United States General Accounting Office

GAO Report to the Subcommittee on National

Security, International Affairs, and

Criminal Justice, Committee on

Government Reform and Oversight,

House of Representatives

March 1997 ENVIRONMENTAL

CLEANUP AT DOD

Better Cost-Sharing

Guidance Needed at

Government-Owned,

Contractor-Operated

Sites

GAO/NSIAD-97-32

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-272542 

March 27, 1997

The Honorable J. Dennis Hastert

Chairman

The Honorable Thomas M. Barrett

Ranking Minority Member

Subcommittee on National Security,

 International Affairs, and Criminal Justice

Committee on Government Reform and Oversight

House of Representatives

This report responds to your subcommittee’s request that we examine

Department of Defense (DOD) policies and practices regarding cleanup of

environmental contamination at government-owned, contractor-operated

(GOCO) plants, as a follow up to our previous reports that showed

inconsistent policies and practices on cost sharing. We reviewed nine

higher-cost case studies at the Defense Logistics Agency (DLA) and the

military services (1) to assess the consistency of cost-sharing practices

across DOD and (2) to compare the service cleanup estimates against DOD’s.

Specifically, we identified the actions taken and the types of arrangements

for sharing cleanup costs between the government and other responsible

parties, and examined site-specific cleanup cost data.

Background Since 1992, we have reported that the government could pay hundreds of

millions of dollars to and on behalf of DOD contractors for cleanup

resulting from their operations. In October 1992, we reported that DOD

reimburses contractors for cleanup expenses at their private property in

different ways, with wide variances in reimbursement decisions and in

investigations into possible wrongdoing by contractors.1

 In July 1994, we

reported that DOD had also incurred cleanup expenses in cases where

contractors and other private parties were involved in contamination of

government property.2 DOD had inconsistent policies and practices for

recovering costs from other responsible parties. In both reports, we

recommended that the Secretary of Defense provide guidance to resolve

the disparities.

1

Environmental Cleanup: Observations on Consistency of Reimbursements to DOD Contractors

(GAO/NSIAD-93-77, Oct. 22, 1992).

2

Environmental Cleanup: Inconsistent Sharing Arrangements May Increase Defense Costs

(GAO/NSIAD-94-231, July 7, 1994).

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One of the principal laws governing responsibility for hazardous waste

cleanup at federal facilities is the Comprehensive Environmental

Response, Compensation, and Liability Act (CERCLA) of 1980, as amended

(42 U.S.C. 9601). This act, commonly known as Superfund, holds owners,

operators, and other responsible parties, including federal agencies, liable

for cleanup of past contamination. Cleanup at federal facilities is also

subject to the legal requirements of the Resource Conservation and

Recovery Act of 1976, as amended (42 U.S.C. 6901), and applicable state

laws.

DOD’s Defense Environmental Restoration Program addresses

identification, investigation, and cleanup of past contamination on DOD

installations. Funding for the cleanup has come primarily through the

Defense Environmental Restoration Account (DERA).3

 The individual

services and DLA are responsible for cleaning up their respective

installations, while the Army Corps of Engineers is responsible for

cleaning up formerly used DOD sites.

Results in Brief The services’ policies and practices for having contractors share cleanup

costs still vary widely. Not withstanding our recommendations to do so,

DOD has not given the services adequate guidance for making decisions on

whether and when to seek recovery of environmental cleanup costs

incurred by DOD from contractors and other parties at GOCO facilities. The

Army authorized indemnifying4

 its operating contractors from cleanup

costs at ammunition plants; the Navy policy requires cost-recovery efforts,

but has not initiated timely requests for cost sharing or followed up; and

the Air Force is beginning to seek participation in cleanup costs from its

operating contractors.

Regarding cleanup at GOCO facilities we visited, DOD’s fiscal year 1994

report to Congress included cleanup costs that were closer to the military

services’ supporting data than DOD’s reported fiscal year 1993 estimates.

DOD’s estimates for cleaning up the 78 GOCO facilities increased from 

$1.4 billion in fiscal year 1993 to $3.6 billion in 1994, but decreased

3

Most cleanup actions are funded through DERA and the Base Realignment and Closure Account.

Congress established DERA in 1984 to fund the cleanup of inactive contamination sites on DOD

installations. Through fiscal year 1995, DOD reports that about $10 billion has been invested from

DERA and $2.6 billion from the Base Realignment and Closure Account for closing installations.

4

Under Public Law 85-804, the National Defense Contracts Act of 1958, as implemented by Executive

Order 10789 and the Federal Acquisition Regulation, three major types of actions may be taken:

advance payments; contract adjustments; and any other actions under authority of the act, referred to

as residual powers. A frequently reported action under residual powers is indemnification of

contractors against losses from unusually hazardous or nuclear risks that are not otherwise insured.

Page 2 GAO/NSIAD-97-32 Environmental Cleanup At DOD
B-272542 

somewhat to $3.3 billion in 1995.5 Although DOD and the services have

addressed our recommendations to improve cost information, their

estimates of past and projected costs still differ, and not all costs were

included. For example, the 1995 estimate decreased in part because DOD

excluded $19.1 million in unfunded Navy cleanup requirements that should

have been reported, and DLA cleanup costs totaling $101 million in fiscal

year 1994 that would be funded by customer surcharges. Also, we found

many additional expenses that were not included in either DOD or service

cost estimates.

Because Superfund holds parties liable for the billions of dollars needed to

remediate past contamination regardless of wrongdoing, it is important

that DLA and the services deal with potentially responsible parties on the

basis of consistent policy and accurate data. However, the lack of DOD

guidance on cost sharing has permitted inconsistencies in approaches to

cost sharing, and the potential for some parties to be held responsible for

cleanup costs, while others in similar situations are not. If cost-sharing

agreements are reached, omissions in historical information and cost data

may inhibit the recovery of all appropriate costs.

Inconsistent

Treatment Remains

Despite Some Service

Progress in

Developing

Cost-Sharing

Guidance

In the absence of sufficient DOD guidance, the services have taken different

approaches in asking parties associated with GOCOs to share the cost of

cleaning up contaminated sites and wide disparities still remain. Since our

1992 report, the Air Force has issued guidance for dealing with other

responsible parties at its facilities. The Air Force, the Navy, and the Army

Corps of Engineers have policies or guidance in place to encourage cost

sharing with contractor operators and other responsible parties, while the

Army itself and DLA generally do not. Except for the Navy, each service has

obtained some cost sharing at GOCO facilities with other responsible

parties. However, only the Air Force and the Army Corps of Engineers

have achieved cost sharing with contractors that operated

government-owned facilities.

Army Policies and

Practices

The Army has no servicewide policy regarding cleanup cost sharing.

However, in a series of actions, the Secretary of the Army approved

indemnification of ammunition plant operators from financial liability for

environmental cleanup. Army officials state that there has been no actual

payment to operators under indemnification because the Army pays for

5

Cost taken from the Defense Environmental Cleanup Program, Annual Report to Congress, dated

March 31, 1994, for fiscal year 1993 and the Defense Environmental Restoration Program, Annual

Report to Congress, dated March 31, 1995, for fiscal year 1994 and May 15, 1996, for fiscal year 1995.

Page 3 GAO/NSIAD-97-32 Environmental Cleanup At DOD
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the cleanups directly out of its own funds. In fiscal year 1994, Army

ammunition plants accounted for $3.1 billion (86 percent) of the

$3.6 billion in past and future cleanup costs reported by DOD.

Pursuant to the Secretary’s approval, the Army authorized the inclusion of

Public Law 85-804 indemnification clauses in its contracts with

ammunition plant operators. These clauses indemnified the contractors

against unusually hazardous risks, including environmental releases.

According to Army officials, contingency clauses in the contracts also

protect ammunition plant operators against environmental liability.

The Army has not negotiated any cost-sharing agreements with contractor

operators at the ammunition plants. However, the Army negotiated a

cost-sharing settlement with a contractor who produced ammunition for

the Army as a tenant at one plant we visited. Also, as discussed in our

July 1994 report, the Army Corps of Engineers negotiated a cost-sharing

settlement with contractors and other private parties at formerly used

defense sites.

Navy Policies and

Practices

Since 1989, Navy policy has required major command officials to

immediately negotiate cost-sharing arrangements with contractors as soon

as the need for cleanup is identified. The policy requires that past and

current GOCO contractors pay “any and all” cleanup costs associated with

their operation of Navy facilities. However, the Navy has not initiated

timely requests for cost sharing or followed up.

For example, although Navy’s 1989 policy required officials to begin

negotiation on cost-sharing arrangements at the two facilities we visited,

the Navy has not initiated timely requests for contractor participation in

the cleanup. The Navy did not send a letter requesting contractor

participation in cleanup at the Allegany Ballistics Laboratory in West

Virginia until 1994, and has not begun as of March 6, 1997, the required

negotiations with the contractor at the Naval Industrial Reserve Ordnance

Plant in Fridley, Minnesota. Neither operator plans to pay any cleanup

costs involving Navy property.

Under the facilities-use contracts at these locations, GOCO contractors

provide goods and services to the Navy, and the service does not directly

manage their operations. Navy documents show that operational

decisions, including those involving waste disposal, are made by the

contractor.

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To date, the Navy has taken responsibility for cleanup costs. Navy officials

said the Navy intends to clean up the facilities first and then decide

whether to pursue contractors to recover a share of the costs.

