United States Government Accountability Office

GAO Testimony 

Before the Subcommittee on Superfund 

and Waste Management, Committee on 

Environment and Public Works, U.S. 

Senate

SUPERFUND

Better Financial Assurances 

and More Effective 

Implementation of 

Institutional Controls Are 

Needed to Protect the 

Public 

Statement for the Record by 

John B. Stephenson, Director 

Natural Resources and Environment 

For Release on Delivery

Expected at 9:30 a.m. EDT

Thursday, June 15, 2006

 

GAO-06-900T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

June 15, 2006

SUPERFUND

Better Financial Assurances and More 

Effective Implementation of Institutional 

Controls Are Needed to Protect the Public 

Highlights of GAO-06-900T, a testimony 

before the Subcommittee on Superfund 

and Waste Management, Committee on 

Environment and Public Works, U.S. 

Senate 

Under the Environmental

Protection Agency’s (EPA) 

Superfund program, parties 

responsible for pollution bear the 

cost of cleaning it up. However,

these parties sometimes no longer

exist, leaving the problem for 

others, typically the federal

government, to address.

Furthermore, many sites’ cleanup

remedies leave some waste in

place, relying on institutional 

controls—legal or administrative

restrictions on land or water use—

to limit the public’s exposure. 

GAO was asked to summarize the

findings of its August 2005 report, Environmental Liabilities: EPA 

Should Do More to Ensure that 

Liable Parties Meet Their Cleanup 

Obligations (GAO-05-658) and its 

January 2005 report, Hazardous 

Waste Sites: Improved 

Effectiveness of Controls at Sites 

Could Better Protect the Public

(GAO-05-163). GAO’s statement 

addresses the actions EPA could 

take to better ensure that parties 

meet their cleanup obligations and

the long-term effectiveness of 

institutional controls in protecting

the public. GAO’s reports 

recommended, among other things, 

that EPA (1) implement a financial 

assurance mandate for businesses 

handling hazardous substances; (2) 

enhance its oversight and

enforcement of existing financial 

assurances and authorities; (3) 

ensure that the frequency and 

scope of monitoring of controls 

sufficiently maintain their 

effectiveness; and (4) ensure that 

information on controls reported in 

new tracking systems accurately 

reflects actual conditions. 

EPA faces significant challenges in seeking to hold businesses responsible 

for their environmental cleanup obligations. These challenges often stem 

from the differing goals of environmental laws, which hold polluting 

businesses liable for cleanup costs and other laws which, in some cases, 

allow businesses to limit or avoid responsibility for these liabilities. For 

example, businesses can legally organize or restructure in ways that can 

limit their future expenditures for cleanups. They can do this by separating 

their assets from their liabilities using subsidiaries, for example. While many

such actions are legal, transferring assets to limit liability may be prohibited 

under certain circumstances. Such cases, however, are difficult for EPA to 

identify and for the Justice Department to prosecute successfully. 

Notwithstanding these challenges, EPA could better ensure that bankrupt 

and other financially distressed businesses meet their cleanup obligations by 

making greater use of existing authorities. For example, EPA has not 

implemented a 1980 statutory mandate under Superfund to require 

businesses handling hazardous substances to demonstrate their ability to 

pay for potential environmental cleanups—that is, to provide financial 

assurances. Also, EPA has done little to ensure that businesses comply with 

the agency’s existing financial assurance requirements in cleanup

agreements and orders. Moreover, greater use of other existing authorities—

such as tax offsets, which allow the government to redirect tax refunds it 

owes businesses to agencies with claims against them—could produce 

additional payments for cleanups from financially distressed businesses. 

EPA also faces a number of challenges in ensuring the long-term 

effectiveness of institutional controls—legal or administrative restrictions on

land or resource use to protect against exposure to residual contamination—

at Superfund sites. Institutional controls were applied at most of the 

Superfund sites GAO examined where waste was left in place after cleanup. 

