GAO-01-431R Bunker Hill Superfund Site

United States General Accounting Office

Washington, DC 20548

March 28, 2001

Congressional Requesters

Subject: EPA’s Expenditures to Clean Up the Bunker Hill Superfund Site

This letter responds to your request that we review the Environmental Protection

Agency’s (EPA) expenditures for the Bunker Hill Superfund site, a mining area in the

Coeur d’Alene River Basin in northern Idaho. In 1980, the Comprehensive

Environmental Response, Compensation, and Liability Act created the Superfund

program to clean up highly contaminated hazardous waste sites. In 1983, EPA listed

Bunker Hill on the National Priorities List—the agency’s list of the nation’s most

contaminated sites—because contamination from heavy metals and other materials

posed a severe risk to human health and the environment. EPA’s Bunker Hill cleanup

activities have focused on a 21-square-mile area (referred to as “the box”) located in

the center of the 1,500-square-mile river basin.

Originally, some of the mining companies responsible for the contamination agreed

to conduct the cleanup work. However, EPA and the state of Idaho took over the

majority of the cleanup effort following the bankruptcy of a major responsible party.

In April 1995, EPA and the state of Idaho signed an agreement setting out a cleanup

strategy with an estimated total cost of $126 million; the agreement also capped the

state’s share of these expenses at $12.6 million.1 To implement this agreement, EPA

segmented the cleanup work into various components—such as the demolition of

industrial complex structures, removal of contaminated soil in gulches and creeks,

revegetation of hillsides, and treatment of wastewater—and hired contractors to do

the work. You asked us to determine (1) EPA’s actual expenditures for the cleanup

activities at Bunker Hill and how these expenditures differ from the estimate set forth

in the agreement and (2) the reasons for any major differences (defined as $2 million

or more) between the actual and estimated Bunker Hill cleanup expenditures for

each component.

 1

Any change to this share would require an amendment to the agreement.
2 GAO-01-431R Bunker Hill Superfund Site

In summary, we found the following:

• As of September 30, 2000, EPA had expended about $212 million for various

cleanup and management support activities within “the box” area of the Bunker

Hill Superfund site. About $101 million of the expenditures was for cleanuprelated activities not covered by the EPA/state agreement and therefore not

included in the 1995 cost estimate. These activities included the study and design

of cleanup activities, emergency removals of contaminated materials,

enforcement of responsible party cleanup activities, and indirect management

support. The remaining $111 million was expended on cleanup work covered by

the agreement. EPA and the state of Idaho expect that the cleanup work covered

by the agreement will be completed by about the end of 2002 at a projected final

cost of about $140 million—or about $14 million more than the $126 million

estimate in the agreement. EPA also expects that the agreement will be modified

to cover the future costs of improving the site’s existing water treatment plant,

estimated to range from $16 million to $33 million.

• For the components of the cleanup work where contractors were hired to

conduct the work, the projected final costs range from $4.7 million less to $6.1

million more than the amounts originally estimated. The $4.7 million cost savings

occurred as a result of improved contractor performance in response to

contractual incentives. Cost increases resulted primarily from (1) higher-thananticipated quantities of contaminated materials requiring removal, (2) greater

handling of materials to dry them before disposal (because they were excavated

from below groundwater levels), and (3) floods that recontaminated areas that

had already been cleaned.

Background

In 1980, the Comprehensive Environmental Response, Compensation, and Liability

Act created the Superfund program to clean up highly contaminated hazardous waste

sites. EPA, the federal agency responsible for implementing the act, places sites that

pose a sufficiently serious threat to human health or the environment on the National

Priorities List for possible remedial action under the program.

EPA employs a multistage process to clean up hazardous waste at sites on the

National Priorities List. EPA first conducts a remedial investigation and feasibility

study to review and consider site conditions, cleanup problems, and alternative

cleanup methods. During this study phase, EPA may also initiate emergency

removals of highly contaminated materials to quickly address the most severe health

or environmental threats. Following the remedial investigation and feasibility study,

a Record of Decision is published to document the selected cleanup remedy and

estimated costs. EPA may compel the parties responsible for the contamination to

clean it up or EPA itself may hire contractors to conduct the site cleanup and try to

recover the cleanup costs from the responsible parties later.
3 GAO-01-431R Bunker Hill Superfund Site

When responsible parties perform the cleanup, they develop the detailed design plans

and conduct the cleanup either directly or through hired contractors. In addition, the

responsible parties perform and pay for any necessary long-term operations and

maintenance actions. EPA oversees the entire process and ensures that the cleanup

meets federal requirements.

