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Allocating Superfund Costs: Cleaning Up the Controversy

March 1993

Citation: 23 ELR 10133

Issue: 3

Author: Michael E. Burton, John C. Butler, George R. Hall, and Mark W. Schneider

Editors' Summary: To promote prompt cost recovery and equitable allocation of liability for remediation costs assessed under CERCLA, Congress granted liable parties the right to sue other potentially responsible parties (PRPs) for contribution. The exercise of this right, however, has resulted in inequity and undue complexity. In trying to determine what constitutes a fair allocation of remediation costs, courts have applied allocation techniques that ignore basic economic principles.

This Article surveys the current state of Superfund cost allocation and proposes an old method to address this new problem. The authors review the relevant provisions of CERCLA, the legislative history, and the attempts that courts have made to determine PRPs' fair share of remediation costs. The authors discuss the problems created by the existence of "common costs" at Superfund sites and propose three principles for evaluating cost allocation techniques. Applying these principles to each of the major allocation techniques currently being used, they find each technique wanting, and advocate the use of a stand-alone cost allocation method. This method, which has been used for decades in water resource projects, would allocate identifiable, direct cleanup costs to the responsible parties, and common costs according to the relative costs of cleaning up each PRP's waste as though that waste were the only waste at the site. The authors conclude that this method, although not necessarily appropriate in all situations, would provide a logical approach to cost allocation in a great variety of cases.

Mr. Butler, Dr. Hall, and Dr. Burton are partners in the Washington, D.C., office of the economic and management consulting firm Putnam, Hayes & Bartlett, Inc. Mr. Butler and Dr. Hall are managing directors of the firm, and Dr. Burton is a principal. Mr. Schneider is a partner in the Seattle law firm of Perkins Coie. Mr. Butler's practice focuses on environmental, product liability, and insurance coverage matters. Dr. Hall, a former commissioner of the Federal Energy Regulatory Commission (FERC), focuses his practice on the economic regulation of public utilities. Dr. Burton focuses his practice on economic and financial analysis of both liability and damage issues arising in businesslitigation. Mr. Schneider practices in the area of environmental litigation with an emphasis on hazardous waste, costrecovery, contribution, and environmental insurance coverage issues. The authors thank Douglas W. Greene and George Hansen for their assistance.

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