LEGISLATION: EPA Encourages Early Superfund Settlements

The Environmental Protection A-gency (EPA) is attempting to make settlements easier and cheaper for small-stakes players in the Super-fund game. The agency encourages early settlements with potentially responsible parties (PRPs) that have contributed small amounts of wastes to sites listed for cleanup under the Comprehensive Environ-mental Response, Compensation and Liability Act of 1980 (CERCLA or Superfund).

These so-called de minimis settlements ultimately reduce transaction costs for small-quantity contributors by safeguarding them from full-blown Superfund negotiations and litigation. Shielding small contributors who make de minimis settlements is essential; unless the harm at a site is easily apportionable, all PRPs are jointly and severally liable for the full cleanup tab, and they can sue each other.

CERCLA established a comprehensive liability scheme for clean-up of property contaminated with hazardous substances. Under the law, EPA can require responsible parties to clean up sites on its National Priorities List (NPL) or re-imburse the agency for its cleanup expenses. In 1986, Congress gave EPA the authority to make expedited settlements. Unfortunately, EPA hasn't accomplished very many of these presumably beneficial work-outs. Of approximately 1,300 sites on the NPL, EPA can claim only 125 settlements at 75 locations (see chart).

Part of the reason stems from EPA's obligation to reconcile seemingly conflicting goals and requirements. EPA must quickly establish a de minimis payment figure (representing cleanup expenses and a penalty) that is low enough to lure parties into an early settlement. However, the agency cannot know if its proposed settlement amount is fair and realistic until it amasses a significant amount of information about the site, the contaminants present and the estimated cleanup costs.

EPA's regional offices cannot chalk up higher numbers of de minimis settlements because, ac-cording to a General Accounting Office report, the agency lacks mo-ney, sophistication and staff to do the job. Moreover, the guidance from EPA headquarters has been unworkably vague if not altogether counter-productive to early settlements, say regional EPA employees.

Under increasing pressure from Congress, small businesses and others, EPA seems ready to relax its constraints on de minimis settlements. Agency guidance now permits regional officials to pursue de minimis settlements by side-stepping the standard, time-consuming method of systematically identifying PRPs and their respective waste contribution and financial re-sources. The agency believes that reasonably adequate information can be found elsewhere.

Last July, EPA headquarters again directed the regional offices to encourage de minimis settlements, providing what it believed to be helpful information for determining the eligibility of a de minimis party. EPA told the regions that, on average, de minimis settlements are offered to 1.0 percent contributors nationally with a range between 0.07 percent and 10 percent. The regions also must now consider the effect of a possible settlement on other parties and the relative toxicity of a PRP's waste.

The amount of a settlement must be composed of a base payment (projected cleanup costs multiplied by the party's share of the waste) plus a premium reflecting possible increases in cleanup costs and the benefits to de minimis parties from avoided litigation, according to EPA.

Most premiums in these settlements have ranged from 50 to 100 percent of the base payment. EPA recommends a premium of 50 percent if the settlement allows EPA to seek additional contributions (so-called "re-opener" clauses) if costs rise above a certain level, and 100 percent if it does not.

Regions have also been told to improve the program's customer relations. EPA headquarters has provided explanatory materials and a sample letter, which discuss the elements of the Superfund program and the nature and advantages of early settlement.

Regions are also learning how to form de minimis groups, how to use alternative dispute resolution, how to get non-de minimis parties in-volved, how to prepare fact sheets and press releases and how to hold public meetings and keep local officials informed.

EPA is also encouraging settlements with de micromis waste contributors; that is, parties that have contributed so little waste to a site that they are not worth formally pursuing. The agency hopes thereby to shield these parties from the steep transaction costs associated with being named in contribution actions by other PRPs.

The way EPA deals with de mi-cromis parties is similar to how it deals with de minimis parties - with only a few differences. For example, de micromis parties do not pay a premium to settle and in-variably face cost re-openers.

EPA seems serious about in-creasing use of de minimis settlements. Pilot projects are underway in four regions. Nevertheless, the program is likely to falter unless the agency can train more staff in de minimis settlements and provide support to the regions.

In the meantime, would-be de minimis PRPs would be smart to aggressively pursue all opportunities for early settlement in this improved climate.