Source: Mondaq Business Briefing, June 13, 2017
By: Mr Van Hilderbrand Jr and Marian C. Hwang
Posted on: http://www.advisen.com
When Scott Pruitt took over the post as Administrator of the United States Environmental Protection Agency (EPA), he made it clear that one of his top priorities was to expedite cleanups at contaminated sites across the country. Facing reductions in the agency’s FY2018 operating budget, including cuts to the Superfund program, it has become clear that in order to achieve this goal, Administrator Pruitt will not be able to simply increase spending, but instead must look to overhaul and restructure the cleanup program from within. To that end, he has made several significant decisions recently including centralizing remedy selection decision-making authority at EPA headquarters and creating a regulatory reform task force.
Briefly, What is Superfund?
The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), enacted in 1980, and the Superfund Amendments and Reauthorization Act (SARA), enacted in 1986, are the federal statutes that provide EPA with the responsibility and authority to identify and clean up contaminated sites throughout the country that pose harm to human health and the environment. CERCLA holds those responsible, in whole or in part, for releases of hazardous substances at a site through a joint and several, strict liability scheme. Those that can be found liable include current and former site owners and operators, as well as waste generators and those that arrange for the disposal of hazardous substances at the site.
CERCLA created a trust fund, also referred to as the Superfund, to finance emergency responses, cleanups, and enforcement activities against potentially responsible parties (PRPs). The original money set aside to address contaminated sites has long since dried up. Today, the program is replenished mainly with Congressional appropriations from the general tax fund and from money collected from responsible parties.
The Superfund program is popular among lawmakers and their constituents because it has been generally seen as a success — remediating contaminated properties and returning them to productive use through the Superfund Redevelopment Initiative or through a state Brownfields program. According to EPA, there are 1,300+ Superfund sites on the National Priorities List (NPL) in the U.S., and at least one in every state. Many have been sitting stagnant for years. Maryland has 20+ sites, while Virginia has 30+ sites. Due to the sheer size of the program, the money involved, and the fact that many constituents live at or near a Superfund site, this program matters to Congress.
Over the last decade, the program has suffered from under-funding from Congress. Thus, there has been a decrease each year in the number of cleanups and no reform. All signals indicate that FY2018 funding will be no different.
The Uncertain Future of Enforcement, Oversight, and Compliance Monitoring
As we discussed in an earlier post, the White House’s FY2018 proposed budget outline decreased funding to EPA’s operating budget by 31 percent, including a $330 million cut to the Superfund cleanup program. The new budget, proposed on May 23, 2017, mostly retained these budget reductions. Although the final FY2018 budget must be approved by Congress, it is clear that significant reductions are on the horizon.
Such a drop in spending may inevitably affect the across-the-board resources available for emergency response and removal, civil and criminal enforcement, compliance monitoring, environmental justice, reclamation and reuse, and the program’s support functions. Funding or lack thereof is usually a contributor in the backlog of sites as EPA can’t cleanup sites on its own and has no resources to force PRPs to perform the remediation activities or to pay the agency back. Spending cuts do not decimate the program’s ability to be effective, but it may slow down the agency’s ability to address some of its perceived needs.
With a proposed reduction in resources by nearly one-third, where does that leave the Superfund program? What we have seen over the past few months is that Administrator Pruitt plans to expedite cleanups through regulatory reform and by handling the negotiations and final decision determination on cleanup remedies himself.
Remedy Decision-Making Authority Shifts to EPA Headquarters
EPA Administrator Pruitt issued a memorandum on May 9, 2017 centralizing decision-making on major Superfund remedies at EPA headquarters. Final decisions on remedies exceeding $50 million are to be made by Administrator Pruitt or the Deputy Administrator, not by Regional Administrators. According to the memorandum, this move will improve the remedy selection process by promoting increased oversight and accountability and “enhancing consistency in remedy selection across states and the regions.” Importantly, the shift in authority only applies to prospective remedies, not those that have already been made and documented in Record of Decisions, and doesn’t shift implementation and oversight responsibility, which remains with the various regions. Many opponents believe this move is simply a way to reduce costs and time in the cleanup process, and question whether expedited cleanups actually means less rigorous cleanups.
Task Force Created to Overhaul Contaminated Site Remediation
Next, EPA Administrator Pruitt issued a memorandum on May 22, 2017 establishing a task force of agency officials to streamline and overhaul the Superfund program. The memorandum asks for detailed recommendations within 30 days “on how the agency can restructure the cleanup process, realign incentives of all involved parties to promote expeditious remediation, reduce the burden on cooperating parties, incentivize parties to remediate sites, encourage private investment in cleanups and sites and promote the revitalization of properties across the country.” In particular, the memorandum requests recommendations on how to:
Streamline and improve the efficiency and efficacy of the overall Superfund program (e.g., identify best practices, reduce time between site identification and beneficial reuse, encourage private investment at sites, realign incentives of all involved parties);
Overhaul and streamline the process used to incentivize private investment at sites (e.g., prospective purchaser agreements, bona fide prospective purchaser status, comfort letters, ready-for-reuse determinations);
Streamline and improve the remedy development and selection process;
Promote consistency in remedy selection across regions while utilizing the National Remedy Review Board and the Contaminated Sediments Technical Advisory Group;
Utilize alternative and non-traditional approaches for financing site cleanups;
Improve the management and use of special accounts;
Reduce administrative, overhead costs, and other burdens borne by remediating parties; and
Improve the agency’s interactions with key stakeholders.