However, documentation of remedy decisions often did not discuss certain 

factors called for in EPA’s guidance. Relying on institutional controls as a 

major component of a site’s remedy without carefully considering all key 

factors—particularly whether controls can be implemented in a reliable and 

enforceable manner—could jeopardize the remedy’s effectiveness. In 

addition, EPA faces challenges in ensuring that institutional controls are 

adequately implemented, monitored, and enforced. For example, EPA often 

does not verify that institutional controls are in place at Superfund sites 

where cleanup has been completed but residual contamination remains. At 

the time of GAO’s review, EPA had begun implementing a tracking system to 

improve the agency’s ability to ensure the long-term effectiveness of 

institutional controls in the Superfund program. However, the tracking 

system being implemented included data that were essentially derived from 

file reviews. These data may or may not reflect institutional controls as 

actually implemented, leaving in question whether the public is adequately 

protected from health and environmental risks 

www.gao.gov/cgi-bin/getrpt?GAO-06-900T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact John B. 

Stephenson at (202) 512-3841 or

stephensonj@gao.gov. 
Mr. Chairman and Members of the Subcommittee: 

We are pleased to have the opportunity to present the results of our recent 

work on the Environmental Protection Agency’s (EPA) Superfund 

Program and, in particular, with regard to environmental liability issues 

and controls at sites where contamination remains in place after 

remediation. To protect the public’s health, the Congress passed the 

Comprehensive Environmental Response, Compensation, and Liability Act 

(CERCLA) of 1980, which established the Superfund program to clean up

the most seriously contaminated hazardous waste sites in the nation. 

CERCLA requires that parties statutorily responsible for pollution bear the 

cost of cleaning up contaminated sites. In many cases, liable parties have 

met their cleanup responsibilities. However, parties responsible for 

cleaning up some Superfund sites include businesses that no longer exist, 

having been liquidated through bankruptcy or otherwise dissolved. Under 

these circumstances, companies that caused environmental contamination 

have left the problem for others, typically the government, to address. In 

addition, at many of the sites addressed under Superfund, EPA has 

selected cleanup remedies that leave at least some waste in place because 

the agency believes it is impossible, impractical, or too costly to clean up 

the contaminated property so that it can be used without restriction. 

Cleanups at such sites often rely on institutional controls—legal or 

administrative restrictions on the use of land or water at the site—to limit 

the public’s exposure to residual contamination. 

This statement, which is based on two recent reports on hazardous waste 

cleanup,1

 addresses (1) actions EPA could take to better ensure that 

bankrupt and other financially distressed businesses meet their cleanup

obligations and (2) the long-term effectiveness of institutional controls in

protecting the public against residual contamination left in place at 

hazardous waste sites, including Superfund sites. 

In August 2005, we reported that EPA faces significant challenges in 

seeking to hold businesses responsible for their environmental cleanup

obligations. These challenges often stem from the differing goals of 

environmental laws, which hold polluting businesses liable for cleanup 

Summary 

 1

GAO, Environmental Liabilities: EPA Should Do More to Ensure That Liable Parties 

Meet Their Cleanup Obligations, GAO-05-658 (Washington, D.C.: Aug. 17, 2005), and GAO,

Hazardous Waste Sites: Improved Effectiveness of Controls at Sites Could Better Protect

the Public, GAO-05-163 (Washington, D.C.: Jan. 28, 2005). 

Page 1 GAO-06-900T 
costs and other laws that, in some cases, allow businesses to limit or avoid 

responsibility for these liabilities. For example, businesses can legally

organize or restructure in ways that can limit their future expenditures for 

cleanups. They can do this by separating their assets from their liabilities 

using subsidiaries, for example. While many such actions are legal, 

transferring assets to limit liability may be prohibited under certain 

circumstances. Such cases, however, are difficult for EPA to identify and

for the Justice Department to prosecute successfully. Notwithstanding 

these challenges, EPA could better ensure that bankrupt and other 

financially distressed businesses meet their cleanup obligations by making 

greater use of existing authorities. For example, EPA has not implemented 

a 1980 statutory mandate under Superfund to require businesses handling 

hazardous substances to demonstrate their ability to pay for potential 

environmental cleanups—that is, to provide financial assurances. Also, 

EPA has done little to ensure that businesses comply with the agency’s 

existing financial assurance requirements in cleanup agreements and 

orders. Moreover, greater use of other existing authorities—such as tax 

offsets, which allow the government to redirect tax refunds it owes 

businesses to agencies with claims against them—could produce 

additional payments for cleanups from financially distressed businesses. 

