Superfund: Recovering EPA's Costs

Superfund Enforcement Topics How Sites are Discovered Finding Those Responsible Getting the Clean-Up Done Recovering EPA's Costs Getting Involved (OERR/Regions) Superfund Cleanup Policy & Guidance documents

•   Response Costs
•   Future Costs
•   Past Costs
•   Collecting Debts
•   Writing-Off Costs
•   Bankruptcy

Response Costs

EPA is authorized to recover all of its costs associated with a response. Response costs include several types of costs, each of which is accounted for differently.

• Direct Costs - money spent on things that can be traced directly to a particular activity, such as a cleanup action. These costs include things such as: time spent on a cleanup-related activity, travel to and from the site, contractor costs at the site, equipment used at the site, etc. These costs include both EPA's costs and government contractors' costs.



• Contractors' Annual Allocation Costs - money spent by government contractors doing things that are site-related but not traceable to a particular site. These costs include things such as training in handling hazardous materials. The training is essential to the site work, but the training one person receives may be put to use at several sites. For this reason, on an annual basis, the contractors allocate these costs across the sites they have been working on during the year. The contractors provide EPA with a site specific allocation of these costs, and EPA treats them as direct costs.



• EPA's Indirect Costs - money EPA spent managing the Agency. These costs are not directly traceable to any particular clean up activity, and include things such as: time spent on administrative issues such as personnel matters, and writing guidance; the cost of office buildings; utility costs; office supplies, etc. EPA has developed a complex methodology for allocating these costs among all of the things it accomplished during a year.

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Future Costs

As noted above, EPA's first goal is to negotiate a settlement with the responsible parties so they will clean up the contaminated site. These settlements usually include provisions requiring the responsible parties to pay cleanup related costs EPA will incur in the future.

 

Past Costs

EPA incurs costs at all of its sites. Costs incurred before a settlement is reached with the responsible parties are referred to as "past costs." Past costs include direct, EPA indirect, and contractors' annual allocation costs as described above, all of which are computed using accounting system data. EPA generally enters into two types of settlements addressing past costs. One is a settlement where the responsible party agrees to conduct the cleanup and to reimburse EPA for costs incurred prior to the settlement. The other is where the responsible party refuses to conduct the cleanup. In these cases, EPA initiates a "cost recovery" action to recover its costs. Cost recovery actions may take years to resolve. During the course of a cost recovery action EPA periodically updates the amount it is seeking. These adjustments include additional cleanup work being done by EPA, legal costs incurred by EPA, and interest accrued on the amount sought.

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Collecting Debts

The Agency records the above-referenced costs as Superfund accounts receivable when a consent decree, judgment or administrative order is entered or a demand for payment is issued. Based on time frames set forth in the agreement, the debtor, generally a PRP, has a certain period of time in which to pay the accounts receivable. When a Superfund accounts receivable becomes overdue, the Agency works with the Department of Justice to collect the debt.

 

Writing-Off Costs

Although EPA generally enters negotiations or litigation seeking 100 percent of its costs, there are instances where 100 percent recovery is not possible. In these cases, EPA has to write-off a portion of its costs. These write-offs may occur prior to settlement (e.g., when EPA can not locate financially viable responsible parties) or after settlement (e.g., when a responsible party has agreed to pay certain costs and then does not do so).




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Bankruptcy

Sometimes, but not always, the Agency will file a claim for cost recovery or penalties or otherwise to participate in a bankruptcy case. There are factors to be considered by EPA in determining whether to participate in a bankruptcy case, including whether to pursue collection of costs or penalties against debtors who have liability under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or "Superfund") or other environmental statutes. There are other issues in bankruptcy cases: e.g., relating to the abandonment of contaminated property, cleanup activities under CERCLA on property included in the bankruptcy estate, and the impact of the automatic stay on different types of administrative and judicial enforcement activities.

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