According to the memorandum, Administrator Pruitt hopes that these recommendations and changes will help the Superfund program “reach its full potential of returning formerly contaminated sites to communities for beneficial use.”
Industry Groups also Urge EPA to Overhaul the Superfund Program
In line with the President’s February 24, 2017 Executive Order 13777 entitled “Enforcing the Regulatory Reform Agenda,” EPA sought comments from the public on what steps the agency should take as it pursues regulatory reform and reviews its existing rules and policies. The agency received thousands of comments, some of which urged the agency to preserve existing policies to protect human health and the environment while others asked the agency to overhaul the various regulatory frameworks that commenters saw as outdated, inefficient, and ineffective.
Many comments were submitted by regulated industries on CERCLA reform. Industry groups, such as the Superfund Settlements Party (coalition of large chemical and other manufacturing companies) and the Federal Recycling and Remediation Coalition (coalition of hazardous waste generators), urged EPA to make a variety of policy changes that ease the regulatory burdens of CERCLA and expedite cleanups. These include an effort to streamline remedy implementation from a scientific, engineering, and construction standpoint, a review of the exposure scenarios used to assess risk, and a review and update to agency guidance documents, particularly on issues such as the use and consideration of applicable or relevant and appropriate requirements (ARAR), treatment of principal threat waste, identification of exposure pathways, consideration of future land use, and vapor intrusion.
Potential Use of Superfund Site Accounts to Supplement the General Fund
One of the areas the regulatory reform task force will report on is how to improve the management and use of special accounts. The funds dedicated to the Superfund program fall into two categories: (1) a general fund replenished with money appropriated to the program from Congress and used by EPA for agency-led site cleanups, removal actions, pre-remedial work, and to pay personnel; and (2) money in accounts that have been established to cleanup particular sites funded by responsible parties under a court-sanctioned settlement agreement. The cuts to the FY2018 budget discussed above affect the first category. With respect to the second, according to a 2009 report from the EPA’s Office of Inspector General, the site-specific funds could be $1 billion or more across 800+ accounts.
Adding to the uncertainty is the potential use of the site-specific accounts to help bridge the gap left by spending cuts, and fund the goals of the broader program. One would think that remedial work at sites with dedicated accounts would progress as before and as planned; however, because EPA administrator Pruitt has made it a priority to speed up cleanups and delist sites, these dedicated site accounts could be reclassified and the money used to fund the broader program. At this point, it is unknown whether the agency has the authority to do this, whether it can do this from an accounting and controller perspective, whether this would create a breach of contract action at sites where a settlement agreement is in place and the money is used for different purposes, and whether this action would undermine settlement agreements in general. It is still too early to tell if and how EPA will use the site-specific accounts.
Subsurface Intrusion Rule Takes Effect
A final rule allowing EPA to place a contaminated site on the NPL based solely on the presence of subsurface vapor or water intrusion went into effect on May 22, 2017. The final rule was signed during the last month of the Obama Administration and its effective date was delayed twice by EPA Administrator Pruitt.
The rule added subsurface intrusion to the list of human soil exposure scoring pathways considered by the agency’s Hazardous Ranking System, which evaluates and scores sites for possible inclusion on the NPL. According to EPA, “subsurface intrusion is the migration of hazardous substances or pollutants and contaminants from the unsaturated zone and/or the surficial ground water into overlying structures.” EPA has a congressional mandate in CERCLA to identify releases of hazardous substances that warrant further investigation and to determine if risks should be addressed.
According to an agency Question and Answer document, EPA doesn’t believe this new final rule will increase the number of sites listed on the NPL or site assessments performed each year. That said, the agency points to budget constraints and the rising cost of subsurface intrusion site assessments as the reasons more sites won’t be added to the NPL. If budget levels return in future years, the final rule provides the agency with another mechanism to address sites that pose a risk.
For a program that hasn’t changed much in the past few decades, Superfund is set to see some significant policy changes in light of the new Administration. All eyes will be on the proposed budget and cuts to the administration of the Superfund program, the first few remedies selected by EPA headquarters, and on the regulatory reform task force’s findings, which should be in the next month. As this issue evolves in the coming weeks and months, please check back to this blog for any updates. In the meantime, if you have any questions, please contact any of the attorneys listed on this page.