Therefore, our report recommended, among other things, that EPA (1) 

implement the financial assurance mandate for businesses handling 

hazardous substances and (2) enhance its oversight and enforcement of 

existing financial assurances and authorities. EPA generally agreed with 

many of the recommendations, stating its intent to further evaluate some 

of them. 

Furthermore, in January 2005, we reported that EPA faces a number of 

challenges in ensuring the long-term effectiveness of institutional controls

at Superfund sites. For example, institutional controls were applied at

most of the Superfund sites we examined during our review where waste 

was left in place after cleanup. However, documentation of remedy 

decisions often did not discuss certain factors called for in EPA’s 

guidance. Relying on institutional controls as a major component of a 

site’s remedy without carefully considering all key factors—particularly 

whether controls can be implemented in a reliable and enforceable 

manner—could jeopardize the effectiveness of the remedy. In addition, 

EPA faces challenges in ensuring that institutional controls are adequately 

implemented, monitored, and enforced. For example, EPA’s monitoring of 

Superfund sites where cleanup has been completed but residual 

contamination remains often does not include verification that 

institutional controls are in place. At the time of our review, EPA had 

recently begun implementing an institutional controls tracking system for 

Page 2 GAO-06-900T 
its Superfund program to improve the agency’s ability to ensure the longterm effectiveness of institutional controls. However, the tracking system 

being implemented included data that were essentially derived from file 

reviews. These data may or may not reflect institutional controls as 

actually implemented, leaving in question whether the public is adequately 

protected from health and environmental risks. To ensure the long-term 

effectiveness of institutional controls, our report recommended, among 

other things, that EPA ensure that (1) in selecting controls, sufficient 

consideration was given to all key factors; (2) the frequency and scope of

monitoring efforts are sufficient to maintain the effectiveness of controls; 

and (3) the information on controls reported in a new tracking system 

accurately reflects actual conditions. EPA generally agreed with GAO’s 

recommendations. 

Under the Superfund program, EPA may compel parties statutorily 

responsible for contaminated sites to clean them up or to reimburse EPA 

for its cleanup costs. In some cases, however, parties responsible for the 

contamination cannot be identified or the parties do not have sufficient 

financial resources to perform or pay for the entire cleanup. In the latter 

case, EPA often settles environmental claims with businesses for less than 

the cleanup costs if paying for the cleanup would present “undue financial 

hardship,” such as depriving a business of ordinary and necessary assets 

or resulting in an inability to pay for ordinary and necessary business 

expenses. Furthermore, when parties file for bankruptcy protection, EPA’s 

recovery of cleanup costs may be reduced or eliminated, particularly when 

there are few other parties with cleanup liabilities at the Superfund site. 

Background 

In implementing the Superfund program, EPA uses risk management 

approaches, such as requiring that certain responsible parties—generally 

businesses—provide the agency with evidence of their ability to pay their 

expected future cleanup costs because the cleanups often take many years 

and the financial position of liable businesses can change during that time. 

Financial assurances are meant to assure EPA that the businesses will 

have the money to finish the cleanups in the future. Thus, when 

negotiating Superfund cleanup agreements with EPA, businesses generally 

agree to provide financial assurances aimed at demonstrating their ability 

to meet the requirements of the agreements. These financial assurances 

include bank letters of credit, trust funds, and, under certain conditions, 

guarantees that businesses or their parent corporations have the financial 

wherewithal to meet the obligations.