Cost-recovery decisions are to be based on evidence, litigation risk, the

contractor’s level of responsibility, and other factors. However, Navy

officials stated that the Navy is reluctant to pursue GOCO contractors

because of concerns they will pass costs back to the government as an

allowable expense or through overhead charges. They also said that a

divisive liability issue could slow cleanup operations and hurt relations

between the Navy and its contractors.

Air Force Policies and

Practices

In December 1995, the Air Force General Counsel’s office developed

guidance that recognizes that past and present contractors, as generators

of contaminants and operators at federal facilities, share the liability for

environmental contamination. The guidance calls for sharing remediation

costs, based on the facts of each situation. In commenting on this

guidance, Air Force officials stated that the Air Force approved a practice

similar to the Navy policy for cost sharing. Air Force officials stated that

the practice is intended to share cleanup costs equally with operators

unless conditions warrant otherwise.

At the two locations we visited, the Air Force was paying all cleanup costs,

but may later pursue other parties. However, at two other locations, the

Air Force had agreed with the facility operators to share costs. According

to Air Force officials, the settlement agreement prohibits the contractors

from charging their environmental cleanup costs back to a government

contract. Air Force officials also stated that the absence of federal

guidance governing how to treat environmental cleanup costs, together

with inconsistent treatments and allowances throughout DOD, have slowed

cost-sharing negotiations with contractors.

DLA Policies and Practices DLA’s policy requires current operating contractors to pay cleanup costs in

cases of wrongdoing, but allows fuel customers to pay for past

contamination through a surcharge.6

 However, DLA does not have a

specific policy for its fuel supply centers to address those cases in which

parties other than contractors, such as lessees or tenants, are responsible

for contamination. DLA has considered developing such cost-sharing

guidance, but had not done so as of March 1997.

6

To recover most cleanup costs for past contamination, DLA assesses a 1-cent per barrel surcharge to

its customers.

Page 5 GAO/NSIAD-97-32 Environmental Cleanup At DOD
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The Norwalk center we visited has been negotiating for the recovery of

costs. Officials are negotiating with a lessee to pay for most of the facility’s

cleanup costs. However, the facility did not gather sufficient evidence to

determine whether to seek recovery from another party for $10 million in

environmental damage at an off-post location.

DOD-Wide Policy Issues Even though we recommended in 1992 and again in 1994 that DOD issue

guidance to resolve disparities between DLA’s and the military services’

cleanup policies and procedures, DOD has not done so. In a letter dated

January 9, 1995, responding to our 1994 report, the Deputy Under

Secretary of Defense (Environmental Security) stated that DOD’s policy for

cost sharing is to comply with the Federal Acquisition Regulation, which

provides for the allowability of costs incurred by government contractors.

However, the regulation only applies to costs incurred by contractors. It

does not prescribe an approach for seeking contractor contributions to

DOD cleanup efforts.

The policies and practices for seeking contractor participation in cleanup

efforts continue to vary widely among the services and DLA. Some

variances, such as DLA’s policy to pay for old contamination (not from

current operations) through a surcharge to customers, may be justified

where no specific evidence identifies the responsible party or when other

case-specific factors, such as frequent changes in contractors, may

preclude assigning responsibility. However, we continue to believe that

uniform guidance from DOD would help resolve disparities among DLA and

service cleanup policies and practices.

Cleanup Estimates

Improving, but

Problems Remain

Following our July 1994 report that cleanup at GOCO plants would take

longer and cost far more than DOD’s estimate, DOD increased its fiscal year

1993 estimate of $1.4 billion to $3.6 billion in fiscal year 1994. For example,

in fiscal year 1993, DOD estimated the Twin Cities Army Ammunition Plant

would be cleaned up by the year 2000 at a total cost of $154 million, which

was not consistent with supporting data showing costs of about

$600 million through 2052. DOD’s fiscal year 1994 report was more

consistent with supporting data, showing estimated completion by 2080 at

a total cost of about $773.2 million.

Although DOD’s report to Congress and service estimates for our case

studies were relatively close in total, table 1 shows significant differences

for individual locations for fiscal year 1994. Some of the reasons for these

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cost differences include different estimating methodologies, an input

error, and the inclusion of more accurate future cost estimates.

Table 1: DOD’s and the Services’

Estimated Total Cleanup Costs for

Nine GOCOs

Dollars in millions

Facility DOD report

Component

estimate

Estimate

difference

Percentage

of estimate

difference

Army

Twin Cities plant $773.2 $810.9 ($37.7) (4.9)

Lake City planta 339.2 168.1 171.1 50.4

Newport plant 55.5 41.5 14.0 25.2

Navy

Allegany 30.7 27.8 2.9 9.4

Fridley 37.9 30.7 7.2 19.0

Air Force

Plant 4 63.0 79.6 (16.6) (26.3)

Plant 44 61.3 90.9 (29.6) (48.3)

DLA

Norwalk 16.5 16.5 0 0

Ozol 6.4 6.4 0 0

Total $1,383.7 $1,272.4 $111.3 8

aDOD cleanup estimates decreased at Lake City Ammunition Plant from $339.2 million in fiscal

year 1994 to $139.4 million in fiscal year 1995.

Source: Service officials and the Defense Environmental Restoration Program Annual Report to

Congress ( Mar. 31, 1995) for fiscal year 1994.

In addition, cleanup expenses not identified in either DOD or service

component estimates included:

• $120 million to decontaminate and dispose of the chemical plant at the

Newport Army Ammunition Plant;

• $6 million in cleanup costs for uranium-tipped bullets at the Lake City

Army Ammunition Plant;

• $4 million in 1983 and 1984, which was paid for cleanup costs at Air Force

Plant 4 before DERA funds were available;

• $836,000 already spent on a cleanup study at the Navy’s Allegany Ballistics

Laboratory; and

• money paid to the Environmental Protection Agency (EPA) and state

regulatory agencies for overseeing the cleanup at several sites (as an

Page 7 GAO/NSIAD-97-32 Environmental Cleanup At DOD
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example, at the Fridley Naval Industrial Reserve Ordanance Plant,

$481,000 was paid to EPA and $106,000 was paid to the state of Minnesota).

DOD’s report for fiscal year 1995, dated May 15, 1996, showed that total

cleanup cost estimates for GOCO facilities decreased from $3.6 billion to

$3.3 billion, but it did not include cleanup costs for our 2 DLA case studies,

or with 1 exception, any of the 21 DLA facilities reflected in prior DOD

reports. According to DOD officials, these facilities were excluded from the

latest report because customer surcharges rather than DERA funds paid for

cleanup costs. DLA cleanup costs totaled $101 million in DOD’s fiscal 

year 1994 report.

We recognize that cleanup estimates for facilities will be preliminary until

DOD fully characterizes contaminants, selects a remedy, and finances the

remedy. However, most of the cost differences noted in our case studies

can be accounted for given the stage of cleanup in each case.

Furthermore, excluding environmental cleanup costs from DOD’s

restoration program report because the funding source is other than DERA

can be misleading. For example, the DLA cleanups excluded from DOD’s

report for fiscal year 1995 are, except for funding source, similar to

cleanups still reported for the military services. Also, DOD’s report still

includes cost for cleanups totaling $624 million in 1995 that were funded

by its base realignment and closure account rather than DERA. Finally, the

services’ stated plans to later obtain cost sharing from other responsible

parties require that complete cost data be readily available.

Recommendations To address the inconsistencies in cost-sharing approaches and the

potential for disparate treatment of other responsible parties described in

this and past reports, we recommend that the Secretary of Defense issue

guidance to DOD components to resolve current disparities and to promote

future consistent treatment of all parties in cost recovery decisions.

So that sufficient data will be available for cost-sharing negotiations and

program oversight, we also recommend that the Secretary direct the

military services and DLA to:

• Identify, to the extent it has not already been done, whether parties other

than the government were involved with any contamination, as part of

environmental cleanup preliminary assessments at GOCO facilities.

Page 8 GAO/NSIAD-97-32 Environmental Cleanup At DOD
B-272542 

• Obtain all relevant data regarding other responsible parties identified,

whether or not wrongdoing is an issue.

• Gather and maintain the most timely and accurate DOD cost data available

in DLA, military service, and other agencies’ records.

• Provide consistent estimates, including all cleanup costs for DOD’s

environmental reports to Congress, regardless of the source of funds.

Agency Comments

and Our Evaluation

In commenting on a draft of this report, DOD stated that it was generally

complying with all five of our recommendations under existing practices.

However, as we detailed below, DOD has not fully addressed the issues and

specific cases discussed in this report and we continue to believe that DOD

needs to take additional actions on each of our recommendations.

Regarding the need for DOD guidance on the recovery of cleanup costs, DOD

stated that its policy is to comply with the Federal Acquisition Regulation

and that the Defense Contract Audit Agency issued audit guidance for field

auditors in 1992 on how to interpret the regulation. However, as we stated

in this and prior reports, federal acquisition laws, regulations, and policies

do not provide specific guidance to decision-makers on how to treat

environmental cleanup costs. In the absence of guidance that explicitly

addresses the sharing of DOD cleanup costs, the services and DLA have

taken different approaches to deciding whether and when to seek

contributions from contractors and other responsible parties. We continue

to believe that a DOD-wide policy is needed to address these disparities and

promote consistent treatment of all parties in the recovery of DOD-incurred

cleanup costs.