When EPA performs the cleanup, it must first enter into an agreement with the

respective state involved. Among other things, the agreement must provide that the

state in which the Superfund site is located match 10 percent of the site’s cleanup

costs. The cleanup costs that the state must match include the cost of the remedial

actions as well as any associated on-site support costs specifically to manage the

agreed-upon cleanup actions. Under the EPA/state agreement, Idaho is not required

to match site study, emergency removals, remedial design, enforcement, or indirect

EPA costs. In addition, EPA regulations provide that the state is generally

responsible for long-term operations and maintenance costs once the cleanup is

complete.

After reaching an agreement with the state, EPA develops technical drawings and

specifications for each component of the cleanup in a phase called “remedial design.”

With these specifications, EPA, or an agency designated by EPA, negotiates with and

hires contractors to perform various components of the cleanup work. Once the

cleanup is complete, EPA and the state evaluate the remedial actions employed to

determine if they are operational and functional. Once this determination is made,

EPA regulations provide that the state is generally responsible for long-term

operations and maintenance costs.

EPA listed Bunker Hill on the National Priorities List in 1983. Subsequent to this

listing, EPA chose a two-pronged approach to the cleanup—one for the populated

areas and one for the nonpopulated areas. In an August 1991 Record of Decision,

EPA published the cleanup actions for the populated areas of the site with an

estimated cost of about $41 million. In a second Record of Decision, published in

September 1992, EPA laid out the cleanup actions for the nonpopulated areas of the

site—as well as some portions of the populated areas not included in the August

Record of Decision—and included a cleanup estimate of about $57 million. The

responsible parties initially implemented the cleanup actions for both records of

decision. The responsible parties are about two-thirds finished with the cleanup of

the populated areas. However, EPA and the state of Idaho took over the majority of

the cleanup effort in 1994 for the nonpopulated areas following the bankruptcy of a

major responsible party. In April 1995, EPA and the state of Idaho signed an

agreement laying out a new strategy for cleaning up the nonpopulated areas at an

estimated cost of $126 million. The new agreement formally capped the state’s share

of the cost for cleaning up the nonpopulated areas at $12.6 million (10 percent of the

agreed-upon cost estimate). Under this agreement, Idaho is also responsible for longterm operations and maintenance once the cleanup is complete.

According to EPA and the state of Idaho, the increase in total estimated cost, from

the $57 million in the 1992 Record of Decision for nonpopulated areas to the $126

million in the 1995 EPA/state agreement, resulted primarily from a change in strategy.
4 GAO-01-431R Bunker Hill Superfund Site

EPA agreed with Idaho to change the cleanup strategy to minimize the costs

associated with long-term site operations and maintenance and thus reduce the costs’

impact on the state. Doing this, however, required additional cleanup actions and

expenditures. Instead of removing some contaminated material and maintaining

many impoundment areas, as described in the 1992 Record of Decision, the new

strategy would require removing significantly more contaminated material and

consolidating that material into a few, large impoundment areas that are lined and

covered to prevent infiltration. In addition, the agreement provided a 37-percent

contingency cost factor for unknown conditions in an effort to establish the best

estimate possible, given the phase in which the estimates were made—prior to

remedial design—and the information available at the time.2 Finally, significant cost

increases were incurred because EPA and the state had to pay wage rates that were

estimated to be about 40 percent more than the wage rates the responsible parties

were paying. Unlike projects funded by responsible parties, federally-funded

construction projects are subject to prevailing wage rates under the Davis-Bacon

Act.3

EPA Expects Actual Cleanup Costs to

Exceed Estimates by About $14 Million

As of September 30, 2000, EPA had expended about $212 million for various cleanup