Page 3 GAO-06-900T 
Institutional controls can be a critical component of the cleanup process 

at Superfund sites and may be used to ensure short-term protection of 

human health and the environment during the cleanup process itself as 

well as long-term protection once cleanup activities at the site are 

complete. EPA defines institutional controls as “non-engineered 

instruments such as administrative and/or legal controls that minimize the 

potential for human exposure to contamination by limiting land or 

resource use.” In December 2002, EPA issued draft guidance setting out, 

among other things, the key factors to be considered when evaluating and

selecting institutional controls at Superfund sites and responsibilities for 

implementing, monitoring, and enforcing institutional controls at these 

sites. Under this guidance, EPA generally—although not always—requires 

that institutional controls be put in place at Superfund sites where total 

cleanup is not practical or feasible. If deemed necessary, these controls 

may be combined with engineering controls—such as capping or 

fencing—to limit exposure to residual site contamination. For example, 

the remedy selected for a hazardous waste landfill may include 

engineering controls, such as placing a protective layer, or “cap” made of 

clay or synthetic materials, over the contamination and also institutional 

controls to prohibit any digging that might breach this protective layer and 

expose site contaminants. 

While more than 231,000 businesses operating in the United States filed for 

bankruptcy in fiscal years 1998 through 2003, the extent to which these 

businesses had environmental liabilities is not known because neither the 

federal government nor other sources collect this information. Information 

on bankrupt businesses with federal environmental liabilities is limited to 

data on the bankruptcy cases that the Justice Department has pursued in 

court on behalf of EPA. In that regard, the Justice Department initiated 136 

such cases from 1998 through 2003. 

EPA Should Do More 

to Ensure That Liable

Parties Meet Their 

Cleanup Obligations 

In seeking to hold liable businesses responsible for their environmental 

cleanup obligations, EPA faces significant challenges that often stem from 

the differing goals of environmental laws that hold polluting businesses 

liable for cleanup costs and other laws that, in some cases, allow 

businesses to limit or avoid responsibility for these liabilities. For 

example, businesses can legally organize or restructure in ways that can

limit their future expenditures for cleanups by, for example, separating 

their assets from their liabilities using subsidiaries. While many such 

actions are legal, transferring assets to limit liability may be prohibited 

under certain circumstances. However, such cases are difficult for EPA to 

identify and for the Justice Department to prosecute successfully. In 

Page 4 GAO-06-900T 
addition, bankruptcy law presents a number of challenges to EPA’s ability 

to hold parties responsible for their cleanup obligations, challenges that 

are largely related to the law’s intent to give debtors a fresh start. 

Moreover, by the time a business files for bankruptcy, it may have few, if 

any, assets remaining to distribute among creditors. The bankruptcy 

process also poses procedural and informational challenges for EPA. For 

example, EPA lacks timely, complete, and reliable information on the 

thousands of businesses filing for bankruptcy each year. 

Notwithstanding these challenges, we found that EPA could better ensure 

that bankrupt and other financially distressed businesses meet their 

cleanup obligations by making greater use of existing authorities. For 

example, EPA has not implemented a 1980 statutory mandate under 

Superfund to require businesses handling hazardous substances to 

demonstrate their ability to pay for potential environmental cleanups—

that is, to provide financial assurances. EPA has cited competing priorities 

and lack of funds as reasons for not implementing this mandate, but its 

inaction has exposed the Superfund program and U.S. taxpayers to 

potentially enormous cleanup costs at gold, lead, and other mining sites 

and at other industrial operations, such as metal-plating businesses. Also, 

EPA has done little to ensure that businesses comply with its existing 

financial assurance requirements in cleanup agreements and orders. 

Greater oversight and enforcement of financial assurances would better 

guarantee that cleanup funds will be available if needed. Also, greater use 

of other existing authorities—such as tax offsets, which allow the 

government to redirect tax refunds it owes businesses to agencies with 

claims against them—could produce additional payments for cleanups 

from financially distressed businesses. 

We made a total of nine recommendations in our August 2005 report 

intended to help EPA in five areas: (1) closing gaps in financial assurance 

coverage that expose the government to significant financial risk for costly 

environmental cleanups; (2) ensuring that the financial assurances EPA 

requires under the Superfund program provide sufficient funds for 

cleanups in the event liable parties do not fulfill their environmental 

obligations; (3) ensuring that EPA holds liable parties responsible for their 

cleanup obligations to the maximum extent practicable; (4) ensuring that 

EPA identifies relevant bankruptcy filings to pursue and bankruptcy 

actions to monitor; and (5) more clearly identifying some actions needed 

to better protect the government’s interest. We specifically recommended 

that EPA (1) implement the financial assurance mandate for businesses 

handling hazardous substances and (2) enhance its oversight and 

enforcement of existing financial assurances and authorities. EPA 

Page 5 GAO-06-900T 
generally agreed with many of our recommendations and said that the 

agency will further evaluate others. 