DOD stated that it is already identifying parties involved with

contamination and obtaining all relevant data for other responsible

parties, in line with our second and third recommendations. However, our

case studies indicate that searches for potentially responsible parties were

not done and services had not obtained all relevant information. DOD’s

comments did not identify what actions it had taken to resolve such cases

or the Air Force concerns about the lack of DOD guidance. Thus, we

continue to believe that more should be done in this area.

DOD indicated that it did not believe it should gather costs incurred by all

non-DOD organizations. We agree and modified our recommendation to

focus primarily on DOD costs. Nevertheless, if another federal agency has

pertinent information on added DOD cleanup costs, as we found in each

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case study, efforts should be made to gather and maintain that

information.

DOD stated that its report to Congress is not intended to represent all

expenses associated with other funding sources, with the exception of the

Base Closure and Realignment Account. DOD also stated that there is no

value added to reconstructing past non-DERA expenses. We agree that it

may not be worthwhile to reconstruct minor costs incurred prior to

availability of DERA funds. However, excluding all cleanup expenses of an

entire agency such as DLA simply because the money to pay those

expenses came from a different federal account results in reports that

materially understate federal expenses for cleanup costs. It may also lead

to omissions by the military service where they funded cleanups from

business operating funds. The use of business operating funds for cleanup

is already prevalent in the Navy. Finally, complete cost data is necessary

for the military services’ stated plans to obtain cost sharing from other

responsible parties. DOD’s comments are reprinted in their entirety in

appendix V.

Matter for

Congressional

Consideration

The high cleanup costs, coupled with inconsistent policies and practices

for recovering costs from other parties, can lead to adverse budget

consequences. Because DOD’s comments indicate that it does not plan to

take any actions to address the problems set forth in this report, Congress

may wish to call upon the Secretary of Defense to issue guidance to

address inconsistencies in cost-sharing approaches and to promote future

consistent treatment of all parties in cost recovery decisions.

Scope and

Methodology

We conducted our work at the Washington, D.C., area headquarters offices

of DOD, DLA, and the military services and at selected commands and field

installations. The Washington, D.C., area commands included the Naval

Air Systems Command, Naval Sea Systems Command, and the Defense

Fuel Supply Center. We also visited the Army Environmental Center in

Aberdeen, Maryland; the Air Force Acquisition Environmental

Management Directorate in Dayton, Ohio; and the Naval Facilities

Engineering Command Southern Division in Charleston, South Carolina.

At headquarters, command, and field locations, we interviewed DOD,

contractor, state agency, and EPA officials. To assess consistency of

cost-sharing practices, we compared headquarters policies and field

practices at case study locations identified below. To examine cleanup

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cost estimates, we obtained data on DOD environmental cleanup program

status and costs, noted differences among organizations, and examined

supporting documents, but did not independently determine actual costs.

We used a case study methodology at selected field facilities. We visited

nine GOCO facilities to determine the status and cost of cleanup, and the

extent of cost sharing for environmental cleanup at the facilities. We

selected facilities with larger total cleanup costs, managed by each of the

military departments and DLA. We determined whether site specific data

identified all known costs and compared the data to military service

records and DOD reports. We reviewed cost-sharing practices across the

locations visited, but did not independently evaluate liability issues or the

merits of cost-sharing decisions in individual cases.

Army

• Lake City Army Ammunition Plant, Missouri

• Newport Army Ammunition Plant, Indiana

• Twin Cities Army Ammunition Plant, Minnesota

Air Force

• Air Force Plant 4, Fort Worth, Texas

• Air Force Plant 44, Tucson, Arizona

Navy

• Allegany Ballistics Laboratory, West Virginia

• Naval Industrial Reserve Ordnance Plant, Fridley, Minnesota

DLA

• Defense Fuel Support Point Norwalk, California

• Defense Fuel Support Point Ozol, California

We performed our work from June 1995 through March 1997 in

accordance with generally accepted government auditing standards.

Unless you publicly announce its contents earlier, we plan no further

distribution of this report until 30 days after its issue date. At that time, we

will send copies to the appropriate congressional committees; the

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Secretaries of Defense, the Army, the Navy, and the Air Force; and the

Directors of DLA and the Office of Management and Budget. We will also

make copies available to others upon request.

Please contact me on (202) 512-8412 if you or your staff have any

questions concerning this report. Major contributors to this report are

listed in appendix VI.

Sincerely yours,

Henry L. Hinton, Jr.

Assistant Comptroller General

Page 12 GAO/NSIAD-97-32 Environmental Cleanup At DOD
Page 13 GAO/NSIAD-97-32 Environmental Cleanup At DOD
Contents

Letter 1

Appendix I 

Army Case Studies

16

Agency Cost-Sharing Policy 16

Twin Cities Army Ammunition Plant 17

Lake City Army Ammunition Plant 20

Newport Army Ammunition Plant 22

Appendix II 

Navy Case Studies

25

Agency Cost-Sharing Policy 25

Allegany Ballistics Laboratory 26

Naval Industrial Reserve Ordnance Plant, Fridley 28

Appendix III 

Air Force Case

Studies

32

Agency Cost-Sharing Guidance 32

Air Force Plant 4 33

Air Force Plant 44 35

Appendix IV 

Defense Logistics

Agency Case Studies

38

Agency Cost-Sharing Policy 38

Defense Fuel Support Point, Norwalk 38

Defense Fuel Support Point, Ozol 40

Appendix V 

Comments From the

Department of

Defense

42

Appendix VI 

Major Contributors to

This Report

45

Table Table 1: DOD’s and the Services’ Estimated Total Cleanup Costs

for Nine GOCOs

7

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Contents

Abbreviations

CERCLA Comprehensive Environmental Response, Compensation,

and Liability Act

DERA Defense Environmental Restoration Account

DLA Defense Logistics Agency

DOD Department of Defense

EPA Environmental Protection Agency

GOCO government-owned, contractor-operated

Page 15 GAO/NSIAD-97-32 Environmental Cleanup At DOD
Appendix I 

Army Case Studies

We visited three Army ammunition plants—one active plant, two

inactive—still owned by the Army. The Lake City Army Ammunition Plant,

Independence, Missouri, was active. The Newport Army Ammunition

Plant, Newport, Indiana, and the Twin Cities Army Ammunition Plant,

Arden Hills, Minnesota, no longer produce ammunition. The Army owns a

total of 27 government-owned, contractor-operated (GOCO) plants, of

which 24 are ammunition plants. Seven of the 24 are currently active.

Agency Cost-Sharing

Policy

The Army has no overall policy for sharing costs with other parties and

does not plan to pursue current or past GOCO operators to share

environmental cleanup costs at the case study facilities. However, at one

plant we visited, the Army negotiated cost-sharing arrangements with

contractors who are not considered operators and is seeking

reimbursement from the operator’s insurance company.1

According to Army officials, the ammunition plant operators are protected

against environmental liability by protective clauses in their contracts,

such as the “Responsibility of Contractor - Contingencies” clause, and by

an indemnification clause, which was recently added. The Secretary of the

Army authorized the indemnification clauses under Public Law 85-804 in a

series of memoranda. For the three locations we visited, we found relevant

memoranda dated May 1985, November 1990, and November 1992. Army

officials stated that the indemnification provision would allow ammunition

plant operators to claim recovery of cleanup costs, but that such a claim

has not been made because the Army has assumed all cleanup costs at its

ammunition plants.

Army officials said that the Army, as the landowner, should be responsible

for cleaning up the property. They stated that it would be inappropriate to

hold former contractors liable for the cleanup costs because

contamination resulted not from bad faith or willful misconduct, but from

industrial practices that used to be considered acceptable. Army officials

stated that indemnification of ammunition plant contractors was justified

by the unusually high risk they encountered in handling explosives and

reactive and hazardous materials.

Despite the Army’s view, a finding of wrongdoing is not a required

condition for cost sharing under the Comprehensive Environmental

1

As noted in our prior reports, the Army Corps of Engineers also negotiated cost-sharing settlements

with former operators of formerly used defense sites. In addition, the Army has obtained more than

$300 million from Shell Oil Company as of December 1995 toward shared cleanup costs at the Rocky

Mountain Arsenal.

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Appendix I 

Army Case Studies

Response, Compensation, and Liability Act (CERCLA). Owners and

operators at private facilities have not been relieved of liability on that

basis.

Although the Army has not achieved cost sharing by its ammunition plant

operators, it has pursued other responsible parties. For example, at the

Twin Cities facility, the Army is attempting to recover more than

$10 million from one GOCO operator’s insurance company. The Army did

negotiate a settlement with a contractor who was a tenant at this facility.

This contractor—like the GOCO operator—produced ammunition for the

Army for decades, but did so under a “facility contract,” that did not

indemnify the tenant. Under an agreement, the tenant contractor must pay

all cleanup costs associated with its production and a percentage of the

cleanup for areas in which the source of contamination is unclear.

Twin Cities Army

Ammunition Plant

The Twin Cities Army Ammunition Plant is an inactive facility that

occupies about 2,370 acres in Arden Hills, Minnesota. Established in 1941,

the plant produced ammunition intermittently until 1976. Throughout all

but the last 1 of the plant’s 55 years, the Federal Cartridge Company was

its only operating contractor. Alliant Techsystems, a long-standing tenant

at the plant, took over as the GOCO operator in November 1995. Alliant,

formerly Honeywell, had been a tenant at the Twin Cities plant since the

late 1950s, manufacturing small ammunition for the Department of

Defense (DOD). Also, the 3M Company, as a lessee, conducted commercial

production activities on the facility between 1950 and 1993.

