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Superfund Transaction Costs: A Critical Perspective on the Superfund Liability Scheme

July 1991

Citation: 21 ELR 10413

Issue: 7

Author: Jonathan Z. Cannon, David M. Friedland, and William N. Hedeman

Editors' Summary: The Superfund liability scheme has been heavily criticized for creating needless litigation among potentially responsible parties (PRPs) and for generating inordinately high costs and extended delays in cleaning up hazardous waste sites. This Article discusses the transaction costs and delays arising at each step in the Superfund process from initial listing of a site on the CERCLA national priorities list, through the search for PRPs, to the formation and maintenance of PRP committees and the remedial investigation/feasibility study processes. The Article describes the millions of dollars in administrative, legal, engineering, consulting, and other management costs that governmental and private parties spend to prepare for and participate in litigation designed to raise money for cleanups. These transaction costs are an unavoidable result of the existing Superfund liability system and do not directly contribute to cleaning up hazardous waste sites. The Article concludes that various settlement tools—de minimis settlements, mixed funding, nonbinding allocations of responsibility, model consent decrees, alternative dispute resolution, and covenants not to sue—may incrementally reduce transaction costs and delays but do not address the Superfund statute's underlying tendency to force parties to litigate or prepare for litigation at every step in the process. The adversarial nature of the process remains unchanged, with EPA extracting funds on a site-by-site basis and PRPs exercising legal options to resist EPA and to impose cleanup costs on other parties. Further, the government's resources and ability to control the process are limited, even under an aggressive enforcement-first policy. Thus, in the current public debate over whether to change Superfund's liability scheme, the Article contributes to the necessary first step of finding out why the system is not working.

The authors are environmental attorneys with the Washington, D.C., office of Beveridge and Diamond. Mr. Hedeman is a partner with the firm and served as Director of the Superfund Program for the U.S. EPA from 1981 through 1985. Mr. Cannon is also a partner with the firm, is a former Deputy Assistant Administrator of the U.S. EPA Office of Solid Waste and Emergency Response (OSWER), and served as Acting Assistant Administrator of OSWER from March through November 1989. Mr. Friedland is an associate with the firm and was Director of the Legal Writing Program and an adjunct professor at Vermont Law School from 1985 through 1987. This Article is a modified version of a Report the authors prepared for the American International Group.

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