Institutional controls were applied at most of the Superfund sites we 

examined where waste was left in place after cleanup, but documentation 

of remedy decisions often did not discuss key factors called for in EPA’s 

guidance. For example, while documents usually discussed the controls’

objectives, in many cases, they did not adequately address when the 

controls should be implemented, how long they would be needed, or who 

would be responsible for monitoring or enforcing them. According to EPA, 

the documents’ incomplete discussion of the key factors suggests that site 

managers may not have given them adequate consideration. Relying on

institutional controls as a major component of a site’s remedy without 

carefully considering all of the key factors—particularly whether the 

controls can be implemented in a reliable and enforceable manner—could 

jeopardize the effectiveness of the remedy. 

Improved 

Effectiveness of 

Controls at Superfund 

Sites Could Better 

Protect the Public 

EPA faces challenges in ensuring that institutional controls are adequately 

implemented, monitored, and enforced. Institutional controls at the 

Superfund sites we reviewed, for example, were often not implemented 

before the cleanup was completed, as EPA requires. EPA officials 

indicated that this may have occurred because, over time, site managers 

may have inadvertently overlooked the need to implement the controls. 

EPA’s monitoring of Superfund sites where cleanup has been completed 

but residual contamination remains often does not include verification 

that institutional controls are in place. In addition, EPA may have 

difficulties ensuring that the terms of institutional controls can be 

enforced at some Superfund sites: that is, some controls are informational 

in nature and do not legally limit or restrict use of the property, and, in 

some cases, state laws may limit the options available to enforce 

institutional controls. 

In our January 2005 report, we found that EPA had begun implementing an 

institutional control tracking system for its Superfund program in order to 

improve its ability to ensure the long-term effectiveness of institutional 

controls. The agency, however, faced significant obstacles in 

implementing this system. The institutional control tracking system being 

implemented tracked only minimal information on the institutional 

controls. Moreover, as configured, the system did not include information 

on long-term monitoring or enforcement of the controls. In addition, the 

tracking system being implemented included data that were essentially 

derived from file reviews. These data may or may not reflect institutional 

Page 6 GAO-06-900T 
controls as actually implemented, leaving in question whether the public is

adequately protected from health and environmental risks. While EPA had 

plans to improve the data quality for the Superfund tracking system—

ensuring that the data accurately reflected institutional controls as 

implemented and adding information on monitoring and enforcement—the 

first step, data verification, could take 5 years to complete. 

In order to ensure the long-term effectiveness of institutional controls, our 

January 2005 report recommended that EPA: (1) clarify agency guidance

on institutional controls to help EPA site managers and other decision 

makers understand in what cases institutional controls are or are not 

necessary at sites where contamination remains in place after cleanup; (2) 

ensure that, in selecting institutional controls, adequate consideration is 

given to their objectives; the specific control mechanisms to be used; the 

timing of implementation and duration; and the parties responsible for 

implementing, monitoring, and enforcing them; (3) ensure that the 

frequency and scope of monitoring at deleted Superfund sites where 

contamination has been left in place are sufficient to maintain the 

protectiveness of any institutional controls at these sites; and (4) ensure 

that the information on institutional controls reported in the Superfund 

tracking system accurately reflects actual conditions and not just what is 

called for in site decision documents. EPA agreed with the 

recommendations in the report and provided information on the agency’s

plans and activities to address them. 

For further information on this statement, please contact John B. 

Stephenson at (202) 512-3841 or stephensonj@gao.gov. Individuals who 

made key contributions to this statement include Christine Fishkin, 

Richard P. Johnson, Jerry Laudermilk, Les Mahagen, Vincent P. Price, Nico 

Sloss, and Susan Swearingen. 

Page 7 GAO-06-900T 

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