The production activities at the Twin Cities facility generated hazardous

waste that contaminated the soil, structures, and groundwater, including

the drinking water for the facility and the city of New Brighton, Minnesota.

Soil was contaminated with explosives, metals, polychlorinated biphenyls,

and volatile organic compounds. Plant property occupied by the lessee

was contaminated by low-level radioactivity. Groundwater was

contaminated with trichloroethylene and had migrated off the site.

The Twin Cities plant was placed on the Environmental Protection

Agency’s (EPA) National Priorities List in 1983 as part of the New

Brighton/Arden Hills Superfund site, an approximately 36-square-mile site

encompassing the plant and the contaminated groundwater. The

Superfund site was divided into three main units. Two of the units contain

distinct plumes of contaminated groundwater, known respectively as the

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Army Case Studies

north plume and the south plume. The third unit consists of contaminated

soils and groundwater within the plant’s boundary.

Production waste from the plant also contaminated three privately owned

disposal sites to which the operator sent the waste. According to a

contractor official, the company had complied with the standards of the

time.

Also, between 1959 and 1962, over 1,400 drums of waste from classified

munitions and, in 1945, 500 tons of 50-caliber bullets were disposed of in

Lake Superior. Records about the classified waste are not available, but

Army officials said that the waste had been packed into 55-gallon drums,

transported over land under Army escort to Duluth, Minnesota, and

dumped into the lake from barges. The state pollution agency and Corps of

Engineers had not yet decided whether an investigation by the Army of the

50-caliber bullet disposal was necessary at the time of our review.

Cleanup Efforts Investigations at the Twin Cities plant began after the 1981 discovery of

contamination in the drinking water supply. Six interim remedial actions

and three removal actions have been completed at the facility. As of

December 1996, the final remedy to pump and treat groundwater from the

south plume is in place, and the final remedy for the north plume has been

implemented. The remedy for cleaning up contamination within the

boundary of the facility has been proposed and is under evaluation.

Cleanup Cost Estimates DOD and Army cleanup cost estimates for fiscal year 1994 ($773.2 million

and $810.9 million, respectively) were much closer than in 1993

($154 million according to DOD, versus about $600 million according to

installation data). DOD’s May 15, 1996, report for fiscal year 1995 increased

the total past and future cleanup cost estimate to $828.2 million.

Neither DOD’s report nor the Army’s estimate included all known cleanup

costs for the Twin Cities plant, with at least an additional $8.2 million of

expenditures.

Examples where either Defense Environmental Restoration Account

(DERA) funds were not designated as being used for cleanup at the Twin

Cities plant or where non-DERA funds were used for cleanup at the Twin

Cities plant, but not reported, include:

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Army Case Studies

• more than $560,000 paid to regulators, including $125,000 for EPA

investigations at the Lake Superior disposal site, and about $435,650 paid

for state regulatory oversight at the plant and

• $398,000 expended by the Army Corp of Engineers for work at the Lake

Superior site.

Expenditures from Army operations funds and judgment funds that were

not in DOD’s and the Army’s estimates include:

• As a result of a toxic tort case settlement related to contaminated drinking

water at the site, the Army reimbursed the Federal Cartridge Company

$3.7 million for the company’s share of a settlement in litigation.

• Relative to the above case, the Army settled for a $1.3-million Army share,

which was paid out of the Department of Justice Judgment Fund.

• The Army reimbursed Federal Cartridge $1.9 million for disposal-related

cleanup costs.

• The U.S. government paid $70,000 on behalf of all other federal potentially

responsible parties for cleanup-related expenses at a disposal site in Oak

Grove, Minnesota.

• The Army paid an additional $234,292 for attorney time relating to cleanup.

Cost-Sharing Arrangement The Army does not plan to pursue Federal Cartridge, the former operator,

to share environmental cleanup costs at this facility. However, both Alliant

and 3M, who also produced at the plant, are being held liable for

contamination associated with their activities and have agreed to share the

cleanup costs.

Federal Cartridge was responsible for manufacturing and testing

ammunition, disposing of production waste, and maintaining the facility.

Beginning in the early 1980s, the company was also responsible for

performing the preliminary environmental damage assessments and

engineering evaluations and analyses. At peak production in 1943,

according to Army officials, almost all of the 26,000 employees who

worked at the plant were contractor personnel. By 1995, the total

decreased to about 1,000 employees, and all but about 19 were contractor

personnel.

The Army is assuming costs not already covered by the other two private

companies and Federal Cartridge believes it has no liability for cleanup

costs. Reasons given by the Army are the Secretary of the Army granting

indemnification status to the contractor under Public Law 85-804, and

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Army Case Studies

contract clauses that address contractor liability. In addition, Federal

Cartridge Company officials stated that disposals were not due to any

company wrongdoing, either willful or knowing, and were at

state-approved landfills under the review and approval of the Army. Also,

they said that the Army did not disapprove of company practices, which

were considered state-of-the-art.

However, Army officials have participated in pursuing Federal Cartridge’s

insurance company to recover cleanup costs associated with the

company’s operations at the plant. The Army asked the Justice

Department to help it recover about $10.2 million, plus interest, that it

reimbursed Federal Cartridge for cleanup-related costs. Negotiations are

underway.

Both of the companies that operated on plant property as tenant and

lessee are sharing in cleanup costs.

• Alliant produced ammunition for the Army as a tenant using government

facilities, but Alliant’s facility contract did not contain indemnification

provisions. In 1995, an attorney for Alliant estimated that the company had

paid over $10 million since the 1985 apportionment agreement, whereby

Alliant is to pay the cleanup costs at the South plume, and the Army is

responsible for costs at the North plume. The cost of cleaning up

groundwater where the origin of contamination is unclear will be split

between the parties, with the Army paying 80 percent and Alliant

20 percent.

• The 3M Company produced for the commercial market under a lease with

the Army. The company is solely responsible for cleanup of radioactive

contamination of property on the site. The company has cleaned up the

contaminated buildings and soils, but the Army has not yet examined and

approved 3M’s cleanup actions.

Lake City Army

Ammunition Plant

The Lake City Army Ammunition Plant is the Army’s only installation that

now manufactures small-caliber ammunition. The plant, which occupies

about 4,000 acres in a rural area near Independence, Missouri, began

operating in 1941. Remington Arms operated the facility until 1985, when

the current contractor, the Olin Corporation, took over.

Manufacturing operations at the Lake City plant generated hazardous

wastes. Soil has been contaminated with explosives; volatile and

semivolatile organic compounds; oil and grease; low-level radioactive

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Army Case Studies

materials; and such metals as arsenic, lead, mercury, and zinc.

Groundwater was contaminated with dichloroethylene, lead, and vinyl

chloride. Because these contaminants exceed levels set by EPA,

groundwater from wells on the installation must be treated before it can

be consumed. For example, the EPA maximum contaminant level for vinyl

chloride is 2 parts per billion, but the drinking water aquifer at the plant

contained 8,000 parts per billion.

According to test results and studies, contamination has not yet migrated

off the site but will do so eventually, unless preventive action is taken.

Because the site is located in a rural, sparsely populated area, no

immediate threat exists to the groundwater of surrounding communities.

The Lake City plant was placed on EPA’s National Priorities List in 1987.

Cleanup Efforts The contaminated areas at the plant are divided into four units.

Preliminary assessments and site inspections were conducted in 1979. EPA

and the Missouri Department of Natural Resources approved the remedial

investigation for one unit in March 1995. Another was completed in

May 1995, but awaits EPA and Missouri approval. The Army is not

proceeding with remedial investigations for the other two units until it

receives comments from EPA and the state of Missouri on the May 1995

investigation report and a feasibility study submitted in June 1995 for the

first unit. The proposed corrective actions mainly involve groundwater

treatment and soil excavation.

Cleanup Cost Estimates Both DOD and Army estimates increased from fiscal year 1993 to 1994. The

DOD estimate increased from $52 million to $339.2 million, while the Army

estimate increased from $24.8 million to $168.1 million. Army officials

attributed the increase to including long-term cleanup costs beyond 2001.

Earlier estimates considered only a 7-year budget cycle.

DOD’s estimate was more than double what Army officials at the plant

reported to us for the same time frame. Lake City officials believed their

estimate was accurate, and they did not know why DOD’s estimate was so

much higher. According to a DOD official, it might have been due to a data

entry error. The difference was generally resolved with DOD’s May 15, 1996,

report for fiscal year 1995, which updated the figure to $139.4 million.

Lake City officials stated that it is difficult to accurately project the cost of

cleanup until options have been selected and approved by EPA and the

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Army Case Studies

state regulatory agencies. We found about $22.9 million in costs that were

not included in either DOD or Lake City estimates.

• Remediation may take longer than the year 2024 estimated, thus increasing

costs by $16.8 million. The feasibility study for one operating unit stated

that the contaminated water should be pumped, treated, and monitored

for at least 50 years, or until 2048. The Army’s estimated cost for such

remedial action was about $700,000 a year, including $500,000 for pumping

and treating the water and $200,000 for monitoring.

• Costs excluded an estimated $6 million to clean up low-level radioactive

contamination caused by ammunition made from depleted uranium. The

cost was excluded from DOD and Army estimates because the cleanup will

be conducted under the direction of the Nuclear Regulatory Commission.

• The state was paid $91,000 for oversight costs.