and management support activities within “the box” area of the Bunker Hill

Superfund site.4 About $101 million was for cleanup-related activities for the

populated and nonpopulated areas not covered by the EPA/state agreement and

therefore not included in the 1995 estimate. These activities included the study and

design of cleanup activities, emergency removals of contaminated materials,

enforcement of responsible party cleanup activities, and indirect management

support. The remaining $111 million was expended to accomplish cleanup work

included in the 1995 agreement. EPA and the state of Idaho expect that the cleanup

work covered by the agreement will be completed by about the end of 2002, at a

projected final cost of about $140 million—or about $14 million higher than the $126

million estimate. (See enc. I for a comparison of Bunker Hill’s cleanup costs to those

of other Superfund sites.) EPA expects most of the anticipated $14 million cost

increase to be offset by about $11 million in settlement funds received from

responsible parties. In addition, Idaho has informally agreed to increase its

contributions to the EPA/state agreement to cover 10 percent of the remaining $3

million.

 2

According to the American Society of Civil Engineers, it is common practice to add 20 percent or more to the

estimated probable total project cost at the completion of the study and report phase (prior to remedial design).

In addition, larger or more complex projects sometimes require higher contingencies.

3

The Davis-Bacon Act, enacted in 1931, and related legislation require employers on federally funded construction

projects valued at more than $2,000, or on federally assisted projects, to pay their workers, at a minimum, wages

that the Secretary of Labor has determined to be “prevailing” for corresponding classes of workers on similar

projects in the same locality.

4

In addition to the cleanup costs incurred by EPA and the state of Idaho, responsible parties and others, including

the U.S. Department of Justice, the Bureau of Mines, and the Agency for Toxic Substances and Disease Registry,

have incurred costs related to the cleanup of the Bunker Hill site.
5 GAO-01-431R Bunker Hill Superfund Site

According to our analysis of the component cleanup costs incurred to date and EPA’s

estimates of the cleanup activities yet to be completed, the $14 million cost increase

is the result of several factors.

• First, according to EPA officials, many cleanup areas that require “capping”

(covering contaminated areas with a layer of soil or other material) were thought

to be within the mining companies’ area of responsibility at the time the EPA/state

agreement was signed. Subsequent to signing the agreement, EPA and the state

identified areas needing capping that were not within the mining companies’ area

of responsibility and added them to the components in the EPA/state agreement.

In addition, because of different property uses, the type of cap required for many

of these added areas will be changed from a 6-inch layer of gravel to a more costly

24-inch layer of gravel, asphalt, or concrete.

• Second, EPA expects greater-than-anticipated costs for the maintenance and

security of the site overall. For example, in an effort to complete the cleanup

work quickly, EPA and the state directed the cleanup contractors to work during

winter conditions, thus increasing road maintenance needs in the winter. Also,

heightened vandalism and trespassing concerns have increased security costs.

• Finally, component cleanup work near completion is expected to cost about $6

million more than was originally estimated primarily because more contaminated

material had to be removed than anticipated. The component cleanup work is

discussed in more detail under the following section heading of this letter.

In addition to the estimated $140 million that will be expended to implement the 1995

EPA/state agreement, EPA anticipates significant expenditures to upgrade and

operate the existing water treatment plant. EPA and the state of Idaho took over the

site’s water treatment plant in November 1994 after the mining company that owned

and operated the plant went bankrupt. The 1992 Record of Decision—which outlined

the cleanup work that needed to be done and was the basis of the April 1995

agreement—did not consider owning and operating the water treatment plant. Thus,

such costs were not included in the remedial investigation and feasibility study

process. However, after taking over the treatment plant’s operation, EPA and the

state recognized that they would incur some costs in operating the plant, so they

included estimated costs in the agreement for interim treatment plant operations

(until the cleanup work under the agreement was completed). In March 2001, EPA

completed a 2-1⁄2-year-long remedial investigation and feasibility study for the

treatment plant that estimated necessary remedial action costs of $16 million to $33

million and 30-year operating costs of $26 million to $37 million. Estimated remedial

actions include (1) decreasing the amount of water needing treatment by reducing

water flows through the Bunker Hill Mine, (2) replacing and upgrading plant facilities

(which are at the end of their useful life), and (3) constructing new areas for sludge

disposal. Under EPA regulations, EPA and the state share the cost of operating the

water treatment plant. EPA is responsible for up to 10 years of water treatment

before the state takes over operation and maintenance responsibilities. EPA expects

to amend the 1992 Record of Decision for the water treatment plant work by about
6 GAO-01-431R Bunker Hill Superfund Site

the end of 2001 and will require an amended EPA/state agreement before

implementing the work.

