell you at each site what would be most helpful.



Examples:

 let us perform an RI/FS under a Consent Decree instead of the

typical AOC

 make the model documents look more like actual settlements

instead of contracts of adhesion (we'll talk more about model documents in a minute)

75

Best Practices: Site Accounts Best Practices: Site Accounts

 Another powerful incentive for the worker PRPs

p is access to money in so-called special accounts.

 This was one of the Superfund administrative

reforms announced by Administrator Browner reforms announced by Administrator Browner back in 1995.

 Unfortunately, it’s lost its way over the years.  The idea was that when EPA received money

from settling parties, such as de minimis cash-

• ut parties, that money would be transferred to
• ut parties, that money would be transferred to

the major PRPs who were doing the cleanup.

 That is officially EPA’s # 1 top-priority use for

special account proceeds! special account proceeds!

76

Best Practices: Site Accounts ( ’ ) (cont’d)

 But in reality, only about 10% of all the money

in those accounts gets used for that purpose. EPA acts like the money belongs to the

 EPA acts like the money belongs to the

Government!

 EPA spends it without even giving notice to the

p g g PRPs who are doing the work at the site.

 Most settlements still do NOT grant PRPs access

to money in site accounts to money in site accounts.

 This is an important reform that needs to be

revived.

77

Best Practices: Model Documents

 Don’t be a slave to model documents.  If you can’t explain why model language has to

y p y g g trump a reasonable request, then something is wrong. It’ t h t “DOJ ”

 It’s not enough to say “DOJ says so.”  The PRPs understand the concern about timing

• f negotiations
• f negotiations.

 We need to show reasonableness.  Stand up to the model police!  Stand up to the model police!

78

Best Practices: Financial Assurance

l (“ ”) l

 Financial Assurance (“FA”) is only a means to an

end, it’s not an end in itself. FA i b i b t l t ttl t d t

 FA is becoming an obstacle to settlement due to

increasing rigidity on the part of the government government.

 Demands for excessive amounts of FA can cause

problems by driving up costs problems by driving up costs.

 So can unnecessary limits on the types and

combinations of FA instruments to be used. combinations of FA instruments to be used.

79

Best Practices: Financial Assurance (cont’d)

 The net result of this rigidity is that large,

fi i ll t i h l tt f financially strong companies purchase letters of credit issued by small companies with marginal credit ratings -- what does this accomplish? credit ratings -- what does this accomplish?

 Don’t assume that “more FA is better.”  Listen when we suggest that FA should be done  Listen when we suggest that FA should be done

differently to avoid jeopardizing settlement.

80

Best Practices: Oversight Costs Best Practices: Oversight Costs

Many experienced Remedial Project Managers have the

 Many experienced Remedial Project Managers have the

confidence to tailor oversight to fit the project.

 Many other RPMs lack the experience or the confidence.

y p

 Oversight thus becomes a recurring source of friction.  PRPs perceive unnecessary use of outside contractors.  Some RPMs spend more to oversee an RI/FS than the

PRPs spend to perform it! Be proactive & “control your client” by considering cost

 Be proactive & control your client by considering cost

caps, dollar limits, and other tools.

81

Question & Answer Q

82