Also, the use of a residential cleanup standard as opposed to an industrial

cleanup standard could increase the cost of cleaning one area by about

$23.6 million, from $5 million to $28.6 million. The cleanup standard for an

industrial site assumes human exposure of 40 working hours per week,

whereas a residential standard assumes continuous human exposure of

168 hours per week. The Army estimates it will cost $5 million to

remediate the contamination at its Area 18 Operable Unit to the industrial

standard. However, the EPA and the state of Missouri believe that the

residential cleanup standard should be used.

Cost-Sharing Arrangement The Army does not plan to pursue cost sharing by current or former

operators of the Lake City plant. Olin has been the operator since 1985,

and Remington operated the plant for more than 40 years. No other private

parties, such as lessees, operated at the facility.

Army officials said they do not plan to pursue cost sharing with Olin

because of the Secretary of the Army’s decision to indemnify plant

operators under Public Law 85-804. Likewise, they applied this decision to

relieve Remington, Lake City’s prior contractor.

Newport Army

Ammunition Plant

The Newport Chemical Facility, formerly Army Ammunition Plant,

occupies about 7,000 acres in a sparsely populated rural area near

Newport, Indiana. The plant, which has been inactive since 1975, currently

serves as a storage facility for a nerve agent the Army plans to incinerate

as part of its chemical material program. The Newport plant was

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Army Case Studies

established in 1941; from then until 1974, several contractors, including

E.I. duPont, FMC Corporation, Liberty Powder Corporation, and Uniroyal,

Inc., produced explosives such as trinitrotoluene (TNT) and chemical

agents. The current operator for the storage function is Mason & Hanger.

Manufacturing operations at the Newport plant generated various

hazardous wastes. Soil, groundwater, and surface water were

contaminated with explosives, solvents, heavy metals, oils, and grease.

Groundwater contaminated with carbon tetrachloride and

trichloroethylene has not yet migrated off the site, but EPA and Army

officials are concerned that it may. If contaminated groundwater reaches

the plant’s boundaries, it could threaten the safety of the surrounding

area’s drinking water.

Cleanup Efforts Preliminary investigations were completed in 1986. The Army identified 

16 sites, 12 of which it believed required some remedial action or

additional study. The Army classified four sites requiring no further action,

but EPA disagreed and is requiring additional testing and monitoring

activities for these four sites. The Army removed underground petroleum

storage tanks and currently plans to remove other contaminants.

Investigations and studies are continuing.

Cleanup Cost Estimates DOD’s estimate of the cleanup costs for the Newport plant was higher than

the Army’s. DOD’s report for fiscal year 1994 put the total cost at about

$55.5 million, as compared to an Army estimate of $41.5 million. Officials

could not reconcile the difference, but said part could be explained by

DOD’s estimated completion in 2010, versus the Army estimate of 2006.

DOD’s report for fiscal year 1995 increased the estimate to about

$68 million, with completed cleanup still estimated for 2010.

A cost not reflected in either DOD or Army data was about $120 million for

a chemical plant cleanup that was excluded because that effort will be

funded by the Chemical Munitions Destruction Defense Account, not DERA.

Army officials stated that costs cannot be accurately estimated until more

is known about the sites. Until the contamination is known and the

remediation methods are selected, the costs of remediation options can

vary significantly. For example, the Army’s cost estimate assumed that the

service will incinerate contaminated soils, but Army officials said that soils

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Army Case Studies

may be cleaned up biologically through composting at about half the cost

of incineration.

Cost-Sharing Arrangement Army officials do not plan to pursue cost sharing by the current or any

past operators of the Newport plant. They said this is because of the

Secretary of the Army’s decision to indemnify plant operators under

Public Law 85-804.

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Navy Case Studies

We visited two active Navy GOCO manufacturing facilities: the Allegany

Ballistics Laboratory, Mineral County, West Virginia, and the Naval

Industrial Reserve Ordnance Plant, Fridley, Minnesota. Both facilities have

been in operation since the early 1940s. The Allegany facility was operated

by Hercules, Inc., until Alliant Techsystems purchased Hercules and took

over operations in 1995. The Fridley facility also involved changes in

ownership. The Northern Pump Company operated the facility from 1942,

until FMC purchased a subsidiary of Northern in 1964.1

Agency Cost-Sharing

Policy

The Navy has had a policy since 1989, which states that the government

and current and former contractors share the liability and responsibility

for cleaning up GOCO facilities. The current contractor is to pay all cleanup

costs associated with its operation of the facility unless the operating

contract contains provisions to the contrary. According to a Navy official,

the Navy has the right to seek reimbursement from prior contractors for

the costs it incurred for cleaning up contamination resulting from their

activities.

Navy officials stated that GOCO operational decisions, including those

about disposal, were left to its contractors, and the Navy had little

presence at its GOCOs. Contractors operated the facilities under a

facilities-use contract to provide goods and services for the Navy without

direct Navy management of operations.

According to the Navy’s cost-sharing policy, if further study and

remediation are recommended after initial cleanup research, the Navy

command is required to immediately begin discussions with the GOCO

contractor regarding responsibility for and participation in the cleanup

effort. Participation is also to be discussed prior to cleanup, including any

removal or interim actions. According to Navy legal representatives, the

policy provides contractors an opportunity to participate in the cleanup

process as a means of reducing litigation risk—that is, a contractor that

participates in the cleanup process is less likely to argue that cleanup

costs were excessive or unnecessary.

If the contractor declines to participate, all cleanup costs are to be

identified for possible future recovery from the contractor. Despite its

1989 policy, the Navy has not initiated timely requests for contractor

participation in the cleanup. The Navy did not send a letter requesting

1

The operations by Northern Pump to 1964 were through a subsidiary, Northern Ordnance,

Incorporated. FMC operations from 1994 were by a subsidiary, United Defense Limited Partnership.

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Navy Case Studies

contractor participation until 1994 at one of the two facilities we visited

and has not begun the required negotiations with the second facility.

At both the facilities we visited, some of the contamination related to

production for the Navy at contractor-owned property adjacent to the

government-owned sites. In one case, the contamination was on the

contractor property, and in the other, it had been transferred to the Navy

property.

Navy officials said the Navy will likely clean up its facilities and then

decide whether to seek a share of the costs from the operators. They

provided a number of explanations for not pursuing cost sharing more

actively: (1) operators who help pay for the cleanup may later get

reimbursed for the expenditures; (2) a divisive liability issue might drive a

wedge into an otherwise productive relationship between the Navy and its

contractors; (3) cost-sharing negotiations could slow the cleanup; and

(4) cost recovery is easier after the cleanup is done, because all costs,

contamination, and responsible parties will have been identified, and the

costs can then be allocated to the responsible parties based on their

contributions.

Allegany Ballistics

Laboratory

Since 1945, the Allegany Ballistics Laboratory has researched, developed,

produced, and tested solid propellant rocket motors on about 1,600 acres

in Mineral County, West Virginia, about 10 miles southwest of

Cumberland, Maryland. The laboratory has been operated by Hercules,

Inc., for all but 2 of its 54 years in operation. George Washington

University, under contract with the Army, operated the laboratory from

1943 until 1945, when Hercules, Inc., took over operations under a Navy

contract. In 1995, the laboratory’s current operating contractor, Alliant

Techsystems, purchased the division of Hercules that had been operating

the facility.

Hercules also began operating commercial businesses on and adjacent to

the laboratory in 1967. Hercules purchased 56 acres adjoining the

laboratory in 1967 and built a propellant production facility. In addition to

rocket development, Hercules began operating a commercial automobile

testing business at the GOCO facility in 1973. According to a Navy study, no

written agreement exists between the Navy and Hercules regarding the use

of laboratory property for the disposal of waste generated by the adjacent

Hercules-owned facility.

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Manufacturing operations at the laboratory, as well as disposal of

contaminated waste produced at the nearby commercial plant, have

generated hazardous waste. This waste contaminated soil and

groundwater with trichloroethylene, explosives, and volatile and

semi-volatile organic chemicals, and the laboratory was placed on the EPA

National Priorities List in 1994. Navy officials do not believe the

contractor’s on-site automobile testing business contributed to the

contamination. However, some of the contamination at the laboratory

stemmed from burning of propellant-contaminated waste from the

adjacent contractor-owned production facility.

Cleanup Efforts Multiple studies and investigations have been performed, starting with

environmental studies initiated in fiscal year 1983 that identified 11 sites

and a later study in fiscal year 1986 that recommended further study at 

8 sites. A subsequent assessment in fiscal year 1993 identified an

additional 105 sites and only recommended further action at 30 of the

sites. As of September 1994, the Navy reported that remedial actions

should be completed by fiscal year 1998. DOD reported in March 1995 that

cleanup-related operations were expected to continue to fiscal year 2010.

Navy officials later stated they expect the study phase to be completed in

fiscal year 2003, remedial actions to be completed by fiscal year 2010, and

long-term operations to be completed in 2025. According to the officials,

limited DERA funding and the unavailability of field data have delayed

cleanup efforts.