Finally, additional cleanup costs may be incurred if the cleanup strategies employed

throughout the site under the EPA/state agreement ultimately do not improve surface

and groundwater quality to the levels outlined in the 1992 Record of Decision.

However, according to EPA officials, this determination cannot be made until all

cleanup activities have been completed and the site’s environment has been allowed

to stabilize. EPA officials said that within 5 years, EPA and the state of Idaho would

evaluate whether additional remedial actions are needed.

Component Cost Increases Are Primarily Due to Underestimated

Contamination and Cleanup Complexity

After reaching agreement in 1995 for cleaning up the nonpopulated areas, EPA and

the state of Idaho began the remedial design phase, including the development of

technical drawings and specifications for the cleanup. Using these specifications,

EPA negotiated with and hired contractors to conduct the cleanup work for a

majority of the cleanup components.5

 These components include the demolition of

industrial complex structures, removal of contaminated soils in gulches and creeks,

revegetation of hillsides, and wastewater treatment. For the implemented

components, the projected final costs range from $4.7 million less to $6.1 million

more than the original estimates, with a net increase of about $6 million, as shown in

table 1.

Table 1: Comparison Between Component Contract Estimates and Projected Completion Estimates for

the Bunker Hill Site

Dollars in millions

Componentsa

Component

contract estimates

Projected

completion estimates

Expected

increase or decreaseb

Overlapping work area I:

Industrial Complex

Government Gulch

Magnet Gulch

Bunker Creek

$43.6 $38.9 ($4.7)

Overlapping work area II:

Central Impoundment Area

Smelterville Flats

37.2 43.3 6.1

Milo Creek 3.8 6.4 2.5

Hillsides 8.9 9.2 0.3

Interim water treatment 4.4 6.3 1.8

Total $97.9 $104.1 $6.1

a

Some components are grouped because negotiated cleanup contracts often involved work in more than one

component area.

b

Totals may not add because of rounding.

Source: GAO’s analysis of EPA’s data.

 5

Contractors have not yet been hired to implement all of the projected cleanup work in the EPA/state agreement.
7 GAO-01-431R Bunker Hill Superfund Site

Completion costs for the work area encompassing the Industrial Complex,

Government Gulch, Magnet Gulch, and Bunker Creek areas are expected to be a net

$4.7 million less than the negotiated contract estimates. A cost reduction of $11.5

million was achieved when a large contractor increased the efficiency of its industrial

complex work in response to a set of financial incentives. On the other hand, a cost

increase of $6.8 million for this component resulted when higher-than-expected

quantities of contaminated soils were encountered in both gulches and in Bunker

Creek and when adverse weather affected the flow of work, as described below:

• The quantity of contaminated soil removed was over 30 percent more than the

amount in the contract estimate.

• Because of excessive rains, the contractor conducted more erosion control

measures than anticipated in the contract estimate.

• A flood caused the recontamination of some areas around Bunker Creek that had

just been cleaned, thus requiring some areas to be recleaned.

• Because of increases in material handling and weather delays, crews worked

overtime to complete the work on schedule.

The net effect of these events was a decrease of $4.7 million for the projected cost of

this work area ($11.5 million, saved as a result of new contractor incentives, less the

$6.8 million in cost increases).

Completion costs for the Central Impoundment and Smelterville Flats areas are

expected to be $6.1 million more than the negotiated contract estimates. The cost

increase is due primarily to an increase in dewatering (material drying) efforts and a

state-requested change in the grading design. To ensure adequate compaction,

material located several feet below the groundwater level needed to be dewatered

prior to disposal in the Central Impoundment Area, as described below:

• Unanticipated dewatering costs resulted when the original plan for disposing of

the extracted water had to be changed. The negotiated contract estimate

assumed that the extracted water was of a quality that would allow for its

discharge directly into the nearby South Fork of the Coeur d’Alene River.