Cleanup Cost Estimates The Navy’s cleanup cost estimates for the laboratory increased from about

$18.7 million in fiscal year 1993, to $27.8 million in 1994, and $43.5 million

in 1995. DOD’s estimates were about $21.2 million, $30.7 million, and

$24.4 million for the respective years. Navy officials attributed the

increases to an extension of the cleanup time frames and a change in the

estimating methodology used. The Navy began to use a projection model

in July 1994 to project future cleanup costs based on factors such as

contamination type and degree of contamination. The Navy attributed the

differences between the Navy and DOD for fiscal year 1995 mainly to the

different data used. For example, DOD’s 1995 reports excluded unfunded

Allegany Ballistics Laboratory requirements included by the Navy for fiscal

year 1998 and beyond. In addition, the Navy estimate increased because

additional investigations revealed more extensive contamination.

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Navy Case Studies

Although DOD and Navy sources agreed on expenditures to date, we found

other costs totaling 76 percent more than the $1.3 million reported for

1994. Expenditures not reported in the above sources for Allegany

Ballistics Laboratory were (1) $836,000 that was paid through the Naval

Sea Systems Command Operations and Maintenance account, as directed

by congressional appropriations language for a remedial investigation;

(2) $60,000 for an initial assessment study funded by the Naval Facilities

Engineering Command; (3) $45,460 provided by the U.S. Army Corps of

Engineers in DERA funds to the state of West Virginia for regulatory

oversight and technical assistance; and (4) $45,285 paid to EPA through the

Superfund for oversight. Also, costs beyond 1994 for EPA oversight are

expected to exceed $667,000.

Cost-Sharing Arrangement According to Navy officials, the contamination at the laboratory resulted

from the contractor’s operation of both the laboratory and the adjacent

contractor-owned facility. The Navy sent a letter on February 22, 1994,

asking that Hercules, the facility operator for more than 50 years,

participate in financing the laboratory cleanup. Hercules declined to

participate, saying that the Navy had assumed all responsibility for the

cleanup. Hercules stated that it would also bill the Navy for

cleanup-related costs incurred in managing the restoration contractor,

because it considers such costs to be above and beyond its normal

operating costs.

Navy officials agreed that their 1994 letter to Hercules was not timely, but

said the Navy will continue to clean up the facility and then determine

whether to pursue a cost-sharing arrangement with Hercules. They said

their decision to pursue Hercules will be based on such factors as

evidence, litigation risk, and the level of independence of the contractor.

Further, Navy officials stated that the Navy has never had a significant

presence at the laboratory, leaving the contractor free to make operational

decisions, including those involving disposal. In the 1960s, about 40

government employees worked on site with 3,200 contractor personnel. In

the 1990s, about 4 government staff worked with 500 contractor personnel.

Naval Industrial

Reserve Ordnance

Plant, Fridley

The Naval Industrial Reserve Ordnance Plant, Fridley, occupies about 

83 acres in the city of Fridley, Minnesota, within the Minneapolis-St. Paul

metropolitan area. Since 1941, the plant has produced gun mounts,

torpedo tubes, and missile-launching systems. With changes in ownership,

the same company has operated the plant for more than 54 years.

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Navy Case Studies

Northern Ordnance, Inc., formerly a subsidiary of Northern Pump

Company, operated the facility from 1942 to 1964. At that time, FMC

Corporation purchased the company and continued operations until 1994,

when United Defense Limited Partnership, a subsidiary of FMC, took over

the plant’s operations.

Manufacturing at Fridley generated hazardous waste that contaminated

soil and groundwater with petroleum, oil, and other lubricants, and such

volatile organic chemicals as trichloroethane. Contamination has resulted

from a leaking sewer system under one of the plant’s production buildings.

The plant was placed on EPA’s National Priorities List in 1989.

Contamination was also discovered at off-site locations, including the

operating contractor’s private facility next to Fridley and three municipal

landfills. From the 1940s through 1969, the contractor disposed of

chemicals and other hazardous waste materials on 18 acres it owned south

of the Fridley facility. In addition, FMC disposed of foundry sand at

landfills in Andover, East Bethel, and Oakgrove, Minnesota, and it was

subsequently named as a potentially responsible party under CERCLA.

Chemicals now considered to be carcinogens were reportedly detected in

the foundry sand, but FMC stated that the chemicals were absorbed by the

sand after its disposal at the landfill.

Cleanup Efforts The Fridley site was divided into three units for investigation and cleanup:

groundwater, soils around the building, and soils under the building. A

1990 record of decision for the first unit called for initially pumping and

treating contaminated groundwater and discharging it into a sanitary

sewer. Later, a permanent groundwater extraction system would treat

groundwater for discharge to the Mississippi River. The final remedy for

the second unit is being developed. It involves containing contaminated

soils and buried drums of waste, and later removing the contamination.

For the third unit, the remedial investigation begun in September 1996 will

serve as the basis for further studies and actions.

Cleanup Cost Estimates Total cost estimates for Fridley increased from fiscal year 1993 to 1995.

DOD’s estimate increased from $13 million in fiscal year 1993, to about

$37.9 million in 1994, and $49 million in 1995. The Navy’s estimate

increased from about $17 million in 1993 to $30.7 million in 1994, and

$52 million in 1995. Navy officials attributed the 1993 and 1994 increases to

changes in estimates of future cleanup activities, completion dates, and

related costs. Also, the Navy used a projection model in July 1994 to

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Navy Case Studies

estimate future cleanup costs, based on such factors as the type and

degree of contamination. For 1995, Navy officials attributed the large

increase to additional investigations that revealed more extensive

contamination needing cleanup. Navy officials indicated that the latest

difference between DOD and Navy estimates resulted from a reevaluation

of the cleanup program between the time the Navy and DOD estimates were

prepared.

We found additional costs of about $4 million not reported by either DOD or

the Navy. Neither included the following:

• Contractors were paid $3.1 million for off-site cleanup. (The Navy

reimbursed FMC $1.9 million that FMC had paid to clean up its private

facility next to Fridley. The Navy also reimbursed FMC about $1.3 million

for costs incurred to clean up three municipal landfills where it had

disposed of waste from the Navy-owned Fridley sites. The reimbursements

total $3.1 million, with rounding. According to a DOD official, the state of

Minnesota may reimburse some of the money to FMC and thus to the

Navy.)

• EPA was paid $481,000 through the Superfund for oversight and technical

assistance.

• Approximately $106,000 was paid by Army Corps of Engineers to the state

of Minnesota for regulatory oversight and technical assistance.

• The Navy paid $269,000 for cleanup before DERA funds were available.

• A study funded by the Naval Facilities Engineering Command cost $60,000.

Costs beyond 1994 for EPA oversight are expected to exceed $1.78 million.

DOD’s report for fiscal year 1994 did not show any projected cleanup costs

for 1995 and 1996. This was corrected in the 1995 report, which showed

total reported cost of about $8 million.

Cost-Sharing Arrangement Navy officials said the Navy will clean up the Fridley facility and then

determine whether to pursue cost sharing with FMC. According to Navy

officials, the Navy has never sent a letter to FMC requesting financial

participation in the cleanup, but did request the contractor to review and

comment on the Navy’s new cleanup policy in September 1989. In its

October 1989 response, FMC disagreed with the Navy’s policy to “require

current GOCO contractors to pay for any and all cleanup costs associated

with their operation of Navy facilities.” According to the FMC response,

the nature of the company’s relationship with the Navy and related

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Navy Case Studies

contractual obligations does not justify it paying for cleaning up the

hazardous waste sites associated with its operations.

FMC stated that under its contract, it is required to perform only normal

maintenance on the facility: “Remediation of hazardous waste sites at the

facility would clearly fall in the category of maintenance over and above

normal maintenance that would either be performed by the Navy or by

FMC at Navy expense.” However, according to a Navy official, the

contractor was free to make operational decisions at the facility, including

those involving disposal. He stated the Navy never had significant

presence at Fridley. For example, in the 1970s, about 70 or 80 government

employees worked onsite with about 2,000 contractor personnel, and in

the 1990s, about 60 government employees worked with 1,500 contractor

personnel.

As noted above, the Navy reimbursed FMC $1.9 million for costs to clean

up the contractor’s facility adjacent to Fridley. Following a contracting

officer’s final decision to deny FMC its requested reimbursement of

$2.2 million, FMC appealed to the Armed Services Board of Contract

Appeals. According to a Navy legal official, after extensive discussion, the

decision to pay FMC was based on litigation-related risk and cost. The

reimbursement was reduced to $1.9 million because FMC recovered

$275,000 through an action against Northern Pump Company, the former

parent company of the subsidiary that FMC purchased in 1964. FMC filed a

claim with its insurance company to recover some of the private facility’s

cleanup costs.

In addition to the previously noted $1.3 million Navy reimbursement to

FMC for the company’s cleanup costs at the three municipal landfills, FMC

has requested another $1.3 million for these facilities. A DOD official

indicated that part of these past costs may be recovered because the state

of Minnesota is reimbursing companies involved in settlements to pay for

cleaning up the landfills. If FMC receives such a payment, DOD is to be

reimbursed its share.

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Air Force Case Studies

We visited two active Air Force manufacturing facilities: Air Force Plant 4

in Fort Worth, Texas, and Plant 44 near Tucson, Arizona. The 2 plants are

among 4 the Air Force plans to retain following divestiture, thereby

reducing Air Force GOCO plants from a post-World War II high of over 100

to the current 9.

Agency Cost-Sharing

Guidance

Cleanup at the nine remaining Air Force GOCOs is expected to exceed

$245 million. The Air Force Deputy General Counsel issued guidance in

December 1995 that deals with cost-sharing arrangements with other

potentially responsible parties, including plant operators. The guidance

states that there is substantial legal rationale for negotiating shared

responsibility for environmental remediation costs, based on the facts of

the situation, especially where the contractor may have liability insurance.