However, the state of Idaho determined that the contaminant level of the

extracted water was greater than what was allowed for direct discharge into the

river. Thus, the extracted water had to be stored in specially constructed ponds

that allowed the extracted water to slowly infiltrate back into the ground.

• Increased dewatering costs also resulted from the additional handling of the

excavated materials in the Central Impoundment Area. To ensure adequate

compaction, the material needed to be thoroughly dried by fluffing and pushing it

into thin layers prior to final grading.
8 GAO-01-431R Bunker Hill Superfund Site

• Increased grading costs resulted from changes in the site grading design. After

the work began, the state of Idaho requested that the grading of the Central

Impoundment Area be changed so that the area could accommodate a golf course

in the future. According to Idaho officials, this change would enhance the area’s

potential use in an economically depressed area.

The completion costs for the Milo Creek component are expected to be $2.5 million

more than the original estimate. The cost increase is due primarily to flooding (a

different storm from the one that flooded the Bunker Creek area), which

recontaminated areas that had already been cleaned and destroyed the existing storm

water control infrastructure. An entirely new storm water control system with

sufficient capacity to handle floods had to be constructed.

Finally, while the difference in dollars is less than $2 million, the interim water

treatment component is expected to cost $1.8 million, or 41 percent, more than the

contract estimate owing to the replacement of the main water line to the treatment

plant. After the main water line—the line that carries water from the Bunker Hill

Mine to the Central Treatment Plant—became clogged, EPA determined that

replacing the line would be cheaper than repairing it because of the water line’s age

of almost 30 years and location.

Agency Comments

We provided EPA and the state of Idaho with a draft of this report for review and

comment. Both EPA and the state of Idaho agreed with the information contained in

the report and provided technical comments, which we incorporated into the report

as appropriate.

Scope and Methodology

Our review focused on the 21-square-mile Bunker Hill area, known as “the box,”

located in the center of the 1,500-square-mile Coeur d’Alene River Basin in northern

Idaho. We performed our work at EPA’s Region 10 office in Seattle, Washington, and

the Corps of Engineer’s project office (EPA’s general contractor for the cleanup) in

Kellogg, Idaho. In addition, we obtained data from Idaho’s Department of

Environmental Quality in Boise, Idaho.

To determine actual and estimated costs for “the box” as of September 30, 2000, we

obtained and analyzed cost data from EPA’s (1) Integrated Financial Management

System on the type and amount of actual spending and (2) “SCORPIO” system on

indirect costs. In addition, we obtained and analyzed various documents associated

with the cleanup, including the two records of decision, the EPA/state agreement,

negotiated contracts for cleanup work, and the Corps of Engineer’s Project Control

Summary Report. We also conducted site visits to familiarize ourselves with the site

and the completed work.

To determine the reasons for differences between actual costs and estimates, we

obtained and analyzed documents relating to the changes to the original negotiated
9 GAO-01-431R Bunker Hill Superfund Site

contract amounts for those work areas with material differences (defined as $2

million or more). We also interviewed officials from EPA, the Corps of Engineers,

and Idaho’s Department of Environmental Quality to discuss changes from estimates.

- - - - -

If you have any questions about this report, please contact me at (202) 512-3841.

Other key contributors to this report were Keith Oleson and Ruth Anne Decker.

David G. Wood

Director, Natural Resources

 and Environment

Enclosure
10 GAO-01-431R Bunker Hill Superfund Site

List of Congressional Requesters

The Honorable Larry Craig

United States Senate

The Honorable Mike Crapo

United States Senate

The Honorable C.L. “Butch” Otter

House of Representatives
Enclosure I

11 GAO-01-431R Bunker Hill Superfund Site

Comparison of Bunker Hill’s Categorized

 Costs to Those of Other Superfund Sites

To provide some perspective on Bunker Hill’s cleanup costs, we compared the ratio of

three cost categories for Bunker Hill with the ratios experienced by other Superfund

sites that we previously reviewed—Raymark in Stratford, Connecticut; Sharon Steel in

Midvale, Utah; United Creosoting in Conroe, Texas; and NL Industries in Granite City,

Illinois.6 The three cost categories are “actual cleanup” (remedial and removal actions);

“study and design;” and “other,” which includes both the Environmental Protection

Agency’s (EPA) direct and indirect support costs. Direct support costs include

enforcement, oversight, remedial support, general administrative management, and

research and development costs. Indirect support costs are overhead costs that EPA

headquarters allocates to all Superfund sites.7

As shown in figure 1, as of September 30, 2000, about 68 percent of EPA’s Bunker Hill

costs were devoted to actual cleanup activities, about 9 percent went toward study and

design activities, and about 23 percent went to other activities (17 percent for direct

support and 6 percent for indirect support).

Figure 1: Categorized Costs for Bunker Hill as of September 30, 2000

Source: GAO’s analysis of EPA’s data.

The 68 percent for actual cleanup costs is lower than that experienced by the other

Superfund sites we recently reviewed. The percentage of costs devoted to actual

cleanup at the other Superfund sites ranged from 74 percent at Sharon Steel to 86

 6

See Superfund: Analysis of Costs at Five Superfund Sites (GAO/RCED-00-22, Jan. 28, 2000). 7

To comply with new cost accounting standards issued by the Federal Accounting Standards Advisory Board, EPA

began using a new methodology for allocating indirect support costs to Superfund sites during our review. Under this

new methodology, indirect costs increased from about $10 million to $57 million, raising cleanup costs as of

September 30, 2000, from about $165 million to $212 million. However, to provide a meaningful comparison, we used

the old methodology to determine the amount of indirect costs and compute the cost ratios for Bunker Hill.

23% • Other (EPA direct and indirect

support)

• 9%

Study/design 68%•

Actual cleanup
Enclosure I

12 GAO-01-431R Bunker Hill Superfund Site

percent at NL Industries, as shown in table 2.8 According to EPA, Bunker Hill’s actual

cleanup cost ratio is lower than that of the other Superfund sites because EPA has

incurred significant enforcement and oversight costs related to the work performed by

the responsible parties in both the populated and nonpopulated areas of the site. Such

enforcement and oversight costs are included in the other cost category. Thus, the

impact is a lower ratio for actual cleanup costs and a higher ratio for Bunker Hill’s other

costs when compared with those of other Superfund sites.

Table 2: Comparison Between Bunker Hill’s Categorized Costs and Those of Other Superfund Sites

Categorized costs under old indirect cost allocation method

Cost categoriesa

Bunker Hill

(13,440 acres)

Raymark

(33 acres)

Sharon Steel

(570 acres)

United Creosoting

(100 acres)

NL Industries

(16 acres)

Actual cleanup

(remedial & removal actions) 68% 75% 74% 85% 86%

Study/design 9% 11% 14% 8% 7%

Other

(EPA direct and indirect support)b 23% 14% 13% 7% 8%

a

Bunker Hill’s costs are those incurred as of September 30, 2000. Raymark’s costs are those incurred for the

industrial site. (Raymark had seven other work areas surrounding the site that were not completed at the time of our

previous review.)

b

“Other” includes (1) directly related EPA support and management, site assessments, enforcement, oversight of

responsible parties, research and development, lab analysis, and technical assistance grants and (2) indirectly

related EPA support and management costs consisting of EPA’s headquarters costs that are allocated among all

Superfund sites.

Note: Percentages may not add because of rounding.

Source: GAO’s analysis of EPA’s data.

According to EPA, Bunker Hill’s large size and complexity resulted in high costs for

oversight activities and negotiating settlements. Therefore, the 23 percent shown for

Bunker Hill’s “other” category is larger than the percentages shown for the other sites.

(160542)

 8

Although the fifth site, Newmark, which is located in San Bernardino, California, had 53 percent of its total costs

devoted to actual cleanup, the cleanup was only half-complete at the time of our previous review and, thus, was

excluded from our comparison.