The guidance recognizes that CERCLA “contemplates that potentially

responsible parties, including both the owner and the operator, are

responsible and will share the costs of environmental remediation.” It

states that “there should be neither an assumption that the government is

responsible for and will pay 100 percent of a company’s environmental

remediation costs, nor an assumption that the government would not pay

for any of these costs under other contracts or continuing liability under

the GOCO contract.”

According to an Air Force memorandum, the Air Force now begins

cost-sharing negotiations by proposing equal sharing of costs between the

Air Force and plant operators unless evidence shows that the government

or operator had a greater responsibility, or other responsible parties were

identified. The memorandum noted that equal sharing is an appropriate

starting place for negotiations because the Air Force has never exercised

day-to-day control over the work of GOCO plant operators and thus has had

little or no ability to control contractors’ compliance with environmental

laws and regulations.

The Air Force recently completed cost-sharing negotiations with a GOCO

operator. Thiokol, the former operator of Plant 78 in Utah, has agreed to

equally share with the Air Force the costs related to cleaning up

contamination at the plant. According to Air Force officials, the decision

to pursue cost-sharing at other locations will ultimately depend on

whether the service identifies other responsible parties at each plant.1

1

In another instance, the Air Force has negotiated a cost-sharing settlement with Aerojet, the operating

contractor at Air Force Plant 70 in Sacramento, California. Aerojet has agreed to pay 35 percent of

cleanup costs associated with its products. The Air Force is to pay the other 65 percent of what DOD

and EPA officials estimate will be hundreds of millions of dollars in cost.

Page 32 GAO/NSIAD-97-32 Environmental Cleanup At DOD
Appendix III 

Air Force Case Studies

Air Force officials stated that the Air Force’s cost recovery efforts have

been hindered by indemnifications of other DOD contractors and other

factors. Budget cuts have delayed searches for other responsible parties,

and the Air Force does not have the financial management systems needed

to track all environmental cleanup costs for recovery purposes. Contractor

officials at the two plants we visited believe they are not liable for

environmental cleanup costs and cited various contract provisions. They

also stated that contractor reimbursements by the government for

environmental cleanup costs are not prohibited by law or regulation.

According to Air Force officials at the two sites visited, the Air Force

intends to pay for cleanup and then recover costs from other responsible

parties.

Air Force Plant 4 Air Force Plant 4, Fort Worth, Texas, began operations in 1942, when

Consolidated Aircraft manufactured B-24 bombers. General Dynamics

operated the plant from 1953 until 1993, when Lockheed acquired General

Dynamics’ Fort Worth operations. These Lockheed operations now

produce F-16 fighter jets, spare parts, radar units, and missile components.

Manufacturing at Plant 4 generated hazardous waste, including waste oils,

fuels, paint residues, solvents, heavy metals, and process chemicals.

Groundwater and soil were contaminated, primarily with

trichloroethylene, chromium, and petroleum byproducts. Four major

plumes of groundwater contamination originate at the plant and extend

offsite, including two plumes that are contaminating the drinking water

aquifer that serves as a municipal water source for the City of White

Settlement. In addition, the contaminated drinking water aquifer is near a

creek that borders the plant. This creek discharges into the Lake Worth

Reservoir, which is the primary drinking water source for Fort Worth.

Plant 4 was placed on EPA’s National Priorities List in August 1990.

Cleanup Efforts Site investigations began in 1984, and the Air Force has begun six ongoing

remedial actions since 1992. These actions consist primarily of

groundwater pump-and-treat, extraction of vapors from soil, and

excavation and disposal of contaminated soil. Based on a November 1994

Air Force Material Command review of the cleanup program at Plant 4, the

Air Force canceled its plans to build a $25-million groundwater treatment

system because monitoring indicated that the contaminants in the

groundwater are slowly biodegrading. According to the Air Force remedial

project manager for Plant 4, remedial actions will be taken only for sites

Page 33 GAO/NSIAD-97-32 Environmental Cleanup At DOD
Appendix III 

Air Force Case Studies

that present an immediate risk, such as contaminated soils or areas where

contaminated groundwater is affecting drinking water. The remedial

project manager expects regulatory approval of a record of decision,

documenting the final plan for cleaning up the site, in 1997.

Estimated Cleanup Costs According to Air Force field estimates, cleanup at Air Force Plant 4 will

cost $79.6 million, which is over $16 million more than the nearly

$63 million reported in DOD’s fiscal year 1994 and 1995 reports to Congress.

Most of the difference between the two estimates related to future costs.

The field estimates were prepared by the Aeronautical Systems Center in

Dayton, Ohio, which is responsible for managing Air Force GOCO plants

and the associated environmental cleanup activities. DOD’s estimate was

based on Air Force headquarters information from an automated

cost-estimating program that considers, among other things, historical

information from similar sites where cleanup has been completed.

Regardless of which estimate is more accurate, both excluded some

cleanup costs, although the total excluded is unknown. According to Air

Force officials, these included such expenses as those incurred prior to

1984, costs claimed through overhead, projects paid for with compliance

funds, and reimbursements to state regulatory agencies for oversight. For

example, the field estimate included nearly $4 million that was used for

preliminary assessments, site investigations, and interim remedial actions

in 1983 and 1984. DERA funds were not available prior to 1984.

A Center official said that costs can be estimated only roughly until a

record of decision has been signed, confirming the cleanup remedy

decision. For example, DOD’s fiscal year 1993 estimate of $113 million was

reduced in 1994 to $63 million partly because of the previously cited

decision to cancel a major groundwater treatment facility. The facility

became unneeded when the Air Force found that the hydrogeologic

conditions at the affected site were conducive to natural biodegradation.

Cost-Sharing Arrangement The Air Force has paid all the costs of the plant’s cleanup to date. A

decision about whether to pursue recovery of any of those costs depends

on the Air Force’s search for responsible parties, which will be conducted

in fiscal year 1997. General Dynamics and Lockheed officials believe that

existing and former contracts obligate the Air Force to pay for all

environmental cleanup costs. Lockheed officials believe that cleanup costs

Page 34 GAO/NSIAD-97-32 Environmental Cleanup At DOD
Appendix III 

Air Force Case Studies

incurred by contractors are normal costs of doing business and thus

generally allowable, as long as they are reasonable, allocable, and meet

other provisions of contracts. According to General Dynamics, the

agreement between General Dynamics and Lockheed for the sale of the

Fort Worth Division set forth how the parties would allocate the

environmental liability if costs were not reimbursed by the Air Force.

Contractor officials noted that this agreement did not constitute an

admission of liability.

Air Force Plant 44 Air Force Plant 44, in Tucson, Arizona, has been operated by Hughes

Missile Systems Company since its 1951 construction. Hughes currently

produces electronic and tactical missile systems at the plant.

Manufacturing at Plant 44 generated hazardous waste that contaminated

soil and groundwater. Contaminants included trichloroethylene as well as

chromium and other metals. The Tucson International Airport area,

contiguous to Plant 44, was placed on the National Priorities List in 1983,

and Plant 44 is a unit within that site because it is one of four source areas

that contributed to a large groundwater contamination plume.

Cleanup Efforts Site investigations began in 1981, when the Air Force initiated a

groundwater monitoring program. Based on a 1986 record of decision, a

groundwater remediation program began with a pump-and-treat system

and numerous extraction and recharge wells. The contaminated plume has

since been reduced by nearly 70 percent and has broken into several

smaller plumes, according to Air Force and contractor officials, but

contamination still exceeds that allowed by EPA for drinking water. The Air

Force submitted a separate Plant 44 feasibility study to EPA in

January 1995 and is developing several cleanup strategies, including a

cleanup remedy to accelerate the soil cleanup.

Cleanup Cost Estimates At the time of our review, Air Force field estimates indicated total cleanup

at Plant 44 would cost about $90.9 million by 2002, which is higher than

either the $61.3 million reported in DOD’s fiscal year 1994 report to

Congress, or the $73.6 million in DOD’s subsequent 1995 report. According

to Air Force officials, the database used to prepare the DOD estimate in

both years was missing nearly $19 million in historical DERA costs. Air

Force headquarters officials believed that field data are more accurate for

Page 35 GAO/NSIAD-97-32 Environmental Cleanup At DOD
Appendix III 

Air Force Case Studies

historical costs because the records of actual obligations reside in the

field.

Air Force headquarters officials told us that projected costs differ because

headquarters used an automated cost-estimating system. Headquarters

officials believe their projections, which were lower than the field’s in

both the 1994 and 1995 reports, will prove to be more realistic. According

to the Plant 44 remedial project manager, his estimates are more accurate

because they are based on contracted studies and historical cost figures

for operating a groundwater treatment plant.

Historical cost estimates from DOD and the field excluded costs funded by

sources other than DERA, such as costs incurred prior to the account’s

establishment in 1984, costs claimed by contractors through overhead

charges, more than $50,000 paid to state regulators for oversight, and

cleanup costs paid out of compliance funds. For example, the plant has

spent over $3 million in compliance funds on cleanup projects and may

similarly use another $3 million that is currently obligated to compliance

projects.

Cost-Sharing Arrangement In accordance with the December 1995 Air Force guidance for cost sharing

at its GOCO plants, Air Force officials plan to search for responsible parties

in the future at Plant 44, depending on the availability of DERA funds.

Hughes officials disclaim responsibility for sharing the cleanup costs,

saying the Air Force is contractually obligated to pay for all historical

environmental cleanup costs. We reported in July 19942

 that a 1987

memorandum from the former Air Force Systems Command said that

Hughes was indemnified from responsibility for past groundwater

contamination. Our November 1994 report noted that Air Force officials

did not believe that the memorandum indemnified Hughes. According to

an Air Force attorney, Air Force officials will not make a formal decision

about Hughes’ potential liability until cost recovery becomes an issue.

Hughes entered into a new lease agreement with the Air Force that makes

Hughes liable for all environmental claims resulting from releases that

arise from acts or omissions occurring on or after the effective date of the

lease. Hughes and the Air Force are to be each equally liable for claims

resulting from unknown conditions after the lease’s effective date, up to a

2

Environmental Cleanup: Defense Indemnification for Contractor Operations (GAO/NSIAD-95-27, 

Nov. 25, 1994).

Page 36 GAO/NSIAD-97-32 Environmental Cleanup At DOD
Appendix III 

Air Force Case Studies

dollar ceiling for Hughes. According to an Air Force attorney, the dollar

total is proprietary information.

Page 37 GAO/NSIAD-97-32 Environmental Cleanup At DOD
Appendix IV 

Defense Logistics Agency Case Studies

We visited two Defense Fuel Support Points managed by DLA at Norwalk,

near Los Angeles, California, and Ozol, near Oakland, California. These

fuel support points, among 25 worldwide, are operated by contractors for

DLA’s Defense Fuel Supply Center. The center purchases bulk refined

petroleum products, coal, natural gas, and synthetic fuels for the military

services and federal civilian agencies around the world.

Agency Cost-Sharing

Policy

The Defense Fuel Supply Center policy and practice have been to recover

most cleanup costs for past contamination through a fuel surcharge

assessed to its customers, rather than with DERA funds. This surcharge,

according to a Center official, is about 1 cent per barrel. We found no

evidence that the Center has recovered environmental cleanup costs from

its former operators. Current operators are to be held responsible for a

fuel spill if they are negligent in attending to a leak on the facility.

The center does not have a written policy that directs the investigation of

cost-sharing opportunities with potentially responsible parties such as

former owners, lessees, or neighboring properties. A complicating factor

for DLA’s cost sharing in fuel-related cleanups is that CERCLA excludes

certain petroleum products from the definition of hazardous substances.

In such cases, joint and several liability under CERCLA may not apply, and

DLA may need to either negotiate with other responsible parties or bring

legal action against them to recover contamination-related damages at its

facilities.

In discussing this issue, a center official stated that the center has

considered developing a cost-sharing policy to encourage cost recovery

and consistency in cost-sharing approaches. According to center officials,

the center has an unwritten policy to pursue cost recovery. In addition,

they believe that the existing general guidance on property damage should

have the same effect, if followed.

Defense Fuel Support

Point, Norwalk

DLA’s Norwalk facility is a 50-acre fuel storage depot in Los Angeles

County, about 20 miles southeast of the city of Los Angeles. From 1923

until 1951, the Norwalk site was owned by a number of private oil

companies. In 1951, the site was purchased by the Air Force. DLA has

operated the facility since 1968. Tenco Services, Inc., has been the

operating contractor of the facility since 1992. Santa Fe Pacific Pipeline

leases about 2 acres of land at the facility and has operated a fuel pump

station there for over 25 years.

Page 38 GAO/NSIAD-97-32 Environmental Cleanup At DOD
Appendix IV 

Defense Logistics Agency Case Studies

Contamination exists both on and off the site in the form of

oil-contaminated soils and underground fuel plumes resulting from fuel

leaks. Three contamination plumes have been identified on site; one

stemmed largely from the lessee’s activities. A fourth plume is off site and

resulted from a 200,000-gallon leak from a center pipeline under an

intersection in the nearby town of Tustin.

Cleanup Efforts From 1991 through 1994, several assessments were performed at the

facility, and monitoring wells and soil borings were installed and drilled. In

1992 and 1993, a total of about 3,300 gallons of liquid hydrocarbons were

removed by a recovery system that was installed for the Santa Fe plume

within the southern portion of the facility. Another project removed 

4,713 gallons of liquid hydrocarbons from seven off-site wells adjacent to

the site during 1992 and 1993.

Delays have slowed investigations at the off-site location, and damage has

not yet been fully characterized. According to Norwalk officials, gaining

access to the surrounding properties to install test wells has been the

major obstacle.

Cleanup Cost Estimates According to Center officials, the Norwalk facility’s on- and off-site

cleanup will cost about $16.5 million, about half for each portion, and will

be completed in 2010. The estimate was submitted to DOD and was

accurately reflected in DOD’s annual reports to Congress for fiscal 

year 1994, but was excluded from its 1995 report.

A factor that could affect DLA costs includes private party leasing of part of

the facility. The lessee was expected to contribute $7.5 million toward the

facility’s cleanup cost. Additional costs that could arise include four claims

totaling about $1.6 million that nearby property owners have filed against

the center. The claims allege that contamination from the site has reduced

the owners’ property values or prevented them from developing or selling

their properties. Center officials have not included any amount for claims

in their estimate because the claims have not been decided.

The center also prepared a worst-case estimate for Norwalk, with total

costs of about $34.7 million. According to officials, the higher estimate

reflects not a more expensive cleanup remedy, but potential increases in

the cost of testing, monitoring, operations and maintenance, system

Page 39 GAO/NSIAD-97-32 Environmental Cleanup At DOD
Appendix IV 

Defense Logistics Agency Case Studies

installation, pump replacement, and other such activities. Completion

would still be expected in 2010.

Cost-Sharing Arrangement The center is not attempting to recover any cleanup costs from present or

former contractors at the site. An investigation performed at this site

identified Santa Fe Pipeline, the lessee, as a potentially responsible party

for this site. The center and Santa Fe are currently negotiating cost sharing

for cleanup, and center officials believe that the company will fund about

$7.5 million in cleanup costs.

Center officials have not identified any possible cost recovery options for

Norwalk’s off-site cleanup at the Tustin intersection, a cleanup that is

expected to cost between $8 million and $13 million. Officials of the

operating contractor believe that a third party may have damaged the

center’s pipeline by digging in the intersection to install a separate

pipeline. A Defense Fuel Region West official believes that DLA center

officials could have been more aggressive in attempting to identify the

responsible party when the leak was first discovered. Center officials

stated that little, if any, evidence was gathered to prove that another party

damaged the pipeline.

Defense Fuel Support

Point, Ozol

The Ozol facility is a fuel storage depot near the town of Martinez,

California, about 25 miles northeast of Oakland. The facility was

constructed in 1959 by the Holley Corporation and leased to the federal

government until the Air Force purchased the facility in 1980. DLA has

managed the facility since 1980, and Tenco Services, Inc., operated it from

1990 until now.

Aviation gasoline and jet fuel are present in soil and groundwater around

and beneath the storage tanks, apparently from leaks in the tanks and

pipes. Four distinct groundwater fuel plumes have been identified.

Cleanup Efforts In 1985, a pilot recovery system was installed to remove fuel and its

byproducts southwest of the lower tank area. This recovery system

consisted of a collection trench/recovery well, air stripper, and recovered

fuel holding tank. In addition, a small, low-volume, passive oil/water

separator was installed to remove fuel north of the upper tank field.

However, both of these systems have been taken out of use pending

establishment of the selected final remedy.

Page 40 GAO/NSIAD-97-32 Environmental Cleanup At DOD
Appendix IV 

Defense Logistics Agency Case Studies

Cleanup Cost Estimates According to center officials, cleanup at the Ozol facility will cost about

$6.4 million. This estimate was accurately reflected in DOD’s annual report

to Congress for fiscal year 1994, but was excluded from the 1995 report.

Officials expected that the cleanup will be completed in 2002.

The center’s worst case estimate totals about $37 million, with cleanup

completed in 2017. The differences in treatment costs would arise if active

pump-and-treat and vapor-removal systems were required, rather than the

current plan to allow contaminated soils and groundwater to naturally

biodegrade.

Cost-Sharing Arrangement The center is not attempting to recover any cleanup costs from present or

former contractors at the site because center officials do not believe that

contractor action caused the contamination. According to a DLA legal

official, DLA is not pursuing cost recovery from the former owner of the

site because it believed the contamination involved occurred after transfer

of the property in 1980.

Page 41 GAO/NSIAD-97-32 Environmental Cleanup At DOD
Appendix V 

Comments From the Department of Defense

Page 42 GAO/NSIAD-97-32 Environmental Cleanup At DOD
Appendix V 

Comments From the Department of Defense

Page 43 GAO/NSIAD-97-32 Environmental Cleanup At DOD
Appendix V 

Comments From the Department of Defense

Page 44 GAO/NSIAD-97-32 Environmental Cleanup At DOD
Appendix VI 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Charles I. Patton, Jr

Uldis Adamsons 

R. Bruce Brown

Leticia V. Bates 

Jerome P. Pederson

Denver Field Office Patricia Foley Hinnen

Pamela K. Tumler

Dallas Field Office David P. Marks

Eric R. Erdman

Kansas City Field

Office

Robert G. Hammons

Gary L. Nelson

Los Angeles Field

Office

Gary W. Kunkle

Nancy Merlino

(709124) Page 45 GAO/NSIAD-97-32 Environmental Cleanup